Portside

The first-ever round of drug price negotiations are underway between the U.S. government and the massive drug companies behind 10 of the costliest drugs covered by Medicare. The companies have until March 2 to respond to the first pricing offers put forward by the Centers for Medicare & Medicaid Services (CMS) on the 10 selected drugs, which do not have a generic or biosimilar equivalents and have been available for at least seven years, among other criteria.

The historic back-and-forth with Medicare over the pricing of blockbuster drugs is something the pharmaceutical industry spent big to try and block from happening. The industry spent a record amount on federal lobbying in 2022, while it focused on stopping the drug price negotiations in the Inflation Reduction Act (IRA), or on shaping the policy after it became law. Last summer, the industry’s largest lobbying organization, PhRMA, sued the government to halt the drug price negotiations, arguing the program is unconstitutional, a case that was dismissed last month. Another lawsuit brought by AstraZeneca, claiming the program was unlawfully implemented, was rejected today when a federal judge ruled the company did not have standing. 

In addition to its lobbying activity and legal challenges, PhRMA funds a host of health care groups that lob public challenges against the drug pricing negotiations—many of which don’t disclose their hefty funding share coming from the drugmakers’ lobbying giant. In 2022, PhRMA donated $16.1 million to groups that challenged the Medicare drug price negotiations, according to an analysis by the nonprofit watchdog group Accountable.US. For several of the advocacy groups that have been echoing Big Pharma’s talking points, the vast majority of their funding in 2022, the most recent year covered in tax records, was doled out by PhRMA.

“Big PhRMA spent millions trying to stop Medicare from negotiating lower prescription drug costs for seniors, and they’ll spend millions more trying to ban it,” said Tony Carrk, executive director of Accountable.US. “Drug company CEOs will do anything to keep the system rigged in their favor, even becoming the entire funding stream for extreme right-wing groups who defend price-gouging of patients in need. Motivated by greed, PhRMA’s push to ban Medicare’s new price negotiation power is a direct threat to the health security and pocketbooks of millions of Americans who will benefit from the Biden administration’s historic action.” 

Funding coalitions and advocacy groups that bill themselves as “grass-roots” is just one branch of PhRMA’s influence spending to prevent Medicare from negotiating over prices of widely-used drugs. PhRMA alone mentioned the Democrats’ legislation on drug pricing reforms in more than $105 million in federal lobbying spending since the start of 2020, according to Accountable’s review of Senate disclosures. 

In January, just as CMS negotiations over the 10 selected drugs were getting started, drug companies raised the prices on 910 brand-name treatments, research firm 46Brooklyn Research found. High drug prices remain a problem for many American consumers: an August tracking poll by health policy organization KFF found that 28% of adults say they have trouble affording the high cost of their prescription medicine. For these initial 10 Medicare-covered treatments, a recent study by the Commonwealth Fund found, the U.S. retail price is, on average, three times higher than it is in other high-income countries.

The Medicare negotiations will run through August 1 and are projected to save the government $25 billion per year by 2031, according to the Congressional Research Service. 

PhRMA’s largest outside grant in 2022 was $13.6 million given to We Work For Health (WWFH), a 501(c)4 industry group that says it supports policies that foster innovation. WWFH’s policy webpage directly echoes PhRMA in criticizing Medicare negotiations as “government mandated price controls.” The organizations’ tax returns show that in 2022, PhRMA gave $13,612,690 to WWFH, a sum that entirely encompassed WWF’s $13,164,690 in total revenue that year. WWFH was similarly PhRMA’s top grantee the year before, when PhRMA’s grant made up about 95% of the advocacy group’s budget.

In a statement last August, WWFH Executive Director Dan Leonard slammed the government’s negotiations, saying the provisions would “essentially poison the industry’s innovation ecosystem.” In addition to disseminating op-eds, WWFH has spent $430,000 while lobbying Congress and the White House Office on drug price negotiations starting in the second half of 2021. 

WWFH does not disclose its virtually exhaustive funding from PhRMA on its website, where the trade association’s logo is nowhere to be found. A list of industry partners linked on WWFH’s site mentions the Biotechnology Innovation Organization (BIO) and others, but not PhRMA, its near-total funder. 

As Democrats were reviving legislation to establish drug pricing negotiations, WWFH battled the plan through an advocacy campaign that the PR firm 720 Strategies called, in a document since taken offline, “a cohesive, industry-sponsored grassroots program.” The D.C.-based firm, which also lists numerous Big Pharma companies like Novo Nordisk among its corporate clients, still mentions its work for PhRMA, but in the past few weeks has removed the group’s logo from its online gallery.

Another organization that opposes the negotiations process while being heavily funded by PhRMA is RetireSafe, which describes itself as a “grass-roots” organization that advocates on behalf of seniors on issues related to Social Security and Medicare. In 2022, RetireSafe received $355,000 from PhRMA, which made up about 63% of the group’s total revenue that year. Besides PhRMA, the group’s website says its partners include drug companies Pfizer and Amgen.

RetireSafe spent at least $50,000 on lobbying in 2022 on issues including opposing the IRA. In August 2023, RetireSafe President and CEO Mark Gibbons wrote an opinion piece for the Washington Times that argued that the negotiations program will “reduce treatment options for older adults on Medicare and plunge America’s ability to discover new cures into the darkness.”

RetireSafe has been receiving funding from PhRMA since at least 2011, and it has also been funded by the Biotechnology Innovation Organization, another prominent pharmaceutical lobbying group. In 2013, RetireSafe sent a letter to Congress, claiming to be co-signed by hundreds of other groups, arguing against a proposal to allow Medicare to negotiate prices with drug companies. It was later discovered that at least five of the organizations RetireSafe claimed had co-signed its letter said they did not and that they actually supported the idea. The organization Health Care for America Now speculated that the letter had been orchestrated by PhRMA, and a PhRMA spokesperson told Forbes that it collaborates with the group, while declining to confirm that it was the author of the letter. 

Neither We Work For Health nor RetireSafe responded to a request for comment on their funding from PhRMA and their advocacy campaigns.

Incubate, a venture capital advocacy group that received all of its funding in 2022 from PhRMA, has been speaking against the IRA program. In August 2023, it called the government’s selection of drugs a “regrettable milestone” in what it described as a “price control” system. In an Axios interview around the same time, Incubate’s executive director John Stanford criticized the way the IRA exempts synthetic drugs from negotiations for nine years while giving more complex biologics 13 years.

Since 2021, Incubate has spent $210,000 while lobbying against price negotiation legislation, including Build Back Better and the IRA. In 2022, Incubate received $715,000 from PhRMA, the totality of its revenue, and in 2021 it had received $720,000 from the drug lobby group. Despite its substantial PhRMA support, Incubate seemingly does not disclose its financial connection to the group on its website.

Other groups have challenged the Medicare price negotiations in op-eds with scant acknowledgement of their PhRMA funding. The Council For Affordable Health Coverage (CAHC), which says it fights back against what it calls government price controls and is weighing in on the implementation of the IRA, brought in $220,000 from PhRMA in 2022, a connection not to be found on its website. The Galen Institute, which says it works to “counter the march toward government-controlled medicine,” received $100,000 from PhRMA, the vast majority of its revenue that year. The institute’s founder, Grace-Marie Turner, cheered a Merck lawsuit that accused HHS of a “draconian and deceptive scheme” in the program. 

The healthcare CEO coalition Healthcare Leadership Council, whose members include pharma firms Merck and Bristol Myers Squibb, both of which took on the IRA’s pricing provisions in court, received $895,000 from PhRMA. The group’s president Mary R. Grealy panned the negotiations as “artificially-low price ceilings” in a statement.

The conservative mainstay Heritage Foundation also was given $125,000 by PhRMA in 2022. Last year, its director of health and welfare policy, Nina Owcharenko Schaefer, threw cold water on the negotiations in a commentary in the Daily Signal, co-authored by the Galen Institute’s Turner, that claimed the IRA’s drug price program would result in price controls and “draconian taxes.” Two more organizations, the Washington Legal Foundation and the Pioneer Institute, received $40,000 and $50,000 respectively from PhRMA in 2022 as their leaders called the plan “Orwellian” in the Washington Times and predicted a “nuclear winter” for biopharma in the Boston Business Journal.

Though pharma industry groups promote warnings that Medicare price negotiations will hamper innovation, congressional Democrats have pushed back with findings that spending by the top 14 drug companies on stock buybacks and dividends hugely outpaced their outlays on research and development from 2016-2020. In February, the Democratic-led Senate Committee on Health, Education, Labor and Pensions (HELP) issued a staff report finding that in 2022, Johnson & Johnson and Bristol Myers Squibb, two companies producing some of the 10 targeted drugs for negotiations, spent billions of dollars more on stock buybacks, dividends, and executive compensation than they did on R&D. One of the drugs now in Medicare price negotiations is the arthritis treatment Stelara, which the HELP report found made twice as much for Johnson & Johnson in the U.S. ($30.4 billion) as it did in the rest of the world combined ($14.9 billion) since 2016.

David Moore is co-founder of Sludge.