Saturday, October 24, 2020
Examination

Pharma showers state capitols with campaign cash

By the time Will Guzzardi, a state legislator in Illinois, called a vote on his controversial drug pricing reform bill, the crowd in the Springfield hearing room had suspiciously thinned. Three committee Democrats were suddenly missing, and, as a result, his bill failed by three votes.

In Guzzardi’s view, it wasn’t a coincidence that the three no-shows accepted more campaign contributions from the drug industry than most other state lawmakers nationwide: Between $6,000 and $15,000 dollars each, a pittance when it comes to campaign contributions at the federal level, but enough to have a significant impact on a smaller, cheaper, and less scrutinized state election.

“They were conveniently absent at the moment of the vote,” Guzzardi, a fellow Democrat, said in an interview.

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The trio’s brazen March 2020 disappearance stands out, but the willingness to take pharma cash does not. Well over one-quarter of all state lawmakers nationwide have accepted money from the pharmaceutical industry since the beginning of 2019, according to a new STAT examination.

In several states, taking drug industry cash was more the norm than the exception: In Illinois, more than 79% of the state’s 177 elected lawmakers have cashed such a check. In California, over 85% of lawmakers have taken pharma money. The data reveals the drug industry has poured over $5 million into state legislators’ campaigns in the past two years alone.

STAT’s analysis, conducted in partnership with the National Institute on Money in Politics, provides a first-of-its-kind study of the drug industry’s influence in state capitols. It follows a companion analysis of drug industry spending at the federal level, which revealed $11 million in industry giving as of July.

Major pharmaceutical companies and trade groups have helped to fund the campaigns of 1,933 state legislators nationwide in the current election cycle. Lawmakers who don’t appear on the map have not accepted a contribution from the drug industry in 2019-20. Legislatures that did not receive pharmaceutical industry contributions do not appear on the map, with the exception of Minnesota, where data is currently unavailable.

While pharma’s clout in Washington is well-documented, no nationwide database of the drug industry’s contributions to state legislative elections has ever been assembled, in part because state transparency laws vary widely and all 50 states maintain separate disclosure databases.

Though the state-level data are rarely scrutinized, they provide a uniquely comprehensive snapshot of the drug industry’s political influence nationwide.

While $10,000 of drug industry cash is largely symbolic at the federal level, the same sum can significantly influence a campaign for state legislature. Though such contributions are widespread, many politicians increasingly view the donations as symbolic of a deeply flawed system in which corporations carry outsize influence.

“PAC contributions buy access to politicians too lazy to raise money from real people,” said Jason Kander, a prominent Democrat who previously served as Missouri’s secretary of state and two terms in the state’s legislature. “And after their first campaign, most politicians get lazy.”

The donations come amid a national reckoning over drug prices, which American voters consistently rank as a top political priority. Though attention typically focuses on Congress, in many cases, it is state legislatures, not the federal government, that have pursued the most aggressive strategies to lower pharmaceutical costs.

The data also shows that even during a devastating pandemic, the drug industry has proceeded as usual with a sweeping influence effort that has reached nearly 2,000 lawmakers nationwide.

“You’re taking a snapshot of a crucial industry in this country: health care and pharmaceuticals,” said Chisun Lee, a deputy director of the Election Reform Program at the Brennan Center for Justice, a progressive-leaning institute that advocates for aggressive election law reforms. “It’s really important to ask whether the patients and consumers and regular citizens who are going to be impacted by lawmaking in that sector are also being heard.”

A spokeswoman for PhRMA, the pharmaceutical industry lobbying group, declined to outline the group’s political advocacy strategy, calling STAT’s specific focus on the drug industry’s political spending “ludicrous.”

In 2019 and 2020, drug companies and their lobbyists had plenty of opportunities to argue against drug pricing bills they viewed as a threat. In California, Maryland, Minnesota, and Illinois, among other states, many lawmakers treated prescription drug costs as a priority, though many of their efforts in 2020 were upended by the Covid-19 pandemic.

It’s bills like those, critics say, that give big business interests a unique opportunity to influence the legislative process. Having donated to key lawmakers, or hiring lobbyists who’ve donated themselves, likely only bolsters their access.

“When a vote is on an issue a state legislator is unfamiliar with, they ask, ‘Who is this between?’ and then someone names two lobbyists, and they pick the one they prefer,” Kander said. “The corruption comes in these small moments.”

Major drug makers often contribute hundreds of thousands of dollars to candidates at the state level, in addition to comparable sums to members of Congress.

Pfizer, the New York-based drug giant, is a prolific spender in state elections. Since the beginning of 2019, the company and its political action committee have written 1,173 checks to a total of 994 lawmakers in 42 states. The donations totaled $778,000; increments ranged from $100 to $4,000.

The company’s giving highlights the brute-strength approach that drug companies and other major corporations often take in state legislatures, spreading small amounts of money as widely as possible. Pfizer’s spending mirrors its behavior at the federal level, where its PAC was also the top political spender among drug companies, having sent nearly $1 million to members of Congress as of July 2020.

Pfizer singlehandedly spent more than PhRMA, the drug industry lobbying group. Eli Lilly, Merck, and Novartis ranked third, fourth, and fifth, respectively, among contributors, each spending between $500,000 and $300,000 on state-level candidates.

The data is current as of mid-September — based on typical trends, it is likely the numbers will spike in the final weeks before the Nov. 3 election, and the weeks that follow. STAT plans to update its analysis with those totals later this fall.

The money is a pittance for the companies, which report between $25 billion and $50 billion in revenue each year. But collectively, it adds up: One analysis found that the pharmaceutical and health products industry — a broader look than STAT’s — has contributed $877 million to state-level political candidates and committees since 1998.

Depending on a lawmaker’s district and whether they face a competitive reelection race, those small chunks of corporate change can have a significant impact.

“A thousand dollars would be a huge contribution in the lower chamber in New Hampshire,” said Lynda Powell, a University of Rochester professor who studies the influence of campaign contributions in state governments, “but it wouldn’t even get you noticed in California.”

Indeed, Sacramento legislators received more money than those in any other state: $1,439,750 spread across 103 lawmakers, an average sum of nearly $14,000 each. Only 17 members of the legislature did not receive drug industry cash.

Texas’ 181-member legislature was similarly flooded with contributions: 66% of lawmakers there reported accepting pharmaceutical industry donations, as did nearly 65% of lawmakers in neighboring Louisiana.

It is unclear how the drug industry’s spending stacks up against other industries in many state legislatures, given STAT’s specific analysis of the highest-revenue companies and trade groups and the logistical difficulty of compiling data about state-level political giving. At the federal level, drug companies’ spending trails that of law firms and the oil/gas producers, but is on par with spending by other major industries, including telecommunications and real estate.

Drug companies’ spending appears largely strategic, and often targets chairs of key committees or other high-ranking lawmakers in large states with a major drug industry presence, like California, Illinois, and New Jersey. Illinois state Sen. Tony Muñoz (D), the chamber’s assistant majority leader, has accepted $52,035 from the drug industry in the past two years, making him the top recipient of pharmaceutical contributions nationwide. His drug-pricing work has largely focused on promoting access to generic drugs; one bill in 2015 mandated insurance coverage for biosimilars, and a similar 2020 bill mandated insurance coverage for generic insulin and EpiPen.

A trio of California lawmakers holds the second, third, and fourth spots, having each accepted roughly $49,000 in industry contributions in the two-year span.

One, Chad Hayes, was the state assembly’s minority leader until he left the Republican party and became an independent in 2019. Another, Jim Cooper, is a member of the assembly’s Democratic leadership. Neither has any substantial record on drug pricing.

Yet in some cases, the spending appears somewhat random: The third member of the California Assembly, Blanca Rubio, ranks second among all lawmakers nationwide with $48,700 in industry funding, but has also authored no relevant legislation and doesn’t serve on committees with health care jurisdiction.

Most lawmakers, however, received dramatically less money. The drug industry’s strategy in many states appeared to rely on a barrage of small contributions to large numbers of candidates.

In 10 states, more than half of sitting lawmakers accepted campaign funding from the drug industry. In three states, pharma’s political spending reached over two-thirds of the legislature.

In three states — California, Illinois, and Oregon — more than two-thirds of lawmakers cashed checks from the drug industry. Among the 35 lawmakers who received the most industry support, 27 were from California; seven from Illinois; and one from Oregon.

All three states were hotbeds for drug pricing activity: Illinois is one of many states that have recently enacted laws capping out-of-pocket costs for insulin, though the pharmaceutical industry has largely not opposed those efforts. Oregon passed laws in 2018 and 2019 requiring drug manufacturers to provide advance notice of price hikes and adding other price-transparency requirements. PhRMA has sued to block the legislation from taking effect.

In California, PhRMA has been engaged for years in a lawsuit to overturn the state’s 2017 price-transparency law, which requires drug makers to justify price increases and to provide advance notice before they take effect. In 2020, Gov. Gavin Newsom, a Democrat, signed legislation that would allow the state to manufacture insulin and other generic drugs on its own, effectively sidestepping the industry.

The lawsuits are a common tactic once lobbying fails and legislatures succeed in passing aggressive reforms. In Minnesota, where recent campaign finance data is not yet available, lawmakers passed a controversial bill forcing drug makers to pay for a program that provides emergency insulin to patients facing dangerous shortages. PhRMA sued to block the law in July 2020, soon after it passed.

In some cases, lawmakers’ connections to the drug industry run deeper than simply accepting campaign contributions. In Illinois, one of Guzzardi’s longtime GOP opponents on drug pricing legislation, state Rep. Deanne Mazzochi, accepted five-figure contributions from the industry. In her day job as a patent attorney, she has represented drug manufacturers in court — though typically she has argued on behalf of generic drug manufacturers in legal fights against large, brand-name pharmaceutical companies.

In 10 states, more than half of all state legislators accepted pharma cash: California, Illinois, Oregon, Texas, Louisiana, Florida, Virginia, Arizona, Ohio, and New Jersey.

But legislatures where huge percentages of lawmakers received industry cash were more the exception than the norm. In many small states, the industry appears to have done little to influence goings-on in the capitol. In Wyoming, Alabama, Montana, Kentucky, Maine, South Dakota, and North Dakota, fewer than 10 legislators reported receiving industry support.

As state legislatures across the country have pursued new strategies to lower drug costs, drug manufacturers have not slowed their efforts to curry favor with politicians at all levels. It’s a common strategy: Corporations and their political arms often contribute to campaigns to secure access to lawmakers and their staff, said Powell, the University of Rochester professor.

The result, she said, is that powerful donors often gain footholds in the offices of key lawmakers. Often, they learn of legislation in its early stages, and use their platform to argue against bills they dislike. But to categorize the arrangement as “buying votes” from lawmakers, she stressed, is simplistic. (Such arrangements are illegal.)

“I don’t think there are very many of them engaging in quid-pro-quo corruption,” Powell said. “That’s pretty rare. Most people, I think, are pretty honest and trying to do their best. But they’re stuck in an incentive system which really mandates, in many cases, that they spend a lot of time fundraising to retain their office.”

In many ways, the drug pricing landscape in state capitals mirrors that of Washington, D.C. Drug companies frequently hire high-powered lobbying firms to help ward off threatening legislation. In some cases, only grassroots patient advocacy groups support drug pricing legislation. And frequently, drug manufacturers — or, depending on the state’s campaign laws, their affiliated political action committees, known as PACs — shower lawmakers with contributions in support of their reelection bids.

Sometimes, major financial interests do intervene on the side of patient advocacy groups. In some cases, drug pricing bills receive support from major labor unions. In others, researchers and advocates funded by the Texas billionaires John and Laura Arnold cast themselves as a counterweight to the drug industry’s clout. Many state fights over drug importation and affordability boards involved two Arnold-affiliated figures: Vinny DeMarco, a Maryland-based advocate who spearheaded the state’s 2019 legislative fight, and Jane Horvath, a consultant who has effectively authored many of the bills.

In an email, PhRMA spokeswoman Priscilla VanderVeer declined to describe the trade group’s political spending strategy, or that of its member companies. She called STAT’s reporting “ludicrous” and argued the analysis chose to “myopically single out the innovative biopharmaceutical industry” instead of reporting on political spending from hospitals, pharmacy benefit managers, and other pharmaceutical industry opponents.

Pharmaceutical industry contributions were split roughly evenly between Democrats and Republicans.

STAT’s analysis, conducted in partnership with the National Institute on Money in Politics, tracked political spending on the part of 25 entities: The top 23 U.S. drug makers by revenue, and the trade groups PhRMA and BIO. (BIO did not contribute to state candidates, and Novo Nordisk has contributed only $5,500 in the current cycle.)

At the state level, spending was split almost evenly between Democrats and Republicans, who received 49% and 50% of the campaign checks, respectively. While more Republicans than Democrats accepted drug industry support, Democrats tended to accept industry contributions in larger increments. Of the $5,041,021 in total spending, 54% was directed to Democrats and 45% to Republicans.

While PhRMA took a backseat on campaign spending at the federal level, it was active in state legislatures: The trade group, which reported $459 million in revenue in 2018, spent a small fraction of that sum on state campaign checks, contributing $769,321 to 545 lawmakers in 22 states. The trade group’s total giving placed second among drug industry entities, behind only Pfizer.

And while major drug manufacturers often wield significant influence in their home states, they typically spread their money far and wide. New York-based Pfizer contributed to candidates in 41 states; New Jersey-based Merck contributed to candidates in 32 states; and Indiana-based Eli Lilly contributed to candidates in 29 states.

Methodology

At the federal level, it is illegal for corporations to contribute directly to political campaigns. U.S. companies, however, commonly form political action committees, or PACs, that allow well-compensated employees to pool their own money and donate it to political campaigns.

In some states, however, it is legal for corporations to donate directly to candidates. This analysis groups together donations from drug industry PACs and their affiliated drug companies. Many donations to lawmakers in Illinois, for instance, come from Pfizer, Inc.; in California, they come from Pfizer PAC. Those donations are all counted toward Pfizer’s total giving in STAT’s database.

State campaign finance laws are more varied, and often more complex, than federal ones. Contribution limits vary widely, or, in some cases, don’t exist. Other states have well-established programs to publicly fund elections and thereby negate much of the need for fundraising from corporations or wealthy donors.

While a large majority of state legislative elections take place in even years (e.g. 2018, 2020), a small group of states elect legislators in odd years. For the sake of consistency, STAT’s analysis uses contributions reported in the calendar years 2019 and 2020 regardless of the date of a candidate’s election. In instances where lawmakers ran as non-incumbents in 2019 and then began fundraising as sitting lawmakers, all contributions are categorized as being made to incumbents. Similarly, lawmakers who fundraised for different elections in different years (e.g., a 2019 campaign for state Assembly and a 2021 campaign for state Senate) are treated as a single recipient.

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