Lilly kicks lobbying into high gear-WEB ONLY

Once again Eli Lilly and Co. is running in the lead pack in dollars spent to bend ears on Capitol Hill. And that was even before the health care reform debate got rolling.

Through the first quarter, the Indianapolis-based drugmaker was on pace to break the record amount of lobbying it did last year, when it led all pharmaceutical firms by spending nearly $12.5 million, according to the Center for Responsive Politics.

So far this year Lilly has spent $3.4 million, ranking it 12th among all U.S. corporations. It has a team of 48 lobbyists swarming the nation’s capital, one quarter of them working for Lilly full-time.

Among drugmakers, Lilly runs second only to New York-based Pfizer Inc., which has spent a whopping $6.8 million, according to the Center for Responsive Politics. Pfizer, however, is more than twice as large as Lilly.

Other Indiana health care organizations that have spent on lobbying include:

-Indianapolis health insurer WellPoint Inc. (nearly $1.4 million)

-Medical device maker Roche Diagnostics, whose U.S. headquarters is in Indianapolis ($90,000)

-Warsaw orthopedic implant maker Biomet Inc. ($60,000)

-Batesville hospital bed maker Hill-Rom Holdings ($60,000)

-Bloomington medical device maker Cook Group Inc. ($50,000)

-Indianapolis-based hospital system Clarian Health ($45,247)

-Warsaw orthopedic implant maker Zimmer Holdings Inc. ($30,000)

-Sisters of St. Francis Health Services ($20,000)

-Health & Hospitals Corp. of Marion County ($20,000)

Lobbying by all the organizations likely picked up in the past month as Congress took up health care reform bills. Much of the rhetoric focused on health insurers like WellPoint, which could face new requirements and possibly competition from a government-run health insurance plan.

But Lilly, too, has more reasons than usual to be concerned about bills in Congress.

“I do not believe that policymakers have yet arrived at a full and complete diagnosis of what’s wrong and what’s right with U.S. health care,” Lilly CEO John Lechleiter declared in a May speech to the U.S. Chamber of Commerce. “I am very concerned that some of the proposed policies – the treatments, to continue my metaphor – will have unintended side-effects that make our situation worse.”

Lilly derives a larger share of its sales from government health programs – 18 percent – than any other major American drugmaker, according to Zack’s Equity Research analyst Jason Napodano. Some in Congress want to allow the federal Medicare program negotiate for bigger discounts from drugmakers.

To stave off even worse outcomes, the industry recently agreed to 50-percent cuts in their drug prices when Medicare recipients burn through enough of their benefits that they have to pay out of pocket.

Because Lilly sells so much of its bestseller, Zyprexa, to Medicare recipients, the deal will cost Lilly 13 cents per share per year in profits, according to an analysis by Cowen & Co. That’s more than any other drugmaker, Cowen concluded.

Congress also wants to OK generic biotech drugs – something Lilly supports so long as it gets more than a decade of exclusive sales first. Nearly half of Lilly’s late-stage pipeline drugs are in the biotech arena, which explains why Lilly executives have been making weekly flights to Washington to bend ears on Capitol Hill.

The biggest hit of all, however, could come from President Barack Obama’s proposed changes to corporate taxes. By taxing foreign profits at U.S. rates and cutting tax credits for research and development, Obama’s plan could raise drugmakers’ effective tax rates to about 30 percent, Napodano estimated.

Lilly has been paying corporate taxes at a 21-percent rate – lower than all but three other major American drugmakers.

To see the bills on which Lilly has focused its lobbying, click here.