Baucus, White House In Deal With Drug Industry

While none of the changes in the prescription drug program would directly lower government costs, several officials also said the industry agreed to measures that would give the Treasury more money under federal health programs. In particular, officials said drug companies would likely wind up paying pay higher rebates for certain drugs under Medicaid, the program that provides health care for the poor.

Those funds would be used to help pay for legislation expanding health insurance for millions who now lack it.

One official said the deal was agreed to late Friday night when Tauzin called Baucus. The senator's statement said the White House was involved in the agreement.

It was not clear what leverage the agreement would give Baucus with other health care providers with whom he is in negotiations.

But at a minimum, the agreement served as an effective counter to impression that the drive to enact health care legislation was sputtering.

The disclosure of negotiations came near the end of an up-and-down week for the administration and its allies on health care.