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Drug lobby second to none...
How the pharmaceutical industry
gets its way in Washington
Reprinted with permission from Center for Public Integrity

By M. Asif Ismail

WASHINGTON, July 7, 2005 — The pharmaceutical and health products industry has spent more than $800 million in federal lobbying and campaign donations at the federal and state levels in the past seven years, a Center for Public Integrity investigation has found. Its lobbying operation, on which it reports spending more than $675 million, is the biggest in the nation. No other industry has spent more money to sway public policy in that period. Its combined political outlays on lobbying and campaign contributions is topped only by the insurance industry.

The drug industry's huge investments in Washington—though meager compared to the profits they make—have paid off handsomely, resulting in a series of favorable laws on Capitol Hill and tens of billions of dollars in additional profits. [See What the Industry Got.] They have also fended off measures aimed at containing prices, like allowing importation of medicines from countries that cap prescription drug prices, which would have dented their profit margins. Pfizer, the world's largest drug company, made a profit of $11.3 billion last year, out of sales of $51 billion.

The industry's multi-faceted influence campaign has also led to a more industry-friendly regulatory policy at the Food and Drug Administration, the agency that approves its products for sale and most directly oversees drug makers. [See FDA: A Shell of its Former Self]

Most of the industry's political spending paid for federal lobbying. Medicine makers hired about 3,000 lobbyists, more than a third of them former federal officials, to advance their interests before the House, the Senate, the FDA, the Department of Health and Human Services, and other executive branch offices.

In 2003 alone, the industry spent nearly $116 million lobbying the government. That was the year that Congress passed, and President George W. Bush signed, the Medicare Modernization Act of 2003, which created a taxpayer-funded prescription drug benefit for senior citizens.

That figure was not anomalous. In 2004, drug makers upped their reported expenditures on lobbyists to $123 million, a record amount for the industry. Of the 1,291 lobbyists who were listed that year as prepresenting pharmaceutical corporations and their trade groups, some 52 percent were former federal officials.

By adding the benefit to Medicare, the government program that provides health insurance to some 41 million people, the industry found a reliable purchaser for its products. Thanks to a provision in the law for which the industry lobbied, government programs like Medicare are barred from negotiating with companies for lower prices.

Critics charge that the prescription drug benefit will transfer wealth from taxpayers, who provide the funding for Medicare, to pharmaceutical firms. According to a study done in October 2003 by Boston University professors Alan Sager and Deborah Socolar, 61 percent of Medicare money spent on prescription drugs will become profit for drug companies. Drug-makers will receive $139 billion in increased profits over eight years, the study predicts. The Medicare prescription drug benefit starts in 2006.

America the lucrative

The U.S. government contributes more money to the development of new drugs—in the form of tax breaks and subsidies—than any other government. Of the 20 largest pharmaceutical corporations, nine are based in the United States. Yet drugs are more expensive in the United States than in any other part of the world, and global drug companies make the bulk of their profits in the United States.

Many blame the industry's clout in Congress and with the executive branch for the high price of drugs. While many governments worldwide have regulated drug prices, the industry has been able to block a host of measures aimed at controlling prices in the United States. In the past few years, the industry has mounted an effective, organized campaign against legalizing importation of drugs from Canada.

As the Center reported in January, the industry trade group, Pharmaceutical Research and Manufacturers of America, hired a former U.S. ambassador to Canada, Gordon Giffin, and his top aide to lobby the Canadian government on the issue. The industry's pressure may be paying off. Last week, Canadian Health Minister Ujjal Dosanjh announced that his government would ban the bulk export of prescription drugs and crack down on Internet pharmacies that sell drugs to Americans.

A spokesman for PhRMA, Jeff Trewitt, told the Center in January that price controls thwart innovation and importation of drugs pose serious health risks.

The top 20 drug corporations and the industry's two trade groups, PhRMA and the Biotechnology Industry Organization, which represents biomedicine companies, disclosed lobbying on more than 1,600 bills between 1998 and 2004. They may have lobbied on far more bills; the Center could only count bills specifically mentioned by the companies and trade groups in their filings. In many cases, lobbyists list issues, like "animal health issues," rather than specific bills. In counting the number of bills, the Center excluded those lobbied on by BIO that relate solely to biotechnology issues, such as genetically engineered foods.

Apart from Congress, the industry lobbied an array of agencies including the Department of Health and Human Services, the Food and Drug Administration and the State Department on dozens of issues. For instance, PhRMA lobbied 33 federal agencies on 39 issues separately identified under the Lobbying Disclosure Act of 1995.

As the Center reported last week, the agencies include the Office of the U.S. Trade Representative, which shapes the country's trade agreements with other nations. Since 1998, it has filed 59 lobbying reports concerning the USTR, more than any other lobby or interest.

In recent years, the industry has shown significant power in influencing U.S. trade policy. For example, current drafts of the Dominican Republic-Central American Free Trade Agreement reflect PhRMA's desire to remove price controls on drugs and provide intellectual property protection in proposed member countries. Recently, the USTR, at the behest of the pharmaceutical industry, pressured Guatemala into repealing a recently passed law permitting wider marketing of generic drugs.

The top 20 corporations and the trade groups reported spending nearly $478 million on lobbying, or nearly 70 percent of all the money the industry reported. These corporations had roughly 64 percent of the global market share, according to IMS Health, a private consulting company that studies the industry.

Congress is most frequently listed as a target of the industry's lobbying attentions; contacts with the House or Senate are listed on about 5,500 lobby disclosure reports. The Department of Health and Human Services, the Centers for Medicare and Medicaid Services, the Food and Drug Administration and the Executive Office of the President are other agencies heavily lobbied by the industry.

Like other well connected interests in Washington, pharmaceutical firms look to former insiders to carry their message to Congress and executive branch officials. In May 2003, as the battle over the Medicare legislation was climaxing, the Pharmaceutical Research and Manufactures of America, the industry trade group, hired the newly formed lobby shop of Larson Dodd, LLC to join its already formidable army of representatives swarming the hallways of Congress. The hiring of Dave Larson and Quin Dodd by PhRMA—and later by Wyeth and other drug manufactures—was in keeping with the industry's standard operating procedure: employing former officials to lobby on bills sponsored by their ex-bosses.

Larson was a health policy advisor to Senate Majority Leader Bill Frist, the chief sponsor of a Medicare bill that, six months later, would become law, with potentially tens of billions of dollars of windfall for the drug companies. Dodd is a former legislative director to Sen. Kay Bailey Hutchison, the fourth ranking Republican in the upper chamber.

A third of all lobbyists employed by the industry are former federal government employees, including more than 15 former Senators and more than 60 former members of the U.S. House of Representatives. The two trade groups, PhRMA and BIO, are headed by two influential former members of Congress. PhRMA chief Billy Tauzin and BIO president Jim Greenwood were on committees that regulated drug companies and they each sponsored several bills related to the industry.

The Center reviewed the 1,600 plus bills the top 20 drug corporations and PhRMA and BIO lobbied. Sponsors of more than 50 percent of those bills had one or more former staff members representing the industry. A few of the sponsors have gone on to become lobbyists themselves.

Political giving

In addition to hiring former members and their staffs, the industry has also helped keep lawmakers in office by making political contributions. Since the 1998 election cycle, employees of the pharmaceutical and health product industry, their family members and industry political action committees have given $133 million in campaign contributions to candidates running for federal and state offices, according to the Center for Responsive Politics. Since 2000, the top drug corporations and their employees and PhRMA gave more than $10 million to 527 organizations, tax-exempt political committees which operate in the grey area between federal and state campaign finance laws.

Nearly $87 million of the contributions went to federal politicians in campaign donations, with almost 69 percent going to Republican candidates. Top recipients of the industry's campaign money include President George W. Bush (upwards of $1.5 million) and members who sit on committees that have jurisdiction over pharmaceutical issues.

In the states, the industry gave more than $46 million to candidates since '98, according to the Institute on Money in State Politics, which tracks campaign finance at the state level.

The Center could not determine the amount drug interests spent on lobbying in states because of the lack of comparable state disclosure requirements for expenditures. But their lobbying, campaign donations and grassroots efforts have taken on an added dimension because many states are threatening the industry's high profit margins in a way the federal government and Congress have been unwilling to do.

With states running into fiscal crises, several governors and legislatures have been exploring ways to contain drug prices. Among the several options that have been considered around the country include allowing seniors and others to legally buy drugs from Canada and other countries.

Though some states have been less amenable to drug industry pressure, the drug industry hasn't given up the fight. For Washington's biggest spending lobby, it's a small investment to make for its continuing prosperity.

Victoria Kreha, Alexander Cohen, Kevin Boettcher and Emily McNeill contributed to this report.