Is the PhRMA Deal Blocking Greater Savings?

It didn’t take long.

At the end of June, news headlines touted the deal pharmaceutical industry had made with the White House to “spend $80 billion over 10 years to help older Americans afford medicines and to lower the cost of a proposed overhaul of the health care system.”

My post on the agreement questioned the industry’s motives by asking how much pharmaceutical manufacturers were actually saving themselves.

Now we begin to see the true cost of that deal.

Today the The New York Times reported that the White House is having to assuage the pharmaceutical industry’s worries about Congressional efforts to find more savings in health care spending:

“Pressed by industry lobbyists, White House officials on Wednesday assured drug makers that the administration stood by a behind-the-scenes deal to block any Congressional effort to extract cost savings from them beyond an agreed-upon $80 billion.

“Drug industry lobbyists reacted with alarm this week to a House health care overhaul measure that would allow the government to negotiate drug prices and demand additional rebates from drug manufacturers.

“In response, the industry successfully demanded that the White House explicitly acknowledge for the first time that it had committed to protect drug makers from bearing further costs in the overhaul. The Obama administration had never spelled out the details of the agreement.”

Congress, however, may not go along. The New York Times noted that House Speaker Nancy Pelosi has said “the House was not bound by any industry deals with the Senate or the White House.” Which has the pharmaceutical industry, represented by one of the most powerful and successful lobbies in Congress, the Pharmaceutical Research and Manufacturers of America (PhRMA), “ready to rumble”—as it has in the past. According to Congressional Quarterly:

“In a sharp departure from its tone of cooperation all year with Democrats, the Pharmaceutical Research and Manufacturers of America is warning that the health overhaul bill teed up for House floor action in September would ‘hurt patients’ and ‘kill jobs.’

“In a news release issued late Friday after passage of the Energy and Commerce Committee version of the bill (HR 3200), the powerful drug lobby also described the measure in terms likely to cause concern among seniors and those who worry that an overhaul would lead to government rationing of health care.

“Given the drug industry’s ample campaign coffers and its power to use television to shape public behavior, the news release is yet another sign of the big challenge House Democrats face during the August recess keeping the public on board with their brand of health overhaul...

“PhRMA stopped short of saying it would launch TV ads slamming the House bill, but language in the version approved late Friday by Energy and Commerce Committee giving the secretary of Health and Human Services power to negotiate prescription drug prices in Medicare guarantees some form of aggressive response.

“PhRMA regards that authority as a direct attack on the profitability of its member companies and its statement responding to the House bill pulled no punches.”

‘Voluntary’ deals such as the one the White House has made with the pharmaceutical industry have a history of not working. Take the recent collapse of investment banks. How could things have gone so wrong when they had agreed to voluntary regulation?

Can we expect any better of this deal with PhRMA? Probably not. But we can enforce fair savings on drug costs in Medicare through the law.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future