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WASHINGTON — When House Democrats pass legislation next month that would slash prescription drug spending to the tune of $1 trillion, they’ll have John and Laura Arnold to thank.

The Texas billionaires, who in recent years have used their wealth to turbocharge America’s drug pricing debate, have brought their advocacy to a peak as Congress edges closer to enacting drug-price reforms. Last month, commercials cut by an Arnolds-backed political group aired on network television during the World Series. In September, a prominent former lawmaker contracted by the couple’s advocacy arm vocally endorsed House Speaker Nancy Pelosi’s marquee drug pricing legislation. And in 2019 alone, at least eight researchers and advocates funded by the Arnolds have testified on Capitol Hill, urging lawmakers to move forward with legislation to slash the cost of prescription drugs.


John Arnold’s clout, in particular, has made for a strange-bedfellows alliance at a moment of surging populism: Democrats’ biggest ally as the party denounces corporate excess is a former hedge fund manager whose career began at Enron and whose net worth totals $3 billion. Progressive advocates, however, have been content to let Arnold shower cash on researchers, patient advocates, and political groups who favor lowering drug prices, helping to push their agenda to a country frustrated with pharmaceutical companies.

Thanks to their roughly $60 million drug pricing push, the Arnolds have quietly accumulated more clout on the issue than perhaps any entity besides the pharmaceutical industry itself. With John as the face of the couple’s drug pricing advocacy, they have made their presence most felt on Pelosi’s legislation, helping to generate shifts in public opinion and pushing Congress to take up major industry overhauls. While President Trump’s aggressive stance and increasing public resentment toward drug companies have helped, the Arnolds have proven effective at pushing lawmakers ever closer to drug pricing crackdowns unthinkable just years ago.

“There’s no question: They have to be the single biggest anti-pharma effort out there,” said Ben Ippolito, a health policy researcher at the American Enterprise Institute. “This moment is ripe for somebody like John Arnold to pour more gasoline on the fire. And he’s got a lot of gasoline.”


Arnold flow chart
The Arnolds, via the Laura and John Arnold Foundation and the Action Now Initiative (since jointly rebranded as Arnold Ventures), have written seven- or eight-figure checks to many of the groups driving Washington’s drug pricing debate. Dom Smith/STAT

John Arnold was a billionaire by age 34. He is the recipient of the single biggest cash bonus — $8 million — in the history of Enron, the scandal-ridden, defunct energy company for which he once made roughly $750 million in a single year. At 37, he stepped away from Centaurus Advisors, the immensely successful hedge fund he founded following his Enron tenure. The couple founded its nonprofit arm in 2008 and signed the “Giving Pledge,” in which wealthy individuals vow to donate most of their financial worth to charitable causes, the same year.

Their new business was political activism, and almost immediately, the Arnolds went to work on upending the political status quo on issues ranging from pensions to criminal justice. Then, in 2014, John Arnold turned on the television to find the physician-researcher Peter Bach criticizing the drug company Sanofi for charging $11,000 per month for its cancer drug, Zaltrap.

The $4.4 million grant the Arnolds awarded to Bach’s team at Memorial Sloan Kettering Cancer Center was among the first of over a dozen multimillion-dollar checks the Arnolds would write in the name of lowering drug prices.

The widening river of cash, Arnold said in an interview, is all part of an effort to counterbalance the legions of physicians, researchers, lobbyists, and even lawmakers he views as beholden to the pharmaceutical industry.

“Prior to us getting involved, there were very little philanthropic resources coming at it from our perspective, which is that the system needs more balance,” Arnold said. “Everything was one-sided, and the pharmaceutical lobby is considered one of the strongest lobbies in D.C. And because there’s been no natural attention against them over the years, almost all of the federal policy has been very pharma-friendly.”

The drug industry has quietly stewed about the Arnolds’ advocacy for years. But as their influence across Washington has grown, particularly with respect to Pelosi’s “Lower Drug Costs Now Act,” tensions have finally bubbled over.

The trade group PhRMA in recent months has openly challenged the Institute for Clinical and Economic Review’s objectivity, given its Arnold Ventures funding, and has begun to question the Arnolds’ motives more broadly.

“Arnold is often portrayed as a philanthropist,” said Nick McGee, a PhRMA spokesman, “when in reality he’s increasingly funding lobbying efforts and political campaigns that advance his political agenda.”

Barrett Thornhill, a lobbyist whose clients include Gilead Sciences, Amgen, and Novartis, was less circumspect.

“Dealing with the Arnold Foundation is like shoving your hand in a barrel of fishhooks,” he said. “They started out like others — better outcomes! lower costs! — but have slipped into pitching inflated claims about how 0% net drug price growth has caused mass ruination and then bought themselves a news outlet to sell it.”

The Arnolds have focused on four lines of attack: direct political advocacy; funding researchers and academics critical of high drug prices; a public opinion blitz featuring op-eds and Democratic pollsters; and state initiatives that have led to major, if unheralded, drug pricing reforms.

Their campaign spending has already made waves in Washington. One group, Patients for Affordable Drugs, became a drug pricing heavyweight virtually overnight thanks to $13 million in funding from Arnold Ventures and the Action Now Initiative, another Arnold-funded nonprofit. For the last two years, the organization has worked to change Washington’s attitudes toward drug pricing through lobbying, political advertisements, and reports highlighting perceived drug company profiteering.

Its impact on the 2018 midterms was instant: Patients for Affordable Drugs quickly pumped $10 million into commercials that slammed lawmakers and candidates backed by the pharmaceutical industry, to mixed results. Bob Hugin, a GOP candidate for Senate in New Jersey, lost his race, in which he was dogged by questions about his tenure as executive chairman of the drug giant Celgene. But another P4AD target, Rep. Anna Eshoo (D-Calif.), shrugged off accusations she was “in the pocket of big pharma.” She now chairs a health subcommittee with jurisdiction over Democrats’ drug pricing bill.

Following the midterms, the group’s founder David Mitchell — a veteran Democratic messaging consultant and a cancer patient himself — said Congress had been given a “mandate” to lower drug prices.

Patients for Affordable Drugs’ commercial blitz has extended into 2019. As pharma-backed groups have used House Democrats’ aggressive drug pricing legislation to attack lawmakers including Rep. Andy Kim (D-N.J.), the group has unveiled a six-figure ad campaign of its own applauding Kim’s efforts.

The Arnolds have also written personal checks to the reelection campaign of their home-state senator, John Cornyn (R-Texas), a perceived industry ally who has become increasingly antagonistic toward drug makers as he gears up for a potentially challenging 2020 campaign.

And since 2018, Arnold Ventures has paid $711,000 to Waxman Strategies, a D.C. consultancy run by the former Energy and Commerce Committee chairman Henry Waxman, for technical help on drug pricing efforts. Waxman, who rarely endorses specific bills, penned an op-ed last month endorsing Pelosi’s legislation. Michael Waxman, the group’s president, said in an email the consultancy has since been given additional funding to provide briefings and help on drug pricing legislation across Capitol Hill.

Arnold views the political spending as a necessary evil, he said in an interview. Success in a money-driven political system, he argued, might require fighting billion-dollar corporations with his family’s personal wealth.

“Those are the ground rules that exist today,” Arnold said. “If we’re not participating on the political field, then the chance of success is very small. So our efforts have been an attempt to try to change that political calculus. If you’re going to be a pawn of the pharma industry, there are consequences. We’re going to let your constituents know how you’re voting.”

Despite the immense impact of Arnold Ventures’ politicking, the group’s spending on research and academia may have done more still to shift the drug pricing conversation.

In recent years, the Arnolds have showered influential drug pricing experts who favor significant reforms with substantial funding, beginning with their nearly $10 million in total contributions to Bach’s drug pricing operation at Sloan Kettering. Like many Arnold grantees, Bach has testified before Congress this year as an expert witness on drug pricing, appearing before the Senate Finance Committee on Jan. 29.

“I know what my budget is, and they don’t dominate it,” Bach said in an interview. “But they are a major contributor, and there’s a bunch of stuff I couldn’t do if I didn’t have the Arnolds’ support. This is an incredible stroke of luck that the work I’ve been doing all this time, and want to pursue, has a natural funder.”

The Arnolds have also granted $4.2 million since 2016 to the Institute for Medicines, Access, & Knowledge, a nonprofit that works to lower drug prices around the world by challenging “unmerited” patents. The group claims credit for lowering drug prices by curtailing monopolies and ushering generic drugs to market, estimating $2 billion in global savings in the past 12 years on HIV drugs alone.

In the eyes of the drug industry, however, the Arnolds’ deadliest sin comes in the form of grants worth $19.1 million to the Institute for Clinical and Economic Review. The Boston nonprofit’s empirical value assessments have called into question the high price tags on a number of new drugs — and many pharmaceutical industry figures view those empirical value assessments as a gateway to more direct price-setting. (Arnold-funded organizations, however, are free to disagree with one another: Patients for Affordable Drugs and ICER clashed publicly in 2017 on the price of CAR-T cancer therapies.)

“The Arnold Foundation has really made a difference, not just in shining a light on patients through Patients for Affordable Drugs but also in saying there’s a broader discussion here about value and what we’re paying for,” said Rachel Sachs, a Washington University law professor who serves on ICER’s public advisory council in the Midwest. “ICER is obviously the most public example.”

The Arnolds have also worked hard on public-opinion efforts, both by polling and bolstering journalistic efforts to document pharma’s clout.

The Arnolds have contracted Geoff Garin, a well-known progressive pollster, to conduct monthly surveys of voter attitudes toward health issues including drug pricing and surprise medical bills, revealing immense desire for Congress to act on both.

The couple also granted $1.27 million specifically earmarked for drug pricing coverage to Kaiser Health News, the Washington-based health news site that covers drug pricing aggressively. The move was criticized by drug industry allies and in conservative media outlets — it is uncommon for a nonprofit outlet to accept funding to cover a specific topic from donors who are politically active in that space. (STAT has also accepted grant funding from nonpartisan outside groups, though never for coverage areas on which the groups are politically active. And STAT, like many for-profit outlets, accepts payments from health industry groups, including the trade group PhRMA, for event and newsletter sponsorships and paid advertisements. Those groups do not direct or shape STAT’s coverage.)

The Arnolds’ clout also extends beyond Washington.

In nearby Annapolis, Md., lawmakers in April voted to establish an unprecedented payment-capping committee for expensive medicines, flying in the face of heated industry opposition. The advocate who led the charge was Vinny DeMarco, whose group, the Maryland Citizens’ Health Initiative, won a three-year, $616,000 grant from Arnold Ventures in 2017. The legislation’s author is Jane Horvath, a D.C.-based policy expert who holds a separate research contract with Arnold Ventures and testified in March before the Senate Aging Committee.

“It’s great that the Arnold Foundation is helping to fund the movement to do something to make prescription drugs more affordable,” DeMarco said in an interview. “ ‘Big Pharma’ has a lot of money and a lot of resources, and the fact that groups like mine can get funding from somebody to take them on is great.”

If the Arnolds’ endgame is to push Congress toward a sweeping solution on drug prices, their work is incomplete. Though leaders in the House and Senate have spent 2019 formulating drug pricing legislation, the dueling efforts have little in common. Much of Washington remains skeptical that lawmakers can strike even the most limited drug pricing compromise.

But if the Arnolds’ true intention, as John Arnold characterized it, is to serve as a “counterweight” to the drug industry’s influence, they have been successful beyond measure.

While Washington may have come to view the Arnolds with wary eye as their drug pricing advocacy has grown, Arnold-backed academics continue to be invited to testify on Capitol Hill — including the group’s vice president for health care, Mark Miller, the now-unleashed former head of the Medicare Payment Advisory Commission. Last week, Miller spoke on a panel following remarks from Sens. Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.), authors of a bipartisan drug pricing proposal in the Senate, and he has testified this year both before the Senate Finance and House Ways and Means committees.

Another Arnold-backed researcher, Gerard Anderson, has testified twice before Congress this year: before the House Oversight Committee in January and before the House Energy and Commerce Committee in September. Anderson is among the most direct links between Arnold-backed research and Pelosi’s marquee drug pricing bill: STAT reported in April that Anderson was among the hand-picked group of experts consulting Wendell Primus, Pelosi’s top domestic policy adviser, on the fledgling drug pricing effort.

Arnolds’ clout on Capitol Hill, in fact, has only grown in the past year, highlighted by a Thursday briefing for congressional aides, hosted in a House hearing room, with a pair of Arnold Ventures staffers focused on value-based drug purchasing.

And though John Arnold himself has no experience in health policy, his spending barrage has thrust him, personally, into the center of the drug pricing debate, even beyond his role funding researchers and policymakers who’ve been engaged in the work for decades.

On Sept. 6, Laura and John Arnold secured a face-to-face meeting with health secretary Alex Azar, the former Eli Lilly executive who has spearheaded much of the Trump administration’s drug pricing work. The same day, the peer-reviewed academic journal Health Affairs published an op-ed written by John. Its title: “It’s time for Congress to go all-in on drug pricing reform.”

Some criticism, however, has forced Arnold Ventures grantees to reconsider. The Arnold Ventures grants to Kaiser Health News, in particular, echo a 5-year-old controversy: In 2014, the public broadcaster WNET returned $3.5 million from the Arnolds meant for reporting on public employee pensions, facing public pressure given the Arnolds’ public stances on pension reform.

The editor of Kaiser Health News, similarly, told STAT that as of late 2018, the outlet was no longer accepting money from Arnold Ventures for reporting about drug pricing.

“After some internal discussion, KHN decided that we didn’t want to accept money that was focused on such a narrow topic, especially one that had become so political,” Elisabeth Rosenthal, the site’s editor-in-chief, said in an email. KHN continues to accept funding from Arnold Ventures, she said, but it is intended “for general operating support with no restrictions.”

Extensive though the Arnolds’ cash infusions may be, their allies are quick to stress that their spending still pales in comparison to the drug industry’s. The trade group PhRMA, in 2018 alone, spent a whopping $463 million on lobbying, grants, staff salaries, and advertisements. Other trade groups and drug companies, including the Biotechnology Innovation Organization, have contributed over $100 million in lobbying, marketing, and public relations expenditures.

Spending on drug pricing advocacy, Arnold said, is “still 50 to 1, pharma money versus our money.”

But the Arnolds’ money clearly packs a punch, perhaps evidenced best by the armada of researchers and advocates who have participated in Capitol Hill hearings urging lawmakers to act — much of which appears to have sown the seeds for Pelosi’s legislation.

“To the extent that Arnold grantees were prominently featured in those hearings,” said Sachs, the Washington University law professor, “I think it’s not a surprise that the House Democrats listened to what they heard.”

  • I wonder if Mr. Arnold is aware that The secretive group, known as Citizens for Truth in Drug Pricing was formed by The American Hospital Association AND
    CVS HEALTH !!!! Why would Mr. Arnold contribute money to an organization
    like this ? Then he doesn’t even mention anything about the PBM’s, who happen to be the root of high drug prices. Something is not kosher here !!

  • As a pharmacist, I completely understand the sky rocketing prices of drug prices. However, the price of drugs is not based solely on Big Pharma. You have to look into the PBMs. They place a huge role in this. If you start cutting prices, then there isn’t going to be any encouragement for innovation and research. Instead of putting your billions of dollars in politics, why don’t you put your money into the companies making biosimilars. Funding generic drugs and biosimilars will tremendously lower drug prices. NOT in the pockets of corrupt politicians.

    • PhRMA pays a pittance University donations through scholarly funds that buy cutting edge research & then steal the rest from the NIH – compare actual research expenditures against lobbying bids and see which hand fills first – you $h#t your friends & I’ll $h#t mine but let’s not bull$h#t each other!

    • The PBM’s have Mr. Trump in their pocket, ans it seems that they have
      Mr Arnold in their pocket too. Pharmacists see where the problem is. They
      deal with this cancer of a problem every day. But no one is listening. Money
      talks and everything else is Bullshit !!!!

  • Reactively cutting drug prices through price controls upsets settled expectations, creating a new risk for investors, and potentially chilling investment in new therapies. How about putting more resources into proactively developing cost-effective therapeutics through new companies like CivicaRx looking at ways to use competitive pressure to lower drug costs?

  • A good article focused on the Arnold’s. But a discussion of drug costs in America cannot be had without knowing and or understanding how pharmacy benefit managers work. Their function in determining what you pay for drugs is paramount.

  • It looks like not all billionaires are evil. It is really too bad the American public remains uninformed or deliberately misinformed on this topic. This country used to have laws and regulations on Lobbying, and deceptive healthcare marketing, but thanks to all of the industry influence they are not being enforced. The politicians are getting scared that the American public might figure out that the rest of the developed world does not have this problem. Their failure to act for decades has led to this debacle. The unlimited greed of the pharmaceutical industry, and legalized corruption is killing Americans. Our corporate media has failed to cover this story even though people die every day due to industry greed.

    • “Our corporate media has failed to cover this story even though people die every day due to industry greed.”

      Wow, you’ve convinced me. I’m quitting medicine, and letting your crew find life-saving treatments, working like dogs for years. Good luck.

  • Good job of reporting on a tough topic. My $0.02 —

    — Everyone wants cheaper. And 99.9% do not want to work very hard at providing it. And most workers refuse to work for pennies .. including writers.

    — Big issue keeps being ignored — USA is basically subsidizing global medicine, paying <50% of costs. DJT says that day is over. Thank you, Mr. President — FINALLY!!

    — Given aforementioned, Mr. Arnold — how is Europe and Asia going to respond to paying more for medicine? What are you doing about that?

    — Easy to criticize. Like to see Mr. Arnold and Ms. Pelosi try to provide life-saving pharms — 97% failure rate of clinical trials, billions at stake, MD/PhDs risking massive career time. Lot harder than trading energy futures and running to TV news cameras — really. Try it, you two. Show us, your true mettle. We're waiting.

    • Your President isn’t going to do anything about drug prices, not domestically and not internationally. Neither will Europe or Asia pay more for medicine. Innovation in medicine does NOT depend on unlimited price gouging–that’s a lazy lie by PhRMA to protect their clients’ profits. Pharma companies can be profitable with price controls and should be competing on EFFICACY and not on marketing.

    • Well I am not falling for it. 8 million dollars for a one time payout and made millions later on. Sorry Pharma officials should all be doing life sentences. They are evil and a lot of people died all in the name price per share.

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