The PhRMA Deal: The Plot Thickens?*

"In terms of savings for you as a Medicare recipient," President Obama told a town hall attendee yesterday , "the biggest (change) is on prescription drugs, because the prescription drug companies have already said that they would be willing to put up $80 billion in rebates for prescription drugs as part of a health care reform package."

Then the president said, "Now, we may be able to get even more than that.”

That sentence -- seemingly an aside -- could be significant. Because it may indicate that President Obama does not consider himself bound by an agreement upon which the pharmaceutical industry thinks the White House has signed off.

As you may know, there have been some questions as to just what the White House agreed to in a deal Senate Democrats have cut with the pharmaceutical industry. (See our blog post from Saturday for a fuller background, with links.)

Ken Johnson, senior Vice President of the Pharmaceutical Research and Manufacturers of America, or PhRMA , tells ABC News of the president's comment that "clearly it creates a little teeth-gnashing" among PhRMA members, "but we're in this for the long hall and at end of the day remain convinced the Senate Finance Committee will produce a bipartisan bill that will serve as a blueprint for comprehensive health care reform."

In other words, PhRMA remains convinced that Sen. Max Baucus, D-Mont., chair of the Senate Finance Committee, will uphold the deal.

In June, Baucus announced that pharmaceutical companies had agreed to a deal as part of an overall health care reform package, where the companies will provide, as Baucus put it, "affordable prices on prescription drugs when Medicare benefits don't cover the cost of prescriptions," as well as kicking in some money for health care reform efforts.

Former House Energy and Commerce chairman Bill Tauzin, R-La., now the head of PhRMA, said his industry had committed a specific amount of money and part of the deal was Democrats would refrain from seeking more than $80 billion.

That would preclude, for instance, a campaign pledge by then-Sen. Obama to re-negotiate the cost of pharmaceuticals through the Medicare prescription drug benefit.

"$80 billion is the max, no more or less," Tauzin said to the New York Times. "Adding other stuff changes the deal.”

Says Johnson: "in the beginning of this process we made pretty clear the dangers of going above $80 billion; the impact it could have on research and development and the potential job losses in a very fragile economy.

Tauzin said that after the deal was reached with Baucus, he confirmed the terms of the deal with White House Chief if Staff Rahm Emanuel, deputy Chief of Staff Jim Messina, and health care reform czar Nancy-Ann DeParle.

“They blessed the deal,” Tauzin told the Times. "As far we are concerned, that is a done deal. It’s up to the White House and Senator Baucus to follow through.”

On Friday, White House press secretary Robert Gibbs seemed to confirm the deal, saying, "we feel like $80 billion is -- is an appropriate amount. And I think the -- I don't have the statistic in front of me, but I think the House bill has $85 billion in it, so I would argue that we're all in the same ball park."

Asked a reporter: "there is a deal that you won't squeeze any more?"

Said Gibbs: "Well, I hate to blow our cover here, but we announced it publicly."

"But there had been some reports saying you privately told Democratic senators that there is no such deal," Henry said.

"I don't know where that's coming from," Gibbs said. "I don't what that's being based on."

But then the White House seemed to back off the notion that it had agreed to an $80 billion limit.

"The White House, Senate Finance Committee and PhRMA agreed that PhRMA would contribute $80 billion to lower costs as part of the health insurance reform legislation that the President expects to sign this year," Linda Douglass, the communications director of the White House Office of Health Reform, told ABC News Saturday.

Asked if the deal precludes the government engaging in direct negotiations for the Medicare prescription drug benefit, Douglass said "that issue was not discussed" during the White House negotiations with PhRMA.

The president's comments yesterday would seem to indicate that he's not on board with any $80 billion limit.

Says Johnson: "People need to recognize that $80 billion is a huge investment by our companies, and will require them to make some very difficult choices. It's not loose change found in the sofa, it's real money that carries some consequences for our companies."

Stay tuned.


*This post has been updated with a response from PhRMA.

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