How Big Pharma's Billy Tauzin conned the White House out of $76 billion.

How to fix health policy.
Aug. 6 2009 7:02 PM

Obama's Biggest Health Reform Blunder

How Big Pharma's Billy Tauzin conned the White House out of $76 billion.

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Obama has taken tens and perhaps hundreds of billions of dollars off the table by ruling out an elementary cost-saving measure whose rejection by the Republican congressional majority back in 2003 is an ongoing scandal. What did he get in return? The hope that other sectors in the health care industry would get onboard with reform. But health reform's principal target—the insurance companies—not only refuses to endorse the creation of a public-option government health insurance program, the one essential component to major health care reform; it refuses even to stop hunting for trivial reasons to cancel insurance for policyholders after they develop expensive-to-treat illnesses. (See "Why You Can't Trust Your Health Insurer.") Mr. President, you've been played for a sucker.

[Update, 7:40 p.m.: Asked at today's White House briefing about the contradiction between the Tauzin deal and what the energy and commerce committee passed, Press Secretary Robert Gibbs said: "I do think—look, I think the goal of all of those at the table, particularly the president, is to see costs come down and to see progress made on that.  But I don't want to get ahead of negotiating what might be bill differences." This at least allows for the possibility that the White House will renege on its ill-advised bargain with PhRMA.]

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[Update, Aug. 7: The White House has graduated to making Clintonian-sounding distinctions about the meaning of its bargain with PhRMA. Bloomburg's James Rowley reports that White House deputy chief of staff Jim Messina told a meeting of Senate Democrats yesterday that the Tauzin deal (what follows is Rowley's paraphrase) "didn't require Obama to discourage Congress from requiring price negotiations for the Medicare program." Huh? The bottom line remains that it would be better for the White House to welsh than to honor this atrocious deal.]

[Update, Aug. 8: "Obama Reverses Stand on Drug-Industry Deal" reads a headline in today's New York Times. The story, alas, doesn't support that conclusion. "White House officials," reports the Times's David Kirkpatrick, "said Friday that Mr. Messina, the deputy chief of staff who sent the e-mail message, had not intended to confirm that the deal ruled out price negotiations." Possibly not. But the White House saying it did not intend to confirm something sidesteps the question of whether that something was true.

Meanwhile PhRMA, Kirkpatrick reports, has stopped complaining about being double-crossed by the House energy and commerce vote, "perhaps satisfied that the White House had at least ruled out the price rebates in the House bill." Does that mean the White House will take rebates out of the House bill? If so, that isn't much of a reversal; drug rebates aren't in the Senate health committee bill. (The Senate finance bill was still being written when the Senate broke yesterday for recess.) Also, Kirkpatrick's use of the word "perhaps" is difficult to parse. Is the Times reporter relating his own speculation, speculation coming out of the White House or PhRMA, or something a White House or PhRMA source told him off the record ("You can report this but make it sound like your own speculation")?

White House Press Secretary Robert Gibbs, when asked  about the Tauzin deal once again on Aug. 7, contiued to dodge the question. But he did say, "[W]e feel like $80 billion [in savings from the drug industry] is an appropriate amount, and I think the—I don't have the statistic in front of me, but I think the House bill has $85 billion in it. So I would argue that we're all in the same ballpark." Translation: "Never mind whether there's a deal to keep PhRMA's health-reform contribution to its promised $80 billion. All we want is $80 billion!" That doesn't sound like to me like the White House is reversing its stand.

In today's radio address, Obama said, "Let me start by dispelling the outlandish rumors that that reform will promote euthanasia, cut Medicaid or bring about a government takeover of health care. That's simply not true." Missing from Obama's litany was the accusation that the White House cut a secret deal with the pharmaceutical industry. Instead, Obama repeated his familiar refrain, "Drug companies have agreed to make prescription drugs more affordable for seniors." Yes, we know. But what will they get in return?]

Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.