Outlook 2007: House of Hearings

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Hearings, hearings and more hearings on the dastardly doings of the pharmaceutical industry will be the order of the day for a Democratic Congress, Washington insiders say.

While congressional Dems may not have the votes to overcome a filibuster or a presidential veto, they do have the gavels—and the subpoena powers that go with it. Pharma foes like Ted Kennedy, Henry Waxman and Pete Stark can use their committee assignments to direct a litany of inquiries—into drug pricing, reimportation, the use of physician data by drug companies and pharmaceutical promotion, to name just a few hot-button issues concerning prescription drugs. Incoming House Speaker Nancy Pelosi has promised to empower Health and Human Services to negotiate drug prices directly with companies in her first 100 hours at the podium.

Practically, all this may amount to bupkus. The Democrats don't control Health and Human Services—the President does. They are far short of the 291 votes in the House and 67 votes in the Senate needed to override a presidential veto, even if they can pick off a few Republicans.

The Dems do have a powerful pulpit from which to bully some of their favorite nemeses, and Big Pharma's high on the list. “In Washington, the two industries most strongly viewed as perpetuating GOP rule are oil and pharmaceuticals,” says one DC advertising industry insider, who wished to remain anonymous. “Is it payback time? I think so.”

As of October 10, pharma political action committees (PACs) and individuals had pumped more than $10 million into GOP coffers for the 2006 election cycle—versus just $4 million for the Dems (though that equation doubtless evened out somewhat in the last weeks of October). That's down from the $18 million drug companies gave to the Republicans in the 2000 election cycle and the $21 million they doled out in 2002, with Medicare Part D on the line.

Then there's public opinion to consider. Pharmaceutical firms have been tacking up from post-Vioxx lows, but still rank uncomfortably close to the oil and tobacco industries in public trust, and that makes them an attractive target for ambitious pols—particularly with a presidential election just around the corner.

“Rather than working together to move forward, the end of the midterms just means the beginning of the 2008 election cycle,” says former FDA assistant commissioner for communications Peter Pitts, now director of the Center for Medicine in the Public Interest and SVP, global health affairs at MS&L. “I see more or less the same thing, which is continued bashing of the pharmaceutical industry.”

Pharma-bashing could grow more pointed as members seek trophies with which to pave their party's way down Pennsylvania Avenue.

“The job of a committee chairman is to keep their parties in the White House or get them there,” says John Kamp, executive director of the Coalition for Healthcare Communications. “In the House, we're going to have a lot of hearings on how things haven't been appropriately handled by the old guys.”

To be sure, the Republican hegemony of the past six years hasn't been a cakewalk for the pharmaceutical industry. Despite a major legislative victory with the Medicare prescription drug benefit and the executive branch's general preference for industry self-regulation over a more interventionist approach, bashing Big Pharma remains a bipartisan sport. GOP legislators like Sens. Grassley (R-IA) and Frist (R-TN) have been sharply critical of pharmaceutical pricing and promotion, and Sen. Vitter (R-LA) has lobbied hard for reimportation of drugs from Canada—even placing a hold on the nomination of Andrew von Eschenbach to head the FDA. Together with his Democratic colleague on the Senate Finance Committee, Sen. Max Baucus (D-MT), Grassley has also grilled the industry over grants for medical education.

However, the GOP's pro-business, anti-regulation governing philosophy has benefited the industry as when, in the wake of the Vioxx scandal, with calls for a curb on DTC mounting, PhRMA was able to head off congressional intervention with its Guiding Principles for DTC Advertisements About Prescription Medicines. The Democrats tend to favor a more activist approach to government.

While the Democrats' squeaker capture of the Senate got the big headlines, their victory in the House is probably of greater significance to the drug industry, because it completes the circuit. “In the Senate, the change is going to be a matter of degrees,” says the ad industry insider. “The House is another story, because no matter what came out of the Senate, it went nowhere in the House with (former Majority Leader Tom) DeLay and (outgoing Energy and Commerce chair Joe) Barton. So that was a sort of insurance policy.”

The players
A particular champion of muscular regulation is Rep. Waxman (D-CA), who will serve as chairman of the House Committee on Government Reform, where he will enjoy virtually unlimited oversight jurisdiction. “He doesn't have an agenda, he has a vendetta,” says Pitts. As former chair of and then ranking Democrat on the House Energy and Commerce Committee's Subcommittee on Health, Waxman has been perhaps the leading Democratic advocate on healthcare issues and one of the drug industry's strongest critics in congress. His office is known for its fearsome investigative prowess and mastery of procedure.

“I see him using that [Committee on Government Reform] as a platform to look at a whole host of issues, including advertising,” says Jim Davidson, president of Davidson & Co. and executive director of the Advertising Coalition.

At press time, it remains to be seen who will chair the Energy and Commerce Committee Subcommittee on Health. Waxman could keep the assignment, but he'll probably have his hands full with Government Reform. A top contender, should the seat open up, is centrist Brooklyn Rep. Edolphus Towns, who recently scrapped with party leftists over his vote for the Central American Free Trade Agreement. 

Another Golden State pharma foe, Rep. Pete Stark (D-CA), will head the House Ways & Means Committee Subcommittee on Health. Formerly headed by an industry ally, ousted Connecticut Rep. Nancy Johnson, the subcommittee wields power over appropriations—the bread, butter and Porterhouse steak of Washington. Stark recently co-sponsored a bill to ban the use of physician data by pharmaceutical companies. “Even if he can't pass a bill, I can't imagine Stark being quiet,” says Kamp. “He's been one of the loudest critics over the longest time in Congress.”

The two most powerful committee barons in the House are less toothsome. Rep. Charlie Rangel (D-NY) will serve as chairman of the Ways and Means Committee, while Rep. John Dingell (R-MI) heads the Energy and Commerce Committee. “They're not enemies of the industry,” says Kamp. “Despite some of his rhetoric, Rangel is a very moderate leader who understands the need for strong business.”

Dingell, says Pitts, “has been very responsible in the past on FDA issues.” That's not to say his committee will be quiet on healthcare topics. “Regardless of what he thinks, he's been given a directive and he's going to be punitive.”

“Dingell is very much for strong enforcement,” says Kamp. “There will be hearings, but he's not out to dismantle any industry. He's from an industrialized part of Michigan and knows the need for strong business. He's been a longstanding advocate of managed care and even a Hillary Clinton-style universal service plan, but he's not going to try and rebuild the industry in his own image.”

Pelosi may be another story. The San Francisco Representative might not be an anti-corporate firebrand, but she is firmly in the liberal wing of her party and made a point of including price controls in her First 100 Hours to-do list. Fifth on her agenda, which she shared with the press: “Allow the government to negotiate directly with the pharmaceutical companies for lower drug prices for Medicare patients.”

In other words, Pelosi would eliminate a clause included in the Medicare Modernization Act that forbids the government from negotiating drug prices directly with companies. Even assuming no veto, the move probably wouldn't have any immediate impact, as a Bush-appointed HHS would be unlikely to act on its new powers, but it could set the stage for fundamental change in the industry's relationship with government—and serious losses—should the White House change hands in 2008.

PhRMA assailed Pelosi's plan in a statement: “Critics infer that there are no negotiations in how prices for medicines are set. That's simply not true. The negotiations are occurring—as they should be—between prescription drug plans, several of which already purchase medicines on behalf of tens of millions of Americans, and pharmaceutical companies. That's the marketplace in action and that's how America's seniors will see true savings without compromising the search for future cures.”

Sounds good, but it goes without saying that PhRMA CEO Billy Tauzin, a longtime conservative Democrat who jumped ship to the GOP in 1995 and went on to chair the Energy and Commerce Committee, is unlikely to get as warm a reception from the new leadership as he did from his old Republican colleagues.

Pelosi's perch may not be entirely secure, though. Rep. Steny Hoyer (D-MD), the pro-business Democratic Whip favored by many centrist and conservative Democrats, has been gunning for her job and could provide a moderating effect on the party regardless. “If Hoyer becomes majority leader, or even speaker, he represents a moderating voice for less regulation,” says Adonis Hoffman of the Four As.  

In the Senate, Kennedy (D-MA), who needs no introduction, will head the powerful Health, Education, Labor and Pensions Committee, which oversees the FDA. Sen. Max Baucus (D-MT) will head the Senate Finance Committee, on which he has been tag-teaming Big Pharma with his Republican colleague, Sen. Chuck Grassley (R-IA). Sen. Herb Kohl (D-WI), who last year joined outgoing Senate Majority Leader Bill Frist (R-TN) in calling for a GAO audit of how DTC drives prescribing, will lead the Committee on Aging (that study, incidentally, should be out soon, and will likely show similar results to a Harvard study that found 12% of prescriptions are generated by advertising).

And should Sen. Harry Reid (D-NV) step aside as Senate Majority Leader, Sen. Hillary Clinton could be waiting in the wings. While that might have been a terrifying prospect for drug companies 10 years ago, Clinton has mellowed since she moved to Chappaqua and joined the Senate, tacking toward the center. Like Rangel, she has her concerns about advertising (particularly advertising aimed at children), but would be loathe to hurt a hometown industry. Sherrod Brown (D-OH), a Senate newbie, is an old hand at pharma-bashing from his days on the Energy and Commerce Health Subcommittee.

Beyond Pelosi's vow to repeal the non-interference clause, the big enchilada is the upcoming reauthorization vote on the Prescription Drug User Fee Act. The 1992 legislation, by which many FDA operations are funded through pharmaceutical company contributions, must be renewed by Oct. 1, 2007. Like an omnibus appropriations bill, the Act's reauthorization promises lawmakers and regulators alike an opportunity to lard it up with pet projects and agenda items.

“It's a train that has to pass, and everybody's going to want to hitch a boxcar onto it,” says Kamp. The reauthorization will also provide a fine platform for grandstanding.

“Rather than looking at the reauthorization as an opportunity to look ahead and enact reforms for a better FDA, it's going to be used to look for villains and bash the agency as inept,” says Pitts.
Despite the mountain of data which has accumulated in its favor over the past decade, DTC advertising is unlikely to escape the new regime's scrutiny. “I don't think it's any secret that drug advertising is going to be the focus of a lot of people's attention,” says Davidson. “The fact is that going into this election, one of the more restrictive bills in the Senate—the Enzi-Kennedy legislation—was bipartisan.”

Among other things, the bill, which proposes a broad expansion of FDA powers in the name of postmarket safety, would authorize the agency to prohibit a company from advertising a product to consumers for two years. Sponsored by Kennedy and Mike Enzi (R-WY), the
bill was referred to the Senate Committee on Health, Education, Labor and Pensions.

The issues
Our ad industry insider sees battles shaping up on three fronts: penalizing companies for advertising through deductions; pre-clearance of advertising; and a moratorium on advertising of new drugs. “They're setting up paradigms for things to go after,” he says. “These ideas are now out there, floating around in the mainstream.” On the deductions issue, He notes that Sen. Vitter has proposed capping the deductibility of DTC at half a company's R&D expenditures. Legislation proposed by Sens. Wyden (D-OR) and Sununu (R-NH) would deduct the amount a company spends on DTC from compensation for government programs like Medicare, Medicaid and the VA.

On the advertising front, the American Association of Advertising Agencies are particularly concerned about potential threats to DTC and food and beverage ads aimed at children. Lobbying for DTC advertising is the Advertising Coalition, which includes PhRMA and Pfizer, NBC, the American Newspaper Association and the National Association of Broadcasters, among other companies, media and trade groups. The shift has also brought a change in fund-raising, as company and agency PACs have begun taking a more bipartisan approach. Kaplan-Thaler Group recently hosted a breakfast for Sen. Clinton, larding her war chest with $52,000.

On the upside, Kamp notes that since the implementation of the PhRMA guidelines on DTC ads, DDMAC warning letters for broadcast and print consumer ads have plummeted, giving DTC foes little in the way of recent violations to work with. The leadership of the FDA and DDMAC has come around to a supportive stance toward DTC, based on the agency's own exhaustive patient and physician surveys as well as external data. Davidson says hopefully that with the evidence stacked in favor of DTC advertising, the shift in the balance of power could present an opportunity to clear the air on the topic once and for all.

“We've been taking a lot of side shots on prescription drug advertising,” says Davidson. “And we've never really had an environment where there was a focus on it, with people asking questions about the benefits as well as the risks. What we're looking for here is a way to properly educate both the physician community and the patient community about the attributes of these drugs.”

However, FDA is likely to implement many of the recommendations of the recent Institutes of Medicine report—one of which was that a two-year advertising moratorium be imposed on new drugs. The establishment of an FDA advisory commission on communications—another of the report's recommendations, and one more favored by the industry—is more likely.

Another unlikely benefit of divided government: a more assertive agency. “We're going to have what we talk about as negative control,” says Kamp, “which is another term for gridlock. Whoever is in the minority still has a lot of power, because it takes consensus to pass bills, and I don't expect much consensus. But that sometimes creates an opportunity for an agency, because when Congress is stalled and can't add or subtract powers, an agency has the authority to act within the scope of its statute.” That may mean movement on Critical Path, labeling and drug safety—particularly if von Eschenbach is soon confirmed as FDAcommissioner by a lame duck Congress, as Kamp hopes. The agency will almost certainly be at odds with Congress on the issue of imports, which many in Congress support and the agency adamantly opposes for safety reasons.

“They're going to make sure Congress takes responsibility for that,” says Kamp, who argues that, in addition to the danger of counterfeit drugs flowing across our borders, reimportation also means “importation of price controls.”

“We're going to have to have to have a more honest conversation about that,” he says.
Whatever happens, one thing's for sure: It's about to get a lot hotter for the drug industry in Washington. “We've all got to start pumping iron,” says one advertising industry insider. “We've got a serious workout coming.”

SIDEBAR:How the shift in power could affect healthcare communication

DTC ADVERTISING
Expect potshots from both houses of Congress with the ascendancy of longtime DTC critics like Sen. Ted Kennedy (D-MA), Rep. Pete Stark (D-CA) and Rep. Henry Waxman (D-CA). Oddsmakers pooh-pooh an outright ban, but a temporary moratorium on advertising for new drugs, as endorsed by the Institutes of Medicine and legislation being advanced by Sens. Kennedy and Mike Enzi (R-WY), is a strong possibility. More likely is further use of the approvals process to impose restrictions on the marketing of new drugs, as with Amylin's Symlin. Congress could also seek to restrict DTC by penalizing companies for their ad spending—by capping tax deductions or sanctioning compensation. A forthcoming GAO report on how DTC influences prescribing could spark fireworks.  

MEDICAL EDUCATION
Sens. Chuck Grassley (R-IA), left, and Max Baucus (D-MT) of the Senate Finance Committee have taken a keen interest in medical education, all but accusing companies of using the grant-making process as a promotional tool. Sponsors can expect this line of inquiry to intensify as Baucus assumes the committee chairmanship from his friend Sen. Grassley. CME is, unsurprisingly, little understood by congressmen, senators and their staffs, and there is a tremendous need to educate them on this complex topic, say CME and pharma company execs. Advocacy, however, is best left to the medical professionals who rely on CME to stay informed about new drugs.

SALES PROMOTION
In the House, the Prescription Privacy Protection Act of 2006, sponsored by Reps. Pete Stark (D-CA) and Frank Pallone (D-NJ), would prohibit drug companies from using prescription data (Stark, incidentally, is poised to take over the House Ways and Means Committee Subcommittee on Health). But perhaps an even greater threat to access comes from what John Kamp calls the “Wannabe FDAs”—overzealous state legislatures like New Hampshire's, which recently enacted a ban on the commercial use of prescription audit data. Proponents of the law, which took effect in August, say it will protect doctors' privacy and curb runaway public spending on drugs.

PUBLIC RELATIONS
The shift in power will almost certainly be a boon to government relations specialists, as companies scramble to educate congressional staffers on why banning DTC and CME is a bad idea. It should also keep public affairs staff busy, as campaigning congressional Democrats engineer hearings and investigations centered on industry promotional practices. It's also, more seriously, a major opportunity to educate the public by presenting the industry's side on DTC, drug prices and other hot-button issues. (Pictured:  FDA “whistle blower” David Graham, left, and Merck's then-CEO Raymond Gilmartin at Vioxx hearing in 2005)

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