How Nancy Pelosi almost killed drug pricing reform — a gamble that expanded Democrats’ final deal

WASHINGTON —  The White House stunned health care experts last month when it declared it was abandoning its efforts to reform drug pricing in the major domestic spending package moving through Congress, a seeming death knell for what had long been a major priority for Democrats.

But unlike earlier in the negotiations, moderate Democrats weren’t the holdouts.

This time, it was Speaker Nancy Pelosi who dealt the blow, late the night before, to the latest deal on offer, according to a person familiar with the negotiations. It was her behind-the-scenes opposition, which has not been previously reported, that prompted the White House to declare the issue dead — a surprising role for Pelosi, given her decades of long support for sweeping efforts to lower drug prices.

The multiple near-collapses and resurrections of the recent negotiations over drug pricing reform underscore how momentous it was, for Democrats, when they finally did announce a drug pricing deal last week. But they highlight, too, how precarious that deal is, and how much of a tightrope walk will still be needed to get it signed into law.

When Pelosi put her foot down, she did so because she felt that what the White House had been negotiating with moderates didn’t go far enough, the person said. That gamble ultimately paid off — the ultimate compromise with moderate lawmakers struck a balance between their earlier, incremental proposal and Pelosi’s preferred sweeping upheaval of the drug industry.

“Pelosi was critical. She’s totally committed to this. … Obviously, at critical moments, [that] can make a huge difference,” said Rep. Peter Welch (D-Vt.), a longtime advocate for drug pricing reform who is often deputized by leadership to do outreach on the policy.

STAT interviewed more than two dozen lawmakers, congressional aides, advocates and lobbyists to recount new details about how Democrats reached the drug pricing compromise they announced last week. Many spoke on the condition of anonymity to candidly describe private conversations.

Pelosi first announced her vision for drug pricing reform more than two years ago. It was a plan that would have tied what Medicare pays for drugs to prices in foreign countries, but it stalled without Republican support in the Senate.

The push for reform took on new urgency in January, when Democrats took full control of Congress. With newfound leverage in a narrowly divided Congress, business-friendly Democrats made a power play.

Reps. Scott Peters (D-Calif.), Kurt Schrader (D-Ore.), Kathleen Rice (D-N.Y.), and Stephanie Murphy (D-Fla.) signaled their opposition to Pelosi’s drug pricing plan in a letter in May, and solidified their leverage with a dramatic blow to the legislation, via a key committee vote, in September.

Days later, reports emerged that Sen. Kyrsten Sinema (D-Ariz.) had reservations about leadership’s approach, too — a big concern, given the power individual senators hold in such a closely divided Senate.

Peters and Schrader spearheaded their own alternative, far more limited than what Pelosi and many other Democrats were hoping to achieve. Theirs would have limited drug price negotiation to drugs given to patients in doctors’ offices, and would have exempted drugs from negotiation for up to 21 years. Experts who reviewed the bill said the negotiation provisions were vague and ripe for gaming by the pharmaceutical industry.

The group of moderates, Sinema included, pushed for it anyway.

Besides their alignment on drug pricing, members of the group are also personal friends. Sinema and Peters started in the House the same year, and some have taken workout classes together. They have a group text, Peters said, which they used throughout negotiations on drug pricing to clarify their positions and make sure they stayed on the same page.

“We were able to trust one another. And that’s the currency here in the United States Congress is trust, right? If you don’t have that you’re in deep trouble,” Schrader told STAT in a brief interview at the Capitol.

Senate Finance Committee Chair Ron Wyden (D-Ore.) had also worked for months to reshape reform policies to appease moderates on his own committee, including Sens. Bob Menendez (D-N.J.) and Tom Carper (D-Del.), who are both from pharma-heavy states. Those concessions resulted in a negotiation framework tied to U.S. prices and breaks for small biotech companies that negotiators would draw from down the road.

On Wednesday, Oct. 27, just one day before the White House very publicly abandoned its drug pricing push, the administration and Sinema agreed to insert the Peters-Schrader proposal into a massive domestic spending package President Biden was announcing — with a tweak to limit monthly costs for insulin to $35 per month instead of $50, according to four officials familiar with the agreement.

When the White House reached out to Pelosi to inform her of the deal, she told them it was not good enough, and said the policy wasn’t ready to be included in the White House’s blueprint.

The White House acknowledged defeat Thursday morning, creating a firestorm of blowback from reform proponents, including AARP.

“We are outraged that the initial framework does not lower prescription drug prices,” the group wrote, calling it a “monumental mistake.”

But drug lobbyists, most of whom do not support the reforms, quickly cautioned against premature celebration, according to an internal email obtained by STAT. Mike Mattoon, who leads federal lobbying for the Biotechnology Innovation Organization, warned other advocates, “We do believe that drug pricing and benefit redesign is still part of the discussion on the Hill and with the White House,” Mattoon wrote.

Almost immediately, lawmakers pushed back on the idea that drug pricing was really dead. The White House announcement forced Democrats to confront the prospect of complete failure — and they didn’t like what they saw.

“That created some space for those of us who just wanted to make that last-ditch effort to make it right,” Welch said.

Lawmakers in both chambers went into overdrive trying to get a deal sealed. By Thursday evening, Pelosi’s office was shopping around outlines of a potential truce.

Senate Majority Leader Chuck Schumer, who had worked with Sinema for months on her various policy priorities, met with her Thursday evening and emphasized the importance of including drugs given out at the pharmacy counter. Sinema agreed to consider it, as long as it was limited and as long as leadership made other tweaks to soften the blow for drug makers that hiked their prices faster than inflation, according to a person familiar with the talks.

A group of senators who support Medicare drug price negotiation, including Sens. Chris Murphy (D-Conn.), Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Amy Klobuchar (D-Minn.) and Mark Kelly (D-Ariz.) huddled Thursday as well. They vented frustrations with how narrow the plan moderates supported was and they decided on how they would try to move the policies forward, an official familiar with the meeting said.

Kelly said he had had conversations with Sinema several times on the issue, as he represents the same constituency as she does and is an ardent supporter of drug pricing reform. Sinema also spoke with Murphy, Warren, and Wyden during the home stretch, an official familiar with the talks said.

“I’m proud that Sen. Sinema was willing to look at some new and creative ideas to get negotiation started. I think she gave significantly over the course of the conversation. So did the group in the House,” Murphy told STAT in a brief interview at the Capitol on Wednesday.

Sinema and Pelosi talked directly on Friday, and the next day, Pelosi, Schumer and the White House produced a counteroffer for moderates. Talks continued through the weekend.

When things were close enough, the resolution came quickly Tuesday afternoon. Sinema had a call with Pelosi to wrap up some last-minute details, but an agreement wasn’t quite sealed when she headed into a lunchtime meeting with Senate Democrats. Schumer asked her to clinch a deal immediately, according to an official familiar, and she ducked into Schumer’s office in the Capitol to finalize details.

On a phone call with pharma lobbyist turned White House counselor Steve Ricchetti, she finally got to yes, and Schumer announced the win within the hour.

The result was a blend of three approaches to drug pricing pushed by the House, Senate, and moderate Democrats. The House’s architecture — a negotiation process backed up by a crippling tax for any drug makers that refused to participate — survived. Wyden’s team helped craft the penalties for drug makers that hiked prices faster than inflation, and carveouts for small biotech companies. Peters and Schrader’s proposal to limit the number of drugs eligible for Medicare negotiation also made it into the deal.

The agreement was a major victory, but it isn’t a final one. There are signs that the legislation will continue to change before its possible passage.

For example, Peters and Pelosi cut a last-minute deal before an important House Rules Committee hearing that pushes back the amount of time pricey biologic drugs can stay on the market without being subject to negotiation. More so-called technical changes may be on the horizon.

Pharmaceutical industry lobbyists have also spent recent days poring over the legislative text of the deal and calling offices on Capitol Hill to suggest changes to the bill, despite the sector’s public opposition to the entire package.

Nick Shipley, executive vice president for the Biotechnology Innovation Organization, told STAT that while the group opposes the entire drug pricing bill, they’re pushing lawmakers to ensure that drugs are only eligible for negotiation after being on the market for 12 years. The current bill allows the Health and Human Services secretary to start negotiating with so-called small molecule drug makers after nine years, which, Shipley argued, would inadvertently skew research and development toward costly biologic drugs.

The Association for Accessible Medicines, which represents generic drug makers, also has vocally opposed the entire drug pricing deal. The group has argued that penalizing generic drug makers for raising their prices more than inflation “makes absolutely no sense” because generics would be penalized for much smaller price hikes than pricey brand name drugs.

“We’re actively working on a number of potential solutions here,” said Erik Komendant, senior vice president of federal affairs for the Association of Accessible Medicines.

Lawmakers are also quibbling over how to use the savings produced by the drug pricing policy — some progressives would like to see money reinvested in expanding Medicare benefits. Some lawmakers are considering measures to crack down on middlemen between drug companies and insurers, Wyden said last week.

While lawmakers and aides caution that meaningful reform isn’t done until it’s signed into law, they are basking in a sense of accomplishment over achieving compromise. Even Sinema, who is famous around Capitol Hill for ignoring reporters’ hallway questions, commented on Wednesday when asked by STAT how she felt about the deal.

“We got it done,” she said.

Nicholas Florko contributed reporting.