Dorgan, Dodd and the New Democratic Math for Pharma

The big news in Washington is the unexpected retirements of two prominent Democratic Senators: Christopher Dodd of Connecticut and Byron Dorgan of North Dakota. Both changes have interesting implications for the biopharma industry, especially in light of the brand name trade association PhRMA's rapprochement with the Obama Administration on health care reform.

It is safe to say that a lot of pharma companies won't miss Dorgan (pictured), who has become the most dogged advocate of reimportation legislation in the Senate, first almost derailing the tobacco bill by trying to attach it, and then forcing a vote on the Senate floor in the context of the health care reform debate.

But be careful what you wish for: Dorgan's departure essentially assures that the North Dakota Senate seat will switch from D to R in 2011--and we don't think the pharmaceutical industry will be better off if the Republicans come to power in the wake of the health care reform debate. Republicans are seething over the fact that PhRMA cut a deal with the Obama Administration on reform; that's why so many voted to support Dorgan's amendment on reimportation. And, while Dorgan's likely successor--Gov. John Hoeven--hasn't been as strident as some border state governors on reimportation, he isn't likely to lead the opposition in 2011.

Dodd's departure, on the other hand, probably won't make anyone in the brandname industry happy. Dodd was one of few Democratic Senators industry could work with when the partisan alignment was different, thanks in part to the large Connecticut presence of Pfizer and several other pharmaceutical companies. In 2009, he has quietly been a key player in helping insure that the Senate live up to the PhRMA deal--including voting against Dorgan's reimporation amendment on the Senate floor.

And even if you still lean Republican, his departure assures that the Connecticut seat will remain in Democratic hands--specifically, in the hands of Democratic Attorney General Richard Blumenthal. As AG, Blumenthal supported reimportation legislation, pushed for legislation banning gifts to physicians, and--most recently--opened an investigation into "price gouging" for flu vaccines.

So, two Democratic departures probably adds up to a net gain of one seat for the Republicans and one loss for supporters of the PhRMA health care reform deal.

PhRMA Wins Reimportation Battle; Can it Win the PR War

The brand name pharmaceutical industry staved off an effort to attach a reimportation provision to the Senate health care reform bill last night. If anyone doubted how much the trade association PhRMA accomplished by working with the White House on reform instead of fighting, let's remove all doubt.

Here, once again, is an Obama campaign video (simply called "Billy") from last year:


Does anyone really doubt that industry could be facing a much bigger bite from health care reform if it didn't cooperate early? (This is why we nominated PhRMA's deal with the White House--which we like to call "dollars for donuts"--for Deals of the Year.)

The only problem with the vote is how bad it all looks. And we think that's a bigger problem for PhRMA than for the White House.

Sure, Obama's taking plenty of hits for flip-flopping on reimportation. (He supported it on the campaign trial, but the White House worked with PhRMA to kill it in the Senate.) But that PR hit has an upside: it reinforces to other industries that when this White House makes a deal it sticks to it. (Is that why the CEOs of several major banks now say they will work directly with the Administration on regulatory reform for their sector?)

But there is no upside here for pharma companies. The pharmaceutical industry has proven that it can defeat reimportation yet again. What the industry needs to do, though, is get to the point where no one seriously thinks reimportation is a useful public policy option in the first place.

We think this column in today's Washington Post should be required reading for everyone in the brand name industry. There is almost nothing in the article that won't make brand executives angry. But it is a fair reflection of how the political chattering classes view this issue: evil Big Pharma's lobbying clout trumped a common sense proposal to help the average Joe.

If industry can't change that perception, its victory in health care reform may be short-lived.

Bump in the Tobacco Road: Reimportation Returns in FDA Bill

Chairman Henry Waxman (D-California) is very close to achieving one of his objectives stretching back more than a decade: granting explicit authority for the Food & Drug Administration to regulate the marketing and development of tobacco products. The Family Smoking Prevention and Tobacco Control Act (HR 1256) passed the House on April 2 by a commanding 298-112 vote and was cruising toward Senate passage this week.

But then Sen. Byron Dorgan (D-ND) hauled out one of his long-term favorite projects (drug reimportation) and created a nasty hurdle in the final stretch of Waxman’s long journey. Dorgan (D-ND) proposed the “Pharmaceutical Market Access and Drug Safety Act of 2009” on June 2 to be introduced as an amendment to the anti-smoking bill. Dorgan has five of long-time allies on the issue: Olympia Snowe (R-ME), John McCain (R-AZ), Debbie Stabenow (D-MI), Bernie Sanders (I-VT) and Amy Klobuchar (D-MN).

There is an interesting irony for Waxman as Dorgan tries to ride the success of the smoking bill. Waxman has never been a proponent of permitting drugs from lower cost markets to be imported to the U.S. as a cost control measure. That approach has been treated by Waxman and other prominent Democratic leaders in the health area as a distraction from more direct ways to address drug prices and a threat to FDA’s ability to protect quality manufacturing for pharmaceuticals.

If Dorgan can link drug reimportation onto the tobacco bill, Waxman may be faced with having to accept a provision he has fought for years if he wants to move forward with one of his top public health priorities.

Experience says that Dorgan will fail to attach reimportation in any meaningful way. Advocates for a strong FDA are watching the Dorgan amendment effort with worry and distaste. Adding tobacco authority and working to improve food control are big projects by themselves. FDA doesn't need to try to undertake the complicated system for assuring safe imports of drugs marketed in Canada or elsewhere. Congress has foiled the reimportation attempts many times in the past or added provisions that made in difficult or impossible to implement. But like Waxman’s tobacco crusade, reimportation seems to be an issue that won’t go away.

The environment around the reimportation debate is changing also. When the proposal first came up, opponents were able to raise the convincing threat of unsafe or poorly manufactured products from outside the US slipping into the domestic drug supply if reimportation were passed.

However, with many manufacturers outsourcing production of active ingredients to a wide variety of low-cost manufacturing locales, they are effectively eroding their own defense-of-quality argument. Domestic suppliers (brand and generic) have had enough well-publicized problems assuring the quality of their products with components from overseas to create a more favorable environment for reimportation. It is one of those Congressional pet projects which might linger around long enough to find the right time for enactment.

Kind of like FDA regulation of tobacco.

Canadian Imports? Think Policy, Not Prescription Drugs

Election Day has come and gone, so once again it is time to handicap the prospects for so-called reimportation legislation—bills that would allow much broader importation of prescription drugs from Canada or other markets where prices are lower than they are in the U.S.

That has been a biennial topic for the last four election cycles, ever since bus trips to Canada burst on to the political scene to dramatize the high cost of prescription drugs in the U.S.

Since 2000, every national election has brought a push for action, but so far at least the borders remain closed to wholesale import of drugs from Canada. So it comes as no surprise to see reimportation on everyone's list of issues for industry to worry about heading into 2009.

But we think asking about the prospects of reimportation legislation next year misses the point.

First off, Congress has already enacted legislation that would allow widespread legal importation of drugs from Canada, as long as HHS Secretary certifies that the practice would be safe. Under President Bush, that certification has not happened, but at least in theory an Obama Administration could change importation policy with the stroke of a pen.

We don’t think that is going to happen.

Yes, we have read Obama’s website, which dutifully pledges to "lower drug costs by allowing the importation of safe medicines from other developed countries."

But we’ve also heard what one of Obama’s key health advisors, Dora Hughes, had to say on the subject at a recent generic industry trade conference: In light of the heparin problems, reimportation is just not that high a priority anymore. (You can read more about her remarks in “The Pink Sheet.”)

That also seems in keeping with the sense that reimportation has served its purpose for the Democratic party—a sense that seemed clear to us over a year ago.

Some of this relates to the odd political history of imporation: bus trips to Canada were always an odd national campaign emblem, but they made a kind of sense back in 2000. In that year, the Democrats saw an opportunity to make significant gains in the Senate by targeting a number of Republican incumbents who happened to be up for re-election in northern border states that year. So people like Maria Cantwell (Wash.) and Debbie Stabenow (Mich.) or even Hilary Clinton (N.Y.) all benefited from the national focus on Canadian imports. And once in Washington, they all shared an interest in advancing legislation.

Eight years later, look at the Senate seats that flipped to the Democrats. Virginia. North Carolina. Colorado. New Mexico. Oregon. Not a Canadian border in the bunch. Reimportation just isn’t the issue there. If anything, the danger for pharma is tighter regulation of trade, or even outright protectionism. (The one exception is New Hampshire, where former Governor Jeanne Shaheen brings a track record of drug cost containment to the Senate.)

Here’s the thing: importing drugs from Canada was never the point. Lowering US prices was.

That’s where the new Administration and the new Congress will focus their attention, starting with the unfinished business from the 2006 elections: price negotiation in the federal Medicare program. So if the Democrats want Canadian prices, they can get them--but they don't have to bother with allowing (and policing) wholesale imports, they can simply direct that the US government pay no more than the Canadian price for medicines sold in both countries.

We don't actually think that is how price negotiation will work at first; as we wrote here, Congress is more likely to start with benchmarking against the US Medicaid price for the same drug. But once Pandora's Box is open, its a safe bet that using Canadian prices as a point of reference will be on the table too.

And that's where industry might start to do some importing of its own--not of drugs, but rather of case studies in the impact of Canadian efforts at price controls on investment in that country.

Beyond that, its time to start gathering stories of how the Canadian health care system overall does and does not meet the needs of Canadians. Fifteen years ago, the US health care reform debate triggered a sub-debate about whether Canada's system does or does not work well for its citizens. That debate is certain to recur if and when the health care reform debate begins again in earnest.

So there will be plenty of cross-border trade in 2009--but in the form of a flow of ideas, not prescription drugs.