Monday, January 12, 2009

Big Pharma’s Political Paradox: The Good News is the Bad News

What’s wrong with this picture?

If you said, “It almost looks like Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin and Families USA Executive Director Ron Pollack are in the same room, working together on something,” well, you are almost right.

The photo is indeed of Tauzin and Pollack at a Capitol Hill press conference unveiling an ad urging immediate action on health care reform. (You can read our coverage of the unlikely partnership here; you can watch the ad here.)

But there is nothing wrong with that picture: indeed, for the brand name trade association it is a sign that something may finally be going right. Families USA has not, to put it mildly, been a friend of PhRMA over the years, attacking industry pricing practices and serving as the head cheerleader for the failed effort to impose price negotiation in Part D in 2007.

So Tauzin’s efforts to build common ground with some of PhRMA’s toughest critics are clearly working.

Pollock didn’t exactly say he thinks drug prices are a non-issue—but when asked whether the groups had common ground on drug prices, he turned the podium over to Tauzin to respond. The implicit message: drug pricing will not be a central issue in the coming health care reform debate. No replay of the Clinton Care experience of 1993-94, when drug industry “profiteers” were portrayed as one of the key villains in the reform debate.

In that sense, this is a picture worth more than a thousand words.

So what’s wrong with this picture? Simple: it is the latest demonstration that industry's policy successes increase with its commercial failures.

One reason PhRMA is finding it easier to round up allies is that it simply isn’t credible to blame the drug industry for soaring health care costs anymore. Given the small slice of health care spending devoted to drugs, PhRMA would argue it was never credible to blame drugs as a driver of overall spending. But with prescription drug spending now growing more slowly than overall health care spending (the latest statistics are here), there is no one who can seriously argue that reining in drug costs would significantly impact the bigger trend line.

That is the silver lining in the generally dreadful performance of the drug sector commercially: it takes the heat off the industry politically. And, with another patent “cliff” still ahead of PhRMA, there will be even less political pressure on drug costs in the next few years.

Gee, if only drug sales would disappear altogether, politicians might even start to like drug companies.

You see the problem: higher drug spending is defined as a priori a bad thing, a problem that needs fixing. Lower drug spending means there is no problem. It doesn’t feel that way in the board room, does it?

This, we submit, is the single biggest policy problem facing the biopharma sector: the industry’s success (measure in rapidly growing sales) is perceived as a policy crisis requiring a governmental response. Someday, somehow, that paradox has to be addressed.

Still, there is no question that PhRMA can benefit from the fortuitous timing. Given those perceptions, it is much safer for industry to have a health care reform debate during a time of commercial weakness.

We can only hope that when the industry comes back stronger than ever, its new-found allies think that is a development worth celebrating.

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