Drugmakers seek Republican allies to defeat cost-cutting panel

Pharmaceutical companies led by Eli Lilly and Co. are trying to eliminate a government panel aimed at controlling Medicare spending seven months after they supported the health-care overhaul that created it.

The presidentially appointed board has the ability to control drug prices by reducing the amount the federal Medicare program will pay for medicines, Bart Peterson, senior vice president of corporate affairs at Indianapolis-based Eli Lilly said in a Nov. 10 telephone interview.

“If price controls are imposed, you end up with a disincentive to make the kind of investments necessary to be able to produce the next generation of drugs,” said Peterson, who served as mayor of Indianapolis from 2000-2007 as a Democrat.

The drug industry’s endorsement of the health law included a promise to contribute $80 billion toward the overhaul, helping Democrats offset new spending in the bill and clearing the way for passage in March. Now manufacturers will need help from Republicans who take control of the House next year to weaken or eliminate part of the law.

The board “was one of the key parts of health reform that will set our system on a path to sustainability,” Jessica Santillo, a spokeswoman for the Department of Health and Human Services, said in an e-mail.

The drug industry endorsed the law even though manufacturers considered the cost-cutting board to be harmful, Richard Smith, senior vice president for the Pharmaceutical Research and Manufacturers of America in Washington, D.C., said Nov. 11. The lobbying group had said it would take aim at the panel later, he said. The trade group represents name-brand manufacturers, such as Pfizer Inc., Merck & Co. Inc. and Bristol-Myers Squibb Co.

Eli Lilly is developing a strategy with the trade association, Peterson said. “Our industry is united on this,” he said.

Hospital chains also are trying to eliminate the panel, known as the Independent Payment Advisory Board. The panel “threatens the long-time, open and important dialogue between hospitals and their elected officials,” the Chicago-based American Hospital Association, which represents almost 5,000 facilities, said in an Oct. 26 letter to Senator John Cornyn, Republican of Texas.

Opponents will need the help of congressional Republicans, who have said they will try to roll back the law.

The lawmakers won’t try to exact revenge against drug companies for backing Obama’s law but may ask the industry to propose ways to cut federal spending, Bill Thomas, a Republican former chairman of the House Ways and Means Committee, said Nov. 10. One way may be by agreeing to shorten the 12-year exclusivity period during which biologic drugs made from living cells are protected against lower-cost generic versions, he said. Thomas is a senior adviser at the law firm Buchanan Ingersoll & Rooney PC in Washington.

Drugmakers would be targeted with fewer cost-cutting recommendations from the panel if they work to change part of the law that exempts hospitals from the board’s proposals until 2019, said Rebecca Gale, a spokeswoman for Senate Jay Rockefeller, Democrat of West Virginia.

The payment board, known as IPAB, will start proposing cuts in 2014 that will reduce Medicare spending by $15.5 billion through 2019, according to the Congressional Budget Office. The board eventually will be able to slash fees for physicians, hospitals and drugs unless Congress intervenes. The savings would be used to pay for some of the $938 billion in coverage expansions and other health-system changes in the legislation.

Prior to the approval of the health law, the drug industry agreed to concessions such as $2 billion in discounts to senior citizens next year. The arrangement didn’t include new price- setting powers for the government. The cost-cutting board was added to the legislation during Senate debate on the health law.

“We very clearly voiced our concerns about IPAB and our intent to work with others to get that provision fixed,” Smith said.

White House officials touted the panel as the “most important institutional change” in the health law in a June New England Journal of Medicine article.

The board “represents everything that pharmaceutical companies have been fighting against for years,” said Patrick Morrisey, a partner at the law firm King & Spalding in Washington, who advises drugmakers on health-care regulation and policy.

Republicans oppose giving up decision-making powers about Medicare spending to a panel of unelected experts.

“These are decisions that Congress should be making,” said Rep. Michael Burgess, Republican of Texas, who is vying for the chairmanship of the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee. Cornyn introduced a bill this year to repeal the board.

Burgess said drugmakers’ deal with Obama shouldn’t be held against them.

“You’re called by your president, you respond,” he said Nov. 8.

The drug industry’s lobbying group opted to “accommodate a Washington takeover of health care at the expense of the American people in hopes of securing favorable treatment and future profits,” Rep. John Boehner, Republican of Ohio, who is line to become speaker, said last year. The lawmaker had “nothing new to add” on the matter, Boehner spokesman Michael Steel said in a Nov. 10 e-mail.

The pharmaceutical trade group’s political action committee contributed $101,800 to support candidates for federal office, 74 percent of which went to Democrats, as of Oct. 25, according to most-recent data compiled by the Center for Responsive Politics in Washington.

House Republicans should focus on undoing the overhaul, not settling scores with the drug industry, Dean Clancy, the vice president for health policy at Washington-based FreedomWorks, an activist group associated with the anti-spending Tea Party movement, said Nov. 10. “You can’t get ahead while you’re getting even,” said Clancy, who served in President George W. Bush’s budget office.