USA: Health Care Firms Spend Big to Head Off Reforms

With billions of dollars in profits on the line, the health care
industry is waging the largest national advertising campaign ever
conducted by a political special interest, with a price tag for the
election cycle that could approach $90 million--more than either of the
major presidential candidates is expected to spend.

Already, leading pharmaceutical makers have spent about $34 million on
television, radio and print ads since last July, making them the biggest
exploiter of a just-closed loophole that allowed donors to remain
anonymous while funding political ad campaigns.

But only part of the staggering sums are being paid by drug makers,
who are fighting a plan to expand Medicare by adding prescription drug
coverage. Managed care companies opposed to proposed regulations such as
a right for patients to sue are also pouring cash into commercials.

"You're going to have the biggest ad blitz on health care America has
ever seen," said Mark Merritt, a strategist for the American Assn. of
Health Plans, which is broadcasting some of the ads. By November, he
said, the waves of ads will mean "the most educated electorate on health
care in modern history."

The commercials make no specific reference to the candidates seeking
the White House. But they attack some White House policies that are
supported by Vice President Al Gore, the presumptive Democratic nominee,
and opposed by Texas Gov. George W. Bush, his Republican rival.

One series of ads critical of White House plans to add prescription
drug coverage to Medicare features "Flo," a senior citizen in a women's
bowling group who rejects the intrusion of "bureaucrats" in her medicine
cabinet.

Another commercial in March seeking to block legislation that would
allow patients to sue their health maintenance organization for medical
malpractice includes scenes of doctors working with a text that reads:
"Washington prefers more lawsuits. But lawsuits don't save lives. Doctors
do. Get patients the care they need instead of getting lawyers the
clients they want."

Key Congressional Races Targeted

The commercials are being funded largely by companies that learned the
political ropes when they organized against President Clinton's highly
touted health care overhaul, which was scuttled in 1994.

Although the ads do not refer specifically to the presidential
campaign, the pharmaceutical industry has focused on key congressional
races, airing commercials in the districts of at least four House
Democrats who backed a bill containing the Medicare drug coverage plan.
The ads accuse them of "playing politics" with the issue.

Gore campaign officials said they are also concerned about commercials
that are critical of the vice president's health care positions, even if
they do not refer to him by name.

"They're going to win some votes on this thing," a Gore advisor said,
referring to the prescription drug commercials. "When you put $50 million
on the air, it's going to have its desired effect."

Although some independent experts agree the spots will help Bush,
others suggest the industry blitz could backfire by raising the profile
of an issue on which public opinion is on Gore's side.

"The more the [ad] campaign focuses on this issue, the more Al Gore
wins support," said Ron Pollack, executive director of Families USA, a
nonpartisan consumer group in Washington.

Gore recently singled out this year's biggest health care advertiser,
Citizens for Better Medicare, a pharmaceutical industry-funded group
responsible for about two-thirds of this year's health-related
advertising. Gore called it a "phony coalition" sponsored by the drug
companies who fear Medicare-backed prescription drug coverage would erode
their profits.

The vice president complained that CBM was hiding its donors under a
controversial provision in the tax code, Section 527, which was recently
closed in the only campaign finance reform bill to pass Congress this
year. The provision let groups raise unlimited sums without identifying
their donors.

Most Donors Come From the Industry

Dan Zielinski, a spokesman for the organization, noted that it has
listed its membership, which includes many of its donors, "from day one"
online. He also said "almost all" of the donors are from the
pharmaceutical industry. But he declined to reveal CBM's complete list of
donors, how much they contributed or how much cash the organization has
for the campaign.

Zielinski said critics who attack the group's lack of disclosure are
"vilifying the messenger instead of discussing the policy" questions
involved. He also insisted the group is not trying to influence political
races.

"Our sole concern is to educate the public [and] counter
misinformation," he said. "We are not interested in the political and
electoral races."

But Democrats are already suspicious because the company that places
the commercials for Citizens for Better Medicare--National Media, an
Alexandria, Va., firm--also does the same for the Republican National
Committee. Many of the CBM ads are also being broadcast in the same
markets as GOP ads, including those in Midwest battleground states.

When the RNC temporarily suspended its television ads earlier this
month, Democrats say that CBM increased its

advertising buys. The GOP
resumed its television campaign this week.

The ads featuring "Flo"--broadcast by CBM--recall the health insurance
industry's famed "Harry and Louise" ads, in which a fictional
middle-class couple sat at the kitchen table berating Clinton's 1994
health care overhaul proposals.

At the time, jaws dropped in Washington over that ad campaign's
estimated $14-million price tag, which was picked up by the Health
Insurance Assn. of America. Now, with far more money to flood the
airwaves, major corporations are testing the tactic again.

Democrats and industry experts expect CBM will have spent $65 million
by November. An analysis by the Campaign Media Analysis Group, a
Virginia-based firm that tracks political advertising for The Times,
shows CBM has spent about $34 million since last summer. Researchers at
the University of Pennsylvania's Annenberg Public Policy Center say the
airwaves this year also are awash with ads from at least six other health
care groups that had spent or committed to spending about $25 million on
political commercials.

Health care industry spending could surpass the ad budgets of either
presidential campaign. Bush has spent about $22.3 million on ads from
early 1999 to the end of May of this year, according to the Campaign
Study Group, a Virginia-based organization that tracks campaign finances
for The Times. Gore has spent about $10.8 million over the same period.
Each candidate is expected to spend about $40 million on ads in the
general election.

By commercial advertising standards, the health care groups' political
ad blitz is big, but not overwhelming. The pharmaceutical group's
spending is roughly comparable to the marketing budget of a summer
blockbuster movie such as "Mission Impossible 2."

Still, the millions being shelled out are "small compared to the
amount of money that's at stake" in November, said Princeton health
economist Uwe Reinhardt.

For the HMOs, many of which are barely profitable, and the
pharmaceutical firms, whose profits are among the highest in American
industry, bombarding the airwaves is good business, he said.

"The rate of return would be stunning if you hold off [stricter
regulation] for another three to four years," said Reinhardt. "It would
be a fine investment . . . and of course the TV industry will laugh all
the way to the bank."

Elderly people without prescription drug coverage make up one of the
most profitable segments of the $100-billion-a-year U.S. drug market
because they pay retail prices for their medicine with cash up front.

The presidential candidates' competing plans could have markedly
different effects on that market. The federal government's Medicare
program, which helps pay for health care for 39 million elderly and
disabled Americans, has never covered prescriptions.

Gore, like Clinton, is pushing a plan to have the government cover 50%
of Medicare recipients' drug costs up to $5,000 and the full cost of
drugs for people with very high out-of-pocket costs. Bush would overhaul
Medicare and have private insurers offer a range of coverage, some with
drug coverage.

State Reforms Already Pending

Major drug firms are already concerned because bills to mandate drug
discounts are pending in 18 states.

Nerves are also frazzled among HMO executives, who are seeing
accelerating momentum for expanding patient rights. Both major party
candidates back legislation prohibiting HMOs from making patients obtain
prior permission to visit an emergency room, for example. HMOs try to
limit access to emergency and specialist services because they cost the
companies more.

Bush signed a patient protection bill as governor of Texas and said he
would expand its provisions to cover people in federally governed health
plans. He also said he would support a limited right for patients to sue
their HMOs in some cases.

Gore supports a more expansive plan that would guarantee consumers
many of the same rights, including an independent vetting of HMO-related
complaints. His plan is more expansive, however, covering people in all
health plans.

"We're talking about no less than the final destruction of managed
care," Reinhardt said. And with pharmaceutical companies wary of
government plans that might lead to price controls, "they fear the
government like the plague."

• 106 Money & Politics
• 122 Pharmaceuticals