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.

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.

Tough Talk on Vaccines: Clinton, Obama Make Three

She may have eked out a victory in the Pennsylvania Democratic primary, but Hillary Clinton probably won't be getting any more votes from vaccine manufacturers. And as far as the vaccine industry is concerned, neither will Barack Obama.

Both Democratic candidates for president have joined the presumptive Republican nominee, John McCain, in making statements about a purported link between thimerosal in vaccines and autism in children.

And here we thought McCain was the only misinformed candidate, making it safe for the pharmaceutical industry to think about voting Democratic this year. For a reminder on McCain's comments on vaccines and autism, you can check out our early blog post here.

Here's Clinton's response to recent candidate questionnaire from the group A-CHAMP:

"I am committed to make investments to find the causes of autism, including possible environmental causes like vaccines....I will ensure that the NIH has the staff and funding to fully explore all possible causes of autism....

I plan to fully invest in our research agencies so they can protect our children’s health, and so they can find the causes and cures for conditions such as autism....We don’t know what, if any, kind of link there is between vaccines and autism--but we should find out."

Here's what Obama said in response to a question during a rally in Pennsylvania on April 21, according to the Washingtonpost.com:

"We've seen just a skyrocketing autism rate. Some people are suspicious that it's connected to the vaccines. This person included. The science right now is inconclusive, but we have to research it."

We should point out that according to the Washingtonpost.com, there's some dispute over what Obama meant when he said "this person." The Obama campaign asserts that the candidate was pointing to an individual in the audience, and was not referring to himself. Video from the remarks appears to back that up, but Obama still refers to the "inconclusive" science, which has been repeatedly discounted by scientific studies.

We know microtargeting has been especially popular during this election cycle, but is there a vaccines-cause-autism voting faction that we've missed? Or will candidates say just about anything on Primary Day to get elected? Given all the evidence to the contrary on the absence of a link between vaccines and autism, we hope that's all it is.

Why Big Pharma Should Vote Democratic

This Super Tuesday, pharmaceutical CEOs should ask themselves one question before they decide which way they will vote in 2008 if they are indeed single-issue voters:

Are you in favor of an expansion of the government subsidy to almost 50 million Americans to buy your products or would you prefer a drastic curtailing of the government subsidy under the popular Medicare Part D drug benefit?

If you’re in favor of the former, you should punch the Democratic ticket in November. If the latter is your desired outcome, then hop on the McCain Straight Talk Express.

The prospect of a Democratic administration with a Democratic-controlled House and a split Senate has a number of drug industry stakeholders nervous about the next four years. After all, the centerpieces of Senators Hillary Clinton’s (NY) and Barack Obama’s (IL) domestic policy agendas are universal health care proposals. And when Big Pharma hears “universal health care” it tends to be synonymous with national, government-run, single-payor system aka price controls.

But here’s something Big Pharma should keep in mind: neither Clinton nor Obama are proposing a single-formulary system. What they are proposing, though, is providing health care coverage for the 47 million and counting Americans without it.

In case you missed it, here was my first take on the Clinton and Obama health care proposals. Clinton has explicitly stated that buying coverage would be mandatory under her plan; Obama says he will wait to analyze affordability of a coverage proposal before mandating that individuals buy insurance.

“This should not be scary,” Clinton senior health policy advisor Chris Jennings told Wall Street investors at the Stanford Group health care conference in January. “This should be viewed as an incredible opportunity.” Obama health advisor Gregg Bloche echoed Jennings’ remarks at the meeting saying, “companies that innovate are going to thrive in the environment under the Democratic plans.”

There’s little doubt that under a universal, government-administered coverage system, there will be downward pressure on pricing, whether it’s through market competition or government “tinkering.” But Jennings and Bloche say whatever drug companies give up in margin, they’ll more than make up for in a jump in market share.

It would be hard to argue that the drug industry hasn’t reaped a windfall from providing roughly 40 million seniors with drug coverage under the Part D program. A universal coverage program would roughly double the number of Americans receiving some form of a drug benefit who previously were not.

Some senior company executives clearly see the advantages of working together with Democrats—should they win the White House—on health reforms. “It is really going to take a bipartisan view to be able to accomplish [universal health care],” Merck CEO Richard Clark said during the Morgan Stanley Pharmaceutical CEOs Unplugged conference in January. “I hope we are able to provide some recommendations, particularly around the uninsured and how that should be solved, just as we provided recommendations around Medicare” and the creation of the prescription drug benefit.

Eli Lilly SVP for corporate affairs and communications Alex Azar is urging the biopharmaceutical leadership to rally around a united position that preserves core industry business principles under more direct involvement by the government in health care. “We have to show that we’re willing to engage and to propose constructive alternatives,” the former HHS deputy secretary told attendees at The RPM Report’s FDA/CMS Summit in December. “Our industry brings some credibility to this discussion.”

For the most part, Republicans are looking at incremental improvements in health care that go hand-in-hand with the free-market principles underlying Part D ie. competitive insurance plans and allowing individuals to cross state lines to buy insurance from different providers if they don’t like the deal they’re getting locally.

Not too scary.

But under a Republican administration, the odds of a Medicare reform bill would be a near-certainty as the government looks for savings to fix the looming physician reimbursement cuts. In that climate, drug prices under Part D would be a tempting target for savings.

Moreover, the presumptive Republican nominee, Senator John McCain (AZ) does not look eager to become best friends with the pharmaceutical industry. During a New Hampshire debate before the primary in January, for example, McCain cast the industry in a not-so-flattering light while discussing why Americans can’t import drug from Canada. Former Massachusetts Governor and Presidential candidate Mitt Romney jumped in, “Don't turn the pharmaceutical companies into the big bad guys.” McCain responded: “They are.”

The drug industry is clearly reading the bi-partisan tea leaves. The pharmaceutical industry has given $4.6 million to Democrats thus far in 2008 compared to $4.5 million for Republicans, a 51-49 split, according to the Center for Responsive Politics. During the last election cycle in 2006, donations to Democrats totaled $6.1 million compared to $13.2 million, a 31% to 67% difference (independent donations make up the remaining 2%). The last Presidential election in 2004 saw the pharmaceutical industry give two-thirds of their donations to Republicans ($12 million) compared to one-third ($6.1 million) to Democrats.

You get the picture.

For all of the undecided In Vivo Blog readers, maybe the HealthCentral.com political PoliGraph will help you choose where you stand. Try it, it’s fun.

Iowans Fall for Obama, Will New Hampshireites?

Uh oh, ladies and gentlemen, it looks like we have a race. I don't think I was the only one stunned by Barack Obama's victory in the Iowa caucus last week. Obama has gained a well-deserved reputation as an inspiring speaker but it just didn't seem like it would be enough to convince voters that a young, one-term freshman Senator would be able to lead the country through wartime (or peacetime depending on how much of an optimist you are).

Well, apparently his words and message are enough to convince voters he's the right (wo)man for the job. In Iowa, Obama accomplished two critical things: turn out voters and have them buy his "hope and change" message. Just look at the numbers.

Democratic Party officials said almost 240,000 Iowans turned out for the 2008 Iowa Caucuses compared to 124,000 in 2004, and under 60,000 voters in 2000. In other words, an incredible turnout.

The Washington Post cited some critical numbers from the National Election Pool that election watchers should be paying close attention to. “Half of the voters who turned out Thursday night said they were looking for a candidate who could bring change to the country while just a fifth said they most prized experience in a potential nominee,” the Post reported. “Half of those change-oriented voters backed Obama in the caucuses and helped propel him to victory.”

The National Election Pool found that 57% of Democrats said they were participating for the first time: roughly 40% chose Obama over Clinton, John Edwards and the rest of the Democratic pack.

Was Iowa an anomaly or the beginning of a trend?

The answer, at the moment, appears to be: trend. There's no question that the momentum Obama seized in Iowa is carrying straight over to New Hampshire. Obama has been down by a large margin for some time due in large part to the number of New Hampshire officials and political influentials who have endorsed Clinton. He narrowed the gap significantly after Iowa, and now two polls show him ahead by double digits as the voting takes place toady.

And how will voters react to this Clinton moment the day before the primary? Will they see Bill Clinton or Ed Muskie?

Assuming the Iowa numbers hold up for the rest of the Democratic Primary season, and a Democrat is elected President, what would an Obama White House mean for US health care policy? It could be a significant departure from a Clinton II Administration.

Some political observers argue that it doesn't matter which Democrat is elected President, since a Democratic victory means a big push for health care reform, and the differences among individual plans are less important than the political impetus of a Democratic landslide.

I don't necessarily think that will be the case. You may see a lot less reforming action under Obama than you would Clinton.

After reviewing both Clinton and Obama's health care proposals, it's patently obvious which one is further along.

Hillary's universal health care proposal is much closer to policy and more comprehensive than Obama's. Clinton emphasizes choice among four options: 1) keep the plan you have 2) buy a new plan from a for-profit insurer 3) pick a plan from the options available to members of Congress through the Federal Employees Health Benefits Plan (FEHBP), or 4) choose a public plan option similar to Medicare.

The program would provide small businesses and other employers with tax credits for buying into the system to help offset coverage costs. There are other pieces, such as Health IT, electronic medical records and a pay-for-performance-like bonus system, that are included in the Clinton plan.

As noted by the LA Times earlier this year, the most obvious sign that Clinton is closest to having a universal health care proposal that could satisfy everyone at the table was an acknowledgment from the America's Health Insurance Plans (AHIP) of the proposal's possibilities. AHIP represents 1,300 US insurers and dueled bitterly with the Clinton Administration in the early 1990's over "Hillarycare," eventually derailing the universal health coverage proposal in its entirety.

This is what AHIP has to say about Hillarycare Version 2.0: They praise the employer tax credit and say Clinton's reforms may be acceptable as long as they are linked to a mandate for individuals to buy coverage. That's very different than the "Harry and Louise" response to Hillary Clinton's proposal more than a decade ago.

Obama's plan for reform looks to be more in the idea stage compared to the Clinton plan. And anyone that has dipped their toe in the political waters in Washington will tell you it's a long journey between idea and policy.

For example, Obama's program would really offer one option, the FEHBP-like choice, under his proposal. Not bad. Obama also calls for the creation of a National Health Insurance Exchange to act as a watchdog arm for Americans. Here's a description of the NHIE from Obama's website:

"The Exchange will act as a watchdog group and help reform the private insurance
market by creating rules and standards for participating insurance plans to
ensure fairness and to make individual coverage more affordable and accessible.
Insurers would have to issue every applicant a policy, and charge fair and
stable premiums that will not depend upon health status. The Exchange will
require that all the plans offered are at least as generous as the new public
plan and have the same standards for quality and efficiency. The Exchange would
evaluate plans and make the differences among the plans, including cost of
services, public."

That's a proposal that seems a lot closer to idea than policy action. The NHIE would also monitor what insurers do with their profits. The plan will "force insurers to pay out a reasonable share of their premiums for patient care instead of keeping exorbitant amounts for profits and administration."

Moreover, where Clinton's plan delves into specifics, Obama offers very general solutions to complicated issues.

On the State Children's Health Insurance Program: "Obama will expand eligibility for the Medicaid and SCHIP programs and ensure that these programs continue to serve their critical safety net function."

On enrollment into a new government plan: "Easy enrollment. The new public plan will be simple to enroll in and provide ready access to coverage."

Still, Obama has a highly respected domestic policy team, many of them ex-Clinton officials. Harvard health economist David Cutler is one of Obama's top health advisers, along with David Blumenthal, director of Harvard's Institute for Health Policy. Cutler has co-authored papers with former FDA Commissioner and CMS Administrator Mark McClellan. Here's a look at some of his papers.

Maybe most importantly when it comes to the odds on serious health care reform happening in 2009, universal health care is Hillary Clinton's issue. It's the issue where she has the most experience and the most visible political wounds to show for it. For Obama, "coverage for all" seems to be more of a classic Democratic tenet he's running on--not necessarily his issue.

Simply put, Clinton's health reform plans are in policy stage, Obama's are in idea stage. So if you're looking at which candidate is most ready to reform health care, it's Clinton, not Obama.