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Bill Daley's Big Pharma History: Drugs, Profits And Trade Deals

Bill Daley Pharma

First Posted: 09/28/11 02:11 PM ET Updated: 11/28/11 05:12 AM ET

This piece is a continuation of The Huffington Post's collaboration on trade issues with The Dylan Ratigan Show, called Trading Our Future.

WASHINGTON -- As commerce secretary under Bill Clinton, William Daley worked with U.S. pharmaceutical giants to curb the use of cheaper generic drugs abroad. As a board member for Abbott Laboratories, he had a front-row seat on a brutal clash between a major drug company and a developing nation over access to life-saving medication. And as White House chief of staff today, Daley has President Barack Obama’s ear.

Add up Daley’s power and experience, and experts who follow public health policy suspect his influence in the U.S. stance in negotiations over a major international trade deal -- a stance with hugely profitable implications for giant American drugmakers.

The United States is in talks with eight other Pacific nations to establish the Trans-Pacific Partnership, which the administration hopes will serve as a template for other trade pacts. According to leaked documents from the negotiations, the Obama administration is using the deal to push hard-line intellectual property standards that could drive up medicine prices overseas, boosting the bottom line for U.S. drugmakers like Abbott Labs at the expense of public health.

Public health advocates are worried. "If the point of the trade policy is not just to protect the interests of our companies, but the public health benefit and burden of research, then [the United States] is doing this all wrong," said James Love, director of Knowledge Ecology International, a nonprofit that focuses on how patent laws affect the poor.

A White House spokesman said only that the negotiations -- which are being conducted behind closed doors with input from corporate lobbyists -- are being "ably led" by the United States Trade Representative (USTR) and that Daley is "not directing or participating in those negotiations."

The USTR always has formal responsibility for negotiating trade deals -- that's the agency's primary purpose. But trade issues often involve much indirect lobbying and policy-making through informal channels. When the Chinese search engine Baidu wanted to be removed from the USTR's "notorious markets" list, the company hired lobbyists to work the Office of Management and Budget, for example.

Daley, who previously lobbied for JPMorgan Chase, is a prominent examplar of a bipartisan phenomenon in American government in which corporate insiders, and the profit-driven perspective of the boardroom, have come to dominate formal and informal debate over public policy.

And key players don’t think he’s out of the loop this time. Earlier this year, both the U.S. Chamber of Commerce -- the top lobbying group for large American corporations -- and Senate Majority Leader Harry Reid (D-Nev.) wrote directly to Daley, urging him to secure strict intellectual property terms in Trans-Pacific Partnership deals. The White House declined to comment on Daley's response to those letters.

ABBOTT'S HARSH LINE

The U.S. has made several efforts to expand the cadre of countries participating in the Trans-Pacific talks, including multiple overtures to Thailand. So far, Thailand has chosen not to join.

It has good reason to be wary. In 2007, the country found itself in a vitriolic feud with Abbott Laboratories, on whose board Daley then served, over a key HIV treatment known as Kaletra.

The primary driver of drug prices is often not direct research costs or production expenses. Kaletra costs more than $10,000 a year for a patient living in the United States, a price that is reflective of the highly protective American patent system. The U.S. is the only country that grants long-term monopolies on life-saving medicine without regulating the price of monopolized drugs.

"Drugs are cheap to produce. Economic theory says that they should be cheap for the people who need them," said economist Dean Baker, co-director of the Center for Economic and Policy Research. "We can find better mechanisms to finance research than patent monopolies, which give incentives for secrecy, deception and outright fraud."

In countries that negotiate with companies on drug prices, the cost of medicine is often far lower. But though American pharmaceutical companies do supply drugs to developing nations at rates below those charged in the U.S., those discounted prices are still too high for many poor or hard-hit nations to afford.

"In many developing countries, it's a death sentence," said Nobel Prize-winning economist Joseph Stiglitz, referring to high drug prices.

In 2007 negotiations with the Thai government, Abbott Labs wouldn't budge below a price of $2,200 per person, per year for Kaletra. At the time, Thailand was classified as a "lower-middle income" country by the World Bank -- the second lowest of four categories. With more than a half-million citizens living with HIV, Thailand considered that price beyond its budgetary capacity. So it declared a public health emergency and began importing a vastly cheaper generic version of Kaletra from India.

And then, by international trade standards, all hell broke loose.

"When countries declare the health emergency, they face a huge backlash, particularly from the USTR and the drug companies," said Tim Boyd, policy research coordinator with the AIDS Healthcare Foundation, a U.S. nonprofit dedicated to eradicating HIV.

Abbott responded by withdrawing pending applications to register drugs in Thailand, cutting its citizens off from other medications. The move was unprecedented: Never before had an American drug company attempted to punish a country during drug price negotiations by cutting off the supply of other medicines.

At the time, Brook Baker, a law professor at Northeastern University and a member of the board at the Health Global Access Project, called the move a "truly appalling example of corporate hubris" that "directly violates any conceivable norm of corporate responsibility."

This year, Abbott spokesman Dirk Van Eeten told The Huffington Post that the company firmly believes U.S.-style drug patents foster pharmaceutical innovation -- an argument disputed by many health care experts. Van Eeten also said that while Abbott pulled back a key HIV medication for adults from Thailand, it continued to provide that medication for children.

As for the USTR, it seemed to support the company, placing Thailand on its "Priority Watch List" of nations that do not respect U.S. intellectual property rights. "In late 2006 and early 2007, there were further indications of a weakening of respect for patents, as the Thai Government announced decisions to issue compulsory licenses for several patented pharmaceutical products," wrote the agency in its report announcing that Thailand had been added to the priority list.

Although the USTR blacklist is little known domestically, it is a major economic indicator abroad and can affect a country's ability to import everything from software to DVDs to automobiles. Thailand's new status as an international rogue sparked concern among the country's economic policy officials and corporate leaders. And 35 members of Congress wrote to the USTR to protest Thailand's blacklisting, noting, "The move is being interpreted in the public health community as a warning and a threat to other countries."

The man ultimately responsible for the USTR decision was Stanford McCoy, assistant U.S. trade representative for intellectual property and innovation. He continues to hold that job today, which includes serving as lead negotiator on all intellectual property terms in trade pacts, including the Trans-Pacific deal.

The American rebuke came despite the fact that Thailand was acting within its rights under World Trade Organization treaties. During the early years of the Clinton administration, the U.S. negotiated a host of intellectual property protections that now require every nation joining the WTO to grant 20-year patents on new drugs. But there is substantial flexibility over precisely which kind of medical innovation is patentable, and there are a variety of circumstances in which nations can allow production of a generic version of a patented drug, effectively overriding certain patent rights. (In intellectual property lingo, the latter process is called granting a "compulsory license.") During a public health emergency, government leeway is even broader.

The USTR says that strict patent rules help "incentivize" companies to develop new medicines, but there is little evidence to support the claim. Drug companies generally spend about twice as much money marketing their medicines as they do on research and development, and the cost of churning out the pills and vaccine doses themselves is usually negligible.

When the situation was finally resolved, the company agreed to a $1,000 price tag, less than half the price they initially stood behind, suggesting the company could get by on far less than the original $2,200 figure. Abbott's refusal to sell new medicine in Thailand -- and the USTR's blacklisting of the nation -- amounted to negotiating tactics to protect Abbott's revenues.

WHAT DALEY KNOWS

Abbott Labs declined to detail Daley's involvement in the Thailand episode, but as a member of the board, he should have been well informed about the strategy. And he had been embroiled in international disputes over HIV drug prices prior to the public- and private-sector fury over foreign Kaletra profits.

When Daley was commerce secretary in the later years of the Clinton administration, Brazil rankled U.S. drug companies by opting to provide its citizens with a generic version of another HIV drug. Like Thailand, Brazil declared a public health emergency in an effort to lower the cost of treating roughly a half-million HIV infections. The U.S. government responded by sending Daley to Brazil with executives from U.S. pharmaceutical giants Merck & Co. and Pfizer to try to pressure the Brazilian government into reversing its decision.

In a speech at Johns Hopkins University before leaving for Brazil, Daley encouraged students to enter the revolving door between big business and public policy-making. "Let me say this: As one of the only members of the president's Cabinet to come from business, it's good when you mix both government and business in your careers," he said. "It makes better public servants, and it makes better businesspeople."

It has certainly been good for Daley's career. His effort to twist arms in Brazil failed, but drug companies apparently took note. It was after leaving the Clinton administration that Daley was hired by Abbott, where he raked in more than $1.3 million as a board member from 2004 to 2010, according to Securities and Exchange Commission filings. Over the same period, he served on Boeing's board and was a top lobbyist for JPMorgan Chase.

And now Daley is an integral player in an administration advocating for an intellectual property system that would raise Abbott's profits still higher -- even as public health professionals from the AIDS Healthcare Foundation to Doctors Without Borders to Oxfam criticize that system as ruthless and inhumane.

"The idea that the patent system works well for pharmaceuticals is just wrong from every perspective except corporate profits," said Judit Rius Sanjuan, manager of Doctors Without Borders' Access to Essential Medicines campaign.

Daley's personal history with drug access is not unique among top-tier government officials with trade responsibilities. McCoy lobbied on intellectual property issues at the influential D.C. law firm Covington & Burling before moving to the USTR in 2006. His top deputy, Kira Alvarez, was a lobbyist for drugmaker Eli Lilly before joining the agency.

There is no evidence that any of these players, including Daley, have done anything illegal or explicitly corrupt during the Trans-Pacific trade negotiations. But public health doesn’t seem to be their first priority.

"The real concern is that the U.S. is using its international power and prestige to force poor countries to enforce our intellectual property standards, and the result of that is that access to medicine is denied and people are dying," said Joseph Stiglitz.

Earlier on HuffPost:

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This piece is a continuation of The Huffington Post's collaboration on trade issues with The Dylan Ratigan Show, called Trading Our Future. WASHINGTON -- As commerce secretary under Bill Clinton, W...
This piece is a continuation of The Huffington Post's collaboration on trade issues with The Dylan Ratigan Show, called Trading Our Future. WASHINGTON -- As commerce secretary under Bill Clinton, W...
 
 
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COMMUNITY PUNDITS
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ChasG 12:05 AM on 09/29/2011
I have complaints about the pricing policies of the pharmaceutical companies that make Americans pay more for identical drugs that can be purchased elsewhere. That's not twhat this article is about. This article boils down to a challenge against intellectual property rights because it means new medicines that are still under patent protection will cost more that generics, and poor people may not be able to  Read More...
HUFFPOST SUPER USER
dbrett480
09:35 PM on 10/01/2011
As much as the left likes to attack big pharma, many diseases have been eradicated and countless lives have been saved because of the pharmaceutical companies.
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HUFFPOST COMMUNITY MODERATOR
Cynth
[Your ad here.]
11:29 PM on 10/01/2011
While true, this isn't the point. Just because pharmceuticals save lives doesn't give them carte blanche, including influence on public health policy.
HUFFPOST SUPER USER
kamact
Market Observer
08:48 PM on 09/29/2011
Run him down and throw him in jail,...and shame on Obama
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PCMartin
Bullish on cat food and refrigerator boxes
07:07 PM on 09/29/2011
My apologies if one of the 3,130 previous comments already mentioned it, but I just wanted to say that the PBS Frontline documentary "Obama's Deal" -- about the secret deals Obama cut with for-profit health concerns, including Big Pharma, during the healthcare reform process -- is probably worth revisiting:

http://www.pbs.org/wgbh/pages/frontline/obamasdeal/
- OR -
http://goo.gl/nWG8G

The healthcare interests Obama has actually favored in office are awfully hard to reconcile with the position he espoused here, in front of an AFL-CIO audience:

http://www.youtube.com/watch?v=fpAyan1fXCE&NR=1
- OR -
http://goo.gl/cymBZ

(The CBO projects that the amount we spend on healthcare under "ObamaCare" will increase from 18% of GDP now to over 20% by 2019 -- roughly twice the First World average -- while leaving around 23 million completely uninsured and additional tens of millions underinsured with high-deductible, high-copay plans. So much for controlling costs and so much for universal coverage. But not to worry: the for-profit health sector will do better than ever.)
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HUFFPOST SUPER USER
The ORF in Largo
Louder than a fart a hurricane
06:35 PM on 09/29/2011
Big Pharma is a charter member of the Greedy Ole Profiteers club
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4eva
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03:10 PM on 09/29/2011
Crony Capitalism: $737 Million Green Jobs Loan Given to Nancy Pelosi's Brother-In-Law
http://www.weeklystandard.com/blogs/crony-capitalism-737-million-green-jobs-loan-given-nancy-pelosis-brother-law_594593.html

But wait... there's more! One of SolarReserve's other investment partners is Argonaut Private Equity:

Steve Mitchell and Argonaut Private Equity might have a chance to recoup some of their losses in the Solyndra debacle now that the Department of Energy has given a $737 million dollar loan guarantee to a company backed by Argonaut that also lists Mitchell among its board of directors.
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HUFFPOST SUPER USER
Jond0
no expectations no surrender
11:15 PM on 09/29/2011
As long as someone profits from it then it's all good... ;)
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HUFFPOST SUPER USER
AndyWright68
Freedom is inevitable!
01:23 PM on 09/29/2011
Government and corporations are the same entity. The corporations pay the government for protection and to squash any real competition. They are all just a bunch of richAsshoIes scratching each others backs while fleecing and abusing the people.
11:51 AM on 09/29/2011
I guess that's why FDA wants to ban vitamins and supplements. How much more of this nonesense are americans going to put up with.
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HUFFPOST SUPER USER
Jond0
no expectations no surrender
11:16 PM on 09/29/2011
I am always wondering the same thing -- maybe we can all band together and write a letter?
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HUFFPOST SUPER USER
Andrea Blackwell
Why watch the news? The truth's on Comedy Central!
02:27 AM on 09/30/2011
I hope not! After years of trial and error, I got nothing but side effects. Lyrica absolutely RUINED last Christmas.
The VA is treating me with only vitamins and supplements.

This one goes back to Reagan's deregulations free for all. I remember the debates and the conclusion was something stupid like, there will be no progress without monetary considerations. So, here we are, as predicted...cronies converged, called their old college buddies and said, "Hey, you wanna be a billionaire?" They exploited the loopholes, stocked up on body bags and greased each other into their fortunes.
FDA cranks out suicidal pharmaceuticals to make money on new and disastrous meds instead of having dedicated chemists who would actually would work towards cures instead of endless treatments. A good preventative plan with access to better healthcare would have greatly decreased the need and that's not good for capitalism.
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HUFFPOST SUPER USER
builderman55
Featherless Biped
11:31 AM on 09/29/2011
It just beggars the imagination that the Grand Ol' Plutocrat party has been able to portray Obama as a radical. He is, by all accounts a moderate Republican, knowing of course that in the current GOP that IS a radical/socialist/communist/Hitler...
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4eva
.-.. --- ...- . --..-- / -. --- - / .... .- - .
03:11 PM on 09/29/2011
He's a radical corporate socialist
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HUFFPOST SUPER USER
Jond0
no expectations no surrender
11:16 PM on 09/29/2011
Clinton was a moderate republican, Obama is a radical right wing republican!
10:50 AM on 09/29/2011
This is the entire problem with the Federal Government. It has been purchased by Corporate America and no longer represents or works for the good of the majority of the people. From the K-Street Lobbyists in Congress...to the Corporate Lackeys chosen to advise Presidents...to the Corporatist Supreme Court...it is all bought and paid for. Corporate Ownership of most media outlets insure propaganda will continue to support continuation of the two party system that can be controlled.
10:31 AM on 09/29/2011
No evidence that they did anything illegal. Of course not. It may be wrong but that's why they throw the big bucks at congress. To make it legal.
This user has chosen to opt out of the Badges program
AZreb
equal-opportunity Independent heathen
10:07 AM on 09/29/2011
Seems like the bad choices in the administration continue. We had Summers, we still have Geithner and now we have Immelt of GE as an economic advisor and Daley, friend of big pharma.

One can look at these choices and ask "Is this the best that our federal government can do?"

"The more things change, the more they stay the same" -
09:15 AM on 09/29/2011
I am going to agree with Obama on this one. . If other countries abuse our intellectual property rights the American Consumer pays.
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HUFFPOST SUPER USER
Jond0
no expectations no surrender
11:24 PM on 09/29/2011
No, American companies pay, and they lay us off to pay for their bonuses they deserve for being duped by the third world. Then they cry to the government for which they have so much derision and want to drown in the bathtub.
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HUFFPOST SUPER USER
P R R
08:59 AM on 09/29/2011
All these crooks in washington need to GO.
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HUFFPOST PUNDIT
lemmyk73
Foxy Shazam!
08:46 AM on 09/29/2011
Now do you obamacrats realize Obama used you all and has no intention of supporting any of you? He is a crook who is owned by big industry. Dump Obama already folks. Once you do, it is a very freeing experience.

I mean not only this but OBama just gave more grants to solar firms- and not a peep from the press about it.
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HUFFPOST SUPER USER
P R R
09:00 AM on 09/29/2011
Exactly. He says one thing then does another. Unfortunately for him, people are very gullible.
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HUFFPOST PUNDIT
den1953
Strange Days Indeed!
10:26 AM on 09/29/2011
Is that how you felt when Bush left Washington, because he left behind a whole host of Washington law makers that still believe in his policies? Especially those tax cutting job creators that are found of getting their pictures taken for publicity while hating on the President?
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HUFFPOST PUNDIT
lemmyk73
Foxy Shazam!
10:43 AM on 09/29/2011
I could not have been happier when Bush left office. I thought OBama was going to start doing things properly. Shame on me for believing that.

You do realize using Bush as a fall back to divert from OBama does not work anymore.
realitycheckga
I misplaced my rose colored glasses
08:45 AM on 09/29/2011
You mean there is deception, cronyism, and corruption in the Obama administration? I never would have guessed it given how transparent they have been!
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HUFFPOST PUNDIT
den1953
Strange Days Indeed!
11:56 AM on 09/29/2011
Oh Halliburton and Bectell, Blackwater seems to do ok even today, those talks Cheney had with his buddies in the Gulf on those oil platforms worked well for the Bush gang!
realitycheckga
I misplaced my rose colored glasses
01:18 PM on 09/29/2011
They all have connections like that. Difference is Obama has become "liar in chief" and everything he says he is he isn't....