The data, which tallies contributions made to political campaigns over ten years (2000-2010), shows that Sen. Max Baucus (D-MT) received more pharma dollars – approximately $340,000 – than any other Super Committee member. Baucus, also chairman of the Senate Finance Committee, took in just slightly more pharma cheddar than Reps. Dave Camp (R-MI) and James Clyburn (D-SC), who got $327,000 and $305,000, respectively. Rep. Jeb Hensarling (R-TX) received the smallest pharma contribution over 10 years, at roughly $15,000; over half of that came from Pfizer.

Pfizer gave more money to Super Committee candidates than any other Big Pharma company, at $183,000, a tear in the ocean for a company with revenues topping $67 billion last year. Lilly came in second at $155,000, and Abbott was the third largest contributor, at $146,000. All told, the pharma sector contributed around $2 million across the 12 Committee members – over ten years – and the rest of the healthcare industry, which includes insurers, professional practice groups and other service providers, gave an additional $7 million.

While these dollar amounts would be enough to constitute a conflict of interest for a physician attempting to sit on an FDA advisory panel, they’re relatively small, and it’s an open question as to whether they’ll provide much in the way of protection against additional cuts beyond the health reform givebacks negotiated by former PhRMA president Billy Tauzin two years ago. President Obama, for his part, received over $2 million in campaign contributions from pharma since 1989, according to the data, but an election season combined with a teetering economy and incessant deficit talks may remove any political safeguards the industry previously enjoyed.

After all, Super Committee members have been handed an assignment to trim $1.5 trillion worth of budget brisket, and if they exempt pharma, then bigger constituencies with more reach in their own districts will have to pay the difference. The fact is, pharma’s clout is concentrated in a few states, and it’s hard to make the case for job creation when it tops the league charts in cutting 300,000 highly-skilled U.S. jobs in the past 10 years. Nevertheless, PhRMA can point to tactical alliances with some unlikely counterparts. For example, Super Committee co-chair Sen. Patty Murray (D-WA) was a key opponent of efforts to open the gates to drug importation and roll back data exclusivity for biologics. This may prove more valuable in contesting the ideological debate around preserving market-oriented solutions in healthcare.

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.

Crafting consensus legislation on health reform depends heavily on all parties understanding precisely the terms of the debate. With the two House and Senate bills now topping out at more than 4,000 text pages, prospects for even a basic awareness of the implications of this reform for big pharma and society are dim. The unfortunate result is that ideology and punditry are today driving much of the discussion, orchestrated by interest groups with an eye on shaping the opinions of a restive public.

As always, money is the price of admission to the circus inner ring. The Center for Responsive Politics reports that health sector interests – ranging from the drug industry and insurers to organized labor and professional academic organizations – will spend $400 million by the end of this year to influence the reform legislation. This is a record in terms of any one piece of legislation before Congress, and for that the many who have invested resources in lobbying have scant assurance that their goals will be secured – or more important, maintained for the long-term.

The conclusion is to expect the unexpected. And to drive that point further, here are a few choice clichés about health reform and the realities likely to intervene to humble even the most confident of forecasters:

“Getting a bill passed will provide the certainty that investors need to secure their business.”  Signing a massive reform bill into law is but the first step of a mandated process likely to take years – well beyond the current business cycle.  Hence the impact of reform is virtually impossible to assess, except for the fact that more uncertainty involving one sixth of the US economy is unlikely to encourage the private risk-taking that creates jobs and tax revenues.

There is the obvious fact that for budgetary reasons much of the contents of the bill will not be implemented until 2014, midway through a President Obama second term.  What takes place first is the preparation of regulations to put flesh on obscure legislative language, and this will involve the participation of staff from at least 40 federal departments and agencies. And many changes with the largest impact on industry – including bundled payment schemes, accountable care organizations or activities to support biomedicines innovation – must be tested first as “pilot” programs. These require extensive negotiations with state and local governments as well as with industry; based on previous legislative history this can take as long as a decade.

Finally, there is a follow up legislative agenda for Congress, which according to the Democratic leadership will include hotly contested and commercially sensitive issues like coding reforms for Medicare reimbursement, due to the fact that the current system has not really been changed since the 1970s.

“Universal coverage for all Americans can be achieved without raising taxes on the middle class.” Reform will move the US closer to the ideal of the Euro/Japanese welfare state – that is clear. But the structural implication of financing this worthy goal over time is not addressed in the current legislation.  The best way to show this is to examine what the public in other OECD countries accept as the condition for maintaining social equity.  In all the major European markets plus Canada, Australia and Japan, the cost of health care is paid for through a mix of employer and employee contributions, dedicated taxes, general revenues, and, most importantly, a value added tax [VAT] on consumer purchases.  In most countries, VAT is applied to retail transactions at the staggering rate of nearly 20 per cent.  It’s a proven revenue raiser for expanded government; experience suggests that if the US wants universal subsidized coverage combined with continued quality care for aging baby boomers on Medicare, it will have to crack this nut, sometime in the next 5 years.

“More competition will be good for our industry.”  Examine carefully where such competition is applied: experience outside the US shows that competition-based reforms usually focus on the insurance sector, which is then compensated for by stronger government regulation of commoditized purchases like medicines. Countries where “market competition” has been endorsed as a broad reform objective – including the Netherlands and Switzerland – have actually tightened constraints on biopharmaceutical spending as a way to recover “savings” captured by the private sector in insurance.  Thus, for some segments of the health care supply chain, more competition leads instead to the opposite.

“We need a process where decisions on access to a new therapy is held separate from politics.”  This notion is commonly cited as justification for creating a new federal panel to evaluate the clinical effectiveness of alternative health interventions. Yet is this approach necessarily good for patients or industry?

Again, precedents outside the US show that when decisions are taken by “experts” immune to stakeholder pressure, fewer new drugs are made available to patients. In Quebec last year, the pharmaceutical industry hastily reversed its position on a new health technology assessment agency to be run exclusively by appointed bureaucrats after realizing it would lose its leverage as a key investor and job creator to shape actions taken by that body on provincial formulary listings. Politics may be as messy as making sausage but the ingredients are moldable and soft to the touch – not to mention quite tasty for those who can pay to watch.

“No enacted bill on health reform will incorporate costs into the evaluation of new medicines for public reimbursement.”  Regardless of the wording of the law, this barrier will be breached through application in practice, particularly once FDA and CMS begin cooperating in the collection and assessment of information provided by industry through the clinical trial process.

The history of the UK National Institute for Health and Clinical Excellence [NICE} bears repeating. Endorsed by the industry at its founding in 1999, on the basis of a guarantee that decisions would never incorporate pricing, NICE today is knee deep in what amounts to price negotiations through the euphemistically titled “patient access schemes” that effectively lower prices paid through the NHS to below list.

There is no contest between a piece of paper law and “mission creep:” once the bricks and mortar of a new federal Center for Comparative Effectiveness are in place, all bets are off because of the basic driving instinct of organizational self-preservation, which is to fill empty space with action.

In sum, the road to reform begins with a single step, but keeping pace will require the stamina of a marathoner – and the balance is likely to be off stride. The best advice in following the process internally is to ensure ongoing input from experts outside the US because in policy, the past is prologue.

Jacky Law

Guest blog by Jacky Law

A couple of weeks ago I attended an industry awards dinner and had an interesting conversation with an eminent doctor who shall remain nameless. The doctor in question works in a highly specialized area and frequently talks about her research at conferences around the world. She always travels first-class and has come to expect accommodation at the best hotels, courtesy of the people who have invited her to speak, which may be a drug company or the conference organizers. She believes she is worth the extra expense and does not think for a second she is abusing the system.

But she was worried about a colleague in Italy who works in the same area and who has had a holiday home paid for in its entirety by a drug company. He also believes he is worth it. The area of medicine in question is highly competitive and I suspect both doctors earn their perks as far as the pharma companies are concerned.

The trouble is that in an era of transparency, other stakeholders get a look-in and conflicts arise, as UK readers will know from the furore that arose after expenses claimed by their Members of Parliament (MPs) were disclosed recently. In that uproar, it was clear that many MPs also thought they had done nothing wrong, even when their expenses ran to extremes such as the cleaning of a personal moat.

This was not how the electorate saw it and lots of MPs’ reputations and the integrity of the system took a hard knock. The doctor I was talking to wondered if the new fashion for transparency in pharma circles would similarly impact the medical profession.

As well she might. Just a few days earlier, Merck & Co had disclosed it had paid 1,078 doctors and nurses in the US a total of $3.7 million from July to September to talk to colleagues about company products and healthcare related to those products. On average, these professionals were paid $1,548 but the highest earner received $22,693, and several doctors got more than $10,000 — not inconsiderable sums.

Merck is not alone. Eli Lilly was the first to fall in line with new thinking on payments to physicians and GlaxoSmithKline, Pfizer and Johnson & Johnson are among others to say they will follow suit. Indeed, all pharma and medical device companies in the US will be compelled to disclose information on their payments to physicians if the Physician Payments Sunshine Act 2009, which was folded into the health reform bill approved last month by the Senate Finance Committee, becomes law. The act sets fines of up to $1 million for knowingly not reporting payments to doctors of more than $100 in a year.

So far the disclosures only focus on the US, but the arguments of Senators Chuck Grassley and Herb Kohl, who introduced the legislation, are equally persuasive in Europe. Timing is everything. The two senators had tried to introduce a similar bill a couple of years ago but it was not even considered by Congress. Now it is strengthened by incorporating many of the recommendations of the Medicare Payment Advisory Commission, an independent agency that advises Congress. Even if the act isn’t passed, many Big Pharma companies see compliance with its spirit as essential to repairing the damage the industry’s reputation has suffered in recent years. They probably also reckon it will save them money as it dawns on doctors, like the one I was talking to, that they also have reputations to protect and may well settle for less to speak on a company’s behalf.

The truth is that ordinary people, like the UK electorate when presented with what their representatives had been getting away with for years, see things differently from MPs or doctors. And having pharma companies pay for second homes doesn’t sound like a terribly impartial way of doing things.

For the first time, the highest court in the land is weighing in on whether federal approval of a drug preempts tort claims against a drugmaker, such as an injured consumer might bring in a state court. A decision for Wyeth upholding preemption could help end the proliferation of product liability and class-action lawsuits at the state level—as seen in the massive Vioxx litigation.

The details of the case verge on melodrama. A Vermont musician, Diana Levine, lost part of her right arm to gangrene after Wyeth’s anti-nausea drug Phenergan (mistakenly) came into contact with arterial blood.

Although the drug’s label carries a warning about this bizarre potential side effect, which can result from an improper emergency “IV push,” the plaintiff has argued that the drugmaker should have either made the warning more prominent or not sought approval for this specific technique. A Vermont court agreed with the plaintiff, ordering Wyeth to pay Levine $6 million in damages. Wyeth appealed.

Following the arguments, Pharm Exec spoke to James Huston, a San Diego–based litigator at Morrison & Foerster, who has scored some big victories defending major manufacturers of drugs and medical devices. (He is also a bestselling crime-thriller novelist.)

We asked Huston for his take on how the arguments went, how the judges might decide, and other aspects of the case.

What can you tell us about the judges’ demeanor during questioning?
I talked to someone who was there, and I have read the briefs in the case as well as the questions that the judges asked. The lawyers on both sides seemed to be on their heels a lot of the time, and Wyeth was getting the more aggressive questioning from the judges, even some of the so-called “pro-business” judges.

They were asking fundamental questions—Judge Alito asked, “How in the world could the FDA approve an IV push for this [anti-nausea] drug when there is a risk of developing gangrene?”
Based on all the questioning, it seems clear that the court is very troubled by this case. And they should be. It’s not a good test case for preemption.

Why not?
Because it’s really a case of medical malpractice. The woman who got the IV push was a victim of medical error, not a regulatory or liability error. Whoever injected the IV push committed medical malpractice.

The plaintiff is arguing that FDA shouldn’t have allowed this type of drug administration at all. And I tend to agree with her. And that’s the problem with this case: We’re all left wondering why neither Wyeth nor FDA can tell us about the potential medical event that is so critical as to make the severe risk associated with this IV push worth it—rather than experiencing 15 minutes of nausea waiting for the regular [and safe] IV drip to take effect.

Wyeth didn’t give a single example in their brief of why this was medically necessary.

What’s the pro-preemption answer to Alito’s question?
The answer is, how FDA came to the conclusion is not up to us or a jury to second guess. The point is that it went to a medical committee, and FDA determined that the warning that this drug carried about this particular risk was adequate.

What does a jury know that medical experts do not know, and that enables them to and say, “No, the warning is not adequate”? And then another jury in another state says, “Yes, it is.” And then another jury says, “No, it isn’t.” And we skip across the country making some lawyers very rich. It’s a crazy patchwork of decisions and an awful waste of money.

Does that mean that under preemption, people who are injured by an FDA-approved drug will no longer be able to sue the drugmaker?
The short answer is yes. A decision supporting preemption would probably cover the vast majority of liability issues related to the design or warning label of a drug. You could probably still sue for manufacturing problems.

Could you sue FDA?
That’s exactly what Judge Scalia said today during the arguments: “If you have a problem with FDA’s decision, sue ’em.” But that’s a crazy idea. You’d have to bring a claim for negligence under the Federal Torts Claims Act, and it would almost certainly be struck down.

If it’s a case of medical malpractice, why is the drugmaker held responsible?
Because of limitations and restrictions in the state medical malpractice rules. If Ms. Levine brought her case in California against her medical professional or the clinic, the amount of money she could recover is very limited. She would never get the $6 million a jury awarded her.

The drug company gets hit for $6 million for a risk that they knew about, identified, and warned against. That’s a problem—and addressing that problem would make a very interesting footnote. We’ll see if it makes it into the opinion. None of the briefs filed with the case mentioned it.

How do you think the Supreme Court will decide the case?
I think the decision, when it comes in three months, will be a very narrow affirmation of the lower court’s result and yet confirming that preemption does apply sometimes. The court will probably say that preemption only applies when we have actual knowledge that FDA considered the specific risk/benefit at issue.

The problem is that you don’t get that proof because FDA never reveals how it comes to its decisions. So I think the decision will ultimately leave us with a big conundrum.

Basically, the judges will decide narrowly both for and against. They may give Ms. Levine her judgment and say, “In this case preemption does not apply because Wyeth should have proposed a change in the warning on the label. But don’t get us wrong, we’re not saying preemption doesn’t apply in general.”

Would that set some kind of precedent for preemption?
It would be a very narrow extension of implied preemption. But even if the court recognized a broad preemption application, I think that Senator Waxman and others in Congress will, on the day after the decision, issue an amended Food and Drug Act saying that nothing in this act is intended to preempt any tort claim in any state anywhere. And given the Democratic majority, that law is likely to be enacted.

But we’re seeing the courts pushing on preemption in a lot of different arenas right now.

For example, in the Ninth Circuit here in California, there was a recent case where the court said, “We’ve got the Federal Aviation Association regulating airports and aircraft and aircraft design already, so how can you—a jury—come in and tell us that the way an international airplane is designed is more likely to cause deep vein thrombosis injuries? The Ninth Circuit said you can’t—that the entire field of aviation is preempted by the FAA.

Is there a potential solution beyond the issue of preemption?
Congress could probably come up with a better solution. They passed a law for medical devices saying that state torts laws do not work, but they didn’t extend it to drugs. Still, there has never been a federal tort standard on anything, and Congress isn’t about to start generating one.