Will the White House-Pharma Deal Survive?

by Suzy Khimm | December 18, 2009

Democrats managed to avoid a big blow-up with Pharma this week when the Senate struck down Byron Dorgan’s drug reimportation amendment on Tuesday. But by promising to close the Medicare Part D doughnut hole in the final bill, the Democratic leadership has effectively deferred, not avoided, a possible showdown with the industry. On Monday, Reid and Baucus announced that they were committed to closing the doughnut hole—but not until the bill has moved off the Senate floor and reached the conference committee.

As Mike Lillis points out, the Democrats have bought themselves some more time to resolve the real problem with closing the Medicare doughnut hole—finding a way to pay for it. The donut hole affects beneficiaries whose drug costs reach $2,700 in a year, after which they must pay full price for their drugs until the spending surpasses $6,100, when their benefit kicks back in. Unlike the current Senate bill, the House bill closes the doughnut hole entirely by 2019, requiring the industry to negotiate with the government on drug prices and to apply Medicaid-level pricing to the "dual eligibles" who qualify for both Medicare and Medicaid. As Lillis explains, such financing measures would directly defy the White House-Pharma deal, and the Senate leadership has made it clear that they’re not willing to break the agreement, at least while the bill is still on the floor.

But will the White House-Pharma deal ultimately survive intact—or are the Democrats simply waiting to goose the industry in the end? Certainly, closing the doughnut hole entirely would be an expensive proposition to finance, costing some $42 billion. While the Pharma has already committed to putting some $34 billion toward filling the gap, they’ve refused to put any more on the table, vehemently opposing the financing reforms in the House bill. Facing such a conundrum, Democrats have already given some signs that they might pursue a more moderate course of action.

Over the last week, news has trickled out about a reported deal that would tighten the Medicare Part D coverage gap to a 75 percent drug discount—an improvement over the 50 percent that’s in the current bill, but which would only go halfway to closing the doughnut hole. And last Friday, Debbie Stabenow confirmed that such a proposal was on the table. “At this point, [we're] going to end up somewhere between closing half of it and closing all of it,” Stabenow said in a conference call, adding that Democrats were prepared to come back later to finish closing the gap.

By doing so, the Democratic leadership could significantly reduce the amount of money they’ll need to find to fund the doughnut hole fix, while still satisfying those who remain incensed that Democrats aren’t taking a bigger bite out of Pharma. And if Democratic leaders do end up demanding more from the industry to pay for the fix, Pharma has less time to wage all-out war against the bill. But by pulling the negotiations back behind closed doors, it’s clear that both the White House and Senate still consider the industry’s support to be critical enough that they’re not willing to risk a battle out in the open.

Follow Suzy Khimm on Twitter: @SuzyKhimm

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