[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
MAKING HEALTH CARE MORE AFFORDABLE:
LOWERING DRUG PRICES AND
INCREASING TRANSPARENCY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
COMMITTEE ON EDUCATION
AND LABOR
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, SEPTEMBER 26, 2019
__________
Serial No. 116-42
__________
Printed for the use of the Committee on Education and Labor
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: www.govinfo.gov
or
Committee address: https://edlabor.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
37-859 WASHINGTON : 2021
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COMMITTEE ON EDUCATION AND LABOR
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
Susan A. Davis, California Virginia Foxx, North Carolina,
Raul M. Grijalva, Arizona Ranking Member
Joe Courtney, Connecticut David P. Roe, Tennessee
Marcia L. Fudge, Ohio Glenn Thompson, Pennsylvania
Gregorio Kilili Camacho Sablan, Tim Walberg, Michigan
Northern Mariana Islands Brett Guthrie, Kentucky
Frederica S. Wilson, Florida Bradley Byrne, Alabama
Suzanne Bonamici, Oregon Glenn Grothman, Wisconsin
Mark Takano, California Elise M. Stefanik, New York
Alma S. Adams, North Carolina Rick W. Allen, Georgia
Mark DeSaulnier, California Lloyd Smucker, Pennsylvania
Donald Norcross, New Jersey Jim Banks, Indiana
Pramila Jayapal, Washington Mark Walker, North Carolina
Joseph D. Morelle, New York James Comer, Kentucky
Susan Wild, Pennsylvania Ben Cline, Virginia
Josh Harder, California Russ Fulcher, Idaho
Lucy McBath, Georgia Van Taylor, Texas
Kim Schrier, Washington Steve Watkins, Kansas
Lauren Underwood, Illinois Ron Wright, Texas
Jahana Hayes, Connecticut Daniel Meuser, Pennsylvania
Donna E. Shalala, Florida William R. Timmons, IV, South
Andy Levin, Michigan* Carolina
Ilhan Omar, Minnesota Dusty Johnson, South Dakota
David J. Trone, Maryland Fred Keller, Pennsylvania
Haley M. Stevens, Michigan
Susie Lee, Nevada
Lori Trahan, Massachusetts
Joaquin Castro, Texas
* Vice-Chair
Veronique Pluviose, Staff Director
Brandon Renz, Minority Staff Director
------
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
FREDERICA S. WILSON, Florida, Chairwoman
Donald Norcross, New Jersey Tim Walberg, Michigan
Joseph D. Morelle, New York Ranking Member
Susan Wild, Pennsylvania David P. Roe, Tennessee
Lucy McBath, Georgia Rick W. Allen, Georgia
Lauren Underwood, Illinois Jim Banks, Indiana
Haley M. Stevens, Michigan Russ Fulcher, Idaho
Joe Courtney, Connecticut Van Taylor, Texas
Marcia L. Fudge, Ohio Steve C. Watkins, Jr., Kansas
Josh Harder, California Ron Wright, Texas
Donna E. Shalala, Florida Dan Meuser, Pennsylvania
Andy Levin, Michigan Dusty Johnson, South Dakota
Lori Trahan, Massachusetts Fred Keller, Pennsylvania
(VACANT)
C O N T E N T S
----------
Page
Hearing held on September 26, 2019............................... 1
Statement of Members:
Walberg, Hon. Tim, Ranking Member, Subcommittee on Health,
Employment, Labor, and Pensions............................ 4
Prepared statement of.................................... 5
Wilson, Hon. Frederica S., Chairwoman, Subcommittee on
Health, Employment, Labor, and Pensions.................... 1
Prepared statement of.................................... 3
Statement of Witnesses:
Garthwaite, Mr. Craig, Ph.D, Associate Professor of Strategy
Northwestern University Kellogg School of Management....... 62
Prepared statement of.................................... 64
Holt, Mr. Christopher, Director of Health Care Policy
American Action Forum...................................... 51
Prepared statement of.................................... 53
Isasi, Mr. Frederick, J.D., MPH Executive Director Families
USA........................................................ 7
Prepared statement of.................................... 9
Mitchell, Mr. David, Founder, Patients for Affordable Drugs.. 91
Prepared statement of.................................... 93
Socal, Dr. Mariana P., MD, MS, MPP, Ph.D, Assistant
Scientist, Johns Hopkins Bloomberg School of Public Health,
Department of Health Policy and Management................. 28
Prepared statement of.................................... 30
Talente, Ms. Bari, J.D., Executive Vice President, Advocacy,
National Multiple Sclerosis Society........................ 17
Prepared statement of.................................... 19
Additional Submissions:
Levin, Hon. Andy, a Representative in Congress from the State
of Michigan:
Letter dated September 25, 2019 from the International
Union, United Automobile, Aerospace and Agricultural
Implement Workers of America (UAW)..................... 135
Ms. Wilson:
Letter dated September 19, 2019 from AARP................ 137
Prepared statement from the Alliance for Retired
Americans.............................................. 140
Prepared statement from the California Medical
Association............................................ 141
Letter dated September 24, 2019 from the American Medical
Association (AMA)...................................... 142
Letter dated September 26, 2019 from the American
Federation of Teachers (AFT)........................... 143
Press Release: Lower Drug Costs Now Act Promises to Bring
Down Prescription Drug Prices.......................... 145
Press Release: Working People Deserve Affordable
Prescription Medicines................................. 149
Questions submitted for the record by:
Mr. Levin................................................ 153
Schrier, Hon. Kim, a Representative in Congress from the
State of Washington.................................... 155
Stevens, Hon. Haley M., a Representative in Congress from
the State of Michigan
Underwood, Hon. Lauren, a Representative in Congress from
the State of Illinois
Levin, Hon. Andy, a Representative in Congress from the
State of Michigan...................................... 153
Responses to questions submitted for the record by:
Mr. Isasi................................................ 161
Mr. Mitchell............................................. 165
Dr. Socal................................................ 168
Ms. Talente.............................................. 170
MAKING HEALTH CARE MORE AFFORDABLE: LOWERING DRUG PRICES
AND INCREASING TRANSPARENCY
----------
Thursday, September 26, 2019
House of Representatives,
Subcommittee on Health, Education, Labor, and Pensions
Committee on Education and Labor
Washington, D.C.
----------
The subcommittee met, pursuant to call, at 2:01 p.m., in
Room 2175, Rayburn House Office Building. Hon. Frederica S.
Wilson [chairwoman of the subcommittee] presiding.
Present: Representatives Wilson, Norcross, Morelle, Wild,
McBath, Underwood, Stevens, Courtney, Fudge, Harder, Shalala,
Levin, Trahan, Scott, Walberg, Roe, Allen, Banks, Taylor,
Watkins, Wright, Meuser, Johnson, and Keller.
Also Present: Representatives, Davis and Foxx.
Staff Present: Ilana Brunner, General Counsel; Emma Eatman,
Press Assistant; Daniel Foster, Health and Labor Counsel;
Carrie Hughes, Director of Health and Human Services; Ariel
Jona, Staff Assistant; Stephanie Lalle, Deputy Communications
Director; Jaria Martin, Clerk/Assistant to the Staff Director;
Max Moore, Office Aide; Merrick Nelson, Digital Manager;
Veronique Pluviose, Staff Director; Banyon Vassar, Deputy
Director of Information Technology; Joshua Weisz,
Communications Director; Cyrus Artz, Minority Parliamentarian;
Courtney Butcher, Minority Director of Member Services and
Coalitions; Cate Dillon, Minority Staff Assistant; Rob Green,
Minority Director of Workforce Policy; Jeanne Kuehl, Minority
Legislative Assistant; John Martin, Minority Workforce Policy
Counsel; Hannah Matesic, Minority Director of Operations;
Alexis Murray, Minority Professional Staff Member.
Chairwoman WILSON. I note that a quorum is present. The
subcommittee on Health Employment Labor and Pensions will now
come to order. Welcome to everyone.
I note that the subcommittee--for the subcommittee: Mr.
Grijalva, Ms. Davis of California, Mr. Castro of Texas, and Ms.
Jayapal of Washington and Ms. Schrier of Washington are
permitted to participate in today's hearing with the
understanding that their questions will come only after all
members of the subcommittee on Health, Employment, Labor, and
Pensions, on both sides of the aisle who are present and have
had an opportunity to question the witnesses.
The subcommittee is meeting today in a hearing to receive
testimony on making health care more affordable, lowering drug
prices and increasing transparency.
Pursuant to rule 7(c), opening statements are limited to
the Chair and the Ranking Member. This allows us to hear from
our witnesses sooner and provides all members with adequate
time to ask questions.
I recognize myself now for the purpose of making an opening
statement.
Today, we are gathered to discuss policy solutions to
reduce prescription drug prices for consumers, businesses and
taxpayers. Prescription drug prices are out of control. More
than $450 billion or about $1,100 per person is spent across
the healthcare system every single year.
Pharmaceutical companies are charging American prices that
are three, four, or in some cases, dozens of times higher than
what they charge for the exact same drugs they sell in other
countries.
As a result, Americans across the nation are struggling to
afford the medication they need to maintain their health. In
fact, in the past three years, in ten adults decided--in the
past year, three in ten adults decided to forego taking their
prescribed medications because of the cost.
We must act on behalf of people like Azima, a social worker
in my home state of Florida who struggles to make monthly co-
payments for her prescription drugs which cost more than her
rent, electricity, cell phone bill and car payment combined,
and Jesimya David Scherer-Radcliff who tragically died from
rationing the lifesaving insulin he needed to treat his
diabetes.
As our witnesses will share, exorbitant drug prices place a
significant burden on workers and their families. Employer
health plans spend nearly $84 billion annually on drugs alone.
As drug companies continue to raise prices with no end in
sight, seniors, taxpayers, workers and our economy are all
footing the bill. That is why we must take bold action by
passing the Lowering Drug Cost Now Act, an ambitious plan to
lower drug prices and increase transparency in five key ways.
First, the bill ends the ban on Medicare negotiating directly
with drug companies to get a fair deal for American consumers.
Second, the bill makes the lower drug prices negotiated by
Medicare available to all Americans, which will cut costs for
both employers that provide their workers healthcare and
workers covered by employer provided healthcare. Third, the
legislation caps negotiated drug prices at prices charged in
similar countries so that drug companies stop ripping off
Americans while charging other countries less for the same
drugs. Fourth, the bill creates a new out-of-pocket limit, on
drugs for Medicare beneficiaries and ends unfair annual price
hikes by prescription drug companies for 8,000 drugs.
Finally, the Lowering Drug Cost Now Act reinvests the
savings from negotiated drug prices in research and innovation
to make new medical breakthroughs.
My Republican colleagues have responded to this proposal
with the same tired rhetoric, labeling it a socialist takeover
of our healthcare system but the central provisions in this
proposal have been endorsed by President Trump himself.
We even put together a few video clips of the President
promising to negotiate prices and align the prices Americans
pay with what consumers in other countries pay. Play the video.
[Video plays]
Chairwoman WILSON. On the day the Lowering Drug Cost Now
Act was introduced, the President tweeted: ``It is great to see
Speaker Pelosi's bill today.'' My Republican colleagues claim
cutting the cost of drugs will stifle research and innovation,
but nine out of ten big pharmaceutical companies spend more on
marketing, sales, and overhead than on research.
Each of us has a responsibility to serve our constituents
and address the unsustainable cost of prescription drugs.
Today's hearing is an important step towards that goal, and
I want to thank each of our witnesses for being with us to
discuss this comprehensive solution to one of our nation's most
pressing crises.
I now recognize the distinguished Ranking Member for the
purpose of making an opening statement. Mr. Walberg.
[The statement of Ms. Wilson follows:]
Prepared Statement of Hon. Frederica S. Wilson, Chairwoman,
Subcommittee on Health, Employment, Labor, and Pensions
Today we are gathered to discuss policy solutions to reduce
prescription drug prices for consumers, businesses, and taxpayers.
Prescription drug prices are out of control. More than $450 billion
across the health care system or about $1,100 per person is spent every
year.
Pharmaceutical companies are charging Americans prices that are
three, four, or in some cases dozens of times higher than what they
charge for the exact same drugs they sell in other countries.
As a result, Americans across the nation are struggling to afford
the medication they need to maintain their health. In fact, three in
ten adults decided to forgo taking their prescribed medications in the
past year because of the cost.
We must act on behalf of people like Azima, a social worker in my
home state of Florida who struggles to make monthly copayments for her
prescription drugs, which cost more than her rent, electricity, cell
phone bill, and car payment combined.
And Jesimya David Scherer-Radcliff, who tragically died from
rationing the life-saving insulin he needed to treat his diabetes.
As our witnesses will share, exorbitant drug prices place a
significant burden on workers and their families. Employer health plans
spend nearly $84 billion annually on drugs, alone.
As drug companies continue to raise prices with no end in sight,
seniors, taxpayers, workers, and our economy are all footing the bill.
That is why we must take bold action by passing the Lower Drug
Costs Now Act, an ambitious plan to lower drug prices and increase
transparency in five keyways.
First, the bill ends the ban on Medicare negotiating directly with
drug companies to get a fair deal for American consumers.
Second, the bill makes the lower drug prices negotiated by Medicare
available to all Americans, which will cut costs for both employers
that provide their workers health care and workers covered by employer-
provided health care.
Third, the legislation caps negotiated drug prices with prices
charged in similar countries so that drug companies stop ripping off
Americans while charging other countries less for the same drugs.
Fourth, the bill creates a new out-of-pocket limit on drugs costs
for Medicare beneficiaries and ends unfair annual prices hikes by
prescription drug companies for 8,000 drugs.
Finally, the Lower Drug Costs Now Act reinvests the savings from
negotiated drug prices in research and innovation to find new medical
breakthroughs.
My Republican colleagues have responded to this proposal with the
same tired rhetoric, labeling it a socialist takeover of our health
care system. But the central provisions in this proposal have been
endorsed by President Trump himself.
We even put together a few video clips of the President promising
to negotiate prices and align the prices Americans pay to what
consumers in other countries pay. On the day Lower Drug Costs Now Act
was introduced, the president tweeted, `` . . . it's great to see
Speaker Pelosi's bill today.''
My Republican colleagues claim cutting the cost of drugs will
stifle research and innovation, but nine out of ten big pharmaceutical
companies spend more on marketing, sales, and overhead than on
research.
Each of us has a responsibility to serve our constituents and
address the unsustainable cost of prescription drugs. Today's hearing
is an important step toward that goal.
I want to thank each of our witnesses for being with us to discuss
this comprehensive solution to one of our nation's most pressing
crises. I now recognize Ranking Member Walberg, for an opening
statement.
______
Mr. WALBERG. I thank you, Chairwoman and I appreciate the
opportunity today to have a hearing on this bill. Also to make
it very clear that the President hasn't yet called upon us to
support it and his statements were that he was glad to see a
bill talking about doing things we all want to do. He did not
say that he supports this bill as written and I would think
that he, as he said, in one of the videos up there, together we
will stop it. Together--there has been no togetherness in
putting this bill together, even from my Democrat colleagues in
working with the speaker who put it together. I just wanted to
make that notation as well. There is no question that
healthcare costs are at the top of the minds for many
Americans--most Americans and the cost of prescription drugs
are a concern for workers and families.
According to a recent report on medicine use and spending
in the U.S., patients paid 61 billion dollars in out of pocket
drug costs in 2018. So it is not surprising that a recent poll
found 1 in 4 Americans worry about affording their medication.
Sadly, individuals and families are being let down by Democrat
leadership. Instead of working on this serious issue in a
bipartisan manner, Speaker Pelosi's radical, partisan bill was
drafted in secret, I think for a purpose, without member input
or the regular committee process.
The public leader McCarthy accurately described H.R. 3 as a
``Step towards nationalizing the drug industry and opening the
door to a one size fits all government-controlled rationing of
prescription drugs.''
This bill is a political ploy that will not be considered
in the Senate or become law. When asked about the bill, Senate
Majority Leader Mitch McConnell said, and I quote: ``Socialist
price controls will do a lot of left-wing damage to the
healthcare system and of course we are not going to be calling
up a bill like that.''
We shouldn't be surprised that once again, Democrat
leadership is pushing far left politics over policy. From
taking over all student lending to mandating wage hikes,
Democrats are pushing an agenda that strips hardworking
taxpayers of their rights. H.R. 3 is just the latest in this
string of aggressive socialist policies introduced by
Congressional Democrat leadership. Over half of the Democrat
Conference supports Medicare for all. A government-run single
payer healthcare system that would eliminate private health
insurance, including employer sponsored coverage, something
that is admired by most everyone who has that opportunity and
ought to be expanded. This is a jurisdiction of our committee.
Congressional efforts to bring down drug prices for American
people have been and should continue to be a collaborative and
bipartisan effort.
In 2016, a Republican Congress passed the 21st Century
Cures Act. Bipartisan legislation, I might add, that was signed
into law by President Obama, which accelerated discovery and
development of new cures and treatments. Additionally, we
reauthorized a generic drug user fee program and last year, the
FDA approved a record number of generic drugs, driving up
competition and giving consumers more affordable choices. And
this year, and I know this for a fact as I sit on the House
Energy and Commerce Committee. This year's House and Senate
Committees have worked together on bipartisan bills to address
the cost and transparency of prescription drugs.
Two of these bills, bipartisan bills have become law and
others are awaiting further action in both chambers. There is a
common thread there in bipartisan efforts.
Governments don't negotiate, they dictate. The radical
approach taken by H.R. 3 includes troubling and unprecedented
government interference in private market negotiations which
will eliminate choice and competition and jeopardize innovation
investment and access to future cures. Countries that have
adopted drug pricing systems like those included in H.R. 3 face
decreased access to innovative new medicines, increased wait
times for treatment and supply shortage for in demand drugs.
H.R. 3 will negatively impact investment and research and
development of future treatments putting breakthrough cures for
diseases like Alzheimer's, cancer, sickle cell anemia, and
others at risk.
Instead of holding a hearing on this socialistic agenda
drug pricing scheme that will hurt the development of money
saving treatments and more importantly, people's lives. The
committee's time would be better spent finding bipartisan
solutions to our Nation's problems.
Republicans stand ready to work with Democrats to push for
legislation that promotes competition, lowers out of pocket
cost for consumers, and establishes transparency and
accountability in drug pricing and might I add, that has a
chance for a two-chamber solution that would get to the
President's desk. With that, I yield back.
[The statement of Mr. Walberg follows:]
Prepared Statement of Hon. Tim Walberg, Ranking Member, Subcommittee on
Health, Employment, Labor, and Pensions
``There's no question that health care costs are at the top of the
minds for many Americans, and the cost of prescription drugs are a
concern for workers and families. According to a recent report on
medicine use and spending in the U.S., patients paid $61 billion in
out-of-pocket drug costs in 2018. So, it's not surprising that a recent
poll found one in four Americans worry about affording their
medication.
Sadly, individuals and families are being let down by Democrats.
Instead of working on this serious issue in a bipartisan manner,
Speaker Pelosi's radical, partisan bill was drafted in secret, without
Member input or the regular Committee process. Republican Leader
McCarthy accurately described H.R. 3 as `a step toward nationalizing
the drug industry and opening the door to a one-size- fits-all,
government-controlled rationing of prescription drugs.'
This bill is a political ploy that will not be considered in the
Senate or become law. When asked about the bill, Senate Majority Leader
Mitch McConnell said, `Socialist price controls will do a lot of left-
wing damage to the healthcare system. And of course, we're not going to
be calling up a bill like that.'
We shouldn't be surprised that once again Democrats are pushing
far-left politics over policy. From taking over all student lending to
mandating wage hikes, Democrats are pushing an agenda that strips
hardworking taxpayers of their rights. H.R. 3 is just the latest in
this string of aggressive socialist policies introduced by
Congressional Democrats. Over half of the Democrat Conference supports
Medicare-for-All, a government-run, single-payer health care system
that would eliminate private insurance, including employer-sponsored
coverage, which is in the jurisdiction of this Committee.
Congressional efforts to bring down drug prices for the American
people have been, and should continue to be, a collaborative and
bipartisan effort.
In 2016, a Republican Congress passed the 21st Century Cures Act,
bipartisan legislation signed into law by President Obama which
accelerated discovery and development of new cures and treatments.
Additionally, we reauthorized the generic drug user fee program - and
last year the FDA approved a record number of generic drugs, driving up
competition and giving consumers more affordable choices.
And this year, House and Senate Committees have worked together on
bipartisan bills to address the cost and transparency of prescription
drugs. Two of these bills have become law, and others are awaiting
further action in both chambers.
Governments don't negotiate, they dictate. The radical approach
taken by H.R. 3 includes troubling and unprecedented government
interference in private, market negotiations, which will eliminate
choice and competition, and jeopardize innovation, investment, and
access to future cures.
Countries that have adopted drug-pricing systems like those
included in H.R. 3 face decreased access to innovative new medicines,
increased wait times for treatment, and supply shortages for in-demand
drugs.
H.R. 3 will negatively impact investment in research and
development of future treatments, putting breakthrough cures for
diseases like Alzheimer's, cancer, sickle cell disease, and others at
risk.
Instead of holding a hearing on this socialist agenda drug-pricing
scheme that will hurt the development of money-saving treatments and--
more importantly----people's lives, the Committee's time would be
better spent finding bipartisan solutions to our nation's problems.
Republicans stand ready to work with Democrats to push for legislation
that promotes competition, lowers out-of- pocket costs for consumers,
and establishes transparency and accountability in drug pricing.''
______
Chairwoman WILSON. Without objection all other members who
wish to insert written statements into the record may do so by
submitting them electronically to the committee clerk in
Microsoft Word format by 5:00 pm on Wednesday, October 9th,
2019. I will now introduce our witnesses: Frederick Isasi is
Executive Director of Families USA. Welcome. Bari Talente is
Executive Vice President of the National MS Society. Welcome.
Dr. Mariana Socal is Assistant Scientist at Johns Hopkins
University, Bloomberg School of Public Health. Welcome. Dr.
Craig Garthwaite is Associate Professor of Strategy at
Northwestern University's Kellogg School of Management.
Welcome. Christopher Holt is Director of Health Care Policy at
the American Action Forum. Welcome, Mr. Holt. David Mitchell is
Founder and President of Patients for Affordable Drugs.
Welcome.
We appreciate all of you coming today and look forward to
your testimony. Let me remind you that the witnesses--let me
remind the witnesses that we have read your written statements
and they will appear in full in the hearing record, pursuant to
Committee Rule 17 and committee practice, each of you is asked
to limit your oral presentation to a five minute summary of
your written statement.
Let me remind the witnesses that pursuant to Title 18 of
the U.S. Code, section 1001, it is illegal to knowingly and
willfully falsify any statement, representation, writing,
document or material fact presented to Congress or otherwise
conceal or cover up a material fact.
Before you begin your testimony, please remember to press
the button on the microphone in front of you so that it will
turn on and the members can hear you. As you begin to speak,
the light in front of you will turn green. After four minutes,
the light will turn yellow to signal that you have one minute
remaining. When the light turns red, your five minutes have
expired, and we ask that you please wrap it up or I will have
to wrap it up for you.
We will let the entire panel make their presentations
before we move to member questions. When answering a question,
please remember to once again turn on your microphone. I will
first recognize Mr. Isasi.
TESTIMONY OF FREDERICK ISASI, J.D., EXECUTIVE DIRECTOR FAMILIES
USA
Mr. ISASI. Chairwoman Wilson, Congressman Walberg, Members
of the subcommittee, thank you for the opportunity to testify
today. I am Frederick Isasi, the Executive Director of Families
USA, a non-partisan, non-profit that for nearly 40 years has
served as one of the leading national voices for the health
care movement in Washington D.C. and on the state level. Thank
you very much for holding this hearing on lowering drug costs.
We are meeting at an extraordinary time for our Nation's
family.
Do you realize that about 1/3rd of Americans report not
taking their prescription drugs because they are too expensive?
Of these, more than 2/3rds are engaging in the terrible gamble
of either skipping doses or cutting their pills in half.
Think of the life these Americans are living. In last
fall's Congressional elections, the American people sent a
strong signal to all of you. An astounding 82 percent of
Republicans and 90 percent of Democrats said taking action to
lower the price of prescription drugs should be a top priority
for this Congress.
Despite all the conflicts, legal and economic discussions
and the alarmist and false arguments of the drug industry, at
its core, the problem of out of control drug costs is very
simple. Congress created a system that provides a government-
granted monopoly to drug makers, and many within the industry
are abusing Federal law.
Let me explain what I mean. Over time, so much of the
industry's focus has shifted from creating innovative drugs
that can save lives to doubling down on high-powered lawyers to
help find loopholes, sue competitors and generally abuse the
spirit in which Federal prescription drug laws were created. It
is time for Congress to reexamine and rewrite patent
exclusivity laws to stamp out these abuses and actually
incentivize innovation.
In the absence of this wholesale reform, we at Families USA
are strongly supportive of the committee acting to mark up and
move forward H.R. 3 the Lowering Drug Cost Now Act. It
represents bold Congressional action that would require the
government to defend our families and negotiate directly with
drug manufacturers to curb abusive practices and price
increases. These are policies supported by more than 2/3rds of
Americans. The bill uses savings and reduced drug costs to
invest in research and development for new cures as well as
capping out of pockets costs for Medicare beneficiaries. It
also could support much needed improvements in Medicare, such
as dental, hearing and vision benefits and support for low-
income Medicare beneficiaries.
We also recommended several critical improvements to
strengthen the bill, such as expanding the selection of drugs
that are subject to negotiations, expanding mandatory price
hike protections to private payers and allowing uninsured
patients to get negotiated prices. So what will the fate of
this legislation be? You are all up against one of the most
profitable industries in the world with revenues in access of
$1 trillion and half of its profits are generated in the U.S.
and Canada alone.
And industry spending, at least $133 million to lobby
Congress, all of you, with over 800 lobbyists in D.C. Members
of the committee, I ask you, does our democracy work? Will this
committee, will Congress, will the President act to support our
Nation's families or will the drug companies win yet again?
Let me tell you about one person, perhaps, who can steady
your resolve to get this legislation enacted. Her name is
Katherine from Wheeling, Illinois. Her story tells her own
struggle but also the struggle of millions of other Americans.
Katherine worked very hard. She had a career as a secretary and
then in her late 50s, she developed a cough. It wasn't going
away. Within three months of going to the doctor for a cough,
however, she was told she had a rare lung disorder and that
without a lung transplant, she wouldn't live to see the end of
the year and then her condition worsened.
Her doctors prepared her to die and Katherine prepared
herself to die, and then she got the call. A new lung had been
found and she was going to live. This all happened about five
years ago. This incredible gift and a new chance at life, but
unfortunately her experience has turned into something else.
Katherine takes 36 pills every day, including anti-
rejection and pain medications. Each year, the cost of her
medication overwhelms her. Katherine has to ration her
medications to make them last. She spends an astounding $1,000
each month on her medications, despite being a Medicare
beneficiary, which is exactly half of her monthly income. Think
about what this means.
Katherine, after living through the experience of almost
dying, receiving a lung transplant, fighting for her life is
left to spend half of her income to pay for medications. You
won't be surprised to know that Katherine sold her home, moved
in with her parents, her mom is 86 and her dad died this year
at 89.
She lives an extremely frugal life but as her drug costs
escalate year over year, she moves closer and closer to
financial ruin and deep poverty. At the end of each year, she
finds herself thousands of dollars short. She lives each day
with the anxiety of wondering how will she find the money to
pay for her drugs.
Despite being one of the wealthiest nations in the world,
despite spending two or three times more than the rest of the
world, this is the life we give to Americans. Thank you for
holding this hearing, thank you for considering this
legislation.
[The statement of Mr. Isasi follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairwoman WILSON. And thank you. We will now recognize Ms.
Talente.
TESTIMONY OF BARI TALENTE, J.D., EXECUTIVE VICE PRESIDENT,
ADVOCACY, NATIONAL MULTIPLE SCLEROSIS SOCIETY
Ms. TALENTE. Thank you. Good afternoon, Chairwoman Wilson
and Ranking Member Walberg. Thank you for the opportunity to
participate in this hearing on lowering drug prices and
increasing transparency. My name is Bari Talente and I am the
Executive Vice President of advocacy with the National Multiple
Sclerosis Society. The Society works to ensure that the nearly
1 million people with MS in the United States have what they
need to live their best lives.
People with MS are typically diagnosed between the ages of
20 and 50, making MS a disease that hits people during their
prime employment years. In fact, nearly 60 percent of people
living with MS have employer-sponsored health insurance. We
hear from people with MS who are reluctant to disclose their
diagnosis publicly because they feel their job may be in
jeopardy or they don't want to be that person with their
coworkers, the one who is responsible for driving up health
insurance costs.
There are now more than 15 FDA-approved disease modifying
treatments, referred to as DMTs, that help manage disease
progression for relapsing forms of MS. No single DMT is best
for all people living with MS so these treatments are not
interchangeable.
The first--unfortunately, the price of these DMTs has
dramatically increased since the first treatment was approved
in 1993. That DMT came to the market at approximately $11,500
and now has a list price of more than $98,000. Imagine how this
has felt for someone who has been on this treatment since it
first came out.
In 2013, the annual median price for the MS DMTs was less
than $60,000 dollars. Today, in 2019, that median price for
brand MS DMTs is over $88,000 dollars.
We have seen escalating prices for products already on the
market, some for a considerable amount of time.
In fact, a recent study by Health Affairs shows that price
increases of brand name drugs are largely driven by year over
year price increases of drugs already on the market and not by
new products.
We have recently asked people with MS about the impact of
the cost of these DMTs on them. 40 percent of those who took
our survey shared that they have altered their use of their DMT
because of costs. They are stopping treatment, skipping or
delaying filling a prescription or not taking the medication as
prescribed to try and make it last longer.
Due to the price, people with MS often face prior
authorization and step therapy in their health insurance, which
can delay care. Each time a person with MS experiences a gap in
care or fails on a medication, they are at risk for a relapse,
disease progression, and worsening of symptoms from which they
may not fully recover.
Here are just two of the direct experiences people with MS
have shared with us. Jenna from Massachusetts is worried about
affording her DMT. Her husband's insurance currently covers it,
but not all insurances will. Jenna says, ``we are terrified for
him to change jobs because we cannot afford my medication if it
is not covered. He has had to turn down a better paying job
with better hours in order to keep our insurance.''
Over the last decade, Keysha from Pennsylvania has tried
many DMTs. She has commercial insurance through her employer
and receives financial assistance through a manufacturer
sponsored program, but she notes ``If I am on super-expensive
meds, I am hurting my company's bottom line in the end. I would
choose a different medicine if there was one that was
significantly lower in price.''
Medications cannot change lives if people cannot access
them. We must look at solutions across the entire prescription
drug supply chain. Additional information about legislation we
support is in our written testimony. We do support the goals
and many provisions of the Lowering Drug Cost Now Act of 2019
and applaud this effort to lower drug costs. We appreciate this
legislation does not establish a formulary and includes an out-
of-pocket cap in Medicare part D.
We believe the bill could be strengthened by beginning the
out-of-pocket cap earlier and expanding competition to be more
than one single generic. I would like to conclude with a
message from Keysha to all of you and your colleagues: ``Do
something to help with the cost. It is not a selfish thing to
want to be well. To want to contribute. All people deserve a
chance to be contributing members of society.'' Thank you, and
I look forward to your questions.
[The statement of Ms. Talente follows:]
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Chairwoman WILSON. Thank you, Ms. Talente. We will now
recognize Dr. Socal.
TESTIMONY OF MARIANA P. SOCAL, MD, MS, MPP, PH.D., ASSISTANT
SCIENTIST, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC HEALTH,
DEPARTMENT OF HEALTH POLICY AND MANAGEMENT
Dr. SOCAL. Good afternoon. Thank you, Chairwoman Wilson,
Ranking Member Walberg and Members of the Committee. It is a
great honor and It is a great pleasure to be talking to you
today.
For over a year, I have been researching America's largest
employers and trying to help them improve the drug benefit that
they offer to their workers. In one of these initiatives and
partnering with the Pacific Business Group on Health, a
coalition of more than 50 large public and private employers to
identify and remove wasteful spending from their drug
formularies.
I am also leading a research project in which I partnered
with ERIC, the ERISA committee. This committee represents
nationwide self-insured companies with more than 10,000
employees. In this project, I am examining the prices that some
of the largest U.S. corporations are paying for their drugs.
The first thing I learned in my research is that employers
want to provide their workers with the best benefits that they
can. Companies want to attract and retain the best workers in
offering good benefits is key for that.
The second thing that I have learned is that companies are
spending a lot of money hiring specialists to help them manage
their drug benefit, but they are not always getting the best
deals that they can. Typically, employers hire pharmaceutical
benefit managers, a PBM, to negotiate drug prices on their
behalf. The PBM also designs the drug formulary that goes to
the employer's plan.
So here is how the negotiation works. The PBM offers to
cover a drug on the formulary in exchange for lower prices.
When the PBM has a choice and can pick between a few drugs,
which one will go into the formulary, then the market can work.
The problem occurs when a drug has no competition. If the PBM
cannot say no to a certain drug and then choose a different
one, then the PBM cannot negotiate a lower price, and there is
no incentive for manufacturers to lower the price.
As a result, for certain drugs without competition, the
U.S. pays three to four times more higher prices than in other
countries.
For these cases, a different type of negotiation is needed.
In the absence of product to product competition in the U.S.
market, the price comparison between the U.S. and other
countries can offer an alternative pathway for this
negotiation. My colleagues and I examined the 79 top spending
drugs in the Medicare part D program, and we found that if the
U.S. paid the average price of the countries that we studied,
Medicare part D alone could have saved $73 billion in 2018.
If employers adopted the same approach, the savings would
be similar. H.R. 3's proposal of having the secretary negotiate
on behalf of all Medicare beneficiaries and those covered by
private insurance is likely to succeed in lowering drug prices
because of two main reasons: first, because it includes
everyone in the negotiation. The more people included in the
negotiation, the greater the negotiating power and the greater
ability to lower prices.
Second, because it incorporates a transparent benchmark
into the negotiation, the prices paid in other countries. U.S.
companies, especially the very large employers, they like to
think that they are getting the best possible deals in drug
pricing, but we found that sometimes, the employers don't even
have the information that they need to understand if they are
getting the good deal or not.
It is very hard, for example, for an employer to know how
much they are paying for a drug. The net price, after the
rebates and discounts can be only known sometimes weeks or
months after the drug bill was paid and there is very little
transparency in this process.
The negotiation proposed in H.R. 3 would benefit employers
by providing them with a transparent maximum price. It will
also allow employers to opt out of the price so that they can
choose what's the best deal for them. For patients, lower and
transparent prices will help reduce cost-sharing. Patient's
cost-sharing is typically calculated over a drug's list price.
Having a transparent and lower drug price available to all
patients will allow them to benefit directly from the
negotiations. This is also very important for the 30 percent of
American workers who are currently enrolled in high-deductible
health plans. These patients pay the drug's full cost. Today,
over half of all Americans obtain health coverage through their
employer, most of them through self-insured employers which the
employer will pay the drug's bill.
In response to rising drug costs, many companies are
pushing more of the cost of prescription drugs onto the
employees, either in the form of high deductibles or by
charging a percentage cost-share, especially for high-cost
drugs. This is one of the reasons why many Americans are not
able to afford the drugs they need, even if they have health
insurance.
Thank you so much for your time, and I look forward to your
questions.
[The statement of Dr. Socal follows:]
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Chairwoman WILSON. Thank you, Dr. Socal. And we will now
recognize Mr. Holt.
TESTIMONY OF CHRISTOPHER HOLT, DIRECTOR OF HEALTH CARE POLICY
AMERICAN ACTION FORUM
Mr. HOLT. Thank you, Chairwoman Wilson, thank you Ranking
Member Walberg, Members of the Committee. I very much
appreciate the opportunity to speak with you about this issue
of complex drug prices. The legislation before you, H.R. 3 aims
to bring down drug costs across the U.S. Healthcare system
without harming innovation or creating barriers to access for
patients. These goals are laudable. I do not believe however,
that the policies in H.R. 3 can achieve the lower drug costs
sought without negatively impacting the development of future
cures, as well as patient access to existing medications. In
the face of rising demand and increasing prices for drugs, the
way to reduce prices without harming innovation and access is
to increase supply and heighten competition.
Unfortunately, the policies proposed in H.R. 3 are likely
to have the opposite effect. Title I of H.R. 3 proposes to
create a process whereby the Secretary of Health and Human
Services will negotiate directly with drug manufacturers over
the price of specific pharmaceuticals and then make that price
available to all third-party payers in the United States.
This in and of itself is an extraordinary market
intervention by the Federal government. The proposal of direct
government negotiation is predicated on the notion that the
prices that the Federal government currently pays for
medications are completely at the whim of manufacturers and
that market forces or negotiation have no impact. In reality,
however, prices for the drugs and the Medicare part D program
right now are already determined through a vigorous negotiation
process that involves plans, sponsors, PBMs and manufacturers.
In the Medicare part B program, which covers physician
administered drugs, we do not have the same benefit from the
competitive nature and structure of part D but even here,
market forces do play a role.
While the formula for determining what Medicare pays for
part B drugs can and I think should be reformed, it does
include most if not all privately negotiated rebates and price
concessions in the group market. In other words, private
competition and negotiation are driving down the government's
price in part B as well.
Still, there are increasing calls for the Secretary to
negotiate drug prices directly. The process that H.R. 3 would
establish, however, cannot accurately be described as a
negotiation. Instead, this bill would import foreign
governments price controls through an average international
market price based on the average volume weighted sales of the
price of the drug in six foreign markets. This price, which
U.S. policy makers would have no role in determining beyond
selecting the countries to be referenced would serve as a
target price in the negotiations and would be used to set both
the maximum price that could be charged and a de facto floor as
well.
The negotiation would be limited to a range of not more
than 120 percent of the average international market price and
in effect, not less than 99 percent as the Secretary would be
required to accept any offer below the average international
market price.
Within that limited range, the manufacturer would have no
leverage in the negotiation process. The secretary would have
carte blanche to require any proprietary data, details of the
company's business practices with civil monetary penalties for
non-compliance.
Most important, the manufacturer would be required to reach
an agreement and if they do not, would face a tax on the gross
receipts of their drug of up to 95 percent.
There is no requirement on the secretary to reach an
agreement. Offering the choice between a lower price or an
excessive tax cannot be described as a negotiation. Rather, it
is government dictated price controls; but because of the
centrality of the average international market price to the
process, the resulting price will not consider the full
therapeutic needs of U.S. patients or their views on value.
Policymakers in the U.S. will ultimately have little
control over the prices of drugs or the determination of value.
The bill includes these heavy-handed provisions because the
government has very limited leverage in a true negotiation. As
detailed in my written testimony, the Congressional budget
office has consistently found that the Secretary could not
obtain lower prices in part D through negotiation without
eliminating planned choice for beneficiaries or impeding their
access. The process outlined appears likely to eventually
encompass nearly all branded drugs and biologics sold in the
U.S. and will certainly restrict the flow of capital to
pharmaceutical companies leading to a decreased capacity for
future research and development.
I appreciate this opportunity and I look forward to your
questions.
[The statement of Mr. Holt follows:]
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WILSON. Thank you. We will now recognize Dr. Garthwaite.
TESTIMONY OF CRAIG GARTHWAITE, ASSOCIATE PROFESSOR OF STRATEGY
NORTHWESTERN UNIVERSITY KELLOGG SCHOOL OF MANAGEMENT
Mr. GARTHWAITE. Thank you, Chairwoman Wilson and Ranking
Member Walberg and Members of the Committee for inviting me to
testify today about H.R. 3, the Lower Drug Cost Now Act. While
this bill has a number of features, in my testimony today, I
will primarily address the proposed pharmaceutical price
controls in the legislation. While supporters of legislation
hope to characterize it as introducing Medicare drug price
negotiations, that is not accurate.
Instead, the bill gives the HHS Secretary unprecedented
power to set market prices for the entire healthcare economy.
Under the bill, the prices for the most expensive drugs that
lack competition would be limited to 1.2 times the price in a
set of six developed markets.
Firms that don't comply will be fined up to 95 percent of
the drug's revenue. Economics is a simple term for this
proposal. It is a price control. This is particularly true in
the case where the mandated price will then be passed along to
the commercial market, which already has a robust system of
negotiations.
While I understand that calling these price controls a
negotiation might be more politically palatable, that doesn't
make it accurate. Now those in favor of price controls argue
they're necessary because the higher prices decrease access to
potentially lifesaving products. They often characterize those
high prices as serving no other purpose than satisfying the
greed and unending pharmaceutical profits.
The reality is far more complicated than this simple
caricature. High prices are part of a necessary tradeoff to
provide the incentives for firms to invest the capital required
to develop lifesaving drugs in the first place. At its heart,
drug development involves a difficult tradeoff of reduced
access today for increased innovation tomorrow.
I don't say this lightly. I understand that high prices can
decrease access to potentially lifesaving medications but
frankly, there are no easy answers here.
The economic evidence is clear, if we institute price
controls of the nature discussed in this bill, we will see
fewer investments in the development of new drugs for
conditions that don't currently have treatments.
Such decreases in innovation create their own access
problems. While It is clear that patients today paying high
prices can suffer decreased access for medication, and this is
not an optimal outcome, those patients have a significant
benefit that shouldn't be overlooked. They, through their PBMs
have the luxury of negotiating the price of their drug.
If you are sick with a condition today for which there are
no treatments, a drug is not available at any price. This is
the access problem that is so often missed in these
discussions. Those who claim innovation won't be affected by
price controls, simply misunderstand or deliberately ignore the
economic evidence. In a modern market, a large share of biotech
products result from venture capital firms, making substantial
and risky investments to commercialize basic science into
products that improve people's lives. The incentive for those
investments come from the high prices and profits earned by
today's successful firms. The venture capital firms at the
heart of this process are not beholden to the pharmaceutical
industry. They can invest in any sector of the economy. If you
lower returns, capital will follow out of this sector into
other more profitable sector, therefore it doesn't matter how
much pharmaceutical firms spend on marketing, and it doesn't
matter if someone believes a pharmaceutical company earns too
much money and therefore can withstand the lost profits.
While people like to mention these facts, the claim that
innovation won't be affected, the basic economics and a number
of empirical studies demonstrate that firms invest in products
based on the expected return. The question then becomes how
much do we value the innovation that would disappear because of
these price controls?
After all, an optimal innovation policy is one where the
benefits of innovation outweigh the costs of reduced access
today. It is possible we are currently getting this balance
wrong. It might be that we provided too strong of an incentive
in favor of new products at the cost of people not being able
to access products today.
We must remember that everything about the existing
parameters of our tradeoff is ultimately a policy decision.
There is nothing magical about a 20-year patent life. The very
fact that it is constant, across both products and markets
suggests that It is not the result of some finely-tuned
calibration that weighs these costs and benefits. That said,
while there is nothing magical about this parameter in our
current policy, it is clear that moving away from this existing
policy will decrease investments and innovation and the
important thing to realize is that might be okay. The extra
innovation we are getting may not be worth it, but that is the
debate that Congress should be having. Instead, legislation
such as H.R. 3 and the Trump administration's international
pricing index effectively outsource this debate to foreign
governments. This is not a profile encouraged by our
policymakers. Why should access to new innovation for Americans
be determined by policy decisions in London, Paris and Berlin?
Simply because It is too hard for us to have the conversation
about what products we want to say no to today in order to have
a true price negotiation? In contrast to other developed
economies who may have lower prices for the same drug, the
United States relies far more heavily on markets because we are
a large and diverse economy and market forces are better for
allocating goods and services than central planning but we must
recognize that markets can fail and when they fail, there is a
role for the government to step in. There are many features of
H.R. 3 that do that.
[The statement of Mr. Garthwaite follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairwoman WILSON. Thank you. Thank you, Mr. Garthwaite. I
will now recognize Mr. Mitchell.
TESTIMONY OF DAVID MITCHELL, FOUNDER, PATIENTS FOR AFFORDABLE
DRUGS
Mr. MITCHELL. Chairwoman Wilson, Ranking Member Walberg,
Members of the Committee, I am honored to be here. I am David
Mitchell, I am founder of Patients for Affordable Drugs. More
importantly, I have an incurable blood cancer and prescription
drugs are keeping me alive. Every two weeks I spend half a day
at a clinic getting infused drugs, which unfortunately are
slowly failing, so last week, my doctors added an oral chemo
drug. I am now taking four drugs. Now that my drugs carry an
annual list price of $875,000, I have relapsed twice.
Eventually I am going to run out of options so the importance
of innovation is not theoretical for me; it is literally life
and death. But my experience as a patient taught me one
irrefutable fact and that is drugs don't work if people can't
afford them.
To address out of control prices, however, we really must
come to grips with some larger facts. Despite what drug
companies tell us, and the general point that was made just now
by Professor Garthwaite, sky high prices are not all about
innovation. Multiple studies show there is no correlation
between the cost of R&D and the price that is assigned to a
drug.
Taxpayers front a huge portion of the bill for the basic
science that leads to new drugs. Every single drug approved by
the FDA from 2010 to 2016 was based on funding from taxpayers,
science brought forward through the NIH. Meanwhile, independent
analyses show that 9 of 10 drug companies spend more on
advertising and marketing than on R&D. Why do drug companies
charge so much? Because they can. Yes, drug companies should
make a profit when they develop innovative drugs, but our
current system is broken. And it is costing us all and our
family finances, our health outcomes and lives.
H.R. 3 would ensure drug companies charge a fair price to
patients while protecting access to lifesaving drugs and
innovation.
I want to run through some highlights of H.R. 3 that I
believe enjoy bipartisan support. First, it brings our prices
more in line with what other wealthy nations pay using an
international price index, very much like the Trump
administration proposal. Second, it stops drug companies from
increasing prices faster than the rate of inflation, just like
the bipartisan Grassley-Wyden bill. Finally, it caps seniors'
out of pocket costs for prescription drugs at $2,000 a year.
Grassley-Wyden has a slightly higher cap.
Now I want to mention three other provisions important to
patients. H.R. 3 ensures that Americans with public and private
insurance have access to lower price drugs.
As an employer myself for 30 years, it is important that
this bill gives 150 million Americans and their employers
access to lower drug prices. Second, savings can go to new drug
research and innovation at NIH.
Finally, it protects access to all drugs unlike in the
private sector, H.R. 3 does not rely on a formulary and drugs
are covered by Medicare just as they are today.
Now we all know the bill is under attack. Here is what
people are saying. I heard some of it today. It is socialism.
Well, competition and negotiation are cornerstones of
capitalism. The truth is taxpayers negotiate on everything from
aircraft carriers to printer paper. The only reason we don't
negotiate for drugs today is because pharma inserted the
prohibition into law in 2003, otherwise we'd be negotiating.
It'll kill innovation; Dr. Garthwaite just made that point.
Well, nobody cares more about innovation than me. As a patient,
however, I find this to be a scare tactic and I find it
offensive. HHS Secretary Azar refutes it best. He says: ``It is
a tired talking point. The idea that if one penny disappears
from pharma profit margins, American innovation is going to
grind to a halt.''
And finally, it is going to lead to rationing. Well, my
Lord, we already have drug rationing in this country. People
are skipping doses, cutting pills in half, choosing between
food and paying for their drugs. People are dying because they
can't afford their insulin. H.R. 3 will stop rationing by
lowering drug prices. Now right now, there's a fundamental
question drug companies want us to ask about drug prices: what
are we willing to pay to save a life? And I can tell you, that
is easy. When It is your child's ability to breathe, when It is
your cancer, the answer is anything, but that is the wrong
question.
We should be asking what is the right amount of money the
drug companies should make on these drugs? With hundreds of
clinical trials underway right now for new gene therapies that
are currently priced at a half a million dollars or more, we
cannot pay just any price the drug companies demand. Neither
American families, nor our system can afford that. I feel
incredibly grateful to be here today speaking on behalf of
patients. I do believe the moment is at hand to address this
problem, and with bipartisan support, we will. Thank you.
[The statement of Mr. Mitchell follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairwoman WILSON. Thank you, Mr. Mitchell. Under Committee
Rule 8(a), we will now question witnesses under the five-minute
rule. I will now yield myself five minutes.
I want to thank all of you for your testimonies, thank you
so much. Mr. Mitchell, you mentioned that you started a new
oral chemotherapy drug last week. Can you repeat the list price
for that drug and tell us what your out-of-pocket expenses are?
Because we have five Members of Congress that I know of that
take oral chemotherapy today.
Mr. MITCHELL. So, this is the drug I started taking last
Wednesday night. It is called Pomalist. It is 21 capsules. It
carries a list price of $17,200. I have to take it this way
every four weeks. The first fill was $2,758. My out of pocket,
under part D, and I will be paying $850 dollars every four
weeks out of pocket for this drug.
Chairwoman WILSON. Ms. Talente, in your testimony, you
share the stories of several of the patients whom you worked
with at the National MS Society. You point out that the
patients always struggle with the fear that they are
contributing to overall health care in their workplace, health
plans, and they don't want to be perceived as that person who
is responsible for making everyone else pay. This is very
troubling to me. Can you talk a bit more about the stigma that
MS patients face and how does it present barriers to
employment, to access, and to care?
Ms. TALENTE. That is probably more than we have time for
today, but I will touch on some of it. Health care cost is
certainly a big part of that. So, the MS disease modifying
treatments are about 75 percent of the cost of treating someone
with MS.
And as I highlighted, the median price of those brand
treatments is more than $88,000 today, and so that is
definitely a drain on employers' health care cost and health
care burdens, and I have talked with people with MS who are the
employee. I have talked with people with MS whose spouses are
the employee and many of them are guilt-ridden about the cost
that they are bringing to bear on their employer and their
coworkers, and many of them are afraid and when people do lose
their job for whatever reason, many of them, rightly or
wrongly, attribute that loss of employment to being that health
care burden.
Chairwoman WILSON. Thank you. Many on the other side of the
aisle and in the insurance industry often say that patients
need to have more skin in the game to keep costs under control.
To me this seems like an excuse for plans to raise deductibles
and increase cost-sharing for patients. And we are talking
about medications, this notion of skin in the game can have
troubling consequences for patients.
Mr. Isasi, what effect does requiring patients to pay more
out-of-pocket have on their ability to access care, including
prescription drugs?
Mr. ISASI. Well what we know right now is a third of
Americans who are trying to access prescription drugs to stay
healthy or to get healthy are not taking that medication as
directed because they can't afford it. And some of those
people, the majority of them are actually cutting their pills
in half, or skipping doses, some are just not taking them at
all. We hear stories all the time about patients who end up
becoming seriously ill or dying because they can't take the
prescription so as we heard earlier, these very high costs
don't actually allow people access to the innovation that the
pharmaceutical company is promising. It is actually rationing.
Chairwoman WILSON. Okay. Now we expect this bill to have--
to greatly reduce cost for patients and tax payers and I
believe it is important that we use savings to improve crucial
health programs for American people, so I am going to ask the
witnesses. Perhaps Mr. Isasi and Ms. Talente. Are there any
programs such as the NIH or Medicare in which you believe
Congress should invest these savings? We will start with you,
Mr. Isasi.
Mr. ISASI. Absolutely, I think that what we know for sure
is right now it is seniors and Medicare beneficiaries across
the country have spoken--they are desperately in need of an
oral health care benefit. In Medicare there is none. They are
desperately in need of a hearing benefit in Medicare. There is
none. They are desperately in need of a vision benefit. There
is none. So there is a lot of need right now to make the
Medicare benefit comprehensive so that we are giving folks who
are receiving it the best chance at living their best self-
actualized life and in addition, we also know that all of these
innovations that the drug industry is profiting from, almost
all of them--all of the ones that are currently being approved
in the last five years started with NIH research, so let's
invest in the place where the innovation actually occurs which
is our public and private institutions that receive NIH
funding.
Chairwoman WILSON. Thank you. Ms. Talente, you have a
couple of seconds.
Ms. TALENTE. We know that for every MS treatment on the
market today, you can tie back some critical understanding of
the biological function of the mechanism of action of the
understanding of MS back to research that was done at the
National Institutes of Health so investments there, at NIH is
probably one of the best ways to spur the future innovation and
bring cures in the future.
Chairwoman WILSON. Thank you so much. I remind my
colleagues that pursuant to committee practice, materials for
submission for the hearing record must be submitted to the
committee clerk within 14 days and now we will have questions
from Mr. Walberg, Ranking Member.
Mr. WALBERG. Thank you, Madam Chairwoman and thanks to the
panel for being here. Mr. Holt, when Medicare's prescription
drug program was implemented, it included a non-interference
clause that prohibited the Secretary of HHS from intervening in
negotiations between private firms or private plans.
Has this model been successful in driving down costs and
increasing competition with Medicare beneficiaries and second,
would the direct negotiation provision in H.R. 3 destabilize
these efforts?
Mr. HOLT. Yeah, so when part D was first developed, the
idea was to get as many plans competing as possible but there
was concern that the negotiation wouldn't work so there was a
Federal fallback plan that would have had a premium of, I
think, 35 dollars at the time. Today it would be at about 44
dollars. In reality, the negotiations between the manufacturers
and the plans and PBMs have led to a situation where the
premium, I think next year is expected to be about 30 dollars
on average per beneficiary, so we've definitely seen that the
negotiation in part D has been very effective. That is not to
say that there aren't reforms that could be made to part D and
I think this bill at least starts to address some of that but
yeah, we've seen very effective negotiation in part D.
Mr. WALBERG. Would we see destabilization of these efforts
by direct negotiation as proposed in H.R. 3?
Mr. HOLT. Yeah, and particularly early on where some drugs
would be having their price set by the Secretary and the others
would still be part of this negotiation would be really
difficult to predict how that would affect the overall benefit.
Mr. WALBERG. Mr. Holt, when talking about the high cost of
prescription drugs, Sivaldi, the cure for Hepatitis C is the
poster child. Although the drug cost 84,000 dollars for a full
course of treatment at the time of its launch, within two
years, competitors introduced rival treatments and the price
came down by 46 percent, which I hasten to say is still too
high for many people. In your opinion, was this an example of
market failure?
Mr. HOLT. No, I mean this is an example of how markets
should work. Competitors come in and we see concessions as a
result.
Mr. WALBERG. Would it be considered a market failure under
H.R. 3?
Mr. HOLT. Under H.R. 3, Sivaldi would be considered to be a
drug that does not have competition.
Mr. WALBERG. Thank you. Mr. Garthwaite, Dr. Garthwaite, you
explained in your written testimony that development of
pharmaceuticals is a long and risky process and that firms rely
on some degree of regulatory and market predictability when
deciding to invest. How would H.R. 3 undermine the
predictability and the willingness of firms to take chances for
the sake of innovation?
Mr. GARTHWAITE. On the predictability side, you'd be a bit
at the whim of the Secretary of HHS as to whether you're going
to be one of the drugs that is picked to have your price
negotiated.
In addition, we would be targeting our negotiation on those
drugs that generate the most unique value in the market, those
that don't have competition and therefore are the only choice.
Now that might seem positive to some people but I would note
that is the very nature of drugs that we would want to see
people invest in so we would be sending a signal to the private
market that drugs that meet unmet demand, that provide truly
new treatment options are going to have their price severely
capped and while Mr. Mitchell mentioned the Secretary Azar's
comment about one penny of profit, that is not what we are
talking about here. We are not talking about marginal changes
to profitability and I am sorry that Mr. Mitchell thinks it is
a tired talking point but the trouble with the truth is it
doesn't change.
The truth is if you decrease the return to innovation, you
will get less innovation and I am happy to have a debate about
whether we want less innovation. I am not happy to sit here and
say that won't be the response. It is personal to me as well. I
have lost very close family members to cancer because they
didn't have the drugs that you have the ability to pay for.
That is an access problem that we have to take very seriously.
There are a lot of conditions for which we don't have
access today because there is no drug and we have to keep those
people in the debate as well because sadly they can't be
sitting at the table testifying because they are no longer
here.
Mr. WALBERG. Thank you. Let's go to some case history, Dr.
Garthwaite in countries that have enacted price control similar
to the ones included in H.R. 3. Do their patients have the same
access to new therapies as patients in the United States, and
second, do patients in those countries face increased wait
times, drug shortages or denial of coverage for lifesaving
drugs?
Mr. GARTHWAITE. This varies a bit by countries. We often
talk about the idea of European healthcare or developed country
healthcare. There is no one system that we want to talk about
or that we can point to and say they are all the same.
In the UK, for example, where NICE is the committee that
negotiates this. Yeah, patients have reduced access to drugs.
Patients with cystic fibrosis don't get access to Vertex'
products there and that is a choice that they've made. In
Germany, they pay higher prices, they get more access, but they
don't get access to some drugs that we get here because they
deem that they are not worth the money that is being paid and
that is all fine. There is no secret to how Europeans get lower
prices. They are not better negotiators than us. They'll just
walk away. They are willing to walk away from drugs. We don't
want to do that here. We don't want to face the hard choice in
that H.R. 3 so what do we say? You're going to give us the
price we want, or we are going to take all of your money as a
drug company. That is not a negotiation.
Chairwoman WILSON. Thank you.
Mr. WALBERG. Thank you, I yield back.
Chairwoman WILSON. Mr. Norcross of New Jersey.
Mr. NORCROSS. Thank you, Madam Chairwoman for having this
hearing and it certainly is long overdue to have some real
conversations that lead to both the continuation of innovation
but at a reasonable price. I can tell you the folks in my
district, nothing twerks them up more as to find out their
great country spent somewhere close to $40 billion a year in
NIH funding which means we had skin in the game. That money
does not magically appear from somewhere. It is those taxpayers
we represent and yet the stories that I hear from a young man
who goes for his insulin and what he pays a year and if they
can go right across the border into Canada, 1/10th the price.
So, Ms. Talente, I'd like to ask you a couple of questions.
When we talk about negotiations going beyond where we have
historically been to where this bill puts us, we spent $40
billion on NIH and it is not all for one particular area.
There's a lot of research there and you say they bring this
great intervention. Do you see that America gets a discount on
some of the pricing from those innovative drugs that come from
NIH? Are we getting that special break?
Ms. TALENTE. No, not that I have seen.
Mr. NORCROSS. So, we pay for it and under many cases we pay
substantially more than other countries?
Ms. TALENTE. Yes, that is true.
Mr. NORCROSS. This is the thank you we get for putting that
research. I really appreciate that. But can you walk me through
the negotiations that Medicare has? Can you directly say
because we pay this much more for our pharmaceuticals in this
country, that we are getting more breakthroughs across the
board but particularly in MS?
Ms. TALENTE. Generally, what we see is that the
breakthroughs in innovation hop in and then those products go
through the drug approval process in other countries as well,
so they are not just coming to the U.S., they are going to
other countries around the world.
Mr. NORCROSS. You find it somewhat distressing that we make
the greatest investment and pay the greatest prices?
Ms. TALENTE. I find it disturbing that people are going
without their medication because they can't afford it.
Mr. NORCROSS. Thank you. I want to talk about some of the
issues with the PBMs. Having spent the better part of my
private career dealing with health plans, pharma plans, the
PBMs that came into existence some time ago were the greatest
thing since sliced bread. They were out there fighting for us,
but now they are part of the problem. So when we see
negotiations, we the end users, even though we buy a large
plan, don't see the direct negotiations that take place. In
other words they are being done behind closed doors.
So, Dr. Socal, how can we ensure those PBMs are pricing,
those price savings are passed on to the end consumers?
Dr. SOCAL. There are two ways that we could do it. We could
try to capture every single change in the negotiation process
and make that known, which I don't think is feasible and I
don't think it helps to the negotiation process or we can have
a benchmark and we can show this is the benchmark that other
countries are paying and you as an insurance plan, you have
something that you can compare your price to. So you don't
really know all the working mechanisms that are happening
behind the curtain but you have a very clear benchmark that you
can take a look at to know if you are getting a good deal or
not.
Mr. NORCROSS. The rebates, that is part of the area that we
don't see anymore, and you might get the savings but you might
not. What do you think the most effective way, other than to
open up that process, and to some degree I agree with you that
it is very difficult to follow everything, that is why they are
doing so well. The confusion that the average person doesn't
have the time to go but rebates see to be a real issue that
they are not making to the end user.
Dr. SOCAL. And I would add it is not only the fact that
there is a rebate, it is the fact that the rebate is
intertwined with the revenue source for the PBM. So, if PBMs
were to pass on fully all rebates, all fees, everything to the
payers, that possibly would generate less distortions to the
market. But PBMs' revenue depends by in large on rebates and
that generates a series of distortions and oftentimes higher
prices for the payers as well.
Mr. NORCROSS. I am out of time. Thank you, I yield back.
Chairwoman WILSON. Thank you, Mr. Norcross. Dr. Foxx?
Mrs. FOXX. Thank you, Madam Chairwoman. I want to thank our
witnesses for being here today. Mr. Holt, what current
regulatory guardrails exist in the pharmaceutical industry to
give incentives to companies to undertake financial risk
associated with developing new drugs? Would H.R. 3 impact the
current patent system and exclusivity periods that attract
investment?
Mr. HOLT. I don't know that H.R. 3 would directly impact
the patent system. I think clearly H.R. 3 has serious
implications for capital to continue coming to drug
development.
Mrs. FOXX. Mr. Holt, H.R. 3 would allow the Secretary of
HHS to negotiate the prices for up to 250 drugs per year. In
your opinion, does HHS have the necessary access to data and
regulatory review capacity to undertake this process and what
are the consequences of granting HHS this information?
Mr. HOLT. So currently no. the legislation does grant HHS
really unlimited power to demand any and all information from
manufacturers in order to in theory facilitate the negotiation
although it is not clear to me that HHS needs any of that
information since the Secretary can basically just wait out the
manufacturer during the discussion; but I have real concerns
about the proprietary data being handed over to the government.
Mrs. FOXX. Thank you. Dr. Garthwaite, you note in your
testimony the important role of the National Institutes of
Health and other government entities in funding scientific
research that contributes to product development. You explain
further, however, that NIH is focused on basic scientific
research and not the start to finish pipeline of pharmaceutical
trials and production. What role does private investment play
in bringing innovations to the market and how would H.R. 3
undermine this process?
Mr. GARTHWAITE. So private market basically commercializes
the basic science that the NIH does and so it helps to think a
bit why we have the NIH in the first place. The NIH solves what
economists call is a public goods problems. So you generate a
bunch of basic science, anyone can use it. You can't protect
it, and because you can't protect it, you can't appropriate the
value. No private firm is going to ever do that research
because they can't get their money back, so that is where the
very valuable role of the NIH comes in. In fact, as tax payers,
we should be happy that the NIH is being used in all drugs
because we are getting the most bang for our buck on the share
of the 30 billion dollars that goes to drug development.
So if you want to use savings from this bill to then get
new drugs to market, you are going to have to really change the
function of the NIH in some way to really start to focus more
on commercialization, which is not something they've done
before, and it is not clear it is going to be something that
they are very good at.
I would note that this is in many ways a centralization of
the research process with NIH, but they are going to act like
they are their own little venture capital company. At the same
that the private market is choosing to decentralize research to
a large number of small biotech companies and so you would
really have to change the nature of what the NIH is to get that
to work and it is going to be sort of a competition between
taking away the incentive for the private market to invest
commercialization dollars, how much innovation will you lose
there compared to how much you think you could get by having
the NIH serve this new and untested role. That is the--you have
to think about that. I don't know if we have a good answer as
to which of those would dominate.
Mrs. FOXX. Thank you. Dr. Garthwaite, proponents of H.R. 3
argue that implementing an ``international price index'' would
force foreign countries to pay their fair share of the
pharmaceutical research and development cost that are largely
borne by the United States. Would this proposal result in other
countries paying more for research and development or everyone
paying for less research and development?
Mr. GARTHWAITE. The answer is kind of both, I guess.
Foreign countries are going to pay a little bit more. We are
going to pay a lot less, a net will meet somewhere in the
middle from that so we will get a little bit more money out of
the foreign countries and I share Mr. Norcross' frustration. I
would like it if the other countries paid more of this than we
currently do. That would be the first best, right? Every
country sort of pays its fair share. Unfortunately, what's
probably going to happen is they'll pay a little bit more, we
will pay a lot less and we will get less innovation and that is
unfortunately where we are going to be.
Mrs. FOXX. Well we've always been the leaders in many,
many, many things and to me this is a small price to pay for
the access that our citizens have to the drugs that are
developed. Thank you very much. I yield back.
Chairwoman WILSON. Now, Mr. Morelle, New York.
Mr. MORELLE. Thank you, Madam Chair for holding this
important hearing today. I will start out by saying I am a
capitalist. I believe in investment and innovation, new
products, new development cycle. I think it has benefitted
Americans tremendously over the years but I am struck by the
issue of innovation in pharmaceuticals because I have met with
pharmaceutical companies, I know the talking points, but I find
it interesting and I will just use an example which is probably
not entirely analogous but if you think about what's happened
in the development of personal computing over the last 30 or 40
years, there's been massive innovation, massive investment, and
yet the price of these devices has continued to drop despite
the fact that there is more and more investment in innovation.
I think back to my old social studies books about Henry Ford
who priced the Model Ts when they were coming off the assembly
line so that individual workers could afford them so he would
help build a market.
The difference in pharmaceuticals, I understand is you
didn't have to buy a car if you didn't want to. You could find
other ways to exist. Mr. Mitchell and people like him don't
really have an option of not buying the car in the analogy.
They have to buy the drug because it is lifesaving, so I
struggle to understand exactly why the innovation cycle works
in just about every other industry, but it doesn't seem to work
very well in the pharmaceutical industry.
Particularly in the advent of supercomputers, mapping of
the genome and more and more information available to
pharmaceutical companies but let me--so I will just use that as
sort of a sense of where I come from on this and I am happy to
talk to others and by the way, Dr. Garthwaite, I thought you
said at one point, and I don't have time unfortunately but I'd
like to get into it with you, perhaps offline. You mentioned
something about the advertising costs and salaries don't affect
return on investment for investors but actually all costs go
into it unless I misunderstood--did I misunderstand you? Okay,
I apologize. I only have three more minutes but I will look at
the testimony, but I do apologize if I mischaracterized that so
thank you for clearing it up.
I did want to talk about insulin. In my district, insulin
prices have skyrocketed as I assume it is everywhere else but
in Rochester alone, where I represent, the 50 most popular
diabetes medications cost the Medicare program and
beneficiaries approximately $24.7 million in 2016 dollars. The
monthly cost of a widely used insulin would be 74 percent lower
Australian prices, 70 percent lower UK prices and 52 percent
lower Canadian prices. We talked about cost setting in those
countries as a reason for that, but it is important to know.
Studies show manufacturers could charge as little as $7 to
$11 per month for insulin and still make a profit. The average
monthly--I'm sorry yearly price--annual price of insulin
nationwide is $450 which is a considerable multiple of that
number so Dr. Socal, if you might, in your testimony you talked
about the role competition plays in controlling health care
costs and when there is no competition, prices tend to rise and
I would just be curious about what barriers there are. Insulin,
in particular does not have--first of all it has been on the
market for a long time so could you talk to me about how--is
there innovation? Is that what is driving the price of insulin
because it doesn't seem for something that is been around so
long that is the issue.
Dr. SOCAL. Well it is a combination of multiple factors but
I would first start by highlighting yes, it is an older drug,
it has incurred changes and innovation over time, especially in
the sense of new application mechanisms, new tweaks to the
length of the effect, faster effect, longer effect and things
like that but most importantly, the prices for insulin, it is a
quite good example of what I mentioned before.
PBMs cannot say no to insulin. You cannot say no. It is a
drug that you really need, and you need right now. It is
similar to a situation where you have a very serious infection
and you need an antibiotic. You cannot wait a week or a month
to get your antibiotic. It is the same way with insulin, but
people with diabetes, they need the same urgency of access
every single day, every single time.
Mr. MORELLE. And is the innovation that you talked about,
is that what is driving the price of insulin?
Dr. SOCAL. No, that is not driving the price of insulin. It
is really distorting a little bit the competition between the
insulins that do exist in the market so before when it was
brought up, the fact that well there are some therapeutic
classes where you do see branded drugs available in the market
and they compete against each other, yes but we have to think
about the clinical aspects of that and I am a physician, I am
very familiar with what patients feel and they feel I am used
to my insulin, to my application mechanisms. If I was going to
change, it is not going to control my disease as effectively so
those clinical aspects also play a lot in terms of being able
to say no and negotiate effectively for that.
Mr. MORELLE. Thank you so much. Thank you, Madam Chair.
Chairwoman WILSON. Thank you. Thank you so much. Dr. Roe?
Dr. ROE. Thank you, Madam Chair for having this and I hope
we will continue to have these hearings. I am going to go on a
little history tour.
I graduated from medical school this December 49 years ago
and I graduated from medical school there was one cephalous
borne antibiotic and now there are--I call them self-
acknowledging. There are so many of them. There were five anti-
hypertensive. Three of them made you sicker than the
hypertension did, and we didn't use them much. Now there are 50
at least.
My first pediatric rotation in medical school was at St.
Jude's children's hospital. I can still remember seeing some of
those kids. 20 percent of them lived, 20. Now It is 83 percent
I believe is the last number I saw from St. Jude's and Mr.
Mitchell, you are getting the benefit of some incredible
research that is been going on and I hope it continues to go
on. I have struggled with this for 40 years, seeing patients as
a private practice doctor and a teacher in medical school. The
innovation that we have, these new medications and then
patients being able to afford them. If you can't take it, as
Mr. Mitchell said, it doesn't do you any good and Mr. Morelle,
I could not agree with you more, insulin was discovered in 1921
by Benning and Best in Toronto, Canada. There is no reason for
it to be 10 times as high in Canada as it is here in this
country and you look at these countries that--that this
international pricing is going to be and of the 270 new global
medicines lost in the United States since 2011 to 2018, 100
percent of them are available in the United States. 41 percent
of them are available in Australia, so one of the ways you do
is no question, the CBO is correct. You limit--when you limit
how much somebody would pay, you are going to limit what's
available for people to take and that is the dilemma I have and
I think Ms. Talente, I think one of the things that we can do
and Mr. Mitchell, there is no question that there are diseases
out there and new innovations that are going to come along that
are going to be expensive and I think we have to take those
patients that are in these very high risk situations and put
them in a high risk pool where their costs are no greater than
anybody else and we are going to continue to find cures. I will
run through very quickly. Dr. Lemial Diggs was my hematology
professor in medical school. He lived his entire life trying to
cure sickle cell disease for African Americans. His entire
life.
I can remember sitting by bedsides of pregnant women and
taking out the sickle blood and transfusing normal hemoglobin
into that woman for 35 weeks so she could get through her
pregnancy and we could deliver her baby safely. Now, at NIH,
some of the basic science research. It looks like we are going
to be able to take an intenuated HIV virus, put the right
genetic code and cure sickle cell disease. That is remarkable,
but it is not going to be inexpensive and we as a society have
to decide are we going to have the innovation and we're going
to help the people that have MS--numbers of patients, a million
patients in the United States have MS and these treatments are
incredibly expensive, so what we have to do is I want the
innovation but I don't want, as a doctor, 41 percent of the new
drugs that I have access to and especially, I have said this
all along. I don't care if your case is one in a million. If it
occurs in you, it is 100 percent. Just like Mr. Mitchell's is
100 percent for him, in that patient, so I am going to ask Dr.
Garthwaite just a couple of questions.
In 2018, the FDA approved 58 novel drugs. In 2017, the
pharmaceutical industry spent 97 billion on research,
development and so forth and a typical R&D, we know It is
somewhere between 800 million and 2.7 billion to bring molecule
to market so that I can write a prescription for it. Do you
think that the elimination, effectively the elimination of the
private industry and R&D by 2023 under this bill will adversely
impact patients 10 years from now and do you think the NIH will
be able to offset that loss through their budget, even though
It is only a third of private spending?
Mr. GARTHWAITE. So I have doubts on whether the NIH will be
able to offset it, even if we gave them a lot more money. As I
said, it is not just about giving the NIH more money, It is
about them doing an entirely different set of activities than
they currently do and we know that private firms partner with
the NIH based on their ability to get returns. We know that in
1995, we used to say that the NIH would have a fair pricing
clause attached to their partnership with private firms. We
took that away. We said there are no more pricing constraints
on the partnerships, the number of these partnerships
skyrocketed in the years after that, so we need to have a
respect for the fact that the private market are the people who
commercialize drugs. We could try to make the NIH that entity,
but it would be vastly different than they currently do.
Dr. ROE. That is not what's going on in Switzerland or
other places--or France. They have a robust market. The private
companies do that research there and It is not done by the
government of France or the government of Switzerland.
Mr. GARTHWAITE. But they do it to sell it to the United
States. Global firms do research and sell to us.
Dr. ROE. Well I do want to continue. Madam Chair, I really
do appreciate this hearing and I hope we continue this
discussion.
Chairwoman WILSON. We will.
Dr. ROE. We don't have enough time.
Chairwoman WILSON. Thank you, Dr. Roe. Mr. Courtney of
Connecticut.
Mr. COURTNEY. Thank you, madam chairwoman and thank you for
hosting this hearing. Last November, this country experienced a
historic moment. It was the largest voter turnout in a midterm
election since 1914. We elected a new majority with a plurality
of 10 million votes which shattered all records in history of
this country and if you looked at the exit poling, health care
cost was the number one concern of voters and more particularly
the cost of prescription drugs so holding this hearing on this
bill is in my opinion keeping faith with the loud strong
message that came out less than a year ago through our
democracy.
Yesterday, we got more validation about this issue. Kaiser
Family Foundation released its annual health benefits survey of
employer-sponsored health insurance. The study found that the
average premium for family plans has increased 22 percent since
2014 which has been a very low inflation environment and last
year to this year, it was a 5 percent increase, again, far
surpassing the rate of inflation. According to the Americas
Health Insurance Plans, 23 percent of private health insurance
premiums go towards prescription drugs. The largest share of
healthcare costs, larger than doctor services, office visits
and hospital stays. In addition, we have seen the trend toward
high deductible coverage as a way, a desperate way of trying to
moderate the increase of a premiums so again, there's an
additional layer of cost which patients and workers have been
experiencing.
So Dr. Socal, when we talk about the brave new world of
high-deductible health insurance, lowering the list price of
drugs, which as you pointed out in your testimony is really
where the rebates are worked off, but they are not shared with
workers so could you kind of talk a little bit more about the
way that all transpires.
Dr. SOCAL. Absolutely. First of all, let me just mention
that from an employer perspective, you want to offer the best
benefit you can to your workers so an employer, if possible,
they would choose to offer the best plan they can and the
offering of these high-deductible health plans, more and more--
the more frequent offering for those plans, it already reflects
how companies are struggling to pay for their bills and they
are sharing these agreements with patients. The real problem is
that once you are enrolled in a high-deductible health plan,
automatically, there is some sort of parallel mechanism to save
money like a savings account, for example.
Patients believe they are going to be protected like an
insurance agreement, however the price that they are going to
be faced with is going to be the list price so you cannot save
your way to pay for the list prices that the insurers are
negotiating down.
Mr. COURTNEY. That was on page 7 of your testimony, which
again, basically says list prices before rebates determine
America's cost-sharing amounts so again, the patient and the
worker again is really sort of excluded from all the--
Dr. SOCAL. Absolutely, they are always faced during the
initial deductible, even for somebody who is fully insured,
doing the cost-share and cost-sharing--percentage cost sharing
is more frequent for the highest cost drugs, so patients are
always paying over the list price, never over the negotiated
price.
Mr. COURTNEY. Thank you. And Mr. Isasi, again, AHIP, which,
you know, maybe hasn't always been aligned with your
organization in the past but I mean do you see any--do you
disagree at all with their analysis that prescription drugs now
are sort of consuming the highest percentage of premium
dollars?
Mr. ISASI. Prescription drugs are 25 percent of premium
dollars at this point. They have gone up exponentially which
means if any of us aren't on prescription drugs, we are still
paying for them.
Mr. COURTNEY. So again, if we are looking at a strategy
both public sector and private in terms of just how we moderate
and hopefully reduce premiums. I mean that sort of trend just
sort of screams out for Congress to act, is that right?
Mr. ISASI. That is exactly right and just on this
innovation question that keeps coming up. A couple of points:
Sovaldi, which was raised before. Gilead bought the drug from
the researcher at the VA and then their analyst said enter the
market at this price and we will make a ton of money and then
they quadrupled it. And then the patients in the VA couldn't
afford to get the drug. That is innovation. MS, we have talked
a lot about MS. In the last five years, the drug went from
$60,000 to $90,000. In five years, same drug, that is not
innovation. That is not about innovation. In fact, what we know
right now is 75 percent of the drugs that are coming to market
are coming to market because they are especially drugs that can
get the Medicare beneficiaries in a catastrophic coverage where
they only pay 5 percent. The government pays 80 percent, the
plan pays 15 percent. Think about what it would mean if we had
iPhones where 80 percent of the cost was government subsidized,
15 percent was paid by the iPhone retailer and then 5 percent
was paid by us. That is what we are living with right now. That
is not innovation; that is why we don't have low cost drugs.
Mr. COURTNEY. And that is why we need to move on H.R. 3--
Mr. ISASI. Absolutely.
Chairwoman WILSON. Thank you. Mr. Johnson from South
Dakota.
Mr. JOHNSON. Thank you, Madam Chair, I appreciate it. So
Mr. Garthwaite, I understood your comments. They made sense to
me that venture capitalists and for that matter other capital
contributors, they could invest in any industry and so that
doesn't offend me that the pharmaceutical companies would need
to have a certain return on investment that need to earn that
return on investment to attract that capital.
It seems like from the data we have looked at and from the
testimony we've heard today, the pharmaceutical companies are
not earning anywhere close to that necessary return on
investment and the European markets, so where do the
pharmaceutical companies make up that shortfall and the target
return on investment?
Mr. GARTHWAITE. The United States.
Mr. JOHNSON. I mean obviously that is the answer. I mean I
do find myself more and more affiliating myself with the
comments of the President that in that environment it looks
like Europeans are really taking advantage of us. That may not
be their intention but that is certainly the effect.
Dr. Foxx, I thought had some good questions about and also
kind of where do we go from here.
Your response that yeah maybe we would come down a bunch
and they might come up a little bit but that means that yes, we
are paying less but we are getting a lot less innovation. I get
that is logical; it seems fatalistic, it seems like we are
putting ourselves and the rest of the world in a box. Is there
any other way? Is there any way to better balance this European
versus American contribution to the return on investment?
Mr. GARTHWAITE. I think if you are looking for optimism,
you shouldn't have invited an economist here to testify. That
is not really what we do. I mean listen, It is unfair. What's
happening is that the Europeans are free riding off of American
dollars and I think that is bad. I think the only thing worse
is that no one is providing this innovative money. I mean
sometimes if we want to get so caught up in the idea of
fairness, we are going to cut our nose to spite our face.
We are going to stick it to the Europeans, right? They are
going to have to spend more and we are going to win in that
sense, but what are we going to win? We are going to win lower
prices, okay? And fewer drugs in the future. This is all
dictated by returns and while I understand Mr. Isasi's example
that Gilead didn't make the drug itself, a company named
Pharmasset made Sivaldi. Why did they do it? So they could sell
it to Gilead. In the end, the venture capitalists are looking
for an attractive exit from their innovation and Pharmasset.
They sold it and then Gilead priced it and took it to market
and that is what people are looking for in this. The return is
what dictates this.
Mr. JOHNSON. So I do understand the value of paying more
for a drug so that a country, like America, can get a preferred
access to that drug but I found myself being struck by Ms.
Talente's comment, her testimony that in most years, most of
the increase in drugs, the price that Americans pay for drugs
come from year over year increases of drugs that are already on
the market rather than new market entrance. Does that comport
with the knowledge you have got about what drives
pharmaceutical inflation?
Mr. GARTHWAITE. Unfortunately, I am well aware of the
health--the article she is citing. It is a tragically flawed
article. It uses bad data. It doesn't understand how drugs are
priced. It uses non-rebate data, and older drugs have bigger
rebates, so by construction, if you don't take rebates into
account, it will look like the price increases are coming from
older drugs, not newer drugs, and so I mean I don't know what
else to say other than the article is wrong.
Mr. JOHNSON. So what suggestions, Mr. Garthwaite, if H.R. 3
is not the right approach, because I do find myself believing
wholeheartedly that the system--that this balance that you very
articulately and logically laid out for us--I believe in that
balance. Cost and innovation, there's a tension between those
two.
I do get the sense that maybe we haven't balanced that
properly so if H.R. 3 isn't the right solution, give us some
thoughts about where we should go from here.
Mr. GARTHWAITE. Absolutely. First, let's do things that
make the market work. Some of the reasons it doesn't work is
because of decisions that Congress has made. We have the
catastrophic program that Mr. Isasi is talking about where the
government pays 80 percent of the cost of high-priced drugs.
That is ludicrous. That doesn't provide insurers the strong
incentive to negotiate, so let's flip that, let's put 80
percent on the back of the insurer. All of a sudden, they are
going to get a lot more interested in negotiating the high
price of the drug.
We have protected classes that say you have to cover every
drug in the category. You don't have to come to Kellog and take
our wonderful negotiations classes to know that if they have to
pay your price, you can just sit there and wait. We have
generics that have very small markets and therefore can't
attract multiple competitors. There, we've already paid for the
innovation. We might want to think about regulation for those
products, things like the Daraprim product that Martin Shkreli
raised the price on that sort of got everyone upset. Maybe that
is where we need regulation. It is not that I am opposed to
regulation in any setting, I want to be clear. We want
regulations when markets failed but a high price is not a
market failure if that price is generating the incentive for
the innovation we want and so targeting the places where the
market isn't working, provide insurers with the incentive to
negotiate and vigilantly monitor the competition. Don't allow
people to gain patents, don't allow people to exclude their
competitors. Have robust anti-trust authority for people who
are breaking the rules and then if all that happens and we are
still at this position, then let's talk about a failed market
but we haven't even given the chance for the market to work
yet.
Mr. JOHNSON. Thank you very much. Madam Chair.
Chairwoman WILSON. Thank you. Ms. Shalala of Florida.
Ms. SHALALA. Thank you very much. I am interested--
obviously you have described the cost-shifting that is going on
from the Europeans to us. It is been going on for a long time
and it is not so easy to get at that and during the time that I
was the HHS Secretary, I begged for an opportunity to negotiate
because I was opposed to the importation, which I thought was
unsafe and I still believe it is unsafe. But explain to me and
all of you can comment on this, how the Europeans can negotiate
directly, have a more limited list of drugs and get better
outcomes than we get in whatever you want to describe the
market for because I don't see analysis that tells me that
large numbers of Europeans are dying from certain diseases
because their health administrators are negotiating are tough
negotiators on the price of drugs.
Mr. GARTHWAITE. So I mean what we can do is we can do what
the Europeans do and start saying no to some drugs on our own.
So we talked about insulin. Why is one reason insulin is
expensive? Yes, it is an old drug but it has evolved a lot over
time and there are two categories you might want to think
about. We have human and analog insulin, analog insulin being a
newer insulin. Caramore, which is a Medicare Advantage provider
in California, they put a bunch of their type II diabetics, a
large fraction on them on human insulin, the older kind and
then they monitored for any adverse events. They had no
increase in hypoglycemic events and they had a big decrease in
savings.
Ms. SHALALA. So basically what you're saying to us is that
where there are more than one drug that will treat the patient,
we have not seen different outcomes necessarily for most
patients but we are not prepared to do that?
Mr. GARTHWAITE. The gentleman left, Mr. Morelle but in tech
what happens is we take slightly worse products that have
meaningfully lower costs. In the U.S., healthcare we are
unwilling to do that. Right?
We want--we will never take a slightly worse product, even
if It is thousands of dollars less. We will, however, take a
slightly better product and pay thousands of dollars more and
until we are willing to say we won't do that, that you have got
to give us the return for our money, we are not going to get
any savings.
Ms. SHALALA. Madam Chair, this is a very important point
because what we are describing is--we have not focused on
outcomes. I am interested in outcomes. I am interested in
whether we can make Americans healthier, and if we can use a
negotiated process to do that, are there any circumstances or
will any of you--would you propose any different ways of
organizing the negotiation other than using an international
price index?
For example, the VA negotiates now, the prices are online.
You can actually see the contracts online. I mean we do have
American government officials that now have experience in
negotiating prices, whether it is on Medicaid or whether it is
VA or whether it is for Tricare, we have had a lot of
experience.
Mr. ISASI. Well I was going to say absolutely and we know
that, for example, what Mr. Garthwaite is talking about in so
much of his testimony is this hypothetical world in which if
only we could do this and if only we could do that but the
truth is we live in a world where there is a Medicare benefit,
cash off of coverage that pharmaceutical companies are pricing
to that coverage, there has been a 96 percent increase in price
only in that coverage. They are playing a game with us, but he
is in this hypothetical world. To your point, in particular
with launch prices, we should be able to understand what is the
real value of this drug? Does it really provide a benefit? How
does it compare to what is on the market currently? We are not
doing that as a country. You are describing that occurring in
other countries, Mr. Garthwaite is as well.
We are not doing that as a country so we just put it on the
market, they market it to doctors, doctors bring it to their
patients and now we are spending $6,000 for something that
should probably cost 5 cents.
Ms. SHALALA. The head of Eli Lilly came in to see me before
they dropped their price for insulin and they actually had the
nerve to say to me he could have dropped the price lower. I
mean--
Mr. ISASI. They tripled--insulin tripled between 2003 and
2012 and it went up 10 times faster than all the drugs since
then. Ten times faster, meanwhile they are suing other
competitors to make sure they can't come to market with a
biologic similar.
Ms. SHALALA. Mr. Holt, just one small point. I am an
academic and normally when we testify or publish articles, we
identify if our organization takes money from--in your case
from pharma. I didn't see that acknowledgement on your
testimony. I would hope that you would disclose whether your
organization does take any money from pharma or has in the past
taken money from pharma. I yield back.
Chairwoman WILSON. Mr. Holt?
Mr. HOLT. Our organization is a 501C3 and we don't disclose
our donors. I am not allowed contractually to do that, and I
also don't have anywhere near the knowledge of our donor
situation to do so.
Ms. SHALALA. It is actually online, the IRS reports.
Mr. HOLT. Not ours. Maybe people who give money to us but
ours are not.
Chairwoman WILSON. Thank you. Mr. Allen of Georgia.
Mr. ALLEN. Thank you, Madam Chairwoman and thank you for
this expert testimony today. Obviously, I think every district
in the country, when we go home, healthcare is number one. No
question about it.
What I have been able to observe is nobody in healthcare is
happy. Patients, Mr. Mitchell, are not happy, providers aren't
happy, and the government has thrown trillions of dollars at
this. The cost is skyrocketing and yes, we've got--we are
developing great drugs. We are--I think, again, in a free
market environment. There is no question that free markets
drive innovation. The government doesn't innovate anything.
Yes, we can do studies, we can pay people to do studies but
still to be able to raise the capital to invest, to be able to
come up with these things that save lives is critical to this
whole process so here is the question. And again, we do believe
that this thing needs to be fair throughout the world. In other
words, we should be able to sell your technology.
I mean we have this problem in China. Why is the President
negotiating with China? Because they are stealing all our
intellectual capital and then turning around and competing
against us and dumping those products in here. In fact, how
much of our drugs today are made in China? Because they have
stolen our capital and they are selling the elements to develop
these drugs back to us.
Mr. GARTHWAITE. A lot are made in China. I don't want to
sign on to the second part that they are made in China because
they are stealing our intellectual property. They are made
there because we outsource manufacturing to China and India for
lots of products so--
Mr. ALLEN. They aren't proprietary.
Mr. GARTHWAITE. We outsource to them to make the drug. It
is a contractual arrangement between us and them. It is a
perfectly legal arrangement.
Mr. ALLEN. I see. And they are using our technology to do
that?
Mr. GARTHWAITE. Our technology on how to manufacture drugs?
Mr. ALLEN. Yeah.
Mr. GARTHWAITE. That is--India has been the drug store to
the world for decades.
Mr. ALLEN. Okay.
Mr. GARTHWAITE. It is not--that technology on how to make a
small molecule product isn't proprietary technology unless
you--you have a lot more access to information than I do so you
might know something about them taking technology, but I am not
sure what you are getting at.
Mr. ALLEN. Well, I just--again, this is a worldwide
problem, I guess what I am trying to say as far as whether it
is Europe or anybody else and the fact that in Canada you can
buy insulin for much less than you can buy it here in this
country, we've got to fix that, and in other words, we've got
to fix it to the extent that whatever we are able to develop
here and sell here, if somebody else is going to use the same--
use our intellectual capital, they need to pay for that and
again, I still don't understand why is it that they can sell
their insulin for less than we can do it. I mean--
Mr. ISASI. Because their government negotiates price. That
is why. That is literally the reason.
Mr. GARTHWAITE. It is also--I'm sorry. It is because they
are willing to walk away. I know you want to talk about me
living in a fantasy world, but it is not hard. They are willing
to walk away, and we are unwilling to tell our seniors, in
particular, that lower prices might mean less access to drugs.
Mr. ISASI. And that is why H.R. 3 is so brilliant because
it actually doesn't walk away; it forces a manufacturer to
either give it a reasonable price or they end up paying an
excise tax.
Mr. ALLEN. I'd like to reclaim my time.
Mr. ISASI. So, they don't walk away. They make sure the
drug is available. That is what we care about.
Mr. ALLEN. I'd like to reclaim a little bit of my time,
Madam Chair. Well listen, I got a little something going here,
right?
Now, so the last questions. So if a--the drug Mr. Mitchell
is taking and I don't know how that is being paid for but say
it is Medicare, okay?
Mr. GARTHWAITE. I mean I guess, yeah.
Mr. ALLEN. And so Medicare is going to negotiate the price
of this drug and they are saying we are going to pay this much
for this drug for Mr. Mitchell and that is all we are going to
pay. The company says we are not going to sell it to you for
that and they walk away from the deal, what do we do then?
Mr. GARTHWAITE. So the hard part is that we have required--
so that is an oral chemotherapy drug so I believe it is in the
Medicare part D. we've required that the oncology products in
Medicare part D, the insurer must cover every single one so it
is the decision--that is a government decision because we
didn't want seniors to not have access to every oral oncology
product and that is a decision that we've made and that is
why--It is not about the government negotiating it. The
government negotiating it under those rules, it is the same
thing that is going to happen and so--
Mr. ISASI. That isn't what would happen under the bill.
Mr. ALLEN. I am not addressing you, sir.
Chairwoman WILSON. Great discussion.
Mr. ALLEN. Can he finish his answer?
Chairwoman WILSON. Finish your answer if it is a minute.
Mr. GARTHWAITE. A whole minute? We have to decide whether
we are willing to walk away. There is no secret to the drug
pricing. It is not about the government negotiating, it is
about the government saying they'll walk away. Creating that
outside option. What we are going to do under the H.R. 3 is
just under H.R. 3, you will still get access to the drug
because we have said we will take all the company's money away
if they don't give it to us so where is the access problem
going to come? It is not going to come today. It is going to
come in 10 years. There are no easy answers here.
Chairwoman WILSON. Okay, thank you so much. And now our
esteemed Chair, Mr. Scott.
Mr. SCOTT. Thank you. Mr. Mitchell, you know what portion
of R&D is done by the private sector and what portion is done
by the Federal government?
Mr. MITCHELL. The budget for NIH this year is $39 billion.
Pharma claims to be spending about $90 billion, but a
tremendous amount of the spending by taxpayers through the NIH
is on early high-risk, basic science that is the platform that
leads to these new drugs. In addition, increasingly, NIH is
doing drug development right now, is running clinical trials on
the sickle cell drug inside its walls and in fact the NIH paid
for most of the clinical trials for this expensive CAR-T drug
which was brought to market by Novartis, so NIH is doing a
tremendous amount of research not just basic science but
increasingly drug development.
Mr. SCOTT. And is there any potential in revisiting the
decision that was made in 1995 to limit the prices for drugs
that are partially developed with Federal spending?
Mr. MITCHELL. Yeah and with all due respect to Dr.
Garthwaite and he can look at this document too, the fact is
that the number of cooperative research and development
agreements did not skyrocket in the wake of the elimination of
the reasonable pricing clause in 1995.
NIH had a standard CRADA and then it created something
called materials CRADAs which did not exist in 1995. Subsequent
to 1995 and the elimination of the reasonable pricing clause,
the increase in the number of comparables, standard CRADAs was
14 percent over the ensuing 15 years and today the number of
cooperative research and development agreements has gone up by
only 45 percent, while the budget of NIH has gone up 400
percent so you need to understand what actually happened in
1995 when they created a different category of CRADA and you
have to compare the original CRADA and see what happened in
those ensuing years. Those are the numbers.
Mr. GARTHWAITE. What is NIH's position on doing this?
Mr. MITCHELL. The NIH made their decision back in 1995 when
drug companies used to have much bigger R&D departments and
today, the drug companies are increasingly reliant on the NIH
for the basic science that leads to these incredible
breakthrough drugs, kind of like the ones that I am taking.
Mr. GARTHWAITE. But the NIH has said they don't want to do
any pricing clauses.
Mr. MITCHELL. The NIH are scientists and they want to pay
attention to science. We need to look after taxpayers. So, I am
with them on that.
Mr. SCOTT. Mr. Mitchell, the question was should we revisit
that proposal?
Mr. MITCHELL. Absolutely.
Mr. SCOTT. Dr. Socal, is there any evidence that if we
reduced our prices to what other countries are paying, that
prices would go up in those other countries?
Dr. SOCAL. Not necessarily, no. So the big difference is
that our country, with our market-based system, we are paying
the price especially for drugs that have been in the market for
a long period of time. These prices are going up where
everywhere else they are going down and they go down everywhere
else because of two reasons, one is because the research and
development costs, they are sunk costs, they are not involved
in the cost of producing every new pill. It is minimal change
for every new production cost so other countries, they have
recognized and they have mechanisms, after the drug is on the
market to control and prevent these cost increases over time so
it is unlikely that costs would increase everywhere else just
because we changed the price here.
Mr. SCOTT. Okay, Mr. Isasi, did you want to say something
about the last discussion?
Mr. ISASI. Absolutely. Thank you. Really quickly just to
say that what was being described as what the legislation does
is incorrect. The legislation would not have the government
walk away from drugs that our seniors need. We at Families
would not support that; that is not what the bill does. What
the bill says is let's negotiate. Let's negotiate and come with
a fair price and if we can't reach agreement, the upper limit
is 120 percent of what the rest of the world is paying so we
are still going to pay more and if we still can't agree, then
you go sell your drug and we are going to take the money back
from you because you are trying to rip off America's families
and American taxpayers. That is what the bill does, it does not
do what he says it does which is walk away from the drug and
take the drug away from seniors. That is not what the bill
does. It protects access and also protects the taxpayer from
this extortion that is happening from drug companies.
Mr. MITCHELL. And Mr. Chairman, could I just add that one
of the key reasons that drugs are available first here in the
U.S. is because we are the largest market and we pay the
highest prices and at 120 percent of those referenced
countries, we will still be the largest market paying the
highest prices. It is very difficult to see how a CEO is going
to walk into his ward, as Secretary Azar said to me, and tell
his board I am walking away from the biggest market with the
highest prices in the world.
Chairwoman WILSON. Thank you.
Mr. SCOTT. Thank you, Madam Chair.
Chairwoman WILSON. Mr. Taylor of Texas.
Mr. TAYLOR. Thank you, Madam Chair. If I remember my
economics correctly, if you want to lower prices, you increase
supply. I mean dirt cheap is cheap because there's a lot of
dirt, right? So if you make more of something, prices will go
down.
Government price controls, tempting as they may be to try
to deal with the problem, I generally haven't seen that work
out very well. Generally. they have to be undone at some point
because they just didn't pan out but just going to this
particular government price fixing system, do you have any
comments with regard to how this particular government pricing
system works in your mind or how it wouldn't work in your mind.
Where would it ultimately end up being a problem? I think you
have alluded to this a bit in terms of research.
Mr. GARTHWAITE. Yeah, I mean I was pretty clear before, I
thought, that this is not about the government walking away
from drugs despite being mischaracterized by another witness.
The government isn't going to walk away from the drugs today
because the government could just effectively take the drugs
today, it doesn't have to. Where it is going to show up is an
investment to innovation for new drugs 5, 10, 15 years for now
which responds to the return on it. And again, as I have tried
to be very clear, we might as a society want to have fewer
drugs in the future in order to get more access today.
There is no purely economic sort of platonic idea about
what that is. That is a decision we should be debating. Do we
want to slow the pace of innovation in order to get lower
prices today?
And let's have that conversation. Let's not let the
officials in London and Berlin and Paris and Sydney have that
conversation.
Mr. TAYLOR. Sure. And I think what I will say is a common
bind here--what binds us together is a common point as I think
everybody in this room wants to see lower drug prices, right?
That is something we can all agree on. I hope we can agree that
the best way to go do that is again to increase supply through
a series of bills that came out of energy and commerce
committee unanimously that were then amended in such a way that
made it unacceptable to Republicans that basically were sent to
the senate to go die so those are not affected bills. I would
hope that we would revitalize those bills, take them up as
separate bills, send them back over to the Senate so that they
can actually pass them and actually help our constituents lower
drug prices so there are opportunities in front of us.
They are here in this chamber, in the House of
Representatives. We know what to do, we know some of the
actions we need to take. We just need to be legislatively inept
at getting them through in such a way that is actually go on to
the President's desk.
Just speaking about research and development, which we have
talked about a little bit. I see there's an estimate that R&D
will be cut by 200 billion dollars over the next 10 years if we
were to go into this government price fixing mechanism that is
in H.R. 3. Does that strike you as broadly correct, is that--
can you speak to that estimate?
Mr. GARTHWAITE. I'd say It is the first one. I don't think
our goal should be about lowering prices. Our goal should be
about increasing welfare or making people better off now and in
the future, and figuring out what the price of an access
tradeoff is there.
If our goal is simply to lower prices, we can do that. That
is actually not hard. The government is a very powerful force.
It can come in and say let's not make it 120 percent. Let's
make it 80 percent of the foreign price so we are trying to
improve welfare. Where that welfare comes in is this effect on
research and development, how much would it be.
I haven't run the number of whether it is 200 billion that
would go down, partly because it is a pretty complicated
question because it is about how is the venture capital company
going to respond and so I don't--is that in order of magnitude
correct? Maybe?
Mr. TAYLOR. So then also going staying on this topic of
research and how important it is for the future of creating the
next innovation, I think you correctly pointed out that it is
not about the present prices where your real worry is. Your
real worry is about future innovations including the United
States which has been a tremendous leader on that. It comes at
a price. So we are--NIH is conducting research and you are
looking at the private industries estimating they are doing 97
billion dollars of R&D every year, which is a tremendous sum of
money to find the next generation of drugs. If we were to go on
a price fixing scheme, it seems to me that you're saying that
97 billion would go down.
Mr. GARTHWAITE. I mean economic logic would dictate that if
you are going to earn less money from your investment, you'll
find the next best use for that dollar, particularly true for
venture capital companies where literally that is what they are
supposed to do. They are supposed to get a return for their
investors.
Mr. TAYLOR. Well I appreciate what you are saying here
today. I will just say that I am certainly here to try to lower
drug costs. As I go across my district, one of the top 3
complaints I hear is the cost of healthcare and we know that
drug cost is a natural component of the cost of healthcare. And
again, I am focused on trying to increase the supply. To me,
price fixing is a lazy legislator's answer to fixing a
particular economic problem and I would challenge anybody here
to tell me hey, price fixing worked great here. This is the
best because I think when they are borne out over several
decades, they generally just fall apart completely and are
completely undone. I don't know that this Congress has done
price fixing in the past, but it has not panned out. With that,
Madam Chair, I yield back.
Chairwoman WILSON. Okay. Ms. Wild of Pennsylvania, welcome
back.
Ms. WILD. Thank you, Madam Chair. I apologize for stepping
out. I had to attend an Ethics Committee meeting, which is an
internal committee governing ethics, but I think It is an
appropriate subject to sort of lead off this discussion because
to me, this is an ethical issue. This is a problem that our
country is having. We have people dying because they cannot
afford their prescription drug prices and that to me is
unethical for the richest country in the world.
It seems to me that we are just consistently putting
profits over people and Mr. Taylor, I have the utmost respect
for my colleague across the aisle. He and I have worked on a
bipartisan basis on other matters, but I will tell you, I don't
think we are legislatively inept as I think you have termed it.
We are, as a body, the government is far too influenced by the
pharmaceutical lobby. That is at the heart of this problem. So
with that said, let me just say that Dr. Garthwaite, you said a
couple of minutes ago, venture capitalists' job is to make
money for their investors. Well we know that in 2016, Turing
Pharmaceuticals CEO raised the price of a newly acquired drug
from $13.50 to $750.
In response to this, J. Michael Pearson, the CEO of Valeant
said his company's responsibility was to its shareholders, not
the customers who rely on the drugs to live. In fact, we know
that shareholders can bring suit for an officer's breach of
fiduciary obligation owed to shareholders through shareholder
derivative lawsuits so Mr. Pearson, the CEO, was right. His
first duty is and was to make as much money as he can for his
company.
I would respectfully submit to you that should not be our
priority in saving lives, in making people healthy again. We
cannot continue to have profits over people as the most
important thing governing this discussion. So, I know that you,
Mr. Holt and Dr. Garthwaite--first of all, do either one of you
have any formal medical background or training? Formal.
Mr. HOLT. I don't.
Mr. GARTHWAITE. No, as my wife says, I am not that kind of
doctor.
Ms. WILD. I didn't think so. I know you both have serious
reservations about government negotiation of drug prices or
tying drug prices to those of other countries, but I want to
talk about something else. I want to talk about something that
matters to my constituents that I hear about almost every
single day. I want to talk about diabetes and the price of
insulin, and you said, Dr. Garthwaite, market competition will
drive down costs.
Well guess what, we have a whole lot of competition for
insulin. We have a whole lot of demand for it. It is been
around forever. There have been no new formularies in decades
and yet the price of insulin continues to go up, so there's no
market force that is influencing that other than the fact that
a whole lot of people need insulin and the manufacturers know
that and so what they do is they keep raising the price on it.
It is unconscionable and I can't believe we're even sitting
here having this discussion. I have constituents who are dying
because they don't take their insulin, or they can't afford to
get it, or they are rationing it.
I don't even--I can't even believe we are having this
conversation. Do either one of you, just the two of you that I
am talking to know what happens physically within a diabetic
patient's body when she doesn't have access to insulin or has
to ration her insulin? Do you know what ketoacidosis is? Do you
know what the symptoms are? I will tell you: confusion,
excessive vomiting, dehydration, shortness of breath, loss of
consciousness, organ failure and death and I have constituents
who themselves are rationing their insulin, whose family
members have died because they rationed or didn't have their
insulin available to them because of the price and I am not
about to go back to them and say let's leave it up to the
market to determine what the price of your insulin should be
because you know what, the market has completely failed them
and that is why we are here now. That is why this bill is
coming before the House because we, as a country, and
pharmaceuticals as an industry have completely failed the
American people and we can't let it continue. I yield back.
Chairwoman WILSON. Thank you very much, Ms. Wild. And now,
Mr. Watkins of Kansas.
Mr. WATKINS. Thank you, Madam Chair. Dr. Garthwaite, we
hear heartbreaking stories of patients in other countries who
are denied access to new treatments that could improve their
lives. Earlier this month, news outlets cover the story of two
sisters battling cystic fibrosis in Scotland. A breakthrough
drug that treats the disease isn't currently covered by the
United Nations' National Health Service because the government
determined that the drug is too expensive. While one of the
sisters was able to receive treatment for free from the
manufacturer's compassionate care program, the other was told
that she was not sick enough to qualify.
Under H.R. 3 with access to these potentially lifesaving
drugs be threatened for America patients?
Mr. GARTHWAITE. I think It is unlikely that access to
existing drugs would be threatened for Americans because as Dr.
Socol said, the cost is sunk, so there is profit to be made
selling it. Where the access restriction is going to come and
we can't avoid an access restriction, it is going to come on
drugs in the future. That is where It is going to come, less
innovation so while Ms. Wild is right, not having access to
diabetes drugs today causes that to happen, causes
ketoacidosis, I would submit to ask her, do you know what
happens to a cancer patient who doesn't have access to oncology
that treats their cancer. You sit next to their bed and you
watch them die like it happened to my family members. So that
access mode happens no matter what. It is a question of whether
we are going to pay attention to it, or we are going to pretend
it doesn't exist.
Mr. WATKINS. Mr. Holt, your testimony denotes that ``the
cost of successfully bringing a drug to market has been
estimated at approximately 2.87 billion dollars.'' And that
establishing an international price index similar to the one
included in H.R. 3 would lead to 9 billion dollars in lost
revenue for drug manufacturers per year.
If this index is expanded to the entire United States
market, how many fewer drugs could we see approved by the FDA
per year?
Mr. HOLT. So the 9 billion figure was looking at the
President's IPI proposal specifically limited to part B. Part B
is about 10 percent of the U.S. market so you would see that
increase by that--so roughly about 30 drugs per year, the
amount that it cost to produce roughly 30 drugs per year would
be lost.
Mr. WATKINS. How does this impact the pipeline and the
development of new medicines?
Mr. HOLT. So on average, FDA approves about 33 new drugs a
year so that is a big chunk of the pipeline.
Mr. WATKINS. Thank you. Madam Chair, I yield the balance of
my time.
Chairwoman WILSON. Thank you very much. And now--oh, Mr.
Keller, Pennsylvania.
Mr. KELLER. Thank you, Madam Chair and I'd like to thank
all the members of the panel for being here today. Prescription
drug pricing is an issue. We've been hearing it from everybody.
I have been in my district and there are a lot of things I
think go into it and a question, I guess I just want to have
for Dr. Garthwaite, I know you talked a lot about the return on
investment and all those kinds of things and when we look at
who this impacts and who the pharmaceutical companies are, they
are basically owned by shareholders, is that correct?
Mr. GARTHWAITE. It is a variety of organizational
structures.
Mr. KELLER. And it would be public pensions and all that
kind of stuff.
Mr. GARTHWAITE. Probably yes.
Mr. KELLER. So a lot of the times, the motivation is to
make sure they get a return on investment and then we as public
sector employers invest in those drug companies too so if we
want to point the finger at people making money, I think we
need to look at all of us and I think we need to look at all
things that we can do to help this and instead of pointing the
finger at one person or another, look for actual solutions
which I think would be in some kind of patent reform, things
that would make drugs accessible rather than trying to point
the finger of blame. I guess the one thing I'd like to ask you
about and I know you mentioned it, you talked about drugs or
people walking away--or making certain drugs because of the
innovation and so forth, that would be that the company would
just stop manufacturing or might not invest money in the
future. In other words, if we weren't going to let them develop
drugs, somebody said the government would walk away. It
wouldn't necessarily be the government, it would be that the
companies wouldn't invest in R&D?
Mr. GARTHWAITE. Yeah, I mean we talk about the innovation
tradeoff, it is not getting new drugs in the future. Drugs that
have already developed, that we have already developed, people
will make and sell at that price.
Mr. KELLER. Right, but that might not get innovation for
future drugs and treatments.
Mr. GARTHWAITE. You would see a--it is not that you would
get none--
Mr. KELLER. You wouldn't get as much because when you look
at some of the other countries where that is happened, there's
not as much R&D in Germany or other countries as there are in
the United States, would that be--
Mr. GARTHWAITE. No, I wouldn't think of it that way. It
doesn't matter where the R&D happens. We get lots of good drugs
from Germany, we get drugs from Israel, we get an emergent
Chinese biotech market. It is about where the profits can be
earned, that is what dictates the investment.
Mr. KELLER. Okay. Another question I guess I would have.
Part of the consideration, would that also be any kind of tort
reform? Would that be helpful in this discussion?
Mr. GARTHWAITE. I mean if I started making a list, I am not
sure that would get to the top 10.
Mr. KELLER. Not the top 10 but probably a portion of it. I
mean--
Mr. GARTHWAITE. Honestly, I have never thought about tort
reform in this context right now. There certainly are liability
issues.
Mr. KELLER. There was a Columbia science and technology
article in the law review between December of 2009 and June of
2010, just one company paid 3.36 billion in claims for cases,
class action suits so I think there's some room--I guess my
point is if you could make a list of things to do, it is just
more than one thing other than just having the government
negotiate prices.
Mr. GARTHWAITE. I would just say that if a company does
something wrong, they might have to--I don't know the case of
the 3.6 billion but just because it is a big fine, doesn't mean
that it is a wrong fine.
Mr. KELLER. Right. I get that.
Mr. GARTHWAITE. Yeah, I mean we want a tort system.
Mr. KELLER. Right, I get that, but again, some kind of
reform might be helpful in order to keep things in check.
Mr. GARTHWAITE. You have to point to me where the tort
system is failing, I guess. I can understand the medical
malpractice side--
Mr. KELLER. I get that too. I get that too.
Mr. GARTHWAITE. I just don't know what the reform you are
looking for is, I guess.
Mr. KELLER. I guess we need to just look at all avenues I
guess is my point. We shouldn't look at just one thing.
Mr. GARTHWAITE. I would agree that we should be
comprehensive at everything we do.
Mr. KELLER. Yes, absolutely. I guess that is my point. I
just don't know that this bill gets us there. This is just one
of negotiating government prices rather than looking at all the
solutions.
Mr. GARTHWAITE. Yeah, but we should be clear. This bill has
a lot of good parts. The stuff they want to do for Medicare at
part D, the stuff that the other witnesses talked about. I mean
that is good. Creating an out of pocket cap, if we expanded it
to think about getting rid of coinsurance, which doesn't really
make a ton of sense, fixing the catastrophic but let's focus on
the things that we can do that are going to make the market
work more efficiently. I'd love to be comprehensive in that,
but I wouldn't say that this bill is not just about the price
control. There are a lot of things in there that are analogous
to what Republicans in the finance community are talking about
as well.
Mr. KELLER. And again, I think those are things to look at
but having the government just be the sole negotiator of price
I think is--in this bill, one person, the Secretary would be
the person that would select the drugs that we are going to
talk about and look at negotiating the prices on that group of
drugs, which I think is controlled by one person.
Mr. GARTHWAITE. That feature of the bill causes me pause,
yes.
Mr. KELLER. There are some things that I think would be
pretty dangerous and limit choices and so forth for people that
need to help. Thank you, I yield back.
Mr. GARTHWAITE. Thank you, Ms. Davis?
Ms. DAVIS. Thank you, Madam Chair, thank you to all of you
for being here. We have just very few minutes, but I wanted to
give Mr. Holt, Mr. Garthwaite that chance, if you'd like to
respond to my colleague because we are very passionate about
this, and I have to tell you that this is not a partisan issue.
Everybody is passionate and I will have a question for Mr.
Mitchell as well so if you could just quickly respond if you'd
like.
Mr. GARTHWAITE. I would say, Ms. Wild, I understand you're
passionate. You brought up Turing Pharmaceuticals and Valiant.
I was pretty specific in my testimony about those two
companies, that those are examples of behavior that I believe
there's a role for the government to regulate their prices. In
fact, a big chunk of my testimony refers specifically to that
instance and why I think for small market generics, that is
something that we should regulate. We've already paid the
innovation tradeoff. This idea about profits versus life. I
mean there are economic realities in life.
Ms. DAVIS. Thank you I am going to--is that enough of a
response? I am sorry. We are just in such a hurry. Mr. Holt?
Mr. HOLT. I also referenced the Turing Pharmaceuticals
situation in my testimony. I do think that is an egregious
breach and I think the single search generics are a real
problem. I also am concerned about patients. My mother has
diabetes. I have seen her off her insulin, so I am very
sensitive to that.
I think the reality is that we see the pipeline that is
coming. We are seeing biologics, gene therapy, we can negotiate
90 percent discounts and individuals aren't going to be able to
pay for these so what we have to talk about is how the system
is going to pay for drugs so that patients do have access.
Ms. DAVIS. Right, and that issue of access--and so I wanted
to turn to Mr. Mitchell and Mr. Mitchell, I wanted to thank you
for being here. I am very familiar with multiple-myeloma, it is
very personal to me and I understand what you are going through
so one of the questions that I have often have, I come from San
Diego and so we work with pharmaceutical companies all the time
but for a long period of time, patients weren't really spoken
to, frankly. They weren't engaged, they weren't at the table.
They weren't really encouraged to participate and provide the
kind of input that I think is important to our researchers, to
the companies as a whole. Mr. Mitchell, do you feel that
situation has changed? Do you feel that people feel as if there
is something that they are being able to offer in this
discussion?
Mr. MITCHELL. I think there is not enough of an opportunity
for policymakers to hear from independent patient groups. Most
of them are funded by the drug companies and that is okay. They
use that money for good purpose, patient education, patient
support but on drug prices they are constrained. I do want to
make a couple of quick points. I agree with Professor
Garthwaite that we should be maximizing welfare and the way to
do that is we are going to have to lower drug prices so people
can get access to the drugs they need. There is enough spending
in the system to reduce crises and not impact R&D, in fact the
money U.S. based drug companies made in 2015 by charging
American side prices was nearly double what was needed to fund
their total global R&D and so if we are going to be making
decisions about where to invest based on returns for venture
capitalists, instead of the needs of people like me and
everybody along this table who knows someone they love, then we
are making a big mistake because we are not putting the public
welfare first. We are saying we are going to provide for the
needs of VCs in order that we get the investment we need and
the final thing is, when drug companies say we are not going
to--what they are saying to me is we want to be able to set any
price we demand and you pay it or you won't get the drugs you
need. We can't do that. We do have to strike the balance that
folks are talking about here.
Ms. DAVIS. Yeah, well thank you. I appreciate your
comments. I mean one of the areas in H.R. 3 that we haven't
focused too much on is how we get to that. If there is a sweet
spot, I am not sure we'd call it that in negotiating with drug
companies and we talked about the average international market
price but in that, and I don't want to go into more detail of
it, there also is this question, this concern about access.
Access in other countries. Again, whether people feel like they
are able to get multi-myeloma drugs elsewhere, obviously have--
it doesn't mean that we have more patients of any one cancer
here in the United States than anywhere else in the world so
obviously they are getting some of that, I think. The other
issue is patents and we haven't talked a lot about them, but
you focused a lot on the fact that we should have more
competition, yes, but you can't have competition if you have
one company that has the monopoly on multiple, multiple drugs
in any one country.
Mr. ISASI. That is the exact point that has not been said
in this entire discussion about competition and worrying about
squelching innovation. These companies are operating with a
government-granted monopoly. This isn't a free market, it is
non-efficient, it is distorted, and they are abusing the
government-granted monopoly and what we should do is negotiate
price in that environment.
Ms. DAVIS. Thank you very much. I know my time is up. I
hope that at some point we are going to be tasking drug
companies to find the cures that we need upfront.
Chairwoman WILSON. Thank you very much, Ms. Davis. I remind
my colleagues that pursuant to committee practice, materials
for submission for the hearing record must be submitted to the
committee clerk within 14 days following the last day of the
hearing, preferably in Microsoft Word format. The materials
submitted must address the subject matter of the hearing.
Only a member of the committee or an invited witness may
submit materials for inclusion in the hearing record. Documents
are limited to 50 pages each. A document longer than 50 pages
will be incorporated into the record by way of internet link
that you must provide to the committee clerk within the
required timeframe but please recognize that years from now,
that link may no longer work.
Again, I want to thank the witnesses for their
participation today. What we have heard is very valuable.
Members of the Committee may have some additional questions for
you, and we ask the witnesses to please respond to those
questions in writing.
The hearing record will be held open for 14 days in order
to receive those responses. I remind my colleagues that
pursuant to committee practice, witness questions for the
hearing record must be submitted to the majority committee
staff or committee clerk within 7 days.
The questions submitted must address the subject matter of
the hearing. Before recognizing the Ranking Member for his
closing statement, I ask unanimous consent to enter the
following materials into the record.
These are letters in support of prescription drug pricing
legislation from AARP, Alliance for Retired Americans, AFSCME,
AFL-CIO, American Federation of Teachers, American Medical
Association, and the California Medical Association. I now
recognize the distinguished Ranking Member for his closing
statement, Mr. Walberg.
Mr. WALBERG. I thank you, Madam Chairwoman and appreciate
the hearing today. Thank you to each of the panelists for being
here. Dr. Garthwaite, I'd be wrong to forget the fact that I
have my oldest grandson turn 13 last week. He was born at 24
weeks at Northwestern Hospital. The result of all sorts of
wonderful, wonderful care in that neonatal ICU unit as well as
medications, et cetera. He's 13 strong, healthy and smarter
than me. At least he would believe that so thank you,
Northwestern.
Madam Chairwoman, this was a good discussion. I think in my
opening comments, I tried to make it clear that this is a type
of discussion that we should have. We don't disagree about
everything in this legislation but there are some major glaring
problems in this legislation that had we had discussions like
this as opposed to a very closed, closed operation of the
speaker of putting together a piece of legislation without
consultation with appropriate committees, ours included, I
think we might have had the opportunity for a better outcome.
As I have said, I have seen that take place in Energy and
Commerce Committee.
I have seen it take place in some major piece of
legislation. I think we could do it. Instead of holding a
hearing on this socialized drug pricing scheme, the committee's
time would be better spent on finding bipartisan solutions to
our nation's problems.
Governments don't negotiate, they dictate. We want
negotiation. How is that done? I think there are means to do
that and I would hope that this committee's leadership, as well
as other committees that are involved with this would put a
slowdown on it to bring together something that indeed can pass
out of this House and chart the course even for the Senate for
something they could vote on and pass as well and the President
could sign, so again, thank you for the time and with that, I
yield back.
Chairwoman WILSON. Thank you to our witnesses for joining
us today and today we heard compelling testimony on the urgent
need for the Federal government to reduce the cost of
prescription drugs for consumers, businesses, and taxpayers.
Americans across this country are struggling to access the
prescription drugs they need to be healthy. They are forced to
pay inflated prices that are far higher than those charged for
the same drugs sold by the same pharmaceutical companies in
other countries and they are hit with annual price hikes that
far exceed the rate of inflation. But our witnesses shared
prescription drug companies are not charging these exorbitantly
high prices because of natural market forces, and the evidence
is clear that they are not inflating prices because they are
investing in research and development as some of my Republican
colleagues may argue. By contrast, prescription drug companies
are artificially inflating prices so that they can pay for
marketing and sales, executive bonuses and stock buybacks. We
cannot allow this to happen in the pharmaceutical industry. We
cannot allow them to get richer while Americans across this
country risk their health under the weight of unaffordable drug
prices.
They are truly drug dealers, and this is criminal. Simply
put, medicines are of no use if those who need them cannot
afford them. That is why it is imperative that we pass the
Lower Drug Cost Now Act. As our witnesses made clear, this
legislation would lower drug prices, increase transparency at
pharmaceutical companies, and align our drug pricing system
with the rest of the developed world.
By adopting the Lower Drug Cost Now Act, Congress can take
a long overdue step toward empowering all Americans, whether
you get your healthcare through Medicare or your employer, to
access fairly-negotiated drug prices. I look forward to working
with each of my colleagues to pass this legislation and improve
the health and lives of Americans for generations to come. If
there is no further business, without objection, the committee
stands adjourned and thank you.
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[Whereupon, at 4:21 p.m., the subcommittee was adjourned.]
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