By Farron Cousins
When it comes to influencing policy in Washington, every industry has their preferred methods. The oil industry sets up phony grassroots campaigns to spread misinformation and lobby Congress for everything they want. Wall Street banks prefer to operate in the shadows, throwing money towards members of Congress they think will be influential. But when it comes to affecting policy in Washington, D.C., no organization or industry has gamed the system better than the pharmaceutical industry.
With combined yearly income that tops $110 billion (and that’s just from prescription drugs – revenue from medical devices hovers around $350 billion,) the pharmaceutical industry is one of the most powerful – both financially and politically – industries in the country. And since they can’t make a move without government approval, they’ve created an infrastructure that will benefit their companies for generations.
Unlike other companies that focus all of their time on either political donations or indirect lobbying, Big Pharma has taken an “all of the above” approach when it comes to dirty tricks. Sure, they throw around a hefty amount of campaign cash, but money can only buy so much if the backlash from the public is strong enough. So in order to overcome the limitations of dollar bills, the industry has decided to take a page out of a sleazy spy novel – they operate with men on the inside of the system.
The crimes that Big Pharma has managed to get away with as a result of their two-pronged approach towards policy influence would make even the hardest gangster blush: Price gouging, negligence, lying to government officials, and even manslaughter. And even though our U.S. Supreme Court tells us that corporations are “people,” not one executive from the pharmaceutical industry is sitting in a jail cell. They are having expensive dinners in New York City; enjoying cocktails with government officials; and coming up with new, manufactured diseases that they can “cure” for a hefty profit. Let’s see how they do it.
First and foremost, cash is always king in Washington. Unlike the oil industry, who gives most of their cash strictly to Republicans, or labor unions who favor Democrats when writing campaign checks, Big Pharma will donate money to any candidate or established politician who has an open pocket. By donating indiscriminately, they insure that their needs are met, regardless of which party is currently in power. For example, during the 2010 midterm elections, 54% of the pharmaceutical industry’s money went to Democrats. In contrast, their donations for the 2012 election cycle have flowed towards Republicans (55% of total campaign contributions.) But a few percentage points one way or the other isn’t enough to show that the industry favors one party over the other. It just shows that they are playing both sides of the board, gaining an advantage over other special interests in every election.
And this isn’t chump change we’re talking about here. Total donations from the industry were more than $54 million in 2010, and have already topped half that amount in the last few months for the 2012 presidential and congressional elections. But that’s just the direct money that the industry is spending. There is also the indirect money that they use to hire lobbyists to sway policy and public opinion. According to a recent analysis by The Center for Responsive Politics, between the years 2009 and 2011, the pharmaceutical industry as a whole spent more than $700 million on lobbying. That’s about 75% more than the oil industry – considered by many to the be the most influential lobby in the country – spent during that same time period. But unlike oil companies, the general public rarely pays attention to what is happening with pharmaceuticals (other than the cutesy animations they see on TV that are advertising the latest “wonder drug” from Pfizer or Merck.)
The difference between pharmaceutical donations and other industries, is that Big Pharma uses the “wait and see” method. For example, the oil industry will pour money into a politician’s campaign while they are running, in hopes that their guy gets elected. By contrast, Big Pharma waits to see who gets elected and sorted onto committees that determine anything related to healthcare or pharmaceuticals, then they load up that politician’s coffers. This method can be much more effective for an industry, as they don’t have to worry about losing money if their candidate doesn’t win – Their guys are already in their respective seats of power.
So…what exactly is Big Pharma buying with this money? They are buying, literally, Congressmen and administration officials.
This is where phase 2 of their plan kicks in. If the money they’ve poured into elections isn’t enough to get their way, they simply add former government officials to their payrolls. This is what is referred to as the “revolving door” between the government and the pharmaceutical industry.
While the “revolving doors” have existed for decades, the concept didn’t get kicked into high gear until 2001, during the Bush administration. It was during that time that the Food and Drug Administration Alumni Association was formed, creating an official industry-government bond that remains strong to this day. While the FDAAA claims that it is simply a non-profit, non-lobbying association, the fact that its board of directors is stacked with industry insiders and their lobbyists leaves no question about their true motives. Their main goal, according to their own website, is to “assist FDA in recruiting alumni with specialized expertise and institutional knowledge during critical situations.” To put it bluntly, they want to make sure that the FDA is consulting with their members during their drug or device approval testing. What the FDAAA set up was a system where regulators and industry could rub elbows, talk politics, have a few cocktails, and work out deals. They would promise lucrative post-government careers to officials who agreed to play ball, or suggest their own industry insiders for open government positions.
And so it was during the Bush years: The pharmaceutical industry began actively recruiting from Washington, as well as pitching their own members for political positions. And it worked. At least 30 members of president Bush’s administration – including FDA officials – came directly from the pharmaceutical industry or ended up there after their government careers were over.
This practice did not die with the end of the Bush Administration. Under President Obama, the FDA has remained just as inept and incompetent as it was under Bush. As it is today, there are countless officials working at the FDA who were once employed by one of the largest firms in the world – Monsanto. Obama has done nothing to rid the agency of the Bush-appointed industry insiders, and appears to be embracing the same “revolving door” ideals that the former president loved so much.
The consequences of both the revolving door and the lobbying efforts of the industry have been catastrophic for the American public. As mentioned earlier, they are one of the few industries in the country that gets away with blatant price gouging. In fact, Americans pay a higher price for pharmaceutical drugs than almost any other country on the planet. For a drug like Lipitor, which costs about $5.80 to produce, Americans pay $272 – that’s close to a 500% markup. And that’s even the worst offender. Celebrex carried a 2,000% markup, while Prozac is marked up by over 20,000%.
The industry likes to tell us that they have to charge such high prices because it costs so much to develop the drugs, and the money is needed to recoup the cost of R&D. I like to use the Vioxx example here – the drug pulled in $2.5 billion for Merck in 2003. That’s just one year of profits from one drug. Meanwhile, the company’s own data showed that it took a little under $1 billion to develop the drug. Yes, $1 billion is an enormous amount of money for one drug. But keep in mind that they made a profit of 150% in one year alone. If the claim of repaying R&D were true, the price of the drug would have fallen to pennies after that enormous year. But I guess they needed all of that money to pay the families they destroyed with their defective drug that they rushed to the market.
But price gouging alone could be forgivable. After all, the majority of the time, these drugs or medical devices do save lives. There’s no question that the pharmaceutical industry is absolutely necessary in our lives today. But the industry is also using their ties with the FDA to slow the testing and approval process of less expensive generic drugs, leaving consumers with no choice but to pay those ridiculous markups. But their power over the FDA goes much further than delaying cheaper drugs.
The revolving door mentioned earlier has allowed the industry to have unbridled influence over the testing and approval of their own drugs. The best possible example is DePuy. Johnson & Johnson was able to exploit a “loophole” in FDA testing requirements for their DePuy hip replacement because their friends at the FDA wrote a loophole into their guidelines that essentially says that a pharmaceutical company can get away with not testing a medical device as long as the company tells the FDA that it is similar to an already-approved device. That’s it. All the FDA needed was Johnson & Johnson’s word that the device was good, and then it was off to the market where countless people have had to undergo painful procedures to remove the faulty device.
And DePuy is not an isolated incident – Between 2005 and 2009, almost all of the 113 “FDA approved” medical devices were approved without a single agency test. Reports have also shown that prescription drug tests were either inadequate or virtually nonexistent in many instances. But hey, no buddy gets hurt but the consumer, right?
Don’t kid yourself – There is no industry more powerful, more influential, and more financially secure that the pharmaceutical industry. The media might not focus as much attention on their activities as they do for other industries, and that just makes them even more dangerous.
Farron Cousins is the executive editor of The Trial Lawyer magazine and the producer of the radio program Ring of Fire.