Drugmakers, Worried About Losing Pricing Power, Are Lobbying Hard

Drugmakers, Worried About Losing Pricing Power, Are Lobbying Hard Worried drugmakers are stepping up efforts to blunt proposals in Washington that they view as some of the most serious threats to their pricing power in recent years. Pharmaceutical industry trade organizations and outside groups are spending millions of dollars on advertisements attacking the proposals, which would peg drug prices in the U.S. to prices paid overseas and force companies to pay rebates if a drug’s price increases by more than the rate of inflation. For instance, one trade group’s radio ad decries “foreign price controls” imposed by European bureaucrats. Industry executives and lobbyists are urging friendly lawmakers to pass legislation blocking the plans. They are also pushing administration officials to pursue measures that would pressure industry middlemen such as pharmacy-benefit managers to provide some relief on patients’ costs without directly curbing drugmakers’ pricing power. The pricing proposals, if enacted, could reduce companies’ sales by billions of dollars, analysts say. The industry is trying to hold off passage of the plans it opposes through the end of this year, people familiar with the matter say, as it is unlikely that Congress would be able to act during election campaigning next year. Doses for D.C.Drugmakers have increased their lobbyingspending in recent years.Annual lobbying spending by thepharmaceutical and biotech industriesSource: Center for Responsive Politics .millionHalf yearFull year2000’05’10’15050100150$200 Yet drugmakers don’t have the political clout they used to largely because of rising public dismay over high drug prices. Even some Republicans, who typically have been more sympathetic to the industry, have joined criticism of high prices. The industry lost a key ally when Utah Sen. Orrin Hatch, a Republican, retired last year. Also, Iowa Sen. Chuck Grassley, long a skeptic of the pharmaceutical industry, returned to the chairmanship of the Senate Finance Committee last year. In July, the Finance Committee approved a bill that would require drugmakers to rebate to the federal Medicare program any list price increases that exceed the rate of inflation. Mr. Grassley was a co-sponsor of the bill along with Sen. Ron Wyden of Oregon, the top Democrat on the committee. The Trump administration last October proposed basing how much Medicare pays for cancer, eye and certain other drugs on the prices charged in other countries, including in Europe, where drugs are less expensive. TV ad from trade group PhRMA blasting health insurers for not sharing rebates with patients. And House Speaker Nancy Pelosi, a Democrat, introduced legislation Thursday that would allow the government to directly negotiate prices for up to 250 expensive drugs that don’t have generic competition. “We’re facing the stiffest political headwinds in the history of the industry,” James Greenwood, president of the trade group Biotechnology Innovation Organization, said in an interview. BIO’s member companies include Amgen Inc., Johnson & Johnson JNJ -1.57% and Pfizer Inc. In response to the drug-pricing efforts, Mr. Greenwood, a former Republican congressman from Pennsylvania, said he and his staff have visited dozens of members of Congress, White House adviser Joe Grogan, who formerly lobbied for drugmaker Gilead Sciences Inc., and deputies to Health and Human Services Secretary Alex Azar, a former Eli Lilly & Co. official. “We want to be proactive in terms of making sure our position is heard down in Washington,” Pfizer Chief Financial Officer Frank D’Amelio said at an investor conference this month. “And many of us, including myself, get down there and make sure we have the conversations that need to be had.” The drug industry does support one key provision of the Senate bill—capping annual out-of-pocket prescription expenses for people covered by the Medicare Part D drug benefit. And companies are willing to negotiate on certain other legislation such as a bill pushing makers of pricey brand-name drugs to share samples with rivals developing lower-cost copycat versions, people familiar with the matter say. However, the industry is opposed to the more far-reaching pricing measures, arguing such steps would restrict patients’ access to medicines, and could reduce funding to research and develop future drugs. Analysts say the Trump administration’s international pricing proposal poses an especially strong threat because it would lower the prices paid by the Medicare Part B government health-insurance program with private health insurers possibly following suit. The proposal, if put into effect, would reduce Medicare spending on the affected medicines by 30%, or $17.2 billion, over five years, the administration estimates. Drug pricing is complicated and secretive. WSJ explains how the flow of money, drugs and rebates behind the scenes may drive up the price of prescription medicine for consumers. Illustration: Mallory Brangan Aside from forcing companies to pay rebates on above-inflation price increases, the Senate bill would raise the maximum for rebates that drugmakers already pay to federal-state Medicaid programs for insulin and certain other drugs. “Potentially we would be selling to Medicaid at a negative price. It’s not reasonable to expect companies to sell at a negative price,” AstraZeneca PLC Chief Executive Pascal Soriot said in an interview. Together, the Medicare inflation-based rebate and increased Medicaid rebate would save the government programs about $70 billion in spending over 10 years. Much of the sum would be lost revenue for industry, according to Moody’s Investors Service. The industry’s biggest trade group, the Pharmaceutical Research and Manufacturers of America, has spent $16.3 million on lobbying during the first six months this year, after spending $28 million for all of 2018, according to the Center for Responsive Politics, which tracks lobbying spending. BIO spent $6 million on lobbying during the first half of 2019, after spending $9.9 million in 2018. Outside groups supportive of the drug industry are also weighing in. Americans for Tax Reform, which advocates for lower taxes, has run newspaper ads in some states either thanking or opposing senators for their votes on the Senate Finance bill. One ad thanked Sen. Pat Toomey, a Pennsylvania Republican who proposed an unsuccessful amendment to block the inflationary rebate, “for leading the charge to stop price controls and protect the free market in Medicare.” A spokesman said Mr. Toomey supports reducing out-of-pocket drug costs for seniors, but that the inflationary rebate would cause high launch prices for new drugs. PhRMA, the trade group, provided funding to Americans for Tax Reform in 2015 and 2016, according to tax records. PhRMA declined to say whether it provided more recent funding. Video ad from retiree advocacy group AARP criticizing high drug prices and urging Congress to take action to cut prices. Conservative-leaning advocacy group American Action Network launched a $2.5 million advertising campaign in August that targets 35 congressional districts and attacks what the group calls “socialist price controls” in the Medicare Part D program. A mailer from the group warns about House Speaker Pelosi’s “Rx Drug Takeover Plan.” In 2017, the most recent year for which tax records were public, PhRMA provided $1.5 million to American Action Network. Both groups declined to comment on whether PhRMA has provided donations more recently. To counter the pro-industry ads, groups such as AARP—which has endorsed the Senate Finance Committee bill—are running their own ad campaigns. AARP’s “Stop Rx Greed” campaign includes a red van emblazoned with slogans attacking high drug prices and a TV ad showing people walking around with over-sized images of $100 bills covering their faces, while the narrator says: “The big drug companies don’t see us as people. They see us as profits.” Maine ethics watchdog may fine Janet Mills for inaugural debt, but not until it is paid A majority of the commission overseeing Maine’s campaign finance system seemed inclined on Wednesday to fine Gov. Janet Mills’ inaugural committee as it continues to carry debt for her January celebration, but not until that debt is paid. The Democrat is the first governor to serve under a 2015 campaign finance law that established reporting requirements for the committees that govern the transition period between election and taking office and set a Jan. 31 deadline to finish fundraising for those activities. But Mills’ inaugural committee has been continuing to raise money with approval from the Maine Ethics Commission after her inaugural celebration at the city-owned Augusta Civic Center cost $63,000 more than the $132,000 the committee said it expected. The committee still owes nearly $70,000 to Augusta, according to Jonathan Wayne, the commission’s executive director. The committee’s most recent report shows it has $35,000 on hand, though Mills attorney Michael Carey said it also has $45,000 in unpaid pledges. That frustrated commissioners, who voted 3-1 Wednesday to delay action on a penalty until Mills retires the debt. Commissioner Richard Nass, a former Republican state senator from Acton, said he would favor giving the inaugural committee the maximum $10,000 fine. He wondered aloud if the public and media were paying the issue as much attention as they would be if Mills’ Republican predecessor was still in office. “Nobody seems to care about this anymore,” he said. “If this was Paul LePage, TV cameras would be parked all over this place. And this is not, this is Janet.” Commission staff has said the fundraising deadline in the law is too early to be workable. A provision in the law preventing lobbyists and their employers from donating to transition funds when the Legislature is in session likely worked to slow fundraising efforts early in 2019.

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