‘The slippery slope is powerful’: Dems believe drug pricing law will pay dividends

Democrats staring down a divided Congress in 2023 have an answer for those wondering if the window is closing for significant health care wins: watch and wait.

The incoming GOP House majority may block their attempts to enact more federal controls on health costs. But this year’s passage of the Inflation Reduction Act will empower Medicare to negotiate drug prices for the first time, paving the way for moregovernment action over the coming years, argued Peter Welch (D-Vt.).

“The slippery slope is very powerful,” said Welch, who shepherded the bill through the House and will, next month, be sworn in to the Senate. “If [negotiation] works in Medicare, it can work in the private market. Once you have the tool, and it gets implemented, and people get to experience lower rates, and it doesn't harm health outcomes, it’s going to be really hard to reverse that.”

Welch’s confidence about the law’s potential to expand over time underpins Democrats’ strategy on drug pricing next year: defend the law from Republican attacks long enough to give Medicare breathing room to begin negotiating with pharmaceutical companies over some of their most expensive drugs, focus on new ways to cap prices of certain drugs, and bet that, like the Affordable Care Act, the policy pays political dividends down the road.

Republicans have introduced bills to undo the legislation, echoing arguments the pharmaceutical industry has made for years that the new regulations will prevent"new innovation."

“I want drug prices to be lower but we have to do it in a way that doesn’t undermine the creation of new drugs,” said Sen. Marco Rubio (R-Fla.), one of the bill’s cosponsors. “Companies are not going to invest in developing new treatments unless they believe they have a chance to make back their money with a profit.”

Though chances of this repeal effort succeeding are vanishingly slim with Democrats holding the Senate and White House, conservative lawmakers and their outside allies want to impede the law’s progress before its expansion becomes inevitable.

“Every year more drugs are added onto the negotiations, so the impact is going to increase over time,” said Joe Grogan, a former pharmaceutical industry lobbyist who led the United States Domestic Policy Council under then-President Donald Trump and continues to advise GOP lawmakers on health policy. “And now that you have demonstrated savings, Congress can expand the law to save more money in the future. So there’s no question it’s a slippery slope. It’s up to Republicans to try and arrest the slide down that slope.”

The drug industry is also gearing up to fight the law’s implementation, using whatever legal and regulatory tools are available.

Sarah Ryan, a spokesperson for the Pharmaceutical Research and Manufacturers of America, said the industry lobby group will “keep working to mitigate the law’s harm and continue to push for real solutions that will bring financial relief for patients” in the new Congress. She also suggested that PhRMA will prod lawmakers to target other health care system players.

“Any further attempt to lower what patients are paying for their medicines cannot ignore the role insurers and other middlemen play in the system,” she said.

A Republican House majority leaves no room for progressives to pass wishlistitems such as “Medicare for All” or a federal expansion of Medicaid. But Welch and his colleagues are confident that their successful fightto rein in drug costs will give them leverage in future health care battles, even if gains can only be made around the margins over the next two years.

“Pharma is no longer seen as invincible,” said Leslie Dach, a former HHS official under the Obama administration who now leads the liberal advocacy group Protect Our Care, which spent years pushing for drug pricing reforms. “The dam hasn’t just been breached. It’s been destroyed.”

'Only politics can get in the way'

Sen. Raphael Warnock (D-Ga.), whose runoff victory in December clinched Democrats their 51st Senate seat, said he’s working to expand the Inflation Reduction Act’s cap on out-of-pocket costs for insulin within Medicare to people on private insurance, and already has “a couple of potential partners” on the other side of the aisle.

“There are 20 states that already cap the cost of insulin. Many of them are red states,” he said. “So only politics can get in the way of us getting this done.”

Welch and other lawmakers are also hopeful for bipartisan action targeting pharmaceutical benefit managers — the middlemen who negotiate prices for insurance companies.

But given the likely gridlock in the next Congress, Democrats are exploring what they can do outside of legislation.

Welch is hoping for a seat on one of the Senate's two health care-focused committees — where both chairs have pledged to focus oversight on the implementation of the new drug law.

Senate Finance Chair Ron Wyden (D-Ore.) said his committee will be on the lookout for any political or corporate meddling, adding that Welch would be “a huge plus” in that work.

Sen. Bernie Sanders (I-Vt.), the incoming chair of the Health, Education, Labor and Pensions Committee, said he also plans to focus on “incredible greed in the pharmaceutical industry.” And earlier this month, Welch launched an investigation with Sen. Elizabeth Warren (D-Mass.) on Pfizer’s plans to quadruple the cost of its Covid-19 vaccine.

PhRMA’s Ryan previewed the arguments drug companies will make to these committees, and while lobbying members of Congress to repeal or water down the provisions passed this year.

“The drug pricing provisions of the IRA are already having an impact on future [research and development] into new treatments and cures,” she said.

Welch called this industry line “bogus” but “powerful” and said he hopes the successful implementation of Democrats’ drug-pricing law will “burst the bubble” of the idea that cost controls hamper innovation.

“All the contributions they make and all their lobbying money gives them a lot of power,” Welch said of the drug industry. “But I think what gives them the most power is that everybody can imagine themselves in a position where someday, somebody they really love is going to need a pharmaceutical drug and won’t be able to get it. They play on the fear we all have by basically saying 'if you make us charge reasonable prices, that'll happen.'”

Welch knows this terror firsthand. Sitting in the bare, windowless office assigned to him in the basement of the Senate — his base of operations until January — Welch said he understands why so many people are wary of anything that might hamper a drug company’s ability to find the next big cure. But he believes that taking on the industry will benefit more people in the end by ensuring they can afford the breakthrough medicines companies create.

“My first wife had cancer, and had a prognosis of six months, but she ended up living a really good nine years, and pharmaceuticals really helped make that happen,” Welch said. “So I've always been somebody who thinks pharmaceutical companies do some really good things, and we need what they do. But they're killing us with price increases, putting up drugs that you can't afford.”

‘The issue was completely dropped’

Democrats’ road to drug pricing legislation featured a Trump fakeout, the death of one of the issue’s leading champions, and delicate shuttle diplomacy among the party’s progressives, moderates and a Biden White House wary of anything that threatened to derail its signature domestic policy package.

Welch began looking for ways to enact drug pricing reform as soon as he arrived in Congress in 2007. But even as drug prices climbed over the following years and pharmaceutical companies turning record profits became a popular punching bag for both Democrats and Republicans, meaningful legislation remained elusive.

Days ahead of his inauguration in 2017, Trump accused drug companies of “getting away with murder” and vowed to turn his “Art of the Deal” negotiating skills to the issue. A few months into his administration, hoping to find common ground, Welch and then-House Oversight Chair Elijah Cummings (D-Md.) visited Trump in the Oval Office to walk through a drug pricing bill they drafted and ask him to rally Republicans to join them on the issue.

“He started telling us what medications he took, and he said he always takes the brand name because he's a brand name guy,” Welch recalled. “Then he started talking to Elijah about the ‘rathole neighborhood’ [in Baltimore] where he lived.”

Despite these tangents, Welch and Cummings left the White House bullish on winning Trump’s blessing. But that optimism soon faded.

“The issue was completely dropped by the White House,” said David Rapallo, who served as Cummings’ staff director on the Oversight Committee until the veteran lawmaker passed away in 2019. “We sent letters following up and asking to talk more. We shared a draft of our bill that hadn’t yet been introduced, saying: ‘If you have thoughts, let us know. We can make changes.’ But we never got any response, so we decided after a few months to introduce the bill without their input.”

Trump administration spokesperson Steven Cheung did not dispute the details of the meeting. He added that “there has been no bigger champion of lowering prescription costs and putting Americans first than President Trump,” arguing that he signed executive orders on the issue while Congress “dragged its feet.”

‘We had to show we could get it passed’

When Democrats took control of the Senate and White House in 2021, the party saw another window for action.

But progressives worried their chance would disappear when the White House unveiled a domestic policy package without any specifics on drug pricing. President Joe Biden’s plan included a passing reference to Medicare price negotiation, but it wasn’t listed as a line item, prompting Welch and others working on the issue to mobilize.

“When we saw the plan, we were nervous,” a House Democratic aide remembered. “Our impression when they put out the plan was that it was an aspirational goal to have drug pricing be a part of it, but we had to work to prove it could get the votes.”

Speaker Nancy Pelosi led the charge, applying public and private pressure.

“She told the White House that health care was what had won us the majority and what we knew from our polling was, hands-down, the single most popular part of the Democratic agenda,” a senior Democratic aide familiar with the talks told POLITICO. “She also told them that the people most aggressively for [drug price reform] were frontliners” — representatives of swing districts who wanted to campaign on the issue in 2022.

Another leading argument: bargaining down drug costs would unlock billions of dollars in savings to spend on Obamacare subsidies and other health care priorities.

But with Republicans uniformly opposed to the drug pricing plan, its supporters worried that objections from more conservative Democrats whose votes were critical were giving the Biden administration pause.

“We had to show that we could get it passed,” recalled Welch. “And I didn't begrudge the White House holding back until they knew that because, obviously, we didn't want to put something in there that was going to bring the whole Build Back Better package down.”

The White House disputed this characterization, arguing the president has supported drug price negotiation since he entered politics in the 1970s and intended it to be included in the package from the jump — pointing to Biden’s speech to Congress pitching the plan in which he said: “Let’s give Medicare the power to save hundreds of billions of dollars by negotiating lower prices for prescription drugs.”

‘Cajoling and hand-holding and strong-arming'

Even after the White House enthusiastically backed the plan and stumped for it in the fall and winter of 2021, obstacles remained.

At various times over the months-long tug-of-war over the bill, groups of both moderates and progressives threatened to walk. Welch served as a go-between, trying to keep the uneasy coalition together as the $3.5 trillion package got slashed to $1.7 trillion and the number of drugs subject to negotiation dwindled from hundreds to dozens.

“My progressive folks were concerned about what they saw as the watering down of price negotiation,” Welch said. Specifically, they worried about how long it would be before the provisions took effect and how many drugs’ prices could be negotiated.

“I realized that all of these were legitimate questions, but I told them that the heart of what we had to do was get this tool of price negotiation,” Welch said.

Meanwhile, a group of moderates led by Rep. Scott Peters (D-Calif.), whose San Diego district is home to thousands of pharmaceutical industry jobs, demanded several concessions — including a years-long delay in how long drugs had to be on the market before their prices could be negotiated and carve-outs for certain kinds of drugs.

“It took an immense amount of cajoling and hand-holding and strong-arming,” said the senior Democratic aide. “It didn’t come easy. But in the end, to quote Joe Biden, it was a big fucking deal.”

The drug pricing overhaul, which Biden signed into law in August, ended up narrower and weaker than Welch and his fellow progressives hoped for. It does not cover all drugs or apply to people with private insurance. But it could bring down the prices of some high-cost drugs for people on Medicare in the years to come. And Democrats believe it plugs an important hole left by the Affordable Care Act — the expansion of coverage without any means to control costs — and emboldens lawmakers to keep defying an industry few had been willing to challenge.

“More of the law will bite as the years go on,” predicted David Mitchell, the leader of the group Patients for Affordable Drugs, which lobbied for the bill’s passage. “People [on Medicare] will soon be enjoying the $35 cap on insulin. In 2024, Medicare beneficiaries like myself will see our payments go down dramatically. If you’re a Democrat running in 2024, we will certainly be hearing about it in your campaign. And in Congress, it will help motivate people to pass more reforms now that they see it’s not impossible.”