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Among the biggest winners in Thursday’s Supreme Court ruling to uphold the Patient Protection and Affordable Care Act is the drug industry, which played an intimate, if controversial, role in shaping the new law.
By expanding the number of insured Americans by as many as 32 million, the health care law will deliver drugmakers a vast new customer pool at a time of industry consolidation. It also will expand drug coverage for senior citizens in the Medicare program and speed up federal approvals of lucrative, high-tech biological medicines, both boons to the industry.
Not that drugmakers are all smiles. Industry leaders remain worried about stepped-up oversight under the system’s health insurance exchanges and about the specter of price controls imposed by a new Independent Payment Advisory Board that will recommend legislation to slow Medicare spending growth.
“I think there will be mixed feelings,” said ex-Rep. Billy Tauzin (R-La.), former president and CEO of the Pharmaceutical Research and Manufacturers of America and owner of the lobbying firm Tauzin Consultants, which is housed at the law firm Alston & Bird. Eliminating the Medicare drug coverage gap, known as the “doughnut hole,” and expanding access to biologic drugs are “a very good sign for manufacturers and patients,” Tauzin said.
But he said the IPAB “is going to be a problem for doctors and most patients in the country.” He added: “You’ll have government bureaucrats making decisions about what medicines are available to people under Medicare. So that’s a negative.”
These drug industry wins, moreover, came at a considerable political price. PhRMA, which represents pharmaceutical research and biotechnology firms, remains under fire from Republicans on Capitol Hill three years after it negotiated a health care compromise with Obama administration officials in the runup to the law’s enactment.
Led by Tauzin, a former Democrat who switched parties while in Congress, drug lobbyists agreed to halve the cost of drugs to seniors in the doughnut hole to produce $80 billion in health care cost savings over a decade. In exchange, Democrats agreed to ease federal approval of biological medicines and to drop plans to promote imports of low-cost drugs from more heavily regulated countries, such as Canada.
The deal prompted then-House Minority Leader John Boehner (R-Ohio) to accuse Tauzin in a 2009 open letter of cutting a deal with “the bully” to “steal others’ money as the price of protecting your own.” Tauzin left PhRMA in 2010, and the association replaced him with John Castellani, who had led the Business Roundtable — a group often critical of the Obama administration.
PhRMA political action committee donations started tilting dramatically toward the GOP. The PAC’s donations were split virtually 50-50 between Republicans and Democrats in the 2010 cycle, but the PAC has given $17,000 to Republicans and only $9,000 to Democrats so far in the 2012 cycle, a split of almost 2-to-1.
Overall, drugmakers remain one of the top-spending industries on K Street, with $153 million in lobbying expenditures last year, according to the Center for Responsive Politics.
But GOP anger has yet to die down. A 16-month investigation by the House Energy and Commerce Committee released emails earlier this month that show that, as part of its deal with the White House, PhRMA spent almost $70 million on two tax-exempt groups that heavily promoted the law.
Committee Republicans say the deal violated the Obama administration’s stated commitment to transparency. Democrats say the probe breaks no new ground and is politically motivated. PhRMA officials have said they worked with the administration to advance patient interests.
PhRMA officials were not available for comment Thursday. Tauzin said Castellani has done a “fine job” and that PhRMA “was able to repair whatever hard feelings existed with the Republican Party.”
PhRMA continues to oppose the IPAB and will fight to repeal it, Castellani said in a statement released Thursday.
“We respect the court’s decision and recognize that there will be ongoing policy discussions about the future of health care in America, and about the impact of today’s decision on the health care law,” Castellani said. “We will work with Congress and the administration on a bipartisan basis to address these important issues and will continue to advocate for an environment that fosters medical innovation and access to new medicines. We will also continue to work for necessary changes to the Affordable Care Act, such as the repeal of the Independent Payment Advisory Board.”
Like many health care providers, drugmakers are likely to keep a low profile in the wake of the Supreme Court’s ruling, given the politically charged nature of the health care debate, said Chris Jennings, former senior health care adviser to President Bill Clinton.
“I think the reaction is quiet relief, but no substantial public embrace or involvement until after the election,” said Jennings, president of Jennings Policy Strategies.
Like insurers, hospital administrators and doctors, Jennings added, drug companies have already invested considerable time, resources and capital into implementing the new health care law. Whatever their complaints, health care providers will hold their tongues until the dust settles, he predicted: “There is going to be plenty of time to reform the reforms.”