“Kindler was definitely politically far to the left of his predecessor, and certainly played a very strong role in pushing PhRMA to make a deal with the Obama administration,” says another industry lobbyist. Steve McMahon, a PhRMA consultant, recommended getting involved early in order to influence the final legislation. He proposed a strategy in a June 3, 2009, e-mail to John Del Cecato, a Democratic strategist working for a firm founded by David Axelrod, and to Andy Grossman, another party strategist who formerly chaired the Democratic Senatorial Campaign Committee. Both were working with the White House on health care.
“It would be very helpful,” McMahon wrote, “to have someone reach out to Jeffrey Kindler, the CEO of Pfizer and a huge Dem, to let him know a) that you folks understand and appreciate all the industry is doing to be helpful; and b) that you hope they will not only continue doing it, but will do more at the appropriate time; and c) we have talked and we plan to continue talking as we move forward to pass health care reform.”
Tauzin, a Louisiana congressman who left the Democrats for the GOP in 1995 before becoming a lobbyist, was the chief negotiator. But Kindler was the boss, and many pharmaceutical insiders believe that he was the driving force behind PhRMA’s decision to support the legislation rather than fight for a bill that would better serve the industry’s interests.
During early negotiations, industry leaders were particularly worried that the health-care law would allow the importation of cheap drugs from Canada. They also objected to rules that would empower the federal government to negotiate down the cost of pharmaceuticals purchased under Medicare Part D, a measure that would in effect give Washington the power to fix prices. In a June 3 e-mail to PhRMA, McMahon implied that if the White House satisfied PhRMA’s demands, PhRMA would publicly support the legislation with advertising — and would run ads against the legislation if PhRMA’s interests were stepped on. “We agreed that we would talk on a regular basis about what they wanted and what we might be able to do,” he wrote. “I also told them if the lines were violated the money would go elsewhere ‘and that wouldn’t be good.’ They get it.”
In the end, PhRMA won commitments to no importation of Canadian drugs and to no federal-government negotiation on the cost of drugs. In exchange, the industry ponied up quite a bit of cash.
“You’re so worried about having a seat at the table that you’re not worried about becoming the main course,” says Bob Goldberg, vice president of the Center for Medicine in the Public Interest, rehearsing his criticism of the tack taken by Kindler.
A memo released by the House Energy and Commerce Committee estimates that the group spent up to $150 million promoting the legislation, including $70 million on two 501(c)(4) groups, Healthy Economy Now and Americans for Stable Quality Care. President Obama is given to mocking the “innocuous-sounding names” of independent groups critical of his policies, but these two thinly veiled industry fronts gave the White House exactly what it wanted. “Rahm asked for Harry and Louise ads thru third party,” wrote PhRMA lobbyist Bryant Hall in a July 7 e-mail. “We’ve already contacted the agent.”
The Obama administration got more than ads. PhRMA made commitments to allow new discounts for seniors, a new tax on its products, and additional Medicaid rebates — concessions that will cost the industry from $80 billion to $100 billion by 2019.
For its trouble, PhRMA got stabbed in the back. After the passage of the Affordable Care Act, the president tried to sneak Part D price negotiations back into the deal through the deficit commission. Many in the industry regarded that effort as a breach of faith. It was blocked in Congress because of Republican opposition. “They got what they deserved,” says Steve Hofman, a former Republican leadership aide. “They should never have expected anything other than to be betrayed. If they weren’t betrayed, they should have been dancing in the streets.”
The pharmaceutical industry is now experiencing buyer’s remorse. When Tauzin lost his job as the industry’s top lobbyist in early 2010, the New York Times reported that he got the boot because of dissatisfaction with the deal. On top of that, PhRMA seriously damaged its relationship with its previously reliable supporters: congressional Republicans. Conservatives were the historic defenders of the pharmaceutical industry — legislators such as Rick Santorum were known as impassioned supporters of the free-market policies that enabled the industry’s success. Siding with the president’s health-care reform was a slap in the face to many of those allies. Goldberg of the Center for Medicine in the Public Interest says that during the health-care fight he heard an enraged John Boehner, who was then the House minority leader, promising Tauzin that “there’s gonna be hell to pay.”
While Kindler was tending to politics, he wasn’t tending to Pfizer, a former Wall Street darling that had fallen on hard times as its pipeline of blockbuster drugs dried up and patent expirations brought new generic competitors into the market. After a revolt in the managerial ranks, Pfizer’s board fired Kindler in 2010. Pfizer still hasn’t recovered from Kindler’s legacy, and neither has the industry. And last week’s Supreme Court decision means that Kindler is leaving a bitter legacy not just for his shareholders, but for all of us.
— Betsy Woodruff is a William F. Buckley Fellow at the National Review Institute. Connor Mellas contributed to this article.