Barack Obama picked up considerable political support for his overhaul of the American health-care system by promising a limit on price concessions to the pharmaceutical manufacturers. They signed onto ObamaCare after getting assurances that their givebacks would amount to no more than $80 billion over 10 years and that the federal government would not try to bargain for lower pricing using its advantage through Medicare. Henry Waxman plans to renege on just about every aspect of that agreement:
As the health care debate focuses on whether cost cuts are looming in Medicare coverage, Representative Henry A. Waxman is on a crusade to save Medicare billions of dollars — in a way that he says would end up helping the elderly.
That is because the money would come from the drug industry, which is why Mr. Waxman may have a fight on his hands.
Drug makers contend they have already worked out a 10-year, $80 billion cost-savings deal with the White House and crucial Senate gatekeepers on the trillion-dollar health care overhaul. The industry says that trying to add Mr. Waxman’s provision could scuttle that agreement.
“You not only break the deal, but you break the bank for us,” said Billy Tauzin, chief executive of the drug industry’s trade group, the Pharmaceutical Research and Manufacturers of America, known as PhRMA.
Waxman says that the pharmas got a big windfall when Congress and the Bush administration enacted Medicare Part D, which ended Medicare’s ability to negotiate prices on drugs. As a result, prices went up 30%, according to Waxman, and manufacturers got a bigger share of the market at the same time. Now he wants to punish the industry for its big win by forcing bigger concessions than Obama got.
However, the numbers don’t really add up. Waxman accuses pharmas of getting a $3.7 billion windfall in the program’s first two years. Projected against a ten-year window, that would amount to less than $20 billion, or about a quarter of the concessions Obama already got from the drug makers. If correcting an injustice is Waxman’s real concern, then he should be more than satisfied with Obama’s deal. Waxman’s crusade shows that he has something else entirely in mind for his version of ObamaCare.
Waxman may force the pharmas to switch sides, and this may be a particularly bad time to do that. Liberal activists might rejoice that they can attack one of their betes noirs, but it’s likely to further estrange moderates from health-care reform. With ObamaCare already sinking in popularity to Edsel proportions, alienating even more people is a recipe for electoral disaster, especially when done in the service of a government takeover of an industry.
As for the pharmas, maybe they’ll wake up and smell the statist coffee now. I have no sympathy at all for them in their sudden shock, shock! that Democrats in Congress have no intention of being their allies on health-care reform. For that, they get the Louis Renault Award:
Update: Henry Waxman as Darth Vader?
“I am altering the deal. Pray I don’t alter it any further.”