Several pharmaceutical executives said in a Senate committee hearing Tuesday that if they are to lower list prices on their drugs in a meaningful way, the government will have to step in.
The Senate Finance Committee hearing was the second in series titled “Drug Pricing in America: A Prescription for Change.” Testifying before the committee, led by Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Oregon, were executives from seven of the world’s largest drugmakers.
As executives sat expressionless, Wyden unleashed a harsh critique of their companies and business practices.
He singled out Chicago-based AbbVie for what he called unfair protection of its patents on Humira (adalimumab), a drug for autoimmune disorders that is the world’s top-selling medication, with revenues last year of $19.9 billion. “AbbVie protects the patent exclusivity of Humira like Gollum with his ring,” Wyden said.
Wyden criticized the other companies as well, citing “empty” promises on drug price reductions last year from Pfizer and Merck & Co. and Sanofi’s raising prices on insulin despite the risks to patient safety. “Diabetics self ration and endanger lives, but investors are happy,” Wyden said.
Humira’s price, after rebates, was more than $38,000 per year as of January 2018, according to The New York Times.
Addressing the executives collectively, Wyden said it was not by accident that drug prices have soared in recent years, but that high prices are “always someone else’s fault.” “It’s not the result of a system too complicated for Americans to understand – they’re astronomically high because that’s where manufacturers want them,” he said.
In their opening remarks, the executives were careful to acknowledge the problem of high drug prices leading, even if indirectly, to unaffordable out-of-pocket costs for consumers. They advocated as potential fixes the rebate reforms that the Trump administration has touted, along with value-based pricing and greater access to biosimilars and generics. In particular, the executives were warm to the suggestion that they would lower list prices if the policy on rebate reform was implemented.
Defending companies’ reluctance to simply lower list prices, Merck CEO Kenneth Frazier emphasized that no one company can move to lower them unilaterally, lest it be placed at a financial disadvantage, its drugs suffering lower uptake as it would mean other parties having to accept lower pay. Frazier said the company has lowered prices before, but because the way the system is set up, it created a disadvantage rather than causing an increase in sales based on volume.
In response to the hearing, David Henka, CEO of pharmacy benefit solution company ActiveRADAR, alluded to the challenges of overcoming the problem. “Drug pricing has reached a boiling point in this country,” he wrote in an email. “However, if history is any indication, this hearing will not do anything to move the needle on reducing drug costs any time soon, given the complexities of our current system.”
Other executives testifying included AbbVie CEO Richard Gonzalez; AstraZeneca CEO Pascal Soriot; Bristol-Myers Squibb CEO Giovanni Caforio; Jennifer Taubert, Johnson & Johnson subsidiary Janssen’s worldwide chairman; Pfizer CEO Albert Bourla; and Sanofi CEO Olivier Brandicourt.
As part of the administration’s “blueprint” on drug pricing, the Department of Health and Human Services in February proposed excluding rebates that drugmakers offer to pharmacy benefit managers, Medicare Part D programs and Medicaid managed care organizations from safe-harbor protection under the Anti-Kickback Statute. At the BIO CEO & Investor Conference in New York earlier this month, several industry insiders also expressed support for the rebate reform proposal.
However, like the participants in the BIO CEO panel, the executives assembled in Washington Tuesday opposed the idea under Medicare Part B to reference drug prices to the prices paid in other countries.
The executives at the hearing Tuesday were less eager to answer a question, posed by Sen. Benjamin Cardin, D-Maryland, about why they couldn’t charge prices comparable to other developed nations. Indeed, responding to a question earlier from Wyden, Gonzalez said the company makes a profit from sales of drugs in countries like Germany and France despite the US paying significantly more for most drugs than other countries do.
On the topic of generics, two members of the committee – Sens. Bob Mendendez, D-New Jersey, and Steve Daines, R-Montana – also brought up the issue of branded drugmakers withholding samples of product for companies to make generics, asking the the executives if any of their companies had ever withheld samples. All said they had not. A list published by the Food and Drug Administration of complaints by generic drugmakers about being unable to obtain samples indicates several have had problems obtaining samples of drugs due to their being subject to limited distribution. While it is unclear if they had deliberately withheld samples, AstraZeneca and Pfizer are both companies whose chief executives testified and that appear on the list. Bristol-Myers Squibb is not on the list, but Celgene, which BMS announced it would buy last month for $74 billion, is.
Sen. Debbie Stabenow, D-Michigan, criticized the companies for raising prices on drugs despite benefiting from taxpayer-funded basic research conducted at the National Institutes of Health, bolstered further by tax benefits for their own research and development.
Executives rebutted Wyden’s comment that their companies spend more on marketing and advertising than they do on research and development. Still, they all acknowledged that the combined spending on marketing and advertising with administration does exceed what they spend on R&D. Merck’s Frazier was the exception, saying spending on those things is approximately even.
Menendez, whose state is home to several drugmakers – including Merck, Johnson & Johnson and Celgene – expressed his appreciation for the industry’s contribution to New Jersey. However, he said, even residents there consider drug prices too high, and Americans around the country reject the notion that lowering drug costs would mean reducing innovation. Notwithstanding drugmakers’ contention that it would take government – and likely legislative – action to bring about change, Menendez issued a “friendly warning.” “If you do do not take meaningful action to reduce prices, policymakers will do it for you,” he said.
Photo: bpperry, Getty Images