Under siege over prices, drug makers ready their counterpunch
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WASHINGTON — It was just a tweet, but it signaled something much bigger.

PhRMA, one of the most powerful industry groups in Washington, had watched for several days as Turing Pharmaceuticals and CEO Martin Shkreli were being savaged on social media and on the campaign trail for dramatically raising the price of an anti-parasitic drug. Then, on Sept. 22, PhRMA tweeted that Turing “does not represent the values of @PhRMA member companies.”

A month later, the group published a blog post in which it charged that Valeant Pharmaceuticals, immersed in a separate controversy, was “more reflective of a hedge fund than an innovative biopharmaceutical company.”

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Not long ago, it would have been almost unimaginable for PhRMA — short for the Pharmaceutical Research and Manufacturers of America — to criticize any company in its field. But faced with nationwide rebukes and attacks from presidential candidates over drug prices, the industry group is confronting a public storm unlike any in years. In response, according to lobbyists, congressional aides, and pharmaceutical executives, PhRMA is not only aggressively criticizing what it perceives as bad actors but also deliberating internally how to rehabilitate the industry’s image.

Inside the nation’s capital, the group has been hosting reporters for briefings, sponsoring many of the email newsletters read by lawmakers and aides, and advertising on social media with links to its literature on the other side of the drug-pricing debate.

“No doubt, this is an intense period of time where there’s a lot of scrutiny, and I think there’s a recognition about the industry that we actually have a great story to tell, a great narrative,” Lori Reilly, PhRMA’s executive vice president for policy and research, told STAT in an interview.

She said that, in her 15 years at PhRMA, she had never seen the group publicly rebuke a drug company like it had with Turing and Valeant.

“Maybe, years past, there wasn’t as much interest in saying, ‘We need and should be part of this discussion and this debate,’” said Reilly. The group can’t always anticipate the next firestorm, either: Reilly first heard about the Turing price hike during a Capitol Hill question-and-answer session on Sept. 18. Two days later, it became national news, forcing PhRMA to react.

“Historically, that just is not an issue we would have engaged in necessarily, or at least not publicly said anything,” she said.

The industry is working its message both publicly and privately. Drug lobbyists have been hammering home the same message — these companies do not accurately represent our industry — in meetings on Capitol Hill, according to congressional aides. Kenneth Frazier, Merck’s CEO and PhRMA’s board chairman, told investors on a recent call that in a meeting with President Barack Obama, he had “tried hard to distinguish between innovative companies … and a few companies that are under-represented in the industry.”

“They have some catch-up to do in terms of public trust.”

Kathleen Sebelius, former health and human services secretary

The pharmaceutical industry is familiar with controversy, and it’s often been a convenient punching bag for politicians. But the intensity and persistence of this backlash feels different.

When a company hikes the price of a drug, it can become national news for days. Hillary Clinton and Bernie Sanders, the two leading contenders for the Democratic presidential nomination, stood on the debate stage last month and happily named pharmaceutical firms among the enemies they are most proud to have. Poll after poll shows that drug affordability has become the top health care priority for Americans.

A playbook that worked

PhRMA has long had a favored set of talking points to defend itself. Drug costs haven’t actually grown much as a share of overall health care spending. Almost nobody pays the list prices that often drive headlines because health plans and pharmacy-benefit managers negotiate for lower prices. Companies create essential life-saving medicines, and they need to be able to recoup their losses from untold amounts of research, including some that doesn’t pan out.

That playbook has been a winning one for years. An analysis by the independent research firm APCO Insight ranked PhRMA, which has a $200 million annual budget, as the most effective lobbying organization in Washington.

But executives across the industry and drug lobby officials acknowledge that the current political climate in Washington and across the country calls for a more coordinated and forceful response.

Kathleen Sebelius, the former health and human services secretary, described in an interview a conversation she had in October with outgoing PhRMA President and CEO John Castellani at the group’s Washington offices.

In their conversation, Sebelius said, Castellani was looking at the current situation and “recognizing that I think things are changing and they may be changing quickly.”

“They have some catch-up to do in terms of public trust,” Sebelius said. “I have actually been sort of amazed. I don’t think the PhRMA folks do a very good job telling their own story.”

Indeed, an August Kaiser Family Foundation poll showed the drug industry was viewed less favorably than insurance companies by the public — even as drug makers blame much of the criticism they’re receiving on the high out-of-pocket costs that consumers are facing from some health plans as the Affordable Care Act’s reforms have become ingrained.

The industry seems to be looking for a kind of consensus on how to counter the criticism. Biogen CEO George Scangos promised in a recent call with investors that companies were preparing a coordinated response to this recent criticism — “a thoughtful presentation,” as he called it.

That approach reflects the value that PhRMA, as an organization, has long placed on solidarity among its 50-plus members.

Billy Tauzin, an ex-Louisiana congressman and former PhRMA president, recalled an informal rule that was known as the “Mayflower Compact” — named for the luxurious Washington hotel just blocks from the White House where it was established — that has in the past helped guide the group’s activity. The rule, rarely if ever mentioned outside the group, dictated that a company could dissent from the official PhRMA position on any given issue only if it let the other members know in advance and if it made clear in its own lobbying that it was not representing the views of its peers.

The real purpose was unity, Tauzin told STAT, expressing pride that he never witnessed a single dissent from the compact, even during the tumultuous drafting of Obama’s health care law. (Tauzin left PhRMA in 2010; the group says the rule is no longer in effect.)

“That’s the thing that got them to hold together,” he said. “Everything we did, we were unanimous, and the reason was they understood the old adage: ‘Together, we succeed. Separated, we fail.’”

That unanimity could be tested as its members debate about how much, even in this difficult time, to deviate from an established game plan that has served them so well for so long.

And although PhRMA has been willing to call out individual companies it believes are misbehaving, critics said the group must do more.

“I think that … doesn’t fix any of the fundamental problems,” said John Rother, who leads the Campaign for Sustainable Rx Pricing, an offshoot of the National Coalition on Health Care, a broad-based lobbying group. “But that’s at least the first recognition by the trade associations that things have gone too far.”

In the meantime, companies have their patient-assistance programs, which they say are often overlooked in the negative news coverage. Pfizer announced this week that it would double the income-eligibility threshold, to four times the federal poverty level, for its program that makes more than 40 medicines available for free for those eligible.

Crafting a positive message

The drug lobby is also looking for new ways to tell the positive stories of hope and healing that are so central to its public messaging.

PhRMA rolled out an “I’m Not Average” campaign last year to highlight the cases of patients whose lives had been extended and bettered by new cancer treatments. But it had been relying on companies to surface those stories. So last month, PhRMA started soliciting input directly from the public, including those with conditions other than cancer, and promoting the campaign through Facebook and Twitter. Those feel-good stories can then be used for promotional material and paid media advertising, examples to remind the public of what their medicines can do.

For those who have been watching the industry have its way for years, such a recalibration felt inevitable.

“You can spend $100 million in advertising and it will change the dynamic for a few days, maybe a few months, maybe a year, but then the next thing that happens that weakens the public confidence in you, you’ve got to start again,” said Chip Kahn, who has worked on health care issues in Washington both on and off Capitol Hill for 30 years and is now president and CEO of the Federation of American Hospitals, the for-profit hospital trade group.

“I think in the past, the kind of PR remediation that they took can only be successful for so long,” he continued. “At some point, you run into the fundamentals.”

Sebelius portrayed it as a “perfect storm” that could distinguish this rancor from past episodes and lead to real policy making in Washington for which the industry must prepare.

“It’s the first time that I have seen not just a periodic ‘Oh, drug prices are too high,’ but a pretty consistent drumbeat,” she said.

But what else can the industry do to combat those forces? And how can it address concerns outside the insular capital?

“There’s the inside-the-Washington-Beltway folks, which, as a trade association, we’ve largely been focused on over the years,” said PhRMA’s Reilly. “But then there’s the broader public, and I think that’s a harder group of people to engage on these issues.”

“It’s also hard to penetrate a lot of the information that’s out there right now,” she said. “To counter that narrative and do it in a bigger more public way, I’d say still remains a challenge.”

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