FEATURE: Drug, biotech sectors embrace Bush--but
just barely
Friday, August 25, 2000
By Chris Gearon
WASHINGTON (Reuters Health) - The pharmaceutical and
biotechnology sectors believe that their interests will fare better
under a George W. Bush administration than under one run by Al Gore,
industry officials told Reuters Health in a series of interviews.
Bush, the Texas governor and Republican presidential nominee, has
made many friends in the drug and biotech industries and has amassed
a healthy campaign bank balance in the process. Industry insiders
applaud his support of pro-industry legislation--such as research
and development tax credits--and tolerate his restrained efforts at
Medicare drug benefits, although they concede that his vision on the
latter is decidedly blurry.
By comparison, Gore, the Democratic nominee, favors a large,
comprehensive Medicare drug package--and has offered some specifics
to support it. Drug and biotech leaders commend Gore for advocating
US Food and Drug Administration reform, for backing greater funding
of the National Institutes of Health (NIH), and for supporting the
Human Genome Project.
But the vice president also appears at times hostile to
pharmaceutical interests. In his acceptance speech last week at the
Democratic National Convention, held in Los Angeles, California,
Gore grouped pharmaceutical companies with "big tobacco, big oil,
(and) the big polluters...." The vice president said these sectors
are "for the powerful" and that he is "for the people," asserting
that "you have to be willing to stand up and say no" to them.
To pharmaceutical industry representatives and insiders, the only
issue worth following is the Medicare drug benefit. It is the one
issue, they say, that can influence drug costs and trigger price
controls, and it is so important to them that it has supplanted such
pet themes as patent protection, managed care's effect on the
industry, and drug reimportation.
While Bush proposes to nearly double the current Medicare budget
from $218 billion to $434 billion, he does not offer a Medicare drug
benefit package per se. According to his campaign, he favors
"bipartisan Medicare reform" although he has not taken a position on
an alternative bipartisan plan passed by House Republicans last June
that calls for a 5-year, nearly $40 billion limited drug benefit
package.
In shaping his drug benefit platform, the governor has pointed to
the work of the National Bipartisan Commission on the Future of
Medicare as a starting point. The commission introduced a plan based
on the US Federal Employees Health Benefit Program, which allows 9
million federal workers to pick from an array of health plans. The
commission fell one vote short of approving the plan earlier this
year.
Bush stresses that when it comes to Medicare, reform must be
bipartisan and ensure certain fundamentals. According to his
campaign, these include preserving guaranteed access to care for
beneficiaries; allowing beneficiaries to choose a health plan with
the option to buy a plan with drug coverage; ensuring that
low-income seniors' expenses are covered; allowing seniors access to
the latest medical advances; and promising not to increase Medicare
payroll taxes.
By comparison, Gore proposes to set aside approximately $339
billion over the next 10 years to shore up Medicare, of which $255
billion will be used to pay for a drug benefit. This money will come
out of the 10-year, $4.6 trillion budget surplus that the
Congressional Budget Office forecasts.
Under his plan, Medicare beneficiaries would choose a federally
funded drug benefit that would pay for 50% of prescription drug
costs up to $5,000. The federal government would pick up 100% of the
tab for the poorest beneficiaries. Gore would "strengthen Medicare
through price competition among managed care plans and cost saving
for competitive pricing," according to his campaign.
"We all agree there should be expanded drug coverage," Jeffrey
Trewhitt, spokesman for the Pharmaceutical Research and
Manufacturers Association (PhRMA), said of a potential Medicare drug
benefit. "But the question is how you do it. The emphasis should be
on the private marketplace and choice."
"We believe the vice president is supporting the wrong proposal,"
Trewhitt said.
Dr. Glen Van Buskirk, chairman of the American Association of
Pharmaceutical Scientists' (AAPS) government affairs and science
policy committee, added, "Mr. Gore has probably been the most
disappointing this year because he holds the bully pulpit."
Bush still has his problems in the eyes of industry insiders.
Echoing an ongoing complaint voiced by Democrats, some industry
representatives believe that the governor's message can do with a
little more meat. "We need to see more details," PhRMA's Trewhitt
said.
David Moskowitz, a specialty pharmaceuticals analyst from UBS
Warburg, told Reuters Health that the governor will "help to defend"
the industry. "If Bush (is elected president then it becomes) a
favorable environment for big cap pharmaceuticals and I think it
would be favorable for biotech."
However, Moskowitz believes that a Gore presidency would have a
better effect on smaller firms. According to Moskowitz, Medicare
reform would be more rapid and comprehensive under Gore. And since a
central concern of Medicare is to control drug prices, generic drugs
will become favored.
But David Saks, chief investment officer at the Saks-Gruntal
MedScience Fund, believes that the industries will perform well
regardless of who is in the White House. "It's not going to mean
diddly," he said, adding that the aging population and the
technology revolution will "continue to make the drug sector a
thriving sector."
Donald Coxe, chairman of Chicago-based Harris Investment
Management and Toronto-based Jones Heward Investments, which closely
follow pharmaceutical stocks, believes that the industry's focus is
misguided. Coxe foresees trouble in recent legislation passed by
both the House and Senate as a much bigger threat to the drug
industry.
That legislation would allow drug wholesalers and other parties
to import US-made prescription drugs from other countries at cheaper
prices. If it becomes law, this re-importation legislation would
make the drug industry "the single biggest loser arguably next to
the tobacco industry this year," Coxe said in an interview.
However, other industry analysts do not see it as such a big
threat. As it currently reads, the legislation would only allow
re-importation if the US Secretary of Health and Human Services
guarantees that no safety or health risk would occur and that
"significant" savings would result.
This may be a moot point on November 7 because many voters likely
remain unaware of the initiative or its implications. "Neither
Governor Bush nor Vice President Gore has brought this up (in their
campaigns)," PhRMA's Trewhitt said.
FOLLOW THE MONEY
The political battle over expanded Medicare drug benefits has not
hurt industry performance on Wall Street. According to the
Saks-Gruntal MedScience Fund, drug and biotech stocks have
significantly outperformed the stock market as a whole through
mid-August: big pharmaceutical stocks were up nearly 19%, generics
were up almost 60%, and specialty drug firms and drug delivery
companies were up 70% and 73%, respectively. Large and small
biotechnology stocks were up 21% and almost 80%, respectively.
This is good news for Bush campaign fundraisers because the
pharmaceutical industry, "notorious for being very large campaign
donors," is "warming up to presidential candidate Bush," Moskowitz
said.
Drug, biotech and medical device political action committees and
industry officials have contributed roughly $490,000 to Bush's
campaign between January 1, 1999 and June 30, 2000, according to an
analysis done for Reuters Health by the Center for Responsive
Politics (CRP). By comparison, the two groups contributed less than
$90,000, or roughly 18% of Bush's bounty, to the Gore campaign.
The CRP's audit found Bush's five most generous pharmaceutical
benefactors to be Bristol-Myers Squibb, which contributed $47,200;
Pfizer, $24,750; Amgen, $20,465; Eli Lilly & Co., $19,750; and
Glaxo Wellcome Inc., $12,000.
Furthermore, the drug and biotech industries have, during that
19-month period, contributed almost twice as much to the GOP in
soft-money and direct contributions--the Republican Party received
$8.9 million compared with $4.9 million that the Democratic Party
received, according to the CRP's analysis of the latest US Federal
Election Commission data.
Much of the contrast in campaign contributions can be traced to
the candidates' political history.
As chief executive of Texas, Bush supported the research and
development tax credit, which allowed companies for the first time
to receive a tax credit for research and development expenditures.
It was a "pinnacle piece of legislation we were going after," Tom
Kowalski, president of the Texas Healthcare and Bioscience
Institute, a private industry advisory group, told Reuters Health.
"The tax credit was a hard-fought battle in the legislature last
year," according to the executive, who attributes its passage to
Bush.
As vice president, Gore sought to extend Medicare's solvency
through 2025 and was against efforts to raise the Medicare
eligibility age from 65 to 67 years. In 1978, as a freshman
Congressman, Gore participated in Congressional hearings into
possible price gouging by the drug industry. Five years later he
co-sponsored legislation that helped generic drug manufacturers
bring down the cost of prescription medications.
"(This) says perhaps what the future has in store," Van Buskirk
said.
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