Outlook 2009: Just the Change We Need?

The prospect of unified Democratic control in Washington is cause for some unease in an industry that has, for years, aligned closely with Republicans. Indeed, President-elect Obama and congressional Democrats seem poised to introduce direct negotiations with drug companies on pricing for government programs, implement curbs on consumer advertising, maybe even legalize drug importation, to name just a few of the legislative unpleasantries in store for the industry. Clearly, the days when drug companies had sympathetic ears in the White House and its agencies are over. 

But one-party rule also means certainty and stability—something a beleaguered drug industry sorely needs as it reinvents its business model while struggling to surmount patent cliffs and a vicious slow spell in the R&D cycle. A better-funded, better-staffed FDA with a permanent commissioner who enjoys congressional support could do wonders for a gummed-up approvals process. Moreover, the Democrats are showing signs of getting serious about broadening access to health insurance, and greater coverage means more prescriptions filled. 

In short, on the big stuff—getting the machinery of new drug approvals moving again and seeing that more Americans get the drugs they need—an Obama administration could prove, to paraphrase a campaign slogan, just the change the drug industry needs. Either way, it won’t be a picnic.

House Majority Leader Rahm Emanuel set the tone for the Dems’ approach to pharma marketing in September, when he told a meeting of the American Association of Advertising Agencies that they would have to choose between tax deductions for R&D spending or consumer advertising. 

Emanuel, a close friend of Obama’s, has since been named White House chief of staff. Forced to choose between deductions, pharmas would probably opt to keep the one for R&D, and advertising could become prohibitively expensive.

“That puts everyone on notice that we’ve not gone unnoticed,” says Jim Davidson, executive director of the Advertising Coalition, noting the recent focus on DTC from the House Committee on Energy and Commerce. Under the leadership of Michigan Dems John Dingell, chairman, and Bart Stupak, who chairs the Subcommittee on Oversight and Investigations, the committee has held several blistering hearings on consumer advertising and investigated campaigns from Merck, Johnson & Johnson and Pfizer. “They’ve really stepped this issue up for action in the coming year,” says Davidson.

Challenging Dingell for the chairmanship of the committee is Rep. Henry Waxman, the California Dem whose Committee on Oversight and Government Reform has fought Bush administration policies on pre-emption and the distribution of journal articles to doctors by manufacturers, among other healthcare policies. 

Advertisers might enjoy the tiff, but it’s a can’t-win situation for them. Dingell and Stupak have pushed for a two-year moratorium on consumer advertising for new drugs. Waxman wants a three-year moratorium. 

“On marketing and communications, it’s going to be a very different environment,” says Arnie Friede, a former top lawyer with Pfizer who is now counsel at McDermott, Will & Emery. “DDMAC has already ramped up enforcement activity, in DTC and in other areas, and all indications are that we’ll see a substantial increase in FDA oversight of all kinds of marketing. A broad sunshine bill is pending, and it’s likely to be much broader than originally envisioned, with a lower reporting threshold and, on the positive side, some pre-emption of state laws.”

The Physician Payments Sunshine Act, from Sens. Chuck Grassley, the ranking Republican on the Senate Finance Committee, and Herb Kohl, who chairs the Special Committee on Aging, is a cinch to pass in some form. 

The bill mandates reporting on gifts, product rebates, dividends, education, funded research, food, trips and travel, and consulting fees to physicians from drug, device and medical supply companies, and imposes fines for reporting violations. 

Originally introduced in March, the bill was softened in May following negotiations with Eli Lilly & Co., which subsequently endorsed the legislation, but Friede thinks a recent report from MedPac, which advises Congress on Medicare policy, could move the needle back. The commission advised that Congress require reporting on all financial relationships between companies and physicians, including sampling, as a means of facilitating counter-detailing and holding down costs for the program. Also in the works for 2009: a report from the influential Institute of Medicine expected to take a hard line on commercial support of CME and conflicts of interest. 

The Democratic Congress could well roll back federal pre-emption of state law on “failure to warn” cases if Wyeth prevails in its Supreme Court case. 

Rep. Waxman has pushed for a reversal of the FDA draft guidance allowing companies to distribute reprints of journal articles on unapproved uses of their drugs. And the Democrats have proposed measures to expand the use of generics and “biosimilars,” along with comparative effectiveness studies, to cut federal spending on pharmaceutical drugs. 

The priority, of course, is enacting some form of universal coverage. While prospects for such a costly overhaul have dimmed somewhat since the economy hit the skids, the Democrats seem much more focused than they were 14 years ago, when Hillary Clinton’s healthcare plan went down in flames. Outside interest groups and staffs from the relevant congressional committees have been beavering away for months already, and there’s talk of employing arcane procedural moves to thwart a potential filibuster. A plan unveiled last month by Sen. Max Baucus (D-MT), the centrist chair of the Finance Committee, seems likely to serve as a blueprint—a consensus starting point—and includes transparency measures for drug and device firms. 

“Next year promises to be a challenging one for us, but with new challenges come new opportunities” says PhRMA SVP Ken Johnson, exhibiting even more message discipline than usual. 

“We’re looking forward to an open and frank discussion with members of Congress and the administration on issues affecting not only us, but more importantly, patients,” he continues. “Healthcare reform looks to be front and center next year. If it’s done in a way that preserves choice and improves access for patients, it can be a tremendous benefit to the economy. Done the wrong way, it leads us down the path of government-run healthcare, and that would be bad for everyone. We’re trying to position ourselves in a way that we have a meaningful voice in the discussion around healthcare.”

If that sounds a little defensive, well, it probably is. PhRMA, like many trade groups in Washington, was wired for access to Republicans. Johnson cut his teeth on Capitol Hill as a press aide to his boss, Dem-turned-Republican former Rep. Billy Tauzin, and PhRMA’s legislative agenda is at odds with the Democrats’ on many points. But the organization is sounding conciliatory notes of late and looking to get out in front of Congressional critics with voluntary self-regulation of industry marketing practices. 

In July, PhRMA revealed tougher policies on interactions with physicians, sharply limiting gifts to doctors and calling for caps on speaker fees to individual physicians, the amount to be determined by individual member companies. A revised set of guidelines on consumer advertising is due in January.  

“What we tried to do is listen to the criticisms,” said Tauzin in announcing the strengthened Code on Interactions with Healthcare Professionals. “These little gifts I don’t think amount to much, but they do create a bad impression, and we’re going to get rid of them.” In May, he told The Politico that DTC ads “could be both a blessing and a curse,” and that PhRMA was “ready to make new friends.” 

“I want to make sure people look at us and see us as patient advocates and not as Democrat or Republican,” Tauzin said.

On the upside for pharmas, that means an end to the antagonistic relationship between Congress and the FDA. Pharmas were often caught in the middle as Congressional chieftains strafed the agency for weak oversight in showy hearings on drug safety, consumer advertising and conflicts of interest.  

“Politicians kick around the other party’s appointees—not their own,” says Coalition for Healthcare Communication executive director John Kamp. “Democrats will support the enforcement efforts of the FDA and even work with the FDA commissioner to highlight them.”

It’s easy to lob spitballs from the bleachers. Now the Democrats have to govern. They’ll own the results. 

“Being in power is different than being in opposition, where everything the president and HHS and FDA does relative to healthcare is bad,” says Peter Pitts, SVP, Manning Selvage & Lee, who was associate deputy commissioner for external relations at FDA for part of Bush’s first term. “Now they’re going to have to strike a middle ground, because you need allies to bring an agenda forward,” says Pitts, pointing to the need for collaboration on Democratic priorities like SCHIP, the children’s insurance program, price negotiations and promoting personalized medicine. 

Getting the FDA back on track would do a world of good, even if it comes, as is likely, with a crackdown on advertising. “I think you’re going to see more focus on drug safety and enforcement, but also, if we get a strong commissioner, drugs are going to start to move through the system again,” says Tom Sullivan, president of Rockpointe, a Maryland med ed firm. “No longer will ‘the dog have eaten my homework.’”

Old hands note that the tenure of FDA Commissioner David Kessler was a Golden Age for drug approvals, despite the drug industry’s disdain for him. “Maybe in the new world, it’s science that drives the marketing and not vice versa,” says Friede. “The best ad for Crestor ever was on the front page of the Wall Street Journal [on the results of the JUPITER study], and nobody paid for that. That was the science, and you can’t buy media coverage like that.”