Thursday, December 8, 2011

Cronyism in Healthcare Goes Viral!-Updated

More cronyism emerged from the Obama administration today in the form of a no-bid $433 million contract for the production of a small pox vaccine by a company with ties to former SEIU head, debt commission panel member, and Obama crony Andy Stern and Obama friend Ronald Perleman. As CNN shares:
Ronald Perelman is controlling shareholder of Siga Technologies and a longtime Democratic Party activist and fundraiser. He's also a large contributor to Republicans, but has been a particular friend of the Obama White House. 
Also on Siga's board of directors is Andy Stern, former president of the Service Employees International Union, who has had close relations with the Obama administration and who has supported President Barack Obama's health care initiatives. 
In May 2011, Health and Human Services awarded Siga a no-bid contract worth nearly $433 million to develop and produce 1.7 million doses of an anti-viral smallpox drug called STS-246. The drug would augment the existing supply of smallpox vaccine now in U.S. control.
Never mind that we spent close to a billion dollars for smallpox vaccines following the 9/11 attacks. The emails CNN obtained suggest that the Siga was poised to gain triple digit percentage profits and considering that the only customer was the US government, the contract was a direct infusion of nearly a half billion dollars from the American taxpayer to President Obama's cronies. This is par for the course in American politics though when it comes to healthcare. Politicians seem to care little about the actual health of the American people and more about the healthcare of Americans. The distinction is important. Improved health means that the people are themselves healthier. Improved healthcare means that people have greater access to healthcare to make them healthier, but increased government intervention allows for greater personal gain for politicians and their buddies. To be sure, access to healthcare--be it affordable care or drugs--is needed, but the government always couches intervention in terms of health related entities such as health insurance or medication. That is, if they themselves do not want to directly control healthcare via a completely universal system, they will legislate to their own personal benefit. GE, one of Obama's favorites (CEO Jeff Immelt heads up Obama's jobs board), is one of the largest producers of health information technology. In fact, they just launched a new venture with Google today. The health care reform bill signed into law by President Obama included $27 billion in "incentives" for physicians to implement and use electronic health record systems. Likely "incentivizing"providers to purchase such technology will only help GE's coffers. So in addition to a net gain of $3.2 billion (without paying taxes) from the American taxpayer, GE stands to continue to gain from their relationship with President Obama. That's not too say that there isn't merit to electronic health records; they do indeed help prevent medical errors. At the same time though, it provides an opportunity for further cronyism. The bigger government becomes, the more opportunities politicians have to pay back their friends.

This is sadly commonplace in politics though-- both for Democrats and Republicans-- as I've written before in reference to personal mandates specifically:
What might make supposedly "conservative" politicians want to have government mandate that individuals purchase a certain product such as health insurance, even under the guise of "personal responsibility"? Doesn't that conflict with the idea of personal liberty that conservatives espouse? Peter Schweizer just published a book, Throw Them All Out, where he spent a whole chapter discussing the relationship between Congressional stock trades and legislation. He discussed how Congressmen purchased stocks in drug companies just before the Medicare Part D legislation was passed in 2003, knowing that the stock prices would rise after the bill was signed into law and they would reap the profits. During Obamacare deliberations, Congressmen purchased stock in health insurance companies once they new the "public option" would be nixed, and insurance stock prices would go up. While neither of these situations focused on a personal mandate, they do suggest that politicians are willing to add layers of bureaucracy and create new government programs for their personal benefit. Speaker Gingrich has expressed support for a personal mandate on multiple occasions, as early as 1993 and as recently as this past May. Why? While Gingrich is indeed opposed to Obamacare and has expressed disapproval of its mandate, he also consulted for drug companies and health insurance companies as part of  his healthcare think tank, which supported insurance mandates, to the tune of millions of dollars. Governor Perry also supported a health care mandate of sorts with his (thankfully overturned) Gardasil mandate, which was essentially political payback for Merck's donations to his campaign and to the RGA. Politicians, even self-proclaimed conservatives, will often advocate for greater government control over healthcare if it helps their pocketbook or their political career.
No bid contracts that go directly to one's friends is the epitome of crony capitalism. This most recent example with Siga is more blatant than most as it's a direct line from the taxpayer to President Obama's friends. Even Solyndra had a few (rare) customers buy their solar panels. With this, the taxpayer is the just that the payer, and as is far too often the case, the government is the consumer. Cronyism has gone viral yet again, but as always, sunlight is the best disinfectant.

Update: SIGA has released a statement to answer these charges explaining the importance of the drug, why it was a sole bid contract, and why the funding they received was appropriate. While no doubt small pox remains a potential method of bioterrorism (or perhaps this administration would call it a virus caused disaster), there are still a few more issues that SIGA and the Obama administration needs to address. While SIGA claims that the price was "fair and reasonable", the fact that emails exist that address the optics of such a large sum of money and the profit and price of the vaccine indicate that this was indeed a negotiated "deal". SIGA even phrases it that way--a deal. SIGA also notes, " HHS also determined in written findings that failure to award a contract to SIGA might cause permanent damage to SIGA’s capacity to supply ST-246 in the future when needed." This is indeed a unique case, as the drug is used to treat a virus that has essentially been eradicated with the exception of the potential use as a bioterrorism method. However, a nearly half a billion sudden infusion of funding is suspect when that cash goes to Obama cronies, even if no "lobbying" was done on behalf of SIGA. As I mentioned earlier billions of healthcare reform dollars have been designated for electronic health records. While this may be helpful in reducing medical errors, it also happens to throw taxpayer money into the coffers of the politically connected. It becomes another display of politicians finding problems that only their friends and donors can solve and thus, they become the beneficiary of taxpayer dollars.

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