Whenever it's called out for charging too much for drugs or outright price gouging, the pharmaceutical industry's standard defense is to assure the public that its profits will be used to develop even better drugs in the future. Turing Pharmaceuticals CEO Martin Shkreli clung to that defense in late September when asked to explain his sudden decision to hike the price of a longstanding anti-parasitic drug by more than $700, prompting a collective eye roll among medical experts and an outraged public.
In reality, a good chunk of pharmaceutical "research and development" comes from the subsidized labs at universities and the National Institutes of Health, and now angry consumers and even some prominent politicians are demanding that the industry put its money where its mouth is.
Large pharmaceutical firms are some of the most profitable companies in the world, so what do they spend all their money on, besides advertising and hefty salaries for rich kid CEOs? Sure, some profits are reinvested to fund research and clinical trials, but hundreds of millions of dollars are also spent on political operations every year, and federal law requires that drug companies disclose this political spending to the public.
The government has long singled out the pharmaceutical industry for premium patent protections while leaving drug pricing up to the whims of the market, and consumers in the United States now pay some of the highest prices in the world for many life-saving drugs. Recent reports show that critical cancer medicines, for example, cost as much as 600 times more in the United States than other countries. The industry has a clear interest in maintaining the political status quo.
Big Pharma Spends Millions on Political Contributions
Pharmaceutical and health product companies injected $51 million into the 2012 federal elections and nearly $32 million into the 2014 elections, according to the Center for Responsive Politics (CRP). The industry has already spent nearly $10 million on the 2016 elections and is expected to spend more, especially now that Democratic presidential candidates Hillary Clinton and Bernie Sanders have made drug prices a campaign issue with separate proposals to rein them in with new regulations.
Big Pharma tends to spend more on Republicans than Democrats, and the GOP benefited from 58 percent of the industry's federal contributions in 2012 and 2014 while Democrats received 42 percent, according to the CRP.
Perhaps unsurprisingly, it's a group of 18 House Democrats, not Republicans, who are demanding that the CEO of Valeant Pharmaceuticals, Michael Pearson, join Shkreli in front of the House Oversight Committee during the first week of October to answer questions about recent price hikes on two drugs produced by his company.
For every $1 the industry spent on contributions during the last election cycle, $7 were spent on lobbying in 2014.
By the time this article was published, the committee's chair, Rep. Jason Chaffetz (R-Utah), had not responded to a letter from the Democrats requesting that Valeant be subpoenaed to provide Congress with documents related to the drastic price hikes. The pharmaceutical industry has contributed $198,000 to Chaffetz's campaign war chest during the course of his career, more than any other special interest group, although none of the contributions came directly from Valeant, which has focused its political resources on lobbying instead of direct contributions.
Industry giant Pfizer was the top spender among drug companies during the 2014 elections with $1.5 million in federal campaign contributions, followed closely by Amgen with $1.3 million and McKesson Corp with $1.1 million. All three companies spent more on Republicans than Democrats that year.
One million dollars plus is a lot of money, but it pales in comparison to the annual salaries of the CEOs at some of these companies. Pfizer CEO Ian Read, for example, raked in more than $23 million in 2014, and Amgen CEO Robert Bradway made a cool $14 million, according to the industry publication FiercePharma.
It turns out that the pharmaceutical industry did not become one for the most powerful interests on Capitol Hill with campaign contributions alone. For every $1 the industry spent on contributions during the last election cycle, $7 were spent on lobbying in 2014.
More Money Spent on Lobbying
The pharmaceutical industry's lobbying expenditures steadily increased from 1998 to 2009, when spending hit a $273 million peak as Congress debated the Affordable Care Act, according to CRP. In 2014, drug companies and their lobbying groups spent $229 million influencing lawmakers, legislation and politicians.
The Pharmaceutical Research and Manufacturers of America (PhRMA), the industry's lead lobbying group, has spent nearly $150 million on lobbying since 2008, and ranks sixth among the nation's top lobbying spenders, outspending powerful interests like defense contractors and the oil and gas industry, according to records retrieved from the MapLight lobbying database. The group has spent more than $10 million on lobbying so far this year. In contrast, PhRMA made $491,000 in political contributions during the 2014 election cycle.
Pfizer ranks among the top 25 lobbying spenders in the nation, with $94 million spent since 2008 and $8.5 million spent in 2014 alone.
Political contributions, which are typically made by individuals and political action committees within a corporation, can curry favors from candidates in the future, but lobbying allows Big Pharma to take advantage of Washington's revolving door and directly influence legislation.
Consistent themes quickly emerge when reviewing records filed by the industry's top lobbying groups, with patent and trademark policies, Medicare and Medicaid, and international trade all ranking as top issues for Big Pharma.
Strict patent and trademark laws in the United States allow pharmaceutical companies to maintain monopolies on drugs for up to 20 years before generics can enter the market and drive down prices. Other countries that manufacture drugs, such as India, have looser patent laws and sometimes allow select manufacturers to make generic versions of certain patented drugs in order to keep prices of live-saving treatments from going through the roof.
As Truthout has reported, the pharmaceutical lobby has aggressively lobbied Congress and the Obama administration's trade representatives to put pressure on India to tighten its patent laws, which have allowed the country to produce cheap drugs that developing countries rely on to combat diseases like HIV/AIDS and hepatitis C.
The pharmaceutical lobby has also repeatedly lobbied to prevent Medicare from negotiating drug prices with drug companies. The proposals floated by Clinton and Sanders would give Medicare the ability to negotiate drug prices and increase market competition by allowing US consumers to buy drugs from Canada, and Big Pharma is already going on the offensive.
In a recent statement to the press, PhRMA claimed Clinton's plan would "turn back the clock on medical innovation and halt progress against the diseases that patients fear most." The proposal, PhRMA claimed, would result in jobs cuts and fewer new treatments for patients.
Despite PhRMA's sensationalist rhetoric, the industry has reportedly shrugged Clinton's plan off as a political long shot that would have little chance of passing Congress even if the Democrat is successful in taking the White House. Experts recently told The Associated Press that Congress has repeatedly rejected Clinton's ideas over the past two decades.
In the meantime, high drug prices will continue to help drug companies gather the financial resources necessary to ensure that lawmakers do not change their minds.