Last month, Ryan Grim at Huffington Post uncovered an internal memo outlining the secret deal made between Baucus, the White House, and PhRMA. According to Grim,

Representatives from both the White House and PhRMA, shown the outline, adamantly denied that it reflected reality. PhRMA senior vice president Ken Johnson said that the outline "is simply not accurate." "This memo isn’t accurate and does not reflect the agreement with the drug companies," said White House spokesman Reid Cherlin.

After completing my preliminary reading of the Chairman’s Mark of the Baucus bill, it appears that Baucus has followed the deal outlined in the memo quite faithfully. Baucus’ bill would increase the Medicaid rebates from 15.1% to 23.1% (page 53). It would provide Medicare part D patients in the donut hole a 50% discount of brand name prescription drugs (page 122).

In accord with the internal memo, the Baucus bill does nothing to change current law regarding drug re-importation from cheaper countries. It does not contain the Medicaid/Medicare dual eligibility rebate promoted by Henry Waxman. It does not allow Medicare to directly negotiate drug prices which was added to House Energy and Commerce committee bill. There also appears to be no change to Medicare Part B in reference to pharmaceuticals.

Baucus bill differs from the memo in only two points. There does not appear to be any change to current law regarding follow on biologics, FOBs. The Baucus bill also imposes an annual fee of $2.3 billion on the entire drug sector ($23 billion total) which is more than what the memo says (page 214). If you do combine the $12 billion agreed to fee with the $9 billion agreed to savings from FOBs (which appear not to be in the bill) it is a total of $21 billion. Overall it appears that the internal memo uncovered by Grim very accurately reflects a secret deal Baucus and Obama cut with PhRMA.

Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at