Floor Statements
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STATEMENT BY SENATOR JOHN McCAIN ON DRUG IMPORTATION AND THE INFLUENCE OF PhRMA
June 25, 2012
“Later this week, the Supreme Court will issue its ruling on the health care bill designed and negotiated by the White House and rammed through Congress during President Obama’s first year in office, when the economy was near its weakest. Instead of focusing on recovery and persistent unemployment, the president and the democrat majorities controlling Congress squandered the opportunity and forced the unpopular and potentially unconstitutional legislation on the American people.
“Today we are voting on final passage of the reconciled FDA User Fee bill. During Senate consideration of this bill I offered an amendment to allow safe drug importation from legitimate Canadian pharmacies. But the pharmaceutical industry spread misleading and inaccurate information about my amendment just like they have done time and again.
“Now, I don’t know if there was a sweetheart deal to protect PhRMA, at the expense of American patients, from the vote on my amendment. But we do know that PhRMA was protected by the White House and Senate Democrats from provisions they didn’t like in Obamacare only after they offered up advertising exchange for more accommodating policies.
“From a recent House Energy and Commerce Committee investigation, it is now confirmed that PhRMA orchestrated a grand deal with the White House and Senate Democrats to oppose importation, and other policies – that might benefit American patients – all in exchange for reportedly $150 million in advertising to support the legislation.
“Here is how The New York Times described the scenario:
‘After weeks of quiet talks, drug industry lobbyists were growing nervous. If they were to cut a deal with the White House on overhauling health care, they needed to be sure President Obama would stop a proposal by his liberal allies intended to bring down medicine prices.
‘On June 3, 2009, one of the lobbyists e-mailed Nancy-Ann DeParle, the president’s top health care adviser. Ms. DeParle sent a message back reassuring the lobbyist. Although Mr. Obama was overseas, she wrote, she and other top officials had ‘made decision, based on how constructive you guys have been, to oppose importation on the bill.’
‘Just like that, Mr. Obama’s staff abandoned his support for the reimportation of prescription medicines at lower prices and with it solidified a growing compact with an industry he had vilified on the campaign trail the year before.
‘A president who had promised to air negotiations on C-Span cut a closed-door deal with the powerful pharmaceutical lobby, signifying to some disillusioned liberal supporters a loss of innocence, or perhaps even the triumph of cynicism.
‘Still, what distinguishes the Obama-industry deal is that he had so strongly rejected that very sort of business as usual.’
“Ironically, candidate Obama sung a very different tune on the campaign trail in 2008: ‘You know, I don’t want to learn how to play the game better. I want to put an end to the game playing.’
The New York Times article continued:
‘The e-mails, which the House committee obtained from PhRMA and other groups, document a tumultuous negotiation, at times transactional…”
‘In the end, the White House got the support it needed to pass its broader priority, but industry emerged satisfied as well. ‘We got a good deal,’ wrote Bryant Hall, then senior vice president of the pharmaceutical group.
‘In July, the White House made clear that it wanted supportive ads using the same characters the industry used to defeat Mr. Clinton’s proposal 15 years earlier. ‘Rahm asked for Harry and Louise ads thru third party,’ Mr. Hall wrote.
‘Talks came close to breaking down several times. In May, the White House was upset that the industry had not signed onto a joint statement. One industry official wrote that they should sign: ‘Rahm is already furious. The ire will be turned on us.’’
“The emails also detail extensive and direct negotiations with PhRMA, its drug company members, the American Medical Association, AARP, the American Hospital Association, Unions and many more. Members of the alliance all participated because they thought they were getting something more valuable – revenue to their organization or membership because the federal government was going to force everyone into some form of government-designed health insurance coverage – than what they were going to have to spend on advertising to support the legislation. Some reports have the PhRMA advertising commitment as high as $150 million, spread out through direct advertising in certain important states and among groups created to sound like they were looking out for patients or to tout the economic ‘benefits’of Obamacare.
“On June 11, 2012 The Wall Street Journal described the emails about the 2009 negotiations:
‘The joint venture was forged in secret in spring 2009 amid an uneasy mix of menace and opportunism. The drug makers worried that health-care reform would revert to the liberal default of price controls and drug re-importation that Mr. Obama campaigned on, but they also understood that a new entitlement could be a windfall as taxpayers bought more of their products…
‘Initially, the Obamateers and Senate Finance Chairman Max Baucus asked for $100 billion, 90% of it from mandatory ‘rebates’ through the Medicare prescription drug benefit like those that are imposed in Medicaid. The drug makers wheedled them down to $80 billion by offsetting cost-sharing for seniors on Medicare, in an explicit quid pro quo for protection against such rebates and re-importation.
‘Terms were reached in June…lead PhRMA negotiator Bryant Hall wrote on June 12 that Mr. Obama ‘knows personally about our deal and is pushing no agenda.’
‘But Energy and Commerce Chairman Henry Waxman then announced that he was pocketing PhRMA's concessions and demanding more, including re-importation. We wrote about the double-cross in a July 16, 2009 editorial called ‘Big Pharma Gets Played,’ noting that Mr. Tauzin's’ ‘corporate clients and their shareholders may soon pay for his attempt to get cozy with ObamaCare.’
‘Mr. Hall forwarded the piece to Ms. DeParle with the subject line, ‘This sucks.’
'The White House rode to the rescue. In September Mr. Hall informed Mr. Kindler that deputy White House chief of staff Jim Messina ‘is working on some very explicit language on importation to kill it in health care reform. This has to stay quiet.’
‘PhRMA more than repaid the favor, with a $150 million advertising campaign coordinated with the White House political shop. As one of Mr. Hall's deputies put it earlier in the minutes of a meeting when the deal was being negotiated, ‘The WH-designated folks . . . would like us to start to define what 'consensus health care reform' means, and what it might include. . . . They definitely want us in the game and on the same side.’’
“More on the ‘WH-designated folks’ in a moment. The Wall Street Journal editorial continued:
‘In particular, the drug lobby would spend $70 million on two 501(c)(4) front groups called Healthy Economy Now and Americans for Stable Quality Care. In July, Mr. Hall wrote that "Rahm asked for Harry and Louise ads thru third party. We've already contacted the agent.’
“Other groups like the AMA were also willing to commit their membership dollars to advertising in support of the legislation in exchange for their policy priorities. According to the Wall Street Journal:
‘At least PhRMA deserves backhanded credit for the competence of its political operatives – unlike, say, the American Medical Association. A thread running through the emails is a hapless AMA lobbyist importuning Ms. DeParle and Mr. Messina for face-to-face meetings to discuss reforming the Medicare physician payment formula. The AMA supported ObamaCare in return for this ‘doc fix,’ which it never got.
‘‘We are running out of time,’ this lobbyist, Richard Deem, writes in October 2009. How can he ‘tell my colleagues at AMA headquarters to proceed with $2m TV buy" without a permanent fix? The question answers itself: It was only $2 million.’’
“The emails uncovered by the House committee also describe potentially serious conflicts of interest for senior White House staff, their former businesses, who was really writing the legislation – the White House, Congress or affected industries – and questions about the appearance of the White House staff orchestrating the outside advertising campaign. On June 21, 2012 the Wall Street Journal further reported on the 2009 secret deals:
‘Rewind to 2009. The fight over ObamaCare is raging, and a few news outlets report that something looks ethically rotten in the White House. An outside group funded by industry is paying the former firm of senior presidential adviser David Axelrod to run ads in favor of the bill. That firm, AKPD Message and Media, still owes Mr. Axelrod money and employs his son.
‘The story quickly died, but emails recently released by the House Energy and Commerce Committee ought to resurrect it. The emails suggest the White House was intimately involved both in creating this lobby and hiring Mr. Axelrod's firm – which is as big an ethical no-no as it gets.
‘Mr. Axelrod – who left the White House last year – started AKPD in 1985. Mr. Axelrod moved to the White House in 2009 and agreed to have AKPD buy him out for $2 million. But AKPD chose to pay Mr. Axelrod in annual installments – even as he worked in the West Wing.
‘The White House and industry were working hand-in-glove to pass ObamaCare in 2009, and among the vehicles supplying ad support was an outfit named Healthy Economy Now (HEN).
‘House emails show HEN was in fact born at an April 15, 2009 meeting arranged by then-White House aide Jim Messina and a chief of staff for Democratic Sen. Max Baucus. The two politicos met at the Democratic Senatorial Campaign Committee (DSCC) and invited representatives of business and labor.
‘The call was from Nick Baldick, a Democratic consultant who had worked on the Obama campaign and for the DSCC. Mr. Baldick started HEN. The only job of PhRMA and others was to fund it.
‘Meanwhile, Mr. Axelrod's old firm was hired to run the ads promoting ObamaCare. At the time, a HEN spokesman said HEN had done the hiring. But the emails suggest otherwise. In email after email, the contributors to HEN refer to four men as the ‘White House’ team running health care.
‘In one email, PhRMA consultant Steve McMahon calls these four the ‘WH-designated folks.’ He explains to colleagues that Messrs. Grossman, Grisolano and Del Cecato ‘are very close to Axelrod,’ and that ‘they have been put in charge of the campaign to pass health reform.’
‘A 2009 PhRMA memo also makes clear that AKPD had been chosen before PhRMA joined HEN. It's also clear that some contributors didn't like the conflict of interest. When, in July 2009, a media outlet prepared to report AKPD's hiring, a PhRMA participant said: ‘This is a big problem.’ Mr. Baldick advises: ‘just say, AKPD is not working for PhRMA.’ AKPD and another firm, GMMB, would handle $12 million in ad business from HEN and work for a successor 501(c)4.
‘A basic rule of White House ethics is to avoid even the appearance of self-dealing or nepotism. Could you imagine the press frenzy if Karl Rove had done the same after he joined the White House?
‘Until the White House explains all this, voters can fairly conclude that the President's political team took their Chicago brand of ethics into the White House.’”
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