The power of money, both in campaign contributions and in lobbying, made itself felt on two issues in the last few weeks as Congress “debated” providing prescription drugs under Medicare and putting some restraints on the use of stock options to mask their bottom line. In both instances success is measured more in terms of what Congress didn’t do than what it did do.
As the profits of pharmaceutical companies have soared in recent years so have the industry’s campaign contributions that stood at $26.4 million in 2000, more than eight times what they did in 1990. The industry spent more than $85 million to influence Congress in those years.
And for good reason: All of the proposals before Congress to include a prescription drug benefit in Medicare would invariably come with price controls, thus cutting into the profits of drug companies.
The lobbying expenses of just two drug companies serve as an example of the millions of dollars the industry has spent to preserve its profits that have averaged more than 18 percent of revenues for the last ten years.
So far during the 2002 election cycle, Pfizer has contributed $1.2 million to political parties and federal candidates – more than two-thirds of it going to Republicans. Pfizer is the drug industry’s second-biggest contributor so far this cycle. But Pharmacia is no slouch. The company ranks No. 4, contributing just under $1 million during 2001-02, mostly to Republicans.
The two companies have contributed a combined $11 million since 1989, with the bulk coming in the last two election cycles, when the industry has experienced not only soaring profits but soaring public outrage over increases in the cost of prescription drugs.
Although most of the contributions in the form of soft money went to the Republicans, money given directly to candidates was more or less evenly split. For example, House Minority Leader Richard Gephardt (D-Mo.) and Sen. Kit Bond (R-Mo.) were high on Pharmacia’s gift list. Montsanto, a subsidiary of Pharmacia, is based in Missouri.
Despite the Enrons, Worldcoms and Tycos, Congress brushed aside all efforts to tighten the rules on stock options and to make corporations show them as expenses in their filings with the Security and Exchange Commission.
Business interests laid out good money – $40 million in political contributions and lobbying costs in 2000 – to protect these options. After all there were hundreds of millions of dollars in the personal net worth of many high-technology executives from companies like Microsoft and Intel at stake.
Many of the defenders of stock options argue that they are now a benefit for ordinary workers and that entering them on balance sheets would hit rank-and-file workers.
But that’s a myth, as is the claim that drug companies need to charge high prices in order to defray the cost of research and development. The National Center for Employee Ownership estimates that at least 75 percent of all option value goes to very senior executives and only about 10 percent to non-management employees. These same estimates place the average value of stock options to a senior executive at $512,000 while the average value to hourly workers is $8,000.
Options for ordinary employees can work out to a new car, college tuition, a down payment on a house, a great vacation, and maybe even a more secure retirement. Options for executives can amount to enough money to fund a small nation. The option packages some executives have received would amount to tens of thousands of dollars per employee in their company.
As they say, “it costs money to buy a Congress, but you get what you pay for.” That certainly holds true when it comes to prescription drugs for seniors or accounting reform.
The author can be reached at fgab708@aol.com
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