Drug Litigation Newsroom

Lobbyist For The Drug Company Trade Group Pharmaceutical Research And Manufacturers To Help Set Those Policies

The drug-industry lobbyist who fought price controls joined the Health and Human Services Department and has helped drug companies avoid the limits.

Top aides in the Department of Health and Human Services provide analysis and advice to the president on key consumer issues, including prescription-drug policies. In doing so, they consider the needs of pharmaceutical companies seeking revenue for future research, and consumers struggling to afford increasingly costly medications.

In June 2001 Bush installed Ann- Marie Lynch, a lobbyist for the drug- company trade group Pharmaceutical Research and Manufacturers of America, to help set those policies.

As a lobbyist, Lynch fought congressional attempts to cap prices for drugs. Price controls, she argued, would hamper medical innovation.

Thirteen months after Lynch became deputy assistant secretary in the office of policy, her division issued a report that praised brand- name drugs. It warned that "government-controlled restrictions on the coverage of new drugs could put the future of medical innovation at risk and may retard advances in treatment."

Consumer advocates say that's nonsense. Other countries innovate despite price controls, said Gail Shearer, director of health policy analysis for Consumers Union, nonprofit publisher of Consumer Reports.

"They haven't taken as seriously their job of making medicines affordable to all Americans," Shearer said. "When you talk about the need for (drug) innovation, you have to put it in the context of, will people get the wonder drugs?"

Critics say the report influenced congressional debate over a Medicare drug policy that, among other things, banned government from using Medicare's buying power to cut drug prices. The legislation will mean an extra $139 billion in profit over eight years to drug companies, Boston University researchers said.

Republicans in Congress used arguments that came "directly out of Ann-Marie Lynch's mouth" and from the trade group she previously worked for, said Rep. Sherrod Brown of Ohio, lead Democrat on the Energy and Commerce Committee's health subcommittee.

Lynch declined to talk to a reporter. HHS spokesman Bill Pierce said the report was not intended to sway Congress. Provisions banning Medicare from negotiating drug prices date to 2000, he said.

Lynch also blocked the release of about a dozen completed research reports that challenge drug-company claims, three former employees said. Pierce said Lynch decides research topics and which reports are released.

One 2001 report, for example, criticizes Medicare plus Choice (now known as Medicare Advantage). Its findings suggested that running the Medicare prescription-drug benefit through private health companies - the method the administration ultimately chose - would be more expensive and would not serve rural areas well.

"Very few of (the private companies) manage to bring in the benefit cost effectively," said Mark Merlis, the private health policy consultant who wrote the report.

The former hospital lobbyist presided over an agency that helped a chain he once represented win a favorable settlement in a Medicare fraud case.

Thomas A. Scully represented the nation's for-profit hospitals as a lobbyist before being hired by the Bush administration in June 2001 to head the federal Centers for Medicare & Medicaid Services.

Eight months after Scully arrived at the Medicare and Medicaid agency, it moved to settle final claims involving HCA Inc., a hospital chain that was the biggest member of Scully's former employer, the Federation of American Hospitals. HCA Inc. faced allegations it fraudulently overbilled the government for Medicare cases.

Under the terms agreed to in June 2002 by Scully's agency, HCA would have settled for $250 million. Medicare fraud cases typically are ironed out with Justice Department participation, but Scully agreed to those terms on his own, said John R. Phillips, an attorney who represented whistle-blowers in the case.

"The $250 million was a total sellout by Scully, who totally negotiated it behind Justice's back," Phillips said.

It also was handled in a way that protected the company from a full review of its cost reports and the triple- damage civil fines that can be imposed in fraud cases, he said.

Sen. Charles Grassley, R-Iowa, asked Justice in October 2002 if that deal was "too lenient."

Justice delayed the settlement until June 2003.

HCA, the nation's biggest for-profit hospital company, eventually paid that $250 million, plus $631 million in civil penalties and damages and $17.5 million to states.

Scully's ethics agreement did not require him to officially avoid cases involving HCA. But Scully said he steered clear.

"I recused myself from everything involving HCA-specific issues or policy and was not involved in any way, shape or form," Scully said. "Every time anything came up (regarding) HCA, I left it to my deputies."

But Grassley in a June 25, 2002, letter to a Justice Department lawyer said comments by Scully "have given me great concern that there is an active, ongoing effort underway to change or modify enforcement (on Medicare fraud) policy that in my view could significantly undermine the (law)."

Scully has since left the administration for consulting jobs with a lobbying firm and an investment company that represent Medicare providers.