“I think without a doubt that we have a problem with drug safety in this country,” Harkin said Thursday morning by phone. “Forty percent of our finished drugs come from overseas, mostly from China and India, and 80 percent of the ingredients that go into our drugs — both over the counter and prescription drugs — come from overseas. We just have an inadequate inspection system.”

The GAO found inspections of foreign drug manufacturers have improved since its similar 2007 report indicated only 8 percent of foreign establishments were subject to inspection. At the initial rate, the U.S. Food and Drug Administration would need 13 years to inspect all foreign facilities. The FDA’s inspection efforts in fiscal year 2009 represent a 27 percent increase in number of inspections it conducted previously. The GAO also notes that FDA officials understand that they remain far from achieving foreign drug inspection rates comparable to domestic inspection rates.

In addition, current types of inspections by the FDA do not generally include all parts of the drug supply chain, and holding such inspections abroad continues to pose unique challenges — including the authority to require such facilities to undergo FDA inspection.

For example, when tainted Haparin, a blood thinner often used in dialysis treatments, was distributed in the U.S. in 2007, leading to at least 81 deaths and numerous injuries, the problem was traced to a Chinese manufacturing facility that had never been inspected by the FDA. Although Herapin was made by an American company, the active ingredient had been sourced from the Chinese manufacturer, which had relied on other smaller suppliers. The tainted aspect of the drug, according to FDA reports, was likely added in China as a way to cut manufacturing costs.

And, according to FDA estimates, the number of drug products made outside of the U.S. has doubled from 2001 to 2008. In 2010, nearly 20 million shipments of food, drugs and cosmetics arrived at U.S. ports of entry — a decade earlier that number was closer to 6 million. According to the FDA, foreign facilities have grown by 185 percent, while inspection rates have decreased by nearly 57 percent.

In order to combat the existing problem and stem compounding problems that are sure to surface in future years, Harkin says the government needs to revamp old laws governing FDA inspection so that it is better equipped to secure a global supply chain — an effort very similar, he said, as to what Congress passed last year in relation to food safety.

Congressional Hearing

On Wednesday, Harkin and the full HELP Committee held hearings on government oversight of the drug supply chain, gathering testimony from FDA and GAO officials as well as advocacy groups and corporate interests.

Allan Coukell, director of medical programs for the Pew Health Group in Washington, D.C., lamented the fact that no one had yet been held accountable for the earlier incident involving the tainted Herapin.

“This incident represents a clear breach of the security of the U.S. pharmaceutical supply,” he said, adding that Congress has yet to act to update statues that govern drug manufacturing. “Numerous experts have asserted that, absent changes to the system, another such event is inevitable.

“In the case of Herapin, it appears that criminals deliberately introduced a substandard active ingredient into the supply chain. At other times, consumers may be at risk because of failures by manufacturers to comply with quality standards. Poor adherence to quality standards has been observed both in the U.S. and abroad, but the shift of manufacturing to low-cost environments with reduced oversight creates an increased risk. According to one estimate, ignoring Good Manufacturing Practices (GMPs) can save up to 25 percent of a factory’s operating costs. The expectation of inspections is an incentive for compliance with quality standards.”

In 2008, he noted, an Indian manufacturer was cited by the FDA for alleged falsification of stability testing records and use of active ingredients made at unapproved sites, according to a U.S. Department of Justice subpoena motion. And, in 2010, another Indian manufacturer was found to have falsified batch manufacturing records for an anti-platelet medicine. European Union inspectors discovered at least 70 batch-manufacturing records in the plant’s waste yard, all of which had been rewritten, and in some cases original entries changed.

In fact, Coukell added, in 2006, dozens of people in Panama died after taking cough medicine that had been made with diethylene glycol, a sweet-tasting poison solvent. It had been wrongly labeled in China and pass through a series of international brokers, who repeatedly re-labeled it, presumably without performing independent testing. Remarkably enough, it was a diethylene glycol poisoning in the U.S. in 1937 that prompted the government to enact the Federal Food, Drug and Cosmetic Act, which is the document that so many pharmaceutical experts and industry watchdogs now believe needs to be updated to reflect the circumstances of the 21st century.

Kendra Martello, assistant general counsel for Pharmaceutical Research and Manufacturers of America (PhRMA), which represents researched-based pharmaceutical and biotech companies, said her organization favors granting FDA discretion to set routine inspection intervals for foreign and domestic facilities according to risk and in lieu of the agency’s current rolling two-year schedule.

“We support providing FDA with the flexibility to prioritize inspections of foreign establishments based on the risks they present, and believe in relying on set criteria such as compliance history, time since last inspection, and volume and type of products produced, will enhance the FDA’s ability to target its inspection resources efficiently and effectively,” Martello told the lawmakers.

She also suggested that the FDA should recognize and utilize foreign inspection reports or those from accredited third parties to facilitate the often difficult task of oversight of those manufacturers.

“These inspections would not take the place of FDA inspections, which are a necessary and important part of the agency’s mandate; however, they would provide FDA with the flexibility to leverage the work of foreign regulatory bodies and maximize its resources, all without foreclosing its ability to inspect any facility.”

Deregulatory Climate

Amid national discussions on how to spur job creation and enhance the economy, calls for reviewing or eliminating government oversight and regulation of private industry have become common both in Iowa and throughout the nation as part of the 2012 Republican presidential nomination process.

In fact, while U.S. Sen. Mike Enzi, a Wyoming Republican and ranking member of the HELP Committee, noted the need for concessions in U.S. policies regarding the globalization of the pharmaceutical supply chain, he also added a caveat that such increased oversight shouldn’t hinder private industry.

“We want to make sure FDA has the tools it needs to ensure supply chain security,” Enzi said. “At the same time, I am concerned about FDA over-regulating in a way that threatens jobs and patient access to therapies.”

When Congress moves forward to address the problem, Harkin said he will push for strengthened FDA inspection authority for foreign products and facilities.

“We do need legislation and we are working on that. That’s what the hearing was about yesterday. Next year, when we turn to the reauthorization of the Prescription Drug User Fee Act, we’re going to have something in there about FDA’s authority and ability to ramp up inspections of important drugs and components,” he said.

Companies, he said, including pharmaceutical companies, have begun reaching out to lawmakers about increasing foreign inspections and oversight.

“They want this. Why? Because many of them who have sourced their goods in this country have been placed at a competitive disadvantage. They want a level playing field. If we are going to inspect here, then the drugs that come in should also be inspected,” Harkin explained.

“I think this is an area that cries out for some form of regulation and support for a leveling of the playing field. If there are Republicans that say they don’t want to regulate on this are they telling people that this is a just a case of buyer beware? When you give medicine to your kids, you don’t know if it is safe or not? Is that what they want to say?”

The GAO’s statement before the HELP Committee is embedded below:

FDA Faces Challenges Overseeing the Foreign Drug Manufacturing Supply Chain

Last week, British prescription drug manufacturer GW Pharmaceuticals announced a licensing agreement with drug giant Novartis, maker of Ritalin and Excedrin, to begin selling GW’s drug Sativex in markets across Asia, Africa, Oceania and the Middle East. The medication is already available in Britain, where it’s produced and marketed by Bayer, and in Canada and Spain. It’s on the market in those countries as a liquid that patients spray under the tongue and is prescribed primarily for sufferers of multiple sclerosis and cancer.

Sativex: Liquefied marijuana

If the name “Sativex” rings a distant bell, that’s because it’s derived from Cannabis sativa, the scientific name for the plant from which both hemp and marijuana are harvested. It’s an appropriate name because, unlike other cannabinoids produced for recreational and medicinal use (and plagued by side effects not present in natural cannabinoids), Sativex is not a synthetic concoction, but essentially liquefied marijuana. It’s an extract of whole-plant cannabis that includes the psychoactive agent THC as well as cannabidiol (CBD), the chemical thought to be responsible for some of the anti-nausea and cancer-cell-killing effects of medical marijuana.

While the official word from GW is that the THC and CBD balance each other out to provide marijuana’s medicinal effects without an accompanying high, cannabis expert and professor emeritus of psychiatry at Harvard Medical School Dr. Lester Grinspoon has said just upping the dosage would provide the same effects as recreational marijuana.

Early in Sativex’s development, GW hired Dr. Andrea Barthwell as a consultant to sing the drug’s praises, although she’s no longer in the employ of GM. Barthwell was a deputy drug czar under George W. Bush and is the former president of the American Society for Addiction Medicine (ASAM). In a recent ASAM press release, Barthwell denounced medical marijuana but — significantly — only because it was unregulated by the federal government.

“The safety and advisability of any prescriptive medicine should depend on years of careful scientific scrutiny, not whims at the ballot box by individuals who lack the qualifications to make such decisions. Allowing cannabis to circumvent FDA approval sets a dangerous precedent and puts us on a slippery slope,” Barthwell says in the release.

“There’s certainly an inconsistency in the fact that she speaks publicly about the negative impact of marijuana even though she’s been paid by a company that sells it,” says Steve Fox, chief lobbyist for the National Cannabis Industry Association (NCIA). “It would be one thing if she were representing the American Society Against Bronchitis and said, ‘I am so concerned that people are smoking a substance that’s not good for their bronchial tubes.’ But she’s speaking for the ASAM.”

Meanwhile, Sen. Richard Burr (R-N.C.), Congress’s top recipient of campaign funds from the pharmaceutical industry, has come out against state medical marijuana laws, despite being an advocate of states’ rights on issues like allowing offshore drilling. The likes of Barthwell and Burr have drawn the ire of supporters for the reform of marijuana laws who believe that they represent the pharmaceutical industry’s goal for medical marijuana: demonize it, prosecute it, shut it down, then grab the market.

(Neither Barthwell nor Burr was available to comment for this story at the time of publish.)

Certainly, such a fight would benefit from proclamations like Barthwell’s distinction between government-approved drugs derived from cannabis and unregulated cannabis itself, as well as the National Cancer Institute’s recognition (later qualified) of the medical benefits of marijuana. That could be exactly what GW is banking on as it works with companies to expand the availability of Sativex around the world. And the one major market left untapped by either Novartis or Bayer (GW’s partners in making and selling Sativex) is the United States. That’s where Otsuka Pharmaceutical comes in.

Otsuka, America’s potential Sativex supplier

Otsuka is an international prescription drug company based out of Japan. In 2007, GW and Otsuka announced that the latter company would be taking on clinical trials for Sativex in the U.S. In November of last year, Otsuka wrapped up its Phase II trials testing the drug’s efficacy and safety and met with the FDA to discuss the next step in getting the drug recognized by the federal agency. Phase III was then set to begin, though Otsuka’s website for the Phase III trials indicates that they’re still being set up.

Otsuka declined to comment to The American Independent on how close Sativex is to FDA approval or how far along the Phase III trials are, but Phase III is typically the final step in a drug’s path to pharmacies. Even getting to Phase III means the FDA has signed off on earlier test results and needs to see them confirmed in a large-scale study before advancing the drug. For its part, the FDA does not comment on ongoing clinical trials.

Pharmaceutical insiders would claim that Sativex is simply a regulated, tested cannabinoid that is demonstrably safe in ways that black-market and state-legal whole-plant medical marijuana isn’t. And yet by its very definition (PDF), Sativex is marijuana, albeit with a lower THC count in the recommended dose than is present in the raw plant.

Can pharmaceutical clout bring FDA approval?

So how are pharmaceutical companies looking to succeed where medical marijuana dispensaries are failing in getting marijuana recognized by the FDA without any federal agencies breathing down their necks? One answer could be in the clout the industry holds in Washington.

The pharmaceutical industry is far and away the biggest spender on federal lobbying. Between 1998 and 2010, Big Pharma spent more than $2 billion sending lobbyists to the capital to fight for industry-friendly legislation and regulations. This is over half a billion more than the amount spent in the same period by pharmaceuticals’ closest competitor, the insurance industry, and nearly twice what oil and gas companies spent. The medical marijuana lobby, less than six months old and consisting almost entirely of Steve Fox (backed by NCIA director Aaron Smith and a handful of dispensary owners and enthusiasts), could never compete.

All this puts the surging federal clampdown on medical marijuana in a new light. As nationwide support for medical marijuana reaches record levels, it may just be the pharmaceutical industry that rides that wave of support to huge profits.

In early August, an obscure measure called Proposition C — which prohibits the government from mandating the purchase of health insurance — passed overwhelmingly in a Missouri referendum and soon became national news. While seen by many legal scholars as a largely symbolic act of defiance, the new statute will likely lead to yet another legal showdown over the implementation of the Affordable Care Act and was seized upon by conservatives as a sign of growing disillusionment with the president’s agenda.

[Congress1] When the White House tried to downplay the measure as a “vote of no legal significance in the midst of heavy Republican primaries,” Sen. John Cornyn (R-Texas) used the response as further evidence that the Obama administration was out of touch with the American people. “This sheer arrogance and political tone deafness from the Obama White House is simply astounding,” the senator said in a statement. “Their disregard for the votes that were cast by 667,000 Missourians as ‘nothing’ is startling.”

But was Proposition C a spontaneous show of grassroots discontent or a carefully orchestrated political ploy? Clouding the picture is the close involvement of a group called the American Legislative Exchange Council (ALEC), a conservative 501(c)(3) nonprofit that brings together state legislators and representatives of major industries to craft “model legislation,” including an item called the Freedom of Choice in Health Care Act, upon which Proposition C was based. Missouri state Sen. Jane Cunningham, who sponsored the legislation to refer Proposition C to the ballot, serves as an ALEC board member, and state legislatures in Arizona and Oklahoma, which have referred similar bills to the ballot for November, also enjoyed the support of ALEC-affiliated state representatives.

“What ALEC does is they’ll get members to simply announce they’ll introduce the legislation and then claim they have a national grassroots movement of 40 states opposing health care reform,” said Charles Monaco of the Progressive States Network, which works on progressive legislation at the state level. “Industry groups saw early on that the mandate would be the place to hit comprehensive reform because it was one of the least popular aspects of the law to voters, even though it’s one of the provisions that will benefit [industry] the most.”

There are conflicting accounts of how the measure came to be introduced in 38 state legislatures, and enacted in six. One side will tell you that the health care industry — particularly the pharmaceutical companies that sit on ALEC’s Health and Human Services task force — is taking potshots at reform by manipulating state representatives; the other describes grassroots anger bubbling up to the attention of legislators. Both contain a measure of truth. Told together, they provide a window into how groups like ALEC, which are obliged by tax law to work for charitable — not private — purposes, nonetheless exercise influence on behalf of private industry over statehouses across the country.

The story of the Freedom of Choice in Health Care Act starts in Arizona, with a lone doctor who decided he’d look into health care reform “as a hobby” and never imagined his ideas would go so far.

*****

Dr. Eric Novack, an orthopedist from the Phoenix area, claims he was never too interested in politics until a number of state governments turned their attention to reforming the system around the middle of the last decade.

“We need health care reform, but seeing where the winds were blowing I felt we also needed some basic protections for patients and families to ensure that it’s kept out of the hands of politicians, their cronies who can lobby them and these so-called ‘experts,’” Novack said.

In 2006, he teamed up with Dr. Jeffrey Singer, a surgeon and expert at the conservative Goldwater Institute, to craft a state ballot proposition designed to preserve the right of patients to purchase health care directly (which did not appear to be threatened) and to prevent the state from mandating the purchase of health insurance (as then-governor Mitt Romney (R) had just done as part of Massachusetts’ comprehensive reform plan).

“They got the measure on the ballot in 2008,” said state Rep. Nancy Barto (R-Ariz.), who would later reintroduce a reworked version of the proposition in the legislature. “It took them a couple years and a lot of funds and signatures to get it on the ballot. They were outspent by a measure of five to one but still lost by only 8,500 votes.”

It was at this point in late 2008 that ALEC took notice, said Barto, who regularly attends the group’s conferences.

“Their legislation is patterned after our language in 2008,” she explained. “They called and asked about it, took our language and put it on their website as model legislation and saw we were getting real traction and started using it in their state conferences. In 2009, [ALEC HHS Task Force Director Christie] Herrera came and spoke at our Health and Human Services committee meeting in Arizona when we were moving the bill. She came and testified.”

Even before Herrera came and spoke on her bill’s behalf, however, Barto was thrilled when ALEC officially adopted the Arizona proposition as model legislation in December 2008.

*****

When asked about the role representatives of the pharmaceuticals industry, which holds three of the seven seats on ALEC’s HHS task force, played in promoting the bill, Novack insists that it became model legislation, if anything, in spite of their opinion.

“From what I heard it managed to get through because no one paid it any attention,” said Novack. “When people start and work backwards and look at who provides money to ALEC they think it was that the health care industry [that’s behind the model legislation], but it was more an issue of insignificance to them, and if they’d recognized that it’d be sweeping the country, then it’d probably not be sweeping the country. I mean, the major health insurers are the major backers of mandates!”

But since ALEC adopted model legislation for the Freedom of Choice in Health Care Act, the group has played a key role in trumpeting iterations of the bill in various states over the past year. ALEC’s Herrera has offered guidance to lawmakers in more than a dozen state legislatures on the issue. The group brags on its website that “as anti-freedom health policy — such as an individual mandate, an employer mandate, and the ‘public plan’ — surface at the state and national levels, ALEC’s Freedom of Choice in Health Care Act has become an essential tool in securing the rights of patients to make their own health care choices.”

ALEC’s task forces are better known for crafting legislation that coincides, rather than conflicts, with the interests of its private-sector members. Famous for hosting lavish conferences for state legislators who possess no staff of their own, the group pampers lawmakers while providing them the opportunity to collaborate on legislation often previously researched and introduced by the policy shops of its corporate members.

“Their conferences proceed in a very orchestrated manner with legislation that was effectively already designed before [state representatives] get there,” noted Rodger Schlinkeisen, president of Defenders of Wildlife, an environmental group that has differed with ALEC on state legislative priorities in the past. “Representatives are having a good time, playing golf. There’s no heavy lifting on the legislative side so they don’t have to do much. The ALEC staff and industry reps hold their hand and out pops this model legislation with various corporate interests in mind.”

In one case, noted by Mother Jones, ALEC drafted model “truth in sentencing” legislation that restricted parole eligibility, effectively ensuring longer prison terms for inmates. A pivotal member of the task force that crafted the bill’s language? The Corrections Corporation of America, the leader in the private corrections management industry, which stood to benefit directly from longer prison sentences.

*****

When it comes to the role of the health care industry in crafting the Freedom of Choice in Health Care Act language, however, the outsize presence of the pharmaceuticals industry on the drafting HHS committee is somewhat counterintuitive. The drug companies, represented by the Pharmaceutical Research and Manufacturers of America (PhRMA), are better known of late as the first major private health care interest to enter into an agreement with the Obama administration over comprehensive health care reform, pledging to promote reform in exchange for only a nominal knock to its bottom line and protection on other issues like drug importation and generics.

The Private Sector Executive Committee for ALEC’s HHS task force is staffed entirely by government affairs and state policy representatives for Bayer, Johnson & Johnson and PhRMA, while the Private Enterprise Board of ALEC, as a whole, is also filled with high-ranking representatives of Bayer, GlaxoSmithKleine, Johnson & Johnson and Pfizer, as well as PhRMA, which represents them all.

“The American Legislative Exchange Council is one of many legislative organizations with whom we have relationships, and in no such relationship is it ever expected that we will always agree about every topic,” noted Jeffrey Bond, Senior Vice President of State Government Affairs at PhRMA, in a statement in response to an inquiry regarding the pharmaceutical coalition’s relationship with ALEC’s health care nullification language. (Spokespeople at Johnson & Johnson and Pfizer did not respond to requests for comment.)

Others, however, see in the pharmaceutical industry’s material support for Freedom of Choice in Health Care legislation a subtle realignment of priorities within an industry that was never fully on board with the Obama administration’s reform agenda in the first place.

“Within PhRMA there was division over backing the bill to begin with,” said Paul Blumenthal of the Sunlight Foundation, which tracked the industry group’s deals with the administration during the health care reform debate. “[Then-PhRMA chief] Billy Tauzin and Jeff Kindler at Pfizer were driving the process of backing the bill and the administration, and Tauzin was ultimately driven out of PhRMA as a result. You could be seeing some of that equilibrium shift back.”

Yet apart from a degree of buyer’s remorse, health care consultants note that the drug industry’s schizophrenic actions seem less like a calculated plan than a struggle to reconcile their free-market tendencies with the fact that aspects of reform like the individual mandate stand to improve their bottom line.

“You can look at it as a mass deception by the pharmaceuticals industry,” said Peter Harbage, president of Harbage Consulting, a Sacramento-based health policy consulting firm. “But it’s not so much deception as mass confusion when you think of it from an industry point of view and the nature of something like heath reform.”

“The insurers and PhRMA folks and others — they stand to make a lot of money from coverage, even though ideologically they’re opposed to government regulation,” Harbage added. “What you’re seeing is a real push and pull in which the industry is trying to reconcile their business interests with their ideological interests. You have the large established interest groups like PhRMA tacitly accepting reform but maybe there’s a company that disagrees and might want to play it both ways. Organizations [like ALEC] create an avenue to take their shots without being public about it.”

And even though the pharmaceuticals industry promotes a lot of legislation through ALEC that benefits its bottom line, there can be a price to doing business with conservative groups, according to one industry insider.

“On this kind of thing in some ways it’s a two-way street,” said the industry insider, who declined to be identified because he represents pharmaceutical clients. “The mandate to buy insurance and the tax penalty is good for the industry. This is one place where you wouldn’t necessarily see the industry advocating. But if you’re lying down with conservative members, your funding goes to support what they’re doing as well as what you want to do.”

Indeed, ALEC’s HHS task force lists sixteen pieces of model legislation on its website that tackle issues favorable to the pharmaceutical industry, such as limiting the importation of prescription drugs, reducing drug liability, abolishing price controls on drugs, lowering state taxes on drug samples, and promoting coverage for experimental drugs. When considered from the perspective of the industry’s relationship with ALEC as a whole, one potshot with scant legal prospects against the administration’s individual mandate begins to look like a small price to pay.

*****

But what seems like a legal non-issue is still providing a lot of political fodder for partisans of comprehensive health care reform, on both sides of the aisle.

The courts will ultimately decide the limits of states’ rights when it comes to the question of the Obama administration’s new health care law, but in the meantime, Republicans are hoping it will energize conservative voters and stave off implementation in Arizona, Oklahoma and Colorado, where similar measures will be on the ballot in November.

“I guess it’s a low investment cost for a group to try to do that,” said Harbage. “You get to automatically have a conversation, and even if it ultimately loses you still had the proposition as a vehicle to motivate voters, and a lot of groups involved might think that’s a good day’s work.”

The two groups are part of a series of GOP-leaning outside organizations that are pouring money into this year’s elections in hope of wresting congressional control from the Democrats. The ads, which label the Democrats as too liberal for their districts, take aim at some of the most competitive races in the country and represent an escalation in spending that is already breaking records. [...]

Freed by a Supreme Court decision earlier this year, the groups are specifically calling for the Democrats’ defeat. Before the ruling, such groups had to couch their ad language as “issue ads” and had to beware of running up against Federal Election Commission rules.

In other words, like Citizens United, these 501(c)4 and (c)6 groups are now free to advocate directly for or against candidates, so long as it’s not their primary mission. I’ve mentioned Americans for Job Security before, but the 60 Plus Association is new (to me) and worth a minute of further discussion.

On its website, the 60 Plus Association says it was founded in 1992 as a “non-partisan seniors advocacy group with a free enterprise, less government, less taxes approach to seniors issues. 60 Plus has set ending the federal estate tax and saving Social Security for the young as its top priorities. 60 Plus is often viewed as the conservative alternative to the American Association of Retired Persons (AARP).”

Besides billing itself as a “conservative alternative,” one additional difference the 60 Plus Association shares with the AARP is that while the AARP has 40 million members (who found themselves divided over many aspects of Obama’s heath care reform bill), the 60 Plus Association is less forthcoming about its membership.

In fact, Sourcewatch.org cites an article written by Bill Hogan for the AARP Bulletin in 2003 that says 60 Plus and other other conservative groups ”claim to speak for millions of older Americans, although as recently as 2001 none of the three listed any revenue from membership dues on their tax returns.” The article also added that “virtually all of their largest contributions in recent years have come from the same source — the nation’s pharmaceutical industry.”

60 Plus’s current ad buy represents an outlay of over $4 million and will go towards attacking nine House Democrats, according to the AP: ”Arizona’s Ann Kirkpatrick, Harry Mitchell and Gabrielle Giffords; Florida’s Allen Boyd, Suzanne Kosmas and Alan Grayson; Pennsylvania’s Kathy Dahlkemper and Paul Kanjorski; Indiana’s Joe Donnelly, and Ohio’s John Boccieri. It also is airing an ad against Tennessee’s Roy Herron, a Democrat seeking to fill an open seat.”

Sure, there are House Democrats who are choking on that very thought — folks like Rep. Anthony Weiner (N.Y.), who thinks parts of the bill are too conservative, and Rep. Bart Stupak (Mich.), who thinks other parts are too liberal. But the alternative is to have Democrats take to the campaign trail this year with the following message: “Yes, Congress spent most of 2009 haggling over health care as unemployment leapt, but it was just too hard to get the thing passed.” Not exactly the inspirational bulletin that wins elections.

Which leaves the question: What exactly would House Democrats be forced to swallow if they agree to adopt the Senate bill as it stands? A few biggies:

Funding: A central disagreement between House and Senate Democrats has been how to pay the tab of covering tens of millions of uninsured Americans. House leaders proposed a 5.4-percent tax hike on those earning more than $500,000 per year, while the Senate bill proposed a 40-percent tax on high-cost insurance plans. The loser here is the labor movement, which had recently negotiated a deal with Democratic leaders of both chambers to exempt union-negotiated plans from being hit by that tax for another eight years — a deal that would be nullified if the existing Senate bill becomes the final word. Even so, some of the labor leaders who pushed for that deal are already urging the House to pass the Senate proposal.

Illegal Immigrants: Members of the Hispanic Caucus lose big here. While both chambers have proposed to ban illegal immigrants from receiving subsidies on the exchanges, the Senate bill takes the strange step of also prohibiting those folks from paying full price for exchange coverage through U.S. companies using U.S. dollars. (The House bill would allow those unsubsidized purchases). The result? There will probably be more uninsured illegals making the emergency room their primary care stop — the very type of behavior that health reform was supposed to discourage.

Kids’ Care: At issue here has been the fate of the Children’s Health Insurance Program, the state-federal partnership that covers roughly 9 million low-income kids nationwide. The House has proposed to do away with CHIP at the end of 2013, while the Senate proposal would keep it alive and provide new funding through 2015. Many children’s welfare advocates, concerned that kids would lose coverage if they’re shifted to more expensive private plans on the exchange, prefer the Senate provision.

Abortion: Both the House and Senate bills include new restrictions on coverage of abortion among plans operating on the exchanges. The House provision, sponsored by Stupak, would prohibit such coverage on exchanges altogether; the Senate bill is a touch less strict, allowing abortion coverage but requiring women to write a separate check for those services to ensure that no federal funds go toward them. This allegedly leniency is the reason Stupak is threatening to vote against the Senate bill.

Anti-Trust: For more than six decades, the nation’s insurance companies have enjoyed an exemption to federal anti-trust laws, justifying the perk with the argument that sharing information encourages smaller companies to enter otherwise unknowable new markets. But critics say the exemption simply allows the companies to collude on pricing at the expense of competition. The House bill eliminates the anti-trust exemption; Senate leaders — bowing to Sen. Ben Nelson (D-Neb.), a former insurance company CEO — stripped that provision from their bill. Advantage: insurance industry.

That $80 Billion Pharmaceutical Deal: Hoping to get the nation’s drug makers to support health reform before the heavy negotiating began, Sen. Max Baucus (D-Mont.) made a pact last summer with the pharmaceutical lobby: If the drug makers put up $80 billion toward reform over the next decade, the deal went, Democrats would withhold support for a proposal allowing states to negotiate drug prices on behalf of their lowest income seniors. The White House quickly signed on, but House Democrats didn’t. Instead, Rep. Henry Waxman (D-Calif.) went ahead and included in the House bill the very provision that Baucus and Obama vowed to oppose. Adopting the Senate bill leaves the deal with Big Pharma intact. Advantage: Pfizer.

The Public Option: House liberals, behind Speaker Nancy Pelosi (D-Calif.), won a major victory in the lower-chamber bill by including a provision to create a national, not-for-profit insurance plan to compete with private companies. The Senate bill contains no such thing. This, on the surface, appears to be a big loss for House Democrats. But in reality, the merged bill would likely have dropped the provision anyways, because it doesn’t have the support of 60 senators.

All of this, of course, could change as the years go by and Congress dabbles at the edges of these provisions. But for the time being, it’s looking like the more industry-friendly Senate bill will form the backbone of health care reform.

Waxman, though, wasn’t a part of those negotiations and has said that he doesn’t feel obliged to honor a deal to which he never agreed. His latest comments, via FireDogLake, came yesterday:

“The President and the Senate made very poor deals with PhRMA,” Waxman said, explaining the deal whereby the drug industry offered $80 billion dollars in givebacks in exchange for their support for the overall bill. “Rahm (Emanuel) said that’s OK,” Waxman said, but he noted that under the deal, the industry would get millions of new customers and Americans would still pay far more than the rest of the industrialized world for prescription drugs.

“I have said that I am not bound by that agreement,” Waxman said, noting all the provisions in the House bill which go further than the PhRMA deal. … Waxman said that in the conference, where he expected the President to sit down personally, “I’m going to say, ‘Are we interested in protecting the profits of the drug companies or protecting seniors?’”

Although the House does not reconvene until Jan. 12, and the Senate is out until the Jan. 19, leaders from both chambers have returned to Washington this week to begin ironing out the differences between the chambers’ health reform bills, of which Waxman’s drug provision is just one.

The count was 51 to 48, nine shy of the supporters needed to overcome a filibuster. Thirty Democrats and Independent Sen. Joe Lieberman (Conn.) voted to kill the provision.

The amendment, sponsored by Sens. Byron Dorgan (D-N.D.) and Olympia Snowe (R-Maine), has been a week-long thorn in the side to Democratic leaders — not because they opposed the provision, but because it threatened to undermine a deal cut earlier in the year between the White House and the nation’s pharmaceutical companies. Under that agreement, the drug makers pledged up to $80 billion toward health-care reform over the next decade if Democratic leaders would withhold their support for several proposals that would cut further into the companies’ profits, including the drug re-importation provision. As a result, White House officials in recent days had urged Democrats to oppose the Dorgan-Snowe amendment, with the FDA writing a letter to senators warning that the agency “does not have clear authority over foreign supply chains.”

Under the provision, Americans would be allowed to buy FDA-approved drugs from certain countries with well-established drug-safety regimes, such as Canada, Australia Japan and those in Europe. Supporters say it will save U.S. consumers roughly $80 billion over the next decade. The Congressional Budget Office estimates that the federal government would save an additional $20 billion over the same span, the result of savings to federally funded programs like Medicare.

The reason is clear: Americans pay more for pharmaceuticals than any other country in the world. Dorgan pointed out that the same Nexium prescription that costs $424 in the U.S. would cost just $67 in France, $40 in the United Kingdom, $37 in Germany and $36 in Spain.

“We shouldn’t be paying the highest prices in the world for prescription drugs,” Dorgan said. “I think it’s flat-out unfair.”

Aside from Snowe, the provision attracted the support of such influential Republicans as Sens. John McCain (Ariz) and Charles Grassley (Iowa), the ranking member of the Finance Committee.

Opponents of drug re-importation argue (1) that there’s no good way to ensure that imported drugs are safe for American consumers, and (2) that the resulting loss in drug-maker revenues would curb the research conducted by those companies, leading to the discovery and development of fewer new innovative drugs.

Critics of the latter are quick to point out that the pharmaceutical industry is perennially among the most profitable. Indeed, last year it ranked third among all industries, reaping 19.3 cents in profits for every $1 in revenues, according to Fortune Magazine.

Senate lawmakers on Tuesday also killed a weaker substitute to the Dorgan-Snowe amendment, sponsored by Sens. Frank Lautenberg (D-N.J.) and Robert Menendez (D-N.J.). Both argued on Tuesday that the Dorgan amendment simply wouldn’t guarantee that the imported drugs were safe. (Strangely enough, both also voted in 2007 in favor of proceeding to a similar Dorgan-Snowe bill.)

“It’s regressive,” Menendez said Tuesday. “It hearkens back to a time when the lack of sufficient drug regulation allowed people to sell snake oil and magic elixirs that promised everything and did nothing.”

Critics in and out of the Capitol, however, say the substitute was so stringent that it will effectively prohibit drug importation. The AARP, which for years, has endorsed the Dorgan-Snowe amendment, argued that the Lautenberg-Menendez provision represents “a thinly veiled effort to undermine importation and preserve the status quo of high drug prices.”

The substitute amendment was shot down by a count of 56 to 43.

The debate proved a pickle for President Obama, who had endorsed reimportation on the campaign trail but was forced to change his tune this year for fear of losing the pharmaceutical lobby’s support for the underlying health-care reform bill.

“When you become president, you realize that the sound bites don’t always work in reality,” Ken Johnson, senior vice president of the Pharmaceutical Research & Manufacturers of America, told The Washington Post this week.

The money that the drug makers have pumped into Congress in recent months couldn’t have hurt their case. Indeed, the industry has contributed roughly $7.5 million to lawmakers this year, with 57 percent going to Democrats — up from 33 percent in the 2006 cycle, and 50 percent in the 2008 cycle – according to the Center for Responsive Politics.

In terms of lobbying, the dollar figures are even higher. PhRMA, representing the brand-name drug makers, has spent more than $20 million lobbying Congress this year alone, CRP says.

“It’s really regrettable that the special interests prevail, and the power of the pharmaceutical lobby,” McCain said Tuesday. “It’s not one of the most admirable chapters in the history of the United States Senate.”

During an hourlong oral argument, Merck was in the unusual position of arguing that investors should have filed their lawsuits earlier because there was an overwhelming amount of public information available by late 2001 suggesting the possibility the company committed securities fraud. Merck, however, also argued that the investors don’t have enough evidence to make a case against the company.

Merrill Goozner, the great health care reporter behind GoozNews, provides a bit of historic context to the case.

What happened in 2001? Merck-funded researchers published the original clinical trial showing a fourfold increase in heart attack risk from the pain reliever. At the time, those results were explained away by Merck and the researchers with the suggestion that the comparison drug was cardioprotective.

In other words, the risks should have been known to investors even though Merck was denying those risks existed.

The absurdity wasn’t lost on Justice Anthony Kennedy, who told a Merck lawyer, “Companies can’t have it both ways.”

The Pentagon (Department of Defense photo)

In 2007, after passing legislation to rein in the schmoozy junkets that allowed lobbyists to buy face time with lawmakers, congressional leaders from all political walks applauded their effort as a long stride toward limiting the influence of moneyed interests over Washington policymakers.

“We have promised the highest ethical standard,” House Speaker Nancy Pelosi (D-Calif.) said at the time, “and we will deliver it, in an open and honest government.”

Illustration by: Matt Mahurin

She didn’t mention that the restrictions targeted members of Congress and their staffs almost exclusively.

Nearly two years later, a new study reveals that travel by executive branch officials might merit similar scrutiny. From 1998 through 2007, Pentagon officials have been treated to at least 22,000 worldwide trips, worth at least $26 million, funded by outside groups like corporations and foreign governments, many of which have contracts or other interests before the agency, according to the study released Wednesday by the Center for Public Integrity and Northwestern University’s Medill School of Journalism. Such junkets are legal as long as internal screeners grant prior approval, but government watchdog groups say there’s plenty of room for conflicts of interest.

Indeed, the analysts found cases where pharmaceutical giants treated Pentagon doctors and pharmacists to overseas trips totaling thousands of dollars each, including a $7,800 visit to Paris. (Meanwhile, pharmaceutical spending by the Department of Defense jumped nearly 300 percent, to $6 billion a year, between 2000 and 2006.) In another case, a Saudi prince picked up the $24,000 tab for a visit from Richard Millies, deputy director of the Defense Security Cooperation Agency, and his wife. Milles just happened to run the program that sells weapon systems to foreign governments, the report found. (Meanwhile, Saudi Arabia accounted for roughly $4.4 billion in such purchases between 2003 and 2006 alone, according to the Congressional Research Service.)

Government watchdog groups are quick to point out that the spending isn’t meant to be charity. “There’s a business reason for providing these trips to officials,” said Robert M. Stern, president of the Center for Governmental Studies, a Los Angeles-based non-profit research group.

The Defense Department did not respond to requests for comment Tuesday.

It wasn’t supposed to be this way. Confronted with the Jack Abramoff scandal — as well as a similar CPI-Medill study detailing congressional travel trends — lawmakers took steps in 2007 to restrict lobbyist- and corporate- funded junkets. Those efforts culminated in the passage of a bill prohibiting trips of longer than one day for any organization employing a lobbyist and banning lobbyists from going along. The new law also prevents moneyed interests from shuttling lawmakers around on corporate jets and requires congressional ethics panels to OK trips 30 days in advance. Additionally, the law requires that all trips be disclosed online.

By contrast, federal rules allow outsiders to fund trips and other expenses for executive branch employees if internal screeners give prior approval. The rules indicate that the travel must be related to the employee’s normal task and not represent a conflict of interest. The records are held, in paper form, by the U.S. Office of Government Ethics.

Craig Holman, legislative representative for Public Citizen’s Congress Watch, said the difference between the limits on congressional travel and those affecting executive branch officials represents “a gaping chasm.” The federal rules might sound good on the surface, he argued, but the sheer number of internal ethics officers — some hired by political appointees — make oversight of the process almost impossible. In one case, a high-level Interior Department official under the Bush administration employed his girlfriend as his ethics officer, he added.

In another high-profile case, Nancy Nord, the acting chairman of the United States Consumer Product Safety Commission, was found to have taken expensive trips to China, Spain and San Francisco on the tab of some of the same retail manufacturers she’s now charged with regulating. Nord’s term expires in October 2012.

“This is the system of ethics we’ve got in the executive branch,” Holman said.

Holman, along with sources on Capitol Hill, said that any changes to the travel procedures for executive branch officials will likely originate with the Obama administration. The White House on Wednesday did not return a call for comment.

How soon that change occurs could have a significant effect on federal spending. Stern said the potential conflicts of interest between White House officials and special interests are potentially more glaring than those between Congress and lobbyists. “In a sense they’re even more important, because they’re the ones who make the decisions about where the money goes,” Stern said of the executive branch officials. “It’s clearly as important — and maybe more important — because no one’s watching.”

Many watchdogs are hoping that Wednesday’s report could be precisely the spark that sets the process of reform in motion. “It usually takes embarrassment,” Stern said, “before these things are done.”