Sunlight Foundation exposes the Obama-PhRMA deal of 2009

http://www.npr.org/templates/story/story.php?storyId=123889454

http://blog.sunlightfoundation.com/2010/02/12/the-legacy-of-billy-tauzin-the-white-house-phrma-deal/

We know that part of Obama's 2009 health care strategy was to avoid the Clinton mistakes (the private sector wasn't sufficiently included and greased, so it spent big bucks on ads to dissuade the public and pressure Congress against Hillarycare). So instead, the "transparent administration" made secret deals with various groups to preempt dissent and get them on board for health care reform. Hospitals, doctors, and the AARP won enough concessions and guarantees, so they signed on. The pharma industry (and its PhRMA lobbying group) was a key piece of the puzzle and needed to be assuaged. PhRMA is one of the biggest lobby groups in DC and responsible for the famous "Harry and Louise" ads during the Clinton years, so Obama wanted to avoid a repeat.

The deal leaked (we'll get into the reasons for this soon), and we soon discovered what a scam it was for consumers:
http://worldaffairs-manwnoname.blogspot.com/2009/08/health-care-overhaul.html

So in order to appease PhRMA and appear to be a victory for the people, Obama touted $80B in cost savings over 10 years. But in actuality, the other concessions in favor of pharma would total much more (Sunlight estimates $220B). Some have described it as a "windfall", since the millions of new customers required to purchase individual insurance (subsidized by the government or not) under Obamacare would invariably purchase more drugs. In addition, PhRMA got guarantees that Washington wouldn't tighten Medicare drug reimbursements (and would in fact expand them by closing a loophole), or permit re-importation of the exact same damn drugs from other developed, trustworthy nations at lower cost (e.g. the same pill in Canada may cost 30% less than in the US because their government actually cares about its citizens, so why can't Canada sell it back to Americans? Isn't that just market economics?). I find this shocking because as a Senator, Obama voted twice to amend Medicare drug laws to permit the very price negotiation and foreign drug re-importation components that he agreed to exclude from Obamacare! Maybe his Senate votes were just out of principle (since he knew Bush would veto any changes anyway), and as president he primarily wants to get some sort of bill passed that will cover the uninsured, not necessarily fix our expensive, broken system. But it's not good leadership to cover the uninsured at ludicrous cost to the rest of us through excessive industry concessions.

http://worldaffairs-manwnoname.blogspot.com/2009/12/importing-foreign-drugs.html

One condition that Obama's people insisted on was that PhRMA spend $100-150M on pro-health-care advertising. So not only would that powerful body refrain from attacking Obamacare, they would actually help sell it. Ironically, they brought back the same Harry and Louise actors to do a pro-reform commercial, I guess now that they are older and poorer from lost 401(k) value and soaring health costs vs. 1994 (http://www.youtube.com/watch?v=yz7iMJpQ2FQ). The company that PhRMA used to produce the ads is run by Obama's head campaign adviser David Axelrod's son (and Axelrod has major financial interests there). Change we can believe in? Of course they'd say that there was no quid-pro-quo, and they picked the company because it's one of the best. But Obama should know that even if it was all ethical and legit, it looks fishy. It's almost as bad as Anthem Blue Cross' horrible, callous timing to announce an up to 39% premium increase on some CA customers, during heated health care reform discussions last fall.  

So what happened to the deal and how do we even know about it? Obama and PhRMA agreed that health care negotiations would go through Max Baucus and his Senate committee, since Baucus was a pharma guy who could maintain control. But Henry Waxman (who has a much chillier relationship with pharma) was working on a rival bill to Baucus', without all the lucrative pharma concessions. PhRMA got concerned that Washington would pull a fast one, so PhRMA's head Billy Tauzin, a cancer survivor and former Louisiana Congressman (who flipped from the Dem to GOP side), snitched to the LA Times (maybe to get back at the White House), and later Obama's people had to admit that the deal existed. PhRMA and the CEOs of major drug companies still want health reform to pass (because it will be great for them in present form), so it's ironic that Tauzin's paranoia possibly compromised the entire reform effort.

Tauzin's background: he helped Bush's Medicare Modernization Act narrowly pass in 2003, which was the biggest change to Medicare in the program's history and more expensive than our Middle East wars (the GOP really cares about deficits and the size of government). It was a huge boon to pharma because it permitted drugs to be partially covered by Medicare (under "part D", as in DUMB), and prohibited government negotiation of cheaper drug prices with companies (which is what the government is supposed to do, and actually does for vets through the VA health system!). Don't get me wrong, I do think truly needy seniors deserve assistance with their prescriptions (if the drugs are really necessary for reasonable quality of life), but it should be through price negotiations and not corrupt subsidies that hurt taxpayers. Otherwise the bargaining power of Medicare is wasted. And for his effort, Tauzin became the new CEO of PhRMA with a $2.5M salary. Anyway, now that the health bill looks doomed and PhRMA wasted $100M plus on ads, Tauzin looks like a goat and recently decided to step down. Hollywood couldn't make this stuff up.

Other details: PhRMA spent $28M on lobbying in 2009 (and spent $390 over 3 years), and the whole industry spent $100M. PhRMA pays 165 lobbyists and outside consultants, of which 137 of them used to work in government.

Baucus health bill passing: historic progress but unimpressive impact

http://www.kqed.org/epArchive/R910140900

An interesting panel discussion of the recent Baucus health bill passage and challenges ahead. Some points to consider:

- This bill will increase the number of Americans covered by health insurance from ~85% now to 94% by 2014. Is that much to celebrate? And there is very little in the bill that would control costs, increase competition, or help under-insured individuals (some studies have shown that "health care cooperatives" would do little and may not even get off the ground). At least new rules would prohibit companies from rejecting customers based on pre-existing health conditions, but that would probably increase costs.

- Did Senator Snowe incur GOP ire by endorsing the Baucus bill (the only version without a public option currently in circulation) in order to actually help the GOP and pre-empt more liberal provisions such as the possibility of a public option?

- The Republicans have no health reform alternative, absolutely ZERO. They just want to impede action, but by doing so are missing a key opportunity to advance conservative changes. The GOP have spoken for years about reforming and trimming down Medicare/Medicaid, and now they could achieve it by playing ball and gaining concessions from the Dems for yes votes. But instead they are just the "Party of No".

- In order to get the 60 Senate votes to send the bill to the president's desk, all Dems, 2 Independents, and 1 Republican need to vote yes. It could be very close, because Senator Lieberman was not thrilled with the bill (many health insurance companies are based in CT).

- It will be very difficult to reconcile the arch-liberal and arch-conservative wings of the Dem Party, who are both against this middle-of-the-road bill for different reasons. House Dems are irate with the lack of a public option (which they see as integral to "real reform", and they are probably right).

- In order to keep this bill deficit-neutral (or positive), the "Cadillac" health plan tax (taxing the most generous health plans) and/or a tax on millionaire Americans seems inevitable. But unions are against the former (some union members enjoy Cadillac coverage), and the House is against the latter (no one wants to be labeled as a tax raiser prior to the 2010 midterms).

- By mandating that more Americans get coverage, it would help if coverage was more affordable, but that looks doubtful. And if families who can't afford coverage (even with more gov't subsidies) remain uncovered, they will be fined. On the flipside, the penalty is meager, so this may encourage more affluent people to game the system. While healthy, they will remain uninsured (since that will save them money overall, even after paying the fee), and then only purchase coverage when seriously ill (since they know they won't be rejected). This will of course increase costs to insurers, who will pass that along to us.

- The plan taxes comprehensive, low-cost, long-term delivery health systems such as Mayo Clinic, InterMountain Health Care, and Kaiser Permanente, even though Obama and others have touted those companies as models for reform. Why penalize the companies who are doing it well, and give their more wasteful competitors a pass?

- The financing for this bill is hardly transparent, and relies on many short-term gimmicks to balance costs. So even if it passes to law, it is likely that we will be doing this all over again in the near future. Also, the bill expands Medicaid eligibility (covering 11M more Americans, which in theory is good), which will be supposedly 90% covered by the feds. But states would still be on the hook for 5-22% of their own costs (which would range in the billions, depending on numerous factors). As we know, most states are in terrible financial shape, and the bipartisan National Governor's Association came out against the Baucus bill. The bills in the House would cover Medicaid expansions 100% by Washington.

- There is nothing in the bill to address Medicare/Medicaid physicians' reimbursement modernization. So as Congress is trying to cover more people under Medicaid, more and more doctors are turning away those patients because they make less money from them.

http://www.ama-assn.org/amednews/2009/09/28/gvsb0928.htm