Pharma’s ‘come-to-Jesus moment’: The industry braces for a Pelosi speakership and Democrats’ drug pricing agenda

WASHINGTON — Nancy Pelosi marched into PhRMA’s offices this July with the law on her side.

Never mind that the law in question has never been put to use: Pelosi spoke in detailed terms of a federal statute that allows the U.S. government to effectively strip drug companies of exclusive licenses to some blockbuster medicines.

It was a head-turning threat from the woman likely to serve as speaker of the House next year, delivered straight to the drug lobby’s board of directors — executives from many of the country’s largest and most politically powerful pharmaceutical manufacturers.

Pelosi’s foreboding words, first described to STAT by multiple sources with knowledge of the encounter and later confirmed by the Democratic leader’s office, were intended as a “come-to-Jesus” moment for the industry, according to one individual familiar with the meeting.

The boardroom ambush from Washington’s most powerful Democrat could prove the first of many such moments for drug manufacturers, which have come under fire from the White House and lawmakers from both parties in the past two years. Interviews with drug industry lobbyists and Democratic aides across the Capitol suggest the same: that the wing of Pelosi’s party outlining an ambitious agenda to combat high drug costs could turn 2019 into PhRMA’s doomsday scenario.

“Democrats have made real action to lower prescription drug prices central” to the party’s campaign strategy, Pelosi told STAT in a statement. “It will be one of our first legislative priorities in the majority.”

Among the scariest planks of a Pelosi-controlled House, beyond the threat she made in the meeting: direct negotiating authority for Medicare’s prescription drug benefit, which spent $90 billion on prescription medicines in 2015.

Another: the installation of a Senate-confirmed “price-gouging enforcer,” who would monitor drug companies’ financial models and fine those found to have increased prices unjustifiably.

Whether the party can implement those changes, however, depends largely on who controls committees and subcommittees that will oversee pharma policy.

Already, a lengthy cast list of drug-pricing hawks is emerging to fill those roles should Democrats retake the House, which pollsters and election forecasters say is highly likely. Three Democratic congressmen in particular — Reps. Elijah Cummings (Md.), Peter Welch (Vt.), and Lloyd Doggett (Texas) — have already positioned themselves as pharma antagonists, and will likely be front and center in the party’s effort to advance drug-pricing reforms.

Cummings would likely chair the House Oversight and Government Reform Committee — the same body that called Mylan CEO Heather Bresch before Congress in 2016 after her company hiked the price of EpiPen.

Of members likely to wield a gavel, he appears the clear leader to haul drug CEOs to Capitol Hill to justify what he views as unreasonable price hikes. Even without the authority that comes with a chairmanship, he has already launched an investigation into Bayer, Novartis, and Teva, among other drug companies, for rapid price increases of multiple sclerosis drugs.

Welch and Cummings also wrangled a White House meeting two months after President Trump’s inauguration, perhaps foreshadowing a strange-bedfellows scenario in which the drug industry finds itself caught between aggressive Democrats on Capitol Hill and an unpredictable Republican administration. The two emerged from their meeting with Trump confident they had found an ally on the issue of drug pricing, though the partnership quickly fizzled.

Doggett, meanwhile, is seen as a frontrunner to chair the Ways and Means health subcommittee, giving him jurisdiction over Medicare, Medicaid, and how those federal providers pay for prescription drugs.

The same month as Pelosi’s meeting with PhRMA’s board, Cummings, Doggett, and Welch unveiled legislation similar to the threat she had delivered — a bill authorizing Medicare price negotiation and giving the health department authority to grant additional licenses to different drug makers if those negotiations stalled.

Democratic aides told STAT that the bill would likely be re-introduced in January, with the aim of a February hearing and a committee markup soon after. Moreover, the aides said, even candidates who have accepted substantial campaign contributions from the drug industry have expressed enthusiasm for the legislation, which is effectively a Medicare negotiation bill on steroids. (In its current form, the bill has 100 Democratic co-sponsors.)

Beyond Cummings, however, it remains an open question which Democrats will be first to declare open season not just on the industry at large but on specific executives. Reps. Frank Pallone (N.J.) and Richard Neal (Mass.), respectively the potential chairmen of two key committees — Energy and Commerce and the similarly powerful Ways and Means — are seen by lobbyists and staffers alike as unlikely to take that role on.

Pallone, who became the top Democrat on his committee in 2015 despite Pelosi’s opposition, emphasizes on his House website that several large pharmaceutical companies call his district home. Neal has tended to focus more on health insurance issues as the top Democrat on Ways and Means. Both have accepted campaign contributions reaching six figures from drug company employees and affiliated PACs.

Some Democrats also privately fretted that a Pelosi ally — Rep. Anna Eshoo (D-Calif.) — may gain control of the House Energy and Commerce Committee’s health panel, which would give her a key say in shaping and advancing drug pricing legislation.

Eshoo is among the prime targets of the political group Patients for Affordable Drugs, and has taken more money from the pharmaceutical and health products industry than any member who will remain in Congress next year besides Rep. Fred Upton (R-Mich.). In her career, Eshoo has accepted $1.61 million in campaign contributions from drug or device makers and their employees, according to the Center for Responsive Politics. Pelosi herself has accepted just shy of $400,000.

Another potential contender for that slot, however, is Rep. Diana DeGette (D-Colo.), a health policy wonk who frequently rails against high insulin prices. DeGette was also instrumental in drafting the 21st Century Cures Act, a series of reforms that made major investments in federal research but that some on Capitol Hill saw as overly friendly to the pharmaceutical industry. If she does not chair the Energy and Commerce health subcommittee, she would likely chair the committee’s oversight panel, another potential opportunity to call drug company CEOs before Congress.

Drug makers have reason to fret about the Senate whether or not Democrats take over the leadership of that chamber on election night. No matter what, the pharmaceutical industry is losing a longtime ally, Sen. Orrin Hatch (R-Utah), who they have long relied on to quash unfriendly legislation.

Instead, the Senate Finance Committee’s likely new chairman is Sen. Chuck Grassley (R-Iowa), who lobbyists and aides described as having populist and even bipartisan tendencies, particularly on drug pricing. In 2015, he and Sen. Ron Wyden (D-Ore.) co-authored an investigation of the pharmaceutical company Gilead’s strategy for pricing Sovaldi, a hepatitis C drug introduced at a cost of $84,500 per course of treatment.

“Fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices,” the pair wrote in the report — stern words from a Republican senator.

Grassley, Capitol Hill staffers were quick to point out, is himself among the authors of the legislation that enacted Medicare Part D, the program’s prescription drug benefit. Out of pure “pride of authorship,” aides said, Grassley could prove open to significant changes short of the Democrats’ wish for full-scale price negotiation. Lobbyists also predicted the White House could itself be amenable to a top-to-bottom examination of Part D.

Assuming a Democratic House takeover, the true nightmare scenario for drug makers involves Democrats regaining control of the Senate — just a 1-in-6 proposition, according to the forecasting site FiveThirtyEight.

Wyden, who would chair the Finance committee and wield broad jurisdiction over health care issues if Democrats take the chamber, has already introduced much of the legislation Hill aides say he’ll be likely to pursue in the first weeks of a new Congress.

Wyden’s legislative plan is threefold: One piece of legislation would force drug companies to publicly justify any price increases; another would require pharmacy benefit managers to disclose their rebate levels to the federal government; and the last would place a tighter cap on how much Part D beneficiaries can pay out of pocket for prescription drugs.

One race that pharma’s watching, in the unlikely event Democrats take the Senate: the endangered Sen. Claire McCaskill of Missouri, among the Democrats who has made drug prices most central to her campaign. On the campaign trail in Missouri this month, McCaskill has said allowing for Part D negotiation is her top priority.

Another of her proposals — to ban pharmaceutical companies from engaging in direct-to-consumer advertising, as nearly all countries have done — may be as much a pipe dream as Democrats taking the Senate.

Even more unlikely, according to congressional aides, is the prospect of Pelosi convincing a Republican administration to effectively employ the nuclear option against the drug industry — as she articulated in the meeting with PhRMA’s board.

While a PhRMA spokeswoman would not confirm Pelosi’s threat in the meeting, the trade group sent STAT its position on so-called march-in rights in response to questions about the encounter.

Referring to the Bayh-Dole law that created the rights, the spokeswoman, Nicole Longo, wrote: “Expanding the use of march-in rights to address drug prices could also effectively defeat the purpose of Bayh-Dole, which was to incentivize the private sector to take on the substantial risk and investment needed to translate discoveries from government-funded research into potentially useful commercial products.”

The trade group took the position that the march-in rights were not intended to be used as a price control — a stance that the National Institutes of Health, which in many cases controls the drug licensing process, has backed in the past.

Pelosi is well aware how far-fetched such a scenario is — one Democratic aide admitted there was “absolutely, unequivocally, no chance the Administration would invoke it, ever.”

If it’s price controls Pelosi wants, however, her party has no shortage of ideas. Her main intention in accepting PhRMA’s invitation, according to a spokesman, was to make clear Democrats are serious.