Friday, February 12, 2010

PhRMA Changing Leaders; Will It Change Tack in Health Care Reform?

The sense of uncertainty surrounding the impact of health care reform on the biopharmaceutical industry just went up with the news that Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin will step down at the end of June.

The timing of Tauzin's departure should have been perfect. If health care reform had made it through as planned ahead of President's Day, now would be the perfect time for Tauzin to take a bow and leave the implementation to his successor. After all, Tauzin is 66, he has been with the association for just over five years--and is also past the five-year milestone in his recovery from intestinal cancer. If only health care reform was done, it would all seem so right.

But health care reform, to put it mildly, is in a state of flux, and so is PhRMA’s famous (or is it infamous?) $80 billion dollar deal for health care reform (or was it a $90 billion dollar deal, or more?).

As it happened, the timing of the announcement (late in the evening on a snowbound week in Washington) took a lot of people by surprise.

So naturally, everyone is wondering the same thing: Are things about to get REALLY bad for Big Pharma?

There are certainly good reasons to worry. First, as we pointed out here, the Democratic leadership appears to be convinced that one of the critical factors in the sour public mood for reform is frustration with the process—and, at least among some prominent Democrats, the PhRMA deal is a case in point.

And its not like Republicans are any happier with the PhRMA deal. Indeed, we are hearing something close to glee at the prospect that the industry will be asked to make the $80 billion contribution to fund other priorities before the year is through.

No question. It could get ugly. But it is far too soon to press the panic button.

Right now, no one can say for sure what will happen on health care reform. It is still possible that a bill very close to the one that looked ready to move in mid-January can make it into law. Failing that, big things could still move through Congress: things like filling in the Medicare Part D donut hole, follow-on biologics legislation, or health insurance reforms that would make expensive drugs more affordable for many people.

What Tauzin’s announcement does is give PhRMA flexibility: if things go well, they can keep the deal, either by working through the last steps of the process during Tauzin’s final months, or by sticking with it under his successor. And they can do so while fending off critics who claim it was a sweetheart deal all along: after all, the guy who cut the deal is out of a job, right?

On the other hand, Tauzin’s departure makes it much easier to turn to a scorched earth strategy if it comes to that. If the focus shifts from reform to punitive taxes, new rebates, populist measures like reimportation and price negotiation, then PhRMA will find it much easier to just declare the deal dead and take the gloves off in return.

We do think, however, that it’s a shame about the timing. Tauzin’s five plus years at PhRMA were a remarkable time, with the association pulling off the nearly impossible feat of transitioning from a quintessentially Republican organization into one that, if anything, may find itself too closely aligned with the suddenly not unstoppable Democratic majorities in DC.

You don’t have to agree with the policy to appreciate the skill it took to pull that off, building alliances across the spectrum of advocacy organizations in DC and across the aisles in Congress.

Sure, Tauzin wasn’t perfect--in the wake of the departure announcement, we’ve heard the rumbling that he didn’t focus enough on the details to translate the framework of “the deal” into the fine print that would make it work.

But we’d bet anything that PhRMA would be much worse off today if he hadn’t built bridges with organized labor, universal coverage advocates and other groups that don’t always see eye-to-eye with Big Pharma.

And we can honestly say that, while we know plenty of people who don’t agree with Tauzin’s positions, we’ve never met anyone who didn’t like him personally.

Those will be some pretty big shoes to fill. And in our next post, we’ll offer our thoughts on who PhRMA might pick to try….

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