Pharma Industry Spent Big to Block Drug Reform in 2021

With drug price reforms on the agenda, pharmaceutical companies last year rallied their significant lobbying resources to block or water down transformational policies. Partly as a result of those lobbying efforts, drug price reform is on the ropes, though sources say there is a meaningful chance that a standalone drug price reform bill could pass Congress this year before the midterm elections.

Drug price reform efforts have most recently been part of the proposed Build Back Better Act (BBBA), a bill that contains much of President Joe Biden’s proposed policy agenda. That bill stalled out in December, when centrist Sen. Joe Manchin (D-W.Va.) said he could not back the measure as proposed. When Congress disbanded for the holiday recess, the BBBA had several notable drug-pricing provisions. The federal government would have been able to negotiate the prices of certain high-cost medications with pharmaceutical manufacturers. Also, drug prices would be barred from rising at a higher rate than inflation, the Medicare Part D benefit design would be revamped to lower beneficiaries’ out-of-pocket costs and the price of insulin would be capped. Moreover, the never-implemented Trump-era rule that would have overhauled the prescription drug rebate structure in Medicare Part D would have been repealed.

These policies were not as ambitious as the drug price reform measures initially introduced by Democrats. That package, which was based on H.R. 3, a bill introduced in 2019 and passed by the House of Representatives, faced determined opposition from pharmaceutical companies and the pharmaceutical industry’s most important trade group, Pharmaceutical Research and Manufacturers of America (PhRMA).

According to Open Secrets, a political fundraising watchdog group that compiles data from federal filings, PhRMA in 2021 deployed a record-high 195 lobbyists and spent $30,377,000 on lobbying. Overall, $353 million was spent on pharmaceutical policy lobbying in 2021 by organizations including PhRMA and drug manufacturers (see infographic below).

Centrist Democrats Flip on Drug Prices

Several centrist Democrats, including Arizona Sen. Kyrsten Sinema, Oregon Rep. Kurt Schrader and California Rep. Scott Peters, flipped their position on drug price reform. They voted for H.R. 3 in 2019 but changed their minds on aggressive drug price reform later on. Each received substantial contributions from pharmaceutical industry interests.

Shawn Gremminger, a veteran lobbyist who is director of health policy for the Purchaser Business Group on Health (PBGH), tells AIS Health, a division of MMIT, that he doesn’t believe pharma’s lobbying efforts are the sole reason Sinema and company changed their tune. PBGH, a trade group of large employer plan sponsors that recently launched a PBM, backs aggressive drug price reform. Gremminger points out that Democrats’ narrow majorities in both chambers mean that they have a slim margin of error.

That means a normal amount of vacillating becomes a big deal.

“The challenge here is just how closely divided Congress is,” he explains. “In a more normal world, in which the majority party has a more sizeable majority, you can afford to just tell people like Peters in San Diego” — Peters’ district contains a notable pharma and biotech research hub — “‘I get it, you have to vote the way you vote, go ahead and vote on the bill — no big deal.’ When you have a five-member majority in the House, you just don’t have that luxury. Each individual member just has substantially more leverage than you might see in a more typical year. So your odds of getting pure policy that isn’t watered down just go down really substantially. When I look at what happened this time around, you have a pretty small group of members” who dictated terms of passing the bill to leadership — not the other way around, as is usually the case.

Votes Are More Valuable With Narrow Majority

“In the House,” Gremminger continues, “it was Peters and Kurt Schrader and a couple of others who had always been somewhat skeptical of regulation of the drug industry. But in the past, they had said they were willing to vote for it, because they knew the vote didn’t really matter. This time, they said that they weren’t going to go for it. What that comes from, I think, is one, they were sort of ideologically predisposed not to agree with it. And two, I think they got lobbied very hard by industry.”

That dynamic also allowed centrist members to water down the bill that they eventually voted on. Drug pricing expert Rachel Sachs, an attorney and law professor at Washington University in St. Louis, observes that “even the version that passed the House, in some ways, had changed from H.R. 3.”

“So the first two elements — the change of the Part D structure to be more generous to beneficiaries and to impose greater responsibility on both pharma and private plans — that remained largely identical between the introduced version in 2019 and the passed version in 2021. And that’s also true for the inflationary rebates,” which had insubstantial changes, she tells AIS Health.

The real changes were in drug price negotiation, Sachs says. There, centrist Democrats “succeeded in obtaining significant changes and…limitations to the ways in which that part of the bill would work. In particular, they limited the number of drugs that could be subject to negotiation. They impose a significant amount of time before that negotiation could even begin.”

Current Bill Is ‘Narrower in Scope’

Sachs adds the current version “would still give the secretary of HHS the authority to negotiate for the prices of certain drugs, which is an authority that HHS does not currently have. But it’s fewer drugs. And there’s limitations on when that negotiation can occur. So it is narrower in scope, and CBO [the Congressional Budget Office] has scored [the bill] as saving significantly less [money] as a result of that.”

Pharma industry allies argue that passing drug price reform would stifle innovation. In a Dec. 6 statement, PhRMA CEO Stephen Ubl said that “when government bureaucrats set the price of medicine, patients ultimately have less access to treatments and cures.” He also argued that the BBBA’s drug pricing component “stifles the development of new uses for and improvements to medicines after they are first approved.”

Sachs says this argument is dubious.

“Pharma wants us to be at a place where they can point to a number of drugs that would be forgone if we were to pass some sort of drug pricing reform and have that end the conversation,” Sachs says. “Pharma wants to say any policy that leads to fewer drugs being developed is the wrong policy. I don’t think that’s the right way to ask the question — they only ask this question sometimes, and it’s not even the right question to ask.”

Will Lower Prices Stifle Innovation?

“We pass laws all the time that give large new subsidies to the pharmaceutical industry in ways that encourage them to make more drugs,” Sachs says, pointing to the debate around price negotiation during the early days of Medicare Part D as an example. Sachs says that pharma relied on the same argument about innovation back then — even though their revenues stood to (and ultimately did) grow as seniors could afford more prescription drugs with government assistance.

The other problem with the innovation argument, Sachs says, is “we don’t just care about the number of drugs, we care about how good those drugs are. What kinds of health benefits do they provide to patients?”
That consideration hasn’t entered the debate, Sachs says, because CBO took “no position on what the health benefits of these products are going to be….It would be better to have drugs for conditions that don’t currently have effective treatments than a drug in a class where there are already a lot of treatment options for patients. And so the question is, what are we currently encouraging companies to make? And how would changes to that impact not just the number but the type of the drugs that they’re developing? I think that’s the more important question.”

Loren Adler, an economist and associate director of the USC-Brookings Schaeffer Initiative for Health Policy, makes a similar point.

“If your argument is we can’t cut prices a cent without destroying innovation — if that’s true, then raising revenues by one penny will unleash some new, massive world of innovation,” Adler says. “So why aren’t we artificially increasing prices? In theory, there is an optimal level of prices here that we don’t know. You could plausibly make an argument that prices are too low.”

Similarly, Adler points out, “we’ve chosen random [patent] exclusivity periods. We’ve tried to guess what we think is fair. But there’s no reason why 12 years is the exact right time frame and anything less would be awful. There’s a lot of guesswork going on.”

Contact Adler at ladler@brookings.edu, Gremminger via James Chisum at james@millergeer.com and Sachs at rsachs@wustl.edu.

Record-High Pharma Lobbying Zeros In On Democrats

By Jinghong Chen

The pharmaceutical industry spent a record amount — more than $352.8 million — on lobbying in 2021, as drug pricing continues to be a hot topic on Capitol Hill. The Pharmaceutical Research and Manufacturers of America (PhRMA) spent $30.4 million in 2021, beating its own spending record of $29.3 million in 2019, according to data compiled by OpenSecrets. The industry lobbied aggressively on H.R. 3, the Lower Drug Costs Now Act, with 184 organizations registered to work on the bill. Meanwhile, pharmaceutical companies, which traditionally give more to Republicans, distributed around 60% of donated campaign funds to Democratic lawmakers in 2021. Among the 20 lawmakers who received the most contributions from the industry during the 2021-2022 election cycle, 15 are Democrats, including Kyrsten Sinema of Arizona, who opposed several provisions of H.R. 3.

NOTE: All donations took place during the 2021-2022 election cycle and were released by the Federal Election Commission on Feb. 1, 2022.

SOURCE: OpenSecrets.

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