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Pharma lobbyists flooded Maryland to block a drug-pricing bill. Opponents pushed back — and won

From STAT News

By: Lev Facher

April 11, 2019

ANNAPOLIS, Md. — The drug industry has long been seen as invincible in this small state capital, where last year it retained more than 100 lobbyists: two for every state senator, plus a dozen to spare.

So drug pricing advocates considered it nothing short of a triumph this past Monday when, with an hour remaining before their 2019 session expired, lawmakers passed a first-of-its kind law to create a state board that could cap payments for ultra-expensive prescription drugs.

Representatives of the trade group PhRMA had been so unnerved by the proposal that in meetings with lawmakers, they outlined scenarios in which the legislation would leave cancer patients without cutting-edge treatments or cause a mass exodus of state employees. And, of course, they hinted in less-than-subtle terms that the pharmaceutical industry would likely challenge the new law in court.

Still, barring a veto from this state’s Republican governor, the creation of a “drug affordability board,’’ which would take effect in 2022, is one of the most visible manifestations of the nationwide political momentum to bring down high drug costs. Passage of the measure here, advocates said, is a case study in out-maneuvering a well-oiled industry influence machine — even in a state capitol its lobbyists have overrun.

“We’ve got a national model here,” declared Vinny DeMarco, a public-health advocate and lobbyist who was the bill’s chief proponent in Annapolis. DeMarco’s group — the Maryland Citizens’ Health Initiative, an advocacy group backed by an array of nonprofits including the drug industry antagonists Arnold Ventures — provided much of the funding and political heft behind the campaign.

Pharmaceutical manufacturers, however, did win two major concessions. While early proposals affected all payers, including private insurers, the final will only touch public-sector insurers serving city, county, and state government employees. And before the board enacts a payment limit, it will have to ask permission from legislative leaders — a step a lawmaker described to a local newspaper as one of several “roadblocks” that could slow implementation.

In a statement, a PhRMA spokesman said the trade group is confident the board “will determine price controls are the wrong approach — that this dangerous policy is unconstitutional, would put patients’ access to medicines in danger, and cannot be implemented effectively.”

Just three days before the legislature’s 2019 session ended, DeMarco had to throw down a gauntlet: his group would prefer no bill at all, he declared, to the watered-down legislation a senate committee had advanced hours earlier. It was something of a Hail Mary — at that point, he said, he was unsure whether the drug industry had bested him.

DeMarco had taken issue with Brian Feldman, an influential Democratic state senator who appeared to have been swayed by pharmaceutical lobbyists’ arguments the day before. The senate’s finance committee voted unanimously to advance a stripped-down version of the legislation that contained few transparency requirements and effectively reduced the affordability board to a study group — with little foreseeable authority to enact payment limits.

Minutes after the committee vote, DeMarco made a beeline to Feldman’s office. As a reporter waited outside, DeMarco spent 20 minutes across from Feldman’s desk, emphatically making his case.

It soon became clear that the legislature would either pass an aggressive version of the bill or no bill at all — leaving a trail of disappointed, vocal, and deep-pocketed advocates like DeMarco who’d have nine months to plan their next step.

Like many Annapolis lawmakers from both parties, Feldman has accepted numerous campaign contributions from drug manufacturers’ political committees. (The Maryland Citizens’ Health Initiative, DeMarco’s group, has reported spending on behalf of a smaller group of legislators — including Katherine Klausmeier, the Democrat who sponsored the drug-affordability bill in the state senate.)

In an interview in his office, Feldman expressed hesitancy to pursue the legislation in its most aggressive form, especially just a year removed from a stinging court defeat. A separate, landmark effort to ban generic drug “price-gouging” had passed Maryland’s legislature in 2017, only to be struck down after a court challenge from an association representing generic manufacturers.

“We had every lobbyist in the U.S. descending on Maryland two years ago,” said Feldman, who oversaw many of the negotiations surrounding the more recent bill to enact the affordability board. “It didn’t stop us from passing the price-gouging bill. Pretty much all the same folks who were here two years ago are also here now.”

Still, the senator said the pharmaceutical industry’s threats that the new legislation would meet the same fate had cast a shadow over some progressive enthusiasm.

“We don’t have to be the first in the country on everything,” he said during an interview in his office. He acknowledged that some legislators’ activist mentality had brought to Annapolis, perhaps, a disproportionate level of outside money and lobbying.

Between PhRMA, its member firms, generic manufacturers, and local biotechs, the industry spent nearly $1 million lobbying in Maryland last year. Those same groups and companies employed at least 106 contracts with lobbyists here in 2018. Just 47 individuals serve in Maryland’s state senate, plus 141 in the state house.

PhRMA, itself, contracted 11 lobbyists in Maryland, one of the highest numbers among the several hundred groups listed in state lobbying disclosures.

It devoted more funding still to ads that ran in local newspapers, over the radio, and online, all of which attempted to shift blame for high drug costs to pharmacy benefit managers and insurers.

Once a top aide to former governor Martin O’Malley and to the president of the Maryland Senate, White did not respond to STAT’s requests for comment regarding PhRMA’s lobbying strategy. The trade group, and numerous other lobbyists for member companies, also did not respond to questions about their advocacy regarding the drug affordability board, other than to state their opposition.

But in Annapolis, White was the face of PhRMA’s opposition to the bill. Lawmakers here allowed him to deliver committee testimony opposing the proposal, and his 15 minutes at the dais quickly turned into scorched-earth invective. He predicted statewide drug shortages, a lack of access to expensive cancer drugs, and, of course, lawsuits.

The industry’s presence here also extends far beyond White. Pharma recruited local firefighters and police groups to their side, too, convincing them that under certain iterations of the bill, public-sector employees could become guinea pigs in an untested drug-pricing experiment.

And its lobbyists were omnipresent. Another PhRMA advocate — deployed from Richmond, Va., a 134-mile drive away — took notes from the fourth row as White delivered his testimony. In recent weeks, a local lobbyist for Amgen became a fixture in the statehouse halls.

It is common here for state senators to text lobbyists during hearings, sometimes ducking outside for a private hallway consultation. Many lawmakers here effectively maintain an open-door policy for reporters and industry representatives alike.

But an open-door policy appeared to advantage DeMarco. A veteran of Maryland politics who appears to be on first-name terms with every barista and lobbyist in Annapolis, his rolodex includes 17,000 entries — including, it seemed, cell phone numbers for every state lawmaker.

His group, the Maryland Citizens’ Health Initiative, and its educational arm spent heavily, too — likely a hair over last year’s $381,000 disclosed lobbying expenditures, DeMarco said.

While those six-figure expenditures still fell short of the pharmaceutical industry’s, collectively, DeMarco’s years of experience on issues ranging from tobacco use to gun violence allowed him to build a broad coalition, highlighted by testimony from the powerful AARP, which traditionally opposes pharmaceutical companies on policy matters. The bill also enjoyed the backing of the labor union SEIU and a slate of county executives — including a Republican whose government in Harford County spends nearly $7 million annually on drugs for just 900 employees.

He relied on one consultant, however, more heavily than any other: Jane Horvath, a health policy veteran who originally conceived of the drug-affordability board. Formerly a policy specialist at the drug giant Merck and a former high-ranking policy aide in the Clinton administration, Horvath took the stand opposite PhRMA’s lobbyists in repeated attempts to assuage legislators’ concerns.

DeMarco’s group also benefited from a second organization funded by John and Laura Arnold, the billionaire couple that has aggressively attempted to recast the drug-pricing debate. Patients for Affordable Drugs Now, the Washington-based advocacy group that spent roughly $10 million to spotlight high drug prices as a 2018 campaign issue, launched a digital ad campaign the day after Maryland lawmakers finalized the bill, urging the governor to sign it.

Another point in their favor: the local Chamber of Commerce, normally a drug industry ally, was occupied fighting a proposed minimum-wage increase during this session — removing a powerful, pro-industry lobbying force from the equation.

In interviews with STAT, lawmakers recounted time and time again the drug industry’s chief argument against the affordability board. The scare tactic, as they referred to it, relied on an implied question: why pour so much effort into a bill the trade group would inevitably challenge in court?

The argument led the state House to scale back the affordability-board legislation — limiting it only to public-sector insurers but excluding private ones. Proponents estimated the legislation now covers a patient pool of roughly 250,000, and emphasized that payment caps would apply only to drugs that cost $30,000 or more or that see substantial price hikes in a 12-month period.

It wasn’t enough for White, who declared during testimony that a bill “can’t just be a little bit unconstitutional — it’s either unconstitutional or it’s not.”

“They pretty well told me: if you do this, we’re just going to take you to court again,” said Katherine Klausmeier, a Democrat and the bill’s sponsor in the state senate.

To PhRMA and its member companies, the bill simply put on display a state government attempting to legislate beyond its scope, without regard to patients or long-term consequences.

To that warning, industry backers added several familiar lines: dire predictions that patients could lose access cutting-edge drugs if the bill passed, or that the state could face drug shortages. PhRMA’s campaign also capitalized on the policy questions that remain unanswered as Maryland moves ahead in its attempt to slash drug spending.

While the proposal could save local governments millions of dollars, advocates also struggled to explain precisely how it benefits patients. The affordability board, Horvath said, would work to determine ways to pass savings from upper-payment limits to patients at the pharmacy counter.

They also left in doubt the worst-case scenario PhRMA had projected: What if a drug company simply refused to sell a treatment at the payment limit the state’s new board dictated?

Horvath, the policy consultant who first conceived of the affordability board, advanced an argument centered on a high-stakes game of public-relations chicken. No company, she argued, would dare cut off access to cutting-edge therapies, fearing nasty headlines about money-hungry drug manufacturers placing profits over patients.

“Why are you going to harm patients to make a point?” Horvath asked. “It sort of defies logic: the NIH is in Maryland, the FDA is in Maryland — there’s a lot going on in Maryland, and you wouldn’t want to take this position.”

It was these question marks, however, that industry lobbyists highlighted relentlessly in committee rooms and around the statehouse.

Ultimately, PhRMA’s efforts to soften the legislation in the Senate committee backfired. Progressive state delegates, following what they saw as their senate colleagues’ capitulation to “Big Pharma,” derided that move.

“Some of the amendments that were placed on the bill were actually PhRMA amendments,” Joseline Peña-Melnyk, the Democratic delegate who sponsored the bill, said in an interview last week. “PhRMA drafted them.”

It was the hard-line stance of Peña-Melnyk and others opposing the state senate legislation, eventually, that convinced lawmakers to go bold instead of risking the legislation’s passage altogether.

And almost as soon as the legislation passed Maryland’s legislature, DeMarco began what he called a “full-court press” to encourage Larry Hogan, the state’s governor, to sign the bill, or at decide against vetoing it. Maryland’s constitution allows bills to become law without a governor’s signature — meaning Hogan could look the other way and let the bill enter the books without his explicit endorsement.

There was one advocate, however, who didn’t linger in Annapolis to celebrate the victory. Horvath, the state-policy expert, instead packed up and boarded a plane for a meeting with a new set of consultees: a group of Massachusetts legislators who seem keen to follow Maryland’s lead.