Yesterday, PhARMA, the Pharmaceutical Research and Manufacturers of America announced that its president, Billy Tauzin, is stepping down from his post. Mr. Tauzin, a former congressman from Louisiana, is noted as a shrewd player on Capitol Hill with close ties with Democrats. But the pharmaceutical trade group is apparently looking to get back to its conservative roots, shifting its vast financial resources towards the republicans in the coming months.
What this means for investors and other stakeholders is unclear but based on past practice, the prospect of this industry weighing in heavily on issues and causes dear to its collective heart is likely.
The pharmaceutical industry is notorious for spending massive sums on television advertising both to tout its products and to weigh in on political causes. One needs only watch prime time television to learn about Lipitor, Plavix, Nexium and a raft of new diseases and syndromes that can be treated with a pill. Thinking back to the Medicare drug benefit debate during the Bush years or the Clinton health care debate in the early 1990s and the industry’s well-financed voice can be remembered.
Now that the Supreme Court has unleashed issue advertising, we can expect to see an acceleration of political spending by an industry trade group that has spent tens of millions of dollars each year in the political sphere. Its impact on shareholders is two fold.
First, as pharmaceutical companies become more emboldened in their ability to spend and influence political races and public policy, the reputational risk from spending will increase. Excessive political spending to influence election outcomes does not have a direct bearing on business operations.
Second, the institutionalized corruption created by the industry’s oversized spending will have unintended consequences both for the individual pharmaceutical companies as well as on business as a whole.
Will the pharmaceutical industry take the lead in excessive political spending?
Only time will tell.
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