PRESCRIPTION DRUG BENEFITS

This week, as senators head back to their home states for August recess, they'll blame each other for the failure to pass a prescription drug benefit for the elderly this year. Don't be fooled. While it's true that an ideological divide - Republicans want a private benefit, Democrats want a government one - kept them from reaching a compromise, another, more powerful force was also working against the bill: the pharmaceutical industry.

One of the most powerful lobbying groups on Capitol Hill, drug manufacturers have always been a top industry when it comes to giving campaign contributions. During the 2000 presidential elections, when a drug benefit for Medicare recipients was the issue du jour, the industry gave more than $19 million in contributions, 77 percent to Republicans. George W. Bush was the top recipient, taking in nearly $300,000.

This time around, with mid-term elections only a few months away, the industry has stepped up its giving, contributing $12 million so far in the 2002 election cycle, 77 percent to the GOP. That's already significantly more than the $8.8 million the industry gave during the last mid-term elections in 1998, when talk of a Medicare benefit was also being bandied about.

The amounts are impressive, but even more important to the industry's success at derailing legislation is its timing. Last June, when the House was debating its prescription drug plan, half a dozen drug companies helped sponsor a record-breaking GOP fundraiser the same week. The gala evening netted $30 million for the Republican party. President Bush headlined the event and during his speech, he singled out the chief operating officer of GlaxoSmithKline to thank him for the company's $250,000 soft money contribution. The industry's trade association, the Pharmaceutical Research and Manufacturers of America, also gave $250,000 that night. Pfizer gave $100,000. Eli Lilly and Bayer each gave $50,000.

A week later, when the House passed a prescription drug bill, it had everything the industry wanted. The bill bunted the Medicare benefit to the private sector, keeping it out of government hands. More importantly, the bill barred the government from setting price controls or interfering with the price negotiations between drug companies and private insurers, virtually assuring that the cost of prescription drugs will continue to go up, not down. How did that happen? Because lobbyists for the pharmaceutical industry helped the congressmen write the bill. Then they all sat down to dinner at the GOP fundraiser.

Not only does the industry know when to give, it knows whom to favor. The industry's predilection for favoring Republican congressional candidates has long held it in good stead, no matter who occupies the White House. Back in 1999, when President Bill Clinton wanted to expand Medicare coverage, it was the Republican-controlled Congress that held him back.

Last week, when the Democrats introduced their plan to add a benefit, they couldn't garner the 10 extra Republican votes they needed to break the deadlock in the evenly divided Senate. Forced to negotiate with Republicans or go home to face their voters empty-handed, the Democrats dramatically scaled back the size of the benefit to cover only the poorest Americans. But even that wasn't enough to entice the 10 extra senators. Even if the Democrats had managed to pass their bill, there was little guarantee it would have survived the conference committee intact. The industry-backed House plan was more to the liking of nearly all the Republicans and President Bush, who has always favored a private sector benefit.

Even so, the pharmaceutical industry does not just stop at individual corporate contributions. Two years ago, during the presidential election, the industry turned to a time-honored tradition: the "grass-roots" coalition, creating Citizens for Better Medicare, a group that generated $65 million in television and newspaper ads opposing the prescription drug benefit. Members of the coalition, which read like a "Who's Who" of the drug industry (including Merck, Bayer and Bristol-Myers Squibb), contributed $20 million to federal candidates and parties in 1999-2000. This year, the drug industry teamed with the United Seniors Association, which represents 1.5 million older Americans. The association used a special "education grant" it got from the drug industry to run a $3-million ad campaign in favor of the industry-friendly bill the House eventually passed.

On the other end of the spectrum, the American Association of Retired Persons, which with 35 million members arguably represents the elderly population better than the United Seniors Association does, released a poll in March that showed 80 percent of Americans over age 45 support a Medicare benefit like the one in the Democratic plan. But AARP ran no ads. And while the drug-industry trade association increased spending on lobbying from $7 million in 2000 to more than $11 million in 2001, AARP spent just $4 million in both years. The AARP has no political action committee and gives no campaign money to any candidates.

About 20 different lobbying shops now do work for the pharmaceutical trade association, all of them with extensive ties to Congress. Among the recent hires are former aides to Sens. Chuck Hagel (R-Neb.), Robert Kerrey (D-Neb.) and Bill Frist (R-Tenn.). The organization even boldly hired Sonya Sotak, Sen. John McCain's legislative assistant for health care issues, a month before the Senate was due to take up McCain's bill limiting the legal maneuvers companies can take against the marketing of generic drugs. Sotak, who would have worked on drafting the generics bill, now has the job of convincing members of Congress not to pass it.

Of course, campaign contributions and lobbying expenditures alone don't determine the fate of legislation. If they did, then there would be no new penalties for corporate executives who commit accounting fraud. The accounting industry has given $5.7 million so far in 2002, but that barely slowed the Senate down. Faced with an endless barrage of corporate scandals and newspaper headlines, the Senate unanimously passed new corporate reforms.

So why did the accounting industry fail to stop legislation where the pharmaceutical industry did? The answer is, it didn't. For a long time, the industry warded off any whisper of corporate reform. In 2000, when Arthur Levitt, then chief of the Securities and Exchange Commission, wanted to ban accounting firms from acting as consultants (the practice that got Arthur Andersen and Enron in trouble), the accounting industry responded with a lobbying crusade that Levitt later called "venal." The industry got 46 congressmen to deluge Levitt's office with phone calls and letters until, subdued, the SEC chief finally backed down. Only this year, when the scandals grew too big to ignore, did Congress finally act.

None of the tactics that the pharmaceutical industry used to stall, change or defeat the prescription drug bill are unusual on Capitol Hill. It's not the only special interest jealously guarding its profit margin. But even in the face of overwhelming public support for the prescription drug benefit, the industry knows how to win in the end.