by Kristi Olson, National Health Law Program
August 2000

Last fall, bidding for a human kidney reached $5.7 million before eBay executives pulled it from the market. The on-line auction house had no choice. Under United States law, human organs are not for sale.

Elections, however, are a different story. And, this fall, the pharmaceutical industry will be doing an unhealthy amount of buying and selling.

According to a new Public Citizen report, drug companies have hired 297 lobbyists--the equivalent of one lobbyist for every two members of Congress--on the Medicare drug benefit issue alone. All told, the drug industry spent an unprecedented $83.6 million on lobbying expenditures in 1999.

Lobbying, however, is just the beginning. Public Citizen estimates that the drug industry will contribute $13.8 million to campaign coffers by the end of the year. And, according to data from the Center for Responsive Politics, the combined soft money contributions for the 1999-2000 election cycle from Schering-Plough, Pfizer, and Bristol-Myers alone came to over $2 million: $1,648,470 for the Republicans and $410,500 for the Democrats.

Source: Center for Responsive Politics data (www.opensecrets.org) analyzed by NHeLP

Republican Orrin Hatch received $341,863 from individual and PAC contributions from the pharmaceutical/biotech industry between 1993 and May of this year. Democrat Joseph Lieberman received $137,600.

Even the employees of drug companies are digging into their pockets. Pfizer employees, for example, gave $21,750 to Bush and $700 to Gore. Employees at Bristol-Myers were even more generous, giving $27,500 to the Bush campaign and $1,250 to support Gore.

Source: Center for Responsive Politics data (www.opensecrets.org) analyzed by NHeLP

Then, of course, there is the estimated $34 million the drug industry has spent so far on television, radio and print ads to manipulate Medicare drug reform. Democrats and industry experts expect Citizens for Better Medicare, the industry front-group, to have spent $65 million on advertising by the time the election rolls around.

And, as added security, Common Cause reports that pharmaceutical manufacturers Amgen, Aventis, Bristol-Myers Squibb, and Glaxo Wellcome each gave $100,000 to the Republican National Convention. SmithKline Beecham donated $250,000.

Why is this election so important to the drug industry that they are willing to spend millions of dollars on lobbying, campaign contributions, and campaign ads? The answer is simple: prescription drugs are a $100 billion dollar business. According to a new study by FamiliesUSA, expenditures for seniors alone amounted to $34.6 billion. With so much money at stake, it is little wonder that the drugs companies are fighting tooth and nail to avoid government negotiated prices for Medicare patients.

While drug companies stress that government negotiated prices would impede their ability to develop new and more sophisticated drugs, rarely do they mention that the pharmaceutical industry is the most profitable industry in the nation, with a large lead over the next highest ranked industry. According to a new report from the Kaiser Family Foundation, the median percent net profit after taxes as a percent of revenues for all pharmaceutical manufacturing firms was 18.9 percent. Commercial bankers followed at 15.8 percent. The median for all Fortune 500 firms was only 5 percent.

Note Percent shown is the median percent net profit after taxes as a percent of firm revenues for all firms in the industry. The second ranked industry each year was commercial banks.
Source: The Kaiser Family Foundation: Prescription Drug Trends - A Chartbook

Nor do drug companies tell you how much they spend on advertising and marketing compared to research and development. In 1999, Bristol-Myers Squibb, for example, spent $4,578,000,000 on marketing, selling, and administrative costs and an additional $2,409,000,000 on advertising and promotion. Yet, they only spent $1,843,000,000 on research and development.

And, when complaining about the harm that government negotiated prices would do to the industry, drug companies sometimes forget to mention that their CEOs are among the highest paid in the world. Raymond V. Gilmartin, CEO of Merck, for example, pulled in $6,031,784 in salary, bonus, and other compensation in 1999, not including the $20,391,908 he was awarded in stock options, or the $80,558,325 in unexercised stock options from previous years. Mr. Gilmartin could easily afford the $1,000 he contributed to the Bush campaign.

As Mr. Gilmartin told members of the Pharmaceutical Research and Manufacturers of American, influencing the political debate is not just good for business, it is a responsibility: "We [PhRMA] have a responsibility to add our voices to the debate on the key issues that affect the U.S. and other nations."

Meanwhile, while Mr. Gilmartin and other drug company CEOs earn millions of dollars, less fortunate Americans are going without necessary drugs. When compared to Australia, Britain, Canada, and New Zealand, for example, below-average income Americans were more likely to forego medicine because of cost. According to a study by The Commonwealth Fund, 32 percent of below-average income Americans surveyed reported that they did not fill a prescription in the past year because of cost. In contrast, only 7 percent of below-average income respondents in Britain reported not filling a prescription because of cost.

* p £ .01
Source: The Commonwealth Fund 1998 International Health Policy Survey

What does all this add up to? The good news is that, after the election, the drug industry will still be developing the most sophisticated drugs in the world. The bad news is that millions of Americans--including many seniors, people with disabilities, and the uninsured--still won't be able to afford them.

If these were human organs and not elections being sold, somebody would be facing up to five years in jail.

APPENDIX 1

Sources: Kaiser Family Foundation, Prescription Drug Trends: A Chartbook; Public Citizen, Addicting Congress: Drug Companies' Campaign Case & Lobbying Expenses; Center for Responsive Politics, Federal Election Data; Bristol-Myers Squibb 1999 Annual Report; Los Angeles Times, Health Care Firms Spend Big to Head Off Reform; Families USA, Cost Overdose: Growth in Drug Spending for the Elderly, 1992-2010.

APPENDIX 2

Should Medicare extend its coverage to pay a portion of prescription drug costs for seniors? If so, how would these additional costs be funded?

George W. Bush: Medicare should give seniors the right to choose from comprehensive health plans that include basic coverage such as prescription drugs. I believe we should ensure prescription drug coverage is available for low-income seniors who otherwise cannot afford it. Many Medicare beneficiaries already have prescription drug coverage and any changes to Medicare must not jeopardize such coverage. All proposals I make will be within the framework of a balanced budget.

Al Gore: I am fighting for a prescription drug benefit in the Medicare program to help older Americans and people with disabilities pay for their medications. I support a voluntary new prescription drug benefit that is available to all Medicare beneficiaries. The benefit will pay 50 percent of prescription drug costs - with no deductible - up to $5,000, when fully implemented. About 90 percent of Medicare beneficiaries have prescription drug costs below $5,000. The proposed plan also eliminates premiums and cost sharing for the drug benefit for beneficiaries below 135 percent of poverty. Cost sharing would also be eliminated for beneficiaries below 150 percent of poverty. The plan would also provide extra protection for those with catastrophic drug costs, by paying for all prescriptions after $4,000 of out-of-pocket costs no matter how high the bills. This benefit is particularly important for people with serious illnesses, such as heart disease or severe arthritis, for which medications can cost thousands of dollars each year. The catastrophic prescription drug benefit would help nearly 3 million vulnerable people. My plan would also provide Medicare beneficiaries with significant discounts on their prescription drugs, beginning with the first prescription they buy.

Ralph Nader: Just as there is for Medicaid recipients, there should be prescription drug coverage for Medicare recipients, with the full amount covered. This would not be feasible unless there are prescription drug price controls or government negotiated prices such as under the federal supply schedule. The funding should come from a taxpayer-based source, much as Part A (the hospital part) of Medicare is now financed.

Source: Election 2000: What the Candidates Say About Health Care, conducted by The Commonwealth Club of California and The California HealthCare Foundation. This survey is part of the HealthVote 2000 project. For more information contact The California HealthCare Foundation.

Source: Center for Responsive Politics