Drink up, even if it’s only old wine in new bottles…
Yesterday’s mid-term congressional poll barely changes the stakes for pharma in its pursuit of its US legislative and regulatory agenda. The key message coming out of the results is stalemate on the big issues like health reform rollback and deficit reduction combined with modest progress — perhaps — in clearing some of the ideological brush that has barred progress on trade agreements, taxation of foreign-held assets, patent reform and approval of follow-on biologics.
Looking ahead, what matters most for pharma is whether the new political alignment away from the Democrats will boost business confidence, restore productivity growth and improve US global competitiveness: the industry depends on exports and its returns are heavily impacted by dollar currency fluctuations. And the value of the dollar is itself a function of international confidence in US economic leadership.
On the personality side, the GOP sweep brings some old friends back into the mix, including newly elected senators Dan Coats [who previously served in the Senate and has spent much of the past decade as a lobbyist for PhRMA, Pfizer and other companies] and Rob Portman, a former USTR. Senator Harry Reid’s win in Nevada is a net plus because it prevents two key industry antagonists – Senators Chuck Schumer and Dick Durbin – from moving up to the post of Majority Leader. More important, mainstay critics like Representative Henry Waxman lose their subpoena power to conduct embarrassing investigations in key areas of industry vulnerability like regulatory compliance, off label prescribing, transparency disclosure and pricing kickbacks.
The new GOP majority in the House will use the same powers on appropriations to pose difficult questions to the Obama Administration as it seeks to implement the hundreds of discretionary rule-making requirements ordained in the health reform legislation enacted in March. The election of 10 new Republican governors is equally significant, as responsibilities for executing the reforms will be shifting to the states over the next few years.
But prospects for rollback — let alone repeal — of the health bill are remote: PhRMA itself remains supportive of the overall objectives of the package and continuing Democratic control of the Senate combined with President Obama’s veto power means that sheer numbers are against it. In addition, the new GOP leadership is mindful that adding jobs to the economy, not tinkering with a legislative monster like the reform bill, is the task the electorate has assigned them going forward.
One area of low hanging fruit is the potential for obtaining pharma’s long sought goal of ratification of three pending free trade agreements with Latin America and South Korea. The latter is the big one due to Korea’s market potential and the precedent it sets on IP protection. The new House leadership may be more willing to push this through, and in so doing the opportunity exists to positively reposition the industry as a job creator – and a driver of income growth, given that average pay scales in US pharma remain the highest of any of the major business sectors. PhRMA President John Castellani will be making a major pitch for the Korea treaty at a joint meeting with the Korean health industry and trade bureau in New York on Thursday.
On the regulatory front, expect renewed interest in FDA efforts to strike a better balance between tolerance for risk and the importance of encouraging additional innovation in drug discovery. GOP control of the House will also have an ameliorative impact on more aggressive tactics by agencies like the Federal Trade Commission to expose anti-competitive practices in pharmaceutlcals.
Nevertheless, industry image has suffered significantly due to a wave of promotional and product safety scandals. It can be said that negative perceptions of the industry can no longer be divided strictly along party lines: “pharma bashing” is emerging as bipartisan sport. The industry has a fresh opportunity to change that — if the commitment to think differently is there.