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Drug Prices Could Become a Divisive Issue for Democrats

Internal tensions over Big Pharma could be on full display next Congress

Divisions among Democrats over the pharmaceutical industry could hurt their party’s efforts to address high drug costs if they win a majority next year. (Courtesy iStock)
Divisions among Democrats over the pharmaceutical industry could hurt their party’s efforts to address high drug costs if they win a majority next year. (Courtesy iStock)

Democrats are making the cost of prescription drugs a pillar of the party’s health care agenda in the midterms, but if they win a majority for the 116th Congress, the party will have to grapple with internal divisions over the issue that might be magnified next year.

This campaign season has been notable for candidates pushing the party to reject corporate influence. For emboldened progressive Democrats, the party’s current plans might not be enough. Their views compete with those of new candidates from politically moderate areas with a big pharmaceutical industry presence that might be more inclined to join with longtime incumbents who sympathize more with the industry’s perspective.

The internal tensions between Democrats who regard the pharmaceutical industry with either skepticism or sympathy could be on full display if the party pursues legislation next year.

Concerns over rising drug prices resonate with voters, and many Democrats will likely want to use their political momentum as a catalyst for bold action. House Democrats often play down potential divisions, arguing that the party would be able to come together on an issue that voters are eager for lawmakers to address.

But some lawmakers fear the party could box itself in nearly as much as Republicans did at the beginning of this congressional session as they rode an electoral wave that led to doomed attempts to “repeal and replace” the 2010 health care law.

For instance, many Democrats are pushing to allow the federal government to negotiate Medicare drug prices, an idea that others say would be ineffective or too aggressive.

“It’s a great talking point,” California Rep. Scott Peters said of the Medicare plan. “I think it deserves some hearings, but it’s not as easy as it sounds. It’s not a magic bullet.”

More liberal Democrats want to take a number of other steps that are not likely to survive Congress. The dynamics probably won’t push the party into the same type of quagmire Republicans were in last year over the health care law, but it could lead to internal arguments over how far to go.

“There certainly are some members that are very sensitive to Big Pharma and get a lot of money” from the industry, said Illinois Democrat Jan Schakowsky, one of the more strident drug industry critics among current lawmakers. “Some of the proposals may be a step too far for some.”

The debate could force a reckoning with the party’s history of accepting pharmaceutical industry contributions.

“Pharma’s lobbying arm and contribution arm is pretty powerful, and it’s powerful with Democrats, as it is with Republicans,” said Rep. Raúl M. Grijalva, an Arizona Democrat who co-chairs the Congressional Progressive Caucus. Grijalva noted that Republicans get more from the industry than Democrats — but most years it’s only around 10 percent more, and when Democrats ran Congress in the late 2000s it was an equal split.

“I think the public mood and demand on drug prices is going to be so intense, and it’s going to be made even more intense as we get into the agenda items, that those members that are trying to accommodate pharma are going to find themselves in trouble,” he said.

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Areas of agreement

To be sure, Democrats are largely unified on some changes. House Democrats, if they capture the majority, have three proposals they mean to enact. Their top priority would be to amend Medicare’s prescription drug benefit to allow the government to directly negotiate with manufacturers over the prices. Currently, insurance plans working on behalf of Medicare negotiate with companies only over the prices in each of their plans, which represent a fraction of the market.

Medicare negotiation passed the House in 2007 with unanimous support from Democrats, but stalled in the Senate.

Plans also call for a federal “price-gouging enforcer,” a Senate-confirmed position that would have powers to investigate drug companies and fine them if their price increases are too high. Finally, makers of drugs that raise their prices by a certain amount would have to submit a justification to the Health and Human Services Department.

All three of these policies, put forward in the Democrats’ “Better Deal” proposal, appear to have widespread — but not universal — support among the party’s members.

Lots of candidates back Medicare price negotiation, such as Katie Porter, who hopes to unseat Republican Mimi Walters in a Toss-up Southern California race.

“They have to deal fairly with consumers, and in this case, one of the consumers is the government,” she said.

Others include Tom Malinowski, who is challenging Republican Leonard Lance in New Jersey’s 7th District, and Sean Casten, who’s up against House Ways and Means Health Subcommittee Chairman Peter Roskam, an Illinois Republican.

All three are running in GOP-held districts also backed Hillary Clinton in 2016.

Those are also places with a lot of pharmaceutical industry employees, and they are represented by incumbents who accepted some of the largest contributions from the industry this cycle: $124,250 for Lance and $87,750 for Walters, both members of the Energy and Commerce Committee, which oversees many health issues. Roskam, whose subcommittee oversees Medicare policies, received $107,563. Pharmaceutical manufacturer contributions from 1989 to present include both PAC and individual contributions.

Democrats also universally say that Republicans haven’t done much to lower prices. While President Donald Trump publicly berates “Big Pharma” for price increases and pushes his HHS secretary to fight back, Democrats view the administration’s plans as industry-approved half-measures. The legislative part of Trump’s plan has seen little action in the current Congress.

But while Democratic candidates agree on some policies and what they see as the other party’s deficiencies, their views on the industry and other ideas vary.

Porter said she would listen to the drugmakers’ arguments, but called Walters “bought and paid for” by the industry. Porter is not accepting corporate contributions. Neither is Malinowski. But he knows not to alienate them.

“They wake up every single morning and go to work because they want to make people better and want to help people suffering,” Malinowski said. “At the same time, many people have legitimate questions about what’s happening to drug prices.”

Then there’s Casten. Pharma contributions aren’t a major factor in his campaign, but as a businessman himself, he’s slightly more sympathetic to the challenges that pharmaceutical companies face. There is “a massive amount of risk associated with new drug development,” he said. “If you don’t have high returns, people won’t take big risks.”

But he acknowledges how much the drug industry can benefit from government-sanctioned monopolies and federal subsidies, which is why he thinks the government needs more of a say in what it finances.

Different directions

Some Democrats are urging bolder action.

In addition to the three main proposals, they also want to import less expensive drugs from countries like Canada, stop the use of regulatory loopholes to prevent competition, and address excessive patent terms that provide monopolies to drug companies.

Many candidates this year support “Medicare for All” ideas in conceptual calls to overhaul the entire health care system by providing federally financed coverage to more consumers.

Alexandria Ocasio-Cortez, who defeated New York Rep. Joseph Crowley in a June Democratic primary, has argued that enacting “Medicare for All” would mean that the program has more buying power to influence the outcome of drug price negotiations. Ocasio-Cortez also didn’t accept corporate PAC funding, and accused Crowley of opposing Medicare-for-All approaches because of the money he accepted from the pharmaceutical industry. (Crowley received $73,150 during the 2018 campaign cycle, according to the nonpartisan Center for Responsive Politics.)

Grijalva predicted the influence of “insurgent” candidates will pressure the party’s leaders into doing more.

“The three points in there, while they’re good, that’s not going to satisfy a good chunk of people here on our side,” he said.

Then there are the members who will caution against Democrats moving too fast, or focusing too much on drug manufacturers without evaluating the rest of the pharmaceutical supply chain.

While the drug industry tends to favor Republicans, with the party’s support of lower corporate taxes and lighter regulations, Democrats get a healthy amount of industry campaign contributions — especially when they are in power.

In the 2012, 2014 and 2016 election cycles, the ratio of drug industry support to Republicans versus Democrats was around 60 percent to 40 percent.

But in 2008 it was an equal split and in 2010 Democrats received 51 percent of the industry’s financial support. They controlled the House, Senate and White House after the 2008 elections before Republicans regained the House two years later. 

So far in the 2018 cycle, pharmaceutical companies have made nearly $13.4 million in individual, soft money and PAC contributions to candidates at all levels. Around $7.3 million, or 55 percent, has gone to Republicans and $5.9 million to Democrats.

Among congressional incumbents, the industry has given $3.9 million to Republicans and $2.7 million to Democrats in House races. It’s a different story in Senate contests, with $1.6 million going to Democrats and $1.1 million to Republicans.

Democrats who accept the money point to the fact that drugmakers are important parts of their district’s economy, and say that colors their views more than any campaign contribution would.

Peters, the Medicare-negotiation skeptic, is among the few Democrats who defend the pharmaceutical industry’s position on a program that lets some hospitals buy drugs at a discount. He co-sponsored a bill that would stop some hospitals from enrolling in the program, and would impose reporting requirements that the hospitals view as unnecessarily burdensome. The drug industry provided $96,050 for his re-election this cycle, for a total of $254,600 since he was elected in 2012.

Peters, who represents San Diego, rejects a correlation between his positions and the contributions.

“I think every major pharmaceutical company has research in my area, which is really important to my region’s economy,” he said in an interview. “I hope that they’re giving to me because they think that I’m a good member of Congress.”

Rep. Anna G. Eshoo, who represents parts of Silicon Valley, said anything the party does next session should also examine how insurers, pharmacy-benefit managers and drug distributors influence prices.

“Any comprehensive approach to drug pricing has to anticipate and address issues at each step of the drug supply chain,” the California Democrat said

Eshoo, who has been in Congress since 1993, has a detailed understanding of drug price issues and is a likely candidate to be the top Democrat next year on one of the main panels overseeing health care, the Energy and Commerce Health Subcommittee.

She faces criticism from the advocacy group Patients for Affordable Drugs Action, which opposes candidates that it views as too cozy with the industry. Eshoo received $68,950 from the drug industry this cycle, and $844,415 since she was first elected. The group opposes her role in creating a 10-year-old policy with implications that are growing more acute.

When the House was crafting the bill that would become the 2010 health care overhaul, Eshoo, along with Texas Republican Joe L. Barton, wrote a provision that launched a framework for regulating generic versions of complicated biotech drugs known as biologics. Most generic drugs can be sold only after the expiration of a five-to-eight-year exclusivity period for the original product. At the time, Democrats like Henry A. Waxman of California wanted the same time frame to apply to biologics. Ultimately, Eshoo and Barton successfully pushed for a 12-year exclusivity period.

Today, most of the generic “biosimilar” drugs approved by FDA are still not on sale because the patent exclusivity periods haven’t expired — meaning drugs for numerous cancers and autoimmune diseases don’t have competition that can help bring prices down.

Eshoo argued that before her biosimilar legislation, the exclusivity period for biologics was unlimited. “It was very, very carefully crafted, passed on an overwhelmingly bipartisan vote,” she said. She rejects the idea the contributions are connected to her viewpoint.

“My voting record has always been directed at the patient, the consumer,” she said.

Eshoo’s focus on other parts of the supply chain is something the drug industry frequently does, too — but it’s not completely unfounded. There are serious questions about the profits made by middlemen and their role in setting prices. That sets up another issue where Democrats could be fighting among themselves.

After a hearing where HHS Secretary Alex Azar criticized pharmacy benefit managers, who negotiate with drugmakers on behalf of insurance plans, Massachusetts Democratic Sen. Elizabeth Warren came to their defense.

Azar alleged that benefit managers have an interest in keeping list prices high because they can profit from the rebates they negotiate. Because of that, he said, benefit managers pushed back on drug company efforts to reduce list prices. Warren and Minnesota Democratic Sen. Tina Smith gave the benefit managers a chance to tell their side of things.

“The information they provided raises serious questions about both of the allegations you made in your testimony, and about whether you were providing accurate and complete information when you indicated that PBMs and drug distributors — rather than drug manufacturers — were responsible for the drug manufacturers’ refusal to reduce drug prices,” the senators wrote in an August letter to Azar.

But in the end, most Democrats are still preaching party unity, and say they will unify to pass their plan. Schakowsky said it’s necessary to help constituents deal with one of their greatest problems.

“Constituents are literally dying because of this issue, and I think we’re going to absolutely have to move forward,” she said.

Others suggest that if Democrats don’t deliver, they will pay a political price.

“People have to make the decision if they want to maintain their friendly ties to pharma,” Vermont Democratic Rep. Peter Welch said. “Nobody can really defend the price-gouging and I think if we get this on the floor, it’s going to be very hard for members to vote against.”

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