Democrats about to antagonize drug makers

By McClatchy-Tribune News Service
November 16, 2009, 10:32PM

WASHINGTON -- Congressional Democrats' intensifying efforts to pay for the health-care overhaul and provide more relief for consumers are threatening to unravel a White House deal with the pharmaceutical industry and turn one of Washington's most powerful lobbies against the legislation.

Senior administration officials, including White House chief of staff Rahm Emanuel, are warning members of Congress not to antagonize deep-pocketed drug makers at a time when a major victory appears to be within reach, according to Democratic aides.

Under terms of the deal struck last summer between drug makers and the White House, the companies pledged to support President Barack Obama's health-care overhaul and provide some discounts to Medicare patients in exchange for a promise that no other controls would be imposed on pharmaceutical prices.

But many congressional Democrats increasingly see the agreement as far too generous to an industry that pulled in more than $40 billion in profits last year, especially at a time when lawmakers are struggling to cover the price tag of a major expansion of medical insurance coverage and to control rising health-care costs.

"I just don't know why we should be overpaying pharmaceutical companies," said Rep. Henry Waxman, Democrat of California, a lead author of the recently passed House health care bill.

The industry's critics got more ammunition Monday from a new AARP survey that showed prices for the most popular brand name drugs rising at their fastest rate since the seniors group started tracking the data in 2002.

The House legislation challenges the White House deal by forcing drug makers to provide bigger discounts when the federal government buys drugs for low-income senior citizens on Medicare. The bill also would give the government new authority to negotiate lower prices for all seniors on Medicare.

Now, a bipartisan group of senators is working on another confrontation with the industry by pushing to give consumers new rights to import lower-priced prescription drugs from other countries.

And still other lawmakers want to press the industry by speeding the development of cheaper generic versions of biologic drugs, a new class of pharmaceuticals.

The House and Senate bills will ultimately have to be reconciled before Democrats can send health care legislation to Obama's desk.

Drug makers, who have already spent $110 million lobbying Congress this year, have largely given up on the heavily Democratic House, according to industry sources.

But they are preparing to make a stand in the Senate, where Majority Leader Harry Reid, Democrat of Nev., is working to unveil a health care bill this week. If drug companies are successful in the Senate, they stand a better chance of removing the House provisions they dislike when the two versions are combine in a conference committee, likely early next year.

In seeking to work their will, industry lobbyists will deploy a tried-and-true strategy by turning to lawmakers from states like Indiana, Delaware and New Jersey -- where drug companies are big employers.

And they argue that Democrats risk draining away money needed to finance the development of new medicines.

"The idea that you can squeeze more and more out of our industry without consequences is seriously short sighted," PhRMA Senior Vice President Ken Johnson said in a written response to questions. "Saving money is important, but so is saving lives. Ultimately, health care reform will be considered a failure if it stalls medical progress for future generations."

Hovering in the background is the possibility that PhRMA, which has helped promote the Democratic health-care campaign with advertising all year, could turn against the initiative.

Last week, drugmaker AstraZeneca's CEO David Brennan warned at a Bloomberg event in Washington that if provisions in the House bill stay in the final legislation, his company would oppose the health care campaign.

"The pharmaceutical industry has a lot of clout and a lot of friends," said Sen. Byron Dorgan, Democrat of N.D., who has been pushing unsuccessfully for more than a decade to legalize more importation of lower-priced drugs from abroad. "They fight back pretty hard."

In the last two election cycles, drug companies have donated more than $24 million to members of Congress, according to data analyzed by the nonprofit Center for Responsive Politics. That is almost as much as the combined giving of the hospital, nursing home and health insurance industries.

The industry's most powerful defenders may be in the White House, where officials have already gone to bat for drug makers this year.

When Sen. Bill Nelson, Democrat of Fla., moved to force drug makers to provide deeper discounts to Medicare -- much as the House bill does -- he got a call from deputy White House chief of staff Jim Messina, who warned him that the proposal threatened to undo the health care campaign, according to Nelson's office.

Nelson's proposal was subsequently shot down in the Senate Finance Committee as three Democrats -- including chairman Max Baucus, Democrat of Mont., who also worked on the White House deal -- joined all the panel's Republicans to vote against his amendment.

That was a followed by a letter in the Orlando Sentinel from the head of the Florida State Hispanic Chamber of Commerce accusing Nelson of trying to raise drug prices for seniors. The chamber's 10 corporate "partners" include PhRMA and drug giant Pfizer.

Nelson is now mulling whether to offer his proposal again when the Senate takes up a health care bill, perhaps as soon as this week.

The Florida lawmaker and others believe that drug companies could provide critical funding to help close the so-called "doughnut hole," a gap in Medicare Part D drug coverage that currently forces millions of seniors to pay out of pocket for many of their prescriptions.

Medicare now pays for most of the first $2,700 of a typical senior's annual drug bills. But the senior must pay out of pocket for the next $3,454 until the Medicare begins covering prescriptions again.

In its deal with the White House, PhRMA pledged to help seniors by committing to offer 50 percent discounts to seniors who have to buy brand name drugs in the doughnut hole.

But any lawmakers and consumers advocates who want to close the doughnut hole completely say the industry should contribute more, given the millions of new customers who will likely buy brand name drugs if coverage is expanded.

Federal spending on prescription drugs has already exploded since the Part D benefit was created, jumping six-fold over the last decade, according to government figures.

If present trends continue, those brand name drugs also figure to become increasingly expensive. In the last 12 months, prices for the most widely used brand name pharmaceuticals shot up 9.3 percent on average, even as prices economy-wide declined, a review released Monday by the AARP showed.

"In order to close the doughnut hole, we need the industry to be more flexible," said John Rother, the seniors group's public policy director.

House Democrats, led by Waxman, are trying to force the flexibility on drug makers by requiring them to provide a 23.1 percent discount when the federal government buys drugs for about 10 million low-income seniors.

The mandated discount, which was included in the House bill, not only offsets the cost of closing the doughnut hole over the next decade, it also leaves $42.3 billion left over for other parts of health overhaul, according to estimates by the Congressional Budget Office.

That is more than drug companies can absorb, said PhRMA's Johnson. "The House bill, as presently written, will kill tens of thousands of jobs in our industry before the ink is dry at the White House signing ceremony," he warned.

PhRMA's allies on Capitol Hill are making the same case. "Somehow there seems to be a focus only on the pharmaceutical industry," said Sen. Robert Menendez, D-N.J., who helped defeat Nelsons' amendment in the finance committee. "Before you ask someone to give more, it seems to me that everybody needs to be at the table."

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