[Ip-health] Detailed Recap of White House-PhRMA Deal

[robert weissman]

    http://blog.sunlightfoundation.com/2010/02/12/the-legacy-of-billy-tauzi=
n-the-white-house-phrma-deal/#more-12694


    [extensive links and a video embedded in original]



    The Legacy of Billy Tauzin: The White House-PhRMA Deal
    <http://blog.sunlightfoundation.com/2010/02/12/the-legacy-of-billy-tauz=
in-the-white-house-phrma-deal/>

By Paul Blumenthal
<http://www.sunlightfoundation.com/people/pblumenthal> on 02/12/10 @
12:51 pm
<http://blog.sunlightfoundation.com/2010/02/12/the-legacy-of-billy-tauzin-t=
he-white-house-phrma-deal/>
|

More than a million spectators gathered before the Capitol on a frosty
January afternoon to witness the inauguration of Barack Obama, who
promised in his campaign to change Washington=92s mercenary culture of
lobbyists, special interest influence and backroom deals. But within a
few months of being sworn in, the President and his top aides were
sitting down with leaders from the pharmaceutical industry to hash out a
deal that they thought would make health care reform possible.

Over the following months, pharmaceutical industry lobbyists and
executives met with top White House aides dozens of times to hammer out
a deal that would secure industry support for the administration=92s
health care reform agenda in exchange for the White House abandoning key
elements of the president=92s promises to reform the pharmaceutical
industry. They flooded Congress with campaign contributions, and hired
dozens of former Capitol Hill insiders to push their case. How they did
it=97pieced together from news accounts, disclosure forms including
lobbying reports and Federal Election Commission records, White House
visitor logs and the schedule Sen. Max Baucus releases voluntarily
<http://wiki.opencongress.org/wiki/Max_Baucus/Schedule>=97is a testament
to how ingrained the grip of special interests remains in Washington.

In the 2008 campaign, Obama declared his intention to include all
stakeholders as he sought to reform the nation=92s health care system, but
also supported key Democratic health reform policies
<http://www.barackobama.com/2007/06/16/obama_says_drug_plan_could_sav.php>.
Among these were several that targeted the pharmaceutical industry:
Allowing re-importation of drugs from first world countries with lower
drug prices and providing Medicare with negotiating authority over
prescription drug prices in the recently enacted Part D program. These
weren=92t just promises, Obama had already voted for both of them as a
senator in 2007. (Roll Call Vote 132
<http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.c=
fm?congress=3D110&session=3D1&vote=3D00132>
and Roll Call Vote 150
<http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.c=
fm?congress=3D110&session=3D1&vote=3D00150>.)

Set to carry out this agenda were two Capitol Hill veterans, schooled in
the monied Washington culture, chief of staff Rahm Emanuel
<http://www.nytimes.com/2009/08/16/us/politics/16emanuel.html?_r=3D1> and
deputy chief of staff Jim Messina
<http://www.washingtonpost.com/wp-dyn/content/article/2009/02/20/AR20090220=
03853.html>.
Emanuel was a former fundraiser, Clinton administration official,
investment banker and member of the Democratic leadership in Congress.
Messina was the former campaign manager and chief of staff to the
powerful Senate Finance Committee chairman Max Baucus. Both were known
for their unparalleled legislative abilities.

Because of Obama=92s decision to develop a plan operating through the
legislative process, members of Congress also played key roles. Early
on, the pharmaceutical companies were told to deal directly with Senate
Finance Committee chairman Max Baucus
<http://www.nytimes.com/2009/08/06/health/policy/06insure.html>. Baucus
would be the vehicle for the deal worked out behind the scenes by the
White House and PhRMA.

Central to this effort was PhRMA president, CEO and top lobbyist Billy
Tauzin, a longtime Democratic member of Congress who switched party
affiliations after Republicans gained control of Congress in 1994. By
switching parties Tauzin was able to maintain his influence and even
rose to be Chairman of the House Committee on Energy & Commerce. Tauzin
became the poster child of Washington=92s mercenary culture. He crafted a
bill to provide prescription drug access to Medicare recipients, one
that provided major concessions to the pharmaceutical industry. Medicare
would not be able to negotiate for lower prescription drug costs and
reimportation of drugs from first world countries would not be allowed.
A few months after the bill passed, Tauzin announced that he was
retiring from Congress and would be taking a job helming PhRMA for a
salary of $2 million.

Tauzin=92s job change became fodder for a campaign ad that then
presidential candidate Barack Obama ran in the spring of 2008 simply
titled =93Billy <http://www.youtube.com/watch?v=3DNCRO0g9CfAw>.=94 It featu=
red
the candidate, sleeves rolled up, talking to a salon of gasping
Americans about the ways of Washington. =93The pharmaceutical industry
wrote into the prescription drug plan that Medicare could not negotiate
with drug companies. 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.=94 The screen fades to black to inform the
viewer that, =93Barack Obama is the only candidate who refuses Washington
lobbyist money,=94 while the candidate continues his lecture, =93Imagine
that. That=92s an example of the same old game playing in Washington. You
know, I don=92t want to learn how to play the game better, I want to put
an end to the game playing.=94

Aiding PhRMA in their outreach to Congress would be a squadron of
lobbyists to push their health care reform priorities. Over the course
of 2009, the drug industry trade group spent over $28 million
<http://www.opensecrets.org/lobby/clientsum.php?lname=3DPharmaceutical+Rsrc=
h+%26+Mfrs+of+America&year=3D2009>
on in house and hired lobbyists. Aside from PhRMA=92s massive in-house
lobbying operation, the trade group hired 48 outside lobbying firms. The
total number of lobbyists working for PhRMA in 2009 reached 165. Some
137 of those 165 lobbyists representing PhRMA were former employees of
either the legislative or executive branches. Of these dozens were
former congressional staffers including two former chiefs of staff to
Max Baucus.

According to data compiled by the Center for Responsive Politics, drug
makers contributed huge sums to congressional campaign committees
<http://www.opensecrets.org/industries/indus.php?ind=3DH04> during the
same period=97from January to the end of October (4th quarter numbers are
still being totaled), industry political action committees, employees
and their family members flooded lawmakers with over $8 million. Those
contributions tilted heavily to Democrats over Republicans by a 57 to 42
percent margin=97the first time in any election cycle going back to 1990,
the first year that the Center for Responsive Politics began tracking
industry giving, that Democrats were so favored. Given their majorities
on Capitol Hill, and the new President=92s intention to reform America=92s
health care system, the new tilt was perhaps not surprising.

***

Key Meetings Between White House, Max Baucus and Pharmaceutical
Companies [click here for a visual timeline]
<http://assets.sunlightfoundation.com/pdf/blog/MeetingSlideshow.pdf>
March 5, 2009 =09Billy Tauzin, President & CEO of PhRMA and Jeff Kindler,
CEO & Chairman of Pfizer, chairman-elect of the Board of PhRMA =09White Hou=
se
April 20, 2009 =09Kevin Sharer, CEO of Amgen =09Sen. Max Baucus
April 20, 2009 =09Kevin Sharer, CEO of Amgen =09White House
May 7, 2009 =09David Brennan, CEO of AstraZeneca, Chairman of Board of
Directors of PhRMA =09Sen. Max Baucus
May 8, 2009 =09David Brennan, CEO of AstraZeneca, Chairman of Board of
Directors of PhRMA =09White House
May 19, 2009 =09Billy Tauzin, President & CEO of PhRMA and James Hall,
PhRMA lobbyist =09White House
June 2, 2009 =09Billy Tauzin, President & CEO of PhRMA; James Hall, PhRMA
lobbyist; Kevin Sharer, CEO of Amgen; Jeff Kindler, CEO & Chairman of
Pfizer, chairman-elect of the Board of PhRMA; Miles White, CEO of Abbott
Laboratories =09White House
June 2, 2009 =09Billy Tauzin, President & CEO of PhRMA; Kevin Sharer, CEO
of Amgen; Jeff Kindler, CEO & Chairman of Pfizer, chairman-elect of the
Board of PhRMA; Miles White, CEO of Abbott Laboratories =09Sen. Max Baucus
July 7, 2009 =09Billy Tauzin, President & CEO of PhRMA; Kevin Sharer, CEO
of Amgen; Jeff Kindler, CEO & Chairman of Pfizer, chairman-elect of the
Board of PhRMA; Miles White, CEO of Abbott Laboratories (David Brennan,
CEO of AstraZeneca, Chairman of Board of Directors of PhRMA is also
listed in visitor logs for an appointment date) =09White House (Deputy
Chief of Staff Jim Messina; Chief of Staff Rahm Emanuel and Max Baucus=92
chief of staff Jon Selib are scheduled to meet at the same time;
Independent reports place Emanuel in the meeting)

On March 5, the White House held a meeting with major health care
industry leaders
<http://www.pbs.org/newshour/updates/health/jan-june09/healthcare_03-05.htm=
l>
to try to bring them to the table and see what could be done to gain
their support. In attendance were Billy Tauzin, president, CEO and top
lobbyist for PhRMA, Pfizer CEO Jeff Kindler, America=92s Health Care Plans
(AHIP) Chairman Karen Ignani, Tom Donohue of the Chamber of Commerce and
Robert Wood Johnson Foundations=92 Risa Lavizzo-Mourey. A day before the
White House meeting Tauzin appeared on CNBC
<http://business.theatlantic.com/2009/03/big_pharmas_top_lobbyist_said_what=
.php>
touting health care reform and promising to work closely with the Obama
administration. In the interview he touted it as an =93optimistic plan=94,
acknowledging that the industry did have a few problems but was glad to
have a chance to discuss these. Some were
<http://business.theatlantic.com/2009/03/big_pharmas_top_lobbyist_said_what=
.php>
caught dumb-founded
<http://corner.nationalreview.com/post/?q=3DNjQxZjZhYTc0ZjM2MDAxMjQ1NDY4NzN=
hZWEzNjg3YmM=3Dhttp://corner.nationalreview.com/post/?q=3DNjQxZjZhYTc0ZjM2M=
DAxMjQ1NDY4NzNhZWEzNjg3YmM=3D>
by this apparent change of heart on behalf of an industry long adverse
to health care reforms.

On April 15, Jim Messina and Jon Selib, chief of staff to Senate Finance
Committee chairman Max Baucus, convened a meeting at the headquarters of
the Democratic Senatorial Campaign Committee (DSCC) with leaders of
organized labor and health care groups, including PhRMA. At the meeting,
the groups decided to form two nonprofit entities to promote reform
efforts, Healthy Economy Now and Americans for Stable Quality Care, that
would be almost entirely funded by PhRMA
<http://www.politico.com/news/stories/1009/28362.html>. The two groups
spent $24 million on their advertising campaigns; the contract to
produce and place ads went to White House Senior Advisor David Axelrod=92s
former firm <http://www.politico.com/news/stories/0809/26240.html>,
AKPD, which owed Axelrod $2 million.

In the next month, CEO=92s from pharmaceutical companies would meet with
Baucus and administration officials at least four times. These talks
preceded a major public event at the White House, one critical to its
strategy to promote health care reform. On May 11, PhRMA and other trade
industry groups pledged cost cutting measures
<http://cnnmoney.printthis.clickability.com/pt/cpt?action=3Dcpt&title=3DHea=
lth+care+groups+propose+$2+trillion+in+cost+controls+-+May.+11,+2009&expire=
=3D-1&urlID=3D403007811&fb=3DY&url=3Dhttp://money.cnn.com/2009/05/11/news/e=
conomy/healthcare_reformproposals/index.htm&partnerID=3D2200>
to the White House that would save, they claimed, upwards of $2 trillion
over the next decade. President Obama announced the deal in the State
Dining Room, flanked by leaders of the various trade groups; the
administration followed up with a media blitz in the press and on the
White House Web site
<http://www.whitehouse.gov/blog/Coming-Together-Bringing-Down-Costs/>.

The next day, Healthy Economy Now=92s PhRMA funded ad campaign ran their
first advertisement <http://www.youtube.com/watch?v=3Dn0KuoAV6yt0> in
support of the health care reform process calling for the government to
finally =93fix=94 the nation=92s health care cost problems. While many
elements of the $2 trillion cost cutting pledge fell apart, the drug
industry remained committed to the process in the hopes that they could
ultimately win out and defeat the provisions they most feared in
closed-door meetings with the White House.

The first occurred on June 2. White House visitor logs show PhRMA=92s top
executives, including Tauzin, and industry CEOs met with Sarah Fenn from
the White House Office of Health Care Reform. On the same day, the
publicly available schedule of Senator Max Baucus shows Tauzin and the
same industry CEOs met the Senate Finance Committee chairman. What
ultimately resulted from these coordinated meetings would be revealed by
Baucus on June 20.

In a press release
<http://finance.senate.gov/press/Bpress/2009press/prb062009.pdf>
featuring a statement by Tauzin, Baucus revealed that the pharmaceutical
industry had accepted $80 billion in cost cutting measures to be
included in the Senate Finance Committee version of the bill. According
to news reports
<http://dyn.politico.com/printstory.cfm?uuid=3DBD18F267-18FE-70B2-A8F596002=
6D227DF>,
Baucus initially proposed $100 billion in cost cutting measures, but the
executives and lobbyists meeting on June 2 were able to win the lower
figure.

The terms of the initial cost-cutting deal included $30 billion go
directly towards closing the =93donut hole=94 in Medicare prescription drug
coverage. The =93donut hole=94 is a term for the gap in coverage that occur=
s
within the Medicare prescription drug coverage. For those purchasing
prescription drugs through the Medicare program coverage cuts off at
$2,700 spent and does not pick back up again until $6,154 is spent by
the participant. The amount proposed in the deal, 50 percent coverage
for drugs within the coverage gap, however, would not completely close
the =93donut hole.=94

In Baucus=92 press release, Tauzin is quoted as saying, =93This is a
once-in-a-lifetime opportunity and, working together, we can make this
hope for a better tomorrow a reality today.=94 This =93once-in-a-lifetime=
=94
opportunity also extended to the pharmaceutical industry=92s ability to
blunt the long-term Democratic agenda of lowering prescription drug
prices through Medicare negotiations, re-importation and quicker release
of generics onto the market. After making such a grand statement of
support through cost cutting proposals it was time for the
pharmaceutical industry to finally force the White House and Democrats
to take certain chips off the table.

Baucus proceeded with a plan to convene a bipartisan group
<http://www.nytimes.com/2009/07/28/us/politics/28baucus.html> in an
effort to craft the bill desired by the White House. These participants
included Democrats Kent Conrad and Jeff Bingaman and Republicans Chuck
Grassley, Mike Enzi and Olympia Snowe. Baucus=92 decision and the need to
solidify deals with groups like the pharmaceutical industry =96 which were
reliant on Baucus producing a bill =96 slowed down the legislative process
making it impossible for Congress to meet the White House=92s announced
August recess deadline
<http://www.huffingtonpost.com/2009/07/21/obama-defends-august-dead_n_24175=
5.html>
for passing health care reform.

Soon after, PhRMA=92s big guns and industry lobbyists paid the White House
another visit on July 7 and this time met with Rahm Emanuel and Jim
Messina (Baucus=92 chief of staff Jon Selib is also listed in White House
visitor logs for this meeting). In August, The Huffington Post=92s
<http://www.huffingtonpost.com/2009/08/13/internal-memo-confirms-bi_n_25828=
5.html>
Ryan Grim reported on an internal memo that was drafted at that meeting
that outlined the policies that would not be allowed into any final
version of health care reform. These included Medicare prescription drug
negotiations, drug re-importation, and the lowering of prices for drugs
available through Medicare Part D and Part B. The deal would be $80
billion in cost cutting and absolutely no more.

***

While the $80 billion deal was cut with Baucus=92 committee, other
congressional committees continued to mark-up their own versions of
health care reform without the knowledge that the White House was
relying on Baucus to produce the final product. In the House of
Representatives, the House Energy & Commerce Committee leveled a direct
threat to the $80 billion deal. Energy & Commerce Chair Henry Waxman
sought to include all of the provisions that PhRMA had gotten the White
House and Baucus to cut out of the reform bill. These included drug
reimportation, Medicare negotiating power and speedier release of
generics to the market. According to previous analysis of the measures
proposed by the committee, these measures would have totaled hundreds of
billions in cost cuts, far exceeding the $80 billion cap agreed to by
the White House, Baucus and PhRMA.

The cost cutting measures passed in the Energy & Commerce bill spooked
the board of PhRMA, which included all of the CEOs involved in the
deal-cutting meetings with the White House and Baucus. The board
pressured Tauzin to go public with the deal to ensure that the White
House would recognize it and not renege. On August 4, the Los Angeles
Times
<http://articles.latimes.com/2009/aug/04/nation/na-healthcare-pharma4>,
in an exclusive report, featured quotes from Tauzin claiming that a deal
between the White House and PhRMA existed and that, as Tauzin put it,
=93The White House blessed it.=94 Tom Hamburger wrote in the article, =93Fo=
r
his part, Tauzin said he had not only received the White House pledge to
forswear Medicare drug price bargaining, but also a separate promise not
to pursue another proposal Obama supported during the campaign:
importing cheaper drugs from Canada or Europe.=94

The White House=92s Jim Messina later confirmed Tauzin=92s claim, stating,
=93The president encouraged this approach =85 He wanted to bring all the
parties to the table to discuss health insurance reform.=94

Democratic lawmakers were furious. Rep. Raul Grijalva, chairman of the
Progressive Caucus, asked
<http://www.nytimes.com/2009/08/06/health/policy/06insure.html>, =93Are
industry groups going to be the ones at the table who get the first big
piece of the pie and we just fight over the crust?=94

***

On September 7, Baucus=92 bill made a private circulation on the Hill;
pharmaceutical industry cost-cutting did not exceed $80 billion. Five
days later, the New York Times
<http://prescriptions.blogs.nytimes.com/2009/09/12/drug-makers-plan-to-back=
-baucus-plan-with-ad-dollars/>
reported that PhRMA planned to spend up to $150 million in an
advertising blitz in support of Baucus=92 bill. The Times noted that the
ad spending =93=85would be a follow-up to the deal that drug makers struck
in June with Mr. Baucus and the White House.=94 On September 16, Baucus
released the full text of his legislation
<http://www.huffingtonpost.com/2009/09/16/health-care-bill-baucus-s_n_28821=
8.html>
to the public.

The White House, PhRMA and Baucus still had to fight a few battles to
keep the deal intact. The key amendment targeting the PhRMA deal in
committee mark-up came from Sen. Bill Nelson from Florida, which has one
of the largest Medicare participant populations in the nation. The pull
of constituent needs clearly put Bill Nelson into a position to push for
further cost cutting in Medicare prescription drug pricing. His target:
closing the =93donut hole=94 completely.

Nelson claimed that his amendment would generate $106 billion in revenue
<http://www.politico.com/livepulse/0909/Nelson_PhRMA_amendment_fails.html>,
or from PhRMA=92s perspective increase their cost-cutting to $186 billion.
That would be unacceptable to PhRMA, to Baucus, to the White House and
to the pharmaceutical industry who had made the deal. Other Senate
Democrats, Tom Carper and Robert Menendez voted with Republicans and
Baucus on the committee to defeat the amendment
<http://www.washingtontimes.com/news/2009/sep/24/panel-fails-overturn-white=
-house-deal-drugmakers/>.
It is little surprise the Carper=92s Delaware is home to AstraZeneca and
Menendez=92 New Jersey is home to Merck and Bristol-Myers-Squibb, all of
which lobbied for the $80 billion cap.

Senate Majority Leader Harry Reid introduced the final bill, with the
cap in place, on November 19. Debate began on Dec. 3, and with it come
one more attempt by members to change the terms of the deal. Senator
Byron Dorgan introduced an amendment that would allow for drug
re-importation, but as the date for voting drew near, the Federal Drug
Administration (FDA) released a letter
<http://thehill.com/homenews/senate/71307-fda-opposes-senate-drug-importati=
on-amendmen>
objecting to the proposal that echoed pharmaceutical industry talking
points: =93=85as currently written, the resulting structure would be
logistically challenging to implement and resource intensive. In
addition, there are significant safety concerns.=94 Dorgan=92s amendment wa=
s
defeated
<http://www.politico.com/livepulse/1209/BREAKING_Senate_rejects_Dorgan_amen=
dment.html>
with numerous Democrats previously in support of reimportation switching
to =93no=94 votes.

On Christmas Eve, the bill passed the Senate with the PhRMA deal fully
intact.

***

New Year=92s Eve passed with no further action on health care reform.
Public opinion regarding the health care reform bill had been slipping
throughout 2009. It reached a fulcrum in the special election to replace
the deceased senator Ted Kennedy in Massachusetts on January 19, 2010.
Newly minted senator Scott Brown campaigned that he would be the senator
to provide Republicans with the votes to filibuster the final health
care reform bill. Democrats ran for cover. Despite having the largest
majorities of any party since the 1970s, Democrats put the brakes on
their agenda, particularly health care reform.

In the end, the pharmaceutical industry=92s support for health care reform
would be left up in the air. After spending $100 million in advertising
in support of legislation that Tauzin and key executives hoped would be
a windfall for the pharmaceutical industry, the legislative process had
flat-lined. In February, the board of PhRMA, split over the deal cut by
Tauzin, pushed Tauzin to resign his post
<http://thecaucus.blogs.nytimes.com/2010/02/11/health-reform-in-limbo-top-d=
rug-lobbyist-quits/?partner=3Drss&emc=3Drss>.

In an interview with Diane Sawyer
<http://www.politico.com/livepulse/0110/Obama_concedes_talks_raised_legitim=
ate_concerns.html>,
President Obama owed up to failures in the process of passing health
care reform, =93[T]he health care debate as it unfolded legitimately
raised concerns not just among my opponents, but also amongst supporters
that we just don=92t know what=92s going on =85 And it=92s an ugly process =
and
it looks like there are a bunch of back room deals.=94