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Drug Makers Will Try to Justify Prescription Prices to Senators at Hearing Drug Makers Try to Justify Prescription Prices to Senators at Hearing
(about 11 hours later)
WASHINGTON — Seven pharmaceutical executives faced a day of reckoning on Tuesday as they were challenged to justify high drug prices at a hearing of the Senate Finance Committee. WASHINGTON — Pharmaceutical executives, testifying before Congress, could not readily explain on Tuesday why the prices for many brand-name prescription drugs were much higher in the United States than in other developed countries.
The hearing will be political theater, but could also be a first step toward legislation to provide some relief to consumers, as lawmakers of both parties and President Trump have vowed to slow the relentless rise of drug prices. “It is almost as if the taxpayer has ‘stupid’ written on their face,” Senator Bill Cassidy, Republican of Louisiana, told the seven executives, who faced a barrage of questions and criticism at a three-hour hearing of the Senate Finance Committee.
Senator Charles E. Grassley, Republican of Iowa and the chairman of the Finance Committee, set the tone for the hearing with a prepared opening statement in which he said that practices of the pharmaceutical industry “thwart the laws and regulations designed to promote competition” and the use of lower-cost generic drugs. Mr. Cassidy joined two other Republican senators, Charles E. Grassley of Iowa and John Cornyn of Texas, and all the Democrats on the panel in expressing deep concern about constituents who could not afford the drugs they needed to survive.
“We’ve all seen the finger-pointing,” Mr. Grassley said. “Every link in the supply chain has gotten skilled at that. But, like most Americans, I’m sick and tired of the blame game. It’s time for solutions.” Senator Robert Menendez, Democrat of New Jersey, the home to many drug and biotechnology companies, offered what he described as “a friendly warning” to the witnesses. “If you don’t take meaningful action to reduce prescription drug prices,” he said, “policymakers are going to do it for you.”
Mr. Grassley said he was determined to restore a proper balance between encouraging the development of innovative drugs and keeping prices affordable for consumers and taxpayers. The hearing was political theater, but could also be a first step toward legislation to provide some relief to consumers, as lawmakers of both parties and President Trump have vowed to slow the relentless rise of drug prices.
Several themes ran through the prepared testimony of drug company executives, who were clearly playing defense. It was also clear from the hearing that senators had a lot to learn about drug pricing and that pharmaceutical executives did not fully appreciate the explosive political potential of the issue.
The main problem, they said, is not the high list prices set by drug manufacturers, but the high out-of-pocket costs paid by patients. The drug makers all said they wanted to be part of the solution because they wanted to be sure patients had access to their drugs. “I feel like I need a Ph.D. in prescription drug pricing to understand how the heck this industry works,” said Senator Maggie Hassan, Democrat of New Hampshire.
Several drug company executives suggested establishing a monthly or annual limit on a Medicare patient’s out-of-pocket costs for prescription drugs. Costs above any limits would be paid by insurers, such as private health plans or Medicare. Richard A. Gonzalez, the chairman and chief executive of AbbVie, the maker of the best-selling arthritis drug Humira, told the committee that his company made profits in countries like Germany and France where prices of brand-name drugs were often much lower than in the United States.
At least two chief executives — Kenneth C. Frazier of Merck and Olivier Brandicourt of Sanofi — said they could support legislation that speeds the development of generic medications by requiring brand-name manufacturers to provide samples to generic drug companies. “The U.S. has some of the highest prices in the world,” Mr. Gonzalez said.
Generic drug developers need samples of brand-name drugs to show that a generic copy is equivalent to the original, but they have often had difficulty getting them. Senator Ron Wyden of Oregon, the senior Democrat on the committee, asked, “How is that not gouging American consumers with high prices?”
“You’re willing to sit by and hose the American consumer while giving price breaks to consumers overseas,” Mr. Wyden said. Drug makers’ attempts to justify their prices, when so many patients cannot afford them, are “morally repugnant,” he said.
The drug makers vehemently opposed Mr. Trump’s proposal for Medicare to pay for certain prescription drugs based on the prices paid in other developed countries.
The Trump administration has said Medicare is paying 80 percent more than the amount other advanced industrial countries do for some of the most costly physician-administered drugs. Under its proposal, Medicare would still pay 26 percent more.
But the drug company executives bristled at the idea. Under such proposals, they said, the United States would be importing price controls from other countries where coverage of costly new drugs is sometimes delayed or denied.
“American patients have access to cancer medicines about two years earlier than patients in other countries, including Germany, France and the United Kingdom,” said Pascal Soriot, the chief executive of AstraZeneca. As a result, he suggested, American patients have generally seen greater improvements in cancer survival rates.
Kenneth C. Frazier, the chief executive of Merck, said his company could not just walk away from European markets where health officials set lower drug prices. It would be “immoral to leave the patients behind,” he said.
Mr. Cornyn said AbbVie had tried to block competition for Humira by surrounding it with a thicket of patents. In response to questions, Mr. Gonzalez, the chief executive, said AbbVie had 136 patents on Humira, with different patents protecting its use to treat different conditions.
“I support drug companies’ recovering a profit based on their research and development of innovative drugs,” Mr. Cornyn said. “But at some point that patent has to end, that exclusivity has to end, so that patients get access to those drugs at a much cheaper cost.”
Mr. Cassidy expressed interest in an idea that has been embraced by many Democrats but few Republicans: that Medicare should, in some cases, be able to negotiate prices with drug manufacturers.
“Right now,” Mr. Cassidy said, “Medicare has a very limited ability to negotiate” prices based on the relative value of a therapy. Medicare’s prescription drug plans, offered by private insurers, hire pharmacy benefit managers to negotiate, but they are not always effective, he said.
Senator Sherrod Brown, Democrat of Ohio, said taxpayers subsidized pharmaceutical research, through the National Institutes of Health, and advertising, through tax deductions for business expenses. But, he noted, many drugs cost more than the median income of Medicare beneficiaries, about $26,000 a year.
“We can’t afford to gave Big Pharma the blank check that you’ve had,” Mr. Brown told the executives.
Mr. Grassley, the committee chairman, set the tone for the hearing when he said that practices of the pharmaceutical industry “thwart the laws and regulations designed to promote competition” and the use of lower-cost generic drugs.
Several themes ran through the testimony of the drug company executives, who were clearly playing defense. The main problem, they said, is not the high list prices set by drug manufacturers, but the high out-of-pocket costs paid by patients.
Several drug company executives suggested establishing a monthly or annual limit on a Medicare patient’s out-of-pocket costs for prescription drugs.
Several chief executives, including Mr. Frazier of Merck and Olivier Brandicourt of Sanofi, said they could also support legislation that speeds the development of generic medications by requiring brand-name manufacturers to provide samples to generic drug companies. Generic drug developers need samples to show that a generic copy is equivalent to the original, but they have often had difficulty getting them.
Ronny Gal, a securities analyst who follows the drug industry for Sanford C. Bernstein & Company, said he doubted that drug companies would change their pricing practices because of the hearing.Ronny Gal, a securities analyst who follows the drug industry for Sanford C. Bernstein & Company, said he doubted that drug companies would change their pricing practices because of the hearing.
“This is a $460 billion industry,” Mr. Gal said. “You think three hours of an orchestrated show before Congress will lead to different behavior? I don’t think so.”“This is a $460 billion industry,” Mr. Gal said. “You think three hours of an orchestrated show before Congress will lead to different behavior? I don’t think so.”
Pharmaceutical executives do “want to be at the table for whatever comes next,” Mr. Gal said, and that could eventually include discussions and negotiations on legislation.Pharmaceutical executives do “want to be at the table for whatever comes next,” Mr. Gal said, and that could eventually include discussions and negotiations on legislation.
Richard A, Gonzalez, the chairman and chief executive of AbbVie, the maker of the top-selling prescription drug, Humira, said his company was “open to working” with Congress on efforts to address drug prices. The list price of Humira, prescribed for rheumatoid arthritis and other autoimmune diseases, has been widely reported as about $50,000 a year. Mr. Gonzalez, of AbbVie, said drug prices were a problem for some patients because their out-of-pocket costs were often a percentage of a drug’s list price.
Mr. Gonzalez said drug prices were a problem for some patients because their out-of-pocket costs were often a percentage of a drug’s list price. For example, he said, AbbVie’s drug Mavyret can cure hepatitis C and entered the market with a list price far below that of competing products, but the out-of-pocket costs “are still too high for many patients to access this medicine.” Mr. Soriot said the list prices of drugs did not reflect the true cost because AstraZeneca and other companies provided rebates and discounts to many health insurance plans and the middlemen known as pharmacy benefit managers. On average, he said, the rebates — intended to secure a favored position on a health plan’s list of covered drugs — are “nearly 50 percent of our gross revenues in the United States.”
The senior Democrat on the Finance Committee, Senator Ron Wyden of Oregon, accused the drug companies of “profiteering and two-faced scheming,” and he said the companies received a huge share of their revenues from taxpayers, through government programs like Medicare and Medicaid. AbbVie, AstraZeneca and several other companies said they would reduce prices for consumers if Congress outlawed the rebates that drug makers pay to insurers and middlemen to promote the use of their drugs in Medicare and commercial insurance.
Pascal Soriot, the chief executive of AstraZeneca, called the drug pricing market unsustainable because of the rising out-of-pocket costs. Democratic senators wanted a firmer commitment. They asked the drug company executives to put it in writing.
“These issues must be addressed urgently, and we hope to be a constructive partner in finding solutions,” Mr. Soriot said.
He endorsed the idea of a monthly or annual limit on a patient’s out-of-pocket costs for prescription drugs.
Mr. Soriot said that the list prices of drugs did not reflect the true cost because AstraZeneca provided rebates and discounts to many health insurance plans and middlemen known as pharmacy benefit managers. On average, he said, the rebates — intended to secure a favored position on a health plan’s list of covered drugs — are “nearly 50 percent of our gross revenues in the United States.”
Likewise, Sanofi said that 55 percent of its gross sales were “given back” as rebates to commercial insurers, Medicare, Medicaid and other government programs. But the company acknowledged that patients often did not get the benefit of these price concessions.
Patients, doctors and members of Congress have cited rising insulin prices as an example of what is wrong with drug prices in America, and Dr. Brandicourt, the Sanofi chief executive, was eager to defend the company’s record.
Sanofi has developed new insulin products that are significantly better and easier to use than those that have been on the market for decades, he said.
“The net price of our insulin product Lantus has fallen over 30 percent since 2012,” Mr. Brandicourt said. “Yet over this same period, average out-of-pocket costs for patients with commercial insurance and Medicare — before the benefit of any Sanofi financial assistance program — has risen 60 percent.”
Giovanni Caforio, the chairman and chief executive of Bristol-Myers Squibb, said he wanted to be sure that patients could afford the company’s medicines. But he said he did not support Mr. Trump’s proposal for Medicare to pay for certain prescription drugs based on the prices paid in other developed countries.
Under such proposals, drug company executives said, the United States would be importing drug price controls from other countries where coverage of costly new drugs is sometimes delayed or denied.
“American patients have access to cancer medicines about two years earlier than patients in other countries, including Germany, France and the United Kingdom,” said Mr. Soriot of AstraZeneca. As a result, he suggested, American patients have generally seen greater improvements in cancer survival rates.
Albert Bourla, the chief executive of Pfizer, said he supported efforts to eliminate rebates paid to health plans and middlemen. Patients, he said, should get the benefit of such price concessions at the pharmacy counter.Albert Bourla, the chief executive of Pfizer, said he supported efforts to eliminate rebates paid to health plans and middlemen. Patients, he said, should get the benefit of such price concessions at the pharmacy counter.
“None of the close to $12 billion of rebates that Pfizer paid in 2018 found their way to American patients,” Mr. Bourla said.“None of the close to $12 billion of rebates that Pfizer paid in 2018 found their way to American patients,” Mr. Bourla said.
He also said that drug makers should be paid in proportion to the value of their medicines. Pfizer, he said, could be “paid based on the number of strokes we prevent or the number of cancer patients who go into full remission, rather than the number of pills we sell.” He also said drug makers should be paid in proportion to the value of their medicines. Pfizer, he said, could be “paid based on the number of strokes we prevent or the number of cancer patients who go into full remission, rather than the number of pills we sell.”
With the proliferation of high-deductible health plans, Mr. Bourla said, patients are paying a larger share of prescription drug costs.With the proliferation of high-deductible health plans, Mr. Bourla said, patients are paying a larger share of prescription drug costs.
“Patients are made to pay on average 14 percent of the cost of their medicines, but only 3 percent of the costs associated with hospital stays,” he said.“Patients are made to pay on average 14 percent of the cost of their medicines, but only 3 percent of the costs associated with hospital stays,” he said.
Jennifer Taubert, an executive vice president of Johnson & Johnson, said that commercial health insurance plans were already required to have caps on out-of-pocket costs, including the drugs they cover. Medicare, the insurance program for people who are 65 and older or disabled, should provide similar protection, she said. Patients, doctors and members of Congress have cited rising insulin prices as an example of what is wrong with drug prices in America, and Mr. Brandicourt, the Sanofi chief executive, defended the company’s record.
Mr. Frazier of Merck said that drug makers were discovering marvelous treatments and cures, but that “our insurance system is broken.” “The net price of our insulin product Lantus has fallen over 30 percent since 2012,” Mr. Brandicourt said. “Yet over this same period, average out-of-pocket costs for patients with commercial insurance and Medicare — before the benefit of any Sanofi financial assistance program — has risen 60 percent.”
The system, he said, encourages drug companies to set high list prices and to pay large rebates to insurers as a way to keep insurance premiums low. This means that “sick patients are essentially subsidizing healthy patients,” he said.