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Opinion

Wollschlaeger: Sweet Deal For Drugmaker At Taxpayer Cost

Bernd Wollschlager.jpg

In "Fiscal Footnote: Big Senate Gift to Drug Maker,” the New York Times reported that key Senate lawmakers inserted a paragraph into Section 632 of the “fiscal cliff” bill which essentially delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.

The provision gives Amgen an additional two years to sell Sensipar without government controls, which is projected to cost Medicare, or better the tax payer, up to $500 million over that period. Amgen, which has a small army of 74 lobbyists in the capital, was the only company to argue aggressively for the delay. Amgen’s success also shows that even a significant federal criminal investigation may pose little threat to a company’s influence on Capitol Hill.

On Dec. 19, as Congressional negotiations over the fiscal bill reached a frenzy, Amgen pleaded guilty to marketing one of its anti-anemia drugs, Aranesp, illegally. It agreed to pay criminal and civil penalties totaling $762 million, a record settlement for a biotechnology company, according to the Justice Department.

Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. Mitch McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns.

In some cases, the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009. Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with “all the stakeholders."

This is a sweet deal for Amgen because Congress in 2008 required Medicare to pay a single, bundled rate for a dialysis treatment and related medications starting in 2011. But lawmakers carved out a two-year delay in the inclusion of certain oral drugs, Sensipar among them, in the new bundled payment system. That meant demand for Sensipar would not decline and Amgen would maintain control over pricing and make MORE money. With that two-year exclusion set to expire in 2014, Amgen’s lobbyists successfully pushed for another two-year delay.

Many lobbyists and Congressional aides said they first learned of the language when the final bill was posted publicly, only hours before being approved. It called for cutting $4.9 billion over 10 years by lowering Medicare payments for dialysis, but left hundreds of millions on the table by extending the oral drug delay.

What is the moral of this story? Companies make big bucks, lawmakers line their pockets and we the people pay the bill. But the story gets even better: the Internal Revenue Service regards some of Amgen's penalties as a cost incurred in the course of doing business. Result: It's fully tax-deductible! So the taxpayer will subsidize them for the money they're ponying up to pay the fines.

Do we really want to take this any longer?