By Peter Baker
New York Times, June 09, 2012
WASHINGTON – After weeks of quiet talks, drug industry lobbyists were growing nervous. If they were to cut a deal with the White House on overhauling health care, they needed to be sure President Obama would stop a proposal by his liberal allies intended to bring down medicine prices.
On June 3, 2009, one of the lobbyists e-mailed Nancy-Ann DeParle, the president’s top health care adviser. Ms. DeParle sent a message back reassuring the lobbyist. Although Mr. Obama was overseas, she wrote, she and other top officials had “made decision, based on how constructive you guys have been, to oppose importation on the bill.”
Just like that, Mr. Obama’s staff abandoned his support for the reimportation of prescription medicines at lower prices and with it solidified a growing compact with an industry he had vilified on the campaign trail the year before. Central to Mr. Obama’s drive to overhaul the nation’s health care system was an unlikely collaboration with the pharmaceutical industry that forced unappealing trade-offs.
The e-mail exchange that day three years ago was among a cache of messages obtained from the industry and released in recent weeks by House Republicans – including a new batch put out on Friday morning detailing the industry’s advertising campaign in favor of Mr. Obama’s proposal. The broad contours of the president’s dealings with the drug industry were known in 2009 but the newly public e-mails open a window into the compromises underlying a health care overhaul now awaiting the judgment of the Supreme Court.
Mr. Obama’s deal-making in 2009 represented a pivotal moment in his young presidency, a juncture where the heady idealism of the campaign trail collided with the messy reality of Washington policymaking. A president who had promised to air negotiations on C-Span cut a closed-door deal with the powerful pharmaceutical lobby, signifying to some disillusioned liberal supporters a loss of innocence, or perhaps even the triumph of cynicism.
But if it was a Faustian bargain for the president, it was one he deemed necessary to forestall industry opposition that had thwarted efforts to cover the uninsured for generations. Without the deal, in which the industry agreed to provide $80 billion for health reform in exchange for protection from policies that would cost more, Mr. Obama and Democratic allies calculated he might get nowhere.
“There was no way we had the votes in either the House or the Senate if PhRMA was opposed – period,” said a senior Democratic official involved in the talks, referring to the Pharmaceutical Research and Manufacturers of America, the drug industry trade group.
Republicans see the deal as hypocritical. “He said it was going to be the most open and honest and transparent administration ever and lobbyists won’t be drafting the bills,” said Representative Michael C. Burgess of Texas, one of the Republicans on the House Energy and Commerce subcommittee that is examining the deal. “Then when it came time, the door closed, the lobbyists came in and the bills were written.”
Some of the liberals bothered by the deal-making in 2009 now find the Republican criticism hard to take given the party’s long-standing ties to the pharmaceutical industry.
“Republicans trumpeting these e-mails is like a fox complaining someone else raided the chicken coop,” said Robert Reich, the former labor secretary under President Bill Clinton. “Sad to say, it’s called politics in an era when big corporations have an effective veto over major legislation affecting them and when the G.O.P. is usually the beneficiary. In this instance, the G.O.P. was outfoxed. Who are they to complain?”
Dan Pfeiffer, the White House communications director, said the collaboration with industry was in keeping with the president’s promise to build consensus.
“Throughout his campaign, President Obama was clear that he would bring every stakeholder to the table in order to pass health reform, even longtime opponents like the pharmaceutical industry,” Mr. Pfeiffer said. “He understood correctly that the unwillingness to work with people on both sides of the issue was one of the reasons why it took a century to pass health reform.”
In a statement, PhRMA said that its interactions with Mr. Obama’s White House were part of its mission to “ensure patient access” to quality medicine and to advance medical progress.
“Before, during and since the health care debate, PhRMA engaged with Congress and the administration to advance these priorities,” said Matthew Bennett, the group’s senior vice president.
Representative Henry Waxman of California, the top Democrat on the House committee and one of those who balked at Mr. Obama’s deal in 2009, now defends it as traditional Washington lawmaking.
“Presidents have routinely sought the support and lobbying clout of private industry in passing major legislation,” Mr. Waxman’s committee staff said in a memo released in response to the e-mails. “President Obama’s actions, for example, are no different than those of President Lyndon B. Johnson in enacting Medicare in 1965 or President George W. Bush in expanding Medicare to add a prescription drug benefit in 2003.”
Still, what distinguishes the Obama-industry deal is that he had so strongly rejected that very sort of business as usual. During his campaign for president, he specifically singled out the power of the pharmaceutical industry and its chief lobbyist, former Representative Billy Tauzin, a Democrat-turned-Republican from Louisiana, as examples of what he wanted to change.
“The pharmaceutical industry wrote into the prescription drug plan that Medicare could not negotiate with drug companies,” Mr. Obama said in a campaign advertisement, referring to Mr. Bush’s 2003 legislation. “And you know what? The chairman of the committee who pushed the law through went to work for the pharmaceutical industry making $2 million a year.
“Imagine that,” Mr. Obama continued. “That’s an example of the same old game playing in Washington. You know, I don’t want to learn how to play the game better. I want to put an end to the game playing.”
After arriving at the White House, though, he and his advisers soon determined that one reason Mr. Clinton had failed to pass health care reform was the resilient opposition of industry. Led by Rahm Emanuel, his chief of staff and a former House leader, and Jim Messina, his deputy, White House officials set out to change that dynamic.
The e-mails, which the House committee obtained from PhRMA and other groups after the White House declined to provide correspondence, document a tumultuous negotiation, at times transactional, at others prickly. Each side suspected the other of betraying trust and operating in bad faith.
The White House depicted in the message traffic comes across as deeply involved in the give-and-take, and not averse to pressure tactics, including having Mr. Obama publicly assail the industry unless it gave in on key points. In the end, the White House got the support it needed to pass its broader priority, but industry emerged satisfied as well. “We got a good deal,” wrote Bryant Hall, then senior vice president of the pharmaceutical group.
Mr. Bryant, now head of his own firm, declined to comment. So did Mr. Emanuel, now mayor of Chicago; Mr. Messina, now the president’s campaign manager; and Ms. DeParle, now a White House deputy chief of staff. Mr. Tauzin, who has left his post as the industry’s lobbyist, did not respond to messages.
The latest e-mails released on Friday underscore the detailed discussions the two sides had about an advertising campaign supporting Mr. Obama’s health overhaul.”They plan to hit up the ‘bad guys’ for most of the $,” a union official wrote after an April meeting with Mr. Messina and Senate Democratic aides. “They want us to just put in enough to be able to put our names in it – he is thinking @100K.”
In July, the White House made clear that it wanted supportive ads using the same characters the industry used to defeat Mr. Clinton’s proposal 15 years earlier. “Rahm asked for Harry and Louise ads thru third party,” Mr. Hall wrote.
Industry and Democratic officials said privately that the advertising campaign was an outgrowth of the fundamental deal, not the goal of it. The industry traditionally advertises in favor of legislation it supports.
Either way, talks came close to breaking down several times. In May, the White House was upset that the industry had not signed onto a joint statement. One industry official wrote that they should sign: “Rahm is already furious. The ire will be turned on us.”
By June, it came to a head again. “Barack Obama is going to announce in his Saturday radio address support for rebating all of D unless we come to a deal,” Mr. Hall wrote, referring to a change in Medicare Part D that would cost the industry.
In the end, the two sides averted the public confrontation and negotiated down to $80 billion from $100 billion. But the industry believed the White House was rushing an announcement to deflect political criticism.
“It’s pretty clear that the administration has had a horrible week on health care reform, and we are now getting jammed to make this announcement so the story takes a positive turn before the Sunday talk shows beat up on Congress and the White House,” wrote Ken Johnson, a senior vice president of the pharmaceutical organization.
In the end, House Democrats imposed some additional costs on the industry that by one estimate pushed the cost above $100 billion, but the more sweeping policies the firms wanted to avoid remained out of the legislation. Mr. Obama signed the bill in March. He had the victory he wanted.
ObamaCare’s Secret HistoryHow a Pfizer CEO and Big Pharma colluded with the White House at the public’s expense.
Wall Street Journal
June 12, 2012
On Friday House Republicans released more documents that expose the collusion between the health-care industry and the White House that produced ObamaCare, and what a story of crony capitalism it is. If the trove of emails proves anything, it’s that the Tea Party isn’t angry enough.
Over the last year, the Energy and Commerce Committee has taken Nancy Pelosi’s advice to see what’s in the Affordable Care Act and how it passed. The White House refused to cooperate beyond printing out old press releases, but a dozen trade groups turned over thousands of emails and other files. A particular focus is the drug lobby, President Obama’s most loyal corporate ally in 2009 and 2010.
The business refrain in those days was that if you’re not at the table, you’re on the menu. But it turns out Big Pharma was also serving as head chef, maître d’hotel and dishwasher. Though some parts of the story have been reported before, the emails make clear that ObamaCare might never have passed without the drug companies. Thank you, Pfizer.
The joint venture was forged in secret in spring 2009 amid an uneasy mix of menace and opportunism. The drug makers worried that health-care reform would revert to the liberal default of price controls and drug re-importation that Mr. Obama campaigned on, but they also understood that a new entitlement could be a windfall as taxpayers bought more of their products. The White House wanted industry financial help and knew that determined business opposition could tank the bill.
Initially, the Obamateers and Senate Finance Chairman Max Baucus asked for $100 billion, 90% of it from mandatory “rebates” through the Medicare prescription drug benefit like those that are imposed in Medicaid. The drug makers wheedled them down to $80 billion by offsetting cost-sharing for seniors on Medicare, in an explicit quid pro quo for protection against such rebates and re-importation. As Pfizer’s then-CEO Jeff Kindler put it, “our key deal points . . . are, to some extent, as important as the total dollars.” Mr. Kindler played a more influential role than we understood before, as the emails show.
Thus began a close if sometimes dysfunctional relationship with the Pharmaceutical Research and Manufacturers of America, or PhRMA, as led by Billy Tauzin, the Louisiana Democrat turned Republican turned lobbyist. As a White House staffer put it in May 2009, “Rahm’s calling Nancy-Ann and knows Billy is going to talk to Nancy-Ann tonight. Rahm will make it clear that PhRMA needs a direct line of communication, separate and apart from any coalition.” Nancy-Ann is Nancy-Ann DeParle, the White House health reform director, and Rahm is, of course, Rahm.
Terms were reached in June. Mr. Kindler’s chief of staff wrote a memo to her industry colleagues explaining that “Jeff would object to me telling you that his communication skills and breadth of knowledge on the issues was very helpful in keeping the meeting productive.” Soon the White House leaked the details to show that reform was making health-care progress, and lead PhRMA negotiator Bryant Hall wrote on June 12 that Mr. Obama “knows personally about our deal and is pushing no agenda.”
But Energy and Commerce Chairman Henry Waxman then announced that he was pocketing PhRMA’s concessions and demanding more, including re-importation. We wrote about the double-cross in a July 16, 2009 editorial called “Big Pharma Gets Played,” noting that Mr. Tauzin’s “corporate clients and their shareholders may soon pay for his attempt to get cozy with ObamaCare.”
Mr. Hall forwarded the piece to Ms. DeParle with the subject line, “This sucks.” The duo commiserated about how unreasonable House Democrats are, unlike Mr. Baucus and the Senators. The full exchange is among the excerpts from the emails printed nearby.
Then New York Times reporter Duff Wilson wrote to a PhRMA spokesman, “Tony, you see the WSJ editorial, ‘Big Pharma Gets Played”? I’m doing a story along that line for Monday.” The drug dealers had a problem.
The White House rode to the rescue. In September Mr. Hall informed Mr. Kindler that deputy White House chief of staff Jim Messina “is working on some very explicit language on importation to kill it in health care reform. This has to stay quiet.”
PhRMA more than repaid the favor, with a $150 million advertising campaign coordinated with the White House political shop. As one of Mr. Hall’s deputies put it earlier in the minutes of a meeting when the deal was being negotiated, “The WH-designated folks . . . would like us to start to define what ‘consensus health care reform’ means, and what it might include. . . . They definitely want us in the game and on the same side.”
In particular, the drug lobby would spend $70 million on two 501(c)(4) front groups called Healthy Economy Now and Americans for Stable Quality Care. In July, Mr. Hall wrote that “Rahm asked for Harry and Louise ads thru third party. We’ve already contacted the agent.”
Mr. Messina—known as “the fixer” in the West Wing—asked on December 15, 2009, “Can we get immediate robo calls in Nebraska urging nelson to vote for cloture?” Ben Nelson was the last Democratic holdout toward the Senate’s 60-vote threshold, and, as Mr. Messina wrote, “We are at 59, we have to have him.” They got him.
At least PhRMA deserves backhanded credit for the competence of its political operatives—unlike, say, the American Medical Association. A thread running through the emails is a hapless AMA lobbyist importuning Ms. DeParle and Mr. Messina for face-to-face meetings to discuss reforming the Medicare physician payment formula. The AMA supported ObamaCare in return for this “doc fix,” which it never got.
“We are running out of time,” this lobbyist, Richard Deem, writes in October 2009. How can he “tell my colleagues at AMA headquarters to proceed with $2m TV buy” without a permanent fix? The question answers itself: It was only $2 million.
***Mr. Waxman recently put out a rebuttal memo dismissing these email revelations as routine, “exactly what Presidents have always done to enact major legislation.” Which is precisely the point—the normality is the scandal. In 2003 PhRMA took a similar road trip with the Bush Republicans to create the Medicare drug benefit. That effort included building public support by heavily funding a shell outfit called Citizens for a Better Medicare.
Of course Democrats claim to be above this kind of merger of private profits and political power, as Mr. Obama did as a candidate. “The pharmaceutical industry wrote into the prescription drug plan that Medicare could not negotiate with drug companies,” he said in 2008. “And you know what? The chairman of the committee who pushed the law through”—that would be Mr. Tauzin— “went to work for the pharmaceutical industry making $2 million a year.”
Outrage over this kind of cronyism is what animates the Tea Party and Occupy Wall Street, whose members aren’t powerful enough to get special dispensations from the government—or even a fair hearing from their putative representatives.
In one email, an AARP lobbyist writes the White House to say “We really need to talk,” noting that calls from seniors are running 14 to one against ObamaCare. But she isn’t calling to say that AARP is withdrawing support—only that the White House needs to adjust its messaging. This is how a bill passes over the objections of most Americans.
The lesson for Republicans if they do end up running the country next year is that their job is to restore the free and fair market that creates broad-based economic growth. The temptation will be to return for the sake of power to the methods of Tom DeLay and Jack Abramoff. If they do, voters will return the GOP to private life as surely as they did the Democrats in 2010.
The warning to business is also fundamental. Crony capitalism undermines public trust in capitalism itself and risks blowback that erodes the free market that private companies need to prosper and that underlies the productivity and competitiveness of the U.S. economy. The political benefits of cronyism are inherently temporary, but the damage it does is far more lasting.
As for Big Pharma, the lobby ultimately staved off Mr. Waxman’s revolt and avoided some truly harmful drug policies—for now. But over the long term their products are far more vulnerable to the command-and-control central planning that will erode medical innovation, and their $80 billion fillip is merely the teaser rate.
Mr. Kindler resigned from Pfizer in December 2010 under pressure from directors, its stock having lost 35% of its value since he became CEO. Mr. Tauzin left PhRMA in February 2010, with the Affordable Care Act a month from passage.
The truth is that this destructive legislation wasn’t inevitable and far better reforms were possible. They still are, though they might have gained more traction in 2009 and 2010 with the right support. The miracle is that, despite this collusion of big government and big business, ObamaCare has received the public scorn that it deserves.