When the Republican-controlled Congress approved a landmark program in 2003 to help seniors buy prescription drugs, it slapped on an unusual restriction: The federal government was barred from negotiating cheaper prices for those medicines.
Instead, the job of holding down costs was outsourced to the insurance companies delivering the subsidized new coverage, known as Medicare Part D.
The ban on government price bargaining, justified by supporters on free market grounds, has been derided by critics as a giant gift to the drug industry. Democratic lawmakers began introducing bills to free the government to use its vast purchasing power to negotiate better deals even before former President George W. Bush signed the Part D law, known as the Medicare Modernization Act.
All of those measures over the last 13 years have failed, almost always without even getting a hearing, much less being brought up for a vote. That’s happened even though surveys have shown broad public support for the idea.
For example, a Kaiser Family Foundation poll found last year that 93 percent of Democrats, and 74 percent of Republicans, favor letting the government negotiate Part D prescription drug prices.
It seems an anomaly in a democracy that an idea that is immensely popular — and calculated to save money for seniors, people with disabilities and taxpayers — gets no traction. But critics say it’s no mystery, given the enormous financial influence of the drug industry, which rivals the insurance industry as the top-spending lobbying machine in Washington. It has funneled $1.96 billion into lobbying in the nation’s capital since the beginning of 2003 and, in just 2015 and the first half of 2016, it has spent $468,108 per member of Congress.
“It’s Exhibit A in how crony capitalism works,” said U.S. Rep. Peter Welch, a Vermont Democrat who has sponsored or co-sponsored at least six bills since 2007 to allow Part D drug price negotiations. “I mean,” he added, “how in the world can one explain that the government actually passed a law saying that you can’t negotiate prices? Well, campaign contributions and lobbying obviously had a big part in making that upside down outcome occur.”
Wendell Potter, co-author of a book about the influence of money in politics, “Nation on the Take,” likened the drug industry’s defiance of public opinion to the gun lobby’s success in fending off tougher federal firearms controls and the big banks’ ability to escape stronger regulation despite their role in the Great Recession.
“They are able to pretty much call the shots,” Potter said, referring to the drug industry along with its allies in the insurance industry. “It doesn’t matter what the public will is, or what public opinion polls are showing. As long as we have a system that enables industries, big corporations, to spend pretty much whatever it takes to influence the elections and public policy, we’re going to wind up with this situation.”
While Part D is only one of the issues the drug industry pushes in Washington, it is a blockbuster program. According to a report from the trustees of the Medicare system, this year Part D is expected to spend $103 billion to serve an estimated 43 million Americans.
What’s more, Part D often pays far more for drugs than do Medicaid or the Veterans Health Administration – which, unlike Part D, mandate government measures to hold down prices. While researchers aren’t unanimous in their views, an array of experts have concluded that federal negotiating power – if backed up by other cost controls – would bring Part D drug costs more in line.
The drug industry and its allies acknowledge that, at least in the short term, federal intervention in the marketplace could bring lower drug prices. Yet the industry says such a step also would kill incentives to develop new medicines.
In addition, industry officials and many analysts say substantial cost reductions will come only if the Part D program refuses to pay for drugs that it considers overpriced, possibly reducing seniors’ access to some medicines. They point to the way the VHA strengthens its negotiating leverage by rejecting some expensive medicines. Instead, the veterans’ health care system limits its purchases to a list of approved drugs known as a formulary.
“If you want to have lower prices, you’re going to have fewer medicines,” said Kirsten Axelsen, a vice president at Pfizer, a pharmaceutical giant that leads all drug companies in spending on lobbying and political campaigns at the federal level.
Part D was conceived at a time when rapidly rising U.S. drug costs were alarming seniors, prompting some to head to Canada and Mexico to buy medicines at dramatically lower prices. With the 2004 presidential election campaign coming up, Republican leaders saw “an opportunity to steal a longstanding issue from the Democrats,” said Thomas R. Oliver, a health policy expert at the University of Wisconsin-Madison and the lead author of a 2004 paper about the adoption of Part D.
A key aim of Part D proponents, Oliver said, was to cover seniors “in a Republican, pro-market kind of way.”
Today, the program remains subject to the pervasive influence of the drug industry. An analysis by FairWarning, based on spending data provided by the Center for Responsive Politics, a nonprofit and nonpartisan research group, has found:
▪ There are more lobbyists in Washington working for drug manufacturers and wholesalers than there are members of Congress. Last year the industry retained 894 lobbyists, to influence the 535 members of Congress, along with staffers and regulators. From 2007 through 2009, there were more than two drug industry lobbyists for every member of Congress.
▪ For each of the last 13 years, more than 60 percent of the industry’s drug lobbyists have been “revolvers” – that is, lobbyists who previously served in Congress or who worked as Congressional aides or in other government jobs. That raises suspicions that lawmakers and regulators will go easy on the industry to avoid jeopardizing their chances of landing lucrative lobbying work after they leave office.
Probably the most notorious example was the Louisiana Republican Billy Tauzin. He helped shape the Part D legislation while chairman of the House Energy and Commerce Committee. In January 2005, just days after he retired from the House, he became the drug industry’s top lobbyist as president of the powerful trade group, the Pharmaceutical Research and Manufacturers of America, or PhRMA. He remained in that job – which reportedly paid $2 million a year — until 2010.
▪ Since January 2003, drug manufacturers and wholesalers have given $147.5 million in federal political contributions to presidential and Congressional candidates, party committees, leadership PACs and other political advocacy groups. Of the total, 62 percent has gone to Republican or conservative causes.
Over the period, four Republican lawmakers from the 2015-2016 Congress received more than $1 million in contributions from drug companies.
▪ The big money goes to top Congressional leaders as well as chairs and other members of key committees and subcommittees.
The House Energy and Commerce Health Subcommittee, repeatedly a graveyard for Part D price negotiation bills, underscores the pattern. The 16 Republican members received an average of $340,219 since the beginning of 2003.
The drug industry “knows that you really only need, in many cases, just a small number of influential members to do their bidding. That’s why you see you see contributions flowing to committee chairs, regardless of who is in power,” Potter said.
Proponents of negotiations say some economic and political currents may turn the tide in their favor. The main factor: After years of relatively modest price rises for prescription drugs, cost increases have begun to escalate.
According to Medicare officials, Part D payments are expected to rise 6 percent annually over the coming decade per enrollee, up from only 2.5 percent annually over the last nine years. Already, cost increases are “putting wicked pressure on our hospitals, on our seniors and on our state governments,” Welch said.
At the same time, both major presidential candidates, Hillary Clinton and Donald Trump, have called for Medicare drug price negotiation.
PhRMA, the trade group, wouldn’t comment for this story on lobbying or campaign spending.
In a written statement, however, PhRMA spokeswoman Allyson Funk said, “There is significant price negotiation that already occurs within the Medicare prescription drug program.” Pointing to the private companies that run the program, Funk added, “Large, powerful purchasers negotiate discounts and rebates directly with manufacturers, saving money for both beneficiaries and taxpayers.”
This article was reported by FairWarning (www.fairwarning.org), a nonprofit news organization based in Pasadena, Calif., focusing on public health, safety and environmental issues. Deborah Schoch, a freelance health and science writer, and Douglas H. Weber, a senior researcher for the Center for Responsive Politics, contributed to this article.