Presidential candidate Donald Trump was an outspoken critic of pharmaceutical companies and high drug prices. He told prospective voters that he’d allow Medicare to negotiate with drug companies. President-elect Trump said Big Pharma was “getting away with murder” with its exorbitant prices for drugs and said he would bring those costs down.
On Monday, roughly 10 months later, Trump formally nominated Alex Azar, the former president of Eli Lilly’s U.S. operation, to run the Department of Health and Human Services (HHS), which oversees the Food and Drug Administration. A Senate committee plans to hold a hearing very soon.
Not only did Azar work at Eli Lilly for 10 years, the final five of which he was president, he was a board member of the Biotechnology Innovation Organization (BIO), the primary lobbying group for the biotech industry, of which Eli Lilly is a member. Azar left both positions in January to launch a biopharmaceutical and health care consulting firm, Seraphim Strategies LLC. Should he become HHS secretary, he’d be overseeing Eli Lilly and his former clients. Prior to joining Eli Lilly, Azar was deputy HHS secretary under President George W. Bush.
The political strategies of Eli Lilly, BIO and another industry lobbying group, including efforts to fight drug pricing transparency and defend their patents in order to keep prices high, shed light on the pro-industry approach that Azar is likely to take as HHS director, should he be confirmed.
Pharma Giants Fight Nevada Over Transparency
In June, the Nevada state legislature passed a law to increase transparency in drug pricing, requiring companies to disclose information on manufacturing, marketing and advertising costs and profits for essential diabetes drugs. It also targets pharmacy benefit managers and aims to obtain information about confidential rebates.
Eli Lilly is one of the biggest manufacturers of diabetes drugs and has come under intense criticism for consistently increasing the price of these drugs. The cost of two key insulin drugs rose quickly while Azar was president of the company; Humalog and Humulin increased in price by approximately 21 percent in 2014, 17 percent in 2015, 7.5 percent in 2016, and 8 percent in the first quarter of 2017, according to an October letter to Trump from three Democratic members of Congress opposing the Azar nomination.
BIO and the Pharmaceutical Research and Manufacturers of America (PhRMA), a major drug industry trade group of which Eli Lilly is a member, filed a lawsuit on Sep. 1 against Nevada Gov. Brian Sandoval and the state’s Health and Human Services director, alleging the law violates the Constitution and risks their member companies’ important trade secrets and patents.
Azar has acknowledged that drug prices are too high, but his professional pedigree does not indicate that significantly lowering drug prices — and, thus, drug company profits — will be at the top of his agenda. According to the three members of Congress who wrote the letter to Trump — Raul Grijalva (D-Arizona), Mark Pocan (D-Wisconsin) and Jan Schakowsky (D-Illinois) — Azar “played a key role in creating the very pharmaceutical industry practices that [Trump has] pledged to end.”
Will Azar Exercise His Department’s ‘March-in’ Rights?
Because a substantial amount of funding for pharmaceutical research comes from federal government agencies such as the National Institutes of Health (NIH), regulators reserve the right to license drug patents as a means of reining in skyrocketing prices. The federal government has faced mounting pressure to use those so-called “march-in” rights, established by the 1980 Bayh-Dole Act, in recent years, but hasn’t done so.
In September, for instance, the nongovernmental organization Knowledge Ecology International wrote a letter to Trump’s Domestic Policy Council director and a senior adviser to then-HHS Secretary Tom Price, asking the agency to use its march-in rights to lower the “excessive” price of a multiple sclerosis (MS) medication known as Zinbryta, which is marketed by both AbbVie Inc. and Biogen Inc. The price of 150 milligrams of the drug in the U.S., $7,390, towered above the cost for the same amount in similarly developed countries; in Sweden, for example, 150 mg of Zinbryta cost $1,737, the group wrote.
A month earlier, Rep. Elijah Cummings (D-MD) and Rep. Peter Welch (D-VT), sent letters to Biogen and six other companies asking them to describe their MS treatment drug pricing strategies, citing a 2015 study on such medications in the journal Neurology. The paper found that MS treatment “costs have accelerated at rates well beyond inflation and substantially above rates observed for drugs in a similar biologic class,” and urged “clinicians, payers, and manufacturers in the United States to confront the soaring costs.”
Companies, consumer protection groups and members of Congress have unsuccessfully pushed the NIH to exercise these rights six other times in the past two decades.
Azar’s former employer makes clear its stance on patent privileges, stating on its website that it “supports strong and effective protection of intellectual property rights, including patent protection for pharmaceutical products.” In the post, Eli Lilly warns that threats to such protections could have a “chilling effect on the industry’s ability to bring new lifesaving medicines to patients around the world.”
Several months before Azar was promoted to president of the firm’s U.S. affiliate, Eli Lilly helped another company fight to protect private control of patents in a 2011 lawsuit over the extent to which Bayh-Dole protected private ownership of inventions, even when the invention was partially funded by the government at a university.
In the 2011 Supreme Court case, Eli Lilly was among half a dozen companies that jointly filed an amicus curiae brief supporting the defendant, a diagnostic products firm accused by Stanford University of unauthorized use of an HIV testing patent developed by a Stanford faculty member both while he worked at the school and later during his employment by the company. Although part of the researcher’s funding came from the NIH, the defendant, Roche Molecular Systems Inc., was ultimately victorious.
“The Bayh-Dole Act does not diminish inventors’ rights in their inventions,” the firms wrote. “Congress could not have intended the Bayh-Dole Act to generate such unsettling and disquieting results.”
James Love, the director of KEI, the organization pressing the federal government to exercise its march-in rights, told International Business Times that “we’ll have to wait and see” how the former Eli Lilly executive reacts to calls for the invocation of Bayh-Dole, especially as Trump himself has been silent on the issue.
“Azar has got to figure out what his job is — if it’s protecting drug companies or if it’s protecting American consumers,” Love said. “I’m sure that Azar will be questioned about it in his confirmation hearing.”
A Lobbying Blitz During Trump Presidency
In late January, Trump met with a collection of CEOs from the top pharmaceutical companies, including David Ricks, the former CEO and current chairman of the Indiana-based Eli Lilly and Company. Drug companies have increased their lobbying presence this year to ward off legislation that would hurt their profits.
Eli Lilly has been active on the lobbying front, advocating for its interests in intellectual property issues over much of the past decade — including, most recently, negotiations of the North Atlantic Free Trade Agreement (NAFTA), which contains measures for strict patent protections — according to the federal lobbying database. The lobbying group PhRMA lobbied Congress on “Bayh-Dole march-in rights policy issues” as recently as the third quarter of this year.
The drugmaker has additionally lobbied the department Azar was selected to lead on drug importation and online sales, trade issues, health care reform implementation, drug pricing, patent reform and promotion of public-private partnerships over the last year, federal lobbying records show. In total, according to the Center for Responsive Politics, Eli Lilly has reported spending $5.7 million on lobbying efforts so far in 2017.
The two major trade groups that Eli Lilly is part of have been lobbying furiously this year as the Trump administration works out its position on drug pricing and regulations. PhRMA had a big increase in lobbying in 2017’s first quarter, spending about one-third more than it had during that period in 2016 and making it the country’s third-largest federal lobbying organization. So far this year, PhRMA has reported spending nearly $20 million on federal lobbying. In addition to march-in rights, PhRMA has lobbied HHS, the Food and Drug Agency and/or the Centers For Medicare and Medicaid Services on drug pricing, Medicaid prescription drug benefits, several bills aimed to increasing transparency and reducing costs of medications, and pharmacy benefit manager disclosure requirements.
BIO has spent $7 million on lobbying this year, already more than in 2016, and has lobbied Congress, HHS and other agencies on drug pricing, renegotiating NAFTA, march-in rights, patents and drug importation bills, among other issues.
A Friend To Pence
Azar has connections to a pivotal member of the White House administration. Eli Lilly is headquartered in Indianapolis, Indiana, where Vice President Mike Pence was governor from 2013 to 2017. In 2010, Azar personally contributed $500 to Pence’s U.S. House campaign, records compiled by the National Institute on Money in State Politics show. Then, in 2012, he gave Pence’s Indiana gubernatorial campaign nearly $3,000. In 2016, before Pence withdrew his candidacy for governor, Azar donated $1,000.
Eli Lilly has been a major supporter of Pence’s political career. Its political action committee gave $8,700 to Pence’s 2010 House campaign, $21,550 to his 2012 run for governor, and $25,000 to his 2016 gubernatorial campaign.
Azar’s numerous conflicts-of-interest have led the three U.S. representatives to sharply criticize his nomination, “Mr. Azar’s appointment would send a very clear signal that your Administration is happy to put the pharmaceutical fox in charge of the health care henhouse,” reads their letter to Trump. “It would also be a perfect example of revolving door practices that are undermining the public’s trust in their federal government.”
Correction (11/14/17 at 10 AM): A previous version of this article stated that Trump, during his campaign, pledged to allow Medicaid to negotiate drug prices. He promised to allow Medicare to do so.Business0