Why are the cost of prescription drugs in the United States are the highest in the world?
Thomas Costanzo 
Date: 4-11-2007
Subject: Healthcare Industry


(CBS) 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.

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.  

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.