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The Halliburton of Medicare?

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On December 11, the American Progress’ Progress Report released an examination of the relationship between President Bush and the owner of one of the largest pharmacy benefits management companies in the U.S. Soon after its publication, the story was widely cited, including in a long article in the Boston Globe on December 12.

Here is a compilation of that report on its first, and subsequent days.

From December 12, 2003

The White House yesterday categorically refused to answer questions about why President Bush’s longtime business associate was allowed to “craft” key portions of the Medicare bill which could send millions to his own company. The Boston Globe reports a Texas company owned by David Halbert “a campaign contributor and former business associate of President Bush” could profit from portions of the Medicare bill. The Globe notes the story was first reported in yesterday’s Progress Report and points out that Halbert specifically helped “craft the portion of the Medicare bill that allows seniors to buy discount drug cards.” Bush had been an investor in a Halbert-owned predecessor company to AdvancePCS, which, “is one of the nation’s largest pharmacy benefit management companies and would be well-positioned to compete for Medicare’s endorsement to issue the discount cards.” Of course, the discount card guarantees no discount – only that companies like AdvancePCS (of which President Bush was an original investor) would gain millions of new customers. Sen. Edward Kennedy said, “Only in this administration would the words `discount card’ mean seniors get the card while corporations get the discounts.” When asked about the controversy, the White House invoked a line similar to its previous stonewalling about which oil industry CEOs wrote its energy bill. Said White House spokesman Trent Duffy, ”I’m not going to be able to say anything about specific conversations the White House had in crafting this legislation.”

A QUESTION OF ETHICS: Lawmakers are questioning the ethics behind allowing Medicare administrator Thomas Scully to remain involved with Medicare legislation – which favored corporate interests – while looking for work in various lobbying firms with strong interests in the bill. According to AP, Reps. Jan Schakowsky (D-IL) and Pete Stark (D-CA) sent a letter to Health and Human Services Secretary Tommy Thompson yesterday, criticizing his decision to allow Scully “to take part in drafting the new Medicare law while he was looking for work in the private sector,” saying, “at best, this waiver is unseemly. At worst, it may well have lead to enactment into law of provisions to benefit particular special interests rather than the public good.”

DEBUNKING AARP’S ADS: The Center on Budget and Policy Priorities analyzes the facts behind the AARP’s claims in a recent ad the group used to try to justify its position on Medicare. CBPP points out that, although the AARP claims “Nothing in the legislation undermines traditional fee-for-service Medicare,” the truth is since the legislation is reimbursing private plans at “approximately 25% higher than traditional Medicare,” the groups “will be able to siphon off healthier, wealthier participants.” The provisions of the new law “which confer very generous federal subsidies on private managed care plans — and thereby enable those plans to lure more beneficiaries away from traditional Medicare — may present a danger over time to the survival of fee-for-service Medicare.” And the AARP claims the legislation “helps those who need it most.” However, this ignores that “several million of the nation’s poorest elderly and disabled beneficiaries will be made worse off by the new legislation, because they will have to pay more for drugs than they currently pay under Medicaid, will be denied coverage for some drugs they currently receive through Medicaid, or both.” For a “claims vs. facts” about the Medicare bill see American Progress’s backgrounder, or see our Medicare summary page.

AARP WORRIED: AARP’s decision to support the corporate friendly Medicare bill at the expense of seniors has had damning repercussions. According to CEO Bill Novelli, “15,000 members have told the organization to cancel their membership because of the endorsement.” And Thomas Mann of the Brookings Institution, says AARP “is ‘really worried’ by the reaction, which could erode its position as spokesman for older Americans. ‘They’ve gotten a huge amount of negative press and the early readings on the bill from seniors are not encouraging at all.’” Instead of fighting to amend the legislation to reflect concerns of seniors, however, AARP is planning to use its resources instead for a PR campaign to try to talk seniors into believing the legislation isn’t harmful.

REIMPORTATION REVOLT: The new Medicare legislation stripped out provisions both to allow Medicare to negotiate with pharmaceutical companies for lower prices and for Americans to reimport FDA-approved medication from Canada, where it sells much more cheaply. Now the states are fighting back. The WSJ reports that yesterday, Illinois, Massachusetts, Oklahoma, West Virginia, Alabama, North Carolina, Vermont, Ohio, Delaware and Louisiana met with representatives from Canadian drug companies “to hear their pitch on how to sell the drugs safely and within the law.” The states “are exploring ways to buy cheap prescription drugs from Canada and make them widely available to Americans, even though importing the medicines is illegal” and “are looking north of the border to buy prescription drugs for their own employees and for people who are on Medicaid or other assistance programs.” At the same time, instead of standing up to pharmaceutical companies and allowing Medicare to negotiate to drive down inflated prices, House Speaker Dennis Hastert (R-IL), in continuing to do the drug industry’s bidding, is advocating raising prices in other countries – instead of lowering them at home. He wants an end to “Canada’s prescription drug price-control policies” – with no proof that would do anything to lower prices for seniors in America.

REIMPORTATION CONTRADICTION: USA Today reports CDC Director Julie Gerbending said this week “that the agency is investigating the possibility of buying about half a million doses of flu vaccine from a British” pharmaceutical company. This apparent Bush Administration endorsement of importing medicines from other countries stands in sharp contrast to the White House’s strong opposition to legislation that would give seniors access to other lower priced meds from Canada and Europe. The White House’s opposition was so strong, that they managed to have House and Senate approved language allowing reimportation stripped out of the final Medicare bill. The Administration has cited “public health reasons” for its opposition – despite the fact that the White House is pursuing importing the flu vaccine from abroad, and despite the fact that it “can’t name a single American who’s been injured or killed by drugs bought from licensed Canadian” or European pharmacies.

From December 11, 2003

Just two days after President Bush signed the new, drug industry-backed Medicare legislation into law, the White House announced the details of the Medicare discount drug card program, in which Medicare will contract with private, pharmaceutical benefit management (PBMs) companies to endorse existing discount cards. The cards have been assailed for not guaranteeing any price discounts, while potentially driving millions to these PBMs. So why, then, is the President so adamant about the cards? For one thing, he has extremely close financial, professional and political ties to AdvancePCS – the company that stands to make a windfall off the program. Specifically, Bush is close friends with David Halbert – CEO of AdvancePCS. As the Fort Worth Star-Telegram reported on 8/18/02 “before starting what would become AdvancePCS, David Halbert helped clean up a deal with Harken Energy that had prompted an SEC investigation of George W. Bush.” After the investigation, Halbert then invited Bush to become one of the original investors in AdvancePCS – a transaction that made the President up to $1 million.

BUSH NOW PAYS BACK HIS COMPANY IN KIND: Soon after assuming the Presidency, Bush paid Halbert back in kind – soliciting his help in writing the 2001 drug discount card proposal that is now part of the new Medicare law. Halbert brags about the complicity, saying the White House specifically asked him to help write parts of the plan. As the Fort Worth Star-Telegram reported on 7/18/01, “AdvancePCS has been working with the White House to create a nationwide private discount card program …David Halbert, AdvancePCS’ chief executive, said the Bush administration contacted his company about two months ago.” When Bush announced the original plan, “Halbert stood next to the president in the Rose Garden” and said “it was quite an experience.”

HOW BUSH’S FRIENDS WILL MAKE A KILLING, PART I: The drug discount cards may not be great news for seniors – but they are terrific news for giant PBMs. AdvancePCS, along with four other companies, controls “80% of the PBM market and up to 90% of the mail-order pharmacy business.” These companies will be hired by drug plans to “negotiate with drug makers, issue discount cards and line up networks of pharmacies” – all without a guaranteed price savings for seniors, and with collateral damage to local pharmacists. As Bloomberg News wrote on 1/29/03, the system is designed to steer “patients away from pharmacies and into mail-order businesses run by pharmacy-benefit managers such as Express Scripts Inc= and AdvancePCS.”

SENDING GOBS OF MONEY TO A COMPANY ALREADY UNDER FIRE: AdvancePCS has already faced lawsuits over market manipulation in the past, “by failing to disclose the extent of their financial ties with manufacturers.” And the AARP sued them last year, accusing “AdvancePCS in court of not only ‘illicitly diverting’ seniors from its drug-discount plan, but of actually putting them at risk for potentially dangerous drug interactions.”

MAKING A KILLING PART 2 – REFUSING TO MONITOR PBM PRICES: Despite these lawsuits, the White House is further rewarding AdvancePCS by refusing to require that they pass along any savings on drug prices to seniors. As the NYT reports, while HHS “will monitor the prices of prescription drugs bought by Medicare beneficiaries, sponsors of drug discount cards will be allowed to change their prices – and the list of covered drugs – on a weekly basis.” The administration stated, “we have chosen not to establish minimum threshold levels for price concessions.” In August, the Bush administration pushed Congress to “kill a provision of the Senate bill” that forbade drug companies to up prices more than once a month, saying “price stability is not a requirement of the drug benefit.” Prescription prices have gone up 17% for four straight years in a row. The bottom line: Discount cards will bring profits to PBMs will little real benefit to seniors. Even William Novelli, head of the AARP which supported the bill, admitted the cards would not make a significant difference for seniors: “I don’t think that drug card will be the world’s most thrilling event.”

THE LONG RELATIONSHIP BETWEEN BUSH AND HALBERT: Halbert was also deeply involved in catapulting George W. Bush into the political spotlight. According to the Center for Public Integrity, “in 1986… Harken’s CEO introduced Bush, the company’s new director and consultant — as well as son of then-Vice President George Bush–to a little startup health-care company. He put in a modest investment, and a few years later walked away with a six-figure windfall.” That company was David Halbert’s, and eight years later, when Bush was running for Texas governor and scrambling for campaign cash,” the company came through. “In 1994, when the company was known as Advance Health Care and Bush was making his first run for Texas governor, those insiders gave him $23,700 for his first gubernatorial run, including $14,500 from Halbert, his brother, Jon, their father and their wives.”

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