Please Don't Believe Everything You Read...
Below, a response to novelist Jane Smiley that I am publishing on the Huffington Post tomorrow. Earlier this week, Smiley posted on Huffington expressing her dismay that President Obama seems to be folding on health-care reform. I don’t blame her for coming to the conclusion: this is what the mainstream media has been telling her. My response begins:
An Open Letter to Jane Smiley: Please Don’t Believe Everything You Read
(The Media Is Not Always a Reliable Narrator )
Dear Jane Smiley,
I understand why you are disappointed with President Obama.
First, the New York Times reported that he had made a “deal” with drug-makers. Then came the second blow: the news that the president was “back-tracking” on the public insurance option that in the past, he had said was essential to “provide choices and keep [for-profit] insurers honest.”
Earlier this week, you told the Huffington Post’s that you felt “jilted.”
“We on the left can and must come to the conclusion that he used us and our money, but never intended to listen to us . . . Health care has been the real test, and if his administration caves to Republican intimidation and lies and foregoes the public option in the health care bill, Obama is failing that test. If there is no public option and no way of lowering the price of drugs -- if Obama is determined to make back room deals with the same old corporate shills--then what have I gotten for my campaign contribution? It's not nothing, it's worse than nothing, because if the man who promised hope does the same old thing, then that is the end of hope.”
I don’t blame you for beginning to lose hope. Based on what the mainstream (and supposedly “liberal”) press has been reporting, the president is letting us down.
But the truth is that in recent months, the media has begun to sour on the president. The “honeymoon” is over. I am afraid that some reporters are now engaging in a time-honored media sport: first build someone up then tear him down. This gives both journalists and pundits something new to say.
Even within the liberal press, support for health care reform has turned to skepticism.
Moreover, many in the media are frustrated that the president has been playing his cards so close to his vest. So, in the quest for headlines and certainty, the press has been “punching up” the news, turning scraps of dubious information into scoops. "The White House Made a Deal", or "Obama is Caving" are headlines. "We Really Aren't Sure What's Going on in Obama's Mind" will not sell newspapers. Too often, reporters pretend to a certainty that they don't possess.
Consider what has been reported, and the quality of the evidence behind the headlines.
In the letter to Smiley, I then go on to explain that, in the context of Pharma’s revenues, $80 billion is a paltry sum—and not worth a quid pro quo from the president.
“At least $30 of the $80 billion represents the revenues Pharma will forego by giving Medicare patients a 50 percent discount when they reach the “donut hole”—the point where they have to begin paying for drugs out- of- pocket. But keep in mind, without the discount, many patients would simply stop buying the drugs altogether—or switch to generics. And Pharma will still turn a profit on many of its over-priced drugs, even while selling them at half-price.
“Then the $30 billion needs to be but in the context of Pharma’s annual revenues. This year, the industry will rake in $252 billion. If sales continue to rise, and drug-makers continue to hike prices at the current rate, Pharma expects revenues to double over the next ten years, to $500 billion in 2019. In that context, giving up $30 billion worth of revenues over ten years –or roughly $3 billion a year--just isn’t a big sacrifice.
I quote Bloomberg: “Unlike most in the mainstream media, Bloomberg’s financial journalists understood this. When the deal was announced, Bloomberg quoted Tim Anderson, an analyst with Sanford C. Bernstein & Co. in New York telling clients: ‘Filling the doughnut hole should help seniors stay on their branded therapies and lessen the tendency for seniors to switch from brands to generics once they hit the donut hole. This is critical because once patients convert to generics, they seldom revert back to the brand and are essentially lost to cheaper generics forever.”
Bloomberg acknowledged that the $80 billion contribution wouldn’t just trim revenues, it also would make a dent in profits. But, bottom line: “Anderson estimated [that giving up $80 billion would] have a ‘profit impact’ of no more than 4 percent, which he described as ‘low.’”
It’s also worth remembering that when Pharma announced that it would give up the $80 billion, President Obama said: “this is a first step.” At the time, I added, “Pharma is going to have to do more.”
I also explain that the only evidence of a deal is that Billy Tauzin has said so—plus an unsigned, typed memo that anyone could have written, and an
unnamed source. As I explained in this HealthBeat post it’s very unlikely that the White House made a deal.
As for the idea that the President was sending a signal last week-end, that he was “giving up” on the public option, I explain that, as a matter of strategy, this makes little sense. Moreover, as I noted in this HealthBeat post, the full text of the president’s speech at the Town Hall meeting shows that he spent a good part of the speech arguing for the public option. Finally, his remarks prompted liberal Democrats to rally around the public insurance plan, making it clear that many consider it essential to reform. This, I think, is what the President hoped and expected would happen.
