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PhRMA Walks Back Claim Of White House Deal

First Posted: 09/10/09 06:12 AM ET Updated: 05/25/11 02:50 PM ET

White House

In yet another in a series of evolving statements and backtracks, an official with the country's major pharmaceutical lobby said on Monday that it never struck a "quote, unquote secret deal with the White House" that would have prohibited the government from negotiating lower drug prices for Medicare.

"It was never brought up at the meeting," said Ken Johnson the senior vice president for the Pharmaceutical Research and Manufacturers of America, just days after his boss told the New York Times that the White House's commitment to not support price controls was, as far as he was concerned, "a done deal."

Johnson was referencing reports that the White House had agreed to not allow the government to use its purchasing power to lower drug prices in exchange for $80 billion in promised cost savings from Big Pharma over the course of ten years. The White House, on Monday, denied that such a deal was ever discussed.

All of which didn't mean that an arrangement of sorts wasn't implicit in separate discussions. Johnson told the Huffington Post that during negotiations with the Senate Finance Committee PhRMA had made it crystal clear that there were certain provisions it would never support.

"In the beginning, when God created earth, we said we will help pass comprehensive health care reform but we cannot support price controls," he said.

Johnson said that PhRMA negotiated around this understanding with the Senate Finance Committee and its chairman, Sen. Max Baucus, (D-Mont.) and that the White House "blessed" that policy agreement. White House Press Secretary Robert Gibbs has also said the administration supported the deal.

"As our contribution to health care reform, we agreed to reduce costs by $80 billion," Johnson concluded.

But what kind of arrangement was made between Finance and PhRMA remains vague. The White House has referred reporters to the statement on the Committee's website. But that statement, issued on June 20, 2009, includes no information beyond the $80 billion promised by PhRMA.

On June 22, the President hailed the "deal" as a win-win-win for the pharmaceutical company, American public and the government. "Drug and insurance companies stand to benefit when tens of millions more Americans have coverage," he said. "So we're asking them, in exchange, to make essential concessions to reform the system and help reduce costs. It's only fair."

But industry observers were already raising red flags, predicting that this was an attempt by PhRMA to head off more costly legislation down the road.

"Our initial take is that this is a win for the industry because it appears to short-circuit the prospect of direct government price negotiation," read an analysis by Leerink Swann and Company, a health care equity research company.

Last week, the New York Times and the Los Angeles Times both reported that Leerink Swann's prediction was correct - the White House had "embraced" a package that would limit the government's ability to negotiate lower drug prices. In a subsequent piece by the Huffington Post, administration officials said that any measures that would pursue cuts to prescription drug prices should be considered outside the health-care overhaul legislation.

In the end, both Johnson and the White House may be trying to draw a distinction without a difference. Both PhRMA and the administration are on record saying that $80 billion worth in concessions is an appropriate amount. "We feel comfortable with the amount of money that has been talked about at this point," Gibbs said in response to a question from the Huffington Post last week.

PhRMA is on record saying it would oppose health care legislation that contained "price controls." The White House, meanwhile, said on Monday that it was committed not to include one measure that could achieve those controls: rebates which would have bridged the prescription drug prices between Medicaid and Medicare.

The questions that still need to be answered are: Will PhRMA renege on its $80 billion pledge if Congress passes health care reform that allows the government to negotiate for lower drug prices? And will it abandon its pledge to run $150 million worth of television ads in favor of the president's agenda if it believes price controls are still on the table?

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Filed by Sam Stein  |