Why Big Pharma Is Winning Again

Pharmaceutical giants don’t have public opinion on their side. But they know how to stop Congress from passing laws most Americans want.

It is difficult to imagine two presidencies more different in priorities, tone, and legacy than those of Barack Obama and Donald Trump. One of the few things both men had in common, though, was their shared goal of lowering prescription drug costs and their failure to achieve it. While the passage of the Affordable Care Act remains one of Obama’s signature accomplishments—under the law, the uninsured rate reached a record low of 9 percent—Democrats never got enough votes on legislation to lower medication prices, such as by allowing the government to negotiate with drug companies.

Trump, for his part, broke from his own party as a candidate by advocating for Medicare to negotiate prices. Once in office, he also voiced support for drug discount cards, importing drugs from Canada, and a bipartisan Senate bill that would have capped what some Medicare recipients pay for medications. None of those reforms, however, came to fruition—even though Trump claimed that “drug prices are coming down, first time in 51 years because of my administration,” when they were actually increasing.

Now, it appears that President Joe Biden’s efforts to lower drug prices are as doomed as his predecessors’. In the past month, three House Democrats—Scott Peters of California, Kurt Schrader of Oregon, and Kathleen Rice of New York—and Arizona Senator Kyrsten Sinema expressed opposition to H.R. 3, the Lower Drug Costs Now Act. The bill would give Medicare the power to negotiate directly with drug companies, limit the maximum price of negotiated drugs based on the average cost in comparable countries, and create a $2,000 out-of-pocket limit on prescription drug costs for Medicare beneficiaries.

In announcing their opposition, Peters and Schrader both cited concerns that the bill would kill jobs and diminish private investment in research and development. Sinema hasn’t publicly explained why she opposes H.R. 3, or what proposal, if any, she would support instead. What Peters, Schrader, and Sinema have in common, however, is that each received substantial support from pharmaceutical companies before coming out against the bill. Both Peters’s and Schrader’s list of top contributors includes Pfizer and AbbVie. Sinema, whom Kaiser Health has called a “pharma favorite,” recently had her most successful fund-raising quarter ever, propelled by contributions from pharmaceutical company PACs, Gilead Science’s CEO Daniel O’Day, Eli Lilly CEO David Ricks, and Merck board chair Kenneth Frazier.

H.R. 3’s demise would be another resounding victory for the pharmaceutical industry after making these hefty contributions to the aforementioned Democratic defectors, as well as spending more than $171 million in lobbying during the first half of 2021. That helps explain why the bill hasn’t sailed through Congress even though more than 80 percent of Americans support its core price negotiation proposal, according to polling from the Kaiser Family Foundation.

If H.R. 3 fails—which seems increasingly likely—it will be a harsh reminder of how much our political system has become skewed in favor of special interests with deep pockets. Large corporations use campaign contributions to protect their bottom lines and prevent members of Congress from passing laws that most Americans desperately want.

Few policy proposals are more essential and politically popular than steps to lower prescription drug costs. Since 2014, prices have outpaced inflation and increased by 33 percent, according to the AARP’s Public Policy Institute. As a result, about three in 10 Americans report not taking at least one of their prescribed medications because of the cost, putting their physical and mental health at risk. Rising drug prices also contribute to financial hardship. Two-thirds of people who file for bankruptcy cite medical issues and the accompanying health care and drug costs as a key factor. Given that Americans spend, on average, about two and a half times more than residents of other countries for the same drugs, it’s clear we can do better.

The reforms in H.R. 3 have been successful abroad, such as allowing the government to limit maximum prices based on the average cost in other comparable countries, which is known as “external reference pricing,” or ERP. Twenty-three countries in the European Union use ERP as the main systematic criterion for setting prices. France and Italy, both of which utilize ERP, have two of the lowest prescription drug prices among G7 nations.

The Congressional Budget Office estimates that, if implemented here, H.R. 3’s policies would slash the prices of many drugs by more than half, while saving the federal government nearly $500 billion over a decade. At the same time, polls show wide bipartisan support for these proposals among voters, with more than three out of four Americans in favor of drug importation, limits on out-of-pocket costs, and price negotiation.

So why haven’t widely popular proposals that would save lives and money succeeded for Obama, Trump, or Biden? Follow the money.

Pharmaceutical and health care companies have spent more on lobbying since 1998—a total of $4.8 billion—than any other industry. On top of that, they have made large, timely contributions to the legislators who have become H.R. 3’s biggest hurdle. Consider Scott Peters. In 2019, Peters strongly praised and voted for H.R. 3. “Families who have to choose between putting food on the table and taking the medicine they need to survive cannot continue to wait for Congress to act,” he said. But that was before Big Pharma opened its wallet.

In the 2020 election cycle, Peters received $229,973 from health and pharmaceutical companies, including Abbvie, AstraZeneca, Pfizer, Merck, Amgen, Johnson & Johnson, and Gilead Sciences, whose products would be directly targeted by H.R. 3. Shortly after, Peters flip-flopped, saying he wouldn’t vote for the bill. “If you institute it, you won’t have cures because you’ll dry up all the private investment that does that research,” he said. It sounded like a talking point straight out of a pharmaceutical lobbyist’s playbook, and it’s a questionable claim.

Granted, if pharmaceutical companies’ profits fall along with drug prices, it could take dollars away from research and development, which could result in fewer new drugs coming to market. Yet research shows that pharmaceutical companies routinely spend more on stock buybacks, dividends, and executive compensation than on R&D, meaning that ample funds could be shifted toward innovation if necessary. Second, a study of 26 transformative drugs that had “groundbreaking” effects on patient care found that the majority were based on discoveries made by federally funded research or joint public-private programs while only a small fraction “originated solely within pharmaceutical industry research programs.” Furthermore, even if H.R. 3 ultimately kept some new drugs from coming to market, there is no evidence that future cost outweighs the lives saved and improved, or bankruptcies avoided by lowering drug prices for Americans immediately.

Not coincidentally, one of the other Democrats sinking H.R. 3, Kurt Schrader, also supported H.R. 3 in the past but changed his mind after getting more money from pharmaceuticals and health care than any other industry in 2020. Schrader and Peters have introduced an alternative proposal, which Schrader argues has a better chance of passing. But their proposal would also limit the conditions under which Medicare could negotiate prices, thereby reducing its impact. The alternative proposal is their version of the classic D.C. trick of trying to look like they support lower drug prices while obstructing the primary bill that would make a meaningful impact.

Sinema has also expressed her opposition to H.R. 3 with suspicious timing. Center Forward, a Washington-based nonprofit bankrolled in part by the Pharmaceutical Research and Manufacturers of America (PhRMA), the powerful D.C. drug lobby, began running ads supporting Sinema on September 9. The ad touted Sinema’s independence, straight talk, and bipartisanship, likening her to John McCain. Six days later, she came out against the House drug price negotiation proposal in a meeting with President Biden. She also doesn’t support Peters and Schrader’s pared-down plan, nor has she offered her own alternative, which is a jarring shift given that Sinema campaigned on the importance of lowering prescription drug prices, a major priority of older Arizona voters of both parties.

While Peters, Schrader, and Sinema’s newfound opposition to H.R. 3 could, theoretically, be unrelated to recent cash infusions from the pharmaceutical industry, it’s doubtful. Three coincidences are cause for skepticism. Either way, the end result is the same. Ideas supported by the vast majority of Democrats and Republicans are once again withering on the vine because too many members of Congress reflect the will of their campaign contributors more than that of their constituents.

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David Edward Burke

David Edward Burke is the founder of Citizens Take Action, a nonprofit organization that advocates for political reform.