2/25/2001 – How drug firms reach the heart of government – stalking US corridor

Our thanks to the British newspaper, The Guardian, for exposing this
corruption in our government. The political ties of the drug companies is key
to understanding why we have drugs remaining on the market that the developer
came out against three years ago calling them “monsters” she has created.

Over the last several years I have watched, breathlessly asking “WHY?”, as
the mergers have continued with these companies making their power and
influence greater and greater in our world. Why this has not been stopped is
clear – our leaders have sold us out to the highest bidder through
“politically correct” bribes paid to those in office in the form of donations
to campaigns by these companies, not to mention the perks coming from their
lobbyists.

Ann Blake-Tracy, Executive Director,
International Coalition for Drug Awareness
www.drugawareness.org

“However, the real debate has arguably not been put before the American
public with any clarity, because the extent to which the pharmaceutical
industry in the US has been able to set the policy-making agenda remains
invisible to the average voter.”

“There was a time not long ago when the corporate giants that PhRMA
represents were merely the size of nations. Now, after a frenzied two-year
period of pharmaceutical mega-mergers, they are behemoths which outweigh
entire continents.

The combined worth of the world’s top five drug companies is twice
the combined GDP of all sub-Saharan Africa and their influence on the rules
of world trade is many times stronger because they can bring their wealth to
bear directly on the levers of western power. ”

http://www.guardianunlimited.co.uk/international/story/0,3604,437212,00.html

or see article at: http://www.mercola.com/2001/feb/24/drug_industry.htm

Industry that stalks the US corridors of power

In the second part of a series – how drug firms reach the heart of government

Special report: George Bush’s America

Julian Borger in Washington
Tuesday February 13, 2001
The Guardian

Washington teems with a thousand industrial lobbyists. They cluster around
the band of luxury offices and expensive restaurants which stretches from the
White House to the Capitol building – a two-mile axis along which money and
power are constantly traded.

In this pantheon of corporate muscle, no industry wields as much power as the
Pharmaceutical Research and Manufacturers Association (PhRMA), a pressure
group breathtaking for its deep pockets and aggression, even by the standards
of US politics.

There was a time not long ago when the corporate giants that PhRMA represents
were merely the size of nations. Now, after a frenzied two-year period of
pharmaceutical mega-mergers, they are behemoths which outweigh entire
continents.

The combined worth of the world’s top five drug companies is twice the
combined GDP of all sub-Saharan Africa and their influence on the rules of
world trade is many times stronger because they can bring their wealth to
bear directly on the levers of western power.

In the struggle between western patent rights and the rest of the world’s
need for affordable medicine, the few concessions handed to the developing
nations in the last year of the Clinton administration are likely to be
reversed under Bush. The US government is expected to return to its customary
role as a battering ram for the interests of the pharmaceutical industry and
the principle of intellectual property.

Until recently, the industry hedged its political bets, backing the Democrats
and Republicans more or less evenly at election time. But at the last
election, it gambled. With billions at stake in a heated debate over
prescription drug prices at home and a growing number of patent disputes
abroad, the drugmakers stacked their chips disproportionately behind George
Bush. The industry spent nearly 70% of its unprecedented $24.4m campaign war
chest on the Republicans.

The wager paid off – just – and PhRMA has emerged at the apotheosis of its
political clout, with grateful Republicans running the White House, Senate
and House of Representatives. Politicians it has supported are now in key
positions and it deploys 297 lobbyists – one for every two members of
Congress.

‘Super profits’

The pharmaceutical industry is therefore well-placed to defend profits which
have soared in recent years to 36% (measured as a return on equity). That
rate of return on investment is more than twice the US average. It is far and
away the most profitable major industry in the country.

These “super-profits” have been generated by the proliferation of new
pharmaceutical discoveries and the parallel spread of worldwide patents. They
are also a measure of PhRMA’s success in using its influence in government to
fight off the threat of domestic price caps and competition from generic
manufacturers producing cheap copies of its drugs.

The industry played a significant role in the drafting of Trips (trade
related intellectual property rights) – that section of the World Trade
Organisation’s trade rules which relate to respect for patents. PhRMA has
also made it a priority to ensure that the US government has enforced the
Trips rules in a manner beneficial to its neighbours.

In 1998, for example, it was revealed that Al Gore had bullied the South
African government with threats of sanctions if it bought cheaper generic
alternatives to brand-name Aids drugs, even though South Africa had the right
to do so under Trips.

The outcry over the vice-president’s role, particularly among black
Americans, led to one of the few setbacks the lobby has faced. In December
1999, Bill Clinton announced that the US trade representative (USTR), the
country’s chief negotiator and enforcer in trade disputes, would consult with
the health department on the impact of intellectual property laws on access
to essential medicines in the developing world.

This may have been little more than lip service. The USTR continued to put
pressure on Latin American countries to agree to patent laws. Its criticisms
of Argentina and Brazil, on its “watch list” of patent miscreants, closely
echo briefing documents supplied by PhRMA.

The industry defends its hard-nosed approach by pointing to the cost of
research and development (R&D) and by the high risks involved in such a
pioneering field. Jeff Trewitt, PhRMA’s spokesman, said: “Patents are the
lifeblood to innovation. It costs about $500m to develop each pill and the
arbitrary abrogation of patents is going to kill that off.”

While the past decade has undeniably been a period of extraordinary and
vigorous innovation, the link between the development of new drugs and the
industry’s breathtaking profit margins is not necessarily as straightforward
as PhRMA maintains.

Creative accounting

Drug prices in Europe are about 60% of US prices, yet European firms spend a
larger share of their revenues on R&D than their American counterparts. The
US companies spent more on marketing than on R&D in 1999 (the last full year
figures are available) and set aside more for profits.

Moreover, with a little creative accounting, all manner of expenditures have
been lodged under the R&D title, partly in the pursuit of tax rebates.

In fact, much of the R&D work on new drugs is government-funded. A study by
the Boston Globe newspaper in 1998 found the National Institutes of Health
(NIH) laboratories spent $1bn on drug and vaccine development in the 1996 tax
year, but only took in $27m in royalties.

In September 1999, it was pointed out to the director of the NIH, Harold
Varmus, that six HIV/Aids drugs, as well as anti-malarial treatments and
other medicines of vital interest to developing countries, had been invented
with public funds. The government therefore had the right under US law to use
the drugs in public health initiatives.

Dr Varmus dismissed the suggestion, echoing the industry line that:
“Undermining licensed intellectual property rights would, I believe,
unnecessarily jeopardise the development of important therapeutic drugs.”

James Love, who runs a Washington-based group called the Consumer Project on
Technology, sees the response as nonsensical because it was the NIH which did
the hard work of discovering and synthesising the drugs in question. “The
rest of the world will have to go however many years more of paying an
astronomical sum for something invented by the United States government,” he
said. “How can we expect Glaxo to share its intellectual property if the
United States government won’t share its intellectual property to save
millions of people. What does that say about the moral character of the
American public. We are responsible.”

However, the real debate has arguably not been put before the American public
with any clarity, because the extent to which the pharmaceutical industry in
the US has been able to set the policy-making agenda remains invisible to the
average voter. Ten years ago, its modest campaign contributions of $2.9m were
evenly shared between the two parties and all in the form of “hard money” –
federally regulated donations for use in a specific election campaign.

In the 2000 election cycle, 60% of the drugmakers’ $24.4m contributions were
in the form of “soft money” – legal unregulated cash paid to the parties’
national committees for supposedly general use.

One of the biggest players in the soft money game is a group with the
public-spirited title of Citizens for Better Medicare. For an organisation
which commissioned an estimated $35m in advertising in the last election,
Citizens for Better Medicare, maintains a remarkably small office in downtown
Washington.

“We are a broad-based coalition of patients, doctors and the industry, which
stands for a system based on competition, consumer empowerment and senior’s
choice,” Tim Ryan, its executive director said. In terms of funding, however,
he concedes the base is considerably narrower.

“We may have some contributions from individuals, but yes, we are largely
funded by the industry. We haven’t talked about figures, so I can’t tell you
the percentage,” he said.

The percentage is close to 100. Citizens for Better Medicare (CBM) was
founded and is funded by PhRMA and the drug industry. When it registered
itself for non-profit status, CBM declared itself as a PhRMA affiliate.
Before taking up his executive director position, Mr Ryan was PhRMA’s
marketing director.

CBM does not need a big staff or extensive premises because 98% of the money
coming in from the industry is funnelled straight out to a single advertising
producer, Alex Castellanos. Mr Castellanos’s other main clients last year
were the George Bush election campaign and the Republican National Committee.
He was responsible for the most notorious advertisement of the 2000 election,
in which the word Rats flashed subliminally on the screen during a discussion
of Al Gore’s healthcare proposals.

Key positions

There are other examples of how the distinction between the interests of the
pharmaceutical industry and the Bush presidency have blurred. There is a
fast-spinning revolving door between government and the pharmaceutical
industry. Mitch Daniels, the new director of the office of management and
budget in the White House, was formerly the vice-president for strategy and
policy at the pharmaceutical giant, Eli Lilly. Two members of the Bush
transition team, Anne Marie Lynch and Bill Walters, are PhRMA members. Three
others were seconded from big pharmaceutical firms.

“The PhRMA doesn’t need to lobby,” Democratic congressman Sherrod Brown said
in a memo to staff last month. “The industry is in the White House already.”

The industry has sympathetic politicians in key positions in Congress. Behind
George Bush, the biggest recipient of pharmaceutical funding in the last
election was Orrin Hatch, a conservative Republican from Utah, who chairs the
Senate judiciary committee and is therefore well-placed to influence patent
disputes.

The industry backed Senator Hatch to the tune of $340,000 and provided a
plane for him to travel about the country in his quixotic bid for the
Republican presidential nomination last year.

Tomorrow: Are western drug companies using the third world poor as guinea
pigs for their drug trials?

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