Memo Confirms Deal Between PhRMA and White House

Ryam Grim of the Huffington Post got his hands on a July 7 memo documenting the deal between PhRMA and the White House, which both are now denying but which was initially confirmed by Jim Messina, Deputy White House Chief of Staff to the New York Times. The memo was ostensibly written following the July 7 meeting at the White House between pharmaceutical industry representatives and members of the administration (who the White House refused to name).

It says the White House agreed to oppose any congressional efforts to use the government’s leverage to bargain for lower drug prices or import drugs from Canada — and also agreed not to pursue Medicare rebates or shift some drugs from Medicare Part B to Medicare Part D, which would cost Big Pharma billions in reduced reimbursements.

In exchange, the Pharmaceutical Researchers and Manufacturers Association (PhRMA) agreed to cut $80 billion in projected costs to taxpayers and senior citizens over ten years. Or, as the memo says: "Commitment of up to $80 billion, but not more than $80 billion."

The White House began negotiating with representatives of stakeholder groups including PhRMA in May after they submitted a proposal for reducing the growth rate of health care costs by 1.5% annually over the next ten years. The growth rate of health care costs is projected to be 6.2% per year. In agreeing to the cuts, the groups weren’t actually reducing what is being paid now, they were just agreeing to raise costs by only 4.5% each year instead of 6.2% per year. The "annual savings of $2,500 for a family of four" touted by Obama wasn’t actually savings out of what they’re currently paying, but rather what they would be paying if costs keep rising as they have been.

That’s what all the "bending the curve" talk is about that most of the public finds incomprehensible.

The White House first viewed the proposals on May 11. On June 6, a deal between the White House and major hospital associations for $150 billion in savings over the next 10 years was announced, though details of that deal are still not known. Just as in the PhRMA deal, Max Baucus and the Senate Finance Committee were key to the negotiations.

Increasing Medicare reimbursement rates to rural hospitals is one of the AHA’s objectives. On June 8, a "bipartisan" bill was introduced by Kent Conrad, Pat Robert, Tom Harkin and John Barrasso that would increase reimbursement rates to rural hospitals immediately (such that they wouldn’t have to wait for any health care bill to take effect in 2013). Both Conrad and Roberts are on the Senate Finance Committee.

The Blue Dogs began threatening to block the House health care bill if rural reimbursement rates were not increased shortly thereafter.

The American Hospital Association is also a part of the coalition running $12 million in advertising in the states of "centrist Senators" key to passing the Baucus deal.

The White House needs to be open and transparent about the deals that they cut, who was involved in making them, and what the ultimate impact on a health care package might be.

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