Pearce, 23, was Reading's player of the season last year but has found it difficult since reaching the Premier League, making only four appearances this term, thanks to the rise of youngster Sean Morrison.
Pearce's deal is set to expire in the summer and with rumours of former boss Brendan Rodgers looking at the young centre-back, McDermott is keen to tie him down.
"We shall see what happens this week," he said. "There is a possibility that there will be talks between Alex, his representative and Nick Hammond. When I first made the decision to leave Alex out (his contract situation) had no bearing whatsoever.
"Alex has a choice to make and so does his agent. Sean Morrison is now in the team, proved a point and proved he can play at this level. He is very much in contention to play because we know he can do it. He's committed and has a three-year deal."
Pearce is one of a few Reading players whose contracts are up for renewal with the likes of Noel Hunt and Jay Tabb also in a similar situation, but the manager insists the club will not be held to ransom.
He explained: "If someone does not sign a contract in January then the club would have to make a decision on that. That would be the same for anybody in that situation."