Obama Gave Up the Pharm

by Tim Foley

categories: Enemies of Reform, Obama and Congress, Public Plan

Published August 06, 2009 @ 09:20PM PT

As part of building a narrative of momentum for health care, the White House rolled out a couple of “deals” with players in the health care industry.  Hospital associations and Vice President Biden rolled out a deal for a more favorable timeline on reducing payments to hospitals for uncompensated care in return for $155 billion in savings to Medicare.  That was impressive!  Sen. Baucus announced that Big Pharma had agreed to help partially close the “doughnut hole” in Medicare Part D by offering beneficiaries who fell into the gap in coverage a half-price discount on their prescription drugs – up to $80 billion over 10 years.  That was less impressive.  And now it looks like it comes at far too high a price.

I gave the deal decidedly mixed reviews when it was first announced:

It's also a big deal for PhRMA, who gets to burnish its pro-reform credentials at fairly minimal cost - Dean Baker calculates this commitment is about 2% of what the pharmaceutical company makes off of Medicare Part D.  [But] don't expect this to translate into savings for the larger health care reform effort, or to necessarily mean Big Pharma will go any easier if health care reform bites into their bottom line through negotiated drug prices for a public plan [emphasis not in the original post], or more investment in comparative effectiveness research that asks "Why am I paying for drug A at $15 a pill, when drug B is roughly as effective at $0.15 a pill?”

In the short term, when we didn’t know all the details, the deal seemed relatively positive.  President Obama had few options to keep his campaign promise to help close the doughnut hole without going to war against the pharmaceutical industry, who would have then gone to war against health care reform.  Senior citizens on Medicare are already the hardest audience to convince that health reform creates benefits them directly.  This doughnut hole deal was an easy, unambiguous win for seniors – one the House was quick to codify into their bill.  And, of course, it’s kept the industry group PhRMA co-sponsoring the next generation Harry and Louise ads that are pro-reform, rather than running ads to kill the plan.  It allowed Rahm Emmanuel to boast, “The very groups we have been talking to have been the most vocal opponents of health care reform; they are now becoming the vocal proponents for health care reform.”

But now the truth has come out.  Part of the negotiations between the Congressional Progressive Caucus, the Blue Dogs, and Rep. Henry Waxman that allowed HR 3200 to pass out of committee was a new amendment that would allow the public option to negotiate drug prices like the VA does (and very un-like Medicare Part D).  As predicted, that was the moment when Big Pharma stopped going easy on health care reform.  In a shocking display of chutzpah, PhRMA president Billy Tauzin took the rest of the deal public via the NY Times.  He had assurances from the White House and Sen. Baucus that Big Pharma would be shielded from further cuts to their bottom line from reforming health care.  The NY Times reports:  “The $80 billion in savings would be over a 10-year period. ‘80 billion is the max, no more or less,’ [Tauzin] said. ‘Adding other stuff changes the deal.’”  Tauzin’s clearly going public for one reason:  to kill the House bill provisions.

After all, in 2006, the top 10 pharmaceutical companies made over $39 billion in profits.  I’m sure they’d be on their way to the poorhouse if they were forced to make only $30 billion.

Let’s be honest:  capping savings in our health care system from PhRMA is giving away the farm.  The whole point of a public option is that it has incentive to lower costs and a large enough member base to get good discounts, like any other big group health insurance plan.  One of the reasons the VA has been able to deliver high quality care and lower costs than Medicare is the ridiculous provision in Medicare Part D that prohibits negotiating for the best rates (provisions, it should be noted, written by Mr. Tauzin when he was in the House).  For all the talk of a “level playing field,” this gives private insurance plans a marked advantage over the public health insurance option, and betrays one of the key reasons for health care reform:  that we can take common sense steps to lower costs.

It’s unacceptable.  Now that it’s out in the open, we need to tear it up and start over.

Write to Congress and the President -- tell them to tear up this deal!

(Photo credit:  pawpaw67 on Flickr.)