Health Care Reform: Words, Words, Words

We said we had a sense of deja vu going into the State of the Union, but this is ridiculous.

Last night, President Barack Obama devoted 516 words to his call to finish work on health care reform, about five minutes of the talk. That is about 7.2% of the total 7, 127 State of the Union address he delivered. Remarkably, it is exactly the same portion of the speech that he devoted to health care in his first address to Congress 11 months ago (427 out of 5,923 words, if you are keeping score.)

And its about half the percentage that health care represents of the economy.

Stirring though the words may have been, their relative dearth suggests health care is hardly a make-or-break issue for 2010.

All of which means, Big Pharma has to think seriously about the consequences if Obamacare goes away.

Yes, it has reached the point where the US brandname pharmaceutical industry is hoping against hope that it can get someone to take $80 billion.

The famous deal between the Pharmaceutical Research & Manufacturers of America and the White House, which we dubbed "dollars for donuts," is up in the air, just like everything else related to health care reform.

AstraZeneca CEO and PhRMA board Chairman David Brennan made that clear at a press conference today tied to the company's year-end financial report. To Brennan's credit, he has said all along that the prospects for reform are uncertain, and today he underscored that things are more uncertain than ever.

And, in case there is any doubt, the collapse of health care reform would be a bad thing for Big Pharma. It is not just what won't happen--no bolus of newly insured customers, no filling in of the donut hole, no reduction in cost-sharing for existing insured, no new IP protection for biological therapies.

It is also what will happen. It is not like Pharma will just get to keep its $80 billion.

To us, the most important words for industry in the entire address weren't in the health care section at all, but earlier--when Obama called on Congress to tax overseas earnings. A year ago, Obama wanted to use that idea as a way to pay for health care reform, and that--maybe more than anything else--explains the deal PhRMA struck with the Administration. Industry came to the table, and the tax deferral on overseas earnings was taken off of it.

Not any more.

"To encourage these and other businesses to stay within our borders," Obama said last night, "it's time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America."

It took just 42 words to express that thought. But those are the words that could really count.

The State of the Union: The More Things Change…

It is a funny thing: it feels like everything has changed in health care reform, and yet we can’t help but have this crazy sense of déjà vu on the eve of President Obama’s State of the Union Address.

The questions about health care reform today aren’t so different than they were eleven months ago, when President Obama made his first address to a joint session of Congress last February 24. (That address was not, technically, a State of the Union address, but—with apologies to constitutional scholars—that is a distinction without a difference).

A year ago, the big question was: how aggressively would Obama pitch health care reform on his agenda? Where would it fall amid other priorities, most pressingly job creation and the reeling economy? And would he say enough to bring Congress with him for the heavy lifting reform would entail?

That pretty much sounds like what we will be listening for tomorrow night.

Yeah, the circumstances look very different. Then, Obama was the newly elected President riding high on an unprecedented wave of hope if not hype. Today, he is still personally popular, but his policy agenda is bloody and bruised.

On health care, sweeping legislation passed both the House and the Senate, but the election of Republican Scott Brown as the new Massachusetts Senator makes final enactment seem like an insurmountable challenge.

But things really aren’t so different than they were a year ago. In 2009, Obama addressed Congress without a filibuster-proof majority. At the time, in fact, the Democratic caucus had only 58 members: it wasn’t until Arlen Specter switched parties and Al Franken was finally certified as the winner in Minnesota that the Dems had 60.

And Obama was fresh off an embarrassing setback then too: the withdrawal of Tom Daschle from consideration as HHS Secretary and health care reform czar.

A year ago, the question was how far and how fast should Obama push for reform? Would it be comprehensive reform or bust? Or would there be a more measured, scaled down plan, with jobs, energy and other priorities defining the agenda?

Those are the same questions Democrats and health care reform advocates are asking today.

And it is interesting to remember the answer a year ago. Then, Obama announced a “down payment” on health care reform, but declined to define comprehensive reform as the priority—instead saying that a robust, sustainable economic recovery depended on reforming health care, clean energy and education reform.

We will see tomorrow night if maybe Obama decides he was right all along…

PhRMA Wins Reimportation Battle; Can it Win the PR War

The brand name pharmaceutical industry staved off an effort to attach a reimportation provision to the Senate health care reform bill last night. If anyone doubted how much the trade association PhRMA accomplished by working with the White House on reform instead of fighting, let's remove all doubt.

Here, once again, is an Obama campaign video (simply called "Billy") from last year:


Does anyone really doubt that industry could be facing a much bigger bite from health care reform if it didn't cooperate early? (This is why we nominated PhRMA's deal with the White House--which we like to call "dollars for donuts"--for Deals of the Year.)

The only problem with the vote is how bad it all looks. And we think that's a bigger problem for PhRMA than for the White House.

Sure, Obama's taking plenty of hits for flip-flopping on reimportation. (He supported it on the campaign trial, but the White House worked with PhRMA to kill it in the Senate.) But that PR hit has an upside: it reinforces to other industries that when this White House makes a deal it sticks to it. (Is that why the CEOs of several major banks now say they will work directly with the Administration on regulatory reform for their sector?)

But there is no upside here for pharma companies. The pharmaceutical industry has proven that it can defeat reimportation yet again. What the industry needs to do, though, is get to the point where no one seriously thinks reimportation is a useful public policy option in the first place.

We think this column in today's Washington Post should be required reading for everyone in the brand name industry. There is almost nothing in the article that won't make brand executives angry. But it is a fair reflection of how the political chattering classes view this issue: evil Big Pharma's lobbying clout trumped a common sense proposal to help the average Joe.

If industry can't change that perception, its victory in health care reform may be short-lived.

DotW: Noble Pursuits

It's Nobel week and the rewards and riches went to experts who've spent their careers ferreting out the secrets of telomeres (medicine), ribosomes (chemistry), and fiber optics (physics). And then there was Barack Obama, who took home the much vaunted--and in this case highly controversial Nobel for Peace. Who needs Chicago when you have the Swedes and Norwegians, eh?

When their blackberries started buzzing, Obama aides reportedly thought they'd been punk'd--it's not April 1, for the record. It ain't hard to see why. Obama is only the third sitting president to win the award and he hasn't been in office long enough to resolve the Middle East conflict, the war in Afghanistan, or the ongoing conflicts in Iraq. What's more, those rumors keep swirling about an invasion of Canada...OK, we're kidding, but it's hard to parse the logic behind the award. Perhaps they meant to give him the Peas Prize in honor of Michelle's bounteous organic White House garden.

Whatever the reasons, we wonder if the political capital of the Nobel will give Obama the domestic leverage to push through meaningful health care reform. Another noble pursuit, the public option, which was given up for dead after weeks of debate, showed new signs of life this week. In an effort to get to 60 (it sounds like some self-help title aimed at lowering cholesterol and increasing dietary fiber, doesn't it?), Senate Dems have unveiled a compromise. (And this doesn't include the trigger option Senator Snowe is mulling.)

The plan is simple: establish a strong national public option for insurance coverage but give individual states the right to opt out. Such a solution, in theory, assuages the more liberal members of Congress afraid of losing their, ahem, moral compass, while pacifying the more conservative denizens. How this proposal would actually be implemented is a mystery. (Hey, this is a free publication. You want real solutions, go read The RPM Report or "The Pink Sheet".)
But enough dithering. It's time to check our moral compass--wait, it's here somewhere. Hark, the arrow is pointing straight toward...


Novartis/Paratek: A clearer, if not necessarily easier, pathway to FDA approval for antibiotics may have spurred Novartis' Oct. 8 purchase of exclusive worldwide rights to Paratek Pharmaceuticals' Phase III broad-spectrum antibiotic PTK 0796. Specific financial terms of the deal weren't disclosed, but Paratek said it could earn up to $485 million during the life of the deal, including an upfront payment and potential milestones. The privately-held Boston biotech also would receive undisclosed royalties on sales if PTK 0796 reaches the market.

The companies tout the compound as a first-in-class aminomethylcycline--basically a next-generation tetracycline--with the potential to become the first broad-spectrum antibiotic given once daily by I.V. or as an oral tablet to treat infections caused by drug-resistant bacteria such as methicillin-resistant Staphylococcus aureus (MRSA) or multi-drug resistant Streptococcus pneumoniae. Currently being tested in a Phase III trial in complicated skin and skin structure infections (cSSSI), '0796 has demonstrated ability to work as a single agent against a number of infectious diseases. A second Phase III trial in community-acquired bacterial pneumonia (CABP) is planned, Paratek CEO Thomas Bigger told "The Pink Sheet" DAILY. Paratek will continue to participate in clinical study and manufacturing, while Novartis will take care of worldwide marketing.--Joseph Haas

Genentech/SurModics: Genentech inked a small deal--$3.5 million upfront and $200 million in donwstream milestones--with drug delivery specialist SurModics to develop a sustained release version of Lucentis this week. But don't let the small upfront fool you. Age-related macular degeneration remains a hot area of investment for VCs and biotechs in part due to the success of Lucentis. In 2008 it totaled $875 million in U.S. sales, and with the recent CMS decision it's unlikely Avastin will steal its market share anytime soon.

Despite Lucentis's effectiveness--it stops loss of vision in more than 90% of patients and restores some sight to about a third of that population--it's far from a perfect drug. The regular monthly injections are a burden to patients and physicians and costly to the healthcare system. New options to reduce the injection frequency would be a welcome step forward. News of the partnership sent SurModics' stock soaring nearly 20%, but there's plenty of competition to worry about. A number of companies are developing competing delivery or device solutions, including Neurotech Pharmaceutical, Buckeye Ocular, NeoVista, and Oraya Therapeutics.--Ellen Foster Licking

Arigene/Trimeris: South Korean medical equipment maker Arigene's acquisition of Trimeris marks the official end of a once high-flying biotech. Trimeris discovered the HIV fusion-inhibitor class of drugs and partnered its Fuzeon treatment with Roche back in 1999 for $10 million upfront. (The Swiss pharma has since paid out milestones totalling at least $24.75 million during the life of the deal.) But the two firms abandoned development of a follow-on fusion inhibitor, T-1249, in 2004, and a next-generation compound that offered the possibility of less-frequent dosing and a better safety profile didn't pan out either. Roche returned all rights to that program to Trimeris in 2007 in exchange for a nominal royalty on future sales.It's been tough going ever since. Enter Arigene, a South Korean firm that markets a line of medical instruments under the Ubiquitous Healthcare Systems label. Arigene is offering $3.60 a share in cash, a 40% percent bump over Trimeris's closing stock price on Oct. 1, to expand its operations into "the broader biotechnology industry."

GSK/Jiangsu Walvax Biotech: In its second vaccine-related collaboration with a Chinese company this year, GlaxoSmithKline announced Oct. 6 it's creating a joint venture with Jiangsu Walvax Biotech to develop and manufacture pediatric vaccines in China. The firms will build a new manufacturing facility for Priorix, Glaxo's three-in-one pediatric vaccine for mumps, measles and rubella, and they will develop vaccines beyond MMR. The deal also involves a technology transfer to let the JV make the vaccines locally, according to Glaxo. (FYI, Walvax is a recently created affiliate of China's second largest producer of the haemophilus influenzae type b (Hib) conjugate vaccine, Yunnan Walvax Biotech.) The two companies will invest a total of £41.2 million ($65.6 million) in the joint venture, with Glaxo initially providing more than half the money and owning a 65% stake in the JV. This is the second vaccine-related JV Glaxo has signed in recent months. In June, the Big Pharma inked a five-year deal with China's Shenzhen Neptunus to make seasonal, pre-pandemic and pandemic flu vaccines.--Joseph Haas

Our final deal of the week is actually a...



Ipsen/Spirogen: Partners since 2003 on a cancer compound, Ipsen this week gave worldwide rights back to Spirogen, which now takes the reins on future development and commercialization with help from a new financial backer. In the original deal, Ipsen gained rights to SJG-136, a DNA minor groove binder, and took a 20% stake in Spirogen. Six years later with the compound entering Phase 2 to test against ovarian cancer and blood-borne malignancies, Spirogen takes over, and Ipsen becomes eligible for commercial milestones and royalties. Spirogen will also tap private-equity firm Celtic Therapeutics Holdings, which invests in projects instead of companies, for up to $15 million to help development of the compound, now renamed SG-2000. "Up to..." can mean lots of things, of course, but the firms didn't say how much of it was guaranteed.--Alex Lash

(Image courtesy of flickrer niznoz used with permission through a creative commons license.)

Quick Takes from Obama Press Conference

Here's our quick takes from the Obama press conference earlier today on health reform:

1) Health care reform represented the anchor leg of Obama's prepared comments at his press briefing, following his comments first on the situation with the protests of the Iranian election and then the importance of an environment bill. We believe that's meaningful and that the White House is very serious about passing sweeping health care reform legislation, much more so than an environment bill.

2) Obama made it as clear as he ever has before: the bill must be deficit neutral or better over a decade. He will not sign a bill that isn't. What does that mean? The final bill will have to be scored at $1 trillion over 10 years. In other words, if a bill is scored as costing $1 trillion over 10 years and covers 75%-80% of the uninsured, we believe that's a bill that gets signed with a Rose Garden ceremony. The administration, or the next one, can work incrementally to cover the remaining 20%-25% of the uninsured.

3) If the only thing that stands between a health care reform bill and no health care reform bill is a public plan option, the President will sign a bill without a public plan. That was our read of his comments: "Ultimately, I may have a strong opinion but it's too early," to make a decision on the plan, Obama said.

4) Obama demonstrated a real and deep understanding of complex health care issues during the Q&A and we believe that is a positive for health care providers. Why? Because when it's time to make extremely tough decisions on reform, Obama will know exactly how deep the cuts that doctors, hospitals, insurers, and drug/medical product makers are sacrificing for reform and how policy decisions will be impacting the overall system.

5) Obama also showed real teeth when it came to the public plan debate. When asked a tough question about the potential for employers to drop their coverage and send people to a cheaper public plan and the inability of private insurers to compete with a government option, he put all of the onus on the private insurers. He essentially said that any private plan worth its salt should be able to compete ably with a public plan assuming 1) the rules are the same and 2) the public plan is not continually subsidized by taxpayer dollars--it has to be premiums paid by enrollees.

If you're interested in health care reform, you can follow our twitter feeds at http://twitter.com/Ramsey_Baghdadi and http://twitter.com/RPMReportMike.

Don't Mess With McAllen

We are prepared to make one bold prediction about health care reform in 2009: Whatever else happens, the health care system in the city of McAllen, Texas is going to experience big changes.

These are heady days for that hitherto little talked-about Texas city, which suddenly finds itself as the unlikely poster child for why we need health care reform in the US. McAllen can thank Atul Gawande, who focused on the city in an article in the June 1 New Yorker. If you haven't read the article, you should. It sure seems like everyone else has.

And we do mean everyone, starting with (apparently) President Obama and heading on down from there through the entire list of key figures in driving health care reform 2009.

Gawande got quite a shout-out for his article during a comparative effectiveness research conference hosted by Brookings June 9. Sen. Max Baucus mentioned it during his opening keynote, saying he was pleased to learn that President Obama himself also read it. He paused to ask if Gawande was in the room so that he could compliment him in person. (He wasn't).

Then Peter Orszag, head of the Office of Management & Budget and perhaps the single most important person shaping the health care reform agenda at the outset of the Obama Administration, delivered his opening keynote—and basically presented the Gawande article in Powerpoint form (and, much as we love the New Yorker, there is nothing like the White House seal next to an excerpt to make it seem that much more authoritative.)

Why is everyone talking about this article? Well, it probably helps that Gawande is himself part of the policymaking circle, at least as an "emeritus" member. He was on the Clinton health care reform task force in 1993, so he's hardly the typical ink-stained wretch (or is it pixel-dimmed?) when it comes to how his journalistic endeavors are perceived.

We've already mentioned him in the context of teeing up the health care reform debate, where an earlier New Yorker article offered some intellectual underpinnings for the notion that US health care reform will have to build on the US system, rather than import ideas from other nations. No US politician would dare suggest that there are any valuable models for health care to import from Europe; apart from Vermont's Bernie Sanders, most legislators in the US don't like being called "socialists. So that article helps make it okay that Orszag's omnibus overview of health care reform options (prepared while he was the head of the Congressional Budget Office) includes just one reference to an international model (and that is from Canada, which doesn't really count does it?).

But even without those connections, you can appreciate why everyone is talking about the latest article. In it, Gawande does the impossible—taking the hopelessly abstract ideas of regional treatment variations and overall health spending trends, and turning them into a specific, concrete, real-world case study: McAllen, Texas.

The article starts with the notion that McAllen is an outlier, generating much higher per capita health spending than the nearby city of El Paso. And yet, there are no obvious demographic differences between the two communities. Moreover, there are also no apparent improvement in health outcomes. (Indeed, by all indications, the community of McAllen ends up getting, if anything, worse care than El Paso, despite all the spending.)

The genius of the article, though, is how Gawande demolishes—one by one—the various possible explanations for the difference. (Our favorite: where he deals with the reflexive answer—also raised during the Brookings event—that overutilization is driven by fear of liability. After all, doctors in McAllen have no reason to fear liability any more than doctors in El Paso. Its not that liability isn’t a problem, just that it can’t explain the difference--which even the doctors Gawande interviews end up admitting.)

By the end of the article, the only conclusion left is that McAllen has fallen into a culture of overutilization, one that is at the very least enabled by a payment system that rewards entrepreneurial physicians who come up with ever-more instensive (and expensive) interventions for patients.

Is that in fact the reason for soaring health care costs (without commensurate improvements in outcomes) across the US? We have no idea.

There are certainly alternate explanations, including one possibility raised in a Wall Steet Journal editorial June 8, which suggests that apparent variations in health care costs are an artifact of the data: federal Medicare spending may vary considerable from locale to locale, but—the editorial argues—high Medicare rates may be matched by lower spending from other sources, meaning net costs overall do not in fact vary as much as Orszag and others suggest. You can see where the Journal editorial board is taking this argument: Medicare spending takes over markets and drives out more efficient private competition.

A reporter at the Brookings event asked Orszag about that hypothesis, and Orszag almost lept off the podium to respond. Cost patterns vary no matter who the payor is, Orszag said, citing large employers and Medicaid databases for further evidence that it is not just a Medicare phenomenon. He promised that he would have a "longer response" to the editorial soon.

Which brings us to our final point about McAllen, Texas. Again, we have no idea what the real cause of variation in health spending is, but this we do know: the people driving the health care reform debate are much more inclined to believe Atul Gawande than they are the Wall Street Journal's editorial board. Biopharma industry executives should bear that in mind as they plan their summer reading.

Lyndon Baines Obama?

This week’s White House meeting between President Obama and a coalition including insurers, the Pharmaceutical Research and Manufacturers of America, physicians, hospitals and others on health reform reminded us of how another president used his PR skills and White House platform to push a key health issue forward in the direction he wanted.

In 2009, the industry groups came to the White House with the idea of expressing their commitment to health reform and to contribute their share toward a goal that health reform would eventually save as much as $2 trillion over 10 years.

Somehow, by the time they got home, there was a widely reported perception that the associations agreed specifically to reduce their costs to the health system by $2 trillion. The president asked them to come back in June with proposals for how they will do this. Since then, there has been a bit of backpedaling, and differing reports of whether the President misspoke in describing their agreement (see the full account in the May 18 issue of “The Pink Sheet”).

Now, we’re not sure how the confusion arose or who is spinning who. But we wonder if Mr. Obama learned a few presidential wiles from Lyndon Johnson and Medicare. LBJ managed to push through legislation creating the Medicare program in July 1965, despite vociferous opposition from the American Medical Association. He knew the program would never get off the ground without physician support. Here’s how he got it, as recounted by historian Robert Dallek in Lyndon B. Johnson, Portrait of a President:

Some members of the Administration were so worried about winning the cooperation of the AMA that they urged a meeting at the White House with AMA leaders at which the President appealed to doctors to support a law favored by the people and worked out “in the most pain-staking way in accordance with the exacting rules of our democracy.”

Johnson did not think that the AMA and most physicians would find it easy to oppose Medicare without serious damage to their public standing. But he was worried enough to invite AMA leaders to the White House, where he could compel a public acknowledgement of their support. In a July 30 discussion with eleven AMA officers, Johnson asked the physicians for help in getting doctors to rotate in and out of Vietnam for a few months to serve the civilian population. Appealing to their patriotism, Johnson declared, “Your country needs your help. Your President needs your help.” The doctors responded almost in unison with promises to start a program immediately.

“Get the press in here,” Johnson told [presidential Press Secretary Bill] Moyers. When they arrived, Johnson described and praised the AMA’s readiness to help the Vietnamese. But the reporters, undoubtedly primed by Moyers, wanted to know whether the doctors would support Medicare. Johnson, with mock indignation, said: “These men are going to get doctors to go to Vietnam, where they might be killed. Medicare is the law of the land. Of course they’ll support the law of the land. Tell them," Johnson said, turning to the head of the delegation. “Of course, we will,” the AMA president responded….A few weeks later, the AMA announced its intention to support Medicare.

We just hope Obama doesn’t have any appendectomy scars to show us.

- Denise Peterson & Cathy Kelly

Obama’s Health Reform Meeting: The Message Is The Message

A pharma stakeholder emailed The RPM Report following the highly anticipated and widespread reporting of a health care reform meeting at the White House, featuring representatives from pharma, insurers, physician and hospital organizations, and medical device manufacturers.

“Is the press really going to let Obama get away with this event? I just don’t see any specifics here and, therefore, no reason to take this seriously. What am I missing?”

The quick answer is: messaging. In short, the meeting was much more about communication than it was about policy.

It’s true, the brief remarks by Obama at the White House offered very few details. Here are the select highlights paraphrased and quoted directly from the President’s speech:

►Americans “must be free” to choose their doctors and insurance.

►Americans can keep insurance they have.

►“I’m committed to building a transparent process and all views are welcome.”

►“This is a historic day, a watershed event.”

►“What’s brought us all together today is the recognition that we can’t keep traveling the same dangerous road.

►“We’re spending more on health care than any other nation on Earth.”

►“What is a growing crisis for the American people is also an untenable burden for American businesses.”

►“When it comes to health care spending, we’re on an unsustainable course.”

Most would agree that the answers to the nation’s health care concerns aren’t layered in Obama's remarks. However, there was one very clear specific offered by the President: a coalition of critical health care providers have vowed to cut costs by 1.5% each year for 10 years resulting in $2 trillion of overall savings for that period.

Those are big, specific numbers that are easily digestible by reporters, broadcasters, and most importantly, voters.

White House Chief of Staff Rahm Emanuel has said controlling costs is the number one priority for health care reform above all else. To read our previous coverage, click here.

Indeed, most headlines and cable TV news shows immediately after the speech zeroed in on the $2 trillion savings—not the lack of specifics on how to get there. That’s a big victory for the White House in such a hotly contested issue.

The second strategy, which has become apparent in the two White House meetings on health care reform, is Obama will not paint himself into a corner when it comes to what health care reform is. He highlighted choice of doctor, choice of insurance/keeping your current plan and lowering costs as part of his principles. That’s pretty vanilla and no one on Capitol Hill is talking about opposing any of those. That gives Obama flexibility as the legislative options become clearer in June.

A third apparent strategy is for Obama to speak infrequently on health care reform—at least for now—in order for his words to carry greater weight and for carefully rolled-out events to make bigger headlines. One of the criticisms of President Clinton in 1993-1994 is that he spoke too frequently about health care reform towards the end leading to messaging missteps and causing the public to eventually tune out the message itself.

For example, much was made in the mainstream media of who met with the President privately and who stood behind him during his remarks. Here’s a list of attendees furnished by the White House:

Insurers

George Halvorson, Chairman and CEO of Kaiser Foundation Health Plan

Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP)

Jay Gellert, President and CEO of Health Net Inc.

Hospitals

Thomas Priselac, President & CEO, Cedars-Sinai Health System

Rich Umbdenstock, President & CEO, American Hospital Association (AHA)

Ken Raske, President,Greater New York Hospital Association

Physicians

J. James Rohack, MD, President-Elect, American Medical Association (AMA)

Rebecca Patchin, MD, Chair-Elect of the AMA

Rich Deem, Senior Vice President of the AMA

Medical Device Companies

Michael Mussallem, Chairman & CEO, Edwards Lifesciences

Steve Ubl, President & CEO, AdvaMed

David Nexon, Senior Executive Vice President, AdvaMed

Pharmaceutical Companies

Richard Clark, Chairman, President & CEO, Merck

Billy Tauzin, President & CEO, PhRMA

Rick Smith, Senior Vice President, PhRMA

Labor

Andy Stern, SEIU

Dennis Rivera, SEIU Health

Administration Officials:

Nancy-Ann DeParle, Director of the Office of Health Reform

Peter Orszag, Director of the Office of Management and Budget

Larry Summers, Director of the National Economic Council

Kathleen Sebelius, HHS Secretary

Halvorson, Rohack, Clark, Mussallem, Rivera, and Priselac joined Obama during his speech. No representatives from biotech or the Biotechnology Industry Organization were invited to the meeting. Broadcasters focused on the fact that many of the people involved in the meeting were the same ones opposed to health care reform in 1993-1994. The inference: the chances for reforming the system are much better now than they were then.

When we asked the pharma stakeholder what the headlines should have read instead of the $2 trillion savings pledge, the response was less positive than the mainstream media coverage: “Obama Cheers as Industry Leaders Offer Big Promises but No Details.”

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Obama's "Down Payment" On Health Care Reform: How Far Down?

Advocates for an aggressive, first-100-days push for universal coverage in the Obama Administration can't have enjoyed much of what they heard in the Presidential Address to Congress February 24.

For the biopharma industry--whose trade associations are among the stakeholder groups publicly urging action on health care--it is hard to gauge how disappointing that outcome will be, though the President's budget proposal (due out Thursday) could make that picture clearer.

There are at least three reasons advocates for universal coverage may be disappointed by the Presidential address.

First, it is clear that while health care reform is a priority for the Administration, it is not the priority. To no one's surprise, Obama focused initially on the response to the economic crisis, including the recently enacted stimulus legislation and the next installment of relief for the financial system. But when he turned to the next item on the agenda, he didn't single out health care, instead listing energy, health care and education as equal priorities.

Indeed, among the three key areas for investment cited by Obama--"energy, health care, and education"--health care was always listed second, and was also the second theme discussed at length in the speech. (As graduates of the IN VIVO Blog School of Rhetoric know, being second on a list of three is worse than being last: debaters are trained to use their strongest argument first, the second best last, and leave the weakest in the middle in hopes that no one listens too carefully.)

Second, Obama stopped well short of making universal coverage the goal of health care reform in the near term, describing his upcoming budget proposal as offering "a down-payment on the principle that we must have quality, affordable health care for every American."

Leaving aside the odd metaphor in a speech shaped so fundamentally by the collapse of the mortgage market, "down-payment" sure sounds like a synonym for "incremental." Indeed, Obama himself described the expansion of the Children's Health Insurance Program already signed into law as a "down payment."

Third, the discussion of health care reform was framed clearly in the context of addressing the long-term economic health of the country rather than as a response to the short-term economic crisis. Translation: reform proposals will be judged on their ability to reduce spending and shrink deficits--there will be no stimulus-style spending to expand coverage with promises to restore balance in the future.

All in all, Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin and Biotechnology Industry Organization CEO Jim Greenwood did a pretty good job of predicting how the address would go. (See our post here.)

In particular, the address lends credence to Tauzin's suggestion that the departure of Tom Daschle from his expected position as the Obama Administration's health care general means incremental change driven by the the economic team rather than comprehensive, policy-first reform.

Therein lies the danger for the biopharma industry: in the context of budgetary priorities, measures to restrain pharmaceutical prices are tempting offsets with little political downside compared to say, slashing physician payments or forcing hospitals to close. We've already noted some rhetorical parallels between Obama's first remarks to Congress on health care and President Clinton's in 1993.

That reform was supposed to be budget neutral, to avoid undoing Clinton's first legislative victory, a tough fought balanced budget (remember those days?). With that mandate, Clinton's working groups quickly moved into aggressive proposals for restraining spending, especially on drugs and biologics before the whole initiative collapsed in the face of opposition from across the spectrum of health care sectors.

In 2009, there is no doubt that the budget comes first, quite literally. Obama's next "down payment" on health care reform will be unveiled Thursday; a bipartisan summit on health care reform kicks off on Monday. Just don't call it the Health Care Reform Task Force ...

Back to the Future on Health Care Reform

“All of our efforts to strengthen the economy will fail unless we take bold steps to reform our health care system.”

With those words uttered during his first address to Congress last night, President Obama officially kicked off the health care reform debate in 2009. Oh wait a second—those words were from Bill Clinton in February 1993.

What Obama said was “the cost of our health care has weighed down our economy and the conscience of our nation long enough. So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.” In our next post, we'll offer our key takeaways from Obama's address.

But first, we just had to note an irony. The one thing everyone in Washington says about health care reform 2009 is that the Democrats have learned lessons from 1993. And yet there sure seemed to be a lot of similarities between Clinton's first address to Congress and Obama's when it came to the arguments for health care reform.

Here are a few of the parallels, courtesy of transcripts provided by the Washington Post for Clinton’s addresses, and the official White House text of Obama’s remarks.

Clinton (1993): “America's businesses will never be strong; America's families will never be secure; and America's government will never be solvent until we tackle our health care crisis.”

Obama (2009): “The crushing cost of health care..now causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas. And it’s one of the largest and fastest-growing parts of our budget.”

Clinton: “Later this spring, I will deliver to Congress a comprehensive plan for health care reform that will finally get costs under control.”

Obama: “In the next few days, I will submit a budget to Congress…[that] includes an historic commitment to comprehensive health care reform – a down-payment on the principle that we must have quality, affordable health care for every American.”

Clinton: “There will be no new cuts in benefits from Medicare for beneficiaries. There will be cuts in payments to providers: doctors, hospitals, and labs, as a way of controlling health care costs. These cuts are only a stop-gap until we reform the whole health care system.”

Obama: “Comprehensive health care reform is the best way to strengthen Medicare for years to come.”

Clinton: “We will root out fraud and outrageous charges, and make sure that paperwork no longer chokes you or your doctor.”

Obama: “We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier.”

Of course, we all know what happened next: Clinton’s vaunted health care reform task force set to work, and the debate devolved into partisan differences and collapsed under its own weight. Obama surely won’t repeat that mistake.

Or will he? “Now, there will be many different opinions and ideas about how to achieve reform, and that is why I’m bringing together businesses and workers, doctors and health care providers, Democrats and Republicans to begin work on this issue next week” (Obama, 2009).

How Much Reform, How Fast? What to Listen For Tonight

Do we have to pay for health care reform?

That is probably the single, critical question all stakeholders in the health care system will be listening for when President Obama addresses a joint session of Congress Tuesday night.

No one expects Obama to back down from his campaign promises to push for universal coverage in his first term. Indeed, Office of Management & Budget Director Peter Orszag affirmed that health care reform will be “the next priority up for the Obama administration” during a closed door meeting with the National Governors’ Association, Michigan Democrat Jennifer Granholm said Feb. 22.

However, the economic crisis and the withdrawal of Tom Daschle from his expected role as health care reform general raise significant questions about the direction of and prospects for reform in the near term.

In the context of the presidential address and upcoming budget proposal, those questions essentially focus on how reform will be framed.

For the biopharma industry, the hope is that Obama will define health care reform as, in essence, a continuation of economic stimulus, pressing the urgency of change without insisting on offsetting cuts to pay for expanded coverage.

Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin suggested that policymakers should learn a lesson for Japan’s economic struggles in the 1990s. That experience, he said during a webcast sponsored by Ernst & Young on Feb. 20, shows what happens when “stimulating the economy helps turn things around and then fiscal restraint comes in too soon and then blocks the good effect of the stimulus.”

“The budget is going to be facing some very ugly deficit numbers,” Tauzin noted. However, he predicted, “the trend is going to be let the stimulus work before we start to focus on these ugly deficits.”

Nevertheless, all indications are that the President instead will call for a specific sum of money to be reserved for health care reform—and pledge to find offsets to pay for it upon enactment.

That may not sound like a significant difference since, after all, health care reform will have to be paid for one way or the other. For biopharma companies, however, the difference could be quite significant: many of the most obvious targets for savings involve cuts to drug pricing or other measures to control spending on pharmaceuticals.

It is almost impossible, for example, to imagine a package of health care spending cuts that does not address the prices of drugs under the Medicare Part D prescription drug program. Or that excludes a follow-on biologics provision, which would presumably be scored as reducing federal spending by billions of dollars.

Both measures may be inevitable anyway, but enactment in the context of finding a fixed savings target to pay for broad expansion of health coverage means a much higher chance that cuts to Part D pricing will be deeper, and that exclusivity to innovators under FOB legislation may be shorter, than would otherwise emerge from the legislative process.

The framing of health care reform is just one of many topics industry will be eagerly listening for in Obama’s “unofficial” state-of the-union address. Here are some key themes:

Bragging Rights: “I think the first thing he will do is talk about what he has already done,” BIO CEO Jim Greenwood said during the Ernst & Young webinar, highlighting expansion of the Children’s Health Insurance Program and several elements of the stimulus bill, including funding for health care IT, comparative effectiveness research, and new spending for the National Institutes of Health.

“I think he starts off with bragging rights and then promises in more general terms that there is much more to be done,” Greenwood said.

Still, even a recap of the first month could contain important indications of policy directions, especially when it comes to the comparative research funding included in the stimulus. That relatively small ($1.1 billion) line item generated a lot of political attention, and it will be interesting to see whether Obama devotes time to it.

Universal Coverage: Obama “is very interested in moving aggressively to expand insurance coverage,” Tauzin noted. But how prominent and how persuasive will discussion of that issue be? Tauzin clearly doesn’t expect much, predicting on the Ernst & Young call that reform will move “piecemeal” rather than in a comprehensive fashion in the months ahead.

Fiscal Responsibility: The President hosted a “fiscal responsibility” summit Feb. 23 and plans to release a 2010 Budget outline on Feb. 26. During his weekly web address Feb. 21, Obama pledged to “release a budget that's sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline.” That sounds like a recipe for pay-as-you-go health reform.

Wellness/Prevention: Many politicians now display “an emphasis on prevention and dealing with chronic diseases in the early stages instead of literally waiting to treat all the damage done,” Tauzin noted. “You see that theme expressed in the politics everywhere and I expect you will see it expressed somewhere” in the Presidential address.

FDA: A month ago, the peanut butter recall made FDA the subject of discussion during White House press briefings and a pledge to name a new commissioner shortly. Daschle’s departure delayed that plan. Obviously any reference to FDA will be important for industry to analyze—all the more so if it suggests an emphasis on the food side of the agency’s mission (and hence a tilt towards an expert in that field to run the agency) and/or a commitment to zealous enforcement by regulators.

Tobacco regulation: All indications are that the White House and Congress are committed to expanding FDA’s mission to include regulation of tobacco products (a theme that ties together both prevention and FDA regulation). A discussion of tobacco could signal a further layer of distraction for the agency from the product review issues central to industry—but perhaps also an enforcement agenda that spares biopharma firms from the toughest scrutiny.

Stem cell research: Overturning the Bush Administration policy on stem cell research is an important priority for BIO, but also one that may have been delayed by the wait for an HHS nominee. Biotech companies would welcome a public commitment to reverse that policy.

Personalized medicine: Obama sponsored legislation in the Senate to create regulatory systems and incentives for personalized medicine. Any discussion of science and medicine from the podium could be a call to move forward in that area.

Generic drugs: Former President Bush often highlighted the cost saving impact of generics. Will Obama do the same?

Medicare managed care: The private sector has a big role in Medicare, both via fully integrated Medicare Advantage plans and as the providers of the Part D prescription drug insurance. The biopharma industry would love to see Part D serve as the template for broader health reform—but it is so closely tied to the Bush Administration that it may be difficult for Obama to embrace the program. Tonight is the first chance.

HHS Secretary Sebelius? It Might Spark a Fight

What we've been telling you for some time is now official: Kansas Governor Kathleen Sebelius is the front-runner to replace Tom Daschle as the nominee for Secretary of Health & Human Services under President Obama.

At least, it is as official as these things get: unnamed "advisers" confirmed to the New York Times that she is the leading candidate.

In Washington, DC and other world capitals, this is what is known as a trial balloon. Get the name out there and make sure you have a chance to weigh any vigorous objections before you make the nomination official. The Administration has to make sure it knows the landscape, especially after the collapse of the Daschle nomination threw the White House's carefully crafted plan to launch the health care reform debate into disarray.

Here's the hitch: If the goal is to pick someone who can sail through to confirmation without a fight, it may turn out that Sebelius is not the perfect choice. As we noted, Sebelius is likely to stir up passionate opposition from pro-life members of the Senate.

The Times explains the issue well:

One issue that could draw attention is her stance on abortion. A Roman Catholic who says abortion is wrong, Ms. Sebelius vetoed a bill requiring clinics to report information on why a late-term abortion was performed, drawing the condemnation of the archbishop of Kansas City, Kan.

With that in mind, it can't be a good sign for Sebelius that the Pope himself just issued a statement affirming the view that Catholic politicians are morally obliged to work to end abortion. That was a direct slap at House Speaker Nancy Pelosi, herself a Catholic, who met with Pope Benedict on February 18. (Reuters has the story here.)

But it doesn't seem like a stretch to see the statement as a call to action against Sebelius, who as HHS secretary would oversee everything from stem cell research to regulation of RU-486 to the use of public funds for family planning services.

Stay tuned....

While You Were Awaiting Stimulus

While the rest of nation waits for Congress and President Obama to finally settle on a stimulus package that will jump start/drag down the economy, Sports Illustrated reported that the Yankee third-baseman Alex Rodriguez received a personal stimulus package back in 2003. The magazine reported that Rodriguez flunked a steroid test while playing shortstop for the Texas Rangers.

No word from A-Roid on the charges, but no matter. (Update: Rodriguez admitted it to ESPN.com.) We would still like to , we'd much rather hear what Obama will say tonight at his prime-time press conference. Until then ...

• Drug stocks have historically been safe harbors in troubled economic times, but some harbors are clearly safer than others. Seeking Alpha reports that publicly traded biotechnology companies have outperformed pharma companies since the stock market hit bottom in November. Why? We'll give you two reasons: Pipe and Line. Okay, that’s really one reason.
• Just a few days after news surfaced that GlaxoSmithKline plans to make deep, deep job cuts as part of a plan to shed £1bn a year in costs by 2011, the Wall Street Journal reported the pharma giant is in talks to buy Indian generic-drug company Piramel Healthcare Ltd. for roughly $1.5 billion.
• If you see Charles Darwin, tell him Happy 200th Birthday from In VIVO Blog then feel free to call the San Francisco Chronicle or The Ghost Hunters .
• Pork may be all the rage in Congress. But the FDA is all about the goats (no, we're not making a crack on agency personnel.) The agency approved first product derived from a genetically engineered animal, with the honor going to genetically modified goats. The Wall Street Journal reports on the approval of Atryn, developed by GTC Biotherapeutics Inc. for the treatment of a rare blood-clotting disorder known as hereditary antithrombin deficiency.
• Carl Icahn took a little time away from erecting his siege tower outside Biogen Idec’s headquarters to give his two-cents in the Wall Street Journal on President Obama’s salary cap for those Wall Street execs obtaining federal bailout funds. His take: the cap is understandable but wouldn’t be necessary if management were more accountable to shareholders.
• And no, “While You Were…” post would be complete without some mention of a Philadelphia sports team, so …yada, yada, yada ... aren't the Phillies great ... blah, blah, blah...they signed Ryan Howard. Enjoy.

A Friend in High Places

VCs finally seem to have a friend residing in the White House. The Venture Capital Journal declared so in its cover story, and, as this picture shows, Steve Jurvetson, managing director of VC firm Draper Fisher Jurvetson, connected with then Presidential Candidate Obama back in 2007.

The new president appears to understand and appreciate the need for innovation. This friendship could be tested because while people love innovators, they don't always have the same regard for the investors in innovation. That sentiment is beginning to shine through, at least in Congress.

First, the Senate is pondering a "Hedge Fund Transparency" bill that lumps those investors in with private equity firms and, gasp, venture capital funds. Clearly, venture firms and hedge funds have completely different charters (although there might have been some blurring over recent years) but the Senate apparently doesn't have the appetite or insight to sort them all out.

Feel free to tip toe over to PEHub for details, but here's the gist: Venture capital firms, at least those with funds of larger than $50 million (so nearly all), will be required to make regular filings to the SEC, listing limited partners and aggregate values of portfolios. It doesn't sound like a big deal, but venture firms already are wrestling with the regulatory demands brought on by FAS 157, the fairly new requirement forcing VCs to regularly assess the values of their portfolios.

If VCs are successful in extricating themselves from the association with hedge funds, they might find themselves fighting a second front. A small business advocacy group, the American Small Business League, is casting the venture industry as predatory billionaires looking to snatch money away from hard-working small business owners. Lloyd Chapman, the group's leader and spokesman, is objecting to the proposed changes by the Small Business Administration that would once again allow companies with significant venture capital backing to apply for SBIR grants.

Through posts on Youtube.com, the Huffington Post and other venues, the group accuses the Obama administration of being in the pocket of the venture capital industry. It even takes aim at Karen Mills, the VC-turned-head of the Small Business Administration, which administers the SBIR program.

President Obama's appointment of multi-millionaire venture capitalist and heir to the multi-billion dollar Tootsie Roll fortune, Karen Mills to head the Small Business Administration (SBA), is seen as an indication he will support federal legislation and policies that could kill millions of middle class jobs by diverting billions of dollars in federal small business contracts to some of the nation's wealthiest venture capitalists.

The National Venture Capital Association issued a worthy rebuttal, pointing out that venture-backed companies are small, struggling ventures that need all the help they can get. Chapman's campaign seems to ignore the fact that venture-backed companies were eligible for the SBIR grants until 2003, when the SBA changed the rules. Congress loosened the requirements again last fall, opening the door for VC-backed companies. But it needs to reauthorize the act.

Like most conflicts, this one isn't necessary. No doubt, venture capitalists and Chapman could sing the same tunes about small businesses creating jobs. In fact, that's just the angle the NVCA pushed in its press release, funding small businesses as a method of getting people back to work. The pharma industry certainly has shed many workers lately, people who could help a small biotech. The two parties also agree that large corporations shouldn't be eligible for the grants, but Chapman's group apparently can't get past the personal wealth of the VCs that may be backing these small businesses, tossing out loaded terms like "wealthy" and "well heeled."

Things are bound to get uglier before they get better. Here's hoping VCs don't get smeared by the same mud brush being used on well-paid Wall Street type. Life sciences VCs, in particular, will need their public images relatively clean as the public discussion moves off the economy onto their new friend's real priority: health care reform and containing the cost of health care.

("Presidential Obama" courtesy of flickr use Jurvetson)

The Next HHS Secretary: All Signs Point to Kansas

So we thought we would be done with this game, but apparently not. Now that Tom Daschle has withdrawn his nomination, the question on everyone’s mind is: Who will replace him?

All signs point to Kansas Governor Kathleen Sebelius. The Governor made a name for herself in her home state as an insurance reformer. She stopped Blue Cross Blue Shield from merging with another out of state company and she refused to accept contributions from insurance companies during her campaign.

She was a key surrogate for President Obama during his campaign and remains close to him. Maybe most importantly, she was already thoroughly vetted for Vice President and was thought by many to be a close second to Joe Biden. As a serving public official, she would bring none of the lobbying concerns that weighed down Daschle’s nomination and eventually torpedoed it.

If Sebelius is the pick, we imagine that Jeanne Lambrew will be named head of the White House Office of Health Reform and Sebelius will take on the more classic role of the HHS Secretary.

But…

If President Obama attempts to remake the pick in the mold of Daschle—a legislative general with knowledge of the issues—here’s our list of potential candidates.

Rosa DeLauro (US Congress): The Connecticut Congresswoman was originally a candidate the first time around, so why not the second? DeLauro currently chairs the agriculture appropriations subcommittee in the House, which among other things oversees FDA's budget. She's no fan of DTC ads, sloppy overseas manufacturing, or anything that looks like overly cosy relationships between industry and regulatory.

DeLauro knows as well as anybody the ins and outs of Congress and where the levers of power are.

And remember that cozy little Super Bowl Party President Obama threw at the White House for a select few members of Congress? Well, DeLauro was invited and attended. We’re just saying…The President may need her as part of the stimulus plan passage/maintenance/implementation but ignore her at your peril.

Ron Wyden (US Senator): Wyden, weirdly, has been one of the forgotten figures of health reform. However, he’s got a bill floating out there and he’s taken a long-term interest in health care. The Health Americans Act, co-sponsored by Utah Senator Robert Bennett, aims to get universal coverage by creating a new private insurance market and uses state-based purchasing pools.

Plus Wyden has served in both the House and Senate, so he knows both worlds well. Not only that, my friends (John McCain reference), but one Emanuel seems to really like his approach. That would be NIH’s Ezekiel Emanuel who is on detail at the Office of Management & Budget. But if one Emanuel likes your thinking, don’t they all?

Donna Shalala (former HHS Secretary): President Clinton had one HHS Secretary for all eight years: Donna Shalala. Is there anyone who knows HHS better? Or the lessons of the failed Clinton health reform plans?

She could step in from Day 1 and hit the ground running while coordinating seamlessly with the White House health care group. In addition, Shalala has spent her post-government life as a university president at the University of Miami.

She appears to garner wide respect from both sides of the aisle. President George W. Bush awarded her the Presidential Medal of Freedom last year. Shalala has also remained very engaged in the health reform debate showing up at reform meetings involving all of the critical stakeholders.

Jay Rockefeller (US Senator): If you can’t get a Kennedy, why not a Rockefeller? (that one goes to one of our blog colleagues). Rockefeller has been intensely engaged and personally moved by the health reform because of family experience. His stake in the Clinton Reform effort is well documented.

Rockefeller would carry the interest, knowledge, experience in the Senate, and gravitas to the position of HHS Secretary. And as Senate Finance Health Subcommittee Chairman, he has the right title.

He has been particularly visible during hearings on Medicare Part D drug prices over the last few years. Before you dismiss this one out of hand, we have it on good sources he considered the Major League Baseball Commissioner job very seriously many years ago because he loves new challenges. We would categorize health care reform and universal coverage as a challenge.

Richard Gephardt (former US Congressman): We think Gephardt would be perfect for the Daschle-like role of legislative general. He served in the House of Representatives from 1977 to 2005 and was both the House Majority Leader and Minority Leader.

In fact, we would think his Daschle-like temperament and experience would make him perfect for the job. Except for one thing: he’s been a consultant to DLA Piper and Goldman Sachs since he left public life. That probably sticks a fork in any chance of Gephardt getting the job even if he wanted it, but you never know. 

Frank Torti Tapped As Acting FDA Commissioner

Drum roll, please….The next commissioner of the Food & Drug Administration will be chief scientist and principal deputy commissioner Frank Torti.

According to an email message sent to HHS staff on Friday evening, Torti will become acting FDA commissioner come Inauguration Day, once Andrew von Eschenbach leaves office. Torti will serve under President Barack Obama until a permanent successor is named.

The announcement comes more than a week before the transition will take place. After 300 meetings with department and agency staff, HHS chief of staff Rich McKeown said in the email message, “the next phase of Transition involves the departure of our team on January 20, and the arrival of President-Elect Obama’s team later that day.”

“In order to create a clear path for leadership transition, I am attaching a list of senior leaders who will become the acting heads of their respective agencies and offices (or in some cases, remain as heads of their respective agencies and offices) until the new Administration appoints individuals to various leadership positions.”

HHS secretary Michael Leavitt will leave the department once President-elect Obama takes office. Assistant secretary Charlie Johnson will lead the department until Secretary-designate Tom Daschle is sworn in. “Once Secretary-designate Daschle is confirmed by the Senate and sworn in as HHS Secretary, he will assume leadership of HHS,” McKeown’s email says.

Once that happens, Daschle is expected to quickly announce his picks for the heads of each agency. At his Senate confirmation hearing last week, Daschle said that the Obama transition team had been aggressively interviewing candidates, and that he hoped to start building his new leadership within the next few weeks. (We've filled up the ethernet with quite a bit about potential commissioner candidates; you can start here, here and here).

But at least for now, Torti will be The Man at FDA. So what do we know about him? If you attended FDC-Windhover’s FDA/CMS Summit for BioPharma Executives in December, then you heard his keynote address first-hand. But if you missed it, you can check out this story from “The Pink Sheet.”

But we can’t help but point out that we called this one back in June—despite rumblings from Torti’s colleagues at Wake Forest that he would be returning to academia as soon as the next president took office.

In many ways, Torti is the logical pick: under the Federal Vacancies Act, Torti’s position as principal deputy commissioner puts him in line to become acting commissioner once von Eschenbach departs. Having joined the agency less than a year ago, he carries no baggage. And he comes from an academic (not political) background—the perfect profile for a caretaker commissioner.

But as recently as early December, Torti had not yet been approached about the job—at least not to the point, he said, where he would have to sit down with his wife and discuss a longer stay in Washington than was originally planned. But, hey, a lot can happen in a month.

Here are some of the other top-level acting positions announced by HHS:

The Centers for Medicare & Medicaid Services will be headed by chief operating officer Charlene Frizzera; acting CMS administrator Kerry Weems will step down;

The Centers for Disease Control & Prevention will be led by chief operating officer William Gimson; current director Julie Gerberding will leave office;

The National Institutes of Health will continue to be led by acting director Raynard Kington;

The Agency for Healthcare Research & Quality will continue to be headed by director Carolyn Clancy; and

The Office of the Surgeon General will continue to be held in an acting capacity by Steven Galson (more on his future plans here).

Has Drug Importation Finally Fizzled?

Senators Byron Dorgan and Olympia Snowe issued a highly upbeat press release today on the prospects for their drug importation bill, which they say they’ll reintroduce later this month. The headline on the release claims their bill “will finally pass Congress.” The release makes a point of noting that both President-Elect Barack Obama and Senator John McCain co-sponsored their bill the last time it was introduced in the Senate and claims that the new president “supports the legislation.”

But the rah-rah tone of the release is belied by a real lack of enthusiasm from the incoming administration. As a candidate for president, Obama’s health care platform initially said he supported importation, but after the drug-tainting scandals hit the press (think Chinese heparin), the campaign’s health policy advisor, Dora Hughes, made a number of appearances at which she did her best to let people know that was no longer the case. (See The Pink Sheet coverage of this topic).

And many Democrats who want to undertake major health care reform see re-importation as a small-ball distraction. New House Energy & Commerce Chairman Henry Waxman has felt that way for many years. (See here in The RPM Report.)

And yesterday in the HELP committee’s courtesy hearing with Obama’s nominee for HHS secretary, Tom Daschle, Bernie Sanders asked about his support for importation. Daschle’s response was evasive. Here it is in its entirety:

“You put your finger on the most important aspect of this effort, which is to ensure the confidence and safety of the drugs wherever they many come from. Many of our drugs today are manufactured abroad and imported as domestic product, even though they’re manufactured abroad. And so some consistent policy with regard to the manufacture and the sale of all of our drugs I think is in order. And I’d love to work with this committee and certainly with you Sen. Sanders to make sure that we come up with the best policy.”

If you can detect any hint of enthusiasm in that response, you have more sensitive ears than we do. It sounds more like a response to a question about making sure we don’t have more tainted heparin fiascos. If the incoming administration wanted to make drug importation happen, don’t you think Daschle would have said so in no uncertain terms? After all, this was a hearing full of self-congratulatory sentiment among Democrats after their resounding victory in November, not to mention warm and fuzzy feelings over the presence of Ted Kennedy, who’s in treatment for cancer, and Daschle, who was ousted from the Senate in an embarrassing defeat when he was Senate majority leader.

While the Dorgan/Snowe bill may well pass Congress, it wouldn’t be the first time an importation bill has made it through. The first time was back in 2000, when a Republican Congress passed legislation saying the HHS secretary could allow drug importation if the secretary could certify that the imported drugs would be safe and save money – and it was President Clinton’s HHS secretary, Donna Shalala, who refused to certify.

Baucus Takes Pole Position in Upcoming Health Reform Debate

Senate Finance Committee Chairman Max Baucus is ensuring himself a prominent and visible seat at the health reform table with a white paper outlining his legislative proposal.

The white paper, “Call to Action: Health Reform 2009,” was unveiled on Nov. 12 and represents a culmination of discussions both in Congressional hearing rooms (10 hearings including one scheduled for Nov. 19) and behind closed doors with key stakeholders.

“The need is so great, we have to act now. There is no choice,” Baucus said during a same-day press briefing on why the economic situation should not delay acting on broad—and expensive—health reforms. “If we wait, the costs will grow.”

Baucus said the next administration and Congress will not repeat two mistakes made by the Clinton Administration in reforming health care: waiting too long and conducting the process from the top down.

In other words, Congress will want to show that it will act quickly after the Jan. 20 inauguration and key lawmakers and committees will be heavily involved in the legislative process from the very beginning.

The Baucus plan is a clear play by the Montana Democrat to get out in front of the health care debate ahead of a number of Democratic heavyweights looking to make health care their signature issue. The Finance Committee has jurisdiction over Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), and all tax policy changes including those affecting health care.

There’s a strong sense among lawmakers, industry representatives and policy wonks that the first term of an Obama Administration is the time to move on sweeping health reform, with universal health coverage for all Americans the crown jewel of Congressional efforts.

Carving Out A Position

But two key questions are making the rounds in Washington: 1) What will the final plan look like? and 2) Who will get credit?

President-elect Barack Obama touted health care for all as a legislative priority closely behind an economic stimulus plan for the middle class during his campaign. Sen. Hillary Clinton (D-NY) made universal health care the cornerstone of her domestic agenda during her bid for the White House. Clinton led the failed effort to create one federal health care system in 1993.

During his speech on the final night of the Democratic Primaries in June, Obama singled out Clinton as a key figure in the fight for universal coverage. “You can rest assured that when we finally win the battle for universal health care in this country, she will be central to that victory.”

Senate Health, Education, Labor & Pensions Committee Chairman Edward Kennedy has been leading the fight for universal health coverage for decades and has made it his cause for the 112^th Congress.

“This is the cause of my life: new hope that we will break the old gridlock and guarantee that every American, north, south, east, west, young, old , will have decent, quality health care as a fundamental right and not a privilege,” Kennedy said on the first night of the Democratic National Convention in Denver.

Kennedy has been working behind the scenes for months with physician organizations, patient groups, and insurers to craft universal health care legislation ready for introduction at the beginning of the next session.

The Baucus proposal, though, essentially cuts off the Kennedy legislation and steals some of the Massachusetts Democrat’s thunder. Still, Baucus says he plans on working with Kennedy and other leaders, naming Republicans Chuck Grassley (Iowa) and Michael Enzi (Wyo.). “I received a call this morning from Sen. Kennedy. It was a very complimentary call…I was truly touched.”

Those feelings may not last, however, as discussions heat up over what a reform bill will include and whether there will be two Senate bills or one. “I’m less concerned with that. I’m more concerned about getting the job done.”

The Baucus press briefing was a show of power for Baucus with a packed room of media attending, including every major national newspaper and more focused trade publications. The whitepaper was also previewed to the national press the day before in order for stories to show up in headlines on the front pages of mainstream newspapers.

The formal presser was followed by a backgrounder for press with a half dozen top Baucus health staffers. Immediately after the backgrounder, Baucus’ policy team was slated to meet with staff from other Congressional members to brief them on the plan and provide specifics on some of the more technical aspects of the white paper.

The Baucus Plan: Walking a Moderate Line

In jockeying for position among reform-minded Democrats, Baucus is carving out a moderate one as his own.

“Some people say the US should have a single payer system—I disagree with that,” Baucus said. The Finance Committee Chairman is casting his proposal as a moderate call for reform that blends private and public coverage to create a “uniquely American system” for universal health care.

Three examples of Baucus’ more moderate approach to reform:

1) The white paper establishes a low threshold of reporting physician relationships with medical product and drug manufacturers but doesn’t go as far as prohibiting gifts to physicians.

2) The proposal notes that the Medicare Payment Advisory Committee estimates Medicare Advantage (MA) insurers are overpaid by 13% more than if the same beneficiaries remained in the traditional Medicare fee-for-service program. However, Baucus calls for a more nuanced approach to MA payments in order to avoid “severe underpayments” by “reducing payments to high-use areas and increasing payments in low-use areas.”

3) The Baucus plan avoids discussion of drug price controls but does address Medicare Part D cost savings by bringing Medicare rebates for dual-eligible beneficiaries in line with the rebates states are able to secure under the Medicaid program, according to Baucus policy staff.

Priorities and a Mix of Ideas

The white paper bases reforms on three overriding principle: meaningful coverage for all Americans; insistence that any coverage expansion be coupled with higher quality care and cost savings over time; and an “absolute commitment” to eliminate waste and overpayments.

The Baucus plan would make health coverage immediately available for Americans between the ages of 55 and 64 years old and begin a phase-out of the two year wait for Medicare coverage for individuals with disabilities. The plan would also strengthen the role of primary care—a theme Baucus hit on multiple times during his remarks—and chronic care management, and increase investments in comparative effectiveness research and health IT infrastructure.

Baucus and his staff drew from ideas from a number of different sources in developing their comprehensive proposal. For example, Baucus policy staff say they had discussions with administrators of the Massachusetts universal coverage “Connector” plan, something Kennedy and his staff have been doing for some time.

The Finance Committee Chairman’s call for the creation of a national Health Insurance Exchange (HIE), which would sell and oversee the administration of coverage, was the centerpiece of Obama’s health proposal.

The Medicare Part D dual-eligible rebates reform plan is a key piece of legislation that House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) is planning to introduce.

Baucus allowed that certain elements would be implemented quickly, citing expansion of SCHIP, while others, such as HIE and the creation of a Comparative Effectiveness Institute, would take longer to phase in.

image detail from Penguin Classics's edition of Hazlitt's essays