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Yesterday, it seemed that the Huffington Post’s Ryan Grim had a scoop. He reported that Huffington has obtained a memo that “confirms” that the White House and the pharmaceutical lobby secretly made a deal—the deal that I wrote about a few days ago in a post titled “What Was Billy Tauzin Thinking?” According to the memo, the White House supposedly pledged to oppose any Congressional efforts to let Medicare negotiate for discounts on drugs, or to import drugs from Canada.
The memo in question turns out to be typed—and unsigned. How does the reporter know that it is authentic? “A knowledgeable health care lobbyist” told him so. According to the lobbyist the memo “was prepared by a person directly involved in the negotiations [and it] lists exactly what the White House gave up, and what it got in return.
Wait a minute. As PhRMA senior vice president Ken Johnson points out later in the story: “Anyone could have written it. Unless it comes from our board of directors, it's not worth the paper it's written on. . . .”
And who is the “knowledgeable lobbyist” who gave the memo to Huffington? His name is not disclosed.
What we have then, is a story based on what one unnamed source says—and a typed memo that probably is untraceable.
Grim acknowledges that “Representatives from both the White House and PhRMA, . . . adamantly denied that the memo reflected reality. PhRMA senior vice president Ken Johnson said that the outline “simply not accurate.’
“‘This memo isn't accurate and does not reflect the agreement with the drug companies,’ said White House spokesman Reid Cherlin.”
Admittedly, I didn’t go to Journalism School, but it’s my impression, as a working journalist, that you really can’t base a story on one unnamed source. Looking for a reality check, I ran the story past Gary Schwitzer, a highly respected professors journalism professor at the University of Minnesota’s School of Journalism & Mass Communication. Schwitzer is also the publisher of HealthNewReview.org, a superb media watchdog that helps keep healthcare news honest by reviewing medical stories.
Schwitzer confirmed my gut instinct: “There are never any hard and fast rules for journalism, but it is widely established that single-source journalism is a bad idea- and in a case like this it seems egregious. Even when Woodward & Bernstein broke the Watergate story, “Deep Throat” forced them to confirm what he said with other sources. This story seems to violate the fundamentals of ethical journalism.”
Reflecting on how the media has handled the healthcare reform story in recent weeks Schwtizer added: “This is crazy—just crazy. The foment that is being stirred up is blindfolding us—and throwing out obstacles that block the rational conversation about healthcare reform that we should be having.”
Oddly, while Grim linked to the August 5 New York Times story where former-Congressman-turned-Pharma- lobbyist Billy Tauzin, claimed that the White House had cut a “deal” with drug-makers, the Huffington Post correspondent totally ignored a second New York Times story, published two days later, that reported:
“In a telephone interview, Linda Douglass, a White House spokeswoman on health matters, said the question of government drug-price bargaining ‘was not discussed during the negotiations.’ Asked if that meant such a provision was excluded, as the top drug lobbyists had previously said, Ms. Douglass declined to comment, repeating, ‘It was not discussed.’” The Times reported that a senior Pharma official confirmed that the White House had not promised anything.
The Times added: “Several people involved in the negotiations of the original drug industry deal with the White House said there had been some ambiguity in the original discussions, conducted primarily through the Senate Finance Committee, over whether the overhaul might include the government negotiations of drug prices.”
The New York Times reporter did what journalists do: he talked to more than one source. He was able to quote more than one source by name. After reading the story, it seemed to me likely that Senator Max Baucus, chairman of the Senate Finance Committee may have given Pharma certain assurances—it is impossible know. But there is no evidence that the president signed off on any deal.
Nevertheless, a week later, Huffington headlined its “scoop” with great confidence: “Internal Memo Confirms Big Giveaways In White House Deal With Big Pharma.” And, at the end of the article, Grim writes as if the “deal” is now an established fact: “Opponents of the deal with Pharma hope that Obama is playing a multilayered game, making a deal in order to keep the drug makers in his camp for now, but planning to double-cross them in the end if he needs to in order to pass his signature initiative.” Grim offers no evidence that President Obama was planning a “double-cross”; it certainly doesn’t seem the president’s style.
Yet, the Huffington Post story is being repeated, with relish, throughout the blogosphere. I haven’t been able to find a single skeptical voice. No one is questioning the evidence. It seems that a great many bloggers want to believe that the President is lying, and that he cut an unholy deal with BillyTauzin.
Over at Time/CNN’s Swampland, for instance (http://swampland.blogs.time.com/2009/08/13/obama-the-drug-companies-pesky-facts-etc/) Michael Scherer wrote about the memo Huffington had acquired without even mentioning that the White House denied its accuracy—until a reader commented: “Funny that you don't point out that in Grim's reporting the White House AND the Big Pharma rep both deny that the memo is accurate at all.”
Scherer then added that fact to the story.
Scrolling through readers’ responses to Scherer’s piece, I couldn’t help but notice how many readers questioned the tale of a secret memo confirming that the White House had made a quid-pro-quo deal with Pharma.
For example: “If the two people involved in a deal, both big pharma and the White House, both say the memo isn't accurate, is that really a ‘confirmation’? Im just sayin. . .’”
Or this comment addressed to the reporter: “please . . . get back to us with facts and statements on which we can base a discussion? Please?”
It seems that at least part of the public is getting fed up with the media’s Obama-bashing.
Nevertheless, the Huffington Post sticks by its story, and 20 hours ago, published a piece describing how reporters assailed White House spokesman Robert Gibbs, demanding to know what the White House gave up in return for Pharma’s support.
"Stepping back a minute on the PhRMA deal, are we to believe that PhRMA didn't get anything for their agreement on the $80 billion; that they did not get anything in return from the White House, any pledges, promises, winks, nods, whatever? Are we to believe nothing was promised to them?" asked NBC’s Chuck Todd.
“‘Well, again, I'm simply — was responding to what the question was about a memo that I think both sides…’ Gibbs responded –before Todd cut him off.”
"’Forget the memo a minute,’ Todd said. ‘Can you answer that — can you answer that question? Were they — can you say for sure they were promised nothing in return?’
Gibbs answered the question again: “’I'm reissuing the denial that I think is in the story that you're referring to, on our behalf and on PhRMA's behalf.’”
The Huffington Post’s Grim still wasn’t satisfied: “Todd's question stands unanswered: Are we to believe that PhRMA didn't get anything for their agreement on the $80 billion?’"
Apparently Grim has absolutely no idea how much Pharma earns: $80 billion over ten years is a paltry sum. As I explained in June when drug-makers came forward with this offer: “In 2009 prescription drug sales in the U.S. will total $252 billion. Meanwhile, if sales continue to rise—and drug-makers continue to hike prices at the current rate, spending on drugs is expected to double between 2014 and 2018. By 2019, Pharma hopes to rake in over $500 billion in U.S. sales.
“In that context, giving up $80 billion over ten years is not a huge sacrifice. Pretend that the $80 billion is spread out evenly, $8 billion a year. This means that in 2019, instead of showing revenues of $500 billion, the industry would have to make do with $492 billion. As I reported at the time when the announcement about the $80 was made, President Obama said “this is a first step,” And I added, “Pharma is going to have to do more.”
Apparently the House agrees. The House bill contains language authorizing Medicare to bargain for discounts. The plain fact is that the economy cannot continue to keep the drug industry in the style to which it is accustomed. Here’s the bottom line: current projections suggest that in 2019, we will be spending $492 billion on drugs—roughly twice what we spend now. But unless GDP doubles, we , as a society, simply cannot afford to spend $492 billion on drugs in 2019.
Let me repeat: Pharma will have to “give up” more.
“Deal on no deal” Big PhRMA is on the ropes.
I am advising friends and family to leave their jobs if employed there and advise all to dump their Big PhRMA stocks.
This is a former miracle industry gone completely sour.
This industry is in for much more regulation than the relatively free ride they have especially had over the past 30 years.
Dr. Rick Lippin
Southampton,Pa
Dr. Rick–
I agree– and so does WAll Stret– see where the big pharma stocks are now.
Pharma needs to be regulated, and will be.
It’s odd that big investors (many of them
conservatives) have figurec this out while suppoed liberals like Baucus believe that they can save the industry’s profits.
Drug prices are recognized as an important component of excessive healthcare costs, and can only be significantly ameliorated through a thorough overhaul of the process by which new drugs are created and marketed.
Is it a breech of etiquette to refer here to material I posted on this subject in another blog? If not, readers would find a perspective on the motivations for creating new drugs that might not be obvious to those who don’t do science. The link is at
http://tpmcafe.talkingpointsmemo.com/talk/blogs/fredmoolten/2009/06/prescription-drug-costs-can-be-2.php
Fred Moolten
Fred–
I read your blog on tpm and recommend it to others.
At one time, the Pharma industry was primarily concerned with marketing, packaging and distirbution.
Research was done by scientists working in non-profit settings.
This was a much better system.
Profits didn’t set research priorities the way they do now. (We have many more allergy medications than we need because it’s easy to sell them. Did you know that fully 1/3 of Americans who take allergy medications don’t have allergies?)
Research on medications that might slow or cure Alzheimer’s are not as appealing to for-profit organizations: the odds of
develping something that you can sell any time in the near future are very, very slim. And Wall Street (shareholders) are looking for short-term gains in earnings.
Citizens simply don’t trust government officials. So it is easy to believe that many on the inside of the Obama admin has been tempted by the dark side, and at least a few have either sold out or were rotten to begin with.
This is the problem with putting hopes on government action.
Doesn’t make much difference now. Democratic plans for Health Care Reform are dead in the water. The “boogeyman” has scared the “bejeebies” out of the American public!
HHS Secretary Kathleen Sebelius says it is not essential that a public option be in the legislation. President Obama said on Saturday that he won’t insist on a public option.
Without the public option, there will be no competition in the market. The large for-profit insurers will continue to have a huge advantage. The public has no objection to that!
Access to basic health care has deteriorated terribly in this country by the free-market system, because much of the growth in expense is in procedures performed by specialists, and doctors who work in these specialty areas have the most to fear from a public option plan.
Big government would be more responsive to the people than big insurance, and doctors would have worked independently, and not for the government.
But private insurers will keep placating physicians because they fit into their overall plan. Doctors will continue becoming employees of the hospitals, instead of remaining as independent contractors, and we’ll continue to have a corporate bureaucrat between you and your doctor.
Looking out for “the healthcare bubble!”
Gregory & Joe
I too am very, very concerned.
But– I don’t see Sebelius as the decision-maker in the White House on healthcare reform.
I could easily be wrong.
But until I hear this from Orszag or Obama–I’m not convinced.
Maggie – As the public option issue takes center stage, I would like your view of a healthcare system in which all medical care except long-term care and care for the disabled is covered exclusively by private insurers under a government regulatory system that reqires all to provide basic benefits, accept all comers, charge a single rate, and be subject to oversight and review. The link to the Netherlands healthcare system is
http://en.wikipedia.org/wiki/Health_care_in_the_Netherlands
I don’t believe the approaches of that society can be transferred unaltered to a society as large and heterogeneous as ours, and I would prefer a public option to keep insurers honest, given that we would not be able to exert the same oversight as the Dutch.
On the other hand, I believe their exerience is something of a caution to anyone who would argue that private insurance is unacceptable by definition. What appears to work well in the Netherlands is a system with considerable competition among insurers, who must all meet basic societal needs and are not allowed to cheat (cherry-picking, denial of claims, discriminatory rates for illness, etc.) Under those circumstances, there still may be excessive cosgts due to duplicate paperwork, marketing costs, etc., but they appear not to be exorbitant.
What is your assessment?
Fred Moolten
Fred
Fred–Private insurers in the Netherlands, like all corproations in the Netherlands, are very different from private insurers in the U.S.
Here we practice what the French call the “capitalisme sauvage” or Wild West Capitalism.
This is the form of capitalism that Russia has attemped to imitate– and you see the corruption there.
Because I covered Wall Street for nearly 18 years– more than 10 years at Barron’s– I know the degree of corruption in corporate America–and on Wall Street, all too well.
Finally, the administrative costs of for-profit insureres in the U.S. are much, much higher becuase they spend far more on lobbying (bribing politicians doesn’t happen on nearly the same scale in the Netherlands, in part because their election campaigns are not nearly as expensive) very expensive advertising and marekting, and multi-million dollar salaries for top executives, plus 7 -figure salares for management that just doesn’t exist in the Netherlands.
Let me put it this way: the Geroge Bush administation was very enthusiastic about the plan in the Netherlands.
I’m afraid Howard Dean is right. If we lose the public option, we lose the spine of healthcare reform, and simply hand millions of Americans over to the for-profit industry, govt’t subsidies in hand.
At this point, I think liberals should refuse to vote for a plan that does not include a public option.
Without it, insurance will be too expensive for many people–the subisidies won’t be enough, or will cost tax-payers more than we can afford.
We will have Massachusetts, writ large–and worse.
(At least some of the insurers in Mass. are non-profits.)
The commonwealth fund estimates that a public sector family plan would cost $2500 less than a for-profit plan.
That’s what worries private-sector insurers.
But we just can’t afford to bail out another industry that isn’t able to compete.
I know that a great many people are uninsured. But if we just give them a paper labled insurance, we
won’t necessarily be giving them access to health care.
I predict that many of the private plans will be high-deductibles–just like many of the plans in the Federal Employees menul.
In New York, those Federal Employee plans have a satisfaction rate of 60% to 70%—much, much lower than satisfaction rate under Medicare.
Because of hte high deductible and high co-pays, premiums will be relatively low, so middle-incme and low-income people who are mandated to buy insurance will buy them.
But they won’t be able to use them becaue they won’t be able to afford the $4,000 deductible. We already have much experience of poorer people buying the high deductible plan and then putting off needed care.
Maggie – Let me preface my comment by restating my strong support for a public option as a component of health care reform. Like you, I believe we should press hard to be sure it’s included in the final package.
Because of your familiarity with the subject, however, I would like to take a “devil’s advocate” role in arguing why the public option is less important than has been claimed, and I hope you will address those points so that we’ll all be better informed as to what’s at stake.
1. First, we don’t know what type of non-profit co-op plan might emerge as an alternative. I gather that a national co-op is not under consideration, but if regional co-ops covered a population equal to, say, the VA health care population, wouldn’t they have very substantial competitive leverage?
2. Even disregarding co-ops, but recognizing that much depends on other elements of reform beyond the public or co-op possibilities, could these other elements be strong enough to mitigate the effects of losing the public option? For example, the proposed Insurance Exchange is expected to offer an array of choices, and each must contain a specified set of essential benefits, so that none could skimp on benefits, demand excessive copays, and none of course could cherry pick or charge discriminatory rates based on health status.
3. The Exchange would also serve as a resource for easy comparison of one plan with another, along with guidelines to subscribers on how to evaluate the plans. This would make it difficult for insurers to compete on any basis other than the obvious ones of service and cost. Obviously, for this to work, more than a couple of plans would have to be competing in most regional markets, but wouldn’t the huge marketplace represented by the Exchange encourage multiple participants? It should be possible, should it not, to mandate that all participating plans be represented nationwide, or at least in very large regions as a condition for participating, so as to ensure the presence of multiple competitors?
4. To what extent is there a valid analogy with automobile insurance, which is mandatory in most or all states, but without a public option as competition? My insurance seems to be reasonable, but I’m constantly bombarded by ads from other insurers claiming they can offer a better deal at lower prices. I haven’t paid that much attention, but if it were my health care that was being insured, and at the prices typical for health insurance, I would pay close attention.
I’m not suggesting that competition among private insurers to provide a guaranteed set of benefits would contain costs to the extent achievable with a public option, but if the competition were substantial, would it not put a lid on exorbitant charges?
What is your view on this?
Fred
Very interesting discussion. Maggie, to echo what Fred said, I’m surprised you think health care reform without a public option is worthless. You’ve said many times that insurance companies are *not* the primary reason for the multitude of problems with our health care system, even if they make a much more convenient villain than doctors or hospitals.
If you want to control costs, wouldn’t it be much more important to focus on a beefed-up MPAC or IMAC?
Peter H–
First IMAC woudl be good–but it would only rein in health care spending for seniors.
That doesn’t solve the problem. If we have a public optoin, IMAC would also oversee the public plan.
I’ve said that the insurance companies administrative costs are not the main problem–and they are not.
Their profits and administrative costs account for a small part of total health care spending.
The problem is that the private insurers do not fight the exorbitant prices that drug-makers and device-makers charge for their products; they pay huge hosptials bills that include charges for preventable readmissions; they reward hospitals for being inefficient, paying a hospital more if it costs that hopsital more to care for patients (because it takes the hosptial longer to diagnose, becuae 10 or 11 specialists see the patient; because the hospital runs 15 unncessary tests on the patient, because the patient picks up an inefection and so must stay longer.)
In addition, private insurers pay for a greate many unnecessary tests–without questoin.
Why do they do this? Because, since 1999, they have simply been passing these costs on in the form of skyrocketing premiums. Over the past 10 years, the reimbursements that insurers are paying out have more than doubled, and your premiums have more than doubled.
A public plan doesn’t have anyone to pass costs onto–except taxpayers. And taxpayers are not willing to pay higher taxes.
So a public plan has more of an incentive to try to eliminate waste. Also, a public plan would not be answering to shareholders looking for short-temr profits; thus it can focus on one goal: doing what will promote better health, at a lower cost, over the long term.
This means paying bonsues to doctos who manage chornic disease patients so that they don’t wind up in the hospital. This means using comparative effectiveness reserach to see which drug really is best for certain patients.
(For profit insurers, by contrast, make deals with Pharma,, agreeing to pay very high prices for a drug like Vioxx, for instance, and ignore the risks; in return for covering its block-buster the drug-maker gave private insurers discounts on other drugs.
By contrast, the VA (a government plan) Kaiser and Mayo (both non-profits) stopped prescribing Vioxx more than a year before the manufacturer was forced to pull it from the makret (because it was causing fatal heart attacks and strokes.)
Unlike for-profit insurers, the VA, Kaiser and Mayo didn’t worry about losing market share if they weren’t covering Vioxx–they worreid about doing what was best for patients. Adn they hadn’t made any under-the-table deals with drugmakers.
See also my ealier post on Obama’s statement in June https://healthbeatblog.com/2009/06/president-obama-i-strongly-believe-that-americans-should-have-the-choice-of-a-public-health-insurance-option.html
and the post where I argue that only the public plan has the “moral standing” to set priorities.
Fred–
Thanks for good questions.
As you say, the co-ops would not be national. They would be regoinal or local.
The VA is national. When it negotiates with drug-makers, it has clout because it is representing a national formulary.
Aetna, is a national for-profit insurance plan and the dominants for-profit insurers are huge (the industry as consolidated.)
By contrast, the co-ops would be much smaller than large insurers. This would be David vs. Goliath–sham competition.
You write: “the proposed Insurance Exchange is expected to offer an array of choices, and each must contain a specified set of essential benefits, so that none could skimp on benefits, demand excessive copays . . .”
Experience teaches that for-profit insurers will do their best to find loopholes in the list of
essential benefits.
AS for demanding excessive co-pays, it is all but certain that private insurers will be allowed to offer high-deductible plans–plans that offer much lower premiums and will attract low-income and middle-income famlies, who then will not be able to afford to use the insurance. (See my most recent post questioning whether Obama is really backing away from a public sector option.)
Right now, there are only two or perhpas three insurers competing in many regions. The same lobbyists and conservative legislators who oppose a public sector option will oppose any legislation that changes this.
Note: once conservatives win on one issue, they will use their new energy and added muscle to move on to another.
Success in opposing the public sector option will bring more money to the cause.
4) There’s just not that much money to be made in repairing autos. When it comes to repairing bodies, on the other hand, people are desperate and will pay whatever sellers demand.
We need insurers who will stand up to drug-makers, device-makers, inefficient hosptials etc, and refuse to be gouged. But insurers have found that they can just pass the excessive costs on to customers in the for of higher premiums, and that is what they have been doing for the past ten years.
Will Congress cap their premiums? Not at all likely, espeically if
Baucus and other conservative Democrats have taken charge of writing the legislation.
Blue Dog Democrats are not in favor of cutting health care spending: they would raise reimbursemnts to providers in their states; they oppose negotiating for discounts on drugs; they oppose using comparative effectiveness reserach to lower payments for less effective treatments.
Where would they save money? By lowering subsidies for the middle-class.
And they would let for-profit insurers shift costs to patients in the form of high-deductible plans