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Kennedy, Kefauver, And Castro: A Historical Lesson On The Politics Of Drug Pricing Reform

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On April 12, 1961, two progressive lawmakers introduced companion bills to the Senate (S. 1552) and House (H.R. 6245) focused on major drug pricing reforms collectively entitled the Drug Industry Antitrust Act (DIAA). The lead House sponsor was Emanuel “Manny” Celler (D-NY) chair of the Judiciary Committee. In the Senate, Estes Kefauver (D-TN) chaired the Subcommittee on Antitrust and Monopoly (part of the Senate Judiciary Committee) and had recently led a lengthy series of hearings on “Administered Prices in the Drug Industry” that included expert testimony from different stakeholders and garnered attention for the political theater of berating pharmaceutical executives for high drug prices—a tactic employed by politicians to this day.

Over the next year and a half, key players and a series of world events would essentially defeat Senator Kefauver’s primary goal of reining in drug prices while simultaneously enacting legislation under his name that has had the very opposite effect. See exhibit 1 at the end of this post for a detailed timeline.

The similarities between those events and the drug pricing players, ideas, and events of today are quite astounding and give credence to the widely quoted aphorism that “History doesn’t repeat itself, but it often rhymes.” For present-day policy makers, it’s worth learning what one of our country’s most beloved presidents—along with a Tennessee Democrat with presidential ambitions and a controversial Cuban revolutionary—can teach us about why it has been so hard to lower drug prices in the United States.

The Drug Industry Antitrust Act

Introducing the DIAA in 1961, Senator Kefauver was clear about his goals: “The time has arrived for action by the Congress to reduce the excessive and unwarranted charges upon those who are least able to afford them—the Nation’s sick and afflicted.”

To reduce drug prices, the DIAA used a three-pronged approach that would amend the Food, Drug, and Cosmetic Act (FDCA), the Sherman Antitrust Act, and patent laws. Changes proposed to the FDCA included requiring a finding of efficacy before a new drug approval, label requirements, information requirements in the marketing to licensed physicians, certification of all previously approved antibiotics, and increasing the scope of factory inspections for Food and Drug Administration (FDA) officials. In particular, the language amending the Sherman Antitrust Act and specific patent laws under 35 U.S.C. Part II would have revolutionized the drug industry by reforming the intellectual property rights of pharmaceutical companies. The bill would:

  • Make it illegal for a drug company to withdraw a patent application or concede priority of invention to another company pursuant to an agreement to share royalties,
  • Remove the patentability of products that are merely a new combination of existing drugs or where the patent application is based solely on slight molecular modifications—this was before the phrase “me too drugs” was part of the policy lexicon,
  • Add a procedure for the “determination of therapeutic effectiveness” by the secretary of Health, Education, and Welfare (HEW), the predecessor role to today’s secretary of Health and Human Services,
  • Limit drug patents to three years from the effective date with up to 14 years where the patentee can earn a maximum 8 percent royalty through licensing to other manufacturers (for example, compulsory licensing).

These four policy changes were direct shots taken with the aim of reducing drug prices. They were the most controversial components of the bill and earned the most significant opposition.

FDA Legislative Priorities And Thalidomide

In September 1960, about six months before Kefauver introduced his legislation, drug company Richardson-Merrell, Inc., submitted a new drug application (NDA) for Kevadon (thalidomide), which was assigned to a new FDA reviewer named Frances Oldham Kelsey, MD, PhD. Kelsey was concerned about some of the drug’s safety information and deemed the application incomplete, effectively delaying the approval. Over the following months while Kelsey went back and forth with Richardson-Merrell scientists, a German study reported birth defects in infants whose mothers had taken thalidomide causing the withdrawal of the drug from several markets worldwide. Nevertheless, Richardson-Merrell continued to send letters to US physicians stating that there was still “no positive proof of a causal relationship between the use of thalidomide during pregnancy and malformations in the newborn.” Finally, in March 1962, Richardson-Merrell withdrew its NDA. Kelsey became a hero, and Kefauver suddenly gained more leverage to get a drug bill through Congress. Recognizing the importance of the thalidomide tragedy to his cause, Senator Kefauver invited Helen Taussig, MD, professor of pediatrics at Johns Hopkins University, to testify in May 1962 on the importance of his drug bill and to urge its passage based on the safety, efficacy, and drug advertisement language in S. 1552.  

Death Of The 1960s Drug Pricing Reform Effort

Despite the momentum from the thalidomide scare, Kefauver had difficulty getting his bill through the Senate Judiciary Committee due to his drug pricing reforms. The bill faced fierce opposition from Everett Dirksen (R-IL) and Roman Hruska (R-NE), who authored the minority report challenging Kefauver’s findings from his famous 1959 hearings arguing that the high profits in the drug industry were in line with the level of risk and innovation in the market and that consumers had protections through their physicians’ knowledge of substitute products. The chair of the Committee, James Eastland (D-MS), was interested in a compromise to get a drug bill approved. The new Kennedy administration faced a dilemma because failing to support the bill would risk backlash from Kefauver but openly supporting it could harm their agenda by alienating more powerful senators such as Dirksen and Eastland. When Kefauver’s S. 1552 was brought before the full committee in March 1962, Senator Dirksen referred it to a different subcommittee to address the patent issues—implicitly with the aim of removing  the compulsory licensing language.

In May 1962, before the subcommittee acted, Senator Lister Hill (D-AL) and Congressman Oren Harris (D-AR), with the FDA’s explicit support, introduced factory inspection amendments to Congress to address: inspection authorities; requiring manufacturers keep records on adverse reactions; adulterated drugs; and certification of all antibiotics. Although, it is not clear whether agency and industry coordinated on this legislation, the FDA had been receiving significant criticism at the time for its cozy relationship with the industry. One of its leading officials on antibiotics at the time, Henry Welch, MD, had close ties and received significant amounts of honoraria while in his regulatory role. Regardless, many of the policy objectives in Lister and Hill’s bill were either supported or at least not aggressively opposed by industry spokesmen making it more politically palatable. For the FDA, items in the Hill-Harris amendments were a priority, and they did not want these items to die if Kefauver’s drug pricing changes became a poison pill for the final drug bill. 

In June 1962, three days prior to S. 1552’s reconsideration by the full Judiciary Committee, Chairman Eastland and the White House convened a meeting to discuss amending the bill and to make it “acceptable to all.” The meeting included administration representatives (Jerome Sonosky and Theodore Ellenbogen), Eastland’s staff director, minority party counsels, and industry lobbyists (Edward Foley, Marshall Hornblower, and Lloyd Cutler). Kefauver and his staff, however, were not included. The result of the meeting was amended language that Sonosky referred to as the “industry amendments,” stripping S. 1552 of the major drug pricing reform components pushed by Kefauver. Outraged by the meeting, Senator Kefauver, described the event as “…the first time in my 23 years in Congress that an administration has emasculated a bill without letting its sponsor and chairman know.”

Despite Senator Kefauver’s efforts to salvage his drug pricing reform language during the full Senate proceedings on S. 1552, the compromise between the Democratic administration and Republicans in Congress (despite being in the minority) had secured the votes to get the watered-down bill through both chambers after a joint conference, capturing major items from the multiple bills introduced (for example, efficacy based on well-controlled studies, mandated regular inspections, antibiotic certification, drug advertising authority changes). President John F. Kennedy signed it into law on October 8, 1962, and handed the first pen to Kefauver.

The Pharmaceutical Industry As A Strategic Asset: Enter Fidel Castro

Amidst the back and forth over Kefauver’s legislation, the Kennedy administration had plenty of other crises to manage. The Cuban Revolution began in the 1950s with Fidel Castro ultimately taking control as prime minister in 1959. By 1960, he nationalized US-owned businesses. The US then retaliated with a trade embargo creating supply problems for Cuba by restricting the flow of many goods, including pharmaceuticals. Then in April 1961 (just days after the Kefauver-Celler bill was proposed), a brigade of Cuban exiles, trained and backed by CIA operatives, attempted to invade the island’s Bay of Pigs. The plot failed miserably, foiled by Castro’s troops who ultimately took more than 1,000 prisoners. For the next 20 months, the Kennedy administration would negotiate with Castro to get the prisoners released and avoid war during the October 1962 events of the Cuban Missile Crisis.

Due to the scarcity of medicines on the island, the US pharmaceutical industry represented a major bargaining chip for the United States in its aim to free the prisoners. In November 1962, shortly after the Missile Crisis was averted, then-Attorney General Robert Kennedy’s Department of Justice set up meetings with the Pharmaceutical Manufacturers Association (PMA, now PhRMA) to work out a deal to get Castro the medicines he specifically requested for the island.

An interview with PMA counsel, Lloyd Cutler, details several conditions the Kennedy administration would need to meet to get the PMA and member companies on board. First, the administration would need to acknowledge the contributions were in the nation’s interest and publicly support any tax write-offs that might result in public backlash for the donation. Second, PMA was concerned that the Republican coalition that “had stood by” their industry throughout the Kefauver ordeal would react negatively to the PMA supporting anything related to Cuba. In the meeting, Attorney General Kennedy assured them that the contribution was already discussed with former President Dwight D. Eisenhower and Senator Dirksen, and both agreed with the pharmaceutical contributions. Finally, the PMA believed the compulsory licensing issue recently defeated would likely come up again, and they were worried because the assistant attorney general leading the Department’s antitrust division had “supported the compulsory licensing principle” during the last Congress. While Cutler stated that the PMA did not ask the attorney general to take a position on the matter, he said they asked to get a “fair hearing” should it come up. Kennedy’s attitude in response evidently made a favorable impression on industry representatives present. Following the meeting, nearly 50 different pharmaceutical companies donated medications on a list of drugs requested by Castro, totaling more than $23 million (1962 US dollars) and began to ship to Cuba on December 22, 1962.

There is no evidence to suggest international affairs between the US and Cuba had any influence, whatsoever, in the Kennedy administration’s maneuvers that weakened the Kefauver-Harris amendments. Many key players believed Kefauver’s S. 1552 did not stand a chance of passage, especially with something as controversial as a compulsory licensing provision with an 8 percent royalty cap. That does not mean President Kennedy opposed drug pricing reform as Wilbur Cohen, assistant secretary for legislation of HEW at that time, recalled the president asked him to work out a compromise and gave him full autonomy to “change the numbers, change the length of time of the license” to get it done. With fierce opposition to compulsorily licensing language, the industry concessions on factory inspections and major regulatory changes in the final law may have been the best our government could have done at the time. Whether connected or just mere coincidence, the fact remains that Castro’s new government needed medicine and the Kennedy administration used the US pharmaceutical industry as a strategic asset to secure a deal to exchange medications for release of the Bay of Pigs prisoners.

Learning From The Past To Inform Current Reform Strategies

While the significant pricing reform components were ultimately removed from what became known as the “Kefauver-Harris Amendments” to the FDCA, remnants of Kefauver’s original proposal would resurface throughout drug pricing debates over the next 60 years. Now, we find ourselves in an oddly familiar situation where a Democratic administration, Democrat majority and Republican minority in Congress, and an influential pharmaceutical industry are debating proposals to lower drug prices in the US. Both major political parties have signaled they are ready to take on drug pricing reform from different angles but several reforms (for example, compulsory licensing, patent reform, health technology assessment) may still be unpalatable to a broad coalition necessary to overcome a Senate filibuster. Allowing the Centers for Medicare and Medicaid Services to negotiate drug prices may have some traction as it has been advertised as a “pay-for” component for infrastructure legislation that has been a major Democratic priority. However, this time the attempts at drug pricing reform may come from the Senate Finance Committee, rather than the Judiciary Committee. Similar to Kefauver’s speech in April 1961 announcing S. 1552, Senator Ron Wyden (D-OR) released a set of core principles to guide the work of the Senate Finance committee stating they will “craft legislation that will finally deliver relief to Americans who are paying too much for their prescription drugs.”

While “paying too much for prescription drugs” has been useful rhetoric for the past 60 years, our political leaders face a similar challenge: The US drug industry (for better, or for worse) is a strategic asset. The COVID-19 pandemic has highlighted the importance of a robust pharmaceutical supply chain, and the current administration has made it a priority to secure this area of industry. Access to pharmaceuticals or materials to make them can quickly create tension on a global scale. For example, in March 2020, India planned on limiting the export of hydroxychloroquine potentially causing supply issues in the US. Additionally, COVID-19 vaccine procurement has become a source of international inequity, further supporting the notion that “paying too much for prescription drugs” has its benefits.

While many attempts at lowering US drug prices have failed, the mere threat of reform may be enough to realize significant concessions from a powerful drug lobby. When President Kennedy needed help negotiating with a hostile foreign leader, his brother used the drug industry’s fear of future reform as leverage to get donated medications that helped bring home Cuban prisoners. As Senate Democrats propose strong reforms that threaten pharmaceutical industry profits, the Biden administration could fully support those reforms or leave the door open as leverage to solve another major problem.

A Strategic Asset

The language adopted in the Kefauver-Harris Amendments, while an important regulatory advancement, does not tell the story more appropriately described as a failed effort to lower drug prices in the US. Additionally, Kefauver’s failed drug pricing policy efforts unearthed a frightening realization that may continue to plague policy makers pursing similar reforms: Our country has an incredibly valuable strategic asset in its pharmaceutical industry that appreciates in value through, as Senator Kefauver put it during his 1961 floor speech, “the excessive and unwarranted charges upon those who are least able to afford them—the Nation’s sick and afflicted.”

Author’s Note

The author declares ongoing research support from the Food and Drug Administration, Patient-Centered Outcomes Research Institute, and Merck unrelated to this post. Additionally, he acknowledges prior research support from the Pharmaceutical Research and Manufacturers of America and prior consulting from Arnold Ventures, Massachusetts Health Policy Commission, and the National Health Council unrelated to this post.

Exhibit 1: The Early 1960s: Kennedy, Kefauver and Castro

Source: Author’s analysis.

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