Health Reform: How The Drug Companies Won A Big One

My idea of a workable compromise is simple. More funding for university research here funded by the government competing with the private industry groups. These drugs funded by uncle Sam would be sold for cheaper than industry drugs.
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Let’s call it the public option.

“in the first six months of this year alone, drug and biotech companies and their trade associations spent more than $110 million — that’s about $609,000 a day — to influence lawmakers, according to figures compiled by the nonpartisan watchdog group Center for Responsive Politics. The drug industry’s legion of registered lobbyists numbers 1,228, or 2.3 for every member of Congress. And its campaign contributions to current members of Waxman’s committee have totaled $2.6 million over the past three years.”
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That’s really the nut of it, isn’t it? It is similar to the Insurance Industry and Baucus’s committee.
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One thing about cash, it can’t cast a ballot in November. And its influence can be countered in elections more effectively than on Capitol Hill.

Drug companies have been much, much bigger players than the insurance companies. Also, as the story later notes, the campaign contributions are only the beginning of how this works.

That’s funny, I originally wrote that the Insurance Industry’s influence was pooh-poohed but deleted it because I wasn’t sure if it had been here that I read it being minimized.

drug and biotech companies and their trade associations
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Your lead doesn’t nake clear what proportion of that lobbying effort is on behalf of the more traditional drug companies vs the biologics that are in fact the topic of your article. What makes the topic difficult to discuss is the fact that the industry in question is high risk/high reward. Under those circumstances, it’s difficult for people to intuitively understand what a ‘reasonable’ return on investment might be. So how one reacts depends more on one’s general reaction to corporate behavior. Cue conservative whinng about ‘stifling innovation’ and liberal whining about ‘buying off Congress’
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My own feeling is that IP laws are grossly overprotective in general and that seven years is plenty of time to capitalize on a patent.

Karen, great article. I’m curious about a couple of things:

1) What are the chances that this amendment makes it into the final bill? (To put it another way: was this just an opportunity for the committee members to vote “for” it before they vote “against” it?) While it’s disturbing to see Waxman get rolled like this, I’m more concerned about the what the final, final bill looks like.

2) How does this amendment square with other efforts to reign in drug costs? For instance, if Big Pharma wants a 12-year monopoly on its drugs, can we re-open the topics such as the Government negotiating Medicare drug purchases/pricing? Or opening the flood gates from Canada? (To put it another way: are they winning on every front? Or, only on this one?)

3) It’s been reported in TIME and elsewhere that much of the problem facing Big Pharma is the industry’s reliance on blockbuster drugs (those earning >$1B) to keep them in the black. Will a provision such as the biologics amendment promote or retard this business model? If yes, would it not be in the interest of the economy at large to curtail this? (I ask because the auto industry has suffered, in part, due to the success and collapse of the SUV market – a segment that was born out of a loophole in the CAFE standards of the 1980′s. Long term consequences, y’know.)

It’s really impossible to sort that out. A lobbyist is a lobbyist, and they don’t really separate their various issues in any way that we could make meaningful or precise.
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However, what we did try to do in the story is explain all the many ways they do it: paying for expert research (indeed, putting just about everyone in town on their payroll in some fashion or another–even howard dean), funding organizations with high-minded names, campaign contributions, home-state pressure. and this issue really represents the future of the industry. it has stayed below radar, but it is a top priority to the drug companies. it should also be to everyone else.

1. Very good that it will be in the final bill.
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2. they are winning on pretty much every front
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3. not gonna happen

Your point about IP laws is well taken. The initial argument was that the industry needed time to recoup investments; then it needed time to make additional investments; and with the 7 year limit in other countries and the growth of the generic drug industry e.g. in Canada the current argument is what? Protectionism?

Welll we have the tradional let’s bash the drug/insurance companies line. How much has the union complex (SEIU et al) and AARP spent lobbying during the same period?

Or is lobbying only a “right” if you have the politically correct goals?

Thank you, Karen, for this and all of your responses to us.

Paul, please see my Post#4, Q#3 below.
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One of the nagging issues with Big Pharma is its reliance on so-called “blockbuster” drugs; ones that rake in over $1B/yr before the patent expires.
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If a 7 to 12-year IP period helps to move the industry to a model where modest revenue-generating drugs can be rolled out profitable, then this may be a part of a good thing. (Provided, for example, the USGovt reasserts its right to negotiate drug prices for Medicare.)

OT: Obama has a cameo in “Men Who Stare at Goats”
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http://www.time.com/time/politics

What about Baxter International, Ms. Tumulty?

http://michaelfury.wordpress.com/2009/10/10/going-viral/

Thank you Karen and Michael, great article.
I watched this vote on CSPAN and wondered why the press did not give this vote more cover, before and after the vote. Press discussion on this vote before might have changed the vote to more reasonable time that would have been beneficial to both sides.

Thank you Karen and Michael, this is a very good article. This article highlights our corrupt system of government. Instead of voting for laws that actually help their constituency, lawmakers sell there vote to the highest bidder. Campaigns should be publicly financed and no one should be able to donate money to a candidate.

Seven years is more than enough time for a patent to guarantee exclusivity. The drug companies are making far too much profit. No drug should cost thousands of dollars a month for treatment. More government funded drug development could bring the cost of new drugs down.

KT: OT, but if you get the time could you check around for a possible “1000 Words” for tomorrow? Your last one generated over 100 posts. It kept us entertained and out of trouble for the weekend.

Side effects include nausea, chills, lighter wallets and higher Big Pharma profits.

KT–obviously the bar is set low enough that almost anything you write can pass as a good article these days. Of course, while you always seem to strike a chord with the commenters, its either because its in response to your regular care and feeding or because your chicken little approach to health reform appeals to those whom the media has taught to expect disappointment from political leadership.

What is clear, is that you and the rest of the villagers have much in common with the GOP. It’s funny, since there is so much animosity to between the two of you that neither of you even notices that you subscribe to the same narrative, for the same reason. Nevertheless, both narratives have as its principal goal to take down the guy living at 1600 (too bad you both went on hiatus during the last eight years). It even started at the same time — when both the GOP and the NY Times were overcome by Clinton derangement syndrome and decided to take down the country bumpkins from Arkansas.

Like parasites feeding off of one another, both of you have engaged in same tactics, even using variations of the same themes and in the end you both have the audacity to claim you’re being fair and balanced when just a cursory look at the body of your work exposes how impossible balance is for either of you to achieve.
Of course, the right wing is supposed to be bias, they are a partisan outfit after all, the media’s excuse I’m less sure of — although some think it was balance run amok and you’re still in search of the let equivalent to Nixon.

Calling yours the chicken little approach is not just about you lowering expectations or being so cynical that you can only dwell on what could wrong. It’s a way to explain the additional story you tell using the theory of death by a thousand cuts. Proportionality is the name of the game and your side wins by not allowing the positives of health reform out to play long enough to breathe let alone build any momentum. What you fail to recognize or at least acknowledge in your articles, is that proportionality is what is read between the lines and it is in effect making news.

Americans are choking on an overdose of media cynicism. You are altering perceptions by the sheer volume of negative stories you author. Just because 9 out 10 articles on health reform may be on the same topic doesn’t alter the fact that 9 out of 10 were negative. When 9 out of 10 stories readers ingest are negative it is interpreted as the news about health reform is overwhelmingly bad. Now you can keep on blaming the communication professionals, the politicians etc. But only the media is responsible for the sheer volume of skepticism and low expectations.

When you consider the sheer volume of negative stories you have written about health reform KT, the individual stories you write matter less because ultimately you are telling the public that the negative outweighs anything good that can come from reform. And that is what is impacting the polls reflecting the public’s concern that in the end reform might leave the worse off. Yes, you can blame the politicians for not communicating the benefits of reform – but that’s not where the problem lies when you admittedly lean towards the negative out of your own skewed sense of cynicism — you are clearly the problem!

It’s good to see you posting. You haven’t been very visible lately.

Dee I don’t know if you see the NYT but this was the Public Editor a couple of weeks ago.
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“The public option, a government-run health plan that would compete with private insurers, favored by a majority in the Times/CBS News poll, has been covered extensively as a political story. But the substance has received less attention. Jill Abramson, the managing editor for news, said she wondered if the paper had done enough. “If people had understood it more, would the politics have turned out differently?” she said. “I don’t know, and I’m not saying this from a point of advocacy.” Editors need to keep asking: Do their judgments about what is realistic become self-fulfilling prophecies?”
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His last line seemed apt.
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http://www.nytimes.com/2009/10/11/opinion/11pubed.html

Dee in Columbi…
” .. KT–obviously the bar is set low enough that almost anything you write can pass as a good article these days. ..”

Evidently KT spent some time and effort getting this “anything” prepared and researched.
We recognize and praise “effort” – even yours, Deein Grumpyia.

As it is, MS needs no assistance in churning out amazingly tepid stuff occassionally. We don’t begrudge him for hitching a ride on the works of the shining lights …

Good job, KT.

====off record
” .. You know you are a redneck if you wear your boxers outside your pants .. ”
Now you know what those TIME dictators don’t want you to know – by hiding from us what MS is wearing in that photo lineup …

” .. obviously the bar is set low enough that almost anything you write can pass as a good article these days. ..”

Damm! It seems effortless to some. And then they bask in the limelight as they celebrate pompously – to the chagrin of the less fortunate – the also-rans.

Maybe we should set the bar at 5.0 sec in 100-yard dash.
Now what were you saying, Mr. Usain Bolt ..

Hey look, cfkura, I call it like I see it. The media has been falling all over themselves to spank the Obama administration for pushing back against the propaganda coming from faux news because they fear any kind of criticism — yet we know that without criticism we get 8 years of Bush. The press needs to recognize that they are impacting the debate and if actions have consequences they have an obligation to consider theirs before driving perceptions in this debate. Mine is not really a critique of KT’s individual article, as I noted the single article matters little when the body of her work is consistently negative, driving the perception that reform is bad. The media blames everyone else for their baser instincts and rather become sensational gawkers than credible analysts. They demand to exercise their fist amendment rights but take no responsibility against abuse — they took down the Clinton administration over nonsense yet let the Bush adminstration operate with impunity. Now they want to sink the Obama administration using the same tactics — CZARs, is a media term, where’s that in the coverage of Lieberman’s inquiry? But God help us all if a wingnut pushes back and then they fall all over themselves in reaction to conservative criticism — case in point — have you heard anything else about the McCain and the lobbyist story, which had a quite a bit of legal ramifications only the tryst with the bimbo was brought into question. How much have you heard about Ensign or Sanford and were talking abuse of power and real legal infractions? Please spare me the don’t be mean to the journalist meme.

I’m a bit confused by the closing statement, KT:

Those are questions that hinge on whether the rest of us can trust Congress to find proper balance between competition and innovation.

Isn’t the cornerstone of free market principles that competition increases innovation? Why then would we need to find a proper balance between the two like they are inversely correlated?

Just a question, Dee:
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Did you actually READ the article? The Obama White House OPPOSES this 12-year protection, and was pretty appalled by what happened in Congress. It proposed 7 years as what Nancy-Ann DeParle and Peter Orszag described as a “generous compromise.”
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But, please, don’t let me interrupt your rant.

In this case, the industry (and its backers in Congress) is arguing that it needs a certain period of guaranteed monopoly to make sure that investors get an adequate payoff for taking big risks. Waxman thinks they should have 5 years; the industry wants 12.
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But the FTC agrees with you: They say that if you give them that much time, they will just sit on what they have and have no incentive to come up with “new inventions to address unmet medical needs.”

Here is a link to the Orszag/DeParle letter from last June:
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http://www.eatg.org/eatg/Seven-years-protection-sufficient-for-brand-biologics-says-White-House

Text of letter:
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energycommerce.house.gov/Press_111/20090625/biologicsresponse.pdf

$110 million over 6 months for lobbying. How many researchers would that money have funded? These companies must feel that their return on this investment will be substantial.
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How much of the research and development that these companies do is funded by the Government, through research grants? How much taxpayer support is involved in getting one of these new drugs to market?

Some fun reading for all:
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http://justoneminute.typepad.com/main/2009/10/who-else-has-obama-endorsed.html

KT: Money trumps the public interest (again).
Dee: Don’t be so negative.

Funny KT, you question whether I read your article and clearly you didn’t read my response to either you or cfkura.

“The individual article matters little”

Its the overwhelming body of work that is negative that is doing the damage. You readily jump on every nuance that is negative but nothing positive ever or hardly ever, I suppose I have to leave the possibility that you might make a mistake and inadvertently congratulate something. It is you who admitted on this very site that you are negative because you were there in 1993 and was cynical and its clear from your reporting that you were telling the truth. All I am saying that as a public opinion researcher I understand how opinion are formed. And the media’s overwhelming propensity to accentuate the negative is in itself its own story impacting the debate in addition to whatever they may be writing about. Whether you want to acknowledge it or not the disproportionate focus on the problems is a problem. but don’t take my word for it, follow all of the media coverage for a week and then check out the polls that follow a week later and you will see for yourself that you don’t just report the news, you influence it.

KT:
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Thanks so much for responding to commentary; since you have a such a comparatively solid track record on health care reporting (so far), I look forward to reading the article (and linking to it when commenting across various blogs).

“… that investors get an adequate payoff for taking big risks….. “
Ahem. ..
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” .. the FTC …say that if you give them that much time, they will just sit on what they have and have no incentive to come up with “new inventions to address unmet medical needs.” ..”

Capitalists are full of themselves. No wonder they almost got extinct nine months ago. [You may say that good old socialism/communism where a government is a main player in business/economy/education saved them. Wasn't that demise predicted by someone big? You may say that socialism/communism saved the capitalist west. But it is not out of the woods yet ... ]

Anyway, suppose the investors/inventors are not given any time to recoup their obscene payoffs – will the people no longer have an incentive to invest? Will new inventions dry up?

I wonder:
Do people tinker/invent only if there are huge financial rewards accruing thereof? Were there no inventions/innovations in communist USSR? Why did those communists give us (the country of capitalists, investors and inventors with great payoffs) such a scare of our lives?

KT, I really do appreciate this article. It highlights the core corruption that has overwhelmed the Republican Party and threatens to overwhelm the Democrats.

But I think the word “subsidy” is really applicable to this twelve year limit. You can call Dean Baker if you need the quote. He’s not afraid to say it.

Because ultimately, that is the issue: it is a wealth transfer from all of us to subsidize these drug companies. And we need to be aware of that, and compare it to subsidies to Wall Street (cheap money to borrow from us and lend to others at a profit), and car manufacturers (obviously) and, of course, subsidies to us, to buy insurance that is more expensive than we can afford, partly because of the higher drug prices…..

Dee, for what it’s worth, and it isn’t worth much since I’m in Canada happily enjoying my universal health care, I agree with you completely. The media has been so negative about all the efforts President Obama and his administration have put into improving the lives of most Americans, it really is astounding to me as an onlooker. KT can bristle and take offense all she wants about what you write but you’re telling it like it is. Good on ya!

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