For months now, House Democratic Party leaders have been feuding behind closed doors with members of the Congressional Progressive Caucus about how to lower prescription drug prices. But as details of negotiations between House Speaker Nancy Pelosi (D-Calif.) and President Donald Trump have leaked into the public, frustration among progressives is boiling over.
Speaking in a personal capacity on Thursday, Rep. Ro Khanna (D-Calif.) told HuffPost that he and “the overwhelming majority” of his fellow CPC members “will oppose” any prescription drug bill that cedes the government’s authority to regulate drug prices to an independent arbitration firm. It’s a direct challenge to Pelosi ― who is championing arbitration in private ― and an effort to disrupt the talks with Trump, which progressives believe are ignoring their views.
“Any bill that allows Pharma to engage in arbitration is inconsistent with a real effort to hold Big Pharma accountable,” said Khanna, who is vice chairman of the CPC, but was careful to note that he was not speaking on behalf of CPC leadership. “The Democrats should at the very least get behind” price negotiation with the threat of ending drug monopolies.
House Democrats promised lower prescription drug prices throughout the 2018 midterm campaigns, and began their new majority in 2019 with a plethora of legislative options. Sen. Bernie Sanders (I-Vt.) and Khanna proposed one plan in November, followed quickly by Sen. Jeff Merkley (D-Ore.) with another. Both bills would require pharmaceutical firms to bring the prices they charge in the United States in-line with a much lower average international price ― or face severe penalties. In early February, Rep. Lloyd Doggett (D-Texas), introduced yet another bill that would allow Medicare to negotiate lower prices with pharmaceutical companies. Under Doggett’s bill, if drug companies refused to play ball, the government would be empowered to license a competing firm to issue a high-priced drug and a lower, government-approved price.
Since Doggett chairs the Health Subcommittee on the powerful Ways and Means Committee, his bill would be the logical starting point for a drug bill under ordinary congressional procedure. But big-ticket legislation has been bypassing the committee process since the Obama years. Most major bills in recent years have been negotiated between the White House and congressional leadership. The spat between progressives and Pelosi carries significant implications for the internal power dynamics of the Democratic caucus, in addition to its ramifications for household medical bills.
The U.S. pays the highest prices in the world for prescription drugs, because the U.S. government grants long-term monopolies to pharmaceutical firms and then refuses to regulate the prices companies charge. Drug prices are thus immunized from both market competition and government pressure.
Pharmaceutical lobbyists and executives insist that these monopoly profits are necessary to foster innovation, but there isn’t much evidence to back up their claims. Pharma companies do make a lot of money, but they don’t spend much on actual scientific research.
Since at least 2006, U.S. pharmaceutical companies listed in the S&P 500 have spent more money on stock buybacks and dividends than they have on research and development. The prescription drug business is consistently the most profitable industry in the world, but according to a recent study by the economists Öner Tulum and William Lazonick, these profits are simply turned over to shareholders rather than reinvested in public health. And shareholders, in general, are rich people ― 80 percent of all stock wealth is controlled by the wealthiest 10 percent of the population. And some of the richest shareholders in America are pharma execs, who receive about 80 percent of their compensation in company stock.
Democrats have known this for a long time, but they have also been beholden to the pharmaceutical industry for a long time. President Bill Clinton went to bat for Big Pharma against Nelson Mandela and AIDS patients in South Africa, and Barack Obama worked to help drug companies raise prices around the world by applying various forms of international pressure.
So it was a big deal when Pelosi made lower prescription drug prices a central policy issue of the 2018 midterms. The language she’s used against Trump in public has been unsparing; in October she tweeted that Trump was “letting Big Pharma walk all over him.”
But in private talks with the Trump administration, Pelosi’s office has been pursuing a much softer line. According to Politico and Stat, Pelosi’s team wants to identify overpriced drugs and sort out lower costs for consumers through arbitration, rather than regulation or the federal court system. Large corporations typically prefer arbitration as a method for resolving disputes with customers, because the private arbitration process is more favorable to corporate interests than public courts.
Under the arrangement currently being pursued by House leadership, the government would forgo direct price negotiation or regulation and instead cede pricing authority to an independent arbitration firm. It’s not clear what the precise rules of the process would be ― and Pelosi’s office declined to offer specifics to HuffPost on what they’re aiming for or where the talks currently stand.
If the deal that does emerge ends up being weaker than Doggett’s bill, Pelosi will likely face an insurrection not only from some of her progressive members, but also from left-leaning groups advocating a tougher approach.
“Democrats got the House back so they could check Trump’s corruption and rein in the big corporations,” said Murshed Zaheed, a progressive strategist active in pharmaceutical policy. Cutting a deal with Trump on drug prices, he added, “would be turning back on the promise they made during the campaign season.”
Henry Connelly, a Pelosi spokesman, insisted that they were consulting members of Congress, as well as outside interests.
“Bold, tough prescription drug negotiation legislation is what the American people want, and we’re looking at every option to maximize the leverage needed to drive down prescription drug prices,” Connelly said. “Our entire Caucus is determined to confront out-of-control drug prices, and we’re continuing to incorporate feedback and ideas from Members and stakeholders about how we can develop the strongest possible bill.”
The problem with arbitration, however, is that Trump already has more powerful tools at his disposal to lower drug prices ― and he doesn’t need to ask Democrats’ permission to use them.
The federal government has the power to issue what are called “compulsory licenses” ― a special contract that allows a competing company to sell a product that another firm has patented. It’s a clunky process, and most drug price reform advocates want legislation to get prices down. But in a pinch, Trump can just identify overpriced drugs and allow a competitor to start selling them at a lower price. He doesn’t need Pelosi’s help or pharma’s permission.
If Trump were serious about lowering drug prices, he’d be asking for Democrats’ help to strengthen his ability to use that tool. That’s how Doggett’s bill works. An arbitration bill, by contrast, would provide a Democratic Party endorsement for Trump to tout a symbolic half-measure.
No president has ever actually used compulsory licensing authority for prescription drugs, but the practice is common in other countries. In 2012, the government of India issued a compulsory license to bring down the price of a cancer drug from over $5,000 a month to $157.00.
Trump frequently changes his mind about policy or simply contradicts himself, making it hard to tell what priorities he actually cares about. But after two years in office, he hasn’t played hardball with Big Pharma. On trade policy, the Trump administration has actually strengthened the pharmaceutical industry’s ability to charge monopoly prices by bolstering intellectual property protections for biologics ― drugs made of living organisms, which have recently been a source of expensive new cancer treatments.
“So far, this Administration has talked a big game on tacking drug prices, but they haven’t delivered,” Khanna concluded. “If [the administration was] serious they would back Sanders and my legislation or the Doggett bill.”