Drug firms’ deal is in play : Congressional moves challenge the pact that pharmaceutical companies reached with the White House.


Congressional Democrats’ intensifying efforts to pay for their healthcare overhaul and provide more relief for consumers are threatening to unravel a White House deal with the pharmaceutical industry and turn one of Washington’s most powerful lobbies against the legislation.

Drug makers, which have already spent $110 million lobbying Congress this year, are preparing to make a stand in the Senate, where Majority Leader Harry Reid (D-Nev.) is working to unveil a healthcare bill this week.

And senior administration officials, including White House Chief of Staff Rahm Emanuel, are warning members of Congress not to antagonize the deep-pocketed industry at a time when a major victory appears to be within reach, according to Democratic aides.


Under the White House deal struck in the summer, companies pledged to support an overhaul and provide limited discounts to Medicare patients in exchange for a promise that no other controls would be imposed on pharmaceutical prices.

But many congressional Democrats see the agreement as too generous to an industry that pulled in more than $40 billion in profits last year, especially at a time when lawmakers are struggling to cover the price tag of a major expansion of medical insurance coverage and to control rising healthcare costs.

“I just don’t know why we should be overpaying pharmaceutical companies,” said Rep. Henry A. Waxman (D-Beverly Hills), a lead author of the recently passed House healthcare bill.

The industry’s critics got more ammunition Monday from a new AARP survey that showed prices for the most popular brand-name drugs rising at their fastest rate since the seniors group started tracking the data in 2002.

In a challenge to the White House deal, the House legislation would force drug makers to provide bigger discounts when the federal government buys drugs for low-income senior citizens on Medicare. The bill also would give the government new authority to negotiate lower prices for all seniors on Medicare.

Now, in another bid to pressure the industry, a bipartisan group of senators wants to open the door to lower-priced prescription drugs from other countries. Still other lawmakers want to speed the development of cheaper generic versions of biologic drugs, a new class of pharmaceuticals.


Neither provision was covered by the White House deal, but each could give lawmakers more leverage when House and Senate bills are reconciled in a conference committee early next year.

If drug companies are successful in beating back opponents in the Senate, they stand a better chance of removing the House provisions they dislike.

They are also making a broader argument that Congress risks draining away money needed to finance the development of new medicines.

“The idea that you can squeeze more and more out of our industry without consequences is seriously short-sighted,” said Ken Johnson, senior vice president of Pharmaceutical Research and Manufacturers of America, in a written response to questions. “Saving money is important, but so is saving lives. Ultimately, healthcare reform will be considered a failure if it stalls medical progress for future generations.”

Hovering in the background is the possibility that PhRMA, which has promoted the healthcare campaign with advertising all year, could turn against the initiative.

Last week, drug maker AstraZeneca’s chief executive, David Brennan, warned that if provisions in the House bill stayed in the final legislation, his company would oppose the healthcare campaign.


In the last two election cycles, drug companies have donated more than $24 million to members of Congress, according to data analyzed by the nonprofit Center for Responsive Politics. That is almost as much as the combined giving of the hospital, nursing home and health insurance industries.

The industry’s most powerful defenders may be in the White House, where officials have already gone to bat for drug makers this year.

When Sen. Bill Nelson (D-Fla.) moved to force drug makers to provide deeper discounts to Medicare -- much as the House bill does -- he got a call from deputy White House Chief of Staff Jim Messina, who warned him that the proposal threatened to undo the healthcare campaign, according to Nelson’s office.

Nelson’s proposal was subsequently voted down in the Senate Finance Committee by three Democrats -- including chairman Max Baucus (D-Mont.), who also worked on the White House deal -- and all the panel’s Republicans.

Nelson is now mulling whether to offer his proposal again when the Senate takes up a healthcare bill.

The lawmaker and others believe that drug companies could help close the so-called doughnut hole, a gap in Medicare Part D drug coverage that currently forces millions of seniors to pay out of pocket for many of their prescriptions.


Medicare now pays for most of the first $2,700 of a typical senior’s annual drug bills. But the senior must pay out of pocket for the next $3,454 until Medicare begins covering prescriptions again.

In its deal with the White House, PhRMA pledged to give up $80 billion over the next decade, partially by offering 50% discounts to seniors who have to buy brand-name drugs in the doughnut hole.

But lawmakers and consumer advocates who want to eliminate the doughnut hole say the industry should contribute more, given the millions of new customers who would likely buy brand-name drugs if coverage is expanded.

Federal spending on prescription drugs has already exploded since the Part D benefit was created, jumping sixfold over the last decade, according to government figures.

If trends continue, those brand-name drugs also figure to become increasingly expensive. In the last 12 months, prices for the most widely used brand-name pharmaceuticals shot up 9.3% on average, a review released Monday by the AARP showed.

In the House version of the overhaul, drug companies are required to provide a 23.1% discount when the federal government buys drugs for about 10 million low-income seniors.


The discount not only offsets the cost of closing the doughnut hole over the next decade, it also allows $42.3 billion during that period for other aspects of the healthcare overhaul, according to the Congressional Budget Office.

That is more than drug companies can absorb, said PhRMA’s Johnson. “The House bill, as presently written, will kill tens of thousands of jobs in our industry before the ink is dry at the White House signing ceremony,” he said.

PhRMA’s allies on Capitol Hill are arguing the same case. “Somehow there seems to be a focus only on the pharmaceutical industry,” said Sen. Robert Menendez (D-N.J.), who helped defeat Nelson’s amendment in the Finance Committee. “Before you ask someone to give more, it seems to me that everybody needs to be at the table.”