Henry Waxman spent four decades in Congress relentlessly going after drug companies for what he charged was their profit-padding.
The California Democrat left Capitol Hill in 2015, but he hasn’t given up battling big pharma.
Waxman is now working as a lobbyist for hospitals and medical clinics to protect a drug discount program, known as 340B, that he helped create 24 years ago. He is urging federal regulators to resist calls by the drug industry’s leading trade group to put new restrictions on the program, which was designed to help hospitals better treat poor patients by requiring drug makers to offer medicines at a steep discount.
“We’re doing everything we can for [hospitals], from messaging to traditional public relations and advocacy,” he said. “I am willing to advocate for clients whose causes I support, and I definitely support the cause of the 340B program.”
The fight over the program is the latest showdown in Washington over how to control drug prices and it comes as the pharmaceutical industry is under increasing political pressure following a recent controversy over the rising cost of the allergy auto-injector EpiPen, which is made by Mylan.
Hospitals and the drug industry have been battling over the future of the program for more than a year, but the intensity is picking up on both sides as federal regulators are expected to finalize as soon as the end of the year new guidelines, backed by the drug industry, that would limit patient eligibility for the discounted drugs.
“Here we find ourselves in a time of enormously high prices,” said Ted Slafsky, president of 340B Health, a group of hospitals lobbying to protect the program. “And this is one of the few programs that exist to help moderate drug pricing.”
The growth of the program in recent years also has made it a higher priority for the drug industry, which argues that it has expanded beyond its original intent of serving the poor and has become a profit generator for hospitals.
The program “has never before been as big a deal to pharmaceutical manufacturers’ bottom line than it is today,” said John Shakow, a lawyer who represents drug manufacturers. “The program is growing much faster than anyone thought it would. The discounted prices that have to be extended to [hospitals] have become greater and greater to the point where senior executives at pharmaceutical companies are paying attention to that part of the bottom line, to see how much of it was taken out by 340B.”
For Waxman, this latest battle with drug companies is a chance to preserve a part of his legislative legacy from his new perch on K Street.
He wrote the 1992 legislation that created the program and supported a measure in 2010 in the Affordable Care Act that expanded it by allowing rural hospitals to participate. He was hired last year by 340B Health, a coalition of 1,200 nonprofit hospitals that participate in 340B, to lobby in support of the program and has earned about $100,000 in fees for the work, according to lobbying records.
Waxman, first elected in 1974, was a formidable and forceful advocate for liberal causes during his time in Congress, where he was known both for the legislation he helped pass, including ACA as chairman of the Energy and Commerce Committee, and for the investigations he helped lead as the top Democrat on the House Oversight panel, including into drug companies, tobacco executives, Wall Street and the use of steroids in professional sports.
He is now chairman of Waxman Strategies, a lobbying and communications firm founded by his son Michael, and his paid client list mirrors his causes in office.
Among the groups he’s working for are the American Association for Justice, the Democratic-aligned trial lawyers’ group, the California Association of Public Hospitals and Health Systems, and the National Association of Community Health Centers.
“Now that I’m out of Congress, we’re representing clients that we believe in,” he said.
That approach has led him to his latest dust-up with the pharmaceutical industry.
The 340B program allows hospitals that serve a large proportion of low-income patients to buy drugs — including cancer treatments and HIV medications — from manufacturers at a discount of 20 percent to 50 percent. Hospitals can then dispense the drugs to uninsured patients for free or at a discount and sell them at a higher price to insured patients.
The idea is the money hospitals make from the difference between the purchase price and the amount they are reimbursed by insurers can be invested in health programs and services for low-income patients. About a third of the nation’s hospitals and clinics, roughly 2,000, participate in the program.
The program has expanded over the past several years under the Affordable Care Act, which allowed more hospitals to participate. Hospitals and clinics purchased about $12 billion in discounted drugs through 340B in 2015 — nearly triple the $4.3 billion in 2009, according to the Health Resources and Services Administration (HRSA), which oversees the program. That amounts to about 2 percent of the overall U.S. drug market.
HRSA, a unit of the U.S. Department of Health and Human Services, submitted proposed guidelines — which include drug industry-backed new limits on patient eligibility — to the Office of Management and Budget earlier this year. OMB is reviewing the proposals and final guidelines could be issued by the end of the year.
While Republicans in Congress have shown some interest in legislation that would scale back the program, the issue hasn’t progressed far in the relevant committees and most of the lobbying efforts have been targeted at regulators.
PhRMA is backing AIR 340B, a coalition that includes drug companies and health groups pushing regulators to limit who can take part in the program. The coalition has commissioned several studies highlighting gaps in accountability in the program and shortcomings in how hospitals are using the resources they devote to poor patients. The coalition has tapped Venn Strategies, the lobby and public relations firm, to aid in the effort.
PhRMA says stricter guidelines are needed because there is not enough oversight to ensure hospitals are not abusing the program. They say hospitals that buy discounted drugs are not devoting enough resources to treating uninsured and vulnerable patients.
“Reforming the 340B program is needed to ensure the program is sustainable for the future and benefits uninsured or vulnerable patients as it was originally intended,” a PhRMA spokeswoman said.
Meanwhile, Waxman and hospital advocates are urging regulators to consider how the restrictions would hurt patients and safety-net hospitals while arguing the pharmaceutical industry is merely trying to preserve its own profits by scaling back the program.
Waxman said he spoke with administration officials as recently as two weeks ago.
“As one of the authors of the program, we knew we would give less money to the drug companies, we just thought drug companies ought to charge less for drugs to hospitals for low-income patients,” Waxman said.
While the two sides jockey to influence regulators’ final decision, the industry is pointing to findings by the Government Accountability Office, the independent investigative arm of Congress, as evidence that it has a solid public policy case to make and is not simply trying boost its profits.
In 2011, the GAO issued a report saying that federal oversight of the program was “insufficient” because it relied mostly on self-policing by hospitals and drug companies to make sure they were properly using the savings generated from the discounts. Since then, HRSA initiated a number of audits on hospitals, resulting in some treatment sites being kicked out of the program, and some hospitals acknowledging they’d received discounts for ineligible drugs.
Waxman argues that regulators need to keep patients in mind as they make their final decision.
“The 340B program is one of the few programs where we get lower prices for drugs for some of the neediest people,” he said. “So if we didn’t have the 340B program, there’s a lot of people who wouldn’t be able to afford their drugs.”
Correction: A previous version of this story incorrectly stated the year that HRSA submitted guidelines to OMB. It was 2016, not 2015.