It was a classic success story: The son of a doctor graduated with honors from a top university, attended one of the country’s best law schools, and landed a job clerking for the Supreme Court. He switched to the private sector and rose gracefully to the top of the world’s biggest pharmaceutical company. He then helped to broker a deal between a powerful industry group and an unassailably popular president to enact legislation that would touch the life of every American.
And then everything went wrong.
Jeff Kindler, former CEO of Pfizer, resigned suddenly in December 2010 under pressure from his board. Subsequently, details about his backroom negotiations with the Obama administration came to light, raising questions about whether he was pursuing his industry’s interests or his own political ambitions. Without Kindler’s clout in the pharmaceutical world, the Patient Protection and Affordable Care Act might never have passed. But the deal he cut ended up hurting his industry.
Kindler clerked for Justice William J. Brennan after graduating from Harvard Law School. From there, he took an unorthodox path to corporate leadership, becoming the general counsel of McDonald’s before rising to the presidency of McDonald’s Partner Brands. Eventually, Pfizer spotted Kindler and wooed him with an offer to supervise more than 300 lawyers as general counsel — and the possibility of rising higher still. Within five years, Kindler was CEO of Pfizer and the most influential board member of PhRMA, the pharmaceutical industry’s powerful trade association. He was also a committed Democrat, which made him an invaluable resource for the Obama administration as it began the now-infamous negotiations that led up to the passage of the Affordable Care Act.
Kindler was no stranger to politics. He donated to the 2008 presidential campaigns of Hillary Clinton, Chris Dodd, and Obama. Like many corporate figures, he has given to both sides of the aisle, but the numbers make his preferences clear — $5,600 to Republicans and $31,350 to Democrats. His ascent was especially significant at Pfizer, a company that had traditionally aligned itself with conservative groups, including the American Enterprise Institute and the National Review Institute. “He was a partisan Democrat,” says a former Pfizer lobbyist. “That was obvious to everybody when he came in.”
He was also well connected — according to the White House visitor log, Kindler visited the White House or the Old Executive Office Building 14 times between May 2009 and February 2012. Six of those visits came before the passage of the Affordable Care Act. He has met with President Obama five times. PhRMA’s head lobbyist at the time, Wilbert “Billy” Tauzin, was present for many of Kindler’s White House meetings.
As the leader of Pfizer, Kindler began to change how the corporation made contributions to political parties and candidates. Instead of giving primarily to groups and individuals that shared the corporation’s policy priorities, Kindler insisted that donations be divided 50/50 between Republicans and Democrats.
Critics argued that in some cases he put his political commitments ahead of the good of the company. A lobbyist recalls attending one fundraising event with Kindler at which they ran into a woman who was challenging an incumbent for a congressional seat. She and the CEO chatted about politics and complained about the Republican party. After she left, Kindler told the lobbyist that he thought Pfizer should support the candidate’s campaign, even though he had not heard a word about her position on issues relevant to Pfizer. “Don’t you think we ought to check out her record, and her position on issues like drug importation and price controls?” the lobbyist asked. “Oh, yeah, yeah, we ought to do that,” Kindler replied.
“This guy’s not a Pfizer CEO,” the lobbyist says. “He’s a partisan Democrat first.” Many in the industry speculate that Kindler had hoped to eventually join the Obama administration.
That made him an important figure in the negotiations over health-care reform. Avik Roy, a senior fellow at the Manhattan Institute, contributor to National Review, and member of Mitt Romney’s health-care-policy advisory group, says that part of the reason health-care legislation failed under the Clinton administration was that the pharmaceutical industry adamantly opposed it. So winning its support this time around was essential.
“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.