ObamaCare's Cutthroat Corporatism

Prior to the passage of the Patient Protection and Affordable Care Act, many of the big players in the health care industry met with the White House in order to cut deals that would result in industry support. The logic, at the time, was that a health care overhaul was inevitable, and therefore it was more advantageous for industry groups to be seen as friendly towards the legislation than as oppositional. The White House, for its part, was at least somewhat anxious about the prospect of fighting a big-dollar industry campaign to kill the law (like the one that helped defeat HillaryCare), and so had an incentive to bring industry groups to the bargaining table.

We're still waiting for information on many of the negotiations that took place between the White House and various outside corporate and union groups. But it's fairly well established that the drug industry, through PhRMA, cut a deal to support the overhaul. In exchange, the White House promised to limit industry concessions to about $80 billion, and agreed that Medicare would not use its bargaining power as a pharmaceutical megapurchaser to negotiate cheaper prices on prescription drugs. 

PhRMA saw the health care overhaul as a chance to advance its long-term interests and played along. But funny enough, it now seems that the White House is not all that interested in holding up its end of the bargain. President Obama's recent speech on the debt included proposals that would violate the agreement. 

Drug industry sources tell FOX Business the Administration is backtracking on what is called the "PhRMA deal" in health reform, a deal that was struck behind closed doors in late 2009 and early 2010 in order to get the industry to support and endorse health-care reform.

In the "PhRMA" deal, drug companies would fork over $80 billion in fees as well as give drug discounts to seniors in Medicare over 10 years, among other things. 

In exchange, the White House agreed, among other items, to not force the drug industry to accept rebates on drugs sold through Medicare Part D, a program launched under President George W. Bush to subsidize prescription drugs for seniors.

But President Barack Obama's new deficit push calls for those Medicare rebates, via the Simpson-Bowles plan. 

The deficit plan "has blown the deal to smithereens," says William S. Smith, managing director of Healthcare National Strategies, a D.C.-based government affairs consulting firm. "The Obama Administration has repudiated the PhRMA deal," says Smith, a former vice president for US public affairs and policy at Pfizer. 

The Obama debt plan may not become law. But the fact that the president is willing to propose these deal-breaking measures at all suggests that the White House feels no obligation to honor the agreement. And why should the White House stick to its word? The incentive to play along disappeared the day the law passed. At this point, you have to wonder why PhRMA and other groups agreed to these non-enforceable deals in the first place. Either way it tells you a lot about the mangled state of America's quasi-government-run health care system: Industry makes a backroom deal to buy into new federal regulations out of self-interest, then, after the regulations pass, finds out that the government has no plans to stick by the agreement. It's cutthroat corporatism at its finest.