Lobbyists circle US drug makers over deficit talks

Lobbyists circle US drug makers over deficit talks

October 17th, 2011 // 12:59 pm @

With pressure mounting for a deficit-reduction deal in Congress, the $300 billion U.S. pharmaceutical industry is looking a little like a ship at sea with danger in the water below.

Drug makers have begun to emerge as a favorite target for cost-cutting proposals from others in the healthcare sphere who hope to avoid the fiscal knife themselves, lobbyists and analysts say.

The six Democrats and six Republicans who make up the congressional “super committee” tasked with finding at least $1.2 trillion in deficit savings over 10 years are less than six weeks away from their Nov. 23 deadline to designate cuts.

Analysts say any deal could include $300 billion to $500 billion in reductions from Medicare, Medicaid and other federal health programs — a prospect that has thousands of healthcare lobbyists frantic to find ways to minimize damage for drug makers, insurers, hospitals, doctors, state governments, the elderly, the poor and the disabled.

“It’s really sort of a shark tank,” said Matt Salo, executive director of the National Association of State Medicaid Directors.

“You’ve got advocates for providers, advocates for beneficiaries, advocates for states — all looking for ways to minimize harm or get something they want.”

What some healthcare lobbyists want are ways to help super committee members find large savings that don’t affect their own revenues or the benefits available to an estimated 100 million Americans who depend on Medicare and Medicaid.

“Many of the players are pointing a finger at pharmaceuticals,” said Ethan Siegal of the Washington Exchange, a research firm that analyzes public policy for institutional investors and businesses.

Among initiatives aimed at the pharmaceutical industry is a proposal backed by President Barack Obama, Democratic lawmakers and health consumer advocates that would impose drug rebates on Medicare Part D, the program’s prescription drug benefit plan.


The White House estimates that such a move would save $135 billion over 10 years, or about 42 percent of the $320 billion healthcare deficit savings that Obama has proposed to the super committee.

“If you can knock off $100 billion-plus in one fell swoop, it’s a very enticing thing and it’s smart for other groups to point that out,” Siegal said.

Some healthcare providers, including hospitals, also want the super panel to lower Medicare costs by speeding the arrival of cheaper generic drugs on the market.

State governments, hoping to avoid potential cuts in federal spending on Medicaid, are promoting ideas that would restrict the use of prescription drugs in the $420-billion-a-year program.

The powerful Pharmaceutical Research and Manufacturers of America (PhRMA) trade group vehemently rejects the rebate idea as a failed price control. It also defends Medicare Part D as a program with declining costs and points to U.S. government estimates that predict average premiums for the program’s drug benefits will be 44 percent lower than expected in 2012.

Otherwise, industry officials dismiss efforts to shift the cost-cutting burden onto its shoulders.

“We’ve certainly had our share of quivers pointed at us, that’s true. It’s not a new phenomenon,” said PhRMA Senior Vice President Matt Bennett.

Lobbyists say the non-pharmaceutical sector of the healthcare industry may be targeting drug makers because of a 2009 deal brokered in part by Democratic Senator Max Baucus that many say limited the pharmaceutical industry’s exposure to the costs of healthcare reform.

Baucus is now a member of the super committee, a fact that lobbyists say could help deflect some of the deficit-cutting onus away from pharmaceuticals.

On Capitol Hill, healthcare lobbyists outnumber members of Congress by more than 5 to 1, according to the Center for Responsive Politics, a nonpartisan research group.

Data compiled by the center also shows healthcare industry sources have donated more than $1 billion to the campaign coffers of U.S. politicians over the decades and nearly $19 million to members of the super committee.


Lobbyists say the pharmaceutical industry’s relative isolation contrasts with a tenuous alliance of interests between doctors, hospitals and other providers that appears to have muted infighting within their ranks, at least for now.

Representatives from other segments of the healthcare industry are also arguing for a united front in making their case to Congress.

“We all need to work together,” said Alissa Fox, vice president of the Blue Cross/Blue Shield Association. “We’re all concerned about costs and we’ve got to move fast.”

Key to the shared interests among some segments of the healthcare industry is the nexus of income streams that bind many healthcare providers and insurance companies.

“As the industry integrates, it’s hard to find places where cuts don’t come back to haunt you,” said a healthcare lobbyist who represents providers. “Hospitals only hurt themselves by punishing doctors because now many of the doctors work for them, and no one wants to cut insurers because they’re a major income source.”

Providers, including physicians, are especially sensitive to the potential knock-on effects of funding cuts to other areas of the healthcare system after rounds of cuts in Medicaid and Medicare reimbursements.

“You can stone us back to the Stone Age. But I don’t know that anybody’s going to like what’s left in the dust,” said Cindy Moran, a government relations specialist at the American College of Radiology.

Healthcare lobbyists across the spectrum agree that their best outcome would be for the super committee to deadlock. That would trigger automatic spending cuts but would spare Medicaid and amount to relatively moderate reductions in Medicare.

But the current balance of alliances could shift if the panel showed signs of striking a deal. The super committee discussed healthcare issues late last month, surveying proposals from several outside sources, according to lobbyists with contacts on the committee staff.

“You’ll see civil war breaking out between industry sectors as things evolve,” said John Howard of the Washington lobby firm Wexler & Walker. “So far, the debate hasn’t crystallized enough for people to know what cuts the super committee is talking about.” (Additional reporting by Alina Selyukh; Editing by Michele Gershberg, Deborah Charles and Sandra Maler)

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