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The Real Cost of Big Pharma’s Lobbying

Image Via Volodymyr Hryshchenko on Unsplash

In the United States, prescription drugs cost, on average, 256% more than the price in 32 other countries (Mulcahy). And it’s not because the medications are even the slightest bit different. It’s because the companies which produce and sell drugs in the U.S. have funneled hundreds of millions of dollars into exploiting loopholes, swaying elections, and influencing public policy– all through the process of lobbying. 

So first and foremost, who are the actors in this dilemma, and what are their conflicting goals? The pharmaceutical industry, composed of companies that make drugs, is the funding and fuel behind the lobbying. Their goal is to prevent the U.S. from exercising government power that might lower the prices of prescription medicines. 

According to Open. secrets (The Center for Responsive Politics), the political action committees for Pfizer and Amgen, and Pharmaceutical Research and Manufacturers of America (PhRMA) donate the largest amounts to political campaigns. Donations to congressional campaigns and lobbying congress members provides an avenue to shape legislation in favor of ensuring that prices for drugs can remain high. 

In definite opposition, medical programs that aim to provide accessible healthcare– such as Medicare– hold the goal of lowering the prices of drugs such that consumers may pay less overall for medical treatment. 

And in between those actors at odds with one another are the political representatives– those who have the power to tangibly impact legislation.

The Pharmaceutical Industry and Billy Tauzin:

Billy Tauzin was a politician who began in the Louisiana State Senate, moved into the Louisiana House of Representatives, chaired Congress’ Energy and Commerce Committee, and served in the U.S. House of Representatives. During this time, he frequently leveraged his political party to acquire more support, switching between parties throughout his career. Tauzin’s campaign finance summary is filled with donations from health-based contributors such as Pfizer. 

 As a politician, Tauzin had received over $200,000 in campaign donations from pharmaceutical companies. However, perhaps the most notable aspect of his political career was his political involvement after leaving Congress in 2005. The day after his term in Congress ended, Tauzin immediately began working for The Pharmaceutical Research and Manufacturers of America (PhRMA). As head of the company, he became the highest-paid lobbyist for health legislation, making $2 million a year (Noah)

Back when Tauzin was the chair of the Energy and Commerce Committee, he led the creation of a bill that prevented Medicare from negotiating with drug companies. And when he was later picking up negotiations with the White House as a lobbyist, he and PhRMA bargained a deal which, despite saving the U.S. government $80 billion, restricted them from another bargain where the government could have saved an additional $76 billion (Noah)

Though Billy Tauzin has been retired now for several years, the issue is that the impact of his opposition to accessible health care remains very much intact. Further, as a politician turned lobbyist whose financing and salaries are mostly public, the data on his negotiations is much more comprehensive than that of other present lobbyists. 

As lobbyists derive a great portion of their power from anonymity or at least from not drawing so much attention to themselves that their actions are publicly questioned, the criticisms around Tauzin’s actions in the realm of health legislation didn’t fully emerge until he had already retired from Congress. 

The Pharmaceutical Industry’s fight against Medicare:

The stark divide between government and pharmaceutical industry interests is evident in the demands for and against Medicare drug price negotiation. According to the Kaiser Family Foundation, despite proposals, nothing has passed to allow “Medicare to negotiate drug prices with manufacturers. Medicare’s ability to negotiate on drug prices, which is currently prohibited by law, would provide the leverage needed to lower drug costs.”

It’s difficult to truly know how efficacious the pharmaceutical industry’s money-spent really is. However, we do know that because the possibility of Medicare negotiations would benefit the public by making drugs more affordable and giving less profit to pharmaceutical industries, much of the industry’s spending contributes towards thwarting efforts to expand the power of Medicare towards being able to create these negotiations.

By looking at estimations and projections of how much money the pharmaceutical industry has saved by not having to have those negotiations (or rather has made in revenue through being able to overcharge), we can understand how the return on investment that these companies make through their lobbyists.

Between 1998 and 2016, assuming that 100% of lobbying spendings go to preventing Medicare negotiating drug prices, profit was approximately $53,821,000,000 for the pharmaceutical industry; this figure comes from total pharmaceutical cost (or spending) for efforts against Medicare negotiations of drug prices, which was $179 million, being subtracted from total revenue, which was $54 billion (Institute for Health and Socio-economic Policy)

This also means that for each dollar the pharmaceutical industry spends on preventing Medicare from negotiating drug prices (whether that’s through funding campaigns of politicians who they know are anti-Medicare or through paying for advertisements to go out to voters), there is a 30,300% return on investment (Institute for Health and Socio-economic Policy).

In other words, for each dollar spent, the industry makes 303 dollars. Given these figures, the lucrative nature of lobbying against Medicare and in favor of keeping drug prices high makes it clear why so much money is consistently poured into lobbyists tasked with swaying Congress or directly into the campaigns of congress members. 

Bringing back the specific work of Billy Tauzin, then, his PhRMA negotiation with the Obama administration would have been viewed by the pharmaceutical industry as astronomically successful. The above numbers demonstrate that it took eighteen years and almost $200 million for the industry to accrue a profit of $53,821,000,000 via blocking Medicare price negotiations. 

Tauzin’s accomplishment was negotiating the U.S. government into a deal that saved them (the government) $80 billion, instead of another deal that some estimate would have saved them $156 billion. Because Tauzin was paid around $2 million a year from PhRMA but “conned the White House out of $76 billion”, he saved an enormous amount of money for the pharmaceutical companies that would have inevitably had to lower their prices if the U.S. government had decided to go with the latter plan (Noah).

What is the impact?

Ultimately, high returns on investment for pharmaceutical companies who invest against negotiations for affordable drugs means immense reason for the pharmaceutical industries to continue those investments. But those investments keep medicines from individuals who need them to survive. Though this is true of all individuals who must rely on prescription drugs, the dilemma is most prevalent in the case of insulin. 

The Congressional Diabetes Caucus found, in 2018, “a vial of Insulin, which is the only life-sustaining option for Type 1 diabetics retails at around $300.”

Not only is this double the price in 2017, but it is also “eight times the cost of insulin than in 32 high-income comparison nations combined” (Mulcahy).

Worse yet, these prices are projected to continue rising to rates that are even more inaccessible for the average American. Stanford Health Policy researcher Dr. Basu found that by 2030, around half of the 79 million adults with type 2 diabetes won’t have access to insulin (Duff-Brown). Despite all this, however, pharmaceutical companies remain intently focused on ensuring the prices of their drugs may only rise higher. 

Right now, the health industry is the second-largest lobbying group, with $600 million having been donated just before the 2020 elections (Abouelenein and O’Donnell). And as long as the beneficiaries of those donations continue to control Congress through lobbyists, efforts for drug pricing reform will remain blocked and bargained against. 

Billy Tauzin may have retired from present-day negotiations, but as long as there remains a culture of “donation”-driven legislation and under-the-table deals, people who take advantage of loopholes in the political system will continue to do so at the expense of hundreds of millions’ health.

Because of the implications that price negotiations have on drug accessibility when representatives are unresponsive to the people and instead reflect the interests of corporations, they are sacrificing the health and livelihood of all United States citizens. 

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