Many are asking what will happen if Democrats take control of the House and Senate. While I’m not interested in taking sides, I think that the issue is certainly on everyone’s mind at the moment since it could effect how business is done after the elections. In the end, I think that the issues will effect things very much on a an industry-by- industry, and even a company-by-company, basis. Having said that, it’s clear that one industry with a particular interest in politics is the pharmaceutical industry.

Pharma companies and the pharmaceuticals industry association, PhRMA, have been among those funneling the most money into political campaigns this year. The pharmaceuticals/health products industry has pumped $14,794,226 into election campaigns so far in 2006. A lot of dough but far off the $29,445,451 spent in 2002 (Note: The Bipartisan Campaign Reform Act, enacted after the 2002 elections, bans the national political parties from raising soft money).

According to an analysis done by the New York Times last week, blue chip corporate action committees funneled 67 per cent of their funding to Republican candidates in the first nine months of this year, and 33 per cent to the Democrats. In the first 18 days of October, though, Democrats were getting 43 per cent of all contributions, the biggest last-minute shift from one party to another since 1994. One of the most significant shifts has been made by Pfizer, which until September was giving 67 per cent of its donations to the Republicans, but in October Democrats were in receipt of 59 per cent.

The Washington Times reports that the most visible confrontation between the parties is forming around the Democrats’ push to require the government to use its negotiating power to lower prescription-drug costs for Medicare patients. The 2003 Medicare law prohibits the government from negotiating with companies to lower the price of drugs for beneficiaries. Democrats hope to set up a single drug plan under Medicare that allows the government to negotiate prices. Democrats would then use the savings from lowered prices to close the coverage gap in the drug benefit. Sometimes referred to as the doughnut hole, annual coverage stops once drug costs reach $2,250. Coverage resumes when costs hit $5,100.

Republicans argue that prescription-drug plans are competing with each other to serve Medicare beneficiaries and thereby are lowering drug costs. Many say that price negotiations will not solve Medicare’s financial problems. A Washington Post editorial points out that while the federal health program for veterans uses its purchasing power to secure drugs at prices lower than the average obtained by the private insurers that administer the Medicare benefit, it is not a fair comparison. The veterans’ program keeps prices down partly by delivering three-quarters of its prescriptions by mail. In addition, having the government set drug prices could lead to yet more pharmaceutical lobbyists and campaign spending making the problem of campaign influence worse, not better. Finally, under the current Medicare plan, retirees can choose to pay more for branded medicines or premium services or they choose to save money through lower benefits. Many argue that the current plan hasn’t had enough time to shake out.

Is gridlock the answer?

In the end, no party is going to end up with any strong majority so don’t look for big changes. Besides, many point out that what Wall Street really wants is gridlock. What Wall Street wants is stability and stability and gridlock are synonymous right now. A congress that is constained from acting may be good for everyone.

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