The prescription drug industry is
spending approximately $230 million this election cycle on lobbying,
campaign contributions and issue ads as it tries to shape public policy in
the face of increasing public hostility to its price-gouging and
profiteering.
It’s clear why the drug industry has gone on such a
political spending spree. Prescription drug coverage and costs, particularly
for the elderly, have become a leading – if not the leading – issue in
election campaigns this year. Drug costs are rising 15 to 20 percent
a year. Drug company profits exceed the profits of other Fortune 500
companies two to three times.
(1) And drug companies spent 38 percent more
on advertising last year to encourage Americans to buy even more expensive
drugs. (2) Consumers are demanding that Congress
provide Medicare drug coverage and drug price relief for the elderly – and
the drug industry is resisting, with all its might.
The drug industry’s investment has paid off handsomely as
the industry’s special-interest clout has kept the Republican-controlled
Congress from providing prescription drug coverage through Medicare.
Public Citizen’s analysis found that:
Drug company lobbying for the first half of 2000 reached
$42.9 million, according to lobby disclosure reports analyzed by Public
Citizen. It is on a pace to break the industry record of $82 million, set
last year, when the industry employed 297 lobbyists – or more than one
lobbyist for every two members of Congress.
Drug company campaign contributions already stand at
$13.8 million this election cycle (Jan. 1, 1999 through Sept. 30, 2000).
That’s 2.5 times what the industry gave in 1992 and 52 percent more than
the industry spent in the entire 1996 election cycle.
The drug industry’s soft money contributions have
exploded this election cycle. Drug companies have contributed $8.8 million
in soft money, which is 74 percent more than the amount of soft money they
contributed in the entire 1996 election cycle and almost seven times more
than the industry’s soft money contributions in 1992. Overall, soft money
accounts for 64 percent of all drug industry contributions this cycle.
Drug companies are writing checks increasingly to
Republicans. In 1992, 52 percent of the industry’s contributions went to
GOP candidates and committees. In 1996, the Republican share of drug
industry contributions climbed to 71 percent. In the 2000 cycle, 78
percent of industry contributions have gone to Republicans.
Citizens for Better Medicare, the drug industry’s front group, spent
$8.5 million from July 1 to September 30, according to the group’s first
disclosure report filed on Oct. 15 pursuant to a new law that requires IRS
section "527" groups to reveal their expenditures and funding sources. (A
new law passed this summer required previously secretive "527" groups,
which are formed to influence elections, to make such disclosures.) The
CBM filing reveals that 98 percent of the money went to ad producer Alex
Castellanos, who also works for George W. Bush and the Republican National
Committee. Castellanos’ threesome of clients raises questions about
campaign coordination between the drug industry and Republican candidates.
Margaret Washington vs. Army of
Lobbyists
Margaret Washington, 80, of Washington D.C. was a teacher
and director of a day care center until she retired 10 years ago. She
remains active in her church and community although she suffers from high
blood pressure, arthritis, and eye problems as well as heart ailments. Her
primary source of income is $543 each month from Social Security benefits.
Margaret takes seven prescription drugs every day. Margaret’s monthly
prescription drug costs exceed $250 so she is often forced to dip into her
savings and sometimes ask her daughter for money. She believes that the
stress from her expensive drug bills complicates her medical conditions. "I
have been a good citizen. I have paid my taxes and I have worked hard," she
says. "I deserve some kind of help to make my prescription drugs more
affordable." (3)
Margaret Washington’s problem – like that of many elderly
citizens – is that Medicare doesn’t provide coverage for prescription drugs.
That means 13 million Americans under Medicare must pay top retail prices
for their prescriptions. Public Citizen drug price surveys in nine states
and the District of Columbia show that consumers who lack prescription drug
coverage are being charged retail prices that are double the prices
prescription drug makers charge their most favored customers, such as the
Department of Veterans Affairs. (4)
In other words, if the Medicare program were to get the
same price discount as the Veterans Department receives, the price of drugs
to uninsured Medicare beneficiaries could be cut in half based on the survey
results. Such a price cut would make Medicare drug coverage much more
affordable for taxpayers and substantially reduce any out-of-pocket costs
for beneficiaries.
But there’s one significant obstacle to this solution: the
drug industry doesn’t want it for fear it would reduce profits. So the
industry has employed an army of lobbyists to battle legislation, backed
mainly by Democrats, that would provide drug coverage directly through
Medicare.
These lobbyists are required to file reports twice a year
revealing the issues they worked on and the amount spent on that work.
Public Citizen’s Congress Watch analyzed drug industry lobbying reports for
the first half of 2000 (the most recent available) to follow up on our "Addicting
Congress" investigation of the industry’s 1999 lobbying and campaign
contributions.
Our new investigation found that the drug industry’s
phenomenal political push has not slowed at all. Instead, it accelerated as
the industry pulled out the stops to keep House, Senate and presidential
candidates from advocating policies that would cut into profits.
Public Citizen found that:
-
Drug companies spent $42.9 million in the first half of
2000 – a pace that will top the industry’s record spending in 1999 ($82.1
million), when it employed 297 lobbyists, including 85 who were former
members of Congress or former Congressional staffers.
-
The top 10 drug companies accounted for $24.4 million in
lobbying expenses in the first half of 2000. By comparison, that’s 62
percent more than what the top 10 companies and trade associations in the
automotive industry spent ($15 million) in the first six months of 2000.
(5)
- The roster of lobbyists working for the drug industry
reads like a "who’s who" of Washington insiders: Haley Barbour (former
chairman of the Republican National Committee), Linda Daschle (wife of
Senate Minority Leader Tom Daschle), Bob Livingston (former House
Appropriations Committee chairman), Vic Fazio (former House Democratic
Caucus Chairman) and C. Boyden Gray (former counsel to President George
Bush). The lobbying dream team also includes lesser known but
well-connected players such as Scott Hatch (son of Judiciary Committee
Chairman Sen. Orrin Hatch), Tony Podesta (brother of President Bill
Clinton’s chief of staff, John Podesta), and Vicki Hart (former aide to
Senate Majority Leaders Bob Dole and Trent Lott). (6)
Soaring Campaign Contributions Benefit GOP
In addition to increased lobbying, drug companies also have
dramatically boosted their campaign contributions. Drug company
contributions already have reached $13.8 million this election cycle – which
is far more than the industry has contributed in the past. That figure
includes soft money (unlimited contributions to party committees) and hard
money (limited contributions from individuals and political action
committees).
As the drug industry’s campaign cash reached new heights,
so did the share of those contributions flowing to Republicans, who have
controlled the House and Senate since 1995, and thus, the legislative agenda
on Capitol Hill (see Figure 1). For instance, this year, House Republican
leaders barely passed H.R. 4680 by a margin of 217 to 214, a bill that would
offer prescription drug coverage to Medicare beneficiaries delivered through
private insurance companies and HMOs. Essentially, the bill – which was
acceptable to the drug industry – would subsidize private companies to
provide prescription drug benefits, leaving millions without coverage. The
Democratic alternative would have provided prescription drug coverage under
the Medicare program – a great fear of the industry because it could lead to
much stronger measures to rein in skyrocketing drug costs.
Killing Us Softly
Much of the drug industry’s hike in campaign contributions
can be traced to a huge surge in soft money, which has become the
contribution of choice for drug companies. Soft money accounts for 64
percent of all donations thus far in the 2000 cycle. This shift to soft
money is easy to explain – drug company executives know soft money enables
them to maximize their influence over congressional leaders who help raise
party money and determine the legislative agenda.
In the 2000 election cycle, drug companies have
contributed far more soft money than in the past, with a growing share going
to the Republicans. For instance:
-
In the 2000 election cycle, the
industry has contributed $8.8 million in soft money (see Table 2). That’s
74 percent more than what drug companies contributed in the entire 1996
election cycle and almost seven times more than the industry’s soft money
contributions in 1992. (7)
-
Drug industry soft money also has gone
increasingly to Republicans. For instance, in 1996, Republicans received
72 percent of the industry’s soft money. (8) This cycle, the GOP’s share has climbed
to 83 percent. This lop-sided distribution of soft money helps explain the
overwhelmingly partisan vote this summer for the House Republican
leadership’s prescription drug bill, which the drug companies favored but
most health and consumer groups
opposed.
Citizens for Better
Medicare
In addition to the drug industry’s record-spending on
campaign contributions and lobbying, it is also financing a front group
called Citizens for Better Medicare (CBM) (12)
that is expected to spend between $30 million and $50 million this election
cycle on "issue" ads that criticize Democratic prescription drug plans, and
in many cases are trying to elect or defeat incumbents. (13)
CBM spent $8.5 million in the third quarter of this year
alone, according to a report the group recently filed with the Internal
Revenue Service. This is the first report filed pursuant to a new law that
took effect on October 15 requiring so-called [IRS code] "527" groups, which are established to
influence elections, to disclose their contributors and expenditures. CBM
was allowed to operate in complete secrecy prior to October 15, so its
income and spending before this year's third quarter (July 1-Sept. 30)
cannot be determined.
CBM's first disclosure report revealed
where most of CBM’s money was going: 98 percent of its $8.5 million in
expenses went to National Media Inc., a company headed by Republican ad guru
Alex Castellanos. Known for his striking attack ads, (14)
Castellanos also makes campaign ads for George W. Bush and the Republican
National Committee. The fact that Castellanos’ three clients have similar
objectives raises the question whether Bush, the RNC and the drug industry
are coordinating their campaigns. The curious threesome of clients also
raises the question of whether CBM is truly an independent group, or a
surrogate for Republican candidates.
In addition to Citizens for Better Medicare, the drug
industry is also funnelling millions of dollars to the U.S. Chamber of
Commerce, which is then running TV ads on the industry’s behalf. The
Wall Street Journal recently reported that the Chamber will spend $20
million on ads, which will be "underwritten substantially by drug
companies," because some industry officials feel the Chamber has more
credibility with voters and therefore, greater freedom to run attack ads. (15)
In sum, if the drug industry pays for $10 million of the
Chamber’s TV ads, and if Citizens for Better Medicare spends $35 million on
campaign ads (a conservative estimate), and if drug industry campaign
contributions total $15 million (very likely), and if drug industry lobbying
in the second half of this year keeps pace with the first six months, then
the drug industry will spend approximately $230 million trying to
shape Congressional policy in the 1999-2000 cycle.
1. Public Citizen, "Analysis of Corporate Profits 1999," see
press release and 12 graphs at http://www.citizen.org/congress/drugs/press/pdcorp$release100600.htm
2. National Institute for Health Care Management (NIHCM),
"Prescription Drugs and Mass Media Advertising," Research Brief, September
2000.
3. Public Citizen, Washington D.C. area drug price survey,
Oct. 24, 2000. See full report at http://www.citizen.org/congress/drugs/statereports/washdc.html
4. Public Citizen’s state drug price surveys can be found at http://www.citizen.org/congress/drugs/statereports/stateindex.htm
5. Public Citizen analysis of auto industry
lobby disclosure reports filed with the Secretary of the Senate and Clerk of
the House pursuant to the Lobby Disclosure Act of 1995.
6. Public Citizen analysis of disclosure reports filed with
the Secretary of the Senate and Clerk of the House pursuant to the Lobby
Disclosure Act of 1995. A full 1999 roster of drug industry lobbyists can be
found in Public Citizen’s "Addicting Congress" report, available at http://www.citizen.org/congress/reform/addicting.htm
7. Center for Responsive Politics (http://www.opensecrets.org/).
8. Public Citizen, "Addicting
Congress: Drug Companies’ Campaign Cash & Lobbying Expenses," July
2000, Table 3, page 10.
9. Public Citizen, "Addicting
Congress: Drug Companies' Campaign Cash & Lobbying Expenses," July
2000, Table 3, page 10.
10. Prof. Steven Schondelmeyer, "Patent Extension of
Pipeline Drugs: Impact on US Health Care Expenditures," PRIME Institute,
University of Minnesota, July 28, 1999. Schondelmeyer asserts that a patent
extension for Claritin would keep generic alternatives out of the market for
three years, then it would effectively slow consumers' purchases of generic
alternatives over the next seven years, as the generic durgs struggled to
market themselves on a par with Claritin.
11. Details of Sen. Hatch’s support for a Claritin patent
extension can be found in the Public Citizen report "Schering Plough’s
Political Money Pushes Claritin Patent Extension and Distorts GAO Report,"
August 2000, available at: http://www.citizen.org/congress/drugs/factshts/patentextension/3splobby083000.htm
12. Citizens for Better Medicare IRS form 8871 shows the
organization’s affiliation with the drug industry trade association,
Pharmaceutical Research and Manufacturers of America.
13. Juliet Eilperin and Thomas B. Edsall, "Ad Blitz Erodes
Democrats’ Edge on Prescription Drugs," The Washington Post, Oct. 27,
2000, A14. Eilperin and Edsall provide an estimate that has been reported in
other news stories recently that Citizens for Better Medicare will spend up to
$50 million on issue ads this election cycle.
14. Sara Fritz, "Consultant Bridges Ad Campaigns," St.
Petersburg Times, July 31, 2000. Fritz says, "Castellanos’ most notable
ad, broadcast in 1990 on behalf of Sen. Jesse Helms (R-N.C.) was clearly
designed to stir up resentment among white voters toward minorities in general
and, more specifically, toward Helms’ black opponent. To this day, consultants
debate the merits of that ad. Under the Code of Ethics of the American
Association of Political Consultants, members pledge that they ‘will use no
appeal to voters which is based on racism.’"
15. Jim VandeHei and Tom Hamburger, "Drug Firms Underwrite
U.S. Chamber’s TV Ads," The Wall Street Journal, Oct. 6,
2000.
