FairWarining Investigates

Swarms of Drug Industry Lobbyists and Campaign Cash Stymie Bid to Restrain Medicare Prescription Costs

Quentin Lueninghoener for FairWarning

Quentin Lueninghoener for FairWarning

See the editor’s note at the bottom of this story.

When the Republican-controlled Congress approved a landmark program in 2003 to help seniors buy prescription drugs, it slapped on an unusual restriction: The federal government was barred from negotiating cheaper prices for those medicines. Instead, the job of holding down costs was outsourced to the insurance companies delivering the subsidized new coverage, known as Medicare Part D.

The ban on government price bargaining, justified by supporters on free market grounds, has been derided by critics as a giant gift to the drug industry. Democratic lawmakers began introducing bills to free the government to use its vast purchasing power to negotiate better deals even before former President George W. Bush signed the Part D law, known as the Medicare Modernization Act.

All of those measures over the last 13 years have failed, almost always without ever even getting a hearing, much less being brought up for a vote. That’s happened even though surveys have shown broad public support for the idea. For example, a Kaiser Family Foundation poll found last year that 93 percent of Democrats, and 74 percent of Republicans, favor letting the government negotiate Part D prescription drug prices.

It seems an anomaly in a democracy that an idea that is immensely popular — and calculated to save money for seniors, people with disabilities and taxpayers — gets no traction. But critics say it’s no mystery, given the enormous financial influence of the drug industry, which rivals the insurance industry as the top-spending lobbying machine in Washington. It has funneled $1.96 billion into lobbying in the nation’s capital since the beginning of 2003 and, in just 2015 and the first half of 2016, it has spent $468,108 per member of Congress. The industry also is a major contributor to House and Senate campaigns.

U.S. Rep. Peter Welch, D-Vt

U.S. Rep. Peter Welch, D-Vt

“It’s Exhibit A in how crony capitalism works,” said U.S. Rep. Peter Welch, a Vermont Democrat who has sponsored or co-sponsored at least six bills since 2007 to allow Part D drug price negotiations. “I mean,” he added, “how in the world can one explain that the government actually passed a law saying that you can’t negotiate prices? Well, campaign contributions and lobbying obviously had a big part in making that upside down outcome occur.”

Wendell Potter, co-author of a book about the influence of money in politics, “Nation on the Take,” likened the drug industry’s defiance of public opinion to the gun lobby’s success in fending off tougher federal firearms controls and the big banks’ ability to escape stronger regulation despite their role in the Great Recession.

“They are able to pretty much call the shots,” Potter said, referring to the drug industry along with its allies in the insurance industry. “It doesn’t matter what the public will is, or what public opinion polls are showing. As long as we have a system that enables industries, big corporations, to spend pretty much whatever it takes to influence the elections and public policy, we’re going to wind up with this situation.”

A blockbuster program

While Part D is only one of the issues the drug industry pushes in Washington, it is a blockbuster program. According to a report from the trustees of the Medicare system, this year Part D is expected to spend $103 billion to serve an estimated 43 million Americans.

A paper released in August by Harvard Medical School researchers cited the size of the program, and its lack of government negotiating clout, as among the reasons why Americans pay the highest prices in the world for prescription drugs. A co-author of that paper, Ameet Sarpatwari, estimates that Part D accounts for nearly 30 percent of the nation’s spending on prescription drugs.

What’s more, Part D often pays far more for drugs than do Medicaid or the Veterans Health Administration – which, unlike Part D, mandate government measures to hold down prices. One report found that Part D pays 80 percent more for medicines than the VHA and 73 percent more than Medicaid. While researchers aren’t unanimous in their views, an array of experts have concluded that federal negotiating power – if backed up by other cost controls – would bring Part D drug costs more in line.

drugchartThe drug industry and its allies acknowledge that, at least in the short term, federal intervention in the marketplace could bring lower drug prices. Yet the industry says such a step also would kill incentives to develop new medicines.

In addition, industry officials and many analysts say substantial cost reductions will come only if the Part D program refuses to pay for drugs that it considers overpriced, possibly reducing seniors’ access to some medicines. They point to the way the VHA strengthens its negotiating leverage by rejecting some expensive medicines. Instead, the veterans’ health care system limits its purchases to a list of approved drugs known as a formulary.

Kirsten Axelsen, a Pfizer vice president

Kirsten Axelsen, a Pfizer vice president

“If you want to have lower prices, you’re going to have fewer medicines,” said Kirsten Axelsen, a vice president at Pfizer, a pharmaceutical giant that leads all drug companies in spending on lobbying and political campaigns at the federal level.

It took intense maneuvering by the Bush White House and GOP leaders to get Part D through Congress in November 2003, when the House and the Senate were under Republican control. The measure came up for a vote in the House at 3 a.m. on the Saturday before Thanksgiving, as lawmakers were trying to finish business before the holiday. But when the bill appeared headed to a narrow defeat after the normal 15 minutes allowed for voting, Republican leaders kept the vote open for an extraordinary stretch of nearly three hours, described in a 2004 scholarly paper as by far the longest known roll-call vote in the history of the House.

Pre-dawn calls

With the help of pre-dawn phone calls from Bush and a custom-defying visit to the House floor by Tommy Thompson, then secretary of Health and Human Services, enough members were coaxed to switch their votes to pass the bill, 220-215, shortly before 6 a.m.

Part D was conceived at a time when rapidly rising U.S. drug costs were alarming seniors, prompting some to head to Canada and Mexico to buy medicines at dramatically lower prices. With the 2004 presidential election campaign coming up, Republican leaders saw “an opportunity to steal a longstanding issue from the Democrats,” said Thomas R. Oliver, a health policy expert at the University of Wisconsin-Madison and the lead author of the 2004 paper about the adoption of Part D.

A key aim of Part D proponents, Oliver said, was to cover seniors “in a Republican, pro-market kind of way.” That meant including “as much private sector involvement as possible,” which led to insurance companies managing the program. At the same time, it excluded federal price controls, which were anathema to the drug industry.

Today, the program remains subject to the pervasive influence of the drug industry. An analysis by FairWarning, based on spending data provided by the Center for Responsive Politics, a nonprofit and nonpartisan research group, has found:

There are far more lobbyists in Washington working for drug manufacturers and wholesalers than there are members of Congress. Last year the industry retained 894 lobbyists, to influence the 535 members of Congress, along with staffers and regulators. From 2007 through 2009, there were more than two drug industry lobbyists for every member of Congress.

For each of the last 13 years, more than 60 percent of the industry’s drug lobbyists have been “revolvers” – that is, lobbyists who previously served in Congress or who worked as Congressional aides or in other government jobs. That raises suspicions that lawmakers and regulators will go easy on the industry to avoid jeopardizing their chances of landing lucrative lobbying work after they leave office.

drugchart2Probably the most notorious example was the Louisiana Republican Billy Tauzin. He helped shape the Part D legislation while chairman of the House Energy and Commerce Committee. In January 2005, just days after he retired from the House, he became the drug industry’s top lobbyist as president of the powerful trade group, the Pharmaceutical Research and Manufacturers of America, or PhRMA. He remained in that job – which reportedly paid him $2 million a year — until 2010.

“It was pretty blatant”

“It was pretty blatant but an accurate reflection of the way pharma plays the game, through campaign contributions and, in Billy’s case, way more than that,” said U.S. Rep. Jan Schakowsky, an Illinois Democrat who has been a leading proponent of government price negotiations.

Since January 2003, drug manufacturers and wholesalers have given $147.5 million in federal political contributions to presidential and Congressional candidates, party committees, leadership PACs and other political advocacy groups. Of the total, 62 percent has gone to Republican or conservative causes.

Quentin Lueninghoener for FairWarning

Quentin Lueninghoener for FairWarning

Over the period, four Republican lawmakers from the 2015-2016 Congress received more than $1 million in contributions from drug companies. (One of them, former House Speaker John Boehner, R-Ohio, resigned last October.) In all, 518 members of the current Congress — every member of the Senate and more than 95 percent of the House – have received drug industry money since 2003.

Pfizer said since the beginning of 2003 through the middle of this year it has spent, at the federal level, $145.9 million on lobbying as well as $12.2 million on political contributions through its PACs. In a written statement, the company said: “Our political contributions are led by two guiding principles — preserve and further the incentives for innovation, and protect and expand access for the patients we serve.”

The big money goes to top Congressional leaders as well as chairs and other members of key committees and subcommittees.

The House Energy and Commerce Health Subcommittee, repeatedly a graveyard for Part D price negotiation bills, underscores the pattern. The 16 Republican members received an average of $340,219 since the beginning of 2003.

The drug industry “knows that you really only need, in many cases, just a small number of influential members to do their bidding. That’s why you see contributions flowing to committee chairs, regardless of who is in power. They flow to Democrats as well as Republicans,” Potter said.

A turning tide?

Proponents of negotiations say some economic and political currents may turn the tide in their favor. The main factor: After years of relatively modest price rises for prescription drugs, cost increases have begun to escalate. That’s partly due to expensive new treatments for illnesses such as hepatitis C.

According to Medicare officials, Part D payments are expected to rise 6 percent annually over the coming decade per enrollee, up from only 2.5 percent annually over the last nine years. Already, cost increases are “putting wicked pressure on our hospitals, on our seniors and on our state governments,” Welch said.

drugchart3At the same time, both major presidential candidates, Hillary Clinton and Donald Trump, have called for Medicare drug price negotiation. So have doctor groups such as the American College of Physicians and an alliance of more than 100 oncologists, many nationally known, who last year garnered headlines with their plea for Medicare negotiations and other measures to fight skyrocketing costs for cancer drugs.

PhRMA, the trade group, wouldn’t comment for this story on lobbying or campaign spending.
In a written statement, however, PhRMA spokeswoman Allyson Funk said, “There is significant price negotiation that already occurs within the Medicare prescription drug program.” Pointing to the private companies that run the program, Funk added, “Large, powerful purchasers negotiate discounts and rebates directly with manufacturers, saving money for both beneficiaries and taxpayers.”

Funk also pointed to skeptical assessments by the Congressional Budget Office about the potential additional savings from federal negotiations. Repeatedly – including letters in 2004 and 2007 – the CBO has said government officials likely could extract only modest savings, at best. The office’s reasoning is that costs already would be held down by bargaining pressure from insurance firms and by drug manufacturers’ fear of bad publicity if they are viewed as jacking up prices too high.

EpiPen and other controversies

Wendell Potter, co-author of a book about the influence of money in politics, “Nation on the Take.”

Wendell Potter, co-author of a book about the influence of money in politics, “Nation on the Take.”

But many analysts, particularly amid recent controversies over skyrocketing costs for essential drugs and EpiPen injection devices, scoff at those CBO conclusions. They fault the CBO for not taking into account other price controls, such as those used by Medicaid and the VHA, that likely would be coupled with price negotiation.

What CBO officials “seem to be assuming is that Congress would change the law in a really foolish way,” said Dean Baker, a liberal think tank economist who has studied the Part D program. “It seems to me that if you got Congress to change the law, you would want Medicare to have the option to say, ‘OK, this is our price, and you’re going to take it. And if you don’t take it, we’re not buying it.”

In fact, related bills proposed during the current Congress by two Illinois Democrats – Schakowsky and Richard J. Durbin, the Senate minority whip — go beyond requiring drug price negotiations. They both provide for federal officials to adopt “strategies similar to those used by other Federal purchasers of prescription drugs, and other strategies … to reduce the purchase cost of covered part D drugs.”

The potential to reduce prices is underscored by a 2015 paper by Carleton University of Ottawa, Canada, and the U.S. advocacy group Public Citizen. It found that Medicare Part D on average pays 73 percent more than Medicaid, and 80 percent more than the VHA, for the same brand-name drugs. The VHA’s success in holding down costs helped inspire a measure on California’s November ballot, Proposition 61, that would restrict most state-run health programs from paying any more for prescription drugs than the veterans agency does.

Quentin Lueninghoener for FairWarning

Quentin Lueninghoener for FairWarning

Two studies by the inspector general of Health and Human Services that compared drug expenditures under the Part D and Medicaid programs also concluded that Part D pays far more for the same medicines. The more recent inspector general study, released in April 2015, examined spending and rebates on 200 brand-name drugs. It found that, after taking rebates into account, Medicaid, which provides health care for low-income families with children, paid less than half of what Part D did for 110 of the drugs. Part D, on the other hand, paid less than Medicaid for only five of 200 drugs.

Those findings provide evidence that “the current reliance on private insurers that negotiate drug prices isn’t working that well,” said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, a Washington think tank.

Fighting the status quo

Five Democrats who are leading opponents of the status quo – U.S. Representatives Welch, Schakowsky and Elijah E. Cummings of Maryland, along with Senators Durbin and Amy Klobuchar of Minnesota — each have introduced price negotiation bills (H.R. 3061, H.R. 3261, H.R. 3513, S.31 and S.1884) during the current, 114th Congress. All of the measures have stalled in committee.

Schakowsky, a House Democratic chief deputy whip, said under Republican control in her chamber, “I think it is virtually impossible for this to ever go to hearings and markups.”

Take, for example, the bill that Welch introduced in the House on July 14, 2015. Within a week, it was referred to two health subcommittees, where it has sat ever since.

U.S. Rep. Jan Schakowsky, D-Ill.

U.S. Rep. Jan Schakowsky, D-Ill.

The closest Welch ever came to success was in 2007. He was among 198 co-sponsors – all but one, Democrats – of a bill introduced by then-U.S. Rep. John D. Dingell of Michigan. It was approved by the House but then blocked by Republicans from being taken up in the Senate.

Lawmakers on committees where Part D bills ordinarily go – Finance in the Senate, and Energy and Commerce as well as Ways and Means in the House – tend to be well-funded by the drug industry.

For instance, Sen. Richard Burr, R-N.C., who sits on the Finance Committee, has received more money from the industry since 2003 than anyone else currently in Congress, $1,303,157. Close behind is Senate Finance Chairman Orrin Hatch, R-Utah, who has gotten $1,182,560. (The other members of the million-dollar club are Rep. Fred Upton, R-Mich, House Energy and Commerce chairman, at $1,000,965, and former House Speaker Boehner, at $1,218,695.)

Burr also is the Senate leader so far in the 2015-2016 political cycle, collecting $229,710 from the drug industry. In the House in the current cycle, John Shimkus, R-Ill., a member of the Energy and Commerce health subcommittee, has snagged $189,000, trailing only Republican Majority Leader Kevin McCarthy ($292,550) and House Speaker Paul Ryan ($273,195).

A Burr spokeswoman declined to comment. Hatch and Shimkus failed to respond to repeated requests for comment.

Amid the EpiPen controversy and growing concerns about prescription drug prices, Park sees signs that more lawmakers are willing to buck industry opposition to government price negotiation.

“There’s a lot of industry opposition. This would affect their bottom line,” Park said. “It doesn’t mean, however, that industry is all-powerful.”

But Baker, co-director of the Center for Economic and Policy Research in Washington, was skeptical about the prospects for reform. “I think it’s pretty clear what you’re seeing is, there’s an industry group that stands to lose a lot of money, and they’re basically using all of the political power they can to make sure that it doesn’t happen.”

Deborah Schoch, a freelance health and science writer, and Douglas H. Weber, a senior researcher for the Center for Responsive Politics, contributed to this story.

Editor’s note: A reader suggested that we provide campaign donation totals from the drug industry for each member of Congress. For those figures, click on this link. Separately, the numbers are explained here.

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About the author

Stuart Silverstein is assistant editor at FairWarning.

5 comments to “Swarms of Drug Industry Lobbyists and Campaign Cash Stymie Bid to Restrain Medicare Prescription Costs”

  1. Richard Cox

    It would be helpful to list all members of Congress/Senate and the amounts they received from Pharma or provide a link to a list online.

  2. daniel green

    seems there was an agenda before the article was written. Why were the discounts given to Medicare D not given in the story? what evidence is there the government could do better than the insurance companies? the government is already the biggest influence in our healthcare. moving med D in addition to medicaid and VA to government would essentially form a single payer government run healthcare system. Why was that not mentioned? why was the difference between med D and medicaid/VA not discussed. The government severely restricts choice of providers and medications in medicaid/VA plans. in fact data show most veterans don’t even utilize their VA benefits but choose to instead get their medications off other insurance because the only medicine available is generics. Why isn’t it mentioned the number of people who work for pharmaceutical companies and their partners and how they are american voters and deserve to be represented as much as anyone else.
    why don’t you write a story with intention of giving the other side of the story.
    there are reasons why the government has not voted to become more involved in Med D.
    they aren’t stupid. in fact, they know a WHOLE lot more than the average american.
    and its not the PAC money. its because there is more to the story than just we can get something for lower cost.
    lets discuss what the prescription programs for medicaid/VA look like and whether their beneficiaries are happy. they are not.
    lets also give ALL the info about drug price increases. most of the increases have come from a small group of drugs. some drugs have gone down in price due to discounts.
    lets present the whole picture instead of just the parts that make your story sound inflammatory

  3. Douglas Baldwin

    Wow, Stuart, what a mega job! I am now 65 and a Part D guy, and I have had the opportunity to compare my drug costs from private insurance to Medicare. Clearly, this is one of the big problem topics of modern government, right up there with Immigration, Security, Tax Reform. I like a lot the detail on how President Bush got this Part D program through despite opposition, getting the final votes by 6 a.m. in the morning before Thanksgiving, the longest roll call in history. I didn’t realize a Republican had done such good stuff for medical care and it was good to know that. Its good for Republicans to know that also.

    I see where you write that Part D accounts for $103B and serves 43m people, accounting for 30% of the total drug spending. It is also noted that there is VA spending and Medicaid spending. Big Pharma claims that if the government meddles in pricing, they won’t be able to afford investment in new medicines. What I would like to see are some total numbers so we can all analyze that Big Pharma threat. How much total money does the federal government spend on drugs, including Part D, Veterans, Military, Medicaid, you name it. Plus, how much do state governments pay? Finally, how much is paid privately by patients, as either co-pays on a prescription or directly? Do all these numbers add up to the presumed total drug spending (if $103b is 30% of the total, that means it would be $340 billion, right?). I think these big numbers would be useful in helping the public realize what is at stake here, and also in putting into perspective any Big Pharma claim that they won’t compete if some portion of that huge number becomes federal negotiated.

    Finally, to round out the picture here I would like description about the rest of the world. Is there no drug development in Europe or Asia? Are they just sitting on their hands over there waiting on the USA Big Pharma? Well, okay, and if that is true, that adds then to the overall drug market for Big Pharma, the market that they are researching and creating drugs to compete in. We aren’t just talking USA drug spending, but world drug spending. That raises the stakes, and the reasons why we can call the Big Pharma bluff refusing government Part D negotiation. Or, if Europe and Asia are developing drugs, do those drugs make into the USA, influence the USA, how does that work? Because, if we are getting drugs from those sources, again, this dampens the threat of Big Pharma — they either compete globally in part to protect their market locally, or fall behind, regardless of federal negotiation over price. World wide car makers surpassed USA car makers, for example, and world wide electronics manufacturing also competes to surpass USA. So, maybe, the real picture here isn’t just USA market, its larger, but that dilutes the Big Pharma threat.

    It seems medical costs are approaching the defense budget, and does this allow further analogy for those who wish to make it? Do we, or do we not, negotiate defense contracts?

    Anyway, good big job, and thank you. Clearly, this topic will continue to build steam and pressure and it needs efforts like this to get it before a wider readership.

  4. Philip Gauthier

    My wife and I are 74 and 75 yrs. and participated in” Medicare Part D” since it’s inception. We are both presently enrolled in United Healthcare Rx Preferred. Plan year 2016 premium increased 25% with an increase in co-pays and a shift upward in tier class. This plan will increase it’s premium 25% in plan year 2017. My wife and I enrolled for coverage when premiums and co-pays seemed reasonably priced and although we did not use any high priced drugs our thinking was based on future needs and penalties imposed by Part D if not enrolled at the time we were eligible. It is now decision time once again and I can find no other better plans.
    Thank You for your article it explains much!
    Sincerely,
    Philip and Helen Gauthier

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