John Castellani – PhRMA’s Top Man in Washington

CQ Press First Street

The pharmaceutical and health products industry has been the top spender on lobbying so far in 2012, doling out nearly $70 million in the first quarter, according to the Center for Responsive Politics. The drug industry’s efforts have focused primarily on protecting existing provisions of Medicare Part D that subsidize prescription drug costs, but also on continued legislative efforts toward price control, implementation of the 2010 health care law, and prevention of prescription drug shortages.

Leading that lobbying effort is the industry’s trade association, the Pharmaceutical Research and Manufacturers Association (PhRMA), whose members include some of the top drugmakers in the country and worldwide, such as Merck & Co. Inc., Pfizer Inc. and Abbott. As president and CEO of PhRMA, John Castellani has among the toughest tasks in the health care debate of balancing relationships with both the Democratic administration and the Republican House. It’s a task all lobbyists in Washington face, but his job has become ever more delicate as the Supreme Court weighs in on the health care law he helped negotiate in his former role at the Business Roundtable, and for which his predecessor Billy Tauzin cut a major, controversial deal with the Obama White House that upset many in the GOP. Also, regardless of the Supreme Court ruling, it is widely expected the law will face further congressional revisions in the next session of Congress, and Castellani faces many Democrats’ continued desire to target rising drug costs in the effort to rein in the country’s increasing health care costs. Furthermore, Castellani is working with the Food and Drug Administration on issues such as user fees which finance drug approval, and dealing with Medicare and Medicaid, under which an estimated one-third of Americans are insured. Finally, he has to work to satisfy industry investors who question whether the billions spent on research and development are leading to enough new products that will ensure them high returns.

Castellani, who joined PhRMA in August 2010, has given few interviews\. But he has been speaking on panels and roundtables (including a health care policy roundtable hosted by Republican presidential candidate Mitt Romney earlier this year), highlighting the progress of the industry’s research and development. PhRMA and its members also have used social media like Facebook and Twitter as well as their website to further their message and to present the industry’s position in the health care debate.

Asked how he and the industry try to balance competing pressures from both sides of the aisle and in all sectors of the government, he responded in an e-mail: “Our members operate in constantly evolving economic, scientific and regulatory environments … We support public policies that help advance patient care, increase the availability of medicines and encourage medical innovation.” And he said they seek support from both sides of the aisle for such policies.

But Castellani has maintained the drug industry can’t be the short-term answer to the nation’s economic woes without sacrificing patients’ long-term health. At PhRMA’s annual meeting in Boston last month, he criticized a “one-dimensional focus on cost” that considers neither the lives extended, improved and saved nor the investment in the economy through the millions of people employed directly and indirectly by PhRMA members: “How dare they focus on the short-term budgetary gain at the expense of long-term societal health, productivity and savings?” He expanded on that theme in his e-mail to FirstStreet: “I must stress the crucial role medicine plays in not only healthier, longer lives, but in controlling health care costs. Despite their small share of health costs – relative to other health services – medicines are yielding major health advances.”

Lobbying Efforts

PhRMA has spent more than $5.3 million so far this year on lobbying, exceeding the amount it spent in any one quarter last year (PhRMA’s total lobbying expenditures for 2011 was $18.79 million). It has focused not only on proposals for implementation of the 2010 health care law, budget proposals, and price control plans, but also on numerous other legislation in Congress, including the Drug Safety Enhancement Act of 2011; the Online Pharmacy Safety Act; the Stop Online Piracy Act; an amendment to the Federal Food, Drug and Cosmetic Act to bar marketing of generic drugs; a bill to provide incentives for antibiotics; legislation aimed at curbing prescription drug shortages; regulation of medical gases; and comparative effectiveness policies. PhRMA reports 320 clients and 1,209 lobbyists working on such issues, including 652 “revolving-door lobbyists such as:

  • Mike Anway, a former legislative assistant to former Sen. Sam Brownback, R-Kan. who served on the committees on Appropriations and Commerce, Science and Transportation.
  • Gregory Gierer, former staffer for former Sen. Chris Dodd, D-Conn. who served on the committee on Health, Education, Labor and Pension.
  • Colleen Maloney, former legislative director to Rep. Eric Cantor, R-Va., now House majority leader.
  • Cara Moon, former legislative director for Rep. Marsha Blackburn, R-Tenn. who was a member of the Health and Financial Services committees.

Sen. Chuck Grassley, R-Iowa, a former chairman of the Senate Finance Committee, once told USA Today: “You can hardly swing a cat by the tail in [Washington, D.C.] without hitting a pharmaceutical lobbyist.”

But Castellani is not a revolving-door lobbyist. Named one of the 100 most influential people in corporate governance by Directorship Magazine in 2007, Castellani came to PhRMA with nearly 30 years of experience in government affairs. After graduating from Union College in Schenectady, New York with a degree in biology, Castellani found his first job with General Electric as an environmental scientist in 1972. He later worked in government relations for the National Association of Manufacturers, moving on to become vice president for government relations in Washington at TRW Inc., a Cleveland-based defense contractor, and in 1992 became executive vice president of Tenneco Inc. In 2001, he was tapped to be president of the Business Roundtable.

With the Business Roundtable, he worked closely with the George W. Bush White House and lobbied hard on the Central American Free Trade Agreement as well as legislation aimed at reforming Social Security into a system of private accounts. While there he was careful to keep the Roundtable out of such contentious disputes as the confirmation of federal judges and cutting estate taxes. Castellani then helped lead the Roundtable’s negotiations with the Obama White House on provisions of the 2010 health care law even while evading a strong public stance on the issue — leaving that public wrangling to the U.S. Chamber of Commerce and the National Federal of Independent Businesses.

Castellani came to PhRMA with many accolades for both his business acumen and his good relationship with members of both parties. He was considered the ideal candidate to repair the group’s relationship with Republicans after Tauzin, the former Republican Louisiana congressman who had led the group for five years, helped close a deal with the White House on the 2010 health care law.

Under that deal, the insurance expansion would be funded in part through taxes and product discounts the industry offered to the White House — estimates ranged from $80 billion to $100 billion — enabling the newly insured to buy the industry’s drugs under the new coverage.

It was a win for drug companies, as it was estimated to gain more than 30 million more customers from the newly insured, according to The New York Times. The industry also evaded price controls in Medicare and again avoided moves to allow the import of cheaper drugs from Canada — both fights it had faced for decades. But Republicans — who opposed the law across the board — were irate that the drug industry supported it.

Both Sides of the Aisle

Shortly after taking over PhRMA, Castellani insisted he would reach out to both Republicans and Democrats, even while maintaining support for the law. “My style and PhRMA’s style will be to be politically relevant, not to be partisan, so we’re not a rubber stamp for either of the political parties,” he said.

In an interview with Executive Leaders Radio, broadcast by the Fairfax, Va., Chamber of Commerce in September 2011, he said he had learned from his father at an early age to try to understand people and what motivates them, and “to see things from their perspective.” That same year he was awarded the Bryce Harlow Foundation business-government relations award for his ability to work with both sides of the aisle.

Castellani told FirstStreet that PhRMA has sought bipartisan solutions to the drug industry’s concerns, pointing to bipartisan support for reauthorization of the Prescription Drug User Fee Act, the Best Pharmaceuticals for Children Act, and the Pediatric Research Equity Act. And the group has reached out to both sides of the aisle to oppose proposed rebates under the Medicare Part D that he said would weaken the program. “It’s about advancing the right policies and programs that work for patients,” he stated.

But there are more difficult battles ahead with both Democrats and Republicans. The Supreme Court’s ruling on the constitutionality of the individual mandate in the health care law is pending. If that provision is overturned, fewer Americans would buy health insurance and drug companies would face less demand. Meanwhile, Republicans on the House Energy and Commerce Committee are probing into the drug industry’s deal with the White House on the health care law. According to Bloomberg, PhRMA has not cooperated with the investigation, forcing the panel to reach out directly to drug companies, including Pfizer, Merck, Amgen, Abbott and AstraZeneca Plc.

Moreover, President Obama’s fiscal 2013 budget proposed cutting $156 billion over a decade from Medicare and Medicaid spending on industry’s drugs, primarily by speeding availability of certain generic drugs and improved management of higher prescribers and users. His proposal also would increase the power of the Independent Payment Advisory Board, which already is tasked with devising cost-cutting measures.

Castellani hasn’t hesitated to take aim at Obama’s 2013 budget proposal, just as he did with the president’s deficit-cutting proposal in 2011. But for the most part, he has avoided harsh rhetoric, having said early on he would avoid the tactics of the Tea Party coalition; he told Bloomberg Businessweek in October 2010 that the coalition’s “kind of extremism makes it much harder to plan from a business perspective.”

Campaign Donations

But, as happens in lobbying, Castellani and PhRMA have kept a close eye on who holds what power in Washington. According to Bloomberg News, about 54 percent of the pharmaceutical industry’s campaign donations in the first quarter of 2012 went to Republicans, down from a 74 percent share in 2002. About 56 percent of the industry’s PAC donations so far during the 2012 election cycle have gone to Republicans, and 44 percent to Democrats, according to the Center for Responsive Politics.

That matches the split for PhRMA PAC. In 2010, PhRMA PAC contributed 73 percent of its cash to Democrats and 26 percent to Republicans.

Castellani himself has contributed $23,000 to political candidates during this election campaign, and $20,000 of that has been directed to Republicans, including to Cantor, Romney, and Senate Republican leader Mitch McConnell of Kentucky.

As he stated in the Executive Leaders Radio interview, the challenge he faces in his role leading PhRMA is that the “industry stands at a crossroads of what it’s future will be.” He explained that what is happening in government and politics will define the industry in the future

Written by Christina L. Lyons, copyright 2012 CQ Press, an Imprint of SAGE Publications, Inc.