Making sure pills go down, and money flows

When drugs maker Wyeth Australia wanted its arthritis drug Enbrel listed on the pharmaceutical benefits scheme (PBS) it hired political lobby group Parker & Partners to wheel out sick kids in its meetings with politicians.

The image of arthritic 10-year-olds, together with the threat of a bleeding heart media campaign, was so potent that Enbrel was rushed on to the PBS under the watch of then federal health minister Kay Patterson, at a cost to Australian taxpayers of $100 million a year.

Getting a government subsidy for a drug through a listing on the PBS is the Holy Grail for big pharmaceutical companies.

Companies spend an average $1.2 billion getting a product to market, so making that pay off is the name of the game.

In the case of Enbrel, the cost of a yearly prescription was estimated at a prohibitive $25,000 back in 2003. Throw it on the PBS list - 600 drugs subsidised by the government - and the cost falls to $5.30 per prescription for healthcare cardholders and $32.90 for other patients.

If doctors are "educated" to prescribe the drug and the pharmacy chains stock the pill, then sales go up and up.

Welcome to the $100 billion health sector, one of the most powerful and complex industries in the country. It represents more than 10 per cent of gross domestic product, employs hundreds of thousands of people, and as the population lives longer, its tentacles grow stronger.

Pharmaceutical companies are among the biggest in the world, with annual turnovers in the tens of billions of dollars and lucrative recurring revenue streams.

While pharmaceutical companies outlay millions of dollars a year on grants and sponsorships to doctors and health groups, the industry spends far more on political donations in an attempt to influence health policy and get their drugs on to the PBS.

Australia's PBS system is world renowned for making drugs for serious illness available cheaply. But the system, which costs $7.7 billion a year, and the process by which drugs are listed has become increasingly vulnerable to commercial and political pressure.

While the PBS scheme is overseen by an independent gate keeper, the Pharmaceutical Benefits Advisory Committee (PBAC), strong lobbying by the huge GlaxoSmithKline and home-grown drug manufacturer CSL, particularly during the later years of the Howard Government, succeeded in securing listings on the PBS for drugs that had earlier been rejected.

CSL's anti-cervical cancer drug Gardasil was one case in point. John Howard promised the drug would make it on to the PBS despite its application being rejected by PBAC some months earlier. GSK's version of the drug was also knocked back by PBAC but the Howard government eventually approved it for a nationwide vaccination program.

An investigation by BusinessDay has traced the millions of dollars spent annually by the health industry - which spans everything from pharmaceutical companies, hospitals, pharmacy chains, general practitioners and health insurance companies - buying political access and influence. The money mainly goes to lobbying, hiring former government staffers both internally and externally, issuing ads and making grassroots campaign contributions.

More than any other industry, drug companies take advantage of a revolving door between the industry and politicians and their staff. A search of where former political staffers go reveals a disproportionate number move to the lucrative health sector.

Jerrold Cripps, QC, who recently ended his five-year term at the NSW Independent Commission Against Corruption, said on his departure that political donations and lobbying by former ministers and other members of Parliament ''are activities that are unmistakably conducive to corrupt conduct''.

Dozens of former government staffers and former politicians are employed as lobbyists for drug companies and health associations, or work on the health accounts of PR firms.

For instance, Kate Carnell, the former ACT chief minister, mostly under the Howard Government, left politics at the start of this decade and became chief executive of the powerful doctor's lobby group GP Network.

Carnell was recently poached to become chief executive of the Australian Food and Grocery Council, which represents supermarket heavyweights Woolworths and Coles. But her move to retailing was not really a sea change. The nation's supermarkets are stepping up efforts to change legislation that would enable them to sell drugs in their stores.

Then there is former South Australian health minister Michael Armitage, who now runs the Australian Health Insurance Association, the private health industry body that represents 26 health funds throughout Australia and collectively covers more than 94 per cent of the private health insurance industry.

AHIA member funds today provide healthcare benefits for approximately 11 million Australians. The power of this organisation became apparent last year when it revealed it had received a letter from then opposition Leader Kevin Rudd four days before the November 2007 election setting out policy commitments to the industry, including retention of the private health insurance rebate.

While there has a backflip by Rudd on the health rebate, the real story was the ability of this lobby group to extract a letter out of a political leader days before an election, detailing his party's policy.

As Richard Denniss, executive director of lobby group The Australia Institute said: "For me the most interesting question is why the then opposition Leader was making these private promises to the health insurance industry.

"It's obviously a pretty powerful organisation than can demand such promises be made in the days before an election. I haven't seen the environment groups waving secret letters around in which the ALP makes them promises about how they will tackle climate change.''

With the emissions trading scheme now seen by all political parties as a poisoned chalice, the focus will increasingly turn to the health sector, with the ownership of hospitals and other health-related matters to be fought out in the lead-up to the next election.

In recent weeks, opposition Leader Tony Abbott has spruiked the idea that Medibank Private would be privatised under a Liberal government and every major public hospital in NSW and Queensland would be given its own management board to make hospitals more accountable.

There is no doubt that the drug industry lobbyists are well connected, on both sides of government.

Wyeth's spin doctor is Peter Poggioli, who was state director of the Liberal party under Jeff Kennett and who also worked for former Howard government minister David Kemp.

Poggioli is married to Rowena Cowan, who worked for former Liberal senators Nick Minchin and Richard Alston and now works at Sanofi Aventis as government relations manager.

A search of any of the big health associations reveals some heavyweight appointments from former politicians and political staffers.

A former staffer with NSW senator Bill Heffernan, Nick Campbell, is executive director of corporate and government affairs for Johnson & Johnson; Mark Elliott, a former adviser to Phillip Ruddock and Ian McDonald, works at Pfizer; and David Miles, a former adviser in John Howard's office, is the communications boss at Pfizer.

Brendan Shaw, head of Medicines Australia, the peak group for drug manufacturers, previously worked with then minister for small business and consumer affairs Craig Emmerson when Labor was in opposition.

Then there is Catherine McGovern, a former staffer in SA Liberal senator Nick Minchin's office, who now works for GlaxoSmithKline, and Nicole Feely, a former senior adviser in John Howard's office, who went to work for tobacco giant Phillip Morris in 2001, became chief executive at St Vincent's Hospital in Melbourne, then moved to Western Australia as chief of Southern Metropolitan Area Health.

As Denniss said: "There appears to be a tight-knit group of ex-politicians, and

ex-political advisers with experience in health who seem to circulate around the different health lobby groups.

"They seem to get quite well paid for whatever it is they do so obviously the big pharmaceutical companies and the other big health lobby groups think they get good value for money out of employing people with their knowledge of government processes."

It is a concern expressed by several current and former politicians, academics and commentators.

John Warhust, a professor in the school of political sciences at Australia National University, described these relationships as "incestuous" and detrimental to the democratic process. "There should be some form of control over this cosy lobbying network and government," he said.

Toby Ralph, a marketing strategist for several blue-chip boards and who has worked on more than 40 election campaigns in Australia, is well aware of the attraction of lobbying and the pharmaceutical industry.

"The pharmaceutical industry is awash with cash, much of it siphoned from the taxpayer. Approved medicines share $6 billion or $7 billion, so dipping the corporate bucket into that deep well is always a priority," Ralph said.

"The starting point is to prove medical efficacy and social and economic benefit, but that just secures a seat at the roulette table. Next they hire people with strong connections to the decision makers."

Then there are the specialist advertising agencies and PR consultancies that put together compelling cases for subsidy.

"This transcends the factual,'' Ralph said. ''They can bring in sufferers to meet the decision makers, humanising the decision."

According to Ralph, while decision makers are obliged to look for the most cost-efficient health outcome and there are complex evidence-based review systems, it's tough to say no to funding a high-priced cancer drug when you've been confronted by an eight-year-old who may die if she doesn't get it.

"Drug pushing is a high-risk game, but if a company secures a government subsidy it is potentially a long-term licence to suck on the teat of the taxpayer for a quarter of a century until patents evaporate," he said.

The pharmaceutical industry spends a fortune on marketing and promotion - nearly twice as much as it spends on research and development. Pfizer is estimated to spend well above $17 billion a year to maintain and increase its 10 per cent market share.

Greens MP Lee Rhiannon said big pharmaceutical companies were also some of the biggest financial backers to major parties. "Pfizer has donated $572,560 and Medicines Australia has donated $392,386 to the major parties. What did they seek in return?"

Ms Rhiannon said political donations from the health industry to federal Labor shot up and then overtook those to the Liberal party after the 2007 election.

These shifting fortunes suggest that the donors from the private health sector have an interest in backing the party in government.

''It's time the Rudd government swallowed the bitter pill and put an end to corporate donations so they can no longer be used to buy influence," she said.

One of the country's largest drug companies, Pfizer Australia, which last year bought Wyeth, has a gaggle of former government advisers working in its lobbying, media and marketing division. It donated to political parties last year, is a member of the Millennium Forum, which was set up in NSW in 1998 to raise money for the Liberal Party. The forum at present pulls in at least $700,000 from subscriptions alone.

The powerful Pharmacy Guild of Australia, a lobby group for pharmacies, is a big donor in its own right, having handed over $447,000 to Labor and $528,000 to the Coalition over the past decade. However, since 2007 its donations to Labor have steadily outpaced those to the Liberal Party.

At the start of last year, GSK announced a new global policy to voluntarily stop all corporate political contributions, a move aimed at countering the impression it was seeking to buy political influence.

However, GSK continues to use external and its own lobbyists while its executives are free to provide personal donations.

via smh.com.au

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