His healthcare plan calls for allowing drug reimportation and direct government negotiation of drug prices with companies that, he says, “benefit most from the status quo, and in many cases are the greatest obstacles to reform.” So why have the executives and employees of an industry which has been more closely identified with the Republican party, favored Democratic presidential candidate, Barack Obama, in donations—by a rate of better than three-to-one?
Well, Republican presidential candidate, John McCain, who also favors reimportation, and who would downsize the Medicare prescription drug benefit and push generics over branded drugs, isn't exactly a peach on issues of concern to the pharmaceutical industry. And in a “change” election, the money—smart or not—is on Obama.
Turning the industry on its head
It's a curious role reversal, as Obama, at this writing, clings to a tenuous lead while trying to close the deal with independents and undecideds who see him as an untested, unvetted question mark. But from an industry perspective, at least you know where he stands, even if his policy positions aren't exactly pharma industry-friendly, and there's a perception that, being more a pragmatist than a populist, Obama is willing to listen to industry concerns.
McCain, the straight-talking maverick turned ardent defender of Bushism, is more of a mystery. Healthcare has never been his forte—he's more attuned to foreign affairs and, from his long service on the Senate Committee on Commerce, Science and Transportation, finance.
His health policies, which dovetail President Bush's unrealized plan on matters of insurance, diverge sharply from the pro-business Republican mainstream when it comes to the pharmaceutical drug industry.
“When it comes to prescription drugs, [Obama and McCain] are remarkably similar,” says Mike Tanner, senior fellow at the conservative/libertarian Cato Institute in Washington, DC, and author of the July 2008 briefing paper A Fork in the Road: Obama, McCain and Health Care.
“Both denounce the industry for ‘obscene profits,' preying on the sick, etcetera,” Tanner explains. “Both embrace reimportation, and not just reimportation but the way they would do it imports price controls from Canada. Both favor allowing Medicare to negotiate drug prices under Part D. The only place they really diverge is on Medicare Part D, where Obama wants to fill in the donut hole and McCain has called for means testing. In some ways, Obama is the slightly more pro-drug company candidate, because he wants [government] to buy more drugs.”
At a January debate in New Hampshire, McCain brought up suits by attorneys general in South Carolina and Iowa against drug companies for allegedly bilking their Medicaid patients with inflated prices.
Caught in a mudslinging match
“How could this happen?,” asked McCain. “How could pharmaceutical companies be able to cover up the costs to the point where nobody knows? Why shouldn't we be able to reimport drugs from Canada? It's because of the power of the pharmaceutical companies. And we should have pharmaceutical companies competing to take care of our Medicare and Medicaid patients.”
“Don't turn the pharmaceutical companies into the big, bad guys,” answered then-rival Mitt Romney, the ex-investment banker and former governor of biotech-happy Massachusetts, before launching into a defense of the industry that could have been authored by PhRMA. “Well, they are,” chuckled McCain.
At times, the campaigns seem to be competing to out-demonize the drug industry. An August spot from the McCain camp, dubbed Broken, boasted: “Only McCain has taken on Big Tobacco, drug companies, fought corruption in both parties.”
Obama's Embrace spot answered with a shot of McCain in front of an oil rig , the narrator scowling: “The money—billions in tax breaks for oil and drug companies, but almost nothing for families like yours.”
When Obama's vice president pick, Sen. Joe Biden of Delaware, drew fire for alleged favoritism toward financial services firms, the campaign shot back: “Sen. Biden has a 35-year record fighting for people against powerful interests, whether it's drug companies, oil companies or insurance companies.”
The devil you know?
Obama's Plan for a Healthy America declares that he will “tackle needless waste and spiraling costs by increasing competition in the insurance and drug markets.” More precisely, he would:
- Establish an “independent institute” to conduct comparative effectiveness studies on drugs, devices and procedures;
- “Allow Americans to buy their medicines from other developed countries if the drugs are deemed safe and prices are lower outside the US;”
- “Increase the use of generic drugs in the new public plan, Medicare, Medicaid, FEHBP (Federal Employees Health Benefits Plan) and prohibit large drug companies from keeping generics out of markets; and
- “Repeal the ban on direct negotiation with drug companies and use the resulting savings, which could be as high as $30 billion, to further invest in improving healthcare coverage and quality.”
McCain's Straight Talk on Health System Reform plan, by contrast, running a trim 1,379 words compared to Obama's 6,900-word opus, says only that he would “look to bring greater competition to our drug markets through safe re-importation of drugs and faster introduction of generic drugs.”
That blurb belies McCain's somewhat antagonistic history with the drug industry. In 2002, he collaborated with Sen. Chuck Schumer (D-NY) on legislation aimed at reducing what they saw as “abuses” of the 1984 Waxman-Hatch Act by making it harder for branded drug makers to stave off generic competition. In 2003, he opposed the Medicare Part D prescription drug benefit, which he characterized, in an Iowa primary speech, as “another unfunded entitlement to the fiscal train wreck that is Medicare.”
McCain, striking a Goldwaterian pose, would scale back the benefit, which the drug industry lobbied hard for, by raising premiums for the plan on couples earning more than $160,000 a year. And he has been an aggressive advocate for reimportation of drugs from Canada and direct negotiation of drug prices for federal programs like Medicare and Medicaid.
Of course, presidents seldom deliver on the big plans they ran on. If they aren't stymied outright by Congress (see Clinton, Hillary), they'll likely see their policy proposals so diluted and larded with pork as to be unrecognizable by the time they reach their desk. But Bush, with a strong majority in the House and a thin majority in the Senate, was able to see major legislation like his tax cuts and Medicare Part D pass into law. So, given the certainty that the far more pharma-averse Democrats will control both houses of Congress, wouldn't the industry fare better under a divided government?
Some, said The CATO Institute's Tanner, fear that McCain would pass more industry-averse measures, because he'd command a measure of loyalty from his Republican colleagues in Congress, while Republicans in the Senate would block Obama.
Marc Scheineson, a former associate commissioner for legal affairs at FDA who now heads the food and drug practice at Washington, DC, law firm, Alston & Bird, finds that logic overly clever.
“The general perception is that Republicans are probably a little more pro-industry than the Democrats, and under a Democratic administration, the honeymoon period is likely to be quite productive in terms of legislative enactment,” he explains. “I think the drug industry is nervous that they could become a target and some kind of federal pricing schedule could be implemented.”
Scheineson notes that industry bête noirs like John Dingell (D-MI) and Henry Waxman (D-CA) would have considerable influence on an Obama administration.
The appointments that matter
Even more worrisome to the industry is a continuation of the drought in new drug approvals. “What's most important to all of this is who's head of HHS and FDA, and will they reopen the drug approvals process so that we can get some new drugs and new uses approved, and do they have an enlightened view of marketing?,” asks John Kamp, executive director of the Coalition for Healthcare Communication. “For the marketing community, the primary concern is the same as their customers, and that's that if there's no new drugs approved and we've got a virtual freeze on new drugs, we don't have drugs to market. So, the next commissioner has got to be willing to create a critical pathway for approval, and that could be a Democrat or a Republican.”
Kamp notes that Scheineson's old boss, FDA Commissioner David Kessler, was one of the most hostile to the industry. And yet it was he who created the agency's early access and fast track approval systems to speed the development of drugs to treat HIV/AIDS.
And while divided government may obstruct nettlesome legislation, it can also gum up the works at FDA, if the past couple years are any evidence. So who might Obama name to head the agency? Steven Nissen's name has been in the mix. The Cleveland Clinic cardiologist has made a name for himself as a drug safety crusader. However, Scheineson notes tartly that “people who campaign for the job don't usually get it, and he's sort of out there.” Democratic FDA commissioners are traditionally MDs, not JDs, says Scheineson, and never come from industry. And though they typically come from outside the agency, Assistant Commissioner for Policy Jeff Shuren might well make an Obama White House shortlist. Another contender on the inside track: Janet Woodcock, director of CDER.
For an Obama HHS secretary, Democratic National Committee head, Howard Dean, or former Senate Majority Leader Tom Daschle (D-SD) (now a partner of Scheineson's at Alston & Bird) would be likely picks. Dean made healthcare a centerpiece of his 2004 primary campaign, and Daschle just wrote a book titled Critical: What We Can Do About the Health Care Crisis.
Sen. Ted Kennedy, (D-MA) who chairs the Health, Education, Labor and Pensions (HELP) committee, would wield enormous influence over health policy, providing his own health held up (he's currently fighting brain cancer). Should Kennedy leave the Senate, Sen. Chris Dodd (D-CT) would be the ranking Democrat on the committee but could well move to the Senate Committee on Banking, Housing and Urban Affairs, leaving Sens. Tom Harkin (D-IA) or Barbara Mikulski (D-MD) in line to chair the committee. Kennedy's lead staffer on health, David Bowen, could be next in line for an appointment, as could Mikulski's former chief of staff Diane Thompson, who was associate commissioner for legislative affairs at FDA. Sen. Mike Enzi (R-WY), the ranking Republican on the HELP committee, would be influential in a McCain administration, as would Rep. Michael Burgess (R-TX), a former OB/GYN doctor, and his fellow Texan Rep. Joe Barton, who serves as ranking member of the Committee on Energy and Commerce. Dr. Edward Dietrich, founder of the Arizona Heart Institute, is a possible home-state pick for a McCain appointment.
Either way, says Kamp, industry will be hoping for “a concern that people are dying from disease rather than the paranoia about side effects that we've got right now.”