DRUG FIRMS FIGHT CLINTON CLAIM Industry rebuts profits charge with advertising

WASHINGTON — WASHINGTON -- Still reeling from President Clinton's unprecedented attack on its profits, the drug industry began fighting back this week with a $500,000 advertising blitz proclaiming the benefits of prescription medicines to be worth the price.

The Pharmaceutical Manufacturers Association placed full-page ads in 40 newspapers around the country, including The Sun, rebutting the president's allegations of profiteering and arguing that drugs help restrain medical spending by keeping people healthy.


In a separate response, Upjohn and G.D. Searle & Co. faxed reporters a joint statement Thursday saying that "only seven cents of America's health care dollar goes to pharmaceuticals." Previously, Merck & Co. ran a newspaper ad urging a "search for truth, not for scapegoats."

Industry officials suggest there will be more ads and faxes as they wage a battle to rally grass-roots support and lobby Congress.


Although deeply concerned by the damage Mr. Clinton may have done to their image, the industry's greatest fear is that the attack might presage an attempt to regulate drug prices.

When the president blasted the pharmaceutical companies Feb. for making "unconscionable" profits on children's vaccines and devoting far more money to advertising than research, he tapped into the public's growing anger about skyrocketing drug prices.

Prices of the top 20 drugs purchased by the elderly increased 79 percent from 1985 to 1991, while those used by younger people shot up even more, 82 percent -- nearly four times the rate of inflation, according to a study published last September by the non-profit Families USA group.

It's not only consumers who are outraged.

"I think the drug costs are extremely high, clearly a burden for patients and a particular burden for the patients I deal with," says Dr. Debra Wertheimer, associate director of clinical services at Levindale Hebrew Geriatric Center and Hospital in Baltimore. "These are people who take medicine for the rest of their lives. So this is a big problem for them."

Winning the public's confidence won't be easy for the drug industry, which is still trying to figure out how to defend itself against the president.

"You can't fight the president specifically," says Mark Grayson, assistant vice president of the industry association. Instead, the organization will focus on influencing the public and, of course, Congress. "It's still our view that if the American public knew the industry, that they would really understand, that there wouldn't be quite this vocal outcry."

But he can't say yet how the industry will proceed. "There will be some things" done, he says vaguely. "Whether ads are the right way to go, we're trying to determine."


In its ad this week, the association put the industry on the side of consumers, advocating that Americans receive insurance coverage for prescription drugs -- something which, of course, could also spur drug sales.

The ad denied that drug price increases are a "major cause" of spiraling health care costs and declared that prices are now risingmore slowly than in the past. It challenged the recent finding of a congressional committee that a program of voluntary price restraints by about 10 companies is not working.

Saving perhaps its most powerful argument for last, the association contended that use of drugs saves money by "eliminating the need for surgery, shortening hospital stays, reducing nursing home admissions, cutting down on doctor visits and keeping people productive."

Hugh C. Newton, a Washington public relations expert retained by the association, says the industry must work hard to influence public and congressional opinion.

"You have to tell your story; you have to tell it over and over $$ again," he says. "You have to testify, you do all the legislative lobbying things that are done. You provide writers, editorial writers, with your point of view."

The industry could even call on its employees and stockholders to speak out, Mr. Newton says. Stockholders have a special stake: The president's offensive contributed to a decline in drug company stock prices.


The attack also caught many drug company executives by surprise. Among those caught off guard was Dr. P. Roy Vagelos, the chairman of New Jersey-based Merck & Co., the largest drug company.

Just last September Mr. Clinton praised Merck and Dr. Vagelos in a speech on health care reform delivered at the company's headquarters. With the company's chairman at his side, the president termed Merck "magnificent" and cited its 1989 pledge to voluntarily keep price increases in line with inflation.

Then came the president's speech last month. "It was a shock to be slammed like that," Dr. Vagelos told the Wall Street Journal.

But it should not have been that much of a surprise, given the history of Mr. and Mrs. Clinton's views on drug prices and their relationship to the industry's toughest congressional critic, Sen. David Pryor, an Arkansas Democrat and close friend of the first couple. "They were very naive," one industry consultant said of the drug companies. "They should not have been caught off guard."

While governor of Arkansas, Mr. Clinton worked to get cheaper drug prices for the state Medicaid program. Last year he endorsed Mr. Pryor's recommendation for a study of the merits of a prescription drug review board, an idea vehemently opposed by drug companies fearful that it would lead to price controls. Hillary Rodham Clinton, in turn, became concerned about the price of vaccines while serving for more than two decades on the board of the Children's Defense Fund.

Even though the industry is on the defensive now, history and public opinion might shield it from the kind of price regulation it abhors, Mr. Newton hopes. "Americans are inherently uneasy with price controls and, two, historically, they have never worked."