Lots of cash for ballot clash
Drug firms spend big to beat one plan, boost own
By Clea Benson -- Bee Capitol Bureau

Sunday, July 17, 2005

The chief executives of many of the nation's largest drug companies met in a closed session to discuss political strategy at the May gathering of the Pharmaceutical Research and Manufacturers Association.
When they emerged, the CEOs announced they had agreed to spend the money necessary to pass their version of a drug-discount plan on California's Nov. 8 special-election ballot and to defeat the discount plan supported by consumer groups, an association official said.

What the drug firms think it will take, it appears, is a huge amount.

According to campaign-finance disclosures filed so far, 17 pharmaceutical companies already have combined to give nearly $52 million to the PhRMA Initiative Fund. That includes some whopping $8.5 million checks from Merck, Pfizer, and GlaxoSmithKline in recent weeks that are among the largest single corporate payments ever to a ballot-measure campaign.

This isn't the largest amount an industry has ever spent on an initiative campaign - at least not yet. Accounting for inflation, that honor still goes to the 1988 fight over insurance regulation. With five competing initiatives on the ballot, the insurance industry spent $74 million - nearly $122 million in today's dollars - and lost its battle against Proposition 103, which required rate rollbacks.

For the drug companies this year, a lot is at stake: The measure they oppose, Proposition 79, would force them to give drug discounts to low-income Californians or face being dropped from the preferred list for Medi-Cal, the state's health insurance for the poor and disabled. Medi-Cal prescriptions total about $4 billion a year.

Jan Faiks, vice president for government affairs and law at PhRMA, said the pharmaceutical industry is particularly concerned about a provision in Proposition 79 that would allow Californians to sue if they believe the companies are making excessive profits.

"It could damage your biotech industry in the state and seriously damage the pharmaceutical industry because of the potential liability," Faiks said. "It's very dangerous."

The drug-company measure, Proposition 78, would allow the firms to set up a purely voluntary discount program for uninsured, low-income Californians, similar to one proposed by Gov. Arnold Schwarzenegger and defeated in the Legislature earlier this year. There is no lawsuit provision in Proposition 78.

The pharmaceutical industry is known for its willingness to fight hard for its interests as well as for its copious spending on politics. Drug firms have spent $800 million on federal campaigns and lobbying efforts since 1998 and the industry has employed 3,000 federal lobbyists during that time, the watchdog Center for Public Integrity reported two weeks ago.

Faiks described the companies' California campaign contributions as part a commitment they made to help Schwarzenegger bring affordable prescriptions to the uninsured. The drug industry says the consumer groups' discount initiative will not lead to better drug prices, because it is unenforceable.

"We are keeping our commitment, and the companies don't make a commitment needlessly," she said.

She added, "We want to be good corporate citizens."

Faiks said the firms' donations reflect what it costs to run a campaign in California.

"Do I wish it would cost less money? Yes," she said. "And the pharmaceutical industry does, too."

As the drug industry shores up its campaign accounts, the consumer groups, Democratic interests and unions supporting Proposition 79 have yet to even file papers to organize a campaign committee to start collecting funds. The money to qualify the measure for the ballot came from the Alliance for a Better California, a multiple-issue committee largely backed by public-employee unions.

Sarah Leonard, a spokeswoman, said it was not clear how much money the alliance would commit to the campaign for Proposition 79.

"Needless to say, it will be a volunteer-driven, grass-roots effort," she said.

Consumer advocates are hoping the millions the drug companies are spending will backfire, as the insurance firms' spending did in 1988.

"That amount of money spent on mail or TV will raise questions in voters' minds about what their prescription-drug dollars have been going for," said Anthony Wright, director of Health Access.

Wright and others point hopefully to the 1988 battle over Proposition 103. Facing the insurance industry's $74 million war chest, consumer groups won with a budget of about $3 million that they raised largely in $9 increments from supporters though the mail, said Harvey Rosenfeld, the consumer advocate who ran the Proposition 103 campaign.

"The more money (the insurance companies) spent, the more it hurt them," Rosenfeld recalled in a recent interview. "It had a real jujitsu effect with the public, because the voters instinctively know that any special interest with enough money to advertise so much on television is not looking out for them. It's looking out for itself."