Drug-cost ire gives industry a chill

WASHINGTON — WASHINGTON - Drug makers, who for years have successfully resisted government intervention that could lead to price controls on their products, have suddenly become fearful of the political quick fix.

Their wondrous concoctions have saved lives, alleviated suffering and changed the nature of health care by often eliminating the need for surgery and hospitalization.


Pills can lower cholesterol, take the itch out of allergies, make depression bearable and restore sexual function.

But increasingly, longtime Republican friends of the pharmaceutical industry are joining traditional Democratic foes in complaining that these wonder drugs cost too much -at least 50 percent more in the United States than in neighboring Canada and Mexico, and often well beyond the means of those without health insurance.


With election-year pressure for price relief building, lawmakers are scrambling to respond.

"While seniors and health plans, employers, hospitals and others struggle with the growing cost of prescription drugs, the pharmaceutical industry has been among the most profitable U.S. industries," Republican Sen. Slade Gorton of Washington told his Senate colleagues recently in what amounted to a public scolding of the drug makers.

"The current system leaves the drug companies' best customers feeling like they've been ripped off," said Gorton, who faces a stiff re-election challenge.

Prospects for enactment of legislation to address drug prices this year are slim. Time is short, and agreement between factions in Congress elusive.

In addition, members of both parties charge that members of the other are more interested in the appearance of action than in accomplishing anything.

Yet, the drug industry is worried enough that it is going national with a multimillion-dollar advertising campaign against congressional action that had been limited to the states along the Canadian border.

"We are concerned about the political pressure to do something that would be politically expedient, a quick fix that doesn't really solve the problem," said Tim Ryan of Citizens for a Better Medicare, an anti-price-control coalition formed by the pharmaceutical industry to conduct the media campaign.

The ads contend that lower drug prices in Canada are the result of a government-run health care system that discourages the sort of innovation that has produced the miraculous U.S.-made drugs. Quality of care is so poor in that system that Canadians come the United States for surgery and other treatment, the ads say.


"I think Congress is just about to take this up as a larger issue," Ryan said. "As legislative activity increases, we're going to have to step up our activities as well."

Proposed solutions include Gorton's idea of prohibiting drug companies from charging higher prices in the United States than they do elsewhere in the world, allowing U.S. wholesalers to buy U.S.-made drugs at lower prices outside the country for resale here and creating a government agency that would negotiate to buy drugs at bulk discounts for resale to Americans who lack insurance coverage.

Those ideas are offered in addition to the expanding array of proposals for adding a drug benefit to Medicare that would help pay prescription costs for the three of five elderly Americans who have little or no insurance covering drugs.

"We want to make [the drug companies] understand that something has to be done," said James M. Jeffords, chairman of the Senate Health, Education and Labor Committee and co-sponsor of a bill that would allow U.S. wholesalers to import drugs in bulk. Jeffords plans a hearing this month on a bill that he hopes will serve as "at least a shot across the bow."

The Vermont Republican said he expects distress over drug prices to be a hot issue in his campaign for election to a third term in the Senate.

The co-sponsor of his bill is Republican Olympia J. Snowe of Maine. She is seeking re-election this year in a state where the drug-price issue is so hot that the Maine government is trying to negotiate discounted rates for its residents who don't have drug insurance.


Critics frequently point out that the pharmaceutical industry topped Fortune magazine's list of corporate money-makers last year with a profit margin of 18.6 percent, ahead of banks, insurance companies, telecommunications companies and computer-services companies.

Those figures don't take into account the high cost of research and development to produce new miracle cures, most of which ends in failure, according to Jeffrey Trewitt, a spokesman for Pharmaceutical Research and Manufacturers of America, a trade association representing the industry.

Trimming drug profits would cripple the research effort, he said.

The solution, Trewitt argued, lies in expanding access to insurance so that more people have drug coverage.

As an effort at compromise, the drug industry grudgingly agreed early this year to stop fighting the creation of a Medicare drug benefit if it would be privately run and market-based to avoid a government pricing system similar to those in Canada and Mexico.

Adding a Medicare drug benefit, a long shot at best this year, wouldn't correct the imbalance that forces Americans to pick up the tab for pharmaceutical research on wonder drugs that the rest of the world buys at bargain rates, lawmakers say. Neither would it address the burden that drug prices put on the rest of the health care system.


"The old argument that this is the price of cutting-edge research isn't cutting it any more," said Martin Corry of the American Association of Retired Persons. "Members of Congress are hearing complaints not only from their constituents but from ... health care providers as well."

Senate Majority Leader Trent Lott, generally a staunch ally of the drug industry, is not happy that GOP senators might see their re-election imperiled because of the drug price issue. He has warned the drug makers that the status quo is not acceptable.

"All I know is, our people are paying more than in Canada and Mexico. That's very hard to explain or defend," said Lott, who has experience with the problem. He's helping his 87-year-old mother with drugs and other expenses at an assisted-living facility.

"I think we have to consider all our options, because there's a problem here," Lott said. "I'm not saying no to anything."

Voter distress at soaring drug prices has grown rapidly in recent years as medication has become an increasingly important and expensive element of health care, particularly for the elderly.

"There is a grass-roots juggernaut behind this issue, coming not only from seniors but from people in their 40s and 50s who are taking care of elderly parents or are starting to think about their own retirement," said Sen. Ron Wyden, an Oregon Democrat.


Wyden is hoping that momentum will help a bipartisan proposal he is developing with Snowe and Rep. Bill Thomas, a Republican from California, to add a drug benefit to Medicare. Part of their plan calls for drug companies to pay a return-on-investment fee to the Medicare trust fund when they profit from government-funded research.

Northern border states have become the focus of the debate over drug prices because of their relatively easy access to Canadian pharmacies.

Voters there can clearly see the discrepancies: $74 for 30 pills of the anti-cholesterol drug Lipitor in the United States vs. $44 in Canada; $61 for the antibiotic Zithromax vs. $28; $57 for Norvasc, which treats high blood pressure, vs. $35 in Canada, according to a survey by Gorton's staff.

In case anyone misses the point, Democratic candidates in at least five states - Maine, Vermont, Michigan, Montana and Washington - have been hammering it home. The most emphatic has been Brian Schweitzer, a Montana rancher hoping to unseat GOP Sen. Conrad Burns.

A political newcomer, Schweitzer has centered his campaign on the theme of driving busloads of elderly Americans across the border to buy drugs in Canada. He has also led a drug shopping excursion to Mexico as part of a crusade to "embarrass Congress" into lifting the ban on importing prescription drugs.

Burns has expressed support for helping low-income Medicare beneficiaries buy drugs but is not backing any legislation opposed by the drug makers.


In taking on the pharmaceutical industry, Gorton, Schweitzer and other candidates are risking affronting one of the most generous sources of campaign contributions.

During the 1997-1998 election cycle, the drug industry ranked 10th in total campaign contributions, with two-thirds of the $13 million total going to Republicans. In lobbying expenses for that period, the drug makers ranked second behind the insurance industry.

"They are enormously powerful and use their power aggressively," said Sen. Russell D. Feingold. The Wisconsin Democrat recently lost a battle with the drug industry to get U.S. patents waived on an emergency basis so that the poor nations of sub-Saharan Africa could produce cheap generic drugs to treat their AIDS epidemic.

President Clinton took the step on his own by executive order after Congress refused, citing the need to protect intellectual property rights.