Guest Blog by Tom Norton of NHD Smart Communications. You can reach him at tnorton@nhdcomm.com.

Amidst all the gurgling of oil last week(bad! bad! bad!), a competing thunderstorm of words erupted as Doug Elmendorf, Director of CBO, had the temerity to revisit the real costs of the new HCR law. Addressing something that, for whatever reason, this lifelong Hill bureaucrat  just couldn’t get done about eight weeks ago as the bill was coursing its way through Congress, the leader of the CBO came clean and spoke his mind. (Do remember that Mr. Elmendorf had been unceremoniously called to the White House in July 2009 during the heat of the HCR debate to “get his facts straight”, personally, with President Obama. So maybe this simple, short PP was a little bit of payback?)

Whatever, to his everlasting glory, Mr. Elmendorf screwed up his courage on May 26th and pronounced the following official OMB view on costs associated with the newly passed Obamacare: “Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.”  Check it out. The deck’s simplicity and clarity are killer. Put another way,  Mr. Elmendorf felt constrained to suggest that the U.S. cannot spend money it does not have.  Indeed, in a none too subtle fashion, he comes very close to suggesting that Obamacare is an exercise in ‘Mad Hatter’ math (See, in particular, Slide #13).

Peter Orzag, former CBO director, and now Director of the Obama Office of Management and Budget was apparently stunned, as, it seems, was the entire Administration.  The slide deck circulated all over Capitol Hill for one week before Orzag, on June 2nd, issued this tardy retort to Elmendorf’s OMB bombshell: “The Act (Obamacare) has the potential to fundamentally transform our health system into one that delivers better care at lower cost. This potential isn’t fully captured in CBO’s numbers…” Whoa.  Case closed, huh?

Even more surprising is that once this first strafing run by Elmendorf was over, and on the same day that Orzag released his lame response to CBO, none other than the New York Times unloaded with both barrels presenting a front page story suggesting that the much praised and oft referred to Dartmouth Atlas of Health Care, widely quoted during HCR battle as the defining  study that declared that all health care everywhere should cost about the same, and that in particular, ‘cheaper care was better care,’ was, well, skewed…Or so said the NYT.

And once again a shocked Peter Orzag responded lamely, this time to the NYT article, stating, “I do not rely on the Dartmouth Atlas alone to prove that huge savings are possible in HCR.”  Enough said.

So let us review.  In the course of one week, we learned that:

A. The new law that is supposed to cost less and give us more, very likely won’t, courtesy of Mr. Elmendorf.

B. The primary study that led to the widely held view that cheaper care is better care during the HCR debate, is wrong, courtesy of the New York Times.

Leading us where?

Well let’s take the last point, first. In considering what the NYT was up to with their expose of the Dartmouth Atlas, I honestly have no answer. Do you get it? I was personally amazed that the publication went all out in its attack on the Administration and still am befuddled as to exactly what was going on there. If you tell me it was journalistic ‘fairness’ at work, fine. But LOL.

In the case of Elmendorf, however, seems to me that sometimes people just need to make a clean breast of things.*  For the last year, it’s been pretty obvious that his nominally Democratic political future is over. Really, has been since his CBO “scoring” single handedly derailed the entire HCR show for several weeks last summer when he found the Senate’s version of the bill was a trillion dollar, plus, budget buster… So, this spring he knew exactly what he was doing and seems to me, he had just decided he wouldn’t go quietly into the night given what he knew was the fiscal enormity of this new law.  And, as a result, I frankly doubt we’ll be hearing a lot more from Doug Elmendorf at CBO. Too bad.

That’s my Point of View. What do you think?

* ‘Make a clean breast of it’ is a suggestion that the ‘breast’ is the seat of the one’s emotions and secrets; one’s ‘heart’. To disclose this openly was to clean one’s heart of impurity.

This column was originally published on The Norton Point of View on the NHD Smart Communications website, www.nhdcomm.com and is available for download there.  The opinions expressed in the Norton Point of View are solely those of Tom Norton and do not represent the position of NHD Smart Communications and Advanstar Communications.

Wall Street smiles when a drug company gets with the program by “restructuring” and “rightsizing”—cutting costs through headline-grabbing layoffs. But for Main Street, the story of hundreds or thousands of sales reps, say, and researchers getting kicked to the curb is quite different.

The two gi-normous mergers that closed in the past month offer Pfizer CEO Jeff Kindler and Merck CEO Richard Clark plenty of opportunities to win kudos from The Street, what with all the synergies and economies of scale rendering whole divisions and layers of employees—many of them highly skilled and in middle age—suddenly redundant. In terms of lost jobs, both firms have set the magic formula at 15 percent of their workforce, or an estimated 19,500 and 16,000 positions, respectively.

Ever since the deals were first announced, towns and cities—not only in New Jersey—have been fretting at the prospect that a local plant or other facility might not make the cut in the Pfizer or Merck integration. Friday’s New York Times had a page one story about one such community, New London, CT, where Pfizer built its $294 million, 750,000-square-foot global R&D headquarters in 2001 at the mouth of the Thames River. Eight years later, this state-of-the art edifice is set to be shuttered by 2012.

What lifts “Pfizer To Leave City That Won Land-Use Case” out of the ordinary woe of pharma job layoffs and plant closings is the sharp sense of betrayal that Pfizer leaves in its wake? However unfairly, the drug giant’s brief encounter with New London is entangled in local memory with a bitter property-rights lawsuit brought by homeowners city officials who had marked their neighborhood for demolition—to be reborn as an “urban village” of high-end hotels and shops, tourism and commerce. Pfizer, while not part of the litigation, was central to this “economic revitalization” scheme: In exchange for erecting its biomedical Xanadu, the firm got 80 percent off its property taxes and other financial incentives.

The battle over eminent domain went all the way to the Supreme Court, which decided in 2005 against the homeowners in Kelo v. City of New London. The old neighborhood was razed to the ground, but the hotels and stores never materialized, and neither did the economic redevelopment.

Pfizer plans to move the remaining 1,400 jobs to its Groton site, just across the river. What the company once hailed as the world’s biggest privately funded biomedical research center has become, in the high keep of 235 E. 42nd St. in Manhattan, merely a piece of redundant real estate. Eventually Pfizer will manage to sell it, but probably for a loss.

The losses for New London are of a different order, as the Times piece makes dramatically evident. No doubt Pfizer brought many benefits to the city during its stay, but the firm may not be remembered very fondly, to say the least.

“Look what they did,” one New Londoner told the Times, pointing at the ragged field where a his neighborhood once stood. “They stole our home for economic development. It was all for Pfizer, and now they get up and walk away.”

PhRMA chief Billy Tauzin so far shows no sign of waving the white flag in response to an accusatory missive from House Minority Leader Rep. John Boehner bludgeoning his former Republican colleague for leading the drug industry’s support of President Obama’s healthcare reform effort. Pointedly CC’d to pharma CEOs – Tauzin’s employers—and simultaneously released to the media on Monday, Boehner’s attempted takedown of Tauzin predictably made big news across the media spectrum, being widely quoted in the political blogosphere and on cable news shows.

In an abrupt and dismissive tone, Boehner disses President Obama as a “schoolyard bully,” accuses the trade group chief of “helping [Obama] steal others’ money as the price of protecting your own” and “[choosing] to accommodate a Washington takeover of healthcare at the expense of the American people in hopes of securing favorable treatment and future profits,” More importantly, the letter insinuates that Tauzin is a dupe because “[the deal] has now gone sour.” And that both Tauzin and his pharma CEOs are politically naïve to expect that “appeasement” of the Administration would produce a concrete deal amenable to liberals in Congress.

Dupe or not, Tauzin and PhRMA are refusing, for now, to budge from their seat at the pro-reform table. The industry trade group posted on Tuesday a “Statement on Commitment to Health Reform,” reaffirming its position in support of universal coverage and bipartisan reform legislation.

And in an email to Pharm Exec, PhRMA senior VP Ken Johnson took the high road: “Emotions are running high on both sides of this important issue and we’re not going to fan the flames. We believe we’re doing what’s best for patients and America. When people go into the emergency room, they don’t sign in as a Republican or Democrat. They’re sick and they need help. Our goal is to make certain that everyone in America has access to that critically important help.”
Johnson said Tauzin would have no comment.

The general outline of the deal struck between PhRMA and the White House has been clear since President Obama first announced it almost two months ago. The industry promised, in a series of meetings with Senate Finance Committee Chairman Max Baucus, to forego $80 billion in potential profits from drug purchases over ten years (about half via a 50 percent cut in brand-name drugs for seniors stuck in the “doughnut hole” of Medicare Part D coverage gap). PhRMA would also bankroll as much as $150 million in pro-reform advertising.

Heaping praise on the industry, Obama called the concession a “major step forward.” What he failed to do was to disclose that this was, predictably enough, a quid pro quo.

When details of the deal began to leak out (most accurately in a July 22 New York Times piece by business reporter Duff Wilson), Tauzin’s apparent coup immediately began gathering a dust cloud of controversy.

According to Tauzin, the Obama administration gave assurances that in exchange for offering up to $80 billion in potential profits over 10 years, any final reform would leave untouched two Bush-era artifacts dear to pharma’s pocketbook: the noninterference clause in Medicare Part D, preventing the government from negotiating drug prices, and federal legislation prohibiting drug reimportation from Canada and elsewhere. (The latter assurance, Tauzin said, was offered at a July 7 meeting with Obama’s chief of staff, Rahm Emanuel, Sen. Baucus, and the CEOs of Pfizer, Merck, Abbott, AstraZeneca, and Amgen.)

Rep. Henry Waxman (D-CA) and other influential progressive House Democrats weren’t quiet about their intention to ignore any agreement to which they had not been privy. Waxman singled out the noninterference clause as a deal-breaker. As the left wing of the party pushed back, the Obama administration beat a hasty retreat, tripping over its own conflicting versions of the unwritten agreement.

Tauzin, meanwhile, went on the offensive, loudly broadcasting the specifics of the agreement. “We were assured: ‘We need somebody to come in first. If you come in first, you will have a rock-solid deal,’ ” Tauzin told The New York Times on August 6. “Who is ever going to go into a deal with the White House again if they don’t keep their word? You are just going to duke it out instead.”

The political stakes within PhRMA may be just as important as the larger prognosis for reform.  Tauzin’s carefully laid plan, starting soon after he took over the industry group in 2005, has been to “liberate” Big Pharma from its anti-government, GOP-backing traditions. A different, more frank way of communicating is at the heart of his strategy; PhRMA today emphasizes what the industry is FOR, rather than what it is against. Being first among healthcare industries to step up to the pro-reform table marks the culmination of Tauzin’s unabashedly pragmatic pharma policy makeover. It might be seen as a setback for industry traditionalists, who are skeptical of both the Administration outreach effort and the internally generated forecasts that indicate drugmakers will benefit from the expanded ranks of covered patients anticipated under the reform legislation.

The fate of healthcare reform is, at this point, anybody’s guess. But it’s likely that Tauzin’s own fate as head of PhRMA is hitched to that star, falling or not. As Boehner’s letter makes clear, the Republicans, reportedly fuming over PhRMA’s palling around with liberal groups like SEIU and Families USA to promote “Obamacare,” are seizing their opportunity to drive a wedge between Tauzin and his CEO backers.

Boehner’s office did not return calls for comment.

Abbott’s CEO Miles White, a stalwart Republican, had no comment when Pharm Exec contacted the firm.

Meanwhile, the trade group’s pricey promotion of healthcare reform continues apace as part of an initiative PhRMA is pursuing with other groups outside its traditional circle of friends. The most widely broadcast spot is a re-do of the infamous “Harry and Louise” ads that are believed to have played a key role in turning public opinion against the Clinton administration’s efforts to reform healthcare in 1994. This summer, an older, and presumably wiser, Harry and Louise smile on reform: “We need good coverage people can afford,” says one ad. “A little more cooperation, a little less politics, and we can get the job done this time.” That smile already seems out of date.