Healthy Skepticism Library item: 7381

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Publication type: news

Newton-small J, Jensen K.
Pfizer, Amgen Face Congressional Democrats' Wrath
Bloomberg.com 2007 Jan 3
http://news.yahoo.com/s/bloomberg/20070103/pl_bloomberg/ablzzd7lt9so

Full text:

Jan. 3 (Bloomberg) — Pfizer Inc., Amgen Inc. and the rest of the U.S. pharmaceutical industry awake to a new reality this week: a Congress controlled by Democrats determined to impose costly restrictions on their business.

Five committees are planning investigations into how to lower prices paid by Medicare, improve drug-safety enforcement and make generic medications available faster. Further probes and policy salvos may follow.

The pharmaceutical firms depend on a friendly federal government: A sixth of 2006 growth in the $252 billion U.S. drug market came from Medicare, according to estimates from IMS Health Inc., a Fairfield, Connecticut-based research firm. Moreover, both Democrats and the companies are well aware that the industry gave at least two-thirds of its political donations to Republicans in recent elections.

``No one believes the sky is falling, but certainly there are a few more clouds,’‘ says Ken Johnson, a senior vice president at the Pharmaceutical Research and Manufacturers of America, the industry’s trade group in Washington. ``I don’t think there’s any question that there’s some pent-up hostility.’‘

Pfizer shares rose 42 cents to $26.32 in New York Stock Exchange composite trading as of 10:19 a.m. Amgen shares gained 57 cents to $68.88 in Nasdaq Stock Market composite trading.

Representative John Dingell (news, bio, voting record), the Michigan Democrat who will head the House Energy and Commerce Committee, says that ``there are a whole lot of questions that have to be addressed, and we will be quite diligent.’‘

Going for the Jugular

As the committee’s chairman until Democrats lost House control in 1994, Dingell often ``went for the jugular,’‘ says John Calfee, a scholar at the American Enterprise Institute. Now that he’s back in power, the 80-year-old Dingell promises in an interview that ``we’re going to try to have a rather broader oversight’‘ into health-care matters.

Dingell says he plans to look at the Medicare prescription- drug benefit for senior citizens pushed through by President George W. Bush and congressional Republicans, and at the generic- approval process. So does California Representative Henry Waxman (news, bio, voting record), the new chairman of the Government Reform Committee and another of the industry’s sometime-antagonists.

The House Ways and Means and Senate Finance committees will also take up Medicare: ``I’m going to have hearings right off the top on the drug benefit to help make sure it works better,’‘ Montana Senator Max Baucus, 65, the incoming finance chairman, said in an interview. And Massachusetts Senator Edward Kennedy will use his Health, Education, Labor and Pensions Committee to work on drug safety-issues.

Direct Negotiations

Industry leaders including Jim Greenwood, the president of the Washington-based Biotechnology Industry Organization, say they expect the House to pass a change to the 2003 Medicare legislation that would let the federal government directly negotiate prices for the 22.5 million elderly and disabled citizens enrolled in the drug plan.

Democrats say the move would save as much as $60 billion over 10 years, and incoming House Speaker Nancy Pelosi of California has pledged to bring it up in the first 100 legislative hours of the new Congress.

The proposal’s fate in the Senate is less clear. In March, the Republican-controlled Senate passed a measure supporting negotiations on a 54-44 vote; at the same time, even backers such as Arizona Republican John McCain didn’t expect it to become law. With a Democrat-led House more likely to back such a measure, there may not be ``as much enthusiasm’‘ in the Senate this year, Greenwood said in an interview.

A Possible Veto

It can take 60 votes in the Senate to consider legislation, and Democrats will have only a 51-49 majority; even if a measure got to Bush, he would probably veto it, Greenwood says. Overturning a veto requires two-thirds majorities in both chambers.

The industry says the current structure of the program — in which each insurance plan negotiates prices separately — is working well, and there’s no need for change. ``Negotiation really leads to price-setting,’‘ says Greenwood, 55, who voted for the original law when he was a Republican representative from Pennsylvania.

``It’s hard to understand why we should make any changes at this time,’‘ says David Beier, the top Washington lobbyist for Thousand Oaks, California-based Amgen and a former chief domestic policy adviser to former Vice President Al Gore, a Democrat.

Other Concerns

Medicare is far from the industry’s only concern, says Michael Werner, president of the Werner Group, a Washington consulting firm that focuses on biotech and biomedical research.

``They’re going to have to play a lot of defense,’‘ Werner says. ``Literally, the full plate of public policy matters that affect the industry could all be in play.’‘

Kennedy, 74, and the outgoing chairman of his committee, Wyoming Republican Senator Michael Enzi, 62, are working on a bill that places additional requirements on companies and the Food and Drug Administration for the advertising and monitoring of new drugs. And lawmakers including North Dakota Senator Byron Dorgan, 64, will push to let Americans buy cheaper medicines from Canada.

Lawmakers are also trying to design a process to allow FDA clearance of the first generic versions of major biotech drugs. Generic medicines often sell for about a third the price of brand-name products.

The money that drugmakers spend on marketing may also become an issue, says Jeffrey Berry, a political science professor at Tufts University in Medford, Massachusetts, who studies special- interest groups. Kennedy, Waxman and Illinois Senator Dick Durbin, the second-highest ranking Democrat, last month seized on a Government Accountability Office study that found research and development expenses far outpacing increases in applications to sell new medicines.

`Unclear at Best’

``It indicates that the link between high research expenditures — which the industry claims must be driven by high prices — and new drug development is unclear at best,’‘ Waxman, 67, said in the lawmakers’ press release. ``Many aspects of the drug development system need to be examined.’‘

The pharmaceutical industry won’t be spending all its time on defense this year. It, along with the Bush administration, will push Congress to renew the FDA program that uses drug- application fees to speed up its approval process. The program expires this year, and Calfee says Democrats may use it as leverage to push other parts of their health agenda.

The industry is also looking for an increase in federal funding for stem-cell research. It may find the new Democratic Congress more receptive than Bush has been; the president used the first veto of his presidency to block a stem-cell measure last year.

Political Giving

Changes in companies’ political giving may also help provide a friendlier reception. The political action committee of Amgen, the top biotech company, gave 69 percent of its donations to Republican candidates for the 2006 federal elections, and New York-based Pfizer, the world’s biggest drugmaker, gave 70 percent, according to Washington-based PoliticalMoneyLine, which tracks campaign finance.

``We are looking at supporting policy makers who share similar philosophies on access to quality health care,’‘ says Pfizer spokesman Jack Cox. Greenwood and Johnson say their groups and members are reaching out to more Democrats, and they expect industry political giving to shift.

``The Democrats want to leverage their power to generate some PAC donations from a very wealthy industry,’‘ Tufts University’s Berry says. ``With one hand they’re going to spank the industry, and with another hand they’re going to hold their hands palms up.’‘

To contact the reporters on this story: Jay Newton-Small in Washington jnewtonsmall@bloomberg.net ; Kristin Jensen in Washington at kjensen@bloomberg.net