Connecting The Dots Between PhRMA And Congress

TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross. When Barack Obama was running for president, he promised to change Washington's culture of lobbyists. Here's one of his campaign ads.

(Soundbite of political advertisement)

President BARACK OBAMA: The pharmaceutical industry wrote into the prescription drug plan that Medicare could not negotiate with drug companies. And you know what? The chairman of the committee who pushed the law through went to work for the pharmaceutical industry making $2 million a year.

(Soundbite of crowd moaning)

Unidentified Woman: Imagine that.

Pres. OBAMA: Imagine that. That's an example of the same old game-playing in Washington. You know, I don't want to learn how to play the game better. I want to put an end to the game-playing.

(Soundbite of applause)

GROSS: Okay, the person referred to in that ad, the chairman of the committee who pushed through the law and then went to work for the pharmaceutical industry, is Billy Tauzin. Within a few months after Obama became president, his administration was secretly negotiating with Tauzin, who was then the head of PhRMA, the pharmaceutical industry's lobby group.

The deal he made with the pharmaceutical industry and what he gave up to bring them on board for his health care plan is detailed in an investigative article by my guest, Paul Blumenthal. Blumenthal is a senior writer with the Sunlight Foundation, a nonprofit organization dedicated to making government more open and transparent.

Paul Blumenthal, welcome to FRESH AIR. So why do you think the Obama administration wanted to meet with the pharmaceutical industry? What did he want from them?

Mr.�PAUL BLUMENTHAL (Senior Writer, Sunlight Foundation): I think that what he was looking to do - which was definitely something that he promised to do in the campaign - was to bring everyone to the table, and that included special interest groups and industry groups and try to get them to back a piece of legislation by any means necessary.

He was looking at a way to get this done and to diffuse the actors and lobbyists in Washington so that they wouldn't run advertising against legislation, and they wouldn't lobby against legislation. And that involved making some serious concessions to industry.

GROSS: So let's look - before we get into the actual meetings, like who met and what kind of dealings they had, let's just talk about the agreement that the Obama administration reached with the pharmaceutical industry. What did the Obama administration get out of it? And then we'll talk about what the pharmaceutical industry got out of it.

Mr.�BLUMENTHAL: Well, what the Obama administration got out of it was taking the biggest lobby in Washington and putting them onto the side of health care reform, as opposed to having them oppose the legislation. They received around $100 million in advertising to support the legislation, spent by PhRMA, the industry trade group. That certainly is a big deal if you're trying to push a kind of bill like this.

GROSS: And what did the pharmaceutical industry get out of this deal with the Obama administration?

Mr.�BLUMENTHAL: Basically, what they got was that Congress would not legislate any kind of cost-cutting that would make a serious dent in industry profits, and that includes taking things off the table like re-importation of drugs from first-world countries or...

GROSS: In other words, buying drugs at cheaper prices from other countries, like Canada.

Mr.�BLUMENTHAL: Yes. Yes.

GROSS: Yeah. What else?

Mr.�BLUMENTHAL: Allowing Medicare to negotiate for cheaper drugs, just as the Veterans Administration does in their health care program. These were pretty big Democratic policies that had been supported by the Democrats since 2003 and by then-candidate Obama in the 2008 elections, and the administration allowed these kind of policies to be pushed off to the side so that they could support of the pharmaceutical industry.

GROSS: The pharmaceutical industry promised the Obama administration savings up to $80 billion. Through what?

Mr.�BLUMENTHAL: Most of that was through partially closing what's called the doughnut hole in Medicare Part D, where at a certain point of spending on prescription drugs, you enter this hole where you don't have any coverage for that amount of money. And once you get over a certain amount, you have more coverage. So it was $30 billion to partially cover those drugs being spent for people spending over a certain amount of money within Part D on prescription drugs. That was the majority of it.

GROSS: So let's look at who was at these secret meetings between the Obama administration and the pharmaceutical industry. First of all, how many meetings were there? Was this, like, a series of meetings that ranged over a period of time?

Mr.�BLUMENTHAL: This was definitely a series of meetings with the White House that totaled around four or five that show up on the White House visitor logs, which the White House has made publicly available for the first time. And the people involved are Billy Tauzin, who is the pharmaceutical industry's chief lobbyist for their trade group, PhRMA. And the other main actors include the CEO of Pfizer, which is the largest pharmaceutical industry company, CEO of AstraZeneca, the CEO of Abbott Laboratories. These are pretty much the main people who you see show up in most of these meetings with the White House and with the Senate Finance Committee Chairman Max Baucus.

GROSS: And who are the main representatives from the Obama administration meeting with these members of the pharmaceutical industry?

Mr.�BLUMENTHAL: The chief people include the chief of staff at the White House, Rahm Emanuel, and the deputy chief of staff who is involved in more of the meetings, Jim Messina, who happens to be the former chief of staff to Max Baucus in the Senate.

GROSS: So Max Baucus, who is the head of the Senate Finance Committee that drew up the Senate health care bill, he already had contacts with the health care industry. How did he make those contacts?

Mr.�BLUMENTHAL: Well, those contacts were made over a series of years. He was previously the ranking member of the Senate Finance Committee when the Republicans were in charge, when they were passing prescription drug expansion for Medicare. And he was deeply involved in those negotiations for that legislation.

He also has a large number of former staffers who have gone on to lobby, and a number of those have become lobbyists for pharmaceutical industry groups and for other health care organizations. One of the chief former staffers of his is his former chief of staff, David Castagnetti, who is a major lobbyists in Washington, who lobbies for PhRMA and America's Health Insurance Plan, among another maybe 10 or so health care companies. Baucus is also a major fundraiser in - from 2003 to 2008, raised well over a million dollars from the health care industry for his election.

GROSS: If you're just joining us, my guest is Paul Blumenthal. He's a senior writer with the Sunlight Foundation, which is a nonpartisan, nonprofit group that advocates for more openness and transparency in government.

Now, Billy Tauzin is an interesting character, and he is the chief lobbyist for PhRMA, the main pharmaceutical industry lobby. He has an interesting history in terms of how he crossed over from Congress to the pharmaceutical industry. Tell us a little bit about his history as a congressman.

Mr.�BLUMENTHAL: Well, Billy Tauzin was a longtime Democrat in the House who, in 1994, after the Democrats lost their majority, switched over to being a Republican. As a Republican, he held the same seniority that he had as a Democrat and began to quickly move up to become the chairman of the House Committee on Energy and Commerce, which is one of the most powerful committees in the House of Representatives.

And in 2002 and 2003, he took up this issue of expanding Medicare to cover prescription drugs, and at this time, it was a pretty controversial issue for Republicans, as many of them opposed this new expansion of safety net program, and Tauzin seriously pushed for this bill, helped craft the bill and, in a lot of instances, met behind closed doors with pharmaceutical industry leaders to help craft the bill, which did not include any of these cost-cutting measures that we've already talked about that he later on got to keep out of the 2009 health care reform bill: re-importation of drugs, negotiations like the VA has.

So the bill was seen by a lot of people as really just a handout to this industry, and pretty soon afterwards, he announced he was retiring from Congress and that he was in negotiations with the pharmaceutical industry lobby to become their president at a $2-million-a-year salary.

GROSS: So how much of a role do you think that the pharmaceutical industry leaders and lobbyists who met with Max Baucus, how much of a role did they have on shaping the bill that emerged from his committee?

Mr.�BLUMENTHAL: I don't know if I can totally answer that question, but I think considering Baucus' history, I'm sure that there was a decent amount of industry influence.

I think that the key in what happened in Baucus' committee is that the White House made this deal with the pharmaceutical companies and told them to only go through Baucus, that they were only supposed to work with him, and no other committee in Congress really knew about these deals going on behind the scenes, except for Baucus.

And so the entire health care reform effort really relied on whatever process Max Baucus was going to go about using to create a bill, which wound up being a fairly drawn-out process after bills had passed every other relevant committee in the House and the Senate.

GROSS: So what about the House of Representatives? Like, there was no similar committee from that House that was represented in this deal-making?

Mr.�BLUMENTHAL: No. The major committee in the House of Representatives is the House Committee on Energy and Commerce, which is headed by Henry Waxman, who's a noted foe of the pharmaceutical industry. And he included a number of these provisions in the House bill that were just verboten for the pharmaceutical industry and the Obama administration, that they'd already made this deal on that whatever Waxman was putting in, it just wasn't going to happen.

But what did happen in the House was Waxman's bill really scared the pharmaceutical industry and forced their hand to make the Obama administration admit that a deal was made.

GROSS: What do you mean by that?

Mr.�BLUMENTHAL: So Waxman's bill passed around July 31st, and then we went into the August recess. And at that time, the board of PhRMA got a little skittish by seeing this bill with everything that they had thought that they would have eliminated: re-importation of drugs and negotiations for Medicare Part D and a number of other cost-cutting measures that well above the $80 billion that they had agreed to and thought that maybe the Obama administration was trying to fool them.

And so Billy Tauzin came out in an article to the L.A. Times and explained that a deal had been made with the White House and sort of forced the hand of the White House, who, a couple days later, were quoted as saying that this deal did exist.

GROSS: So the head lobbyist for the pharmaceutical industry leaked the deal that the industry had made with the Obama administration because they were afraid Obama would renege on it after the House passed a bill that had all the things that the industry had wanted taken out?

Mr.�BLUMENTHAL: That's correct.

GROSS: My guest is Paul Blumenthal, senior writer for the Sunlight Foundation. We'll talk more about the secret negotiations between the pharmaceutical industry and the Obama administration after a break. This is FRESH AIR.

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GROSS: If you're just joining us, my guest is Paul Blumenthal. He's a senior writer with the Sunlight Foundation, which is a nonpartisan, nonprofit group that advocates for more openness and transparency in government.

When Senator Max Baucus was meeting with pharmaceutical lobbyists, working on this compromise that the lobbyists had agreed to at the Obama administration, was he getting money from those lobbyists, too?

Mr.�BLUMENTHAL: Well, I think that Baucus did a very smart thing as a politician handling this kind of issue and actually refused money from health care PACs and lobbyists during the course of 2009. So he actually wasn't getting any money in 2009.

However, his previous election campaign, from 2003 to 2008, he received well over a million dollars from health care industry players.

GROSS: Can you give us a sense of how much money and how many lobbyists the pharmaceutical industry has?

Mr.�BLUMENTHAL: Well, the pharmaceutical industry in total certainly spends over $100 million, probably, on lobbying. I know that the trade group PhRMA, who is deeply involved in this, spent $28 million in 2009, which was a record for them, and had hired $165 lobbyists. And that includes their in-house lobby shop and outside lobbying firms.

And from going over these names of these lobbyists, I was able to determine that 137 of them had previous experience in government, whether in Congress or in the executive branch.

GROSS: How do they do it? How do they push, and what is the money used for? What did that $28 million go to?

Mr.�BLUMENTHAL: I don't know exactly what the $28 million goes to. Lobbying disclosures are very opaque. I know that they're supposed to be transparent disclosures, but they aren't, really, and we only really know how much they spend and not what they spend it on. We don't even know the salaries of lobbyists or who lobbyists are meeting with, and it's a serious problem in trying to cover these kinds of issues.

GROSS: One of the things that the pharmaceutical industry promised to do in its deal with Obama was to spend up to $150 million on advertising. Why was that important to the Obama administration?

Mr.�BLUMENTHAL: Well, they really didn't want to have a replay of 1993 and 1994, with the Harry and Louise ads run against the health care reform proposal put out by Bill and Hillary Clinton. And they really wanted to diffuse that situation by getting these industry players to back health care reform and to have them spend this large sum of money on advertising in key states in key congressional districts for pushing members of Congress or pushing their constituents to call their members of Congress in support of the legislation.

GROSS: Now, you write that the company that was hired to produce the ads and to place the ads was a company that David Axelrod, one of Obama's chief advisors and one of his chief campaign managers, the company that he used to be a partner in.

Mr.�BLUMENTHAL: Yes. His company, which still employs his son and still owes David Axelrod $2 million, was the initial company to be hired to place the beginning $24 million in advertising that was spent through to advocacy organizations that were created in a secret meeting between Jim Messina, John Selib, the chief of staff to Max Baucus, and the pharmaceutical industry and a number of other groups.

GROSS: So anything about that that, to you, does not pass the sniff test? I mean, I could see why the Obama administration would want that company to do the ads. They obviously felt that company did a great job with the Obama campaign. So is there anything that seems not right to you about that?

Mr.�BLUMENTHAL: It definitely appears questionable, and I don't think we've heard enough answers about why that company was chosen. The pharmaceutical industry says that they chose that company because it was one of the better advertising companies out there. And why wouldn't they go with the company that had run ads for President Obama?

GROSS: What were some of those ads? Refresh our memories. Which were these ads?

Mr.�BLUMENTHAL: Some of the first ads that they played actually brought back the characters of Harry and Louise from the 1993 advertisements against health care reform. And in these advertisements, Harry and Louise are now talking about the rising costs of health care and why they actually do need health care now. And this was in support of the legislation.

GROSS: And when those ads were shown, was it clear that it was the pharmaceutical industry who was funding the ads?

Mr.�BLUMENTHAL: Absolutely not. Actually, these were run through an advocacy organization called Healthy Economy Now, which included a number of other groups, including labor unions like SEIU and the Robert Wood Johnson Foundation, and they don't have to disclose in their advertising who is paying for these ads. But most of the money came from the pharmaceutical industry and from PhRMA.

GROSS: The health care bill appears to be stalled. Scott Brown was elected to replace Ted Kennedy's seat in the Senate. He's a Republican. So the Democrats no longer have that 60-seat super-majority that's needed to block a filibuster. So with health care stalled for now, where do you think that compromise between the Obama administration and the pharmaceutical industry stands?

Mr.�BLUMENTHAL: Pharmaceutical industry CEOs are still mostly backing the deal and would still love to see a health care reform bill passed with only the $80 billion in cost-cutting. The passage of the bill would certainly be a windfall for the industry. They'd have so many more people with health insurance coverage who would be able to purchase pharmaceuticals, and with the small amount that they agreed to on cost-cutting, their profits would shoot up exponentially. There's no doubt that they're happy about what they got out of this, for the most part, but they're definitely not thrilled with the fact that they spent 100 to $150 million in advertising, and it really seems like this legislation is not going to pass.

GROSS: Shortly after Scott Brown was elected to the Senate, Billy Tauzin resigned. He resigned around the second week of February. What do you know about why he resigned?

Mr.�BLUMENTHAL: There are some people, some of the board members are saying that they didn't like his style, and there are other reports that there are a number of board members who weren't involved in this deal who never really liked the deal to begin with.

And I think that probably one of the better explanations is that Billy Tauzin and a number of these board members made this deal, and part of the deal was to spend 100 to $150 million in advertising for a bill that wound up going nowhere. And that's kind of a bad way to run a business, even for a lobbying firm, is to spend that much money and get nothing out of it.

GROSS: Well, Paul Blumenthal, thank you very much for talking with us.

Mr.�BLUMENTHAL: Thanks for having me.

GROSS: Paul Blumenthal is a senior writer at the Sunlight Foundation, which is dedicated to making government more open and transparent. You can find links to his investigative articles on our Web site: freshair.npr.org.

Today, president Obama released a new blueprint for health care reform. It does not include part of the deal he made with the pharmaceutical industry. On Thursday, he plans to hold a health care summit with Democrats and Republicans.

I'm Terry Gross, and this is FRESH AIR. Transcript provided by NPR, Copyright National Public Radio.