Concessions to the pharmaceutical industry were added to the reconciliation bill after the industry agreed to provide additional savings requested by President Barack Obama. According to the Associated Press, Senator Max Baucus stated in an interview that the pharmaceutical industry agreed to provide an additional $10 billion to cover the coverage gap in Medicare Part D known as the “donut hole” in exchange for eliminating the expansion of drug discounts at certain health facilities initially included in the Senate health care bill.

The Senate health care bill would have expanded drug discounts under a Medicaid program that serves over 14,000 covered facilities. The Medicaid 340B program provides outpatient discounts on brand name drugs to a variety of health facilities that serve low-income communities. The provision removed in the reconciliation bill would have expanded access to the discount program to cover inpatient drug purchases. While the inpatient expansion was eliminated in reconciliation, an increase in the kinds of covered health facilities remained.

Last year, the pharmaceutical industry negotiated a behind-the-scenes deal with the White House and Sen. Baucus to limit the savings sought from the industry in the health reform bill to $80 billion. The deal involved the White House and Baucus to not pursue long-sought-after Democratic policies including allowing the government to negotiate for lower drug prices in the Medicare drug program and the reimportation of drugs from first world countries. The pharmaceutical industry would, in return, support the legislation through advertising and grassroots means. The industry ultimately spent upwards of $100 million on advertising to support passage of the legislation.

The extra money to fill the “donut hole”–a coverage gap in the Medicare prescription drug program–was proposed by the White House in the run-up to the Blair House Summit. The Washington Post reported at the time that industry lobbyists were not enamored with this new proposal, “PhRMA, which agreed to $80 billion in cuts in exchange for protection from other steps, has concerns about Obama’s proposal to add another $10 billion to that amount.”

The industry had already beaten back the expansion of the 340B drug discount in earlier negotiations with the House of Representatives. The initial Tri-Committee House health care reform bill contained the same expansion that was included in the Senate bill, but was removed in November when the final version of the legislation was introduced and voted on. At the time, other industry leaders voiced their concerns over the exclusion of the expansion of coverage. The American Hospital Association (AHA) stated that the discount should be added to the bill later on: “Lawmakers also should restore a provision that would expand the outpatient 340B drug discount program to inpatient services for all eligible hospitals.”

The Congressional Budget Office (CBO) projected that the expansion of 340B drug discounts to inpatient services would save hospitals $1 billion annually and Medicaid $1.7 billion over ten years.