As I noted earlier, the President used his closed-door meeting with the House Democratic caucus yesterday to announce his support for dropping the exclusivity period for biologic drugs by at least two years. A source familiar with the meeting, whose professional position does not allow public communication with the press, told me that Anna Eshoo, who had been the lead supporter of the 12-year exclusivity period, protested at the meeting, telling the President that this was not right because her position was reflected in both the House and Senate bills. The President replied that he did not agree, that everything was on the table in the negotiations.

The pharmaceutical industry, along with the biotech trade group BIO which reps a lot of biologic makers, went ballistic. FDL News has obtained the text of an email sent by Billy Tauzin, head of the trade group PhRMA, to his board members, wherein he basically announces that they would oppose the final bill if their exclusivity period were to be dropped:

Mr. Waxman is pushing hard, with the support of the President, to drop our 12-year FOB (follow-on biologics) period down. We are all letting everyone we know hear that we could not support the bill if this happens. Please activate immediately all of your contacts.

Billy

The AP is reporting the same.

My source described it as “outrageous” that PhRMA would try to block the bill over a two-year change in the exclusivity rules. “They did think they won this already, and even two years means a lot of money,” said the source. “But it shows you the greed of these companies, that over two years, they’d blow up the bill.”

PhRMA has already been shielded from the reimportation of prescription drugs from abroad, as well as negotiation through Medicare for lower prices. And the biologics language was not even part of their original deal. “This is a violation of their commitment,” said the source.

The President is seeking the lowering of the exclusivity period, presumably, because he’s looking for more money after cutting the revenue raised by the excise tax by roughly $60 billion dollars. PhRMA obviously isn’t in a giving mood.

The question this raises is what would be the implications of PhRMA’s threat? There are a variety of explanations. One, the bill initially passed with razor-thin margins, and so PhRMA may believe that they could credibly flip enough members to ensure no passage until their biologics deal is restored. The other is that they would wage an immediate advertising campaign against the bill, but considering that this would pass in a couple weeks if everything goes to plan, I don’t see how that could be effective.

The most likely explanation is that PhRMA would withdraw its support from Democratic candidates in 2010, and in fact move quickly to support the challengers, threatening the Democratic majority in key races. Asked whether that implicit retaliation would fit the profile here, the source said, “I have not heard that, but it wouldn’t surprise me.”

Regardless of motive, it does strike one as a sign of the country we live in, where a corporate trade group basically holds the success or failure of legislation in their fingertips.

If the President and Congress can lose PhRMA’s support based on this relatively minor tweak to their profit margin, then there’s nothing really stopping them from changing everything about the structure of the deal. “This is an outrageous move, and the Congress and the President should just go forward with the bill,” the source continued. “They think they’re the 101st member of the Senate.”