60 Minutes: pharmaceutical industry

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Under The Influence
NEW YORK, April 1, 2007
CBS - 60 Minutes


If you have ever wondered why the cost of prescription drugs in the
United States are the highest in the world or why it's illegal to import
cheaper drugs from Canada or Mexico, you need look no further than the
pharmaceutical lobby and its influence in Washington, D.C.

According to a new report by the Center for Public Integrity,
congressmen are outnumbered two to one by lobbyists for an industry that
spends roughly a $100 million a year in campaign contributions and
lobbying expenses to protect its profits.

One reason those profits have exceeded Wall Street expectations is the
Medicare prescription drug bill. It was passed three-and-a-half years
ago, but as 60 Minutes correspondent Steve Kroft reports, its effects
are still reverberating through the halls of Congress, providing a
window into how the lobby works.
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The unorthodox roll call on one of the most expensive bills ever placed
before the House of Representatives began in the middle of the night,
long after most people in Washington had switched off C-SPAN and gone to
sleep.

The only witnesses were congressional staffers, hundreds of lobbyists,
and U.S. Representatives like Dan Burton, R-Ind., and Walter Jones,
R-N.C.

"The pharmaceutical lobbyists wrote the bill," says Jones. "The bill was
over 1,000 pages. And it got to the members of the House that morning,
and we voted for it at about 3 a.m. in the morning."

Why did the vote finally take place at 3 a.m.?

"Well, I think a lot of the shenanigans that were going on that night,
they didn't want on national television in primetime," according to
Burton.

"I've been in politics for 22 years," says Jones, "and it was the
ugliest night I have ever seen in 22 years."

The legislation was the cornerstone of Republican's domestic agenda and
would extend limited prescription drugs coverage under Medicare to 41
million Americans, including 13 million who had never been covered
before.

At an estimated cost of just under $400 billion over 10 years, it was
the largest entitlement program in more than 40 years, and the debate
broke down along party lines.

But when it came time cast ballots, the Republican leadership discovered
that a number of key Republican congressmen had defected and joined the
Democrats, arguing that the bill was too expensive and a sellout to the
drug companies. Burton and Jones were among them.

"They're suppose to have 15 minutes to leave the voting machines open
and it was open for almost three hours," Burton explains. "The votes
were there to defeat the bill for two hours and 45 minutes and we had
leaders going around and gathering around individuals, trying to twist
their arms to get them to change their votes."

Jones says the arm-twisting was horrible.

"We had a good friend from Michigan, Nick Smith, and they threatened to
work against his son who wanted to run for his seat when he retired," he
recalls. "I saw a woman, a member of the House, a lady, crying when they
came around her, trying to get her to change her votes. It was -it was
ugly."

When the prescription drug bill finally passed shortly before dawn, in
the longest roll call in the history of the House of Representatives,
much of the credit went to former Congressman Billy Tauzin, R-La., who
steered it through the house.

"It's just a messy process," Tauzin says. "I mean, the old adage about
if you like sausage or laws, you should not watch either one of them
being made is true. It's a messy process."

Tauzin says that the voting machines were open for three hours "because
the vote wasn't finished."

As for arms being twisted? "People were being talked to," he says.

And of Walter Jones' comment that it was the "ugliest night" he had
"ever seen in politics in 22 years?"

"Well, he's a young member," counters Tauzin with a laugh. "Had he been
around for 25 years, he'd have seen some uglier nights."

It certainly wasn't ugly for the drug lobby which invested more than $10
million in campaign contributions during the last election and has been
a source of lucrative employment opportunities for congressmen when they
leave office.

Former senators Dennis Deconcini, D-Ariz., and Steve Symms, R-Idaho, and
former congressmen like Tom Downey, D-N.Y.; Vic Fazio, D-Calif.; Bill
Paxon, R-N.Y., and former House Minority Leader Robert Michel, R-Ill.,
all registered as lobbyists for the drug industry and worked on the
prescription drug bill.

"I can tell you that when the bill passed, there were better than 1,000
pharmaceutical lobbyists working on this," says Rep. John Dingell,
D-Mich.

Dingell has been in Congress for 52 years and is the new chairman of the
House Energy and Commerce Committee which shares jurisdiction over
Medicare. He says the bill would not have passed without the efforts of
the drug lobby.

"There is probably a lotta truth in it that the bill was stacked in
their benefit. And it's probably also true that it was written by their
lobbyists," he says.

Says Jones: "You couldn't even walk to the steps of the Capitol without
having somebody, maybe one or two, coming up to you to say, 'Can't you
change your vote? Can't you vote for this bill?' "

Why was the drug lobby was so interested in this bill and what did it
have to gain? Ron Pollack the executive director of Families USA, a
nonpartisan health care watchdog group, says it all boiled down to a key
provision in the legislation.

It prohibited Medicare and the federal government from using its vast
purchasing power to negotiate lower prices directly from the drug
companies.

"The key goal was to make sure there'd be no interference in the drug
companies' abilities to charge high prices and to continue to increase
those prices," says Pollack.

Pollack says there's no question that this was prompted by the
pharmaceutical lobby.

"They were the ones who wanted to make sure Medicare could charge high
prices and to continue to increase those prices," he said.

The drug industry says that competition among private insurance plans
that service the Medicare program help keep prices low. But Families USA
reported in a January study that Medicare patients are being charged
nearly 60 percent more for the top 20 drugs than veterans pay under a
program run by the U.S. Department of Veterans Affairs.

For example, Lipitor, a popular cholesterol drug, the cheapest Medicare
price is $785 for a years supply - 50 percent more than the VA's price
of $520.

For Zocor, another cholesterol drug, the best Medicare price is $1,485
for a years supply. The same drug only costs $127 a year under the VA's
plan.

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Read the full Families USA report
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Pollack says the VA successfully negotiates with the drug companies on
price.

"Medicare could do the same thing," he says, "but Medicare is prohibited
from doing that as a result of this new Medicare legislation."

"What was the logic? Or what was the idea, the rationale behind not
giving the government the ability to negotiate drug prices?" asks Kroft.


Burton says it was simply that the drug companies didn't want it.

"They wanted to make as much as money as possible. And if there's
negotiation, like there is in other countries around the world, then
they're gonna have their profit margin reduced," he says.

Before the vote, Congress was told the program would cost a whopping
$395 billion over the first 10 years. In fact, Medicare officials
already knew it was going to cost a lot more.

Burton said he and others were misled.

"Within two weeks after the bill was passed, everybody knew it was gonna
cost well over $500 billion," he says. "And many members of the Congress
[who] had voted for it said, 'I would never have voted for it had I
known that.' "

Medicare Chief Actuary Richard Foster later told Congress that he
revised the cost estimate to $534 before the vote, but was told to
withhold the new numbers if he wanted to keep his job.

During a Congressional hearing, Foster stated: "It struck me there was a
political basis for making that decision. I considered that
inappropriate and, in fact, unethical."

Foster said the person who told him to withhold Congress from getting
the revised estimates was Medicare boss Tom Scully.

Scully was the administration's lead negotiator on the prescription drug
bill, and at the time was also negotiating a job for himself with a
high-powered Washington law firm, where he became a lobbyist with the
pharmaceutical industry.

"He was negotiating for his job at the same time that the Medicare
legislation was being considered. He wound up taking this job 10 days
after the president signed this legislation," says Pollack.

It is but one example of the incestuous relationship between Congress
and the industry, and just one of the reasons the pharmaceutical lobby
almost never loses a political battle that affects its bottom line.

Former Congressman Billy Tauzin, who helped push the prescription drug
bill through the House, didn't disagree.

Has the bill been good for the drug industry?

"It's been good for the patients whom the drug industry represents ..."
Tauzin says. "In terms of profits - [for the drug companies] and
volumes, yes."

Says Kroft: "Your old friend, John Dingell, says that of the 1,500 bills
over the last 8 years dealing with pharmaceutical issues, the drug
companies almost, without exception, have gotten what they wanted."

"Yeah ... I would think he's correct. They've done fairly well," replies
Tauzin.

Why has this lobby been so successful? The former congressman says he
believes it's because they stood for the right things.

If Tauzin sounds a lot like a lobbyist for the drug industry, that's
because now he is.

Just a few months after the prescription drug bill passed, Tauzin began
discussions with the pharmaceutical industry to become its chief
lobbyist in Washington. He says it was one of several lucrative offers
he's received just before he got some very bad news.

"I got a call from a doctor in Bethesda who said, 'You got cancer. And
it's extremely rare. And it could kill ya.' And then everything
changed," Tauzin says.

Tauzin had a cancerous tumor removed from his intestines and was treated
with a new medicine, called Avastin, that had never been used before on
that form of cancer.

The treatment was successful, and as a result Tauzin says he felt he
owed his life to the drug industry. After serving out his congressional
term, he accepted a $2 million-a-year job dollar as president of PhRMA -
Pharmaceutical Research and Manufacturers of America.

"There was an extraordinary moment when my wife literally looked me in
the eye and said, 'Look, you're gonna do well wherever you go, Billy ...
You got a lot a great offers ... And maybe you oughta think about
working for the people that struggle everyday to try to invent the
medicines that save lives like yours.'

"And that was a pretty important moment in my life," Tauzin says. "And
it was the moment I decided that this was the work I wanted to do -
headaches and all."

Jones and Burton agree that the perception of Tauzin's move is not good.


"I mean, when you're pushing so hard for a bill that's controversial and
you have to keep the machine open for three hours to get the one vote
necessary to pass it, and then, within a matter of months you go to work
for the industry that's gonna benefit from it, it does cause you some
concern," says Burton.

They are not the only ones cynical about the decision.

"You push this bill through that produces a windfall for the drug
companies. And then a short time later, you go to work for the drug
lobby at a salary of $2 million. That doesn't look good," says Kroft.

"There was nothing I could've done in my life after leaving Congress
that wouldn't have had - I didn't have some impact on in 25 years in
Congress ... If that looks bad to you, have at it," Tauzin says. "That's
the truth."

In fairness to Tauzin and former Medicare chief Tom Scully, they weren't
the only public officials involved with the prescription drug bill who
later went to work for the pharmaceutical industry.

Just before the vote, Tauzin cited the people who had been most helpful
in getting it passed. Among them:
* John McManus, the staff director of the Ways and Means
subcommittee on Health. Within a few months, he left Congress and
started his own lobbying firm. Among his new clients was PhRMA, Pfizer,
Eli Lilly and Merck.
* Linda Fishman, from the majority side of the Finance Committee,
left to become a lobbyist with the drug manufacturer Amgen.
* Pat Morrisey, chief of staff of the Energy and Commerce
Committee, took a job lobbying for drug companies Novartis and
Hoffman-La Roche.
* Jeremy Allen went to Johnson and Johnson.
* Kathleen Weldon went to lobby for Biogen, a Bio-tech company.
* Jim Barnette left to lobby for Hoffman-La Roche.

In all, at least 15 congressional staffers, congressmen and federal
officials left to go to work for the pharmaceutical industry, whose
profits were increased by several billion dollars.

"I mean, they - they have unlimited resources. Unlimited," Burton says.
"And when they push real hard to get something accomplished in the
Congress of the United States, they can get it done."

In January, one of the first things the new Democratic House of
Representatives did was to make it mandatory for Medicare to negotiate
lower prices with the drug companies.

A similar measure faces stiff opposition in the Senate, where the drug
lobby is spending millions of dollars to defeat it. The president has
already announced that if the bill passes, he will veto it.