USA: Drug Industry Poised to Reap Political Dividends

WASHINGTON -- Few industries campaigned harder than pharmaceutical manufacturers to elect Republicans to the new Congress, and few industries are better positioned to reap the rewards of the election returns, analysts said Thursday.

"The pharmaceutical industry may be at the front of the line of groups looking at the next two years as an opportunity to make a lot of progress on their issues," said Larry Makinson, senior fellow at the nonpartisan Center for Responsive Politics in Washington.

It is a long line, with some related industries -- insurance companies, HMOs and physicians -- crowded near the front, along with energy companies, financial services and much of the rest of corporate America's elite.

Their wish lists have many items in common, notably less regulation and more tax incentives.

For drug manufacturers, that translates to no price controls, no patent reform and laws that keep drugs that are sold at cut rates abroad from being resold in the U.S. at the lower prices.

For insurance companies, it means tax credits to help the uninsured buy health coverage -- but no requirement that mental illnesses be covered like other diseases. HMOs want to put an end to efforts to make it easier for patients to sue their health plans, and physicians are seeking malpractice reform and higher Medicare payments.

In every case, the new Republican-controlled Congress will make an industry's preferred outcome more likely.

And while drug manufacturers and other health-care industries were quick to describe Tuesday's election results as proof that voters agree with them on key issues, "the real story here is money," said John Rother, director of policy and strategy at AARP, the 35-million-member seniors' lobby.

Robert Blendon, a professor at the Harvard School of Public Health, agreed that the pharmaceutical industry's election day successes said more about the effectiveness of its political spending than voters' views.

"It was really the money they spent in the hinterlands helping candidates and the money they spent on advertising to soften the blow of the issues so the number of voters who would vote on these issues would go down," he said.

As of June 30, drug and nutritional supplement manufacturers ranked ninth among more than 80 industry groups in direct contributions to congressional candidates and political parties, according to Federal Election Commission records compiled by the Center for Responsive Politics. At that time, 73% of its $18.1 million in contributions had gone to Republican candidates and party committees.

But those numbers reflect only a portion of what the $400-billion-a-year industry spent to influence Tuesday's elections. When FEC records from the last four months become available, the industry's contribution total will surely go up.

On top of that, drug manufacturers consistently rank among the top two industry groups in money spent to lobby Congress. With more than 400 registered lobbyists -- nearly one for each of the 535 members of Congress -- the pharmaceutical industry spent nearly $97 million in 2000, according to records filed with the Secretary of the Senate and compiled by the Center for Responsive Politics.

The industry and its sponsored advocacy groups also spend tens of millions of dollars on print and television ads. In the months before Tuesday's elections, they used photographs of sick children and frail seniors to suggest that generic drugs would make them worse.

While the Pharmaceutical Research and Manufacturers of America, or PhRMA, would not reveal the size of its advertising budget, an industry official who spoke on condition of anonymity said published reports citing ad expenditures of $30 million a year were "not inaccurate."

The United Seniors Assn., an advocacy group financed almost entirely by PhRMA, Pfizer Inc. and other drug companies, reportedly spent more than $12 million in the campaign's closing weeks to air radio and television ads that encouraged voters to support Republican candidates.

All that spending appears to have paid off, analysts said.

The industry's top political priority, for example, a Medicare prescription drug benefit run by private insurance companies rather than the government, is virtually "settled by the outcome of the elections," said Blendon. "That's what they spent their money to get."

Drug manufacturers "won't win everything they want" from the Republican Congress, he added, "but the something that gets done will be relatively nonthreatening. They are direct beneficiaries of the outcome of the election."

This year, most health-care legislation languished in stalemates between the Republican-majority House and the Democratic-controlled Senate. The House, for example, passed a Medicare prescription drug benefit that would be administered by private insurance companies; the Senate debated three versions of a drug benefit but did not pass any of them.

Likewise, while the Senate overwhelmingly passed a bill making it easier for generic drugs to get to market, the House did not consider it. Similar divisions stalled action on tax credits for the uninsured, expanded legal rights for HMO patients and a measure that would have prevented health insurance plans that cover treatment for mental illness from limiting that coverage.

"The industry works with Republicans and Democrats," the industry official said. "But over the last three or four years, some Democrats said they were going to make prescription drugs the campaign issue."

The industry's political efforts were needed to help the public see through "that demagoguery and rhetoric" and realize that the continued production of life-saving medicines -- not drug prices or the demonization of drug companies -- was the key issue, the official said.

A survey conducted for PhRMA last week asked whether "politicians who are criticizing prescription drug companies are motivated primarily by a desire to gain political advantage or by a desire to lower drug prices."

Of the 1,000 voters in the survey, 51% said drug-company criticism was mostly about politics, leading PhRMA President Alan F. Holmer to conclude that "voters do not want to jeopardize the miracle of life-saving innovation in modern medicines."

Voters were not asked whether they thought drug prices were too high.

• 106 Money & Politics
• 122 Pharmaceuticals