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GOP corporate allies in Congress's cross hairs

Pharmaceutical companies and Big Oil look to be Democrats' first targets after the party takes control of Capitol Hill in January.

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"Critics would have you believe that there are no negotiations in how prices for medicine are set. That's simply not true," said Ken Johnson, PhRMA's senior vice president, in a statement after the November elections in anticipation of the Democrats' proposal. "The negotiations are occurring – as they should be – between prescription drug plans, several of which already purchase medicines on behalf of tens of millions of Americans, and pharmaceutical companies. That's the marketplace in action and that's how America's seniors will see true savings without compromising the search for future cures."

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But despite broad public support for lifting a ban, Democrats are divided on how to proceed and have yet to release specifics of their proposal. Max Baucus (D) of Montana, incoming Senate Finance Chairman, opposed a bipartisan plan in the 109th Congress that would have required the Department of Health and Human Services to get involved in negotiations between private drug plans and drug companies in some cases. If House Democrats lift the ban, as expected, Senator Baucus says he will conduct hearings on its likely impact. Meanwhile, HHS Secretary Mike Leavitt has already signaled that if given the opportunity to negotiate lower drug prices, he would not exercise it.

Similarly, Democratic calls to roll back subsidies for Big Oil are also popular, but problematic. In the first days of the new Congress, Democrats are calling for establishing a fund to promote renewable energy and conservation, which they say will be funded by money recovered from oil companies.

"Every oil subsidy will be given the highest level of scrutiny. We've been paying record energy prices at a time when Big Oil is making record profits – and record CEO compensation packages. It's unconscionable," says Drew Hammill, spokesman for incoming Speaker Nancy Pelosi.

But even before Congress reworks subsidies provided in the Energy Policy Act of 2005, Democrats will take up proposals to recover royalties from oil and gas companies in the Gulf of Mexico. Because of a gaffe in 1998-99 oil leases, negotiated during the Clinton administration, companies have avoided some $10 billion in royalty payments. Republicans in the 109th Congress tried to go after these lost revenues; Democrats say they will push harder.

"The companies have not done anything wrong. We're a nation of law, and contract law is one of the cornerstones of our economy," says Red Cavaney, president and CEO of the American Petroleum Institute, the industry trade group. Under an agreement announced Dec. 14, five companies – BP, ConocoPhillips, Shell Oil, Marathon Oil, and Walter Oil and Gas Corp. – have already reached an agreement with the federal government to pay royalties on production that began on or after Oct. 1, 2006. "Why not let the process continue," he says.

Both the outgoing chairman of the House Government Reform Committee, Rep Thomas Davis (R) of Virginia, and incoming chairman Henry Waxman (D) of California have pledged to go after all lost royalties. Forty-one other companies are currently not paying royalties under the terms of these leases.

Still, the biggest wild card for energy companies such as Halliburton in the 110th Congress isn't energy subsidies, it's the scope of congressional investigations into wartime contracts. House Democrats are reviving an investigative subcommittee that was eliminated when Republicans took back the House in 1995. That panel will target both Defense contractors and White House officials who contracted with them, aides say.