July 17, 2009
Drug Makers Score Early Wins as Plan Takes Shape
By ALICIA MUNDY and LAURA MECKLER WASHINGTON -- The pharmaceuticals industry, which President Barack Obama promised to "take on" during his campaign, is winning most of what it wants in the health-care overhaul. The final contours of the legislation are far from settled, but the industry, led by a onetime powerful congressman, has notched a string of victories. Legislation expected soon in the powerful Senate Finance Committee will leave out cost-cutting steps as part of an agreement with the industry and the White House, according to Congressional aides, industry lobbyists and others involved in the talks. The missing items include two planks of Mr. Obama's campaign platform: allowing cheaper drugs to be imported from Canada and giving the federal government the right to negotiate Medicare drug prices directly with pharmaceutical companies. While the industry has engaged in vigorous lobbying just as Mr. Obama took office, that alone doesn't explain all the success. Reimportation and Medicare drug-price negotiation are largely symbolic and Congressional researchers have said they won't save much money in the long run. Meanwhile, a separate Senate committee voted this week as part of its health bill to give branded biotechnology drugs at least 12 years of market exclusivity, a defeat for makers of cheaper copycat medicines. "This is the best year the drug industry has had in decades," said Nancy LeaMond of AARP, the seniors' lobby, which is seeking greater price-cutting on drugs. Pharmaceutical firms say cutting drug prices would hurt innovation and make it harder to bring new medicines to market, and say they are making sacrifices as part of the health-care overhaul. Last month, the industry agreed to what Mr. Obama touted at the White House as $80 billion over 10 years in give-backs to help pay for expanded health insurance. About $50 billion of the total is available to help pay for the overhaul, expected to cost $1 trillion over a decade. The remainder comes from an agreement to sell more brand-name drugs to certain Medicare beneficiaries at a 50% discount -- which saves those seniors money but also generates new business for the industry. White House spokeswoman Linda Douglass said the deal represented "an unprecedented commitment" from "an industry that has opposed health-reform efforts in the past." The pharmaceuticals industry has a war chest it can use either to back a health-care bill or rally public support against it. Already radio spots helped secure congressional support for extended protection for biotech drugs. If Mr. Obama retreats on some drug-industry issues, it might help him land a much bigger prize: a broad health-care bill. "The motivation for the White House and Finance Committee is to take PhRMA and its money out of any possible opposition, and that's really what's driving these agreements, along with the desire to get financing for the bill," said John Rother, another AARP lobbyist, referring to the Pharmaceutical Research and Manufacturers of America. "Think about who has money enough to cause a problem." On Thursday, PhRMA and the liberal group Families USA unveiled television ads featuring "Harry and Louise," the fictional couple in ads that helped defeat health legislation during the Clinton administration. In the new ads, the couple now favors a health overhaul. PhRMA didn't respond to requests for comment on its ad strategy. Some Democrats, including Mr. Obama, have pushed Congress to establish a pathway for generic biological drugs. But the Senate health committee voted this week to give biologics 12 years of market exclusivity -- separate from any patent protection they might enjoy. The White House had proposed seven years. Last month, when it seemed that the bill would be more favorable to generics, Watson Pharmaceuticals Inc., a big generics maker, announced the acquisition of Arrow Group of Europe for $1.7 billion as a platform to develop biologics. "Now we have to rethink our strategy," said Watson Chief Executive Paul Bisaro. "We're all very disappointed." In a statement, the Biotechnology Industry Organization said the 12-year window is a "fair and reasonable period to ensure continued biomedical innovation." PhRMA is headed by former Republican Rep. Billy Tauzin, who was chairman of the House Energy and Commerce Committee and began reaching out to Democrats shortly after Mr. Obama was elected. He was among the first people in the health-care industry to sit down in negotiations with the administration when it took office. That effort came to fruition with the June announcement of the $80 billion deal. "I think they probably are the most effective and well-financed health stakeholder group in the country," said Ron Pollack, president of Families USA. The House bill includes about $30 billion more in cuts to the drug industry than the Senate version, according to calculations by outside analysts. It also contains one particular measure that drug companies don't like. When the Medicare drug benefit went into effect, certain seniors who were getting drug coverage through Medicaid moved on to the new Medicare program. "It was like a $2 billion-a-year windfall for drug companies," said Rep. Henry Waxman (D., Calif.), because Medicare prices are higher. The House bill proposes rebates that would take back that money, but the Senate Finance Committee left that out, and the White House declined to say whether it supports the effort to impose the rebates. The Finance Committee had proposed using this policy as a stick to make sure that drug companies gave seniors the 50% discount they were promising as part of the $80 billion deal. Drug makers found that objectionable, and the announcement of the agreement was delayed for 48 hours while they found another enforcement mechanism, according to one lobbyist involved. Write to Alicia Mundy at alicia.mundy@wsj.com and Laura Meckler at laura.meckler@wsj.com
