Drugmaker ads to target Obama idea

The nation’s largest pharmaceutical lobbying group is preparing a multimillion-dollar public relations campaign to tout the importance of free-market health care and undercut an expected push by the Obama administration for price controls of prescription drugs.

The effort, which will include a national television commercial scheduled to begin airing next week, is the first salvo in what likely will be a huge battle over health care reform during the Obama presidency.

Other major industries are also gearing up for the fight, including big businesses and insurance companies. But the stakes are especially high for drugmakers, which stand to lose as much as $30 billion in revenue if President-elect Barack Obama’s plan to let the federal government negotiate Medicare drug prices is implemented, according to one independent report.

“There’s no question that next year will be a challenging year,” said Ken Johnson, senior vice president with the Pharmaceutical Research and Manufacturers of America, or PhRMA, which is organizing the campaign.

Mr. Obama attacked drug companies repeatedly during his election campaign.

PhRMA says its upcoming advertisement, which will feature TV talk show host and PhRMA spokesman Montel Williams, doesn’t criticize the pending Obama administration or any of its health care proposals.

“We’re going to do an ad campaign that is designed to make people aware of the importance of preserving your free-market health care system,” Mr. Johnson said.

He added that PhRMA recognizes that “some reforms are needed in order to keep that system vibrant.”

Mr. Johnson said PhRMA would’ve embarked on exactly the same ad campaign if Mr. Obama’s Republican presidential rival, Sen. John McCain, had won last week’s presidential election.

Mr. Obama has said he will hold drug and insurance companies “accountable for the prices they charge and the harm they cause.” He has promised to allow Medicare to negotiate with drugmakers for cheaper prices, he said.

Giving Medicare the authority to negotiate drug prices - a provision that they currently don’t have - would cause the pharmaceutical industry to lose $10 billion to $30 billion in annual revenues, according to a report released last month by the Boston Consulting Group.

“If you start to take a pretty big price decrease out of that large market, it has an enormous impact on drug companies and really their ability to generate their type of shareholder return that they have had in the past,” said Peter Lawyer, a senior partner with Boston Consulting.

“I think [drug companies] are rightfully concerned about it. Even on the lower end of our estimate - the $10 billion - that’s a big deal, that’s a big chunk of your profitability.”

The report analyzed the health care proposals of Mr. Obama and Mr. McCain.

With less revenue from Medicare, drug companies may begin charging more for drugs sold outside the program. And lower profits mean less money for research and development - and a reduction in the amount of new drugs on the market in the future, Mr. Lawyer said,

Story Continues →