The Irish Independent reports that Taoiseach Brian Cowen faces into a crucial week of talks with unions about €1.3bn in cuts to the public sector pay bill after admitting for the first time that his attempts to radically overhaul the area have failed.
Despite repeated enquiries by the Irish Independent to establish what changes he has made over the past 18 months, his department could show no results other than a series of "works in progress."
Mr Cowen's admission of failure on reform will encourage public sector unions to dig in on their demands for cuts to be stretched over a longer timeframe -- as the Government appears to have no momentum built up for real change.
The Taoiseach admitted that change had been frustratingly slow and his department, when questioned, could give no deadline on reform. Neither could it give any idea of the cost of making the necessary cuts.
Against a backdrop of such sluggish movement, Mr Cowen enters talks with the public sector unions today to try to find agreement on shaving €1.3bn off the €20bn public sector pay bill in the Budget.
Ahead of those talks, Mr Cowen yesterday reiterated previous commitments to make reform a top priority.
"There is a lot of work going on in this but we're not getting it done fast enough. We have to get this done quickly but it can't be done overnight,"Mr Cowen said.
His statement followed a similar pledge two years ago when he set out a plan, and 18 months ago when he became Taoiseach.
It's two years since he published the 13-point blueprint for the transformation of the sector -- in the Indecon speech -- but Mr Cowen's roadmap has not been implemented to date.
Mr Cowen also signalled that the planned cutbacks were only a "first step" in bringing about a "total reform" of the public service.
In a celebrated speech two years ago, he set out a plan for improving the public sector's productivity. Despite this "wish list" there is still no agreed government policy allowing for redeployment of staff between departments and state agencies.
The current model is not sustainable in the long term and "fundamental reform" is now required, the Taoiseach added. Pointing to two small areas where reform has been achieved, Mr Cowen said the Defence Forces were now far more efficient and productive and better equipped today than when it had greater numbers.
The Revenue Commissioners has also been reformed through new technology and moving more of its work online.
However, Fine Gael last night rounded on Mr Cowen, claiming his "new-found interest" in public sector reform, along with that of the trade unions, had come"too late".
"If we'd done it four years ago, we might be avoiding the cuts we are facing now,"the party's frontbench spokesman Leo Varadkar said.
The public sector pay bill has ballooned to €20bn, the number of public sector employees has increased by over 70,000 in 10 years, while the pension liability has hit over €75bn.
Demonstrations
With public sector unions continuing preparations for strike action on November 24 and the Frontline Alliance planning to hold demonstrations on Wednesday, general secretary of the Irish Congress of Trade Unions (ICTU), David Begg signalled further protests could be averted. "It can of course be averted if sufficient progress is made between ourselves and the Government," he said.
Reiterating his belief that the adjustment period should be extended to 2017, Mr Begg further claimed that if the Government pursues its current strategy of €4bn in public spending cutbacks, it would cause a"prolonged slump."
The Irish Independent also reports that Allied Irish Banks and Bank of Ireland, which both received state guarantees to keep them afloat, have cancelled their Christmas staff parties.
AIB has decided to discontinue sponsoring all social activities for both retired and active staff such as Christmas functions, annual lunches, dinners and golf outings with immediate effect "due to the current financial environment".
AIB triggered a storm of protest in October when it hiked salaries for many employees by 3pc just months after the State stepped in to save the bank.
Rival Bank of Ireland has also scrapped all Christmas parties while other banks, which are not supported by the taxpayer, are looking at holding modest ones.
"A decision has been made that the group will not be providing support for Christmas parties this year,"Bank of Ireland staff were recently told in an email signed by the group executive team.
"It would be inappropriate to support these events during an economic downturn when many of our personal, business and corporate customers will be curtailing, or cancelling, their own seasonal activities."
Irish Life & Permanent, which has not been recapitalised by the State and which will not transfer loans to the National Asset Management Agency, will be holding "small get-togethers" at branch level, a spokesman said.
Meanwhile, state-owned Anglo Irish Bank said it had not yet made any plans for Christmas parties.
The Irish Times reports that AIB is set to appoint Dan O’Connor as executive chairman on an interim basis while it continues its search for a suitable external candidate to become its new chief executive.
It is understood Mr O’Connor, who serves as AIB’s non-executive chairman, could occupy the executive role for up to a year. He joined the bank’s board in 2007.
The move comes as AIB seeks to reach a compromise with the Government about the appointment of a new chief executive to succeed Eugene Sheehy.
The bank is also expected to appoint Irish-born former Bank of America executive Colm McCarthy to a senior position with the company.
At one point, Mr McCarthy – whose brother Dermot is secretary general at the Department of the Taoiseach – was reported to have been approached by AIB to succeed Mr Sheehy as chief executive. He was also linked with the top job at Anglo Irish Bank.
Mr McCarthy joined Bank of America in 1979 and held various key positions, including president of Asia, head of Asia and director of the bank’s legal entities in Singapore, Malaysia, Hong Kong and Japan. He retired from the bank in June 2008.
It is not clear what role Mr McCarthy will assume with AIB.
It is understood that Mr O’Connor’s decision to take on the role of executive chairman follows discussions recently with Minister for Finance Brian Lenihan.
The decision would bring to an end a lengthy standoff between the board of AIB and Mr Lenihan over the appointment of a successor to Mr Sheehy, who announced his intention to retire from the bank earlier this year.
The Government is keen to have an external candidate appointed as AIB’s next chief executive. But it is understood that a number of external candidates approached by the board of AIB declined to take on the role.
Reports suggested that the proposed salary of €500,000 – which forms part of the Government’s bank guarantee scheme – was not sufficiently attractive to interest an overseas candidate.
But it is understood that the Government indicated some time ago its willingness to be flexible on the remuneration issue if the right person could be hired.
In the absence of an external nominee, the board of AIB felt that Colm Doherty, the head of AIB’s capital markets division, was the strongest candidate for the job.
The board is believed to have made this known to Mr Lenihan, who is understood to have held his position that an external appointment was more appropriate in light of the State’s banking guarantee and the billions that AIB has received in taxpayer funds.
Mr O’Connor will take day to day responsibility at the bank. He had previously resisted overtures from the Government to take on the role on a permanent basis.
His decision was revealed in a report by the Sunday Business Post yesterday.
Mr Doherty, meanwhile, is expected to be be offered a new senior role at the bank, possibly that of chief operating officer.
AIB declined to comment on the potential changes in its executive structure. No comment was available from the Department of Finance.
But informed sources indicated that these changes will be implemented shortly. AIB is due to submit a business plan to the European Commission later this month for approval in the context of the State’s equity involvement in the bank.
AIB recorded a loss of €786 million in the first half of this year, a period when it received €3.5 billion in capital from the Government. It is set to transfer €24.1 million in bad loans to the State-backed National Asset Management Agency (Nama).
The Irish Times also reports that a rights commissioner has found that a decision by Aer Lingus not to pay an increment of over €900 due to a pilot last April represented an unlawful deduction of wages.
Union sources said that the ruling by the rights commissioner, which was issued last Thursday, would be carefully studied by more than 400 other pilots at the airline.
The pilot concerned had claimed that it was an express and/or implied term in his contract that he would progress annually on an incremental scale.
He said that every year he had received an incremental increase on April 1st – with the exception of 2002 when none was paid following an agreement between his representative body, the Irish Airline Pilots’ Association, and Aer Lingus.
However, he said the airline had failed to pay the increment due in April 2009, which would have brought his salary to €104,280.
The pilot maintained that on April 14th this year his trade union had requested that the increment be paid and had argued that a refusal to do so represented a breach of his contract and of the Payment of Wages Act.
The pilot said that the company, in reply, had made no reference to its responsibilities under this legislation and had ignored the request to indicate any lawful basis for its refusal to pay the increment.
He also maintained that a collective agreement reached between his union and Aer Lingus in 2008 – known as PCI 07 – had included a guarantee that there would be no further initiatives to reduce pilots’ pay before April 2011.
Aer Lingus contended that the non-payment of an increment in all of the circumstances did not represent a breach of the legislation. It argued that it was not open to an employee to assert that “a non-increase in pay is in fact a deduction”.
However, rights commissioner Gaye Cunningham noted that the claimant’s contract of employment stated that the salary was on a scale “with a starting point”.
She said that while it was clear that the company was facing financial difficulties, section 5 (1) of the Payment of Wages Act provided that employers shall not make a deduction unless this was authorised by statute, by virtue of a term in the employee’s contract or with the prior written consent of the employee.
The Irish Examiner reports that the €1.3bn pay cut will just be the start of a slimming down of the public service that could see tens of thousands of jobs lost, Taoiseach Brian Cowen has indicated.
Mr Cowen admitted his Government hadn’t been fast enough in securing public service reform, but said it had to be achieved now because of the dire state of the public finances.
Significantly, he failed to rule out a winter of industrial discontent in response from the unions, saying he "hoped" an agreed path forward could be reached.
He was speaking two days after an estimated 90,000 workers – most of whom were thought to be public servants – took to the streets to protest against budgetary policy.
Earlier this year, the Government announced that the €4bn of savings in next month’s hairshirt budget would be reached through spending cuts of €2.25bn and extra taxes of €1.75bn.
But the coalition has since decided the bulk of the savings will have to come from spending cuts and, to the unions’ chagrin, has targeted a €1.3bn reduction in the public sector pay and pensions bill as part of this.
Talks between the two sides are ongoing, but in addition to the "day of protest" organised by the unions last Friday, a national strike has been pencilled in for November 24.
But Mr Cowen insisted the €1.3bn cut would have to be achieved – and that this represented merely "a first step" towards "total reform of the service".
"We have to get the savings for next year – that’s the imperative in the immediate term – and with a budget coming up on December 9, we have to focus on that. But we also have to recognise that the present service as it’s being provided is not sustainable long-term," he told RTÉ.
Mr Cowen cited the Defence Forces as an example of how the wider public service could be slimmed down. The Defence Forces have reduced size from 12,000 to just over 10,000, and Mr Cowen insisted their productivity was now "far higher" with a "much better set-up" than previously.
"So numbers is not the gauge of everything," he said. A comparable cut in the wider public service would see tens of thousands of jobs lost.
Mr Cowen said public service reform was ongoing, but admitted: "We’re not getting it done fast enough."
Asked if it was possible to reach agreement with the unions and avoid a winter of discontent, he said: "Those discussions are continuing and I believe that all of us have the common good and the national interest at heart and I hope – I hope – that the outcome will be positive."
But the secretary general of the Irish Congress of Trade Unions, David Begg, warned that if the Government persisted with its planned €4bn of cuts, it would "run the risk of driving the economy into a prolonged slump" similar to Japan in the 1990s.
Fine Gael described Mr Cowen’s comments on reform as "laughable".
"Brian Cowen promised public sector reform when he became Taoiseach. Since then, there has been zero progress," said FG deputy leader Richard Bruton.
The Financial Times reports that the European Union’s public debt could by 2014 rise to 100 per cent of gross domestic product – a year’s economic output – unless governments take firm action to restore fiscal discipline, EU finance ministers will be warned on Monday.
The stark message is contained in a European Commission analysis, which highlights the rapid deterioration in EU public finances caused by emergency measures in the past 12 months to rescue Europe’s financial sector and combat recession.
Finance ministers of the 16-nation eurozone will discuss the Commission’s paper at informal talks on Monday evening and it will also be addressed at a meeting on Tuesday of all 27 EU ministers.
As recently as 2007, the euro area’s public debt was only 66 per cent of GDP. But, even at this level, it was above the 60 per cent target set for countries aspiring to join the eurozone.
In its latest six-month economic forecast, published last week, the Commission predicted that the eurozone’s public debt would rise to 84 per cent of GDP next year and 88.2 per cent in 2011. But the new document paints a more sombre picture.
The document says, based on projections of a return to long-term pre-crisis growth levels, that “without consolidation, the gross debt-to-GDP ratio for the EU could reach 100 per cent of GDP as early as 2014, and keep on increasing”.
In spite of mounting concerns about the boom in debt, EU government leaders agreed at a summit on October 29-30 that the fragile nature of Europe’s recovery made it advisable to delay efforts towards fiscal consolidation until 2011.
The latest paper backs this position, saying:“A financial meltdown and a generalised loss of confidence have been avoided. However, uncertainty remains high, and there are still risks of negative feedback loops between the financial sector and the real economy.”
In a report published on Monday the Lisbon Council, a Brussels-based think-tank, recommends that EU governments cap expenditure at 2 percentage points below nominal GDP growth from 2011 onwards.
The Commission identifies five countries as at particular risk – Greece, Ireland, Latvia, Spain and the UK – because their public finances will come under strain from large increases in pension and healthcare costs, and high deficits triggered by the financial crisis.
This is particularly the case for Greece, which faces the second-highest increase in age-related expenditure in the EU, while its high debt ratio adds to concerns on sustainability.
Last week’s Commission forecast estimated that Greece’s public debt would hit 135.4 per cent of GDP in 2011, a level for which there is no precedent since the euro’s creation in 1999.
The FT also reports that extending anti-dumping duties against footwear from China and Vietnam risks Europe’s long-term commercial relations with both countries, the UK business secretary has warned.
There was no longer justification for the duties, said Lord Mandelson, who initiated the measure in 2006, as he expressed concern about waning enthusiasm for free trade across the European Union as a result of the economic crisis.
“You have a more inward-looking ‘let’s keep hold of what we have’ attitude growing within member states,”he said after a speech in Brussels where he called for a stronger and more decisive Europe.
“The job of the European Commission is obviously to take note of the political pressures but not to be swayed by them,” he said.
Footwear duties have proved highly divisive since Lord Mandelson, as European trade commissioner, first imposed them when low-price imports took market share from small European manufacturers, particularly in Italy and Spain.
At the time, the Commission reported “compelling evidence” of dumping and the trade commissioner said: “It is important that we act against unfair trade while encouraging legitimate and competitive trade from emerging economies. We do not target China and Vietnam’s natural competitive advantages, only unfair distortions of trade.”
Tariffs of 16.5 per cent for Chinese imports and 10 per cent for Vietnamese were set for a two-year period instead of the typical five, reflecting the deep misgivings of other member states, such as the UK and the Netherlands, which have derided them as protectionist. Large footwear retailers, such as Clarks and Adidas, have also opposed the measures.
The Commission and member states are expected to reach a final decision on the matter at on November 19. Baroness Ashton, trade commissioner, last month issued a preliminary recommendation for a 15-month extension, arguing that European market share had only just begun to recover.
But Lord Mandelson said: “I think this would be taken negatively by China and Vietnam and would not help our long-term trade interests with both countries,”
There was no evidence that the alleged dumping was hurting European manufacturers, since their market share was recovering, and that consumers would be harmed, said Lord Mandelson, who had expressed his “very great concern” to Baroness Ashton last week.
Amid intense lobbying from both sides, Baroness Ashton has insisted that her final decision will be guided by anti-dumping law and the evidence at hand.
Baroness Ashton has used her short tenure in Brussels to urge vigilance against protectionism at a time when the economic crisis is pressuring governments to favour national industries.
The New York Times reports that the White House, growing concerned that the Congressional timetable for passing a health care overhaul could slip into next year, is stepping up pressure on the Senate for quick action, with President Obama appearing Sunday in the Rose Garden to call on senators to “take up the baton and bring this effort to the finish line.”
Mr. Obama’s remarks came just 14 hours after the House narrowly approved a landmark plan that would cost $1.1 trillion over 10 years and extend insurance coverage to 36 million uninsured Americans; the president called it “a courageous vote.” But the votes had barely been counted when the White House began turning its attention to an even bigger hurdle: getting legislation passed in the Senate.
In the Senate, where proposals differ substantially from the House-passed measure on issues like a government-run plan and how to pay for coverage, the bill is stalled while budget analysts assess its overall costs. The slim margin in the House — the bill passed with just two votes to spare, and 39 Democrats opposed it — suggests even greater challenges in the Senate, where the majority leader, Harry Reid of Nevada, is struggling to hold on to all 58 Democrats and two independents in his caucus.
Mr. Obama has staked his domestic agenda on passing comprehensive health legislation, a goal that has eluded presidents for decades. While Democrats were forced to make major concessions on insurance coverage for abortions to win House passage of the bill, they were nonetheless ebullient on Sunday, with many saying the vote gave them momentum to push the bill forward.
“For years we’ve been told that this couldn’t be done,” Mr. Obama said in the Rose Garden. Of the American people, he said, “Moments like this are why they sent us here.”
But for all the exultation, there was a sense inside the White House and on Capitol Hill that the hardest work is yet to come. The House debate highlighted the pressures that will come to bear on senators as they weigh contentious issues like federal financing for abortion, coverage for illegal immigrants and the “public option,” a government-backed insurance plan to compete with the private sector.
In the Senate, Mr. Reid has merged two bills into one. The fine print is not public, but the broad outlines are known. Unlike the House bill, which pays to extend coverage by taxing individuals who earn more than $500,000 a year and couples who earn more than $1 million, the Senate bill imposes a 40 percent excise tax on so-called Cadillac plans that cost more than $8,000 a year for an individual or $21,000 for a family.
And unlike the House bill, which includes a national public plan, the Senate measure would allow states to opt out. But even that is too much government involvement for moderates like Senator Joseph I. Lieberman of Connecticut, a Democrat-turned-independent, who pledged Sunday to wage a filibuster to block any plan with a public option in it.
“If the public option plan is in there,” Mr. Lieberman said on “Fox News Sunday,” “as a matter of conscience, I will not allow this bill to come to a final vote.”
Apart from substantive hurdles, the Senate bill faces procedural ones; Mr. Reid cannot bring it to the floor for debate until he gets an analysis, or “score,” from the nonpartisan Congressional Budget Office, expected later this week. The delay could push Senate consideration of the bill until after Thanksgiving, which could in turn make it very difficult for Congress to meet Mr. Obama’s goal of signing a health bill into law by the end of this year.
The timing is crucial. Administration officials say Mr. Obama wants to wrap up work on health care so that he can turn his attention to other legislative priorities, including passing an energy bill and revamping financial regulations. But White House officials also know that the closer the final vote comes to the November 2010 midterm Congressional elections, the more difficult it will be to pass legislation.
Sending members of Congress home over an extended Christmas break without a health care bill in hand could prove disastrous politically. Democrats remember well the setbacks they suffered over the August recess when the Senate Finance Committee failed to meet Mr. Obama’s deadline for finishing its measure, and lawmakers were pummeled in town-hall-style meetings around the country.
“The holiday break is viewed the same way as the August break,” said one Democrat close to the White House, speaking anonymously to discuss strategy. “We don’t want a repeat. We could probably survive it, but why take the chance?”
The White House began prodding Mr. Reid to move quickly even before Saturday’s House vote. In a private meeting with Mr. Obama this year, Mr. Reid pledged to work to finish the measure by the end of December. But last Tuesday, Mr. Reid said the Senate was “not going to be bound by any timelines.”
On Wednesday, Rahm Emanuel, the White House chief of staff, visited Mr. Reid. The two met on Capitol Hill to “continue the discussion on ways to get a bill done by the end of the year,” said Mr. Reid’s press secretary, Jim Manley, adding that Mr. Reid intends to bring the bill to the floor “as quickly as possible.”
In case the leader did not get the message, Mr. Obama reinforced it Saturday night. In a statement after the House vote, he said he looked forward to signing comprehensive health legislation“by the end of the year.”
A big question is whether Mr. Reid has the 60 votes that will almost certainly be necessary to permit debate to begin. Mr. Manley said Democrats hoped “the momentum from the House bill will make everyone realize that the Senate should at least have a chance to begin debate.” Still, he conceded that there was “no glide path” toward getting the Senate to actually pass the measure.
As the Senate vote draws closer, the fight on the airwaves, where groups for and against the health bill are already spending millions of dollars on advertising, will only intensify. Republicans are also intensifying their opposition as they try to cast Democrats as tax-and-spend liberals, a theme echoed Sunday by Senator Mitch McConnell of Kentucky, the Republican leader.
“Soon, Senate Democrats will propose their own version,” Mr. McConnell said in a statement. “We don’t know how big it will be or how expensive, but we do know with certainty that it will mean higher premiums, higher taxes and massive cuts to Medicare to create even more government programs. That’s not reform.”
Representative Pete Sessions of Texas, the chairman of the National Republican Congressional Committee, issued a fund-raising appeal within hours of the vote. In an e-mail message to supporters, he said of Democrats, “Their unprecedented power grab will further bankrupt America while destroying the finest medical system in the world.”
But Representative Chris Van Hollen of Maryland, the chairman of the Democratic Congressional Campaign Committee, had his own fund-raising appeal, an e-mail message sent to supporters shortly after midnight Sunday that said “thank you for helping to make this historic day.” Below the text was a bold blue icon, a link to the committee’s fund-raising site, that proclaimed in block letters, “Contribute Now.”
The NYT also reports that for any industry, there has to be at least some good news any time Congress votes to expand the market by tens of millions of customers.
But the business world found plenty to complain about Sunday, as it assessed the House bill that would make sweeping changes in the health care system and extend insurance coverage to millions more Americans.
Insurers do not like the provision to create a new government-run insurance program. Drug makers oppose billions of dollars in rebates they would have to give to the government over 10 years. Makers of artificial hips, heart defibrillators and other medical devices are not particularly happy about the proposed 2.5 percent tax on their products.
And employers large and small oppose rules that, for many of them, would make health care coverage — long a job benefit — become a federally mandated obligation.
That is why, as attention now shifts to the Senate, where Democratic leaders are trying to merge two bills into one, virtually every business group with a stake in the outcome will be hoping to strike at least a slightly better deal than they found in the House version.
And they may indeed get a break from the Senate, where the need for Democrats to compromise to win 60 votes may ensure a more business-moderate outcome.
And yet, many analysts said on Sunday that even the House bill was not as bad for business as many in the health care industry might have feared when the overhaul effort began many months ago.
“All industries stand to gain from this legislation,” Steven D. Findlay, senior health policy analyst with Consumers Union in Washington, said in an interview. “They’re going to continue to fight their narrow issues and get the best that they can get. But all of them are aware they stand to gain significant new business and new revenue streams as more Americans get health coverage and money flows into the system for them.”
Of course, new revenue streams apply only to companies in the business of selling medical goods and services. To employers required to provide worker health benefits or else, in many cases, pay some sort of financial penalty, the House legislation offers little to cheer about.
Employer groups complained on Sunday that the House bill would impose insurance obligations while doing little to rein in the medical costs that help drive premiums higher year after year. In fact, those groups argue, the bill’s creation of a government-run insurance program, which may pay doctors and hospitals less than private insurers do, could end up shifting even more medical costs to the private insurance system that employers use.
“This won’t just hurt business, it will hurt millions of workers who have coverage through their employers,”said John J. Castellani, president the Business Roundtable, a group of chief executives of some of the nation’s biggest companies.
And the National Federation of Independent Business, representing many small businesses, said it was furious with the legislation. Susan Eckerly, senior vice president of the federation, attacked mandates, which she called punitive, and “atrocious new taxes.” The legislation, she said, was“a failed opportunity to help small-business owners with their No. 1 problem — skyrocketing health care costs.”
Another group, the Small Business Majority, praised the legislation but said the Senate needed to take more steps to lower costs.
Employers hope the final Senate legislation ends up looking more like the bill the Finance Committee passed, which does not require companies to insure their workers.
Meanwhile, the health insurance industry has been increasingly vocal about the emerging shape of the legislation, and it was sharply critical of the bill that passed on Saturday night.
“The current House legislation fails to bend the health cost curve and breaks the promise that those who like their current coverage can keep it,” Karen M. Ignagni, the chief executive of America’s Health Insurance Plans, the industry trade association, said.
The reference to a broken promise refers, in part, to people enrolled in privately offered Medicare Advantage insurance plans, which would lose federal subsidies under the House bill. Ms. Ignagni warned of cuts that would “force millions of seniors out of the program entirely.”
But the promise reference also refers to the bill’s provision of a new government-run insurance plan that would compete directly with the health plans offered by private insurers. The insurance industry has long opposed such a move and warns that it will eventually force many people with private insurance into the government-run program.
That “public option,” as it is known, was also in the Senate health committee bill approved in July. And the Senate majority leader, Harry Reid, Democrat of Nevada, has also signaled that he intends to include some kind of public plan in whatever Senate legislation is reached.
But some observers say the House legislation is much less of a threat than the industry had feared. While insurers were worried that the government plan would be able to piggyback on the Medicare program in being able to demand lower prices than the private insurers get from doctors and hospitals, the House legislation does not give the government plan the same bargaining power as Medicare.
“The ability of that program to gain incredible market share and have the clout to severely undermine the market is minimized,”Robert Laszewski, president of Health Policy and Strategy Associates, a consulting firm in Alexandria, Va., said in an interview.
Erik Gordon, a business professor and industry analyst at the University of Michigan, said insurers would find it difficult to price their new risks but might not be hurt too much by the competition — considering how many new customers they would have.
The drug industry expected harsh treatment from the House and got it. The bill would require drug makers to pay much more in rebates and discounts than in the $80 billion, 10-year deal that the industry struck in June with the White House and the chairman of the Senate Finance Committee, Max Baucus. The House bill tacked on $60 billion or so in rebates over 10 years, raising the total to around $140 billion.
But the White House and Mr. Baucus have said they will stay with their deal. It remains to be seen whether it survives the melding of Senate bills being directed by Mr. Reid.
“A good critic doesn’t write his review at the end of the first act of a play,”Ken Johnson, senior vice president of the pharmaceutical trade group the Pharmaceutical Research and Manufacturers of America, said in an interview. “We’re hoping the second act is a lot better.”
And while the House legislation allows direct government negotiation of Medicare drug prices — something specifically precluded in the Senate Finance bill — it does not allow Medicare to create a formulary, or list of limited drugs. Mr. Findlay, of Consumers Union, said that largely neutered Medicare’s price-negotiating power, although it would represent a first step down the price-setting path that the industry is certain to fear.
In a victory for the biotechnology drug industry, the House bill would give biotech drugs, which can cost tens of thousands of dollars a year, protection from generic competition for 12 years.
Doctors were left holding a mixed bag. The American Medical Association supported the House legislation. But the doctors’ group did not get its quid pro quo — the restoration of $210 billion in cuts to physicians’ Medicare fees over the next 10 years, which were already scheduled before the current effort. Attempts in the House and Senate to restore those cuts have been set aside at least temporarily because the issue has been seen as a political distraction from the main health care overhaul effort.
