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Drug lobby said to eye member cuts amid price scrutiny

May 8, 2017
  • Changes in U.S. lobby group’s rules would oust smaller members
  • PhRMA board said to vote on membership changes on Tuesday

The pharmaceutical industry’s Washington lobbying group will likely adopt new membership rules this week that will oust many smaller companies that don’t spend heavily on research, people familiar with the matter said, amid increasing scrutiny of prescription drug prices.

The lobby group, Pharmaceutical Research and Manufacturers of America, or PhRMA, is proposing that to remain a member, companies will have to spend $200 million a year on research and development, based on a three-year average. They’ll also have to have to show that their research spending amounts to at least 10 percent of their global sales, according to the people, who asked not to be identified because the matter is still private.

PhRMA’s membership includes industry giants such as Eli Lilly & Co. and Pfizer Inc., as well as smaller companies that don’t have the same research pedigree. The thresholds are a high bar for some companies whose businesses have focused more on buying older drugs and raising their prices, and for smaller companies that don’t yet have drugs on the market.

The review began earlier this year after one of PhRMA’s then members, Marathon Pharmaceuticals LLC, said it would charge $89,000 a year for a drug that was being imported from overseas for about $1,000. The company had done limited new research to get the drug approved in the U.S. The drug is used to treat a rare and deadly pediatric condition.

Marathon Out

Soon after Marathon announced the price for its drug, Steve Ubl, chief executive officer of PhRMA, said Marathon’s “recent actions are not consistent with the mission of our organization.” Marathon left PhRMA last month ahead of the review, which the lobbying group’s board is scheduled to vote on Tuesday, according to the people familiar with the matter. The changes would be immediate, according to a third person familiar with the matter.

Another proposal in the new rules gets rid of a tiered membership within the trade group, one of the people said. While many large drug companies are full members, smaller companies have been able to join as “research associates” for lower fees. This category would be eliminated under the new guidelines.

The changes come as the White House sends mixed messages about its plans to address drug prices. President Donald Trump’s administration has said he wants to loosen regulations on almost all industries, though he has also accused drugmakers of “getting away with murder” because of their pricing practices. He’s promised to take action to decrease drug costs.

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