|
Gore vs. the drug makers
|
 |
October 26, 2000: 7:06 a.m. ET
Rx firms take center stage amid debate over Medicare drug benefit plans
By Staff Writer Martha Slud
|
NEW YORK (CNNfn) - It's Al Gore vs. George W. Bush on the presidential ballot this year. But Gore is also campaigning heavily against another foe - the pharmaceutical industry.
The price of prescription drugs has emerged as one of the biggest issues in the campaign, an issue that particularly appeals to older voters - one of the country's most powerful lobbies -- who are struggling to pay for costly medicines.
Vice President Gore has painted drug makers as corporate villains, accusing them of price-gouging while at the same time racking up huge profits that outpace virtually every other industry. Gore, following earlier efforts by the White House on the prescription drug issue, would offer a broad new prescription-drug benefit under the government-run Medicare plan.
Bush, meanwhile, says he supports subsidized prescription drug benefits too, but he proposes a more free-market approach administered by private insurers -- a less-generous benefit plan that's also considered friendlier to the drug industry.
It's little surprise then that the pharmaceutical industry is clearly siding with the Republicans - much as it has in prior years before Medicare reform became an issue. Of the roughly $17.3 million in total drug industry contributions given to political candidates this year, about $11.8 million has been earmarked for the GOP compared with $5.54 million for Democrats, according to the Center for Responsive Politics, which tracks campaign contributions.
 The biggest donors include Pfizer Inc. (PFE: Research, Estimates), the world's biggest drug maker, which has earmarked 84 percent of its $11.8 million in donations for the GOP; Bristol-Myers Squibb (BMY: Research, Estimates) (83 percent to Republicans) and Eli Lilly and Co. (LLY: Research, Estimates) (78 percent).
But why has the drug industry gotten so worked up about prescription-drug benefits? Helping low-income people pay for medicines might seem like a good thing for the industry by making their products more available, but drug lobbyists say the Gore plan would be anything but positive for their industry. The industry doesn't endorse candidates, but it clearly opposes Gore's initiative.
The politics of business: During the final month of the 2000 campaign, CNNfn.com will examine how key industries would fare under a Bush presidency or a Gore presidency. Each Monday and Thursday, CNNfn.com will turn its attention to a new sector. On Monday, we will profile what each candidate would mean for the technology industry.
"We have some serious reservations about the Vice President's plan," said Jeff Trewhitt, a spokesman for the Pharmaceutical Research and Manufacturers Association, an industry trade group in Washington. "We think his approach is flawed."
Billions of dollars are also at stake. Spending on prescription drugs is expected to total about $112 billion this year, up from $38 billion in 1990, according to the Health Care Financing Administration, the government agency that oversees Medicare. By 2008, prescription drug spending is expected to jump to $243 billion.
Gore's plan would pay for half of prescription drug costs for Medicare recipients, up to certain limits, and offer free coverage to poor seniors.
The Bush plan, meanwhile, would make prescription drugs free for impoverished seniors through state block grants, while phasing in a private-sector system that would offer prescription drug benefits as part of an overall revamp of the federal Medicare health program.
Drug makers fear the Gore plan would open the door for the government - which would become the biggest bulk purchaser of pharmaceuticals - to set price caps on drugs and decide which medicines are covered for Medicare recipients and which ones are not.
The industry argues that if price controls go into effect, companies would see lower profits and thus reduce their coffers for research and development.
Biotechnology firms also oppose any plan involving government controls. Biotechnology Industry Organization spokesman Charles Craig said biotech companies, the vast majority of which are not yet profitable, are particularly vulnerable to any Medicare reforms that would curtail investment in their industry.
Would a Gore plan hurt earnings?
Wall Street has monitored the debate closely, viewing the campaign as pivotal for the drug industry. The Gore plan, if enacted in its current form "would be negative to the earnings prospects of the pharmaceutical industry," said Richard Lawrence, a pharmaceutical analyst at Parker Hunt Inc. Under the Bush scenario, the drug industry's long-term profit outlook likely would not be affected, he said.
With recent polls showing the presidential race is neck-and-neck, many analysts say the industry is now betting that Gore's plan has little chance of passage. They say it would take a Democratic sweep of the White House and Congress for Gore to have enough support to push his plan through.
Perhaps that's why drug stocks have stood up remarkably well this year despite all the bad publicity. The American Stock Exchange Pharmaceutical Index has risen about 20 percent since Jan. 1, compared with a 5 percent decline in the S&P 500 index during the same period.
The drug sector also has benefited from the volatile market environment. Many investors have shifted funds into drug stocks in their search for a safe haven in a turbulent market environment for technology shares. Drug stocks rallied Wednesday despite overall weakness in the market, spurred by jitters over the tech sector after Nortel Networks reported lower-than-expected revenue in the third quarter.
But observers warn that swings in drug stocks may be seen in the next few days as the Nov. 7 election nears. "I think stocks would weaken if the polls moved more in Gore's direction," Lawrence said. 
|
|
|
|
|
 |
|
