Crimes Against Liberty (31 page)

The White House was forced to distance itself from its own deal amidst public criticism after the terms had been leaked. Communications Director Linda Douglass, for example, confirmed PhRMA’s commitment to reduce drug costs by $80 billion but, incredibly, denied PhRMA was promised anything in return—as if the $80 billion were a spontaneous act of altruism. “The issue,” claimed Douglass, “was not discussed.”
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Her denial contradicted Tauzin’s account as well as the statements of White House press secretary Robert Gibbs. According to
ABC News’
Political Punch, Gibbs tacitly confirm the deal when he told CNN’s Ed Henry, “We feel like $80 billion is—is an appropriate amount.” When Henry asked if “there is a deal that you won’t squeeze any more?” Gibbs responded, “Well, I hate to blow our cover here, but we announced it publicly.” When Henry asked why the White House had privately told Democratic senators there was no such deal, Gibbs replied, “I don’t know where that’s coming from. I don’t know what that’s being based on.”
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Given Obama’s reputation for brilliance, it’s surprising he failed to foresee the drug companies would raise their prices in anticipation of the promised cost cutting. As the
Boston Globe
reported in November 2009, “Big Pharma has taken savings off the table. A new AARP analysis has found that drug companies raised their prices for prescription drugs by 9.3 percent over the last year, amounting to $10 billion in revenues. That is $2 billion more than the promised annual cost cuts.”
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One explanation of the drug-makers’ apparent double-cross is that perhaps they had never agreed to any cost cutting measures at all. In other words, Obama might have merely been trying to make it appear he had extracted concessions to give him cover for a unilateral bribe—promising not to negotiate prices or import drugs from Canada in exchange for PhRMA’s support for ObamaCare. Perhaps that explains why drug companies had given up their longstanding support for Republicans to endorse Obama.
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Regardless of what PhRMA had ultimately promised, the deal showed the White House to be a hardball player of Chicago-style politics, willing to violate campaign pledges or political deals to accomplish its goals. It was all on display here. Obama promised he would make no deal with pharmaceuticals, and he reneged. He presented Big Pharma’s support of the bill as a result of some magical conversion they’d undergone toward his socialized medicine scheme, when in fact they were simply bought off. He said he would operate openly, but this deal was so secretive even his own staff couldn’t get their stories straight, and his congressional allies were kept out of the loop. He said he would reduce the influence of lobbyists. Instead, he elevated their influence on a deal involving one-sixth of the U.S. economy, giving unelected people he had previously demonized a bigger seat at the table than the elected members of the House of Representatives, thereby empowering the “special interests” he routinely decried.

There is also a lesson in this story for drug companies and others who deal with Obama: as soon as he gets what he wants and doesn’t need you anymore, you’re expendable. For shortly after the deal was allegedly struck, the drug companies found themselves targeted again by the administration—this time over exclusive rights to produce drugs called “follow-on biologicals (FOB)” that treat certain major diseases. Biologicals are not, according to a FOX News report, drugs like Prozac, which the company patents for a period of years until other companies are allowed to replicate generic forms of the drug. They are among a group of some 600 “cutting-edge, new-wave drugs derived from living plant and animal cells and can cost upwards of $20,000 to $25,000 per year.”

So far Congress had supported “data exclusivity” for these biologicals for twelve years, when other companies could not develop similar versions. The administration was pushing to reduce the data exclusivity period to seven years, but the drug companies were resisting, based in part on the enormous cost of bringing a biological to market—an average of $1.2 billion, which doesn’t count another $250 to 500 million to build a facility and manufacture the drug.
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Eventually, the drug companies threatened to withdraw their support for ObamaCare if the White House persisted. Billy Tauzin said, “We are letting everyone we know hear that we could not support the bill if this happens.” PhRMA senior vice president Ken Johnson added, “This well-intentioned effort will ultimately fail if it becomes a roadblock to medical progress in America.”
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The administration must have taken Tauzin’s and Johnson’s threats seriously, as the final ObamaCare bill did not reduce the twelve year data exclusivity period.
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WAR ON INSURANCE COMPANIES

The drug companies were lucky enough to strike a deal with Obama early, thus avoiding his presidential wrath. The insurance companies, in contrast, became the quintessential bogeyman. Even before he realized how unpopular socialized medicine was in this freedom loving country, Obama had demonized health insurers. But after his healthcare scheme encountered heavy resistance, he ratcheted up his assault on them, reframing his entire healthcare reform as “insurance reform.” At one point, he implied Americans didn’t understand the implications of their own preferences. After acknowledging some polls revealed as many as 80 percent of Americans were satisfied with their health insurance, Obama scoffed, “The only problem is that premiums have been doubling every nine years, going up three times faster than wages.”
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In addition to deliberately inflating the number of uninsured as described in chapter three, Democrats bludgeoned health insurance companies for their “obscene profits.” House Speaker Nancy Pelosi declared, “I’m very pleased that [Democratic leaders] will be talking, too, about the immoral profits being made by the insurance industry and how those profits have increased during the Bush years.” Congressman Chris Van Hollen argued, “Keeping the status quo may be what the insurance industry wants. Their premiums have more than doubled in the last decade, and their profits have skyrocketed.” The vilification reached something of a crescendo with a
MoveOn.org
ad claiming, “Health insurance companies are willing to let the bodies pile up as long as their profits are safe.”
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During the healthcare debate, Obama vehemently denied he favored government-run healthcare. But his right-hand lady, Health and Human Services secretary Kathleen Sebelius, was not so circumspect in May 2009, when she told a House panel that a government-run plan was needed to exert better control over private insurers that often allegedly fail to serve the public interest. She said, “The president is committed to—and I’m committed to—a design that needs to level the playing field, and it’s on two fronts.”

The two fronts were a more regulated private sector and a
government-run
public option insurance plan, which Obama was selling at the time under the Orwellian argument that it would enhance competition.
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Obama claimed the public option was “an important tool to discipline insurance companies,” which “have been spending more time thinking about how to take premiums and then avoid providing people coverage than they have been thinking about ‘how can we make sure that insurance is there, healthcare is there, when families need it.’”

Obama also promoted the myth that Medicare and other government-run plans have lower administrative costs than private healthcare plans, saying if the government-run program “is able to reduce administrative costs significantly . . . I’d like the insurance companies to take note and say, ‘Hey, if the public plan can do that, why can’t we?’”
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In her book
The Top Ten Myths of American Health Care: A Citizen’s Guide
, Sally Pipes cites this as the very first myth. Pipes demonstrates the inaccuracy of studies purporting to show lower administrative costs for Medicare, studies that also fail to account for Medicare’s enormous hidden costs. For example, unlike the Medicare Trustees report, private healthcare providers include such items as marketing costs and managers’ and administrators’ salaries as administrative expenses. Additionally, because of its low reimbursement rates, Medicare passes off a huge portion of its costs to private payers .
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It was against this disgraceful backdrop that Obama, during a prime-time news conference in July 2009, launched his assault on insurance companies for making too much money. “There have been reports just over the last couple of days of insurance companies making record profits, right now,” he declared. “At a time when everybody’s getting hammered, they’re making record profits, and premiums are going up. What’s the constraint on that?...Well, part of the way is to make sure that there’s some competition out there.”

The entire campaign against insurers was based on a lie—insurance industries profits were
not
at a record high. The
St. Petersburg Times
’ fact-checking operation,
PolitiFact.com
, found that United-Health Group, one of the largest publicly traded health insurance companies, had net income for the previous quarter of $859 million, which was far short of the $1.23 billion it had earned during the same quarter in 2007. Rating Obama’s claims as “false,” Polit-Fact reported, “We reviewed the income statements of the other largest publicly traded health insurance companies—WellPoint, Aetna, Cigna, Humana and Coventry Health Care—and found similar trends.”
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Other evidence refuted Obama’s inflammatory claims. Fortune 500’s annual ranking of America’s largest corporations for 2008 showed “Health Care: Insurance and Managed Care” to be ranked 35
^th
in profitability, with a modest profit of 2.2 percent for 2008 .
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The AP’s “Fact Check” likewise threw cold water on Obama’s contentions. Obama, according to Fact Check, attacked insurers “as rapacious profiteers making ‘immoral’ and ‘obscene’ returns while ‘the bodies pile up.’ Ledgers tell a different reality. Health insurance profit margins typically run about 6 percent, give or take a point or two. That’s anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones. Profits barely exceeded 2 percent of revenues in the latest annual measure.”
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Yahoo’s industry browser also contradicted Obama’s claim. It showed in August that “Health Care Plans” ranked 86
^th
in terms of profit margin with 3.3 percent. In other words, eighty-five industries were more profitable.”
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In early August 2009, the
New York Times
reported that Obama and congressional Democrats were preparing for “an August offensive against the insurance industry as part of a coordinated campaign to sell the public on the need for reform.” It would be “a campaign of increasingly harsh rhetoric against the insurance industry” designed “to drive home the message that revamping the health care system [would] protect consumers by ending unpopular insurance industry practices, like refusing patients with preexisting conditions.”

Obviously the administration was unable to sell Obama’s plan through the magic of his silver tongue, because facts are stubborn things—facts that he was misrepresenting, as people could easily discover through the Internet and the new media. The public knew he couldn’t reduce costs while expanding coverage. They knew he couldn’t increase patient choice with a “public option” and government bureaucracies and an official health care czar (“Health Choices Commissioner”) who would have control over treatments based on their “cost effectiveness.” People also rightfully doubted Obama’s promise that they could keep their own insurance, since his plan would eventually drive private insurers out of business.

Obama had to demonize the insurance companies to divert attention from the facts and replace them with the divisive rhetoric of class warfare. Obama adviser David Axelrod unleashed a harsh salvo, saying, “This is going to give people who have insurance a degree of security and stability, the protection they don’t have today against the sort of mercurial judgments of insurance bureaucrats.” Despite drawing first blood against the insurance industry, the administration and its congressional allies portrayed insurers as the aggressor in the media battle. House Speaker Nancy Pelosi said there would be a “drumbeat across America” to hit back at the health insurance industry for its “shock and awe, carpet-bombing . . . to perpetuate the status quo.”
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In a
New York Times
op-ed, Obama said the “system” often works better for health insurers than for millions upon millions of Americans. He cited a 2007 national survey that, in his words, showed insurance companies had “
discriminated
against more than 12 million Americans in the previous three years because they had a pre-existing illness or condition.” (emphasis added) Thus, Obama used civil rights language to slander private insurance companies simply for enforcing lawful provisions in their contracts excluding coverage for pre-existing conditions. In Obama’s America, to enforce a contract is to “discriminate.”
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