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Report | July 22, 2021

The Industry Agenda: Big Pharma

Anti-MonopolyIndependent AgenciesIntellectual PropertyPharmaTrade Policy
The Industry Agenda: Big Pharma


“Big Pharma” is a broad term that refers to large pharmaceutical companies with significant market power in the industry. The term generally includes Johnson & Johnson, Eli Lilly, Pfizer, and Sanofi, among others.

In 2019, Gallup found that the pharmaceutical industry was “the most poorly regarded industry in Americans’ eyes,” and rightfully so. Pharmaceutical companies often set drug prices exorbitantly high, including life-saving drugs which patients literally cannot go without, such as insulin. This includes older drugs that are cheaper to produce — such as epinephrine (emergency medication used to treat severe allergic reactions and asthma attacks). These firms achieve this by stifling competition at the consumer’s expense, jealously protecting their money-makers from the generics which the pharmaceutical system is supposed to develop after a patent expires. 

This is done through various tactics, which often bypass antitrust laws and abuse the patent system. One harmful anti-competitive tactic employed by Big Pharma is product hopping, otherwise known as “evergreening” or “line extension”. In this practice, brand name pharmaceutical companies make minor changes to the original formulation of a drug when its patent is about to expire (for example, manufacturing the drug as a tablet instead of a capsule), and then obtain patents for the latest version of the drug, preventing or discouraging the production or sale of the original formulation. Although the switch from one version of a drug to another may seem harmless, it stifles competition and prevents competitors from putting cheaper generic versions on the market. It also costs healthcare payors and patients billions of dollars. For instance, one study found that just five instances of product hopping cost the US healthcare system $4.7 billion annually. Thus, this seemingly minimal “innovation” keeps drug prices high for consumers without significantly improving the product. 

Another harmful Big Pharma tactic is called “pay-for-delay” (also known as a reverse payment patent settlement). This is where a brand-name pharmaceutical company pays generics manufacturers to delay the release of the generic version of a drug, so the brand-name company can preserve their monopoly and continue to sell the drug at a higher price. In effect, bribing generics companies becomes part of the “cost of doing business,” as it is still far more profitable to continue gouging patients than to allow a cheaper alternative on the market. 

Big Pharma also exploits lax regulatory policy downstream of actual drug production, in the form of those much-parodied drug ads Americans see on late-night TV. The United States is one of only two countries (the other being New Zealand) that allows direct-to-consumer pharmaceutical advertising (DTCPA) with product claims. DTCPA refers to pharmaceutical companies promoting their prescription products to patients directly, usually through popular media. The Federal Trade Commission (FTC) regulates ads for over-the-counter (non-prescription) drugs, while the Food and Drug Administration (FDA) oversees ads for prescription drugs. The FDA requires DTCPA to provide a balanced presentation of the benefits, risks and side effects of a given product. However, this is difficult to enforce due to significant bureaucratic procedures and staff shortages. Additionally, since the FDA relaxed rules for DTC broadcast advertising in 1997, there has been a surge in DTCPA. Between 1997 and 2016, spending on DTCPA rose from $2.1 billion to $9.6 billion. A study published in 2018 found a decrease in the number of ads that provide information about the condition being targeted and the risk factors of a given drug, while positive emotional appeal continues to be emphasized. In short, Big Pharma is willing to use misleading tactics to sell their products, even if it misinforms patients

DTCPA could also lead to patients diagnosing themselves or self-medicating with insufficient information, increase costs for patients as ads tend to feature expensive brand-name drugs instead of cheaper generic alternatives, strain patients’ relationships with their health care providers, exaggerate the drug’s benefits, and advertize new drugs before their safety profiles are fully known. In light of the FDA’s lax and poorly enforced regulations, the negative impacts of DTCPA are particularly alarming. 

Big Pharma also hires sales representatives to convince physicians to prescribe specific products.  Specific sales tactics include all-expenses-paid vacations thinly disguised as professional conferences, gifting branded office supplies, paying for meals, and cash payments for speaking engagements. This undermines competitors, reduces the likelihood of doctors prescribing cheaper generic alternatives, and could even jeopardize patients’ health. Countries like Australia acknowledge the harmful effects of pharmaceutical representatives and banned pharmaceutical companies from providing lavish hospitality, personal gifts, or entertainment to physicians. 

The most notorious example of this is Purdue Pharma, the manufacturers of addictive pain medication Oxycontin. They spent millions not only providing lavish gifts to doctors interested in prescribing Oxycontin, but funding research for pro-Oxycontin articles in respected medical journals. This helped reverse decades of medical orthodoxy to only prescribe opioids like Oxycontin in limited, extreme cases, due to their highly addictive nature. Purdue successfully turbocharged sales of Oxycontin, which directly led to the modern-day opioid crisis.

Not only does Big Pharma influence physicians, the industry also has a powerful hold on Congress. PhRMA, the industry’s largest lobby group, has spent over $428 million lobbying public officials since 1998. Comparatively, other major trade associations such as the Securities Industry and Financial Markets Association (SIFMA) and the American Petroleum Institute (API) spent $169 million and $125 million respectively, since 1998. The industry’s desire to influence government policy is not limited to the legislative branch. Between 1998 and 2021, lobbyists for Big Pharma at large spent $4.7 billion lobbying politicians, more than any other sector. 

Without change, Big Pharma will continue to abuse the intellectual property system, circumvent antitrust laws, and influence physicians, politicians and government agencies to undermine competition, keep prescription drug prices high, and even shift medical consensus in favor of overprescription of their particular drugs, no matter the human cost. Like most Democrats, President Biden vowed to lower prescription drug prices, but Big Pharma is planning to raise prices on at least 500 prescription drugs this year. If the pharmaceutical industry remains underregulated, millions of Americans will continue to pay outrageous prices for medication, make extreme sacrifices or not be able to afford it at all. Black and brown communities, in particular, struggle to afford ridiculously high-priced medication. 

What are the executive branch issues Big Pharma cares about? 

Intellectual Property: Intellectual property, which includes patents, trademarks, copyrights and trade secrets, generally refers to legal protections against the unauthorized use by others of certain pieces of human creativity, after applying for and receiving the requisite form of IP protection from the federal government. Intellectual property rights are one of the pharmaceutical industry’s most valuable resources. IP guarantees firms a period (typically 20 years) of effective monopoly power on production, and therefore pricing, of certain parts of a drug’s creation process. 

Big Pharma’s abuse of the IP system to generate monopoly profits leads to Americans paying unsustainably high prices for prescription drugs, treatments and therapeutics. Big Pharma contends that strict IP protections and corresponding high prices are necessary to recoup the costs of research development. However, this claim ignores the role public research funding plays in the development of most drugs for the market. One study by the Universities Allied for Essential Medicine showed that as many as 210 drug molecules approved between 2010 and 2016 were developed at research universities. Another study showed that 89 percent of funding for development of these molecules came from the publicly funded National Institutes of Health. Moreover, the high costs of drug research, even in cases where it is truly all privately funded, do not justify the continuing high costs of older drugs which are cheaper to produce and for which firms have likely already recouped their investments. Remodeling the United States Patent and Trademark Office, and the global IP system generally are essential to ensuring greater public control and participation in IP and drug pricing issues. 

To maintain their monopoly over pricing, pharmaceutical companies file hundreds of secondary and tertiary patent applications designed to extend their monopoly protections. While primary patent applications focus on the drug’s active ingredient, secondary patent applications focus on alternative forms of the active ingredient, different formulations and doses. These additional patents extend the period of exclusivity beyond the end date associated with the protection granted for the primary patent. One recent study by the University of Pittsburgh’s Center for Pharmaceutical Policy and Prescription found that between 2007 and 2018, list prices for prescription drugs increased by 9.1 percent per year. The federal government can step in to correct this with an array of executive actions. The federal government can already exercise its march-in rights to relicense pharmaceutical companies’ patents that were obtained from publicly funded research. Additionally, Section 340B of the Public Health Service Act requires pharmaceutical firms to enter into pharmaceutical pricing agreements with the Health and Human Services Secretary to ensure their medications are covered by Medicare and Medicaid, allowing the department to negotiate discounts. However, the 340B program is currently limited to prescriptions received at hospitals and clinics classified as covered entities, which represent only 6 percent of the country’s total drug purchases.

Big Pharma is aware of provisions that, properly deployed and appropriately expanded, would weaken its vise grip on prescription drug prices. That is why they spent a record-breaking $92 million to lobby the federal government in the first quarter of 2021. 

Antitrust: Over the past 10 years, pharmaceutical companies have rarely faced pushback from the Federal Trade Commission for merging with and acquiring rivals, further consolidating the industry. Despite claims that these mergers would spur greater economies of scale, consolidation has led to higher drug prices and a weakened supply chain. Just four companies produced over 50% of all generic drugs in 2017. Due to the influence of corporate lawyers who revolve in and out of government posts, the Federal Trade Commision (FTC) in particular has moved away from blocking anticompetitive mergers outright. Instead, the agency uses consent agreements to remedy the anticompetitive effects of the merger, allowing companies to merge while extracting concessions like specific drug divestitures. The pharmaceutical industry has supported the use of these alternative regulatory mechanisms. However, new leadership at the FTC has signaled that the agency will update its approach to analyzing the effects of pharmaceutical mergers.

Trade: Since the inclusion of the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in the 1994 formation of the World Trade Organization, trade agreements have become a major issue of concern for Big Pharma. The TRIPS agreement was a culmination of decades of jockeying by corporations, particularly Pfizer, to enforce American-style IP protections abroad. In simple terms, pharmaceutical companies are not satisfied with their domestic monopolies and seek to entrench their power globally. Big Pharma’s framing of IP as a trade issue allows companies to continuously obtain further protections in regional, bilateral and multilateral trade agreements. As journalist Alexander Zaichik points out, it also leads to a telling contradiction: the WTO, a shrine to free markets, goes out of its way to restrict market competition on pharmaceutical products. The current battle to waive IP protections of COVID-19 vaccines, therapeutics and treatments at the WTO is an illustrative case. PhRMA, which represents over 30 pharmaceutical firms, recently launched digital campaigns to target the Biden administration’s (through the Office of the United States Trade Representative) decision to join over 100 countries in waiving IP protections on essential COVID-19 treatments. 

Which agencies is Big Pharma seeking to influence?

The United States Patent and Trademark Office: The U.S. Patent and Trademark Office (USPTO/PTO) is a fee-funded sub-agency within the Department of Commerce responsible for granting patents and trademarks in the United States. Reforming the PTO is indispensable to creating a more equitable patent system that would weaken Big Pharma’s monopoly control of various prescription drugs and treatments. Right now, the USPTO can redefine the current process for granting initial patents as well as extensions on current patents. Big Pharma with help from Delaware senator Chris Coons has been pushing for a business-friendly nominee to lead the office. However, pushback from progressive groups limited the efficacy of Coons’ pressure campaign. It now seems likely that Marcus Delgado, a compromise candidate who is not a known reformer, will be appointed as the office’s director. 

The Office of the United States Trade Representative: Part of the Executive Office of the President, the office of the United States Trade Representative (USTR) is responsible for negotiating trade deals with other nations on behalf of the United States, then lobbying for their approval by Congress where necessary. Since trade agreements have been so crucial to the globalization of IP protections, USTR will need to negotiate to undo the current scope and length of IP rights in bilateral, regional and multilateral trade agreements in the long term. Moreover, current Trade Representative Katherine Tai played a key role in the US’ commitment to waiving IP on COVID-19 vaccines, speaking to this position’s influence over the rest of the administration on determining key questions of global trade policy.

Department of Health and Human Services: The Department of Health and Human Services (HHS) is responsible for protecting and enhancing the health and well-being of all Americans. HHS runs the Medicare program through the Centers for Medicare & Medicaid Services. HHS also manages the Food and Drug Administration (FDA) which ensures drug safety and the National Institutes of Health that conducts biomedical research. The HHS currently faces numerous lawsuits from pharmaceutical companies over rules released towards the end of the Trump administration to lower drug prices. This includes the foreign pricing rule which would set an international pricing reference for the industry and the Canada import rule which would allow importation of (cheaper) prescription drugs from Canada. 

Food And Drug Administration: The Food and Drug Administration (FDA) is a sub-agency within HHS responsible for protecting public health through regulation and monitoring of foods, drugs, vaccines and medical devices. The FDA has been accused of ignoring its safety experts to approve the use of risky drugs. Most recently, the agency approved a new Alzheimer’s drug Aduhelm overruling the concerns raised by its own scientific advisory committee. The drug, which is currently priced at $56,000 a year per patient, showed thin evidence of clinical efficacy in trials. Therefore, the FDA has ignored scientific advice to transfer government and patient funds to a single drug manufacturer. This pro-pharma approval process is likely related to the fact that approximately half of the FDA’s budget for regulating the drug industry comes from fees the industry pays to expedite the drug approval process. 

National Institutes of Health – Office of Technology Transfer: A sub-agency within HHS, the National Institutes of Health (NIH) performs biomedical and public health research. The NIH conducts its own scientific research and provides biomedical research funding to public and private institutions. The NIH was the primary funder of the research that led to development of the 210 medicines approved for market by the FDA between 2010 and 2016. The NIH’s Office Of Technology Transfer (OTT) manages the agency’s discoveries, inventions and intellectual property. The OTT also plays a major role in identifying partners and licensees to support the agency’s patenting and licensing efforts. A 2020 report by the Government Accountability Office called on the NIH to be more transparent about licensing of its intellectual property to allow the public to evaluate whether the current structure benefits the nation’s public health. The National Institutes of Health can also exercise its march-in rights to relicense use of patents that were developed from its own research. Despite receiving multiple petitions over the years, the NIH (and federal government at large) has never exercised its march-in rights. 

National Institute of Standards and Technology: Housed within the Department of Commerce, National Institute of Standards and Technology (NIST) aims to promote innovation and industrial competitiveness. NIST holds patents on behalf of the federal government. Additionally, the agency’s Technology Partnerships Office is responsible for appraising employee inventions and working with all parties to patent and license inventions. In the final days of the Trump administration, NIST proposed a new rule in relation to the Bayh-Dole Act, which would eliminate high drug prices as a reason for the government to exercise its march-in rights. This would obviously weaken the federal government’s ability to ensure reasonable drug prices. While this rule was included in the Biden administration’s regulatory agenda, it can still be reversed by October 2021.

Department of Justice: The Department of Justice (DOJ) is responsible for enforcing federal law and administering fair justice to all in the United States. The DOJ can bring civil and criminal lawsuits against pharmaceutical companies that break the law and act unjustly — for example, the DOJ’s case against Purdue Pharma for its role in the country’s opioid epidemic. However, there is a serious need for public-interest, non-BigLaw personnel to ensure the DOJ regularly uses this authority. 

Federal Trade Commission: The Federal Trade Commission (FTC) is responsible for antitrust enforcement and consumer protection. The FTC can bring antitrust lawsuits against Big Pharma companies and limit anticompetitive pharmaceutical mergers. In fact, the FTC recently announced a multilateral working group alongside State Attorneys General, DOJ and international counterpart competition agencies to build a new approach to pharmaceutical mergers and acquisitions. Moreover, President Biden’s recent executive order promoting competition encourages the agency to develop a rule banning pay for delay, the anticompetitive Big Pharma tactic. 

What previous work experience should raise serious questions for Biden’s nominees and appointees? 

Beyond simply registered lobbying, there are a number professional and personal activities that should raise concerns or disqualify individuals from serving in an administration committed to fostering healthy economic competition and ensuring Americans can afford the medication they need. These include:

  • Working directly for a Big Pharma company, the Pharmaceutical Research and Manufacturers of America (PhRMA), or other pharmaceutical industry trade groups after previously working in a senior executive-branch position, most especially a political appointment.
  • Lobbying on behalf of a Big Pharma company, the Pharmaceutical Research and Manufacturers of America (PhRMA), or any other pharmaceutical industry trade group either under their direct employer or as a client at a lobbying firm.
  • Working for a law firm frequently or currently hired by a pharmaceutical company, especially to defend Big Pharma on antitrust, privacy, or other politically relevant concerns.
  • Either significantly investing personally in the pharmaceutical industry, or advising those who do.
  • Working for a think tank, philanthropy, or advocacy non-profit funded significantly by a pharmaceutical company or trade association to work on pharmaceutical-related issues.
  • Conducting academic research funded by a Big Pharma company, most especially research on topics relevant to that company’s interests and which is flattering to the company overall.
  • Conducting professional fundraising by targeting and receiving funds from executives and companies in the pharmaceutical industry.

What questions should nominees with recent connections to the pharma industry be required to answer? 

In order to ensure all potential conflicts of interest are disclosed, Senators should ask the following questions of Biden’s nominees during and after confirmation hearings:

  • Have you ever been employed by any pharmaceutical firm, or had a pharmaceutical firm as a client for lobbying, consulting, legal, or other services? If so, name the firms.
  • Have you ever had an equity stake in any pharmaceutical firm, especially those which you have advised or been employed by? If so, name the firms.
  • Do you believe it is likely that any pharmaceutical companies that compensated you marketed their association with you to prospective investors?
  • Have you ever provided policy, regulatory, or strategic advice to a pharmaceutical firm? If so, how were you compensated, and how much were you compensated? Which clients have you advised, and what was the content of your assistance?
  • Have you ever invested personally in a pharmaceutical firm, or professionally advised investors in a pharmaceutical firm? If so, for how long did you have this financial or advisory relationship, and are the activities of the firms in which you or your associates invested relevant to the position for which you are now nominated?
  • Have you ever advised or been employed by a non-profit organization substantially funded by a pharmaceutical firm, such as a think tank or advocacy organization? If so, were you compensated? Has this non-profit organization produced work relevant to the position for which you are now nominated? When did your employment by this organization end, and when did the organization stop marketing their association with you?
  • Have you ever conducted research funded by a pharmaceutical firm or investors in pharmaceutical firms? If so, was such research relevant to the position for which you are now nominated? Were you compensated by the firm(s) or investor(s)?
  • If you have ever served in a professional fundraising role, have you raised funds from a pharmaceutical firm or its major executives and/or financial backers?
  • If you have answered “Yes” to any of the above questions, in what ways do you expect to govern or regulate on issues relevant to the firms with which you have a past association? Do you predict that these firms will materially benefit from your governance decisions?
  • Will you commit now to not pursue nor accept employment, compensation, or other professional benefit from pharmaceutical firms after you leave this role? Regardless of your answer to the previous question, what do you predict you shall pursue professionally after your time in government service?
  • Do you think an association with a former regulator or political actor helps a firm convince investors or clients that it is legitimate, law-abiding, and effective at lobbying?

Who are the Big Pharma allies currently in the Biden Administration? 

The following individuals with connections to the pharmaceutical industry have been appointed to various jobs within the administration: 

  • Elizabeth (Liz) Fowler: Elizabeth Fowler serves as the Deputy Administrator and Director of the Center for Medicare and Medicaid Innovation (CMS Innovation Center) at the Centers for Medicare and Medicaid Services (CMS). After leaving Wellpoint (now Anthem), a health insurance company, Fowler drafted healthcare bills that benefitted Big Pharma companies and her former employer. She also played a key role in drafting the 2003 Medicare Prescription Drug, Improvement and Modernization Act, which was needlessly generous to drug companies. While serving in the Obama administration, Fowler met with several investment firms looking to access private information and gain advantage over competitors. She claims her discussions with firms like T. Rowe Price never went beyond publicly available information, but this is still worrisome. Her past is especially troubling given that CMS could pursue drug pricing reform and works closely with private companies.
  • Steve Ricchetti: Former corporate lobbyist and current White House Counselor Steve Ricchetti is one of the most notorious revolvers currently serving in the Biden Administration. Ricchetti co-founded the lobbying firm “Ricchetti, Inc.” with his brother Jeff in 2001 and has profited for decades off of corporate clients, often including the healthcare industry. Ricchetti Inc.’s Big Pharma clients include Novartis, Eli Lilly, and Sanofi, and Steve himself represented other Pharma firms before his most recent turn back into government. Eli Lilly, in particular, manufactures and limits access to insulin, a decades-old life-saving drug that is cheap to produce but exorbitantly expensive for most diabetics. Although Jeff Richetti has reportedly rejected requests from clients to lobby his brother, some of his longtime colleagues believe that clients might still seek him out because his brother works in the White House. Given Steve Ricchetti’s Big Pharma ties and Ricchetti Inc.’s clients, we urge Steve Ricchetti to abstain from all Pharma-related matters, especially regarding the next PTO Director.
  • Jonathan Blum: Jonathan Blum is a Principal Deputy Administrator at Centers for Medicare & Medicaid Services (CMS).  He was a former Medicare/Medicaid administrator before becoming an insurance company executive and healthcare lobbyist who worked at Avalere Health (at the same time that Brooks-LaSure did). He was the executive vice president at health insurance provider CareFirst BlueCross BlueShield from 2014 to 2018. He also served as VP of Federal Policy at Health Management Associates, a healthcare research and consulting firm, in 2018. 
  • Martine Cicconi: Martine Cicconi is an Associate Counsel at the Office of The White House Counsel. Cicconi provided legal services to Novo Nordisk, Inc., one of three pharmaceutical companies that control the insulin market which has skyrocketed insulin prices for patients due to a lack of competition. In 2017, Novo Nordisk settled with the U.S. Department of Justice for $58.7 million for downplaying risks of their diabetes medication.
  • Jonathan Cedarbaum: Jonathan Cedarbaum is a Deputy Counsel to the President and National Security Council Legal Advisor. As a former partner at Big Law firm WilmerHale, Cedarbaum represented a host of corporate clients including Big Pharma companies BTG International, DaVita, EXACT Sciences Corp., and Karyopharm Therapeutics. Cedarbaum has up to $4.5 million in various investment vehicles and owns minor stock in several companies, including Johnson & Johnson. 
  • Jonathan Su: Jonathan Su is a Deputy Counsel to the President. Su was a partner at the BigLaw firm Latham & Watkins, LLP, where he earned $3,117,226. While at Latham Watkins, Su’s provided legal services for Mylan, a pharmaceutical company that merged with Pfizer in 2020. Mylan was responsible for a price-fixing scandal with EpiPens in 2016.

This list will be continuously updated. Any additions made after initial publishing will indicate the date added.

PHOTO: “Prescription Drugs – Prescription Bottle – Pills” by weiss_paarz_photos is licensed under CC BY-SA 2.0

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