Sunday, September 30, 2018

Pharma's Dark Money: Touting Corporate Responsibility and Non-Partisanship, But Using Dark Money to Promote Self-Serving Policies and Partisan Causes

Health Care Corporations Promote Their Social Responsibility

The US health care system's extreme dsyfnctionality is now a cliche.  So it's no wonder that everyone seems to want to make things better.  Big health care corporations in particular tout their socially responsible ideas for health care reform.

For example, PhRMA, the trade organization for drug and biotechnology firms, describes its mission thus:

PhRMA is committed to advancing public policies in the United States and around the world that support innovative medical research, yield progress for patients today and provide hope for the treatments and cures of tomorrow.

Amgen states simply its mission is "to serve patients."

Biogen published a "Corporate Citizenship Report" which included

our commitment [is] to positively impact our communities, to inspire the next generation of scientists, to solve social and environmental challenges and to create a diverse and inclusive workforce that thrives professionally and personally.

Giant pharmaceutical/ biotechnology/ device company Johnson & Johnson has its famous "credo" which starts with

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.


We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens – support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education.

With all that positivity supporting better health care, one would think that health care dysfunction should be soon gone. But maybe under all this talk about corporate responsibility lies something darker.

An Early Case of Dark Money in Health Care

Back in 2012 we discussed a case of "dark money" being used to conceal sources of support for particular health policy and political positions.  The case was of the Center for Protection of Patient Rights, an obscure group whose mission was to "protect the rights of patients to choose and use medical care providers."  The CPPR financed the US Health Freedom Coalition, led by Dr Eric Novack, which received nearly its entire budget — $1.7 million — from the center to help pass a state ballot measure that aimed to block President Obama's healthcare overhaul.  The Center ultimately transferred $55 million to Republican candidates in the 2010 election.  Its money came from the equally obscure Americans for Job Security, and was conveyed by groups such as the American Future Fund. The people who gave the money to the Americans for Job Security remained unknown, save for one wealthy Alaskan "landowner."  

Do Health Care Corporations Put Their Money Where Their Mouths Are?

This year, we discussed the case of huge pharmacy chain CVS,which proclaims its "social responsibility," and its policy of only making charitable contributions to improve "health and healthcare nationwide."  Yet CVS was donating to America First Policies, a supposed non-profit group devoted to promoting the partisan agenda of President Trump, including "repealing and replacing Obamacare," and immigration policies such as building the "wall" and deporting  "illegal immigrants."  America First Policies appears to be yet another dark money organization.  CVS only decided to stop contributing when journalists revealed that America First Policies staffer had made flagrantly racist and pro-Nazi comments.

This suggested that it is possible that health care corporations which promote themselves as socially responsible and non-partisan may actually be secretly promoting political agendas that might shock some of their consumers and/or patients, employees, and health care professionals who must deal with them. 

We have  now found some more cases that reinforce this suspicion, showing how pharmaceutical and biotechnology companies have funneled funds through more "dark money" organizations to support policies that do not fit so well with the image they want to convey.

The PhRMA Backed Dark Money Campaign Against an Ohio Initiative to Control Drug Pricing

In August, 2017, the International Business Times revealed how the pharmaceutical/ biotchnology industry had set out to defeat a 2017 Ohio initiative meant to hold down drug prices without revealing who was funding it.

PhRMA had already succesfully defeated a similar initiative in California in 2016.  However, industry support for this campaign, while obscure, was not a secret. 

PhRMA set up ... Californians Against the Misleading Rx Ballot Measure, which raised over $111 million for its campaign against a California initiative that ... would have blocked that state from paying higher drug prices than those negotiated by the Veterans Affairs Department. The trade group set up a political action committee in California to which pharma companies donated directly — so PhRMA had to disclose these donors. Merck, Pfizer and Johnson & Johnson gave over $9 million each; Amgen gave $7.6 million; and 19 other drug companies gave $1 million or more. The PhRMA-run committee spent nearly all of the millions it raised, and the measure failed to pass, with 53 percent of voters shooting it down. All donors except for Genentech and Gilead Sciences are PhRMA members, and only a handful of companies out of more than 30 total corporate donors are headquartered in California.

Somehow, with all the news coming out about the 2016 US elections, this generated little interest.  However, in Ohio in 2017, PhRMA was able to do something similar while keeping the corporate sources of the money hidden.  Their target was:

Issue 2, the Ohio Drug Price Relief Act — a citizen-initiated ballot measure designed to prevent state agencies, including the state Department of Medicaid, from purchasing drugs at rates any higher than the lowest amount paid by the federal Department of Veterans Affairs, which negotiates with drug companies and saves between 20 and 24 percent on drug costs.

This time:

Pharmaceutical Research and Manufacturers of America (PhRMA), the biggest trade organization in the U.S. representing major drug companies, created a political action committee on May 1 called Ohioans Against the Deceptive Rx Ballot Issue. On the same day, PhRMA also founded a limited liability corporation of the same name and registered at the same address; under normal circumstances, it would not be required to disclose its donors. Campaign finance reports document only one donor to the ballot measure committee: the linked LLC.

So contributions from corporate donors to the LLC to financeed the political action committee were concealed.  So,

'Certainly, setting up an LLC to launder drug company money into fighting the ballot measure looks like an effort to evade Ohio's transparency and disclosure laws,' Brendan Fischer, director of federal and Federal Election Commission reform at the nonpartisan Campaign Legal Center, told International Business Times in an email.


The Campaign Legal Center contends that hiding donors this way at the federal level violates the Federal Elections Campaign Act, which prohibits 'straw donors.'

There were only two flies in the ointment.  Two companies did disclose donations to the LLC:

According to the Columbus Dispatch, California-based Amgen gave $6.3 million from 2016 through June 2017, and Biogen, headquartered in Massachusetts, gave $1.5 million last year. This accounts for roughly half of the $15.8 million total that PhRMA’s LLC raised in just May and June to fight Issue 2.
Who donated the rest, amounting to some $58 million, remains unknown.  And the effort to defeat Issue 2 was succesful, as reported by in November, 2017.

Issue 2 also now holds the distinction of being the most expensive ballot issue in state history, with more than $74 million raised over the course of three years, topping the $64.4 million spent on Issue 6 in 2008, which sought permission for a casino in Wilmington, Ohio. Issue 6 also failed at the ballot.

Big Pharma accounted for more than $58 million of the total raised.


Because the drug companies passed the money through a limited liability company created with the intention of funneling cash to the opposition campaign, it's currently impossible to tell which companies actively spent money combating the initiative in Ohio.

A proponent of Issue 2 charged:

'The onslaught, the bombardment of television advertising that was misleading, lying and negative led to tremendous confusion,' he said.

Uncertainty from the public about the effects of the bill coupled with the ugliness of the campaign likely led to Issue 2's defeat. Voters were often confused and felt both sides were of zero help in explaining the issue.

And by August 25, 2018, the Columbus Dispatch reported that all legal compaints against the PhRMA dark money campaign were dismissed.

Think of the campaign to defeat Issue 2 as a proof of the concept that health care corporations can finance campaigns against policy measures using dark money organizations to hide their support.

But no one would be surprised to find out that pharmaceutical companies were against a policy measure that would restrict the prices they charge.  Our next case shows how the dark money ruse can be used by corporations to support partisan policies that conflict with their proclaimed social responsibility and non-partisan nature.  

The PhRMA Backed Dark Money Campaign to "Repeal and Replace" the Affordable Care Act (ACA)

Investigative journalism from Kaiser Health News appeared in the New York Times and the Washington Post in late July, 2018 showing how PhRMA again used dark money, but this time to advocate for "repealing and replacing" the Affordable Care Act (known informally as "Obamacare"), which PhRMA had previously supported, and about which it was then ostensibly neutral.  The article began,

In 2010, before the Affordable Care Act was passed by Congress, the pharmaceutical industry’s top lobbying group was a very public supporter of the measure. It even helped fund a multimillion-dollar TV ad campaign backing passage of the law.

But last year, when Republicans mounted an aggressive effort to repeal the law, the group made a point of staying outside the fray. 'We’ve not taken a position,' Stephen Ubl, head of the organization, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, said in an interview in March 2017.

This was deceptive.

That stance, however, was at odds with its financial support of another group, the American Action Network, which was heavily involved in the effort to repeal the act, often referred to as Obamacare. The network spent an estimated $10 million on an ad campaign designed to build voter support for its elimination.

'Urge him to repeal and replace the Affordable Care Act now,' one ad running in early 2017 advised viewers to tell their congressman. That and similar material (including robocalls) paid for by the American Action Network ran numerous times last year in 75 congressional districts.

PhRMA was one of AAN’s biggest donors the previous year, giving it $6.1 million, federal regulatory filings show. And PhRMA had a substantial interest in the outcome of the repeal efforts. Among other actions, the Republican-backed health bill would have eliminated a fee the companies pay the federal government, one estimated at $28 billion over a decade.

But there was no way the public could have known at the time about PhRMA’s support of the network or the identity of other deep-pocketed financiers behind the group.

The KHN report went on to explain how this works

Unlike groups receiving its funds, PhRMA and similar nonprofits must report the grants in their own Internal Revenue Service filings. But the disclosures don’t occur until months or sometimes more than a year after the donation.

The conservative-leaning AAN has become one of the most prominent nonprofits for routing what is known as dark money — difficult-to-trace funds behind TV ads, phone calls, grass-roots organizing and other investments used to influence politics. Such groups have thrived since the Supreme Court’s Citizens United decision in 2010, which loosened rules for corporate political spending, and amid what critics say is nonexistent policing of remaining rules by the I.R.S.

Generally speaking, dark-money groups are politically active organizations, often nonprofit, that, under I.R.S. regulations, are not required to disclose the identities of their donors.

Such groups are often chartered under Section 501(c)(4) of the tax law, which grants a tax exemption to 'social welfare organizations.' For those seeking to influence politics but stay in the background, 501(c)(4) designations offer two big advantages: tax exemption and no requirement to disclose donors.
The AAN seems to be an obviously partisan, right-wing, pro-Republican group.

PhRMA’s $6.1 million, unrestricted donation to AAN was its single-biggest grant in 2016, dwarfing its $130,000 contribution to the same group the year before. Closely associated with House Republicans — AAN has a former Republican senator and two former Republican House members on its board — the group backed the failed G.O.P. health bill intended to replace the Affordable Care Act. It also supported the successful Tax Cuts and Jobs Act of 2017, which reduced corporate taxes by hundreds of billions of dollars over a decade.

So far in this election cycle, AAN has given more than $19 million to the Congressional Leadership Fund, a Republican super PAC with which it shares an address and staff, according to the Center for Responsive Politics. The fund recently ran ads opposing Democratic candidates in high-profile special congressional elections in Georgia and Pennsylvania.

In fact, PhRMA made a variety of contributions to dark money groups associated with right-wing and/or Republican party backed causes, while it presumably maintained a non-partisan public stance.

PhRMA gave nearly $10 million in 2016 to politically active groups, including AAN, that do not have to disclose donors, its most recent filing with the I.R.S. shows. By contrast, PhRMA and its political action committee made only about $1 million in political donations in 2015 and 2016 that were disclosed to regulators and reported by the Center for Responsive Politics.

PhRMA’s 2016 political activities included support for the Republican National Convention. Rather than directly support the Cleveland convention, which several companies pulled out of after it became clear that Mr. Trump was going to be the nominee, PhRMA routed $150,000 through limited liability companies with names like Convention Services 2016 and Friends of the House 2016.

Like 501(c)(4)s, LLCs do not have to disclose their donors. PhRMA’s support was revealed in I.R.S. filings more than a year later. (Donations by PhRMA and other groups to Friends of the House, which financed a luxury lounge for convention dignitaries, were first reported by the Center for Public Integrity last fall.)

PhRMA’s surge in donations to AAN coincides with the arrival of Mr. Ubl, who took over as president and chief executive in 2015 and has longstanding ties to Norm Coleman, a former United States senator from Minnesota who is now the network’s chairman. Mr. Ubl once ran the lobby for manufacturers of knee implants, heart stents and other medical devices, one of which, Medtronic, is based in Minneapolis.


PhRMA’s 2016 dark-money contributions included $150,000 to Americans for Prosperity, a conservative group associated with the billionaires Charles and David Koch. Their group has already signaled it will be active in November’s elections, running attack ads against Senator Jon Tester, a vulnerable Montana Democrat, for not supporting a repeal of the Affordable Care Act.

PhRMA also gave $50,000 to Americans for Tax Reform, run by the conservative anti-tax activist Grover Norquist.

In contrast, PhRMA gave lesser amounts to groups identified as centrist or left-leaning.

Mostly smaller amounts went to centrist and liberal groups. Center Forward, which claims to seek bipartisan, common ground on drug policy and other issues, received $300,000 directly from PhRMA and another $179,000 from a PhRMA-backed group called the Campaign for Medical Discovery, according to tax filings.

And the groups to which they donated were also pursuing narrower issues that supported the industry's economic interests, not broadly partisan (and in this case, prro-Democratic) issues. For example,

Center Forward worked to preserve a tax credit for researching rare-disease medicines known as orphan drugs. PhRMA took a similar stance, encouraging Congress “to maintain incentives” for rare-disease drugs.

The KHN article noted that there is evidence that individaul pharmaceutical companies hide their political advocacy, possibly mainly their advocacy of right-wing and/or Republican backed causes, in similar ways.

Johnson & Johnson gave $35,000 that year to the Republican Main Street Partnership, a 501(c)(4) that describes itself as a coalition of lawmakers committed to 'conservative, pragmatic government,' the C.P.A. data shows.

But the center’s research also shows that many pharmaceutical companies don’t disclose donations made to 501(c)(4) organizations, nor are they legally required to do so.

Corporations 'could dump millions into one of these (c)(4)s and nobody would ever know where it came from,' said Steven Billet, a former AT&T lobbyist who teaches political action committee management at George Washington University.

Summary and Discussion

So in three cases, health care corporations, and/or their trade associations, made significant financial contributions to dark money organizations, thus avoiding reporting of such fund transfers.  In two cases, these fund transfers went to organizations with clearly partisan, right-wing, pro-Republican and/or pro-Trump agendas.  Yet the corporations and their trade association had publicly committed themselves to social responsibility, putting patients and health care ahead of all other concerns, and had never advertised themselves as partisan, explicitly politically conservative, and/or Republican.

This is a new dimension of stealth health policy advocacy or stealth lobbying.  Most of the previous, at least pre-2016 campaign, examples we had found of these involved corporations promoting measures that would improve their revenue (and consequently their top managements' pay).  They did not involve explicitly siding with a single political party or political philosophy.

Patients, consumers, health care professionals, and the public at large might not be pleased but would probably not be too suprised that health care corporations and their management pursue financial self-interest, but prefer doing so without much publicity.  However, I suspect most people would be unpleanatly shocked to find out that well-known health care corporations have been actively siding with a single political party and that party's ostensible political philosophy, but keeping that support very quiet.

Since such dark money support is by definition secret, who knows how many health care organizations have been doing this?

As an aside, I wonder if this hidden support from large corporations has pushed one political party to more extreme actions despite such actions' popular disfavor?  But that is for more politically attuned people to ponder.

In any case, as we have said again and again,...

There are myriad ways corporate and political insiders push health policy agendas because of self-interest, regardless of their effects on patients' and the public's health.  Health policy in the US has become an insiders' game.  Unless it is redirected to reflect patients' and the public's health, facilitated by the knowledge of unbiased clinical and policy experts rather than corporate public relations, expect our efforts at health care reform to just increase health care dysfunction. 

Physicians, public health advocates, whatever unbiased health policy experts remain must educate the public about how health policy has been turned into a corporate sandbox.  We must try to somehow activate the public to call for health care policy of the people, by the people, and for the people.

1 comment:

Kris Alman said...

Corporate give-aways do come with a price at all levels of governance.

Take a look at the NCSL (National Conference of State Legislatures) sponsors and their benefits.

This is dark money that comes with organizational heft. NCSL is one of the "Big Seven," a group of "nonpartisan, non-profit organizations" made up of United States state and local government officials.