Drug companies' PAC gives big after Schwarzenegger's vetoes

By TOM CHORNEAU,
Associated Press Writer
Friday, March 11, 2005

For more than a decade, a trade group representing the nation's biggest drug companies was content to sit on the sidelines of California's legislative races.

But after Gov. Arnold Schwarzenegger vetoed four bills in September that would have made it easier for Californians to buy cheaper prescription drugs from Canada, the Pharmaceutical Research and Manufacturers of America Alliance quickly emerged as one of California's major players and one of the governor's key supporters.

The PhRMA group jumped into state legislative races late in the 2004 campaign — only two weeks after Schwarzenegger's Sept. 29 veto of the industry-opposed bills. It raised nearly $360,000 from its members for distribution largely to Republican candidates backed by the governor.

Since then, the alliance has adopted the governor's plan to encourage manufacturers to give price breaks on prescription drugs. The group, which includes such companies as Bristol-Myers Squibb, Abbott Labs and Pfizer, is working to qualify Schwarzenegger's "California Rx" proposal as a ballot initiative.

And drug makers have poured nearly $7.7 million into a political committee supporting California Rx and two other ballot measures pushed by Republican groups — one to prevent unions from using member dues for some political activity; and one to limit jury trial awards.

A Washington, D.C., fund-raiser for the governor this week was co-hosted by the organization's top federal lobbyist.

PhRMA's sudden turn raises new questions about the governor's vetoes, said Richard Hasen, a professor of law at Loyola University in Los Angeles and an expert in California campaign finance law.

"This is one of those classic cases where there's no way to tell whether the money followed the votes or the votes followed the money," Hasen said. "It is plausible to argue that these contributions are coming because the donors wanted to support politics already determined by the governor. But it is natural for skeptics to raise questions about the connections."

Merrill Jacobs, the PhRMA representative in Sacramento, said the group got involved because consumer groups and other opponents were "trying to put us out of business."

Any implications of a quid pro quo between the governor and PhRMA are "absurd and baseless," said Rob Stutzman, Schwarzenegger's director of communications.

The governor's veto message called the Canadian drug proposals flawed solutions that conflicted with federal free trade rules, and Stutzman said that was Schwarzenegger's only reason to reject the bills.

PhRMA's role in the November election came through donations to a variety of third parties that then funneled the PhRMA money to the candidates. Jacobs said PhRMA has never contributed directly to candidates.

Records show that drug companies gave nearly $300,000 to the PhRMA PAC during a one-week period ending Oct. 14 for use in legislative races. Records show the PAC then distributed $249,500 on Oct. 18 and 19 to Republican candidates through a series of intermediaries, including four county Republican central committees, the California Chamber of Commerce and two other business-oriented PACs.

PhRMA PAC gave $49,500 on Oct. 19 to the California Business and Affordable Housing Council, which used it to pay for then-Assemblyman Abel Maldonado's campaign for the state Senate, campaign finance records show. Another $75,000 went to the chamber's Jobs PAC, which used it to pay for advertisements attacking Democratic Assembly candidate Mike Gordon of El Segundo.

Maldonado, a Republican from Santa Maria, won his race, as did Gordon.

Records show that PhRMA PAC money went to aid seven Republicans supported by the governor — Assembly candidates Dean Gardner of Bakersfield; Shirley Horton of Bonita, who was seeking a second term in the Assembly; Paul Betancourt of Fresno; Greg Hill of Redondo Beach, Gordon's opponent; Nellie McGarry of Merced; and Senate candidates Maldonado and Gary Podesto of Stockton.

One Democrat who was not supported by the governor, Assemblywoman Barbara Matthews of Tracy, got $25,000 from PhRMA.

Matthews, Horton and Maldonado won, while the other Republicans lost.

Jacobs said PhRMA knew the money given to intermediary groups would "benefit business-oriented candidates" but didn't know which candidates. He also denied that PhRMA's increased political activity had anything to do with Schwarzenegger's vetoes. "There was something like 30 bills dropped on our heads — it was a wake-up call."

Still, it was after the legislative session had ended and while the governor had the Canadian bills on his desk that PhRMA began raising money. Jacobs said the group organized its fund-raising unit in the spring but member companies did not begin writing checks until after the governor's veto.

The governor's California Rx plan, which calls on manufacturers to voluntarily provide prescription drug discounts to the uninsured, came about during the closing days of the legislative session as Schwarzenegger faced growing pressure on whether to sign or reject the pending drug bills.

PhRMA had regular and ongoing contact with the administration about the proposed alternative drug plan while the Canadian bills sat on Schwarzenegger's desk, according to lobbying records and interviews. Jacobs said he attended one meeting with Kim Belshe, Schwarzenegger's health and human services secretary, in which she outlined what would become the California Rx program and called on the drug companies to support it.

In January, Schwarzenegger backed a bill that would create California Rx, although there's been little action to pass it. Last month, PhRMA created its fund to get an initiative identical to the bill on the ballot this fall. So far it has raised $7.7 million.

Stutzman said the governor has not taken a position on California Rx and still supports getting the bill through the Legislature.