An Amgen Payoff?
Why is Ted Kennedy being so nice to the biotech industry?
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Sen. Edward Kennedy has introduced a bill granting Amgen and other biotech companies more than 13 years of marketing exclusivity for new "biologic" drugs, a class of protein-based drugs engineered from living cells. That's nearly twice the seven years' protection proposed by the White House; Sen. Chuck Schumer and Rep. Henry Waxman have proposed five.
All parties to this disagreement are dedicated to the plight of the health care consumer, none more than Kennedy himself. Why, then, the difference? Reporting on the controversy in the Wall Street Journal (subscription required), Alicia Mundy suggests that Kennedy was trying to "keep the pharmaceutical industry on board" with the health care reform bill. Another possible reason—one Mundy fails to mention—is that Amgen has pledged $5 million to help create the Edward M. Kennedy Institute for the United States Senate, a pricey "Teddy Too" annex that Kennedy hopes to build alongside the John F. Kennedy Presidential Library and Museum in Boston. *
The case against longer exclusivity appears to be pretty straightforward. Biologics make up about 14 percent of the domestic market for prescription drugs, and they can be very expensive. A one-year treatment with the breast cancer biologic Herceptin, for instance, costs about $48,000. The Federal Trade Commission has argued that giving Big Pharma 13 years to market new biologics on an exclusive basis would constitute an unjustifiable delay in making available cheaper alternatives. These alternatives are called "follow-on biologics," or FOBs, rather than generics, because technically you cannot replicate a biologic the way you can other drugs; the best you can do is produce another biologic that's similar.
Hence the need for new legislation. Under current law, manufacturers of nonbiologic drugs receive five years' protection from generic competition. Manufacturers of biologics want 12 to 14 years' protection, even though they have significantly less to fear from FOBs than drug-patent holders typically do from generics. FOBs are much more expensive to develop than generics, and because they can't be designated "therapeutically equivalent" by the FDA, as generics can, they're unlikely to displace brand-name biologics anywhere near as much as generics currently displace brand-name nonbiologics. In a June 24 letter to Waxman, Nancy Ann DeParle, director of the White House Office of Health Reform, and Peter Orszag, director of the Office of Management and Budget, said that seven years' exclusivity "is a generous compromise between what the FTC research has concluded and what the pharmaceutical industry has advocated."
Why isn't seven years generous enough for Kennedy?
I don't mean to suggest that the $5 million Amgen pledged to the Kennedy Institute constitutes a bribe. But it is a difficult sum to ignore. Matt Viser, who broke this story in the Boston Globe way back in January, reported that Amgen was the biggest donor among the drug companies, hospitals, and insurance companies and other health-interested parties who kicked in a combined $20 million to create the Kennedy Institute. (Viser also reported that Nick Littlefield, one of Amgen's lobbyists, was a former top Kennedy aide.) Joe Ganley, a spokesman for the Kennedy Institute, told me that Amgen had not given any more since the institute's annual donor disclosure in January; he could not tell me who had given since January, because "we don't typically update our fundraising progress on an ad hoc basis during the year." But by next January, the health care reform bill will likely either have passed or have been killed off.
(An e-mail to Kennedy press aide Melissa Wagoner drew the following reply: "You should contact the Institute directly for the list of donors. With respect to your suggestion that Senator Kennedy's positions on legislation are somehow influenced by contributions made to the Institute, you must not know Senator Kennedy very well. For nearly fifty years, Senator Kennedy has been fighting to provide all Americans, regardless of race, gender or income, with access to quality affordable health care. Every decision he makes on health policy is designed to further that important national goal. To suggest otherwise is laughable." Amgen spokeswoman Kelley Davenport directed me to a July 11 Boston Heraldarticle in which the biotech industry beefed that it didn't receive greater protection from Kennedy's bill, as it did in a bill Kennedy introduced in 2007, and to a statement arguing that the promised 13 years of protection really amounts only to nine, which, even if true, is more than the White House's seven and Schumer and Waxman's five.)
I hate to pick on Sen. Kennedy, for several reasons. Most obviously, he is gravely ill. He has indeed dedicated much of his life to extending decent health care to those who can't afford it, and, as best as I can make out, the influence he and his Senate staff have exerted in shaping the bill currently being marked up in the Senate Committee on Health, Education, Labor, and Pensions has been almost entirely to the good. But as I pointed out in January, it seems hardly fair that Rep. Charles Rangel should get barbecued in the New York Times for shaking down American International Group for a similar vanity project while Kennedy attracts almost no attention as his friends and former aides not only solicit but receive an amount twice as high. (Rangel never got the $10 million he sought from AIG to fund a public-policy institute in his name at City University of New York.) In both instances, members of Congress were asking, either directly or through proxies, for staggeringly high sums from companies affected on a near-daily basis by their legislative activities. The Kennedy Institute is "the single most important thing, other than family and health, that Sen. Kennedy is focused on," Paul Kirk, a former Kennedy aide, told Viser a year ago. Yet when the Times' normally fierce Mark Leibovich profiled Kennedy in February ("Hold the Eulogies, Kennedy Says"), the Kennedy Institute and its ethically dubious fundraising received no mention.
With his promotion of this overly generous biologics bill, Kennedy is providing future students of government with a lesson in how government works that may surpass anything they'll learn at the institute the bill is helping to fund. What's sad is that this lesson is not only unworthy but unnecessary: Kennedy's legacy of government service requires no bricks or mortar to stir grateful remembrance.
[Update, 10 p.m.: At the time I filed this piece, Ganley of the Kennedy Institute had not yet gotten back to me on another question: Had any other pharmaceutical company donated since this past January? According to a followup e-mail from Ganley, the answer is no.]
[Update, July 14: The Senate Committee on Health, Education, Labor, and Pensions late yesterday approved, 16-7, a variation on Kennedy's proposal sponsored by Sens. Mike Enzi, Orrin Hatch, and Kay Hagan. The bill grants new biologics exclusive marketing rights for 12 years. The committee rejected, 5-17 *, an alternative sponsored by Sen. Sherrod Brown that granted new biologics seven years' exclusive marketing rights, the compromise favored by the Obama administration.]
Corrections, July 14, 2009: This column erroneously stated that Amgen is headquartered in Massachusetts. Amgen is headquartered in Thousand Oaks, Calif. ( Return to the corrected sentence.)
This update originally misstated the committee vote as 5-7. ( Return to the corrected sentence.)
Timothy Noah is a former Slate staffer. His book about income inequality is The Great Divergence.
Photograph of Sen. Ted Kennedy by Chip Somodevilla/Getty Images.