[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
LOWERING THE COST OF PRESCRIPTION DRUGS: REDUCING BARRIERS TO MARKET
COMPETITION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MARCH 13, 2019
__________
Serial No. 116-17
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
38-120 PDF WASHINGTON : 2021
COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, Jr., New Jersey
Chairman
BOBBY L. RUSH, Illinois GREG WALDEN, Oregon
ANNA G. ESHOO, California Ranking Member
ELIOT L. ENGEL, New York FRED UPTON, Michigan
DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland PETE OLSON, Texas
JERRY McNERNEY, California DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice BILL JOHNSON, Ohio
Chair BILLY LONG, Missouri
DAVID LOEBSACK, Iowa LARRY BUCSHON, Indiana
KURT SCHRADER, Oregon BILL FLORES, Texas
JOSEPH P. KENNEDY III, SUSAN W. BROOKS, Indiana
Massachusetts MARKWAYNE MULLIN, Oklahoma
TONY CARDENAS, California RICHARD HUDSON, North Carolina
RAUL RUIZ, California TIM WALBERG, Michigan
SCOTT H. PETERS, California EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
------
Professional Staff
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
MIKE BLOOMQUIST, Minority Staff Director
Subcommittee on Health
ANNA G. ESHOO, California
Chairwoman
ELIOT L. ENGEL, New York MICHAEL C. BURGESS, Texas
G. K. BUTTERFIELD, North Carolina, Ranking Member
Vice Chair FRED UPTON, Michigan
DORIS O. MATSUI, California JOHN SHIMKUS, Illinois
KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland H. MORGAN GRIFFITH, Virginia
BEN RAY LUJAN, New Mexico GUS M. BILIRAKIS, Florida
KURT SCHRADER, Oregon BILLY LONG, Missouri
JOSEPH P. KENNEDY III, LARRY BUCSHON, Indiana
Massachusetts SUSAN W. BROOKS, Indiana
TONY CARDENAS, California MARKWAYNE MULLIN, Oklahoma
PETER WELCH, Vermont RICHARD HUDSON, North Carolina
RAUL RUIZ, California EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire GREG WALDEN, Oregon (ex officio)
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
LISA BLUNT ROCHESTER, Delaware
BOBBY L. RUSH, Illinois
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
----------
Page
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, opening statement............................... 1
Prepared statement........................................... 3
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 4
Prepared statement........................................... 6
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 7
Prepared statement........................................... 9
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 9
Prepared statement........................................... 11
Hon. Jeff Duncan, a Representative in Congress from the State of
South Carolina, prepared statement............................. 116
Witnesses
Lou Kennedy, Chief Executive Officer and Owner, Nephron
Pharmaceuticals................................................ 13
Prepared statement........................................... 16
Answers to submitted questions............................... 230
Chester ``Chip'' Davis, Jr., President and Chief Executive
Officer, Association for Accessible Medicines.................. 21
Prepared statement........................................... 23
Anthony A. Barrueta, Senior Vice President, Government Relations,
Kaiser Permanente.............................................. 34
Prepared statement........................................... 36
Answers to submitted questions............................... 232
Marc M. Boutin, Chief Executive Officer, National Health Council. 41
Prepared statement........................................... 43
Kurt R. Karst, Director, Hyman, Phelps and McNamara, P. C........ 49
Prepared statement........................................... 51
Jeffrey P. Kushan, Partner, Sidley Austin, LLP................... 55
Prepared statement........................................... 58
Answers to submitted questions............................... 244
Michael A. Carrier, Distinguished Professor, Rutgers Law School.. 66
Prepared statement........................................... 68
Submitted Material
H.R. 938, the BLOCKING Act of 2019............................... 117
H.R. 965, the Creating and Restoring Equal Access to Equivalent
Samples Act of 2019............................................ 120
H.R. 985, the FAST Generics Act of 2019.......................... 142
H.R. 1499, the Protecting Consumer Access to Generic Drugs Act of
2019........................................................... 157
H.R. 1503, the Orange Book Transparency Act of 2019.............. 175
H.R. 1506, the FAIR Generics Act................................. 180
H.R. 1520, the Purple Book Continuity Act of 2019................ 191
Analysis of March 2019, ``Measuring the cost of delayed ANDA
approvals,'' Office of Generic Drug Policy, Center Drug
Evaluation Research, from Food and Drug Administration, Mr.
Schrader, submitted by Ms. Eshoo............................... 196
Letter of March 13, 2019, from Tom Woller, R.Ph., System Vice
President, Pharmacy Services, Advocate Aurora Health, to Ms.
Eshoo and Mr. Burgess, submitted by Ms. Eshoo.................. 200
Letter of February 5, 2019, from Joyce A. Rogers, Senior Vice
President, Government Affairs, AARP, to Representative David
Cicilline, et al., submitted by Ms. Eshoo...................... 203
Letter of March 12, 2019, from Scott Frey, Director of Federal
Government Affairs, American Federation of State, County and
Municipal Employees, to Ms. Eshoo and Mr. Burgess, submitted by
Ms. Eshoo...................................................... 205
Statement of the America Society of Health-System Pharmacists,
March 13, 2019, submitted by Ms. Eshoo......................... 207
Letter of March 12, 2019, AARP, et al., to Mr. Pallone and Mr.
Walden, submitted by Ms. Eshoo................................. 211
Letter of February 15, 2019, Campaign for Sustainable Rx Pricing,
et al., to Representative David Cicilline, et al., submitted by
Ms. Eshoo...................................................... 213
Letter of March 13, 2019, from Michael L. Munger, M.D., Board
Chair, Fellow American Academy of Family Physicians, to Ms.
Eshoo and Mr. Burgess, submitted by Ms. Eshoo.................. 215
Letter of March 13, 2019, Cigna, et al., to Mr. Rush, submitted
by Ms. Eshoo................................................... 218
Letter of February 25, 2019, from Susan A. Cantrell, R.Ph., CAE,
Chief Executive Officer, Academy of Managed Care Pharmacy, to
Representative Jim Sensenbrenner, et al., submitted by Ms.
Eshoo.......................................................... 219
Letter of March 12, 2019, from George J. Hruza, M.D., President,
American Academy of Dermatology Association, to Representative
Peter Welch, et al., submitted by Ms. Eshoo.................... 221
Letter of March 13, 2019, from David Certner, Legislative Counsel
and Legislative Policy Director, Government Affairs, AARP, to
Mr. Pallone, et al., submitted by Ms. Eshoo.................... 223
Statement the Campaign for Sustainable Rx Pricing, by Lauren
Aronson, Executive Director, March 13, 2019, submitted by Ms.
Eshoo.......................................................... 225
LOWERING THE COST OF PRESCRIPTION DRUGS: REDUCING BARRIERS TO MARKET
COMPETITION
----------
WEDNESDAY, MARCH 13, 2019
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:02 a.m., in
John D. Dingell Room 2123, Rayburn House Office Building, Hon.
Anna G. Eshoo (chairwoman of the subcommittee) presiding.
Present: Representatives Eshoo, Butterfield, Matsui,
Castor, Sarbanes, Lujan, Schrader, Kennedy, Cardenas, Welch,
Ruiz, Dingell, Kuster, Kelly, Barragan, Blunt Rochester, Rush,
Pallone (ex officio), Burgess (subcommittee ranking member)
Upton, Shimkus, Guthrie, Griffith, Bilirakis, Long, Bucshon,
Brooks, Mullin, Hudson, Carter, Gianforte, and Walden (ex
officio).
Staff present: Jeffrey C. Carroll, Staff Director; Luis
Dominguez, Health Fellow; Waverly Gordon, Deputy Chief Counsel;
Tiffany Guarascio, Deputy Staff Director; Megan Howard, FDA
Detailee; Zach Kahan, Outreach and Member Service Coordinator;
Joe Orlando, Staff Assistant; Tim Robinson, Chief Counsel;
Samantha Satchell, Professional Staff Member; Kimberlee
Trzeciak, Senior Health Policy Advisor; C. J. Young, Press
Secretary; Mike Bloomquist, Minority Staff Director; Adam
Buckalew, Minority Director of Coalitions and Deputy Chief
Counsel, Health; Jordan Davis, Minority Senior Advisor;
Margaret Tucker Fogarty, Minority Staff Assistant; Theresa
Gambo, Minority Human Resources/Office Administrator; Peter
Kielty, Minority General Counsel; Ryan Long, Minority Deputy
Staff Director; James Paluskiewicz, Minority Chief Counsel,
Health; Zack Roday, Minority Communications Director; Kristen
Shatynski, Minority Professional Staff Member, Health; and
Danielle Steele, Minority Counsel, Health.
Ms. Eshoo. Good morning, everyone. The Subcommittee on
Health will now come to order.
The Chair now recognizes herself for 5 minutes for an
opening statement.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
First of all, welcome to all of our witnesses. It is a
pleasure and an honor to have you here with us today, to
everyone that is in the hearing room, and to all of my
colleagues. This is the first hearing of the Health
Subcommittee on drug pricing--legislative hearing.
For too long, the American people have been subjected to
the abuse of the patent system by pharmaceutical companies, and
generic companies entering into agreements and employing
tactics that block competition and keep prices high. When brand
and generic manufacturers employ these tactics, it is really
the American people that lose out by having to pay more for the
prescription drugs because there is less competition.
We know that when generics come to market, they can drive
prices down exponentially for consumers. The United States has
the lowest, generic drug prices in the world. So where there
are competition between brand drugs and multiple generics, it
works. The bills we are considering today will inject
competition in the system sooner, move drugs to the market more
quickly, and lower costs. We are examining the CREATES Act,
authored by Representatives Cicilline, Sensenbrenner, Nadler,
Collins, Welch, McKinley, and the FAST Generics Act, authored
by Representatives Welch, McKinley, and Cicilline, which
address barriers to generic development.
Both bills take a different approach to address the
stalling tactics brand manufacturers use to restrict access to
samples of their products. Generic companies rely on samples of
the brand product to ensure that the generic is identical to
the brand drug, so that patients can use the products
interchangeably.
The second group of bills addresses marketing abuse
barriers. The BLOCKING Act, introduced by Representatives
Schrader and Carter, target generics that have been granted
exclusivity and then block other products from coming to
market. This delaying of their exclusivity periods is referred
to as parking, and I believe Secretary Azar yesterday referred
to it as squatting.
When a company delays the start of the exclusivity period
of a product, it not only delays other generics from coming to
market, it also delays lower prices reaching patients sooner.
During our hearing on the fiscal year 2020 budget
yesterday, Secretary Azar explained that this parking behavior
leads to an average delay of 12 months for a generic to come to
market. The Protecting Consumer Access to Generic Drugs Act,
introduced by Representative Rush, and the FAIR Generic Drugs
Act, introduced by Representative Barragan target pay-for-delay
agreements. This is brand manufacturers paying generic
companies to delay entering the market with generic versions of
the drug.
Remember that saying, it takes two to tango, and they have
tangoed. And both are wrong. The Protecting Consumer Access to
Generic Drugs Act prohibits these pay-for-delay agreements
outright. While the FAIR Generics Act sets up a different,
legal framework that discourages brand manufacturers and
generic companies from entering into these agreements.
The last group of bills make important updates to the
Orange and Purple Books at the FDA by amending what information
must be included and requiring these resources to be published
in a user-friendly way. When manufacturers are considering
where to invest their research and development dollars, they
use the Orange and Purple Books to determine what patents are
currently active and which patents will be expiring soon.
Representative Kelly and myself introduced the Purple Book,
and at any rate, this is a legislative hearing to discuss the
bills, to close loopholes, eliminate bad practices in the drug
system, all in order to bring the costs down.
Welcome to our witnesses and we look forward to your
testimony.
[The prepared statement of Ms. Eshoo follows:]
Prepared Statement of Hon. Anna G. Eshoo
Welcome to the first hearing of the Health Subcommittee on
drug pricing.
For too long, the American people have been subjected to
the abuse of the patent system by pharmaceutical companies and
generic companies entering into agreements and employing
tactics that block competition and keep prices high.
When brand and generic manufacturers employ these tactics,
the American people lose out by having to pay more for their
prescription drugs because there is less competition.
We know that when generics come to market, they can drive
prices down exponentially for consumers.
The United States has the lowest generic drug prices in the
world, so where there are competition between brand drugs and
multiple generics, it works.
The bills we're considering today will inject competition
in the system sooner, move drugs to the market more quickly,
and lower costs.
We're examining the CREATES Act authored by Representatives
Cicilline, Sensenbrenner, Nadler, Collins, Welch and McKinley,
and the FAST Generics Act authored by Representatives Welch,
McKinley, and Cicilline, address barriers to generic
development. Both bills take a different approach to address
the stalling tactics brand manufacturers use to restrict access
to samples of their products.
Generic companies rely on samples of the brand product to
ensure that the generic is identical to the brand drug so that
patients can use the products interchangeably.
The second group of bills addresses marketing abuse
barriers.
The BLOCKING ACT introduced by Representatives Schrader and
Carter targets generics that have been granted exclusivity and
then block other products from coming to market. This delaying
of their exclusivity periods is referred to as ``parking''.
When a company delays the start of the exclusivity period
of a product, it not only delays other generics from coming to
market. It also delays lower prices reaching patients sooner.
During our hearing on the FY2020 Budget yesterday,
Secretary Azar explained that this ``parking'' behavior leads
to an average delay of 12 months for a generic to come to
market.
The Protecting Consumer Access to Generic Drugs Act
introduced by Representative Rush, and the FAIR Generic Drugs
Act introduced by Representative Barragan, target pay-for-delay
agreements. This is brand manufacturers paying generic
companies to delay entering the market with generic versions of
the drug. It takes two to tango and manufacturers and generic
companies are both wrong.
The Protecting Consumer Access to Generic Drugs Act
prohibits these Pay for Delay agreements outright, while the
FAIR Generics Act sets up a different legal framework that
discourages brand manufacturers and generic companies from
entering into these agreements.
The last group of bills make important updates to the
Orange and Purple Books at the FDA by amending what information
must be included and requiring these resources to be published
in a user-friendly way online.
When manufacturers are considering where to invest their
research and development dollars, they use the Orange and
Purple Books to determine what patents are currently active and
which patents will be expiring soon.
The Orange Book Transparency Act was introduced by
Representative Kelly, and I introduced the Purple Book
Continuity Act.
This is a legislative hearing to debate bills that will
close loopholes and eliminate bad practices in the drug system
in order to bring down costs. I look forward to passing bills
that will be considered in the full House.
Welcome to our witnesses and we look forward to your
testimony.
Ms. Eshoo. I now would like to yield the remainder of my
time to Representative Welch.
Mr. Welch. Thank you very much. Thank you, first of all,
Madam Chair, for your leadership on this incredible issue of
drug pricing.
Second, we have got an opportunity, bipartisan, to finally
tackle the rip-off pricing in the pharma system. And yesterday
we had Secretary Azar here, who said that the administration
supports efforts to end pay-for-delay, to have FAST and the
CREATES Act passed to help us to ban product-hopping, to crack
down on the citizen-petition abuses.
So we have an opportunity, bipartisan, to address something
that has been an enormous burden on the American consumer and
the American taxpayer. And thank you for your leadership, and I
look forward to working with you and our ranking member to make
progress. Thank you.
Ms. Eshoo. I thank the gentleman. I now have the pleasure
of recognizing the ranking member of the subcommittee, Mr.
Burgess, for 5 minutes for his opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Yes, just prior to doing that, if I could ask
to be recognized for a unanimous-consent request for
Representative Duncan to be able to participate in today's
hearing.
Ms. Eshoo. So ordered.
Mr. Burgess. And also if he is yielded time to make an
opening statement, enter a written opening statement in the
record, question witnesses during the hearing, and submit
additional questions for the record at the end of the hearing.
Ms. Eshoo. So ordered.
Mr. Burgess. So, thank you. We are having a hearing that
will touch upon the important topic of drug pricing, and I will
admit to being frustrated that we are not considering, perhaps,
some additional policies. As the chairman of this subcommittee
in December of 2017, I held a drug-supply-chain hearing with a
total of ten witnesses. The number of witnesses pushed the
limits of how many individuals we could actually fit at one
table, and I do recall getting some criticism from the then
ranking member of the full committee, but I thought it was
critical that we had someone present--or someone to represent
each level of the drug-supply chain.
Now, as evidenced at that hearing, there are a number of
conflicting opinions held by the entities along the supply
chain, but that does not mean that we should not listen to
them. It is likely that legislation to address drug pricing
will ruffle some feathers, and that is OK. However, it is not
acceptable to intentionally legislate within a black box.
A few of the bills before us today are bipartisan and have
been previously introduced, and there are numerous new pieces
of legislation. The text of the bills was not shared with the
Republicans until last Monday. And that, of course, does not
comport with the two-week rule that has been considered sacred
for years. Not a Republican rule. This was a rule that both
Chairman Waxman and Chairman Dingell held in high regard.
I will reiterate what I said last week. Bipartisanship is
asking for my input, not just my vote. There are some of these
bills that we might have been able to work and collaborate, and
we may still be able to collaborate going forward, but giving a
Member less than 24 hours to sign on to a piece of legislation
they have never seen is discourteous, especially when we have
said at each step along the way, in this Congress, that we are
willing to work in a bipartisan fashion. But if we don't have a
seat at the table during the drafting process, you can expect
it to take longer as we do our due diligence in vetting the
policies.
Additionally, no stakeholders had been consulted in the
drafting of these bills, including the Association for
Accessible Medicines, the generics manufacturers whose bills--
some of these bills are intended to benefit. In fact, the
generics manufacturers have either not commented on, or opposed
some of the bills that are before us this morning, and we may
hear more about that later.
Several of these bills had not seen the light of day
outside of the chairman's staff, the Members these bills were
assigned to, and House legislative counsel. These bills have
received no input from stakeholders, no technical assistance
from the agencies, specifically the Food and Drug
Administration, and the Federal Trade Commission.
As chairman of the subcommittee, I would have never thought
about holding a hearing on seven bills that were not shared
with the other party until 9 days before the hearing, not to
mention, without the agency witnesses. It is unthinkable, that
the Food and Drug Administration was not invited to testify at
this hearing.
And these are not grab-bag, drug-pricing issues. These are
seven pieces of complex legislation that all intricately
involve the Food and Drug Administration, and not only was the
Food and Drug Administration not invited to present us with
their thoughts about these bills, but the Food and Drug
Administration was not consulted for technical assistance on
any of these bills prior to this hearing.
I learned that the staff spoke with the Food and Drug
Administration about these bills for the first time yesterday,
and the agency had more questions than answers. As the agency
that would be largely tasked with implementing these bills,
should they be signed into law, it is troubling that agency
witnesses were not considered. Ideally, the Republicans could
have called the FDA as a Republican witness, but we didn't get
the notice for the hearing in time to allow us to do so. As you
recall, is it does take some time to get testimony cleared
through Office of Management of the Budget.
But I do want to thank the witnesses who are here today,
and I want to thank them for agreeing to testify before us this
morning. This is a complex problem, and as someone, I think,
previously has said, there is no one single solution. So there
is no 100 percent solution, but there are probably 101 percent
solutions, and if we will get to work on some of them, we can
achieve some benefit for the American people.
But I do again thank the witnesses, and I think we can
utilize their expertise while we highlight the flaws in some of
these bills, we can accentuate what is positive in some of
these bills, and use their input to improve upon the bills
during the path forward. And I will yield back my time.
[The prepared statement of Mr. Burgess follows:]
Prepared Statement of Hon. Michael C. Burgess
Thank you, Chairwoman Eshoo. Today, we are having a hearing
that will touch upon the important topic of drug pricing;
although I am frustrated that we are not considering more
substantive policies. As the chairman of this subcommittee in
December of 2017, I held a drug supply chain hearing with a
total of ten witnesses. While the number of witnesses pushed
the limits on how many individuals we could fit at one table, I
thought it was critical that we have someone to represent each
level of the drug supply chain.
As evidenced by that hearing, there are a number of
conflicting opinions held by the entities along the supply
chain, but that does not mean that we should not listen to
them. It is likely that legislation to address drug pricing
will ruffle some feathers, and that is OK; however, it is not
acceptable to intentionally legislate in a black box.
While a few of the bills before us today are bipartisan and
have been previously introduced, there are numerous new pieces
of legislation. The text of these bills were not shared with
the Republicans until last Monday, which violates the two week
rule that has been considered sacred for years. This was not a
Republican rule. This is a rule that both Chairman Waxman and
Chairman Dingell held in high regard. I will reiterate what I
said last week--bipartisanship is asking for my input, not just
for my vote.
There are some of these bills that we might have been able
to work together on, and may be able to partner on going
forward. Giving a Member less than 24 hours to sign onto a
piece of legislation they have never seen is discourteous,
especially when we have said at each hearing thus far this
Congress that we are willing to work in a bipartisan way. If we
don't have a seat at the table during the drafting process, you
can expect us to take longer to do our due diligence in vetting
the policies.
Additionally, no stakeholders had been consulted in the
drafting of these bills, including the Association for
Accessible Medicines--the generics manufacturers, whom these
bills are supposedly intended to benefit. In fact, the generics
manufacturers have either not commented on, or oppose, a number
of the bills before us this morning.
Several of these bills had not seen the light of day
outside of Chairman Pallone's staff, the Members these bills
were assigned to, and House legislative counsel. These bills
have received no input from stakeholders, and no technical
assistance from the agencies--namely the Food and Drug
Administration and the Federal Trade Commission.
As Chairman of this Subcommittee, I never would have even
thought about holding a hearing on seven bills that were not
shared with nine days until the hearing, not to mention without
the agency witnesses. It is unthinkable that the Food and Drug
Administration was not invited to testify at this hearing.
This is not a grab-bag drug pricing hearing. These are
seven pieces of complex legislation that all intricately
involve the FDA. Not only was FDA not invited to present us
with their thoughts about these bills, the FDA was not
consulted for technical assistance on any of these bills prior
to this hearing. I learned that staff spoke with FDA about
these bills for the first time yesterday, and the agency had
more questions than answers. As the agency that would largely
be tasked with implementing these bills should any be signed
into law, I find it immensely troubling that they agency
witnesses were not considered by the Democrats. Ideally, we
could have called FDA in to be our Republican witness, but we
did not get notice that this hearing was happening with enough
time to do so.
I do want to thank the witnesses that are here for agreeing
to testify before us this morning. I do hope that we can use
their expertise to highlight the flaws in some of these bills,
and that we can utilize their input to improve upon some of the
bills on which we may find a bipartisan path forward. I yield
back.
Ms. Eshoo. I thank the gentleman.
I would just like to say a few things about--a few remarks.
First of all, the sky is really not caving in. Half of the
bills being considered have been introduced in previous
congresses. They are not brand-new. And multiple are
bipartisan. We shared language with the minority on March 4th.
We included the minority in all witness calls, we are open to
having conversations on language. This is a legislative
hearing. It is the first step, and to have the FDA--agencies
don't come to legislative hearings to comment on the
legislation.
So this is an important--I believe that this subcommittee
is the first to be taking up, with a legislative hearing, seven
bills, on drug pricing, and I don't believe any other committee
in the House has done that, nor has it occurred in the Senate
as yet. So on we go.
Now I would like to call on the--recognize the chairman of
the full committee for his opening statement, 5 minutes. Mr.
Pallone?
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Madam Chair. And let me also add,
from a process point of view, you know, the Energy and Commerce
Committee is one of the few--maybe the only one--that has
complete, regular order. Meaning that, you know, we have
hearings in the subcommittee; we have markups in the
subcommittee; we then have a markup in the full committee. And
this has been done on a bipartisan basis.
So I just--I just want to remind everyone that when you
talk about process, you know, we really follow regular order,
and I am not trying to disapprove of other committees, but
there are very few committees that actually do that entire
process.
But in any case, today the committee begins the process of
fulfilling our commitment to provide some much-needed relief to
Americans struggling to pay for skyrocketing prescription
drugs. I am pleased that we will be examining policies that
will help to bring the high cost of prescription drugs down.
The American people have justifiably been demanding
congressional action to make prescription drugs more
affordable, and who can blame them.
Prices are so high that recent data shows that nearly a
quarter of Americans didn't fill a prescription in the past
year due to the high cost. Nineteen percent say they skipped a
dose or cut pills in half because they wanted to make them last
longer. These are choices Americans simply should not have to
make. It is unacceptable and could, in fact, lead to greater
illness and higher medical costs down the road.
And it is time for Congress to help make prescription drugs
more affordable. One way to achieve this goal is to facilitate
greater competition from generic and biosimilar manufacturers.
And I believe reducing barriers to generic drugs and increasing
competition in the pharmaceutical market will benefit American
families who are struggling to afford their medications.
And let me stress that--competition. You know, a lot of
times Congress is accused of, you know, trying to do things
that are not competitive. This is clearly the opposite. This is
competition. This is market-driven. This is capitalism. That is
what we are about here.
Generic drugs play a critical role in increasing access and
reducing costs in our healthcare system. In 2017, the entry of
generic drugs to the market saved patients and the public $265
billion, including over $82 billion for Medicare alone, and
that is more than $1,900 per enrollee. These numbers alone
demonstrate the substantial cost savings to consumers when we
ensure generic products can come to market as soon as possible.
The proposals before us today will close loopholes that
some drug companies are exploiting to game the system, unfairly
raise drug prices, and take advantage of American families. And
more specifically, the bills address three key barriers for
generics--patent listing, drug development and market entry,
and market barriers. Two of the bills we'll be discussing, the
Orange Book Transparency Act of 2019, introduced by
Representative Kelly, and the Purple Book Care Continuity Act
of 2019, introduced by Chairwoman Eshoo, would help to increase
accuracy and transparency of the two databases that guide
development decisions for generic and biosimilar manufacturers.
These bills would help generics overcome the barrier of patent
listing.
Two other bills--the CREATES Act and the FAST Generics
Act--led here on the committee by Representatives Welch and
McKinley, would help address the barrier of drug development
and market entry. Today the use of restrictive distribution
systems, including REMS by certain manufacturers, delays access
to samples of branded drug products for development purposes.
It also impedes market entry through delays in negotiations on
single shared system REMS. And this important legislation would
eliminate these barriers.
And, finally, we are considering three policies focused on
market barriers--again, market, I stress market--the BLOCKING
Act, introduced by Representatives Schrader and Carter, would
address delays that occur when first-time generics are unable
to be approved. This blocks the approval of other generics.
The Protecting Consumer Access to Generic Drugs Act of
2019, introduced by Representative Rush, would discourage use
of pay-for-delay agreements that result in generics delaying
development or market entry.
And, finally, the FAIR Generics Act, introduced by
Representative Barragan, would strengthen incentives for
generic first applicants to enter the market on the earliest
possible date and disincentive patent settlement agreements
that delay generic entry.
These are all commonsense solutions that will remove
unnecessary barriers to competition, and again I stress
competition. These bills are a strong first step in making
prescription drugs more affordable and providing real relief to
hardworking Americans that are being price-gouged at the
pharmacy counter.
Now, I know there are some people that think that, you
know, generics aren't a major factor in bringing drug prices
down. Totally disagree. My predecessors--Congressman Dingell,
Congressman Waxman--very much believed that generics will lower
prices and that generic competition is important, and I
strongly believe that as well. And that is why we want to bring
back the generics as even more a factor in bringing drug prices
down, because we believe very strongly in that.
So thank you, Madam Chair. This is a very important
hearing.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
Today this committee begins the process of fulfilling our
commitment to provide some much-needed relief to Americans
struggling to pay for skyrocketing prescription drugs.
I am pleased that we will be examining policies that will
help to bring the high costs of prescription drugs down.
The American people have justifiably been demanding
Congressional action to make prescription drugs more
affordable, and who can blame them. Prices are so high that
recent data shows that nearly a quarter of Americans didn't
fill a prescription in the past year due to the high cost.
Nineteen percent say they skipped a dose or cut pills in half
because they wanted to make them last longer. These are choices
Americans simply should not have to make. It is unacceptable
and could in fact lead to greater illness and higher medical
costs down the road.
It is time for Congress to help make prescription drugs
more affordable. One way to achieve this goal is to facilitate
greater competition from generic and biosimilar manufacturers.
I believe reducing barriers to generic drugs and increasing
competition in the pharmaceutical market will benefit American
families who are struggling to afford their medications.
Generic drugs play a critical role in increasing access and
reducing costs in our healthcare system. In 2017, the entry of
generic drugs to the market saved patients and the public $265
billion, including over $82 billion for Medicare alone--that's
more than $1,900 per enrollee. These numbers alone demonstrate
the substantial cost savings for consumers when we ensure
generic products can come to market as soon as possible.
The proposals before us today will close loopholes that
some drug companies are exploiting to game the system, unfairly
raise drug prices and take advantage of American families.
More specifically, the bills address three key barriers for
generics--patent listing, drug development and market entry,
and market barriers.
Two of the bills we will be discussing--the Orange Book
Transparency Act of 2019 introduced by Rep. Kelly, and the
Purple Book Continuity Act of 2019 introduced by Chairwoman
Eshoo--would help to increase accuracy and transparency of the
two databases that guide development decisions for generic and
biosimilar manufacturers. These bills would help generics
overcome the barrier of patent listing.
Two other bills, the CREATES Act and the FAST Generics Act,
led here on the Committee by Reps. Welch and McKinley, would
help address the barrier of drug development and market entry.
Today, the use of restricted distribution systems, including
REMS, by certain manufacturers delays access to samples of
branded drug products for development purposes. It also impedes
market entry through delays in negotiations on single-shared
system REMS. This important legislation would eliminate these
barriers.
And finally, we are considering three policies focused on
market barriers. The BLOCKING Act, introduced by Reps. Schrader
and Carter, would address delays that occur when first time
generics are unable to be approved. This blocks the approval of
other generics. The Protecting Consumer Access to Generic Drugs
Act of 2019, introduced by Rep. Rush, would discourage the use
of pay-for-delay agreements that result in generics delaying
development or market entry. And finally, the FAIR Generics
Act, introduced by Rep. Barragan, which would strengthen
incentives for generic first applicants to enter the market on
the earliest possible date and disincentive patent settlement
agreements that delay generic entry.
These are all commonsense solutions that will remove
unnecessary barriers to competition. These bills are a strong
first step in making prescription drugs more affordable and
providing real relief to hardworking Americans that are being
price gouged at the pharmacy counter.
Ms. Eshoo. We thank the chairman, and now it is my pleasure
to recognize the ranking member of the full committee, Mr.
Walden.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Well, good morning, Madam Chair, and thanks for
having this hearing, and I appreciate the comments of the full
committee chair regarding how this committee works with
hearings and then subcommittee hearings on legislation, and, of
course, full committee markups, and I think that has been a
hallmark of this committee, and I am glad to hear it will be
that way going forward.
I wasn't going to say this, but given all the other
discussion, it is important to note that the majority added a
witness to this panel that we didn't find out about until after
5:00 on Friday.
And so, Mr. Davis, we thank you for joining us, because we
reached out to you after that, because then we were given an
opportunity, and it was sort of short notice, I know. But we
appreciate your being here today.
Last Congress, as chairman of this committee, it was a
priority of mine to make sure that patients could get
streamlined access to more affordable prescription drugs.
Working together in a bipartisan manner, the committee advanced
the Food and Drug Administration Reauthorization Act, FADARA,
to the full House, by unanimous vote, I might add, 54 to zero.
The bill then went on to pass the House and, by voice vote, the
Senate before being signed into law.
This law helps incentivize the entrance of competitive,
generic drugs--I agree with the chairman, generics really
matter--where there was a lack of competition in the
marketplace, resulting in ability to decrease cost to
consumers, and as a result, we have already seen generic drugs
come to the market through these new pathways and prices begin
to drop for consumers on a variety of medications. So I think
the good work of the Energy and Commerce Committee again
showing through.
In fact, according to the FDA, roughly 1,275 approvals and
approximately 320 tentative approvals for generic drugs have
occurred since passage of this law. This includes the approval
of the first ever generic EpiPen, and we know what was involved
around that. Even more, five competitive generic therapies
approvals have taken place thanks to the new pathway granted to
the FDA by this committee. And I would also say the work the
committee did on the 21st Century Cures, as we heard yesterday
from Secretary Azar, also allowed for more drugs to come to
market sooner and more competition.
So I thank the former chairman, Mr. Upton, for his
leadership, and Ms. DeGette as well.
The bipartisan law has lowered the cost of important
medications and devices. It has sped up how medical innovations
come to fruition, and this is a win for consumers. The real
results are a bipartisan cooperative approach, and we didn't
stop there.
We then turned our attention to the complete, drug-supply
chain. We put together arguably, I think, one of the best
bipartisan member briefings, as my tenure as chairman. For that
briefing, we brought in an academic expert in drug pricing to
better educate the members of the committee on the multifaceted
problem and creative solutions to drive down the cost of
prescription drugs.
Following that, we brought in ten witnesses, into a
bipartisan hearing in this very room, where we dug into all
aspects of the entire drug-supply chain. That included
manufacturing, wholesale and distribution, and payment for
drugs, and how each of these stages impacts the cost of
medications. And they were all at that table, and they couldn't
point to somebody who wasn't because that person was there,
too, and it really helped in our discussion.
Last Congress, our committee made real progress in getting
lower-cost generics to market, incentivizing adding competition
where it previously did not exist, examining the drug-supply
chain, all because we worked together toward a common goal.
Regrettably, while Republicans share the goal of today's
hearing--and we do--and some of these bills have bipartisan
cosponsorship, and we do want to lower the cost of prescription
drugs--we wish it were more inclusive. Today we are considering
seven bills. Only three have Republican cosponsors. That is
largely because we didn't get a list of these bills until just
8 days ago. And then we were given just 24 hours to help
identify potential Republican cosponsors, and by my count, this
subcommittee has reviewed 14 bills this Congress. Just four
have Republican coauthors, and I know we can do better than
that.
Equally concerning, the bills we are examining today each
represent complex modifications of the Food, Drug, and
Cosmetics Act, and the FDA is not serving as a witness. And I
think we would benefit by their input, and certainly Dr.
Gottlieb, who is leaving the FDA, was a terrific participant
before this committee.
So I hope we will hear from the FDA along the process
before the markup. Legislative hearing is the only public
opportunity, though, to hear from experts on the policies being
advanced, and we will not have the agency responsible for
implementing such technical policies present.
[The prepared statement of Mr. Walden follows:]
Prepared Statement of Hon. Greg Walden
Thank you, Madam Chair, for hosting today's hearing--the
first regarding the issue of drug pricing under the new
majority.
Last Congress, as chairman of this committee, it was a
priority of mine to make sure that patients could get
streamlined access to more affordable prescription drugs.
Working together in a bipartisan manner, this committee
advanced the Food and Drug Administration Reauthorization Act--
or FDARA--to the full House by a unanimous vote of 54-0. The
bill then went on to pass the House of Representatives by voice
vote before being signed into law by President Trump.
This law helps incentivize the entrance of competitive
generic drugs where there was a lack of competition in the
marketplace, resulting in an ability to decrease costs to
consumers. As a result, we've already seen generic drugs come
to the market through these new pathways, and prices begin to
drop for consumers on a variety of medications.
In fact, according to the FDA, roughly 1,275 approvals and
approximately 320 tentative approvals for generic drugs have
occurred since passage of this law. This includes the approval
of the first ever generic EpiPen. Even more, five competitive
generic therapies approvals have taken place thanks to the new
pathway granted to the FDA by this committee.
This bipartisan law has lowered the costs of important
medications and devices, sped up how medical innovations come
to fruition, and is a win for our healthcare workforce.
These real results are the result of our bipartisan,
cooperative approach.
And we didn't stop there. . .
We then turned our attention to the complete drug supply
chain. We put together arguably the most well attended
bipartisan member briefing of my tenure as chairman. For that
briefing we brought in an academic expert in drug pricing to
better educate our committee on this multifaceted problem and
creative solutions to drive down the cost of prescription
drugs.
Following that, we brought 10 witnesses into a bipartisan
hearing in this very room where we dug into all aspects of the
drug supply chain, including manufacturing, wholesale and
distribution, and payment for drugs--and how each of these
stages impact the cost of medications.
Last Congress, our committee made real progress in getting
lower-cost generics to the market, incentivizing and adding
competition where it previously didn't exist, and examining the
drug supply chain--all because we worked together towards a
common goal.
Regrettably, while Republicans share the goal of the
today's hearing--lowering the cost of prescription drugs--the
process has been anything but inclusive.
Today, we're considering seven bills, but only three have
Republican cosponsors. That's largely because we didn't even
get a list of these bills until just eight days ago. And then,
we were given just 24 hours to help identify potential
Republican cosponsors.
By my count, this subcommittee has reviewed 14 bills this
Congress. Just four have Republican coauthors. That's a
disturbing trend.
Equally concerning, the bills we are examining today each
represent complex modifications to the Food, Drug, and
Cosmetics Act and the FDA is not even serving as a witness. A
legislative hearing is the only public opportunity to hear from
experts on the policies being advanced, and we will not have
the agency responsible for implementing such technical policies
present.
Madam Chair, is there a reason we're not hearing from the
FDA experts? Can you commit that this subcommittee will have an
opportunity to get the agency's expert advice and counsel
before members are required to vote on these bills?
I know you care deeply about getting public policy right,
and we stand ready to work with on these important matters.
American consumers need our help to get medical costs down and
consumer choice up.
Mr. Walden. So with that, I am going to yield the balance
of my time to Mr. Duncan.
Mr. Duncan. I thank the gentleman, and Madam Chairman,
thank you for giving me the time and opportunity to be here
today. It is an honor to introduce the President and CEO, and
owner of Nephron Pharmaceuticals, and my good friend and fellow
South Carolinian, Ms. Lou Kennedy.
Nephron Pharmaceuticals moved their headquarters to South
Carolina in 2017 and employs over 600 people locally, all with
a variety of skill sets. It is important to note that Lou is
strongly supportive of our local veterans, all with a variety
of skill sets. It is important to note--excuse me, Nephron
hires a significant number of veterans as they are already
primed to follow chain-of-command in the work environment. Lou
is supportive of the University of South Carolina where Nephron
recently established----
Ms. Eshoo. The gentleman's time is expired. I am sorry.
Your time is expired. And we are glad that you are joining us
today.
Mr. Duncan. I yield back.
Ms. Eshoo. Once again, welcome to all the witnesses. We
have a very full table, and we are anxious to receive your
testimony, and thank you for your written testimony. I want to
remind Members that, pursuant to committee rules, all Members'
written opening statements shall be made part of the record.
So we will start with Ms. Lou Kennedy, the CEO and owner of
Nephron Pharmaceuticals. Welcome to you and make sure the mike
is on----
Ms. Kennedy. Thank you.
Ms. Eshoo. Ms. Kennedy, you have 5 minutes.
STATEMENTS OF LOU KENNEDY, CHIEF EXECUTIVE OFFICER AND OWNER,
NEPHRON PHARMACEUTICALS; ANTHONY BARRUETA, SENIOR VICE
PRESIDENT, GOVERNMENT RELATIONS, KAISER PERMANENTE; MICHAEL
CARRIER, DISTINGUISHED PROFESSOR, RUTGERS LAW SCHOOL; KURT
KARST, DIRECTOR, HYMAN, PHELPS & MCNAMARA, P. C.; JEFFREY P.
KUSHAN, PARTNER, SIDLEY AUSTIN, LLP; MARC M. BOUTIN, CHIEF
EXECUTIVE OFFICER, NATIONAL HEALTH COUNCIL; AND CHESTER
``CHIP'' DAVIS, Jr., PRESIDENT AND CHIEF EXECUTIVE OFFICER,
ASSOCIATION FOR ACCESSIBLE MEDICINES
STATEMENT OF LOU KENNEDY
Ms. Kennedy. Good morning, Chairwoman Eshoo, Ranking Member
Mr. Burgess, Chairman Pallone, and Ranking Member Walden, and
distinguished members of the Energy and Commerce Subcommittee
on Health. I want to thank you for this invitation to appear
before you today to discuss competition to lower drug prices in
the United States.
I am Lou Kennedy. I am CEO and owner of Nephron
Pharmaceuticals Corporation. I am headquartered in West
Columbia, South Carolina, and we have added more employees and
have now reached a thousand employees. We are a leading
manufacturer of sterile, genetic--generic medications, and we
are sterile compounders of drugs on the FDA shortage list for
all U.S. hospitals and surgery centers. High quality and
affordable products for patients is our company focus.
Nephron believes drug patents should be controlled by a
patent-approval system that reasonably rewards innovation but
also incentivizes appropriate patent challenges, particularly
for Orange Book-listed patents. A fair playing field would
ensure erroneously granted patents are not used to prevent
generic competition and maintain monopoly drug prices to the
detriment of American consumers.
The Trump administration has published the American
Patients First policy position which, if implemented, would
encourage drug competition and reduce drug prices in the U.S.
The American Patients First policy statement notes the negative
impact of parking, the 180-day exclusivity awarded to eligible,
first-to-file ANDAs, or abbreviated new drug applications.
Parking is the practice of delaying the introduction of a
first-to-file ANDA, which goes directly against Hatch-Waxman
Act, by entering into a delayed-entry settlement agreement
between the ANDA filer and the original patent holder. This is
commonly known as pay-to-delay. This is really an impediment to
lowering the drug cost for Americans.
Nephron applauds this policy position for appropriate 180-
day exclusivity, because of the immediate pricing reduction of
second and follow-on suppliers of generic drug pricing.
Pricing data commonly demonstrates drug costs for a single
med will drop approximately 80 percent when the fourth
competitor enters the market. That is where we enter. Parking,
along with Paragraph 4, patent challenges, and REMS program
abuses add significant delays to generic competition, there by
maintaining higher monopoly drug prices.
Nephron shares the goal of this committee and the
administration of addressing the problem of purposeful parking
that delays generic competition from tentatively approved
subsequently submitted ANDAs. However, while Nephron shares the
goal of H.R. 938, Blocking Low Cost Operation--the BLOCKING Act
of 2019, we are concerned as currently drafted the legislation
would undermine the value of the 180-day exclusivity period.
This recent draft would prematurely terminate or reduce the
first-to-file, 180-day exclusivity period by providing an
overly broad, additional, exclusivity trigger that can result
in forfeiture of the award. This outcome would not be in the
best interest of American patients and taxpayers, and it would
weaken this 180-day exclusivity incentive for generic
manufacturers to drive challenges of brand patents.
The 180-day exclusivity period is important to allow the
first filer to bring its product to market at the earliest
possible time. We are also concerned that this well-intentioned
legislation fails to address pay-to-delay settlements between a
first-to-file generic company and its brand counterpart, which
is the main source of delay for generic competition,
particularly like us.
Nephron believes that pay-to-delay agreements allow weak,
unchallenged patents to remain in place and serve as barriers
to block subsequent, generic drug manufacturers from obtaining
final approval. The current framework provides no incentive for
subsequent applicants to challenge blocking patents that are
left untested in pay-to-delay settlements.
Even if a subsequent applicant is successful in challenging
all of the blocking patents, it cannot enter the market until a
first applicant launches, allowing the 180-day exclusivity
period to expire. Delaying the start of this period results in
higher prices for a drug.
Now, the FAIR Generics Act, H.R. 1506, would achieve the
needed broader fix of the parking problem by allowing
subsequent applicants that win their patent challenges to share
the 180-day exclusivity award with the first generic to file an
application challenging a brand patent. As such, Nephron urges
Congress to take action to fix the broader parking problem, not
just a narrow subset of the problem, by enacting legislation,
along the lines of the FAIR Generics Act.
We would welcome the opportunity with the committee to
strengthen and refine this legislation, which would enable a
comprehensive solution to the parking problem. The Trump
administration, the committee, and Nephron are all in agreeance
of the need to lower drug costs for the American public.
Nephron supports pending bills relating to ANDAs and the
180-delay exclusivity, some of which are directly related to
H.R. 938, and others that are necessary to remove stumbling
blocks for ANDAs being filed. The Protecting Consumer Access to
Generic Drugs of 2019 aims to prevent pay-to-delay settlements
between first applicants and brand companies by adding a
clause, exchange of anything of value, to current laws which
prevents money from being exchanged for delayed marketing under
a parked, 180-day exclusivity situation.
Ms. Eshoo. Your time is expired.
Ms. Kennedy. Thank you. I would entertain any questions
from the panel.
[The prepared statement of Ms. Kennedy follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you very much for your testimony and your
written testimony.
Mr. Davis, good morning.
Mr. Davis. Good morning.
Ms. Eshoo. And welcome to you. You have 5 minutes to
present your testimony to the committee.
STATEMENT OF CHESTER ``CHIP'' DAVIS, Jr.
Mr. Davis. Great. Chairman Eshoo, Ranking Member Burgess,
Chairman Pallone, Ranking Member Walden, thank you on behalf of
the Association for Accessible Medicines, our members, and the
patients that we serve, for the invitation and opportunity to
testify today.
Over the last decade, our members have delivered savings of
nearly $1.8 trillion to patients in the U.S. healthcare system,
and looking forward, FDA-approved biosimilars have the
potential to provide even greater savings and access to live-
saving treatments. However, current market realities and
certain anticompetitive tactics that impede competition,
threaten the long-term stability of both the generic and
biosimilar markets here in the United States.
So as Congress considers steps to lower prescription-drug
prices, we encourage this committee to advance policies that
increase competition and patient access to generics and
biosimilars. Equally important, however, is to avoid policies
that could, despite best intentions, end up further delaying
such competition and access, and address the very real
sustainability challenges faced by generic and biosimilar
manufacturers here in the U.S. market.
To some of the specifics on the bills before you today, AAM
greatly appreciates the leadership of Chairman Pallone,
Congressman Welch, and Congressman McKinley on the CREATES and
FAST Generics Acts. With the support of more than now 90
organizations, these strongly bipartisan, market-based
solutions will stop anti-competitive abuses of FDA safety
programs and reduce spending on prescription drugs by over $13
billion annually.
AAM strongly supports the CREATES and FAST Generics Act and
encourages Congress to pass them into law immediately. AAM and
our members value innovation and intellectual property, and the
benefits that they provide to patients in the U.S. healthcare
system. That said, it is equally important to recognize that
perhaps the greatest barrier to competition occurs due to
abuses of the U.S. patent system.
Increasingly, brand name companies are building so-called,
quote, ``patent estates,'' end quote, around blockbuster drugs.
In fact, recent research shows that at least 78 percent of new
patents are associated with existing drugs that are already on
the market.
If Congress is going to meaningfully reduce drug prices,
addressing abuse of the patent system must be front and center.
To that end, we recommend three solutions: First, to provide a
date certain for generic and biosimilar entry; second, to
accelerate the biosimilar patent dance; and third, to harmonize
Hatch-Waxman with the IPR process.
Despite the deterrent effect of brand name drug-patent
thickets, a patent challenge and a potential settlement of that
challenge is increasingly the only way a generic or biosimilar
manufacturer can actually bring a competitive medicine to
patients.
Thus, it is imperative to make sure, as these bills are
deliberated, that two critical elements are preserved: First,
the right of two private parties to reach a settlement that is
procompetitive, that brings generic drugs and biosimilars to
market prior to the expiration of applicable patents; and
second, the 180-day exclusivity period provided to the first
generic filer.
Since the Supreme Court's decision in FTC v. Actavis, the
FTC has reported that there are now very few patent settlements
involving what is characterized as, quote, ``pay-for-delay,''
end quote. In fact, the vast majority of patent settlements are
now resolved without a transfer of value, since that decision,
to the generic manufacturer or restrictions on generic
competition.
It is our view that the patent-settlement legislation under
consideration today is not yet quite aligned with the Supreme
Court's Actavis decision. Moreover, the FTC is not required in
the current bill to establish anticompetitive harm. As a
result, we recommend that the proposal be narrowed to preserve
agreements that are procompetitive, while making sure that
those that are anticompetitive are held to account.
Patients and taxpayers also benefit when generic
manufacturers take on significant risks and costs associated
with being the first to file with the FDA and challenge a
brand-name patent. The 180-day exclusivity incentive for first
generics has helped fuel the growth of the American, generic
drug market that today provides 90 percent of prescriptions for
just 23 percent of drug spending, numbers that are unparalleled
anywhere in the world.
Chairwoman, thank you for recognizing that earlier.
Importantly, Congress prohibited so-called parking as part
of the Medicare Modernization Act. The FDA has the authority to
address this issue, and despite our requests, we have not been
provided any examples yet, to date, to justify the legislative
proposals and changes. For these reasons, at this point,
recognizing that this is a fluid process, AAM is not supporting
the legislation that would prohibit patent settlements or
changes to the 180-day exclusivity for first generics,
recognizing that this is a process.
In our view, while well-intentioned, these proposals have
the risk of ending up delaying patient access to more
affordable generics and biosimilars.
So let me close by thanking the committee for the
opportunity to testify today and say that our members stand
ready to work with you to ensure patients have access to
generics and biosimilars. Thank you.
[The prepared statement of Mr. Davis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you very much, Mr. Davis.
And now it is a pleasure to welcome and recognize Mr.
Anthony Barrueta, the senior vice president of government
relations at Kaiser Permanente, the first HMO in our country,
correct?
Mr. Barrueta. Pretty close. Pretty close.
Ms. Eshoo. 1942, I think.
Mr. Barrueta. We have been around for a long time, so thank
you.
Ms. Eshoo. You are recognized for your testimony for 5
minutes. And you are welcome.
STATEMENT OF ANTHONY A. BARRUETA
Mr. Barrueta. Thank you, Chairman Eshoo, Mr. Burgess, and
distinguished committee members. I greatly appreciate the
opportunity to testify today.So I am Tony Barrueta, senior vice
president for government relations for Kaiser Permanente. As
the Nation's largest private integrated healthcare system, we
provide care and pharmacy benefits to over 12 million people
across the country, dispensing approximately 90 million
outpatient prescriptions and over 50 million outpatient and
inpatient doses every year.
Our nonprofit model combines coverage and care delivery. We
operate pharmacies that dispense drugs prescribed by our
Permanente medical group physicians. We, therefore, have a
unique perspective on the prescription-drug marketplace and
prescription-drug pricing. Our mission for pharmacy, and all
the services that we provide, is to deliver high quality,
affordable care, and to improve the health of our members and
the communities we serve.
We greatly appreciate this committee's attention to the
problem of high drug prices. High drug prices impose a
crippling burden on our members and our ability to carry out
our mission. Drug companies--random drug companies have
virtually unfettered discretion to raise prices, which really
imposes considerable and often devastating financial hardship
on patients and families.
We are very concerned by overpatenting, exclusivity gaming,
and pernicious lifecycle management trends. Too often the
primary goal of these tactics is to leverage the law to stifle
competition, rather than protect meaningful clinical
advancements. It is past time for new policy framework that
fosters competition and prices that patients and the healthcare
system can actually afford, while still rewarding and incenting
innovation.
Congress has a critical role to play in mitigating this
behavior by evaluating the extent to which the current laws are
subject to gaming that empowers the drug companies to extend
monopoly pricing well beyond congressional intent.
We applaud the committee for working to make the patent
landscape more transparent, curbing REMS abuses, and stopping
tactics such as pay-for-delay settlements and exclusivity
parking. We are especially grateful that the committee is
considering the CREATES Act. These anticompetitive practices
significantly delay generic and biosimilar availability,
hampering our ability to provide more affordable options for
our members. They also create uncertainty that disrupts our
ability to design optimal pharmacy benefits.
Our research pharmacists actively monitor drug pipelines to
forecast when competition may enter the market. When
competition doesn't occur at the expected time, it undermines
our efforts to negotiate better prices from drug companies that
would allow more affordable premiums and cost-sharing.
Our approach to pharmacy benefit shows what is possible
when markets are competitive. We have industry-leading generic
utilization, and every one-tenth of one percent increase in our
generic utilization saves our system $28 million.
Many in the market have struggled to transition to
biosimilars. At Kaiser Permanente, our physicians have embraced
them. For example, within our system, Inflectra, the
biosimilar, is used over 75 percent of the time instead of
Remicade, the reference product. Inflectra utilization in the
rest of the market is less than three percent.
Major contributors to our success include our evidence-
driven formularies, developed by our physicians and
pharmacists, our ability as an integrated system to generate
and disseminate unbiassed information about drugs, and our
restrictive approach to marketing by pharmaceutical sales
representatives in our facilities.
Prescriber confidence is in excellent and unbiassed
information, strong investment in clinical support and
education, and our physician-pharmacist alignment, are all
crucial to facilitating generic and biosimilar uptake. Breaking
down barriers for generic entry is of critical importance to
our model of care. We simply cannot fully leverage our process
to spar competition if generics and biosimilars are not
available in the first place. That is why the work of this
committee is so important.
We look at these as positive, first steps toward a more
functional market for drugs. There are much more to be done. We
think other things should be considered, including whether
exclusivities on the books now should be narrowed to better
balance access and rewarding innovation; whether the FTC should
have more expansive authority to review drug companies'
anticompetitive practices, including patent abuses; and whether
agencies like FDA, NIH, PCORI, AHRQ, and others should play a
role in educating through academic detailing and providing
unbiased sources of information.
So thank you for considering our perspective on this
important set of issues. We share your commitment to lowering
drug prices and reducing barriers to biosimilar and generic
market entry.
[The prepared statement of Mr. Barrueta follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. And look at that, you just stayed right within
your 5 minutes. Excellent. Thank you very, very much.
I now would like to recognize Mr. Boutin, the chief
executive officer of the National Health Council. Welcome, and
you have 5 minutes for your oral testimony.
STATEMENT OF MARC M. BOUTIN
Mr. Boutin. Good morning, Chairwoman Eshoo, Chairman,
Ranking Member Burgess, and members of the Subcommittee on
Health.
Bad actors have gamed the system, driving up costs for
patients, and only Congress can fix it. My name is Marc Boutin.
I am the CEO of the National Health Council. I became a patient
advocate more than 20 years ago, when virtually every member of
my family was diagnosed with one or more chronic conditions,
ranging from cancer, heart disease, neurological, autoimmune,
an ultra-rare condition, and HIV.
I sat in the doctor's office with my parents, when my
father was told he had a terminal cancer. As a result of the
treatments he underwent, he lost the dexterity in his fingers.
The challenge was, he had an antique clock business. So he also
lost the income for the family. Like so many people with
chronic conditions, healthcare costs pile up. My sisters and I
moved my mother to a smaller, more affordable home after his
death. She died of a heart attack before all the boxes were
unpacked.
The impact of medical debt on the financial, emotional, and
clinical well-being of more than 160 million people living with
one or more chronic conditions has become a national crisis.
The National Health Council is a nonprofit organization that
was created by and for patient advocacy organizations.
While the patient groups control our governance, and our
policy-making process, we welcome all stakeholders into
membership. We have the biopharmaceutical companies, the device
diagnostic, generics, payer, provider, researcher, and family
caregiving communities all represented in membership.
Over the last few years, we have heard loud and clear from
our members that while patients care deeply about getting
better and new treatments, they are having incredible
challenges affording the medications that they need. According
to a recent poll, 49 percent of people in poor health, the
people we represent, are having significant challenges getting
their medications.
Young, expecting families used to tell us their greatest
fear was having a child with a deadly disease and no effective
treatment. What they tell us now is, their fear is having a
child with a deadly disease for which there is a treatment, but
they cannot afford it.
The National Health Council reviewed nearly 200 policy
proposals all aimed at reducing healthcare costs. We learned
two things: One, the vast majority of those policies actually
reduced costs by eliminating access. And for the remaining
policies, there was virtually no data to show that they would
actually drive down costs. With one major exception. And that
is increased competition, especially among generics. On this
point, the data is unequivocal and so are the experiences of
millions of Americans.
Mackenzie is a 32-year-old, running her own business in
North Carolina. She has a common, genetic condition called
familial hypercholesterolemia. She was born with cholesterol
levels more than three times the level normal, putting her at
extreme risk of an early heart attack. Adding Zetia, a brand
product, to her statin regimen had the potential to greatly
improve her cholesterol level. But the cost was an additional
$60 a month on top of all her other medical expenses, a huge
burden for a young professional just starting off in her own
business. When the medicine went generic, her cost dropped to
$5 a month.
We, in the patient community, keenly understand the need
for intellectual property and exclusivities to drive
innovation, but when bad actors abuse the current system to
delay access to generics and biosimilars, people with chronic
conditions and their family caregivers suffer. Congress needs
to address this.
While some patent settlements can bring generics to market
quicker, far too many delay entry and line the pockets of
investors at the expense of patients. Similarly, without REMS,
many people would not have access to medications to improve how
they feel, function, and survive. When bad actors use REMS to
block generics and biosimilars to markets, we have a serious
problem.
We recognize this is a complex issue, but I want to tell
you, this is a great first step. On behalf of Mackenzie, my
family, more than 160 million people with chronic conditions
and their family caregivers, thank you.
[The prepared statement of Mr. Boutin follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you, Mr. Boutin. Powerful testimony.
Now, I would like to recognize Mr. Karst. He is the
director at Hyman, Phelps & McNamara. Welcome to you, and you
have 5 minutes for your oral testimony.
STATEMENT OF KURT R. KARST
Mr. Karst. Thank you. Good morning, Chairwoman Eshoo,
Ranking Member Burgess, and distinguished members of the
Subcommittee on Health. My name is Kurt Karst. I am a director
at the law firm of Hyman, Phelps & McNamara, where I specialize
in food and drug law and, in particular, the Hatch-Waxman
amendments--and I say that as I look up at Chairman Waxman's
portrait--and the Biosimilars Act. I am a coauthor of the legal
treatise Generic and Innovator Drugs: A Guide to FDA Approval
Requirements, and a cofounder of the popular FDA Law Blog.
I am honored to participate in today's hearings and would
like to make clear at the outset that I am testifying today in
my personal capacity and that the views I express are solely my
own and not the views of my law firm or any company or client
of my firm.
The information and perspectives I provide today are based
on nearly 20 years of experience, helping drug and biologic
manufacturers, both on the brand and on the generic side, in
helping them obtain approval of life-saving therapies.
So first, do no harm. It is a maxim as old as medicine
itself, and it is one of the principal precepts of medicine and
bioethics, and I believe it applies to the law just as much as
it does to medicine. As an attorney who studies and cares
deeply for the Hatch-Waxman amendments, I am always concerned
about what good or what harm proposals to amend these laws
might cause, or if they are needed at all. In my experience,
amending and tinkering with the Hatch-Waxman amendments is akin
to performing brain surgery. One wrong move can have dire
consequences. So it is through this first do-no-harm lens that
I approach the package of bills at issue in today's hearing.
Now, we obviously don't have time to get into all the
nitty-gritty for each of the bills. I place them into three
buckets: First, those addressing drug and biologic product
information transparency; those involving 180-day exclusivity
and patent-settlement agreements; and third, those seeking to
facilitate generic manufacturers' access to brand-name
products.
In the first bucket, we have H.R. 1503, the Orange Book
Transparency Act, and H.R. 1520, the Purple Book Continuity
Act. H.R. 1503 seeks to clean up and, to some extent, modernize
the Orange Book, a publication of approved prescription and
over-the-counter products which I brought an example of here
today.
The Orange Book is really the linchpin of the Hatch-Waxman
amendments and the generic drug approval process. Generic drug
manufacturers depend on it to list accurate patent and
exclusivity information as they consider what generic drugs to
develop.
H.R. 1503 authorizes FDA to remove from the Orange Book
information on patents determined to be invalid, to allow the
listing of unspecified, additional patent information and to
prohibit the listing of information on drug-delivery devices.
Broadening or narrowing the scope of information on patents
that can be included in the Orange Book could dramatically
impact the timing of generic market entry.
H.R. 1520 would require FDA to include in the Purple Book,
which are two lists published by FDA of licensed biological
products, certain patent information on brand-name reference
products, but this information would only be added after the
initiation of the patent litigation provisions of the statute
instead of immediately after licensure of a brand-name product.
While the proposed patent information provisions in the
bill are, in my opinion, a good first step to facilitating
biosimilar availability, Congress should consider whether an
enhanced patent notice feature should be added to the law.
Moving on to the second bucket, we have the BLOCKING Act,
the FAIR Generics Act, and then the Protecting Consumer Access
to Generic Drugs Act. So 180-day market exclusivity for the
first generic drug manufacturer that risks patent infringement
litigation, incentivizes companies to clear the patent thicket.
Today in a highly competitive, generic drug market, where only
a handful of manufacturers may be able to successfully
commercialize a drug, exclusivity is the brass ring.
Legislative measures that dilute or obscure that prize could
jeopardize the generic drug industry, and, in fact, the
BLOCKING Act would do just that.
It seeks to prevent exclusivity-eligible applicants from
parking their exclusivity when alleged deficiencies prevent FDA
from granting final ANDA approval, when subsequent ANDA
applicants otherwise eligible for approval are ready. Whatever
merit that proposal may have, the BLOCKING Act would address it
by imposing immensely and unnecessarily complex framework to
trigger 180-day exclusivity, and the analysis under that
framework becomes more complex with the addition of each
variable.
As a food and drug lawyer, this proposal will certainly
keep me in business for a generation, but few others will
benefit from the costly and time-consuming litigation these
changes will spur. The generic industry won't. This bill will
make the 180-day exclusivity eligibility far more
unpredictable. In my opinion, the BLOCKING Act is unnecessary,
and, in fact, FDA already has a statutory and regulatory
authority to deal with this situation.
Both H.R. 1506 and 1499 address patent-settlement
agreements peppered with a dash of exclusivity. From my
standpoint, patent-settlement agreements are generally
procompetitive and represent a fair balancing of the parties'
relative risks from inherently uncertain litigation.
And, finally, the CREATES Act and the FAST Generics Act,
both these bills would go a long way to address, I believe,
legitimate concerns about reference product access.
[The prepared statement of Mr. Karst follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you very much.
Now I have the pleasure of recognizing Mr. Kushan.
Mr. Kushan. Kushan, yes.
Ms. Eshoo [continuing]. Kushan. He is a partner at Sidley
Austin, and I am pleased to recognize you for your oral
testimony for 5 minutes.
STATEMENT OF JEFFREY P. KUSHAN
Mr. Kushan. Thank you, Madam Chairwoman, and thank you to
the members of the committee, to Ranking Member Burgess for
giving me this opportunity to offer some remarks today. I am a
private attorney. My comments today are my personal views, and
they should not be attributed to any client of our firm.
I provided some general observations on innovation and the
way that things work in the innovative side of the industry,
and I would like to just address a few additional issues.
Before I do that, it is important for the subcommittee to
appreciate the nature of innovation in this industry. Every
life sciences company that I have had an opportunity to work
with in my career has the same goal. They want to make the best
new medicines to help patients. That is what is driving these
companies to work every day.
They obviously start with the big bang, they come up with a
new idea that leads to a new drug, a new therapy, but they
don't stop innovating at that point, they keep innovating. They
have to innovate as they develop the way to make this drug in
large scale and in a way that is going to be safe and can be
delivered to the patients.
They also don't stop innovating when they get FDA approval
of their drugs. They keep innovating because they want to make
their drugs better. They want to make better manufacturing
processes. They want to develop new ways of making the drugs
easier to use by patients. And all these things that they are
developing are aimed at making better products that improve the
lives of the patients.
And as you go through that process, as an innovator, you
look for opportunities to deliver these things to the market.
At the very beginning of the biotech industry, there were a
number of drugs that came out, that had to be administered
through injections, and you had to go into a hospital or
outpatient center. Innovations after approval led to
development of pen devices and other ways of getting those
products into the patient safely where they could administer
them in their home.
There are innumerable benefits that come from this
continued process of innovation in the industry, and we don't
want to do anything that is going to discourage these companies
from stopping that innovative instinct they have, both before
and after the initial approval of a drug.
Now, I have got a few observations on some of the bills
that have been presented. First, I would like to talk about the
patent listing ideas that have been proposed for biologics.
This is H.R. 1520. One thing I think we need to clarify is that
biotechnology companies, whether they are in the innovative or
biosimilar side of the process, have no difficulty finding
patents that are relative to what they are doing.
Patents are public. They are put into databases. We use
sophisticated tools. I do this myself to find patents that are
relevant to the technologies that are being used to make the
products. These companies are also very large and
sophisticated. They are going to make a significant investment
in building factories or reconfiguring them to make
biosimilars. There is not a problem in finding patents that are
relevant.
I think the other thing that it is important to appreciate
about the design of the BPCIA is that it does not slow down the
approval of a biosimilar based on whether there is patent
litigation. The FDA approves those applications as they are
submitted. There is no impact like in the Hatch-Waxman scheme,
where there is a listed patent.
So at the end of the day, if a biosimilar has received
approval for their product, they can launch. When they don't
launch, they typically are looking at a patent they recognize
as valid and will cause consequences if it is infringed. It is
important to appreciate that variable in the equation, because
what that is showing you, is that the incentive of the patent
system is working. It is protecting the innovation that merited
a patent, and it is driving conscious business decisions of
these companies to not launch and risk infringement of that
valid patent.
The third thing to keep in mind is that the innovators
can't find the patents that are relevant to a particular
biosimilar applicant because those are going to depend on
information only the biosimilar applicant has. It is their
manufacturing information.
I raise one practical concern that in the bill that was
proposed, that there is a requirement for the innovator to
immediately provide information to the FDA about which patents
are implicated by the biosimilar's manufacturing process. As
someone who is subject to protective orders, I am a little bit
skittish about doing that before there is a public disclosure
of the patent litigation, because that means you may be
implicating the confidential information of the biosimilar.
The other thing I would like to flag, just very briefly, is
the Orange Book Transparency Bill, and that is H.R. 1503. And
this raises a question about which patents may no longer be put
into the Orange Book. Particularly, they are excluding medical
device patents, and many of these technologies are used to make
the drug effective. I think we want those patents to be part of
the system of early notice and patent resolution, so they don't
disrupt the later launch of the products after they are on the
market.
I am happy to take any further questions the committee may
have.
[The prepared statement of Mr. Kushan follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you very much for your testimony.
It is a pleasure to welcome you, Mr. Carrier. Mr. Carrier
is a distinguished professor at Rutgers Law School. You have 5
minutes for your testimony.
STATEMENT OF MICHAEL A. CARRIER
Mr. Carrier. Thank you. Drug prices are too high, and one
central reason why they are too high is that brand companies
play all sorts of games to delay generic entry. Brands pay
generics to delay entering the market. Brands deny samples the
generics need to enter the market. Brands abuse the regulatory
system, and as Ranking Member Burgess pointed out, we are going
ruffle some feathers when we say that the brand companies
cannot do this sort of conduct.
On the other hand, nothing that I say today will have
anything to do with patents. Nothing that I say today will have
anything to do with innovation. That is not at issue here.
My name is Michael Carrier. I am a distinguished professor
at Rutgers Law School. I emphasize and focus on pharmaceutical
antitrust law. I have written more than 115 articles, including
60 on pharmaceutical antitrust law. I write friend of the court
briefs to courts on behalf of hundreds of professors, and I am
frequently cited in the media and the courts.
The first thing that this committee can do is focus on
samples. Under the Hatch-Waxman Act the generic was supposed to
have a sample from a brand company, and that is how it can
enter the market quicker. It doesn't have to replicate the
costly clinical trials that brand companies have to do. The
generic can do it a lot more easily. The problem is that when
the brand company denies a sample that a generic needs the
generic can't even get to the starting line. So you look at the
nonREM setting where there is no safety concern at all. Take
Pharma Bro, Martin Shkreli, jacked up the price 5,000 percent.
Everyone focuses on that. No one focuses on the fact that the
restricted distribution system is the reason that he could do
this.
So when he said you can only get it through Walgreens
specialty pharmacy and his official said, oh, we don't give it
to generics that is a problem. The REM setting is a safety
setting, and so the FDA is allowed and is supposed to have
restrictions that deal with safety. Brand companies, however,
have abused this. And they have said that we are not going to
give you the sample even if you have a letter from the FDA that
says that it is safe. We have all sorts of concerns. We don't
have a duty to deal.
The FDA has tried mightily to solve this problem. It is
hard to think of an FDA Commissioner doing more than Scott
Gottlieb has to address this situation, but even so, it is
still not enough to get samples in the hands of generics.
So the FDA can't solve the problem. Antitrust litigation is
costly and nuanced and takes years, and so this Congress is the
best place to do it. There are two great pieces of legislation
I think the CREATES Act is even stronger because it would make
clear that brand companies can't engage in these games that any
excuse they have in relation to safety or product liability is
addressed in the legislation. So I am a big fan of the
legislation, including the CREATES Act
Something else that this committee could do is focus on
settlements, so Chairman Eshoo talked about two to tango. That
is exactly what is going on here. Under the Hatch-Waxman Act
the 180-day period was designed to encourage early generic
entry. So let's say you have the brand company dancing on the
dance floor all by itself and it is a dance floor of monopoly
profits, what happens is that the goal was to have a generic
that wants to break into the dance floor so consumers could get
affordable medications.
Unfortunately, the 180-day provision has been completely
twisted, so now you have a first filer who is rushing to be the
first filer, going to tango with the brand company for years
and all the meantime the consumers are paying monopoly prices
and no other generic has an incentive to challenge the patent
and enter the market.
And so the FAIR Generics Act would go a long way towards
addressing this by dealing not just with the first filer but
saying if you are the first to win District Court litigation
that is what we want to incentivize. So I am a big fan of that
legislation.
In terms of other settlements legislation FTC v. Actavis
solved a lot of the problems. It didn't solve all the problems.
Courts are still getting it wrong. There are still pay-for-
delay settlements, so if you make clear that these settlements
are illegal that would be incredibly helpful to the FTC and
courts and as a reminder to courts themselves.
In terms of the Orange Book, there is a lot that could be
done. The FDA plays a ministerial role. It does not remove
patents from the Orange Book when the patents are declared
invalid by a court or the Patent Trial and Appeal Board. It
would be useful to do that. You have device patents like the
EpiPen. Why is that in the Orange Book for decades keeping
generics off the market? That is something that can be
addressed, as well.
And then finally the Purple Book could be brought into the
21st Century. It is now a PDF. Let's make it searchable. Let's
make it more like the Orange Book. So in short, these are
incredibly important pieces of legislation. They will not
affect patents. They will not affect innovation, but they will
get affordable medicines into the hands of consumers that need
them. Thank you.
[The prepared statement of Mr. Carrier follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you very much. Well, that concludes the
testimony from all of the witnesses, and I think each Member
had a very strong sense that their brain was trying to catch up
with what you were saying to absorb it all because you have
comments--you have each made comments on not only what you
agree on but how to strengthen the legislation and to fill in--
let's see how I can describe it--where you think there is a
blank somewhere in the legislation to strengthen it, but I
think that collectively it has been excellent legislation.
Now, between--I would like to pursue both the orange and
the purple because, Mr. Kushan, you were smiling when Mr.
Carrier was testifying. So I will start with Mr. Carrier. How--
synthesize for us where you think the improvements need to be
made relative to the Orange Book and the Purple Book, and if
you think the legislation regarding both comes up short?
Mr. Carrier. So I think that one----
Ms. Eshoo. As quickly as you can.
Mr. Carrier. So one problem with the Orange Book is that it
does not make clear exactly when a patent is invalidated. When
a patent is in the Orange Book that is very helpful----
Ms. Eshoo. Let me ask this because I don't know all that
much about it. Why would something be carried in print when it
is no longer in use?
Mr. Carrier. So the FDA regulates the Orange Book. It is a
listing of patents and drugs that go along with them, but the
FDA is not checking every day to see what happens in the court
system, in the Patent Trial and Appeal Board. So it is possible
that you have a patent that is listed in the Orange Book, which
gives the brand company an automatic 30-month stay where that
is not the most up to date information. So if we get that----
Ms. Eshoo. Why not have something orange online?
Mr. Carrier. So, yes, the Orange Book----
Ms. Eshoo. I mean, as soon as it is printed it is out of
date.
Mr. Carrier. So the Orange Book is online. It is just that
some of the information is not as up to date as it could be,
and so that is one improvement that could be done.
Ms. Eshoo. OK. Mr. Kushan?
Mr. Kushan. So I think--so I was smiling because I have
downloaded the PDF for the Purple Book, and it is way less
useful than the Orange Book, which is a very useful tool that--
--
Ms. Eshoo. Does the legislation address your concerns,
though, that is what I want to know?
Mr. Kushan. So the issues that I see with the listing
issues turn on the impact of these listing provisions. One of
the things that Mr. Carrier had flagged was the idea of going
in and updating patent status based on kind of current
information on litigation around the patents or in something in
the Patent and Trademark Office.
I think one of the concerns we have about going in and
altering the status before there is a final determination about
these patents is that you might have to change it later. There
was a proposal I think in one of the bills that you would have
to delist a patent if there was a decision of the Patent Trial
and Appeal Board. Those are not final decisions, those are
always appealed to the Federal Circuit. It is much better to
have a system where you can get a final outcome on the patent
before you start making these changes.
It is also important to recognize that this is not an
insular world. There is a very readily accessible information
about the status of these outcomes in patent litigation they
get into the news. So I think we have to just look at those
very carefully and make sure we have stable system, thus people
have more predictability, and I think, you know, more enhanced
searchability, capability of the Purple Book certainly would be
welcome.
One thing I did mention in the listing process for the
patents for the biologics we really need to look at how we can
do that as a practical matter because of that confidential
information that we are looking at during the patent dance.
Ms. Eshoo. I appreciate that. Is there any witness that
thinks that of the legislation that we are considering today
and that you spoke to, do you all agree that it moves the
needle to help consumers? Is there anyone that disagrees with
that? Uh-oh, Mr. Kushan, you have a look on your face.
Mr. Kushan. No, I apologize. I don't want to dominate this
hearing either.
Ms. Eshoo. You can tell that I take everything into
consideration.
Mr. Kushan. I think you are making a lot of strong moves to
help make the system more transparent. That is good----
Ms. Eshoo. And I appreciate your pointing out how important
innovation is. We can do many, many things to lower drug prices
to really--so that the consumer, the patients, the stories that
Mr. Boutin told as well as the testimony of all of you and
still obviously protect innovation because the patients depend
on breakthroughs in order to address what is ailing them. So I
think that it is a set of book ends.
With that I would now like to recognize the ranking member
for his 5 minutes for questioning, Mr. Burgess.
Mr. Burgess. I prefer the term Chief Republican.
Ms. Eshoo. Whatever you want.
Mr. Burgess. So I know when we had this hearing in December
of 2017 I think I made the comment, it is still applicable
today, that if we don't understand the difference between
Sovaldi and Daraprim we may very get--come to the wrong
conclusions here, and several of you, Mr. Carrier, you brought
up Daraprim, a medicine that has been around for a long time,
really not protected by patent. Great medicine but it wasn't
really something in breakthrough status, but because of the
vagaries of the market now is--if I go on my GoodRX app I can
buy it for $60,000 for a month's supply so that is a problem.
Sovaldi, a medicine that was developed to treat hepatitis--
not treat hepatitis C, cure hepatitis C, and I made this point
several times in this committee. I mean, that is a gift to
humanity. Hepatitis C didn't even have a name when I was a
resident at Parkland Hospital. We called it nonA/nonB
hepatitis, and someone said, hey, that is hepatitis C, and the
division of nomenclature said, yes, you are right, they blessed
it hepatitis C, but there is a disease in 1977, 1978 didn't
even have a name that now has a cure. I mean, that is a pretty
good result.
So to balance the availability of medicines that will be
affordable, and Mr. Boutin did a great job of illustrating why
that is important. Same time innovation the world looks to the
United States for innovation. I don't know of any other country
that was going to cure hepatitis C, but the United States did,
so thank you for that.
And actually and Mr. Davis or Mr. Barrueta you actually
made the point in your testimony about the--for Kaiser the
medicines to cure hepatitis C and actually the cost has come
down. I have got your brief history of drug pricing from 2015,
and, of course, there the concern was 2014 a lot of stuff went
up, and I think the thesis was Sovaldi or Harvoni has cost, but
now there has been without a generic actually but just
different formulations and the price has come down, so
competition did work. It may not have come down as much as
Kaiser would like, but still it has come down, wouldn't you
agree with that?
Mr. Barrueta. I do. I do think, Congressman Burgess, one
thing to really recognize here is the system the way it is
currently designed has a major impact on where manufacturers
choose to launch their prices, and signals are set based on the
way the system is operated.
And so with the case of Sovaldi in particular there was
tremendous concern that the choice to price that product at the
upwards of 80, $90,000 reflected what the old therapy was,
which was not very useful for very many people, but that drug
was going to be used in a huge number of people. So you need to
look at the whole of this.
Mr. Burgess. Correct. And that is actually the point I was
going to make. We are on the cusp of some rather dramatic
cures, not just treatments but cures, and this committee is
responsible for the Cures for the 21st Century. We worked on it
for three Congresses. We have really pushed that along 60
Minutes, a show I don't normally watch but had a special on
sickle-cell and curing sickle-cell. I mean, who would have ever
thought that that was possible?
But we do need to think about how we are going to amortize
the cost of research and development and paying for that
innovation, how are we going to amortize that into the system
because we could agree that Sovaldi nearly broke the bank of a
provider like Kaiser and our State Medicaid organizations
really felt the brunt of that. They had no way to prepare for
that. They didn't know it was around the corner.
One of the things that I have talked about in this
committee, I think Mr. Guthrie has a bill that would at least
allow CMS to talk to a manufacturer before the FDA approves if
it looks like something coming down the pipe is going to be
pretty dramatic but dramatically expensive it would be good
that people could begin to at least make some decisions that
might soften the blow. And I think we are going to have to
look, if you look at some of these gene therapies that are
single, single administrations that cure blindness, hemophilia,
muscular dystrophy, and these are things that we are going to
have to figure out. You are right, the old way of pricing and
that extrapolating that as using some formula may not work at
the same time, and this committee understands the value of the
Cures legislation that we did. We cannot interfere with the
scientific discovery process.
Mr. Carrier, just one thing because you had it in your
testimony a medicine I wasn't even familiar with Xyrem, that is
patent protected until 2024, but the REMs on that is going to
be significant because it can be a dangerous product in the
wrong hands.
Ms. Eshoo. The gentleman's time is expired.
Mr. Carrier. Repeat the last five seconds.
Mr. Burgess. I said that the REMs is going to be
significant--it is patent protected until 2024.
Ms. Eshoo. Why don't you let him answer because your time
is expired?
Mr. Carrier. So, yes, there is a concern when there are
patents on REMs that is not really what the patent system is
about. I couldn't agree more that innovation is absolutely
crucial, but sometimes at the margins we are not talking about
innovation just like the Daraprim example you mentioned and
this one, as well.
Ms. Eshoo. Thank you. I now would like to recognize the
chairman of the full committee, Mr. Pallone.
Mr. Pallone. Thank you, Madame Chair. I wanted to start by
asking Mr. Carrier a question and then move to Chip Davis, and,
Chris, I want to acknowledge that Mr. Carrier is a professor at
Rutgers Law School where I also went to school, so it is
special to me that you are here today.
When the REMs program was put into place as part of the
Food and Drug Administration Amendment Act of 2Congress
contemplated and ultimately made it explicit that these safety
protocols should not be use as a means to delay generic
competition. Unfortunately, congressional intent has been
obfuscated by delay tactics by branded manufacturers that have
thwarted generic attempts to develop their own versions of drug
products or to impede the ability to enter into a shared safety
protocol.
This committee has been considering for some time now how
to best ensure that congressional intent was upheld, and
Congressman Welch and myself have advocated for market-based
solutions that would allow for streamlined processes for
accessing samples, resolving challenges in establishing REM
safety protocols.
So initially, Mr. Carrier, some concerns have been raised
that the CREATES Act, which of course is a main vehicle for
dealing with this problem, could unintentionally incentivize
frivolous lawsuits in order to obtain monetary penalties,
rather than seriously pursuing samples for purposes of drug
development. While this is suggested maybe that maybe the
CREATES Act could lead to additional patent settlements. What
are your thoughts on these claims? I mean, obviously I support
the CREATES Act. I am only being devil's advocate here kind of
get your feeling on some of these suggestions against it. Do
you believe that CREATES could lead to a different type of
gaming?
Mr. Carrier. Absolutely not, and I do respect the brand
companies for their creativity in coming up with arguments like
these. For starters, the CREATES Act only applies to eligible
product developers. You can tell really quickly if it is a
generic that is trying to get the sample or a trial lawyer with
slick backed hair. I mean, you can figure that out quickly.
Will it lead to settlements? Absolutely not. The problem with
settlements today is that you have patents involved. Generally
we don't have patents here. And also you have a 180-day
exclusivity period that cues up that first generic that settles
with the brand company. So when the brand settles with the
first generic no other generic is able to enter the market.
Here that is not the case. The brand company would have to
settle with every single generic that wants to enter the
market. That is a lot harder than in the settlement context.
Mr. Pallone. Thank you. And then Mr. Davis could you
respond to the same question, then I want to ask you another
question about CREATES.
Mr. Davis. Sure. Thank you, Chairman Pallone. I would
completely associate AAM and our members with the comments of
Professor Carrier. We do not see any concern about frivolous
lawsuits. I think it is important to remember that the CREATES
Act and the FAST Generics Act keep the FDA at the center of
this issue and ensuring the safety, and certifying the safety,
and integrity of whether it is the branded manufacturer
handling their lot or a generic manufacturer subsequently.
So we have always supported a bill that kept the FDA in the
center and ensuring that no matter who is handling the samples
that they get certified by the FDA accordingly. The other thing
that I think it is important to point out is that it is a very
limited cause of action that is only triggered if a branded
company fails to negotiate in good faith at fair market value.
So it is a very limited window, and one quite frankly our
members hope they never get to because it only reflects a
failure of the ability to secure the samples through fair
market value.
Mr. Pallone. Chip let me ask you another question. You know
the CREATES Act contemplates a legal pathway by which the
generic manufacturer could access samples, as well as possibly
a monetary penalty if the brand manufacturer refuses to allow
access. And I understand that other enforcement mechanisms have
also been contemplated in this path. But will you discuss AAM's
perspective on the CREATES Act and what your members believe
will be the strongest deterrent to gaming of the REMs
requirement.
Mr. Davis. Yes. Thank you, again, Mr. Chairman, for the
question. Again, our mindset is that a cause of action is only
an issue of last resort that we hope we never have to get to be
completely candid. The challenge is since REMs programs were
created back as part of the Purdue for reauthorization in 2007
that bill specifically says REMs programs should not be used
for anticompetitive purposes.
The problem is there is no enforcement provision. So unless
there is a significant enforcement provision or risk of a
significant penalty to the branded manufacturer the risk of
having some sort of diluted remedy is that it just simply
becomes the cost of doing business, and you are better off
continuing the anticompetitive practices because the penalty on
the back end won't be severe enough.
So we want to make sure that it is a very limited scope of
action that is only triggered by a failure to negotiate in good
faith, and at that point though there has to be something of
significance to hopefully deter the actions that have now been
going on for the better part of a decade.
Mr. Pallone. Thank you. Thank you, Madam Chair.
Ms. Eshoo. Thank you, Mr. Chairman. It is a pleasure to
recognize the former chairman of the full committee, the
gentleman from Michigan, Mr. Upton.
Mr. Upton. Well, thank you, Madam Chair. This is an
important hearing, and I appreciate everyone's testimony, that
is for sure. And as you all may know every one of us on this
committee worked very hard on the 21st Century Cures Act. We
are all cosponsors. We all worked our networks of folks. We
were all pleased when President Obama signed it into law in
2016. And one of the issues that I have some concern about, Mr.
Kushan, as we think about that legislation with the unintended
consequences of hampering innovation in medicine.
In your testimony you cautioned against legislation that
would undermine the value of patents because the patent system
was developed in part to encourage innovators to bring their
discoveries into the public, rather than keeping it as a trade
secret, and thus, be able to recoup all the value. Can you
speak more to that dynamic and how it is facilitating
continuing innovation and biologics and biosimilars, something
relatively new?
Mr. Kushan. Sure. One of the things I tried to point out in
my written testimony was that we are seeing a lot of innovation
in the biologic space both from innovators and from
biosimilars. When you have to actually figure out how to make a
product and build a plan and reengineer it to make that
product, you make innovations. That is just what is happening
in that environment.
Mr. Upton. And that is different than the generic side of
things.
Mr. Kushan. Correct. In the biologics space there is a much
bigger investment needed to make these products, and what you
are seeing with those investments is a lot of ancillary
innovation. And I think one of the things that I didn't mention
in my oral remarks, but I think I have heard it from a number
of other panelists is when you are getting into a setting where
you are trying to settle litigation those entities in the
biologics space actually are very sophisticated companies. They
are both innovators and biosimilar manufacturers, and there may
be settings for those interactions where they are going cross-
license their technology to each other. We don't want to
discourage that behavior if you are ultimately benefitting the
patients with a procompetitive settlement.
I think what is very important in that process is to make
sure you don't have punitive sanctions on the value of the IP
voiding them or having them held unenforceable. There are some
ideas floating around with patent listing concepts that I think
would raise concerns on that front, but I think it is very
important to keep that dynamic that is generating this type of
ancillary innovation in the industry.
Mr. Upton. And I got to say I think you agree I am
particularly concerned that existing settlements would suddenly
become illegal because of the retroactive nature of some of the
bills that we are considering today. Is that your impression,
as well?
Mr. Kushan. Yes, there is one of the provisions in the
bills that would kind of retroactively review some of the
settlements that have already been entered into and, that is
particularly troubling from a litigation perspective because
you have companies who have relied on that settlement to then
move forward with their commercial activities. If those things
somehow change if those are no longer allowed, then you are
going to have a fairly significant disruption in the commercial
activity of these companies.
Mr. Upton. I will confess that I am not a lawyer. Most
people would say good, but I think that we all recognize the
problem of that. I yield the balance of my time back to Mr.
Burgess.
Mr. Burgess. Thank you, Mr. Former Chairman, chairman for
life, chairman in exile. Mr. Davis, if I could ask you as you
are well aware, there was a version of the CREATES Act in the
last Congress that was worked on with stakeholders. This
version of CREATES is a little bit different, and some of the
private action are perhaps more aggressive than this version
today. Would you support a version of CREATES that perhaps was
modified to make it once again bipartisan?
Mr. Davis. Thank you for the question. I think from my
perspective the current version in both the House and the
Senate does enjoy wide bipartisan support with over 90
stakeholders. I was saying the other day that I am not sure of
another piece of legislation that enjoys from an external
stakeholder perspective the support of both Public Citizen and
FreedomWorks as an example, so it is a pretty diverse group of
people who have come to the realization that after 10 years of
abuse the time has come to end this problem. To that extent----
Mr. Burgess. That was the version from last Congress,
correct?
Mr. Davis. That was actually the Senate version which has
not been modified. So my short answer would be we have been and
continue to be willing to work with anybody who is committed to
solve the problem in a meaningful way. We think actually,
Congressman, the real risk here is that if there are parties
that say they want to work together with an intent to actually
dilute the enforcement mechanisms then you get at the risk to
my answer previously, which is there is not a sufficient back-
end remedy to actually alter the behavior on the front end.
So provided at the end of the day there is that sufficient
enforcement, we stand ready--have been and continuing to stand
ready to work with anybody.
Mr. Burgess. I thank you. I yield back to the gentleman
from Michigan.
Mr. Upton. My time has expired.
Ms. Eshoo. Thank you. I now would like to recognize the
gentleman from Oregon, Mr. Schrader, for 5 minutes of
testimony.
Mr. Schrader. Thank you, Madam Chair.
Ms. Eshoo. Questioning.
Mr. Schrader. Thank you very much for calling the hearing
today, very important hearing. I think we can all agree that
bringing generic drugs to market faster brings down costs for
all. We should all support efforts to challenge abuses in the
system that would delay getting generic drugs into the hands of
patients. Getting these drugs to the market and into the hands
is where I think we need to focus. I am encouraged by the
record number of generic approvals and was a proud author in
the last Congress of legislation to help create the competitive
generic pathways therapy that frankly just in the last 6 months
has brought five more generic drugs on to the market where no
competition had existed before.
I would like to emphasize today that getting drugs into the
approved pipeline isn't the same as getting them on the market.
As we discussed yesterday with Secretary Azar every year we see
companies get tentatively approved as first filer, complete the
bulk of the application process, and then stop before getting
final approval. According to HHS this happens an average of
five times a year. Drug companies wait so long to market their
drug that they effectively block subsequent filers which could
help drive down costs.
The Secretary indicated this lasts for an average of 12
months, far longer than the 180-day incentive that Congress
created. Five drugs times an extra 12 months of exclusivity
means much higher costs for patients in the healthcare system.
Why has this happened? Well, Secretary Azar says there are
times when applications have some deficiencies that need to be
corrected in a timely manner, and there are other times when
manufacturers struck a deal with brand manufacturers to refrain
from moving their drug to the market.
My bill, which I introduced earlier this year bipartisanly
with Mr. Carter will stop the practice of parking generic
exclusivity by first filers. Under the BLOCKING Act when a
first to file drug application is parked at the tentative
approval stage and that is the only thing blocking the
subsequent generic from coming to the market the first filers'
180 days of exclusivity begins to run. This concept has the
support of the President and is part of his budget in the
lowering drug costs section.
After our conversation with Secretary Azar yesterday the
FDA got back to me with a data analysis that suggested this
proposal might save $1.8 billion, and at this time I would like
to ask unanimous consent to enter that into the record
Ms. Eshoo. So ordered.
[The information appears at the conclusion of the hearing.]
Mr. Schrader. And contrary to what some in the industry may
want you to believe this bill does not revoke, diminish, or
shorten any period of exclusivity for any first filer. Very
simply, it puts manufacturers on notice and requires them to
keep the ball rolling after they have started the application
process.
So, question for Mr. Carrier if I may, some have noted, and
it was--the Secretary testified on this yesterday that there
are some provisions in law that do require a generic
manufacturer to forfeit their 180-day exclusivity. In your
testimony you describe these forfeiture provisions as
toothless. Could you expand on what you mean by the fact that
they are toothless?
Mr. Carrier. The Medicare amendments of 2003 were designed
to solve the problem of a generic not entering the market and
forfeiting its exclusivity as a result. The problem is that the
provisions were drafted in way that they only apply upon the
later of two events, one of which is an Appellate Court
decision, which could take place years down the road.
So there have been four settlements where the Appellate
Court decision took place 6, 8, 11, and 13 years after the
settlement was entered into. And so if forfeiture only kicks in
a decade down the road in my mind it is toothless.
Then the other question is what incentive is there for a
subsequent generic to actually bring one of these challenges if
it is not going to get a piece of the 180, and so those are the
two reasons why I think it is toothless.
Mr. Schrader. Well, Secretary Azar agreed with you
yesterday, and for the record I would like to note that we did
have FDA input on this product. We have talked at length with
the different manufacturers in the industry, and this is a
bipartisan bill supported by the President of the United
States.
Thank you, Madam Chair, and I appreciate your calling this
hearing today. I yield back.
Ms. Eshoo. Thank you, Mr. Schrader, and thank you for your
excellent, thoughtful work. It is a pleasure to recognize the
gentleman from Virginia, Mr. Griffith, for 5 minutes.
Mr. Griffith. Thank you very much, Madam Chair. Mr. Kushan
and Mr. Karst, in your view would H.R. 1499, the Protecting
Consumer Access to Generic Drugs Act or H.R. 1506, the FAIR
Generics Act, make it easier or harder for a generic medicine
to come to market?
Mr. Karst. Thank you very much. I actually think it would
make it more difficult, and particularly on the FAIR Generics
Act, which intertwines these concepts of patent settlement
agreements and 180-day exclusivity. I am in the trenches every
day working with generic drug manufacturers, dealing with these
immensely complex scenarios on exclusivity and forfeiture, and
adding these two together which are complicated enough
themselves separately I think would slow down things, could
lead to further litigation. I don't think they are as
procompetitive as the law currently is, in fact.
Mr. Griffith. Mr. Kushan.
Mr. Kushan. I generally share Mr. Karst's conclusion on
this. On H.R. 1499 there seems to be kind of an idealized
settlement defined, and it doesn't reflect some of the
realities that I have seen when innovators are trying to find a
way of settling a patent dispute with a generic. They tend to
look at more variables that are going to be mutually
beneficial, which is natural in any kind of settlement
negotiation that are not going to disrupt the core point of
delivering that product onto the market before the patent
expires. And so, I think we just need to have kind of a broader
mindset when we look at these settlement agreements to look at
the bottom line, is it going to get the product on the market
as quickly as possible and yield procompetitive advantages to
the market.
Mr. Griffith. So without significant amendment you all do
not believe that the patients would benefit from these two
bills if they were passed and signed into law. Is that
correct?Without significant amendment.
Mr. Kushan. That is a hard question to answer, but my
instinct is that it will make the negotiations much more
complicated and less fruitful of what we are trying to do.
Mr. Karst. I fully agree. I think it will be a disincentive
to--there won't be an incentive to settle, therefore, there are
will an incentive to carry on litigation, and that is simply
going to delay generic drug competition all that much more.
Mr. Griffith. Thank you. Mr. Davis, in 2013 the Supreme
Court ruled, as you know, in FTC versus Actavis that the so-
called reverse payments from brand drug companies to generic
companies with the intention of delaying the entry of a generic
or biosimilar pharmaceutical could be deemed anticompetitive.
Consequently, according to the Federal Trade Commission the
number of patent settlements involving so-called pay-for-delay
agreements between brand companies and generic manufacturers
has declined significantly. Can you explain if patent
settlements may be useful in some cases and what some of the
unintended consequences of eliminating patent settlements may
be?
Mr. Davis. Sure, Congressman. Thank you for the question. I
think it is--let me state up front that what has in the sort of
public debate about patent settlements the term ``pay-for-
delay'' has become almost all encompassing. To be clear, AAM
and our members we do not support pay-for-delay agreements full
stop. What we do support is the ability of private parties to
negotiate in good faith if, in fact, it leads to the
acceleration of generics coming to the market. And there have
been, and the FTC issued a report post the Actavis decision in
2013 that the vast majority of agreements that have been
reached subsequent to that seminal decision have been ones that
have not been found to be anticompetitive.
The other thing I would add Congressman is I think it is
really important when you look within the context of patent
settlements that it is we would submit to this committee
problematic and quite frankly dangerous to disassociate issues
around patent settlements without thinking about the larger
context and the bigger financial impact of patent abuses. If
you will, if patent settlements are the symptom, patent abuses
are the disease because if we actually don't take on a
significant effort to address some of the things about
evergreening and patent stacking that increasingly generic and
biosimilar manufacturers are only left downstream with the
ability to decide to enter into negotiations to try and get
some clarity and certainty on having a date certain in which
they can come to the market.
So our recommendation to the committee would be to make
sure that as you are continuing to review legislation around
patent settlements I think the Humira example is prima facie,
which is without the ability for those companies to settle in
2023 and 2024 for a drug that was approved in 2002 whose main
ingredient patent expired in 2014, the first competition would
not be until 2034. And so my concern is that the legislation
before you would not address that issue, and, in fact, may
incentivize innovator companies to continue to throw as many
patents as they can against a product in the late stage life
cycle of the product.
Mr. Griffith. I thank you very much, and I yield back.
Ms. Eshoo. I now would like to recognize the gentlewoman
from California, Ms. Matsui.
Ms. Matsui. Thank you very much, Madam Chair and thank you
for having this hearing today. And I want to thank all of you
for appearing here today.
I would like to focus for the moment on the potential for
these policies to save real money for consumers. We are here to
talk about high drug prices and some of the policy loopholes
that allow drug manufacturers to maintain them for prolonged
periods. We know that market competition lowers prices for
consumers. That costs decreases exponentially when a third
product comes on the market and continues to decrease with each
additional generic product introduced into the market.
These dynamics have incentivized some companies to extend
their market monopolies for certain products well beyond the
period of reward initially granted to them by the drug approval
process. And I would like to better understand how consumers
are being impacted by this behavior and how the policy we are
considering here today could make a difference.
First of all, Mr. Barrueta, could you please describe for
us why payers like Kaiser Permanente are concerned about
generic drug access and how gaming of the drug approval system
prevents such access. In short, how does generic drug
utilization impact your members? I am just thinking of the
patient.
Mr. Barrueta. Thank you, Congresswoman Matsui. The ready
availability of generics is really crucial to keeping the cost
of prescription drug benefits stable over time. We do know that
over time new drugs do come to the market, and if older drugs
are not leaving branded status and becoming generically
available in an orderly manner you see spikes in the cost of
prescription drug benefits, and we have seen that for several
years. That results ultimately in the need for health plans to
generally modify the shape of those benefits. This is one of
the reasons why we have seen increased deductibles in benefits
and things like that.
And this is why we are very eager, particularly as we move
toward much more expensive biotech drugs in the future to make
sure that we are dealing with this problem up front because the
problem that we have seen over the last 5 or 6 years where
coverage has shrunk some as the cost of drugs has gotten higher
and higher that is a dangerous warning sign for what is to come
if there isn't some kind of approach that looks to the future
of these drugs, as Congressman Burgess said million dollar
drugs for various therapies start coming to market. We need a
more rational way to do this.
Ms. Matsui. OK. Mr. Barrueta the solutions the committee is
considering today, which would have the most direct immediate
impact on high drug prices? Does Kaiser Permanente prioritize
passage of any of these policies?
Mr. Barrueta. I think it would be great to move CREATES as
soon as possible and get that on the market. I think that can
help a lot.
Ms. Matsui. And that would be it, you wouldn't prioritize
the rest of them at all?
Mr. Barrueta. I think it is really important that the
committee is looking at all of this. I think the testimony we
have heard today has demonstrated there are--careful
consideration needs to be taken on all of these. I think they
are all very well intentioned to do the right thing and it is a
complicated process as we have heard from some of the experts
who actually practice in this field. CREATES for us is just
very clear and should move forward.
Ms. Matsui. OK. Well then as we move forward to consider
additional action on drug pricing, are there other policies
that we should consider in the future?
Mr. Barrueta. I do think that it would make sense to look
more broadly around this. Some of this may not be within the
jurisdiction of the committee, but one of the--I didn't mean to
imply anything, Congressman Burgess, but I do think there are
some obvious targets. I think the way part B drugs are
reimbursed in Medicare is driving higher and higher prices B
part B. I think that that is an area that needs to be looked
at. Reimbursement policy could be changed, disincent--to stop
incenting the use of much more expensive drugs when less
expensive drugs are available.
The Medicaid rebate program has in it a formula that deters
discounting by drug manufacturers. I think that could be
modified in a way to leave the States and the Medicaid programs
at least whole and encourage competition in the marketplace.
And then the last one and we have talked a little bit about
this is I do think we have an excellent agency that is focused
on competition and markets and protecting competition, and I
think providing broader authority and broader resources to the
Federal Trade Commission to take a more active role in
examining how this market is actually operating would be
beneficial.
Ms. Matsui. OK. Well, thank you very much. We appreciate
your ideas, and I yield back.
Ms. Eshoo. I thank the gentlewoman. Now I am pleased to
recognize the gentleman from Kentucky, Mr. Guthrie.
Mr. Guthrie. Thank you, Madam Chair. Thanks for holding
this meeting and the important meetings that we are having on
prescription drug prices, and I have said for the last year or
two that we need to deal with prescription drug prices and
preferably through the marketplace and bringing competition to
the marketplace, so this is an important hearing today, and I
appreciate you doing that.
And, Mr. Karst, I want to kind of follow-up on my friend
from Virginia's questioning of Mr. Davis, the pay-for-delay
particularly. And I really looked at getting involved in moving
this bill, and what I want to do is make sure that it is right,
and it does what we want it to do. And I think Mr. Davis talked
about--and I don't want any unintended consequences. I think
you might have been the one who said sometimes it is like brain
surgery, if you mess up you can really mess the problem up.
And I understand there were five out of 170 cases that have
ruled to be noncompetitive that went before the Federal Trade
Commission, and so how can these settlements in the pay-for-
delay, how can these settlements actually be procompetitive?
Mr. Karst. Sure. Thank you very much, Congressman. So often
times you have, of course, patents that extend years beyond any
other type of regulatory exclusivities that may be granted by
FDA, and, of course, you have generic manufacturers challenging
these patents, paragraph 4 litigation, and if they have to
continue to litigate these patents all the way to the end, as
Mr. Carrier pointed out, sometimes these cases can go on up to
the Federal Circuit for 10, 12 years after the initial
litigation.
By being able to settle the litigation by some form of
patent settlement agreement that allows for an earlier market
entry date that is prior to the actual patent expiration not
only means that companies, generic manufacturers can save
millions of dollars when it comes to patent litigation,
attorneys fees and what not, but they are also able to
develop--put those moneys back into the company to develop
other generic drugs to have more generic competition on the
market, and they have date certain when they are going to be
coming to market.
They could decide to go through the litigation process, and
maybe they end up losing in the end. Well, what happens then,
of course, is they are not even going to get approved until
that patent expires years later than they might have otherwise
been able to get on the market because of a settlement
agreement. So in that respect I view these agreements as very--
as procompetitive.
Mr. Guthrie. Well, are there cases where that brand has
paid a generic and the generic doesn't pursue moving forward,
and if so, what would be the solutions for that? That is what
we want to prevent, and my understanding as I dig deeper into
this it seems to be more the way you describe is the situation
then just the generic accepting a payment not to come into the
marketplace.
Mr. Karst. Well, it is not necessarily a payment. Whatever
value you may exchange hands, I mean, again, it is for the
benefit of getting that product on the market. I am a generic
manufacturer, that is what I need to do. I need to get my
product on the market and sooner rather than later.
And when you do the calculus of patent litigation the
calculus may add up to if we are able to settle this patent
litigation for an entry date certain that knocks off X number
of years on the term of the patent for us to be able to get in,
that is again procompetitive.
Mr. Guthrie. Thank you. Mr. Kushan, one of the concerns in
the CREATES Act is it provides incentives for generic
manufacturers to initiate litigation with the real purpose of
extracting a settlement, rather than acquiring samples
necessary to get a generic approval, I guess the argument for
pay-for-delay they would rather have the settlement than access
to the marketplace. Should we consider provisions that would
deter these types of frivolous lawsuits?
Mr. Kushan. I will start by noting I am a patent litigator,
so I don't have all knowing insights into some of these things.
I do have instincts that when you create a right of action that
gives an opportunity for a monetary outcome of the litigation
you are just going to incentivize some activity that may not
ultimately deliver what you are hoping for. I think this is a
complicated topic. I have not had a lot of experience with the
whole process of providing samples, but it seems like, you
know, there should be a way to make sure that samples are made
available for the purposes that they are needed to get the
testing done to make these products available.
Mr. Guthrie. OK. I just have a few seconds, and Mr. Davis
the prelude to an Oversight and Investigation hearing. Working
with Congresswoman DeGette her staff has worked tirelessly to
try to find real solutions for millions of Americans who depend
on insulin. Can you explain why more generic insulins are not
on the market, and how a March 2020 deadline for insulin
approval will hurt generic insulins from coming to the
marketplace?
Mr. Davis. I will do it as briefly as I can, Congressman,
and thank you for your leadership on this issue. I think
insulin is a classic case of a convergence of a number of
troublesome and concerning issue, not the least of which is the
sort of the perverse rebate incentive system that we have now
where list prices increase to absorb a larger demand for a
rebate. There is late stage patenting with some of the insulins
that are currently on the market.
And then to your specific question about the FDA's guidance
about moving forward into March 2020 with what is being
referred to as the regulatory dead zone, that was actually a
requirement coming through the BPCIA that was passed in 2010,
but the reality is if you have a pending biosimilar application
pending with the agency you are actually going to have to go
back to the drawing boards and actually start over again if we
encroach upon that time frame.
Mr. Guthrie. My time has expired, so tune in March 11 for
our next--April for our next hearing.
Mr. Davis. Thank you for your leadership on it because it
is a very real issue.
Ms. Eshoo. I allowed the gentleman to finish his answer
because I think that it is important that we hear the answers,
but we will be following up with you, Mr. Davis. Thank you very
much.
I now would like to recognize the gentleman from
California, Mr. Cardenas, for his 5 minutes of questioning.
Mr. Cardenas. Thank you, Madam Chair. I would like to thank
the ranking member, as well, for agendizing this important
hearing. I hope that the Americans are watching because 1 out
of every $5 in Americans' wallets somehow some way goes back
into their healthcare needs, and this is an important aspect of
that. So and also, I would like to thank the witnesses for
coming forward and giving us your expertise and your
perspectives, and when it comes to prescription drug pricing it
is a complicated topic, but it is one that impacts the lives of
Americans all over the country.
There are many moving pieces here, but I want to focus for
a moment on biosimilar entry to the market. Despite the fact
that the FDA has approved 17 biosimilars in the U.S., only 7
are on the market and available to providers and patients. This
is a sharp contrast to the experience in Europe where more than
50 biosimilars are available. While it is true the Europe
regulatory experience with biosimilars is more mature than here
in the U.S. I am worried that if we do not start to address the
barriers to biosimilar entry sooner than later patients will
not be able to realize the benefits.
We know that spending on specialty drugs, which include
biologics, has grown rapidly and is now nearly half of all of
our spending. Biosimilars hold the potential to help cut down
these costs with marked--with marketed biosimilars being priced
an average of 40 percent less than the biologic.
So my first question is to you, Mr. Barrueta. I was
impressed to learn that Kaiser Permanente has taken such a
leading stance on biosimilar utilization, but what is the
biosimilar utilization rate for Kaiser Permanente, and what led
Kaiser to take such an aggressive stance on generic and
biosimilar utilization?
Mr. Barrueta. Thanks Congressman Cardenas. We are using
biosimilars as they are available pretty quite intensively, so
I mentioned in my testimony that on one drug we are over 75
percent use of the biosimilar as opposed to the referenced
product. We have intensive use of Zarzio over Neupogen as
another example, and, in fact, that is one where the data that
we are able to see within our clinical records is demonstrating
that drug is performing excellently. So we are having the
European experience on biosimilars within Kaiser Permanente in
many respects.
I think the critical thing is to make sure that good
information is available to practitioners across the country
who are faced with the opportunity to consider biosimilars for
their patients and to make sure there is a regular source of
objective unbiased and very solid information, and I think it
would be important to use the Governmental resources that are
charged with bringing information forward to make that
available.
Mr. Cardenas. OK. In your opinion, what are the key
barriers that are blocking or delaying biosimilar entry into
the marketplace today in America?
Mr. Barrueta. I think it is clear what we have heard much
of the testimony today that the patent thicket problem, I
think, is inevitably a problem. I do think that as Mr. Davis
said it is hard to separate the issues of some of the conduct
that is going on in the existing system versus just the ability
to throw vast numbers of patents forward, and there is a need
to look at this broadly as the committee is today and try to
create more transparency and more clarity to allow these things
to come to market faster.
Mr. Cardenas. There are some manufacturers that have
benefitted from several loopholes in our current regulations,
including agreeing to multiple patent settlements to further
delay competition. In some cases, these products lack
competition in the U.S. but have several competitors on the
market in Europe and much lower list prices there as a result.
Again, Mr. Barrueta, will the legislation we are
considering today help to close some of these loopholes and get
competition to the market more quickly in America?
Mr. Barrueta. I think it is a start. I think it is a move
in the right direction. I think we have heard it is a
multifaceted problem, but certainly pay-for-delay problems
continue to exist that there should be further examination on
these even moving forward. Whether that is the total reason why
some of these are delayed as opposed to the broader patent
thicket problem it is hard to pull apart, but I think
absolutely what is being considered is a step in the right
direction.
Mr. Cardenas. I believe Congress has a role to play in this
in correcting this problem, and hopefully we will be able to
advance some legislation in the right partisan manner so that
we can get this through for the American people.
My time having expired, I yield back. Thank you, Madam
Chair.
Ms. Eshoo. I thank the gentleman, and just for the record
on the issue of biosimilars, the legislation that created the
pathway for biosimilars to actually move to generic was the
legislation of the late Senator Kennedy and myself. So anything
that blocks that from occurring we are going to do a deep dive
on.
I now would like to recognize the ranking member of the
full committee, Mr. Walden, of Oregon.
Mr. Walden. Good morning, Madam Chair, and thanks for
recognizing me for questions. Mr. Boutin, H.R. 938, the
BLOCKING Act has bipartisan support on this subcommittee, and I
understand that the goal of the legislation is to prompt
generic manufacturers to launch their products as early as
possible. Can you walk us through the issues in the market
currently in the way this bill attempts to resolve those
issues?
Mr. Boutin. I can tell you on that issue the National
Health Council has not taken a formal position, but I will tell
you that we are very supportive of the intent of this
legislation. I know looking more closely at how we can help
ensure that generics are getting to market as quickly as
possible.
Mr. Walden. All right. Mr.--and I probably will get this
wrong, Barrueta.
Mr. Barrueta. Barrueta.
Mr. Walden. Barrueta all right. What was the 2018 operating
revenue of Kaiser Permanente?
Mr. Barrueta. The operating----
Ms. Eshoo. Turn your microphone on.
Mr. Walden. I am told 79.7, so----
Mr. Barrueta. Just under 80.
Mr. Walden. Almost 80. What kind of impact would losing
$79.7 billion have on your organization?
Mr. Barrueta. That would be very bad.
Mr. Walden. It wouldn't help your employees, would it?
Would you expect your company to have to lay off some workers,
and how might it impact your organization's ability to continue
operations?
Mr. Barrueta. The loss of revenue obviously is something
that any business has to accommodate itself to.
Mr. Walden. And we are all obviously interested in finding
a powerful deterrent for bad actors, but I want to be sure we
all understand what is at stake we are talking about revenue
not profit or actual damages. As you well know there is a big
difference there.
Mr. Davis, Mr. Burgess touched on some of the concerns he
has about the unintended consequences of the pay-for-delay
bill, and I think it is an important issue to consider fully.
Can you provide some additional insight on how the agreements
actually work, and would you say that they lead to earlier
competition than we would otherwise see on the market?
Mr. Davis. Yes, thank you, Congressman Walden, for the
question. So the short answer is, yes, there are situations,
and I think the FTC has spoken to this in the report I
referenced earlier, that in the wake of the Supreme Court's
guidance in the seminal decision back in 2013 about their
scrutiny that they would apply to a transferral of anything of
value that the number of anticompetitive agreements as
determined by the FTC has dropped significantly. That is a good
thing. It is a good thing for the market. We support more
market-based competition. In fact, competition if you will, is
the DNA of the generic and biosimilar sector.
What we want to do is make sure that as our companies are
doing everything in their power to get safe, effective, and
affordable generics or biosimilars to the market as quickly as
possible is that in those instances where settling, whether it
be because of late stage patent stacking or patent abuse and
filings the generic companies don't generate the revenue the
brands do, so even in litigation there is a potential that they
will get worn out of resources to the point about loss of
revenue where they cannot continue. There is not a generic
company that is going to be able to debate in court 100 pending
patents for way of example.
So to not have the ability to settle on a date certain
admittedly quite frankly because of certain patent abuses one
that is longer out than they would have liked to otherwise is
still important to make sure that they can preserve so they
have some clarity and certainty about being able to go forward
on a certain date. We used to have that complete--to be candid
as an industry, and that is getting away from us year over year
as the absolute certainty of when our manufacturers are going
to be able to come to market with a competitive product.
Mr. Walden. All right. Anybody else want to add anything to
that? Yes.
Mr. Kushan. I have just heard a few times the concerns
about these patent thicket issues, and I want to make sure that
we recognize that it is a slightly more nuanced circumstance. A
lot of times the patents that come out later are very narrow,
and when you are an innovator or when you are a biosimilar
manufacturer you can make a choice whether to use the
technology that is covered by the patent or not use it. And so
when you look at all these patents, there are ways around the
patents that are not involving invalidation of the patents.
It is important when we engage in this discussion to make
sure that we don't kind of oversimplify the patent issue into
an assumption that all patents do the same thing. Some are very
narrow, some dominate the product, but you have to look at the
actual obstacles if there are any that are in front of the
biosimilar manufacturer and how they might best navigate around
those obstacles.
Mr. Walden. All right. I see Mr. Carrier wants to say
something. I have 14 seconds, it is all yours.
Mr. Carrier. Very quickly, certainty for the brand and the
generic companies is a lot of what we have talked about today,
but on the other hand the Supreme Court in Actavis said it is
the risk of competition that is the anticompetitive harm. Nine
out of ten of these patents are not on the active ingredient,
let's litigate them.
Mr. Walden. Thank you. Thank you, Madam Chair.
Ms. Eshoo. Thank you. Let's see, who is next? Mr. Welch of
Vermont, one of the key members of our committee whose name is
on more than one of the bills that we are considering today,
you are recognized for 5 minutes.
Mr. Welch. Thank you very much, Madam Chair. It is kind of
exciting to be here because we are actually on the threshold of
doing something, and that is something that eludes us in
Congress, so it is nice to show up for work today. And we are
actually building on work that was done when Mr. Burgess was
the chair of this subcommittee and Ms. Eshoo was following on.
So I am pretty excited.
The second thing is I really appreciated the testimony. It
is like you all like know something about what you are talking
about, and that is refreshing, as well. And I have got a
request for everybody because you have been talking concretely
about legislation, and one of the big challenges around here is
to start getting into the details.
So if you have specific suggestions about how any of these
bills can be improved, I think that would be of great interest
to our committee because we want to get this right. And you
have concrete, practical knowledge and experience that can help
us do that. So my request to you is to send in your bullet
points about areas on each of these bills where you have
improvements. So thank you. But I want to just make a few
comments and ask a few questions.
Mr. Davis, you said something that makes total sense to me,
and that is that we want a deal on the front end where we
eliminate patent abuse, so that we don't have to argue on the
back end where no matter what the remedy is it is going to be
tough. Can you just elaborate a little bit on that?
Mr. Davis. Sure, happy to, Congressman, and thank you for
your sustained leadership on the issue of REMS abuse. It is
greatly appreciated.
The larger dynamic in terms of--and again, I want to be
clear here--that the generic and biosimilar industries
recognize the importance of strong patent protection of
intellectual property. We like to say that we rely every bit--
--
Mr. Welch. You have got to be brief here because I only
have 5 minutes.
Mr. Davis. So--but what we have more of a concern with, is,
after sort of the initial filings on the patent and the product
comes to market, as it is nearing the end of its product
lifecycle, you see a lot of subsequent filings, particularly on
expensive specialty drugs that further delay competition.
Mr. Welch. OK. And, Mr. Carrier, an amazing number of
articles you have written, congratulations and thank you for
your contribution, but one of the pushbacks that we have had
from branded pharma is that if we do anything about pricing, it
is going to affect innovation. And I heard you say--and I just
want to make sure I am right--that the various proposals that
are under consideration today would not, in your view,
adversely affect innovation?
Mr. Carrier. That is correct. And so that is always the
argument that the brand companies offer--if you do anything at
all, that is going to hurt innovation. On the other hand, what
is complicated about this area is that we have innovation on
the one hand and generic competition on the other.
You look at Hatch-Waxman. Half of it is for innovation.
Half of it is for generic competition. The brand companies have
gotten everything they have wanted for innovation--the 30-month
stay, the patent term extension, the nonpatent market
exclusivity. But when it comes to the generic side, like the
180, they have now taken that for themselves. There has to be
something there for generic competition.
Mr. Welch. All right. Thank you for making that point. Mr.
Barrueta, I want to ask you, do you have a view on the pros and
cons of CREATES versus FAST? I am a cosponsor of both pieces of
legislation, but I want you to tell us what you think is--
should we combine them, or do you have a view on which one
would be more effective?
Mr. Barrueta. I guess my comment is probably more of a
process one. Whichever one you can get done more quickly, I
would go with that.
Mr. Welch. Either way.
Now, Mr. Karst, you were talking about litigation. I have a
confession. In addition to now being an active politician, I am
a recovering trial lawyer.
Mr. Karst. OK.
Mr. Welch. And public approval about 3 percent. I don't
like litigation, all right? It just--it is the last resort, and
there are other agendas that are usually involved in it. And do
you see a way where we can try to do what Mr. Carrier is
talking about, protect intellectual property and innovation,
but on the other hand, spur biologics and generics? You know,
you seem to be raising some questions about the necessity
litigation, and I would like to get away from that, really, by
doing what Mr. Davis is suggesting.
Mr. Karst. Yes, it is--as, of course, a lawyer, litigation
is part of my job, but I was really raising that in the context
of the BLOCKING Act, which, again, I am in the trenches all day
when it comes to 180-day exclusivity generic drug approval, and
anything that makes an amazingly complex law have all that much
more complex tapestry is simply not good, in my opinion.
Mr. Welch. Well, send us your suggestions.
Mr. Karst. This is in the context of the--yes, certainly--
the BLOCKING Act, which I----
Mr. Welch. Right.
Mr. Karst [continuing]. Just don't think is necessary, and
it is just going to lead unnecessarily to more litigation.
Mr. Welch. Yes, I mean, see--I know my time is up, but this
is where there are some common ground here. We all want to
protect innovation, but we want to get the prices down and make
it affordable. So thank you. I yield back.
Ms. Eshoo. I thank the gentleman. It is a pleasure to
recognize my favorite Greek in the Congress, the gentleman from
Florida, Mr. Bilirakis.
Mr. Bilirakis. Thank you very much. I appreciate that,
Madam Chair. Thank you for holding this hearing, by the way.
This is a priority for all of us, because our constituents talk
about this all the time, again, the high prices--the high,
prescription drug prices. So we must lower the prescription
drug prices, and I hear this from our veteran's population, our
senior population, but the general population.
So I remain committed to working with my colleagues on both
sides of the aisle to achieve that desired result in a way that
does not undermine progress and that has already been made,
so--the progress that has been made. And I agree with
Representative Welch, I appreciate your testimony, and keep
sending us your suggestions, because it means so very much. We
have got to get this right.
Mr. Davis, can you share with us what is currently working
and how we might double down on these efforts? That is the
bottom line.
Mr. Davis. Sure. Congressman, thank you for the question.
I think when you look at the bills that are before you, I
think both transparency bills, on the Orange and Purple Book,
are, as has been referenced before by experts far greater than
I, a really positive step in the right direction, and AAM is
supporting both the CREATES and FAST Generics Act that are also
under consideration here.
I think one other area that is really important that hasn't
been touched on yet today because it is not reflected in a bill
currently before the committee, but relates to--and I think Mr.
Barrueta's talked about how biosimilar uptake has been so
significant at Kaiser--is about benefit design and formulary
placement and the importance of ensuring that when generics and
biosimilars get onto the market that they have a preferred
position on the formulary.
We actually have an increasing case year over year, where
follow-on competition from an out-of-pocket cost perspective
may be more expensive because of agreements between originators
and plans than the follow-on competition. If that happens, I
would submit to you that Hatch-Waxman and BPCIA don't work. So
ultimately now, and a credit to CMS, they are looking at this
very issue as we speak for the 2020 Part D plans.
And so we encourage any Member of Congress who wants to
make sure that generics are on a generic tier, biosimilars are
on a biosimilars tier, and that the out-of-pocket costs, which,
as we all know is what consumers and patients are really
focused on, is making sure that those are lower for the
subsequent, low-cost alternative as opposed to being higher.
Mr. Bilirakis. Thank you. Very recently this committee
passed legislation to address the products with limited
competition by creating the competitive generics therapy
Program at FBA, also known as the Schrader-Bilirakis bill, and
it extended the 180-day exclusivity to products without
competition, and by all accounts, the program has been
successful, with FDA receiving over 100 applications from
generics manufacturers looking to bring competition to these
products.
To me, this is a perfect example of the value that a 180-
day exclusivity holds for generic manufacturers. But my concern
with some of the bills we are discussing today, that, you know,
we have a solution in search of a problem and should we move
forward. The consequences of undermining the 180-day
exclusivity and the adverse effect it may have on generics.
Mr. Karst--and you have touched on this--actually the
entire panel has but let me ask the question again. In your
opening statement, you stated the BLOCKING Act is not
necessary. Why is that, and could you elaborate more? You
referenced the medical maxim in your testimony, do not harm,
and we don't want to harm. Could this bill end up weakening the
180-day exclusivity that has proven to be such a powerful
incentive for bringing generics to market as quickly as
possible?
Mr. Karst. Thank you very much for your questions,
Congressman Bilirakis. And as an initial matter, thank you very
much for the CGT, the competitive generic therapy legislation.
It has been--it has been a smashing success. I can tell you,
working with a lot of companies in the generic drug industry,
this is--this is very important to them, and I am constantly
working with companies to get the designations and the
approvals, and companies are very much responding to your
legislation and Congressman Schrader's legislation.
On the BLOCKING Act, quite simply, I don't think the bill
is necessary, because, one, FDA already has the statutory and
regulatory authority it needs to address the problem. Now, this
has been, I guess, characterized by Secretary Azar as squatting
on exclusivity, and it is not, I don't think, an accurate
description of the situation.
In fact, these companies may, for one reason or another,
whether it is due to FDA or their own fault, unable to get
final approval, but FDA does have authority under the statute
to deal with that situation already. Putting new provisions
into the statute that are amazingly complex, again, not only
will lead to litigation, but they are so complex in nature that
I am afraid that it is going to significantly hurt the 180-day
exclusivity incentive.
Mr. Bilirakis. Thank you.
Madam Chair, I will yield back to my favorite Syrian-
Armenian chairman. Thank you.
Ms. Eshoo. We really got something going here.
It is a pleasure to recognize the gentleman from New
Mexico, Mr. Lujan.
Mr. Lujan. Thank you very much, Madam Chair.
Issues with REMS programs have been coming up for years.
These requirements are meant to help ensure the safe use of
certain drugs. Unfortunately, we have heard testimony over the
years that REMS have been gamed to delay generic drug
development activities. The FDA Commissioner has said that REMS
abuse needs to stop, and the agency has taken a number of steps
to try to facilitate generic access to samples.
I am concerned, though, that some have tried to argue that
such access by generic drug developers could put patient safety
at risk. Both the CREATES Act and FAST Generics Act lay out a
process by which generic manufacturers could access samples of
a branded drug product, provided that certain conditions have
been met.
Ms. Kennedy, can you please describe the kind of testing
you might do on a product before it comes to market? What do
you have to show the agency to obtain approval?
Ms. Kennedy. Yes. Delighted to answer. As the only
manufacturer who gets up every day to lower healthcare and
costs to American patients on this panel, I'm----
Ms. Eshoo. Move your microphone. Maybe it is not on. We
really want to hear from you.
Ms. Kennedy. I am pretty loud anyway.
Ms. Eshoo. There you are.
Ms. Kennedy. OK. And I like your first name. At any rate, I
would like to say that we are absolutely equipped with all the
innovation and knowledge that we need to deformulate any brand
product on the market with the exception of some of the
biologics.
And as such, we are hoping that it is made easier by
Congress and others to get those REM samples and make sure that
we can begin our innovative process, and from that, we then are
expected to prove to the FDA, with regular standards in place,
that we are qualitatively and quantitatively equal and
efficacious to the brand product.
As such, we are doing that over and over again, and
particularly in the Part B Medicare space, and that is truly
lowering the cost of drugs to American patients, because our
drugs that we are making as generics today are the 100 top
movers list. They are taken by emphysema patients and others
four times a day, and we hope to expand that as other drugs
are--are closing--closing to near the end of their patent life.
And we hope that the Congress and all of the laws that will
be enacted as a part of what we are talking about today,
encourage us and help us to get our products to market and
truly lower the cost of healthcare. That is where we are.
Mr. Lujan. Ms. Kennedy, can you touch on the safety as
well----
Ms. Kennedy. Yes.
Mr. Lujan. [continuing]. That you have to be attentive to,
to ensure the product is, in fact, safe?
Ms. Kennedy. Yes, we have to prove every test that the
brand innovator has to prove, and we have also other tests
required of us if we, for example, move to a different
container closure, something that would be innovative and
perhaps a less expensive way to package those products. We are
required to test from soup to nuts, all C of A's must be
passed, all matters of assay identity, osmolarity and all the
other tests, including sterility, must be passed. So the
quality is not at issue. We will not receive approval unless we
are perfectly 100 percent efficacious or better than the brand.
Mr. Lujan. So, Mr. Davis, based on your review of the
CREATES Act, do you believe that this legislation changes the
safety standard or patient protections that are currently in
place for equivalent branded products, and do you believe the
bill opens a possibility of additional risk to patients?
Mr. Davis. So I believe it maintains the level of safety
certification requirements that the FDA has, and actually puts
more, sort of, teeth into it, Congressman. I would associate
our comments with everything that I think was perfectly
articulated by Ms. Kennedy as well. I do not think it exposes
anyone along the continuum to any increased risk of safety
whatsoever, because we actually trust the FDA to get it right.
Mr. Lujan. Mr. Davis and Ms. Kennedy, do you believe that
either the CREATES Act or the FAST Generics Act would hamper
the FDA's ability to ensure all drugs, regardless of whether
they are brand or generic, are safe and effective and
adequately protect against patient safety risks? Mr. Davis?
Mr. Davis. None whatsoever.
Mr. Lujan. Ms. Kennedy?
Ms. Kennedy. Agreed. Their governance is what is expected
of us. That is the law.
Mr. Lujan. And I guess as I close, Madam Chair, I take
comfort in knowing that both pieces of legislation preserve a
process by which the FDA can register any concerns with that
plan before the samples are transferred, which is also
something that is important for us to be noting as we move
forward with consideration of legislation.
With that I yield back the balance of my time.
Ms. Eshoo. I thank the gentleman.
I now would like to recognize the gentleman from Indiana,
Dr. Bucshon.
Mr. Bucshon. Thank you, Madam Chairwoman.
Mr. Davis, I want to clarify, earlier you said--you listed
a long list of people that supported the CREATES Act, and I
want to clarify the version of that that you are talking about.
The version was introduced to this Congress--or is this a
previous version, and I think you mentioned it might have been
the previous Senate version. Can you clarify that?
Mr. Davis. Yes, Congressman. Thank you for the question.
So, yes, the list of supporters of which AAM is one, that has
been tracked as actually a list that has been growing year over
year, as this problem has become more significant, dating back
to 2007 when the REMS programs were created. So that list
applied to the version that was being considered last fall, in
the Senate. The CREATES Act that actually passed out of the
Judiciary Committee, is, I believe, the one where all of those
stakeholders actually wrote a letter in support.
Mr. Bucshon. OK, in that vein, I want to be able to support
a version of the CREATES Act, but the current version seems to
me, it could potentially and perversely incentivize litigation.
As currently drafted, it appears that the generic company could
simply not accept the valid offer from a brand manufacturer and
go to court because--understanding the damages available to
them could be much more lucrative. If an offer to sell samples
on commercially reasonable, market-based terms has been made,
should a generic be able to reject that offer and go to court?
Mr. Davis. I think the issue will be determining what fair
market value is. As they always say, beauty is in the eye of
the beholder in the negotiations. So I think that is actually
one of----
Mr. Bucshon. But that is defined in the law, right?
Mr. Davis. I am sorry?
Mr. Bucshon. What fair market value is, is----
Mr. Davis. That would actually be based upon what is
available in the marketplace, what the originator would be
offering to sell to the generic manufacturer.
Mr. Bucshon. Right, so commercially reasonable market
based. I mean, I am not a lawyer, but----
Mr. Davis. Correct.
Mr. Bucshon [continuing]. That is probably a definable,
legal term, I would imagine, correct?
Mr. Davis. Correct.
Mr. Bucshon. So would you maybe then--because since you
were talking about the one that were supporting was the
previous version last fall, and would you then support
potentially adding language to the current version that might
clarify that that type of scenario wouldn't unfold?
Mr. Davis. I would have to see the language, sir, and we
are happy to take a look at the proposed language. I think from
our perspective; the real issue is making sure this problem
gets solved now.
Mr. Bucshon. OK, great. Anyone else want to comment on
that? Do you have any other comments?
Ms. Kennedy. I think we have to encourage competition at
every turn. We look to you guys for guidance and keeping people
in their lanes and really putting a stop to the gaming and the
things that we are faced with.
Mr. Bucshon. Well I don't think anyone disagrees----
Ms. Kennedy. We are ready to serve.
Mr. Bucshon. Yes, I don't think anyone disagrees with that.
Mr. Carrier. And one other thing on litigation----
Mr. Bucshon. Yes.
Mr. Carrier [continuing]. Sure, it sounds pretty crazy, but
nothing else has worked. And you have the FDA Commissioner
saying, we are trying everything, it is not working, cut out
the shenanigans. If you have deterrents and you have attorneys'
fees, then finally the brand companies might wake up and say it
is not worth the cost of doing business in this case.
Mr. Bucshon. So then maybe that, you know, the language,
``commercially reasonable and market-based'' is not strong
enough and that could be an area that could be strengthened to
make sure that companies aren't purposefully turning down
settlements that could be reasonable and commercially
reasonable, in order to litigate? Mr. Karst, do you have a
comment on that?
Mr. Karst. We are typically talking--I mean, again, for the
amount of product we are talking about, maybe several hundred
pills or tablets or capsules. So we are not probably talking
about, in the end, a significant cost in the overall
development program here for that generic manufacturer.
Mr. Bucshon. But it is a very complicated subject, and I am
not a lawyer. That is why I am asking you all.
Mr. Davis. Congressman, I would only add in the discussions
that we have had with our members who were engaged in this and
have been frustrated for the better part of a decade, I have
never heard anybody talk about the interests in actually being
able to go to court and sue on the grounds of not being able to
recover as opposed to their interest in getting the samples, to
bring product to park that so patients would benefit.
Mr. Bucshon. Fair enough. Yes, I was a cardiovascular
surgeon before, so obviously I am averse to frivolous
litigation. And, you know, in all of our specialties, as
providers, we all--if you practice long enough, you have to go
through that process. And so, you know, anything that might
potentially exacerbate that type of a problem, and whatever our
solution is, to this issue, which we all agree needs to be
addressed, is something that I wouldn't--I wouldn't support. So
with that, I yield back.
Ms. Eshoo. Thank you, Doctor.
I now would like to recognize the gentlewoman from New
Hampshire, Ms. Kuster, 5 minutes of questioning.
Ms. Kuster. Thank you, Madam Chair, I appreciate it.
One of the most egregious abuses that we are discussing
today is the abuse of measures intended to provide additional
safety protections to consumers, as we have discussed, commonly
known as REMS, risk evaluation and mitigation strategies, and
plans that the FDA requires companies to develop as a response
to a particularly serious safety risk posed by the drug.
At the front end of development, some companies are citing
these REMS requirements as a reason not to provide product
samples to generic drug developers for bioequivalence testing
that supports their drug applications. And on the back end of
development, some branded drug manufacturers are negotiating in
bad faith with generic developers to enter one--into one single
system REMS.
So let me start, Mr. Davis, with you, if I could. Please
describe for us the various safety measures in place to ensure
that generic drugs come to market with the same level of safety
as their branded counterparts. I know that is a broad question.
Have in mind, I have 5 minutes.
Mr. Davis. Congresswoman, thank you for the question. I
will try to be as brief as possible. I think the requirements
are the same, right, that the generic manufacturers have to
meet in terms of convincing the FDA from a pharmaco-vigilance
perspective that we will adhere to the same standards and
criteria as set forth for the originators.
As part of that, when it comes to actually doing the
reverse engineering, if you will, the FDA is actually required
to look at the generic manufacturer, look at a company like Ms.
Kennedy's, and actually certify that they have the confidence
in their ability the same as the originator.
Ms. Kuster. Great. Thank you.
Mr. Carrier let me turn to you, you have been very helpful
this morning. Do you have any concerns about the FDA issuing
waivers of the single shared system REMS requirement?
Mr. Carrier. So I have no concerns. The issue here is that
the brand company will slow off the process of a shared REMS.
When the brand and the generic each have a REMS, the brand will
say, sure, I will get back to you, and then 3 years later it
gets back to the generic. So eventually the FDA has to wade in.
Thirteen times it has been asked to get in the middle of these.
All 13 times, it says, generic, you can go your own way,
because the brand has no interest in working with you. And so
at the end of the day, the FDA is able to waive the shared REMS
requirements.
Still a hundred percent safe, absolutely no concerns there,
but it would be a little better to have us not go through that
whole song and dance and have the generic be able to enter the
market a lot quicker with a completely safe REMS.
Ms. Kuster. So the 19 times it was always--the brand
dragging their feet?
Mr. Carrier. Yes. That is my sense, that the FDA has--was
asked to get involved and the generic has a REMS, it has FDA
approval, and still it is not able to be worked out between the
two.
Ms. Kuster. OK. That is very helpful. Thank you.
And then Ms. Kennedy, do you agree that legislation, such
as the CREATES Act, is needed to address these kind of gaming
tactics?
Ms. Kennedy. One-hundred percent. We have watched over the
last decade as many missed opportunities for generics to get to
market and lower the price of healthcare have come and gone.
Whatever we can do to help American taxpayers and patients, is
incumbent upon us to do that. This is America.
Ms. Kuster. Do you have a sense of the cost of these types
of delay tactics and gaming techniques on healthcare overall,
cost to consumers?
Ms. Kennedy. The costs are amazing. Imagine that we sell a
product 50 million doses a month, to people like Kaiser
Permanente, for 6.8 cents a dose. Now, we have to be lean and
mean. We don't have the money to do expensive litigation. I am
always a fourth or fifth to file. And I am lowering the cost of
healthcare and drug products, and I want to do it, and I want
to do it with safety and efficacy.
Ms. Kuster. And what is the impact on multiple filers? When
you say you are fourth or fifth into the market, is there still
an impact----
Ms. Kennedy. Yes.
Ms. Kuster [continuing]. At that point on price?
Ms. Kennedy. Yes. The first filer typically lowers the cost
25 percent. That is great. But when I get to market, it is 80
to 85 to 90 percent. That is real savings.
Ms. Kuster. And what is the impact on the quality of that--
--
Ms. Kennedy. There is no impact to quality because we are--
it is incumbent upon us to prove to the FDA that we are equal
or better. And we have to file each and every lot with all
complete C of A testing and sterility testing.
Ms. Kuster. Well, I will just close by saying, it seems
clear to me that there are some manufacturers using these REMS
requirements as a way to keep competition off the market, and
as we have all just heard, that is not the original intention
of REMS. And I think we have bipartisan agreement to wade into
this and make it a top priority. So thank you. I yield back.
Ms. Eshoo. I thank the gentlewoman.
It is a pleasure to recognize the gentleman from North
Carolina, Mr. Hudson.
Mr. Hudson. Thank you, Chairwoman Eshoo, for holding this
important hearing. One of the things I hear constantly from my
constituents is their out-of-pocket costs are too high. I think
working in a bipartisan way to make generic access to the
market as simple as possible is important, not only for our
government spend on drug prices but also for our consumers'
out-of-pocket cost. Simply put, generics save money.
I do worry, though, we are using generics as a silver
bullet for issues facing us with high drug prices. I believe
robust protection for innovation needs to remain in place, to
continue to nurture the high level of innovation we have seen
recently with technology such as CAR-T and CRISPER.
I noticed almost half of my Democratic colleagues on this
committee support a policy that allows the Government to strip
innovators of their patents through compulsory licensing and
allow other manufacturers to produce a generic. Generics need
to come to market as soon as provided protections for
innovations run out, but not before. Otherwise, we threaten
therapies like these new CAR-T drugs which can have an over 80
percent success rate for some cancers. That is a four out of
five chance your parent comes home from the hospital after a
cancer diagnosis.
To that same point, though, I believe we should reward
innovative science, not innovative legal work. I am happy to
see the committee consider concepts that will help end legal
gamesmanship and support bringing generics to the market, but
the process behind this hearing does concern me.
And we don't have the Food and Drug Administration, the
agency responsible for implementing these bills, here to
testify and give us a chance to ask them questions. As
Congress, we should seek the input of the agency that will be
regulating this space.
And so, Chairwoman Eshoo, as I have said to you before, I
really want to work with you on this issue, want to work with
my colleagues across the aisle in a bipartisan way, to advance
the concepts we are talking about here today. Could you commit
to getting the FDA's written, technical assistance on these
bills before we mark up?
Ms. Eshoo. We will.
Mr. Hudson. Great. I appreciate that. I think that would be
very valuable input for us.
And then I appreciate all the witnesses being here today. I
have read your testimony. It has been extremely helpful for me
in my understanding of this space.
Mr. Karst, I have had concerns with the Purple Book
legislation being offered here today. Where--oh, there you are,
sir. The transparency is something we all support and we all
want, and certainly we have seen the Orange Book requirements
since Hatch-Waxman provide benefits to the small-molecule
market. Could you provide more detail on how you think the
Purple Book legislation could be improved so it could be
equally as useful in the statute?
Mr. Karst. Sure. Thank you for the question, Congressman.
So--and part of this, I have to say, couched in terms of, it
may require a broader change to the BPCIA, but as least as an
initial start--and Mr. Kushan and I may disagree to some extent
on this--having a list of patents in the Orange--excuse me--in
the Purple Book, somewhat akin to the Orange Book, I think,
would be helpful for manufacturers.
Now, I recognize Mr. Kushan's concerns that under the
current--the proposed bill that the patent information would go
in after the first biosimilar challenge and could raise issues
about confidentiality, but we can get rid of all that simply by
requiring the brand to list all of its patents in the Purple
Book, upon licensure of its product. Then potential biosimilar
applicants will know the entire patent estate that is out
there, that may be shot at them in litigation.
Mr. Hudson. Great. Well, I appreciate that. That is very
helpful.
With that, Mr. Bucshon, do you want the last minute of my
time?
Mr. Bucshon. No, I am good.
Mr. Hudson. OK. Seeing that, Madam Chairman, I will yield
back. Thank you.
Ms. Eshoo. I thank the gentleman.
I think those members that are left are getting--they have
an appetite for lunch. Let's see. I would like to recognize the
gentlewoman from California, Ms. Barragan, 5 minutes for
questioning.
Ms. Barragan. Thank you, Madam Chairwoman, and thank you to
our panel for being here today. It has been great to have
conversation on a bipartisan basis that we all want to lower
prescription drug prices for Americans. When I have town halls
in my district, it is one of the top issues I hear about, and
how people have to choose between prescription drugs and rent
or groceries. And in a district like mine,--it is very working
class--it is so nice to hear, on the other side, say, hey, we
have a common goal to bringing these down. Obviously, we have
this hearing today and we see that there is--there is a lot of
details, there are some differences, but I am hoping that we
can get through them to find a solution.
And, I think back in 1984, when Congress passed the Drug
Price Competition and Patent Term Restoration Act which we all
know as Hatch-Waxman, the bill kind of laid the ground work for
the modern, generic drug, approval system. Now, Congress has
worked hard to try to strike this balance between innovation
and getting generics to the market as soon as possible. We had
the Secretary here yesterday also talking about what we are
talking about here today, and it was good to hear from him that
he agreed that this delay in getting generics is an issue.
And one aspect of the framework is an incentive for the
first generic drug manufacturer to submit their application and
come to market, 180 days of market exclusivity. In other words,
180 days during which the FDA could not approve additional
generic versions of the same product.
Now, I have been reading, and we have been certainly
learning in recent years, that some of the generic drug
manufacturers are abusing this reward. They are signing
agreements to keep their products off the market longer, or for
other business reasons, they do not launch their products as
early as can be.
Now, I am the author of one of the pieces of legislation
here today, the FAIR Generics Act. I happen to believe that
this would help the problem by realigning incentives for
generics to come to market sooner.
Mr. Carrier, in your research, have you seen this to be a
problem, and could you maybe explain and tell us more about it?
You know, why are generic drug manufacturers behaving in this
way?
Mr. Carrier. Absolutely. Thank you for the question and
thank you for your support of this incredibly important
legislation. The problem is that the brand company is settling
with the first filing generic, agreeing not to enter the market
for years, and as a result, no one else can enter. As I
mentioned before, the Medicare Amendments Act of 2003 was
designed to deal with the issue; it has not.
And so the 180-day provision here really needs to be opened
up. It is not just the first company to file a Paragraph 4
certification, but it is also a company that is not sued by the
brand company. It is the first generic that wins a district
court ruling in court, that the patent is invalid or not
infringed. So whenever anything about the 180 comes up, the
question is, oh, do you need the incentives for the 180? And I
would just say, you do not need the full, exclusive 180 just
for the first filer. Because right now we have shared
exclusivity. You have many generics on the first day. Still
tons of generic applications filed. There is an FTC report on
authorized generics a decade ago, that found that there is no
effect on filing a first-filer application when there is an
authorized generic in a small market.
So at the end of the day, we need this. And it is not just
me who is saying it. So you go back to the Supreme Court in
Actavis, the justices said--Justice Scalia said, Hatch-Waxman
made a mistake. You look at what Representative Waxman and
Senator Hatch have said. They said it is appalling, the
legislation is turned on its head. The 180 was designed for a
certain purpose. It is not being used for that purpose. This is
the simplest place to deal with it, not an antitrust law, but
with your legislation.
Ms. Barragan. And earlier on there was some conversation
between some of the panelists. Mr. Kushan and Mr. Karst, they
had raised concern about the bill. They questioned whether it
was an appropriate realignment of market incentives. Is there
anything you want to add to kind of respond to those concerns
that they raised, and could this legislation be an effective
deterrent?
Mr. Carrier. This legislation would be the most effective
deterrent for settlements. And the problem is, a lot of the
discussion that we heard this morning was about settlements
being good, about entry before the scope of the patent expires.
This was all rejected by the Supreme Court in Actavis. Actavis
made clear that, sure, settlement is good for the brand and the
generic company, but it is outweighed by five public-policy
considerations.
The Supreme Court made clear that you don't get to say
entries before the end of the patent, so therefore it is
procompetitive. That is the scope of the patent test that was
rejected because antitrust has to play a crucial role.
And just one final point here, we have heard a lot about
the FTC and the number of pay-for-delay settlements going down,
but there still are a ton of settlements and there is still a
ton of delay. So if you go back through the past 5 years, there
have been 771 settlements, 653 of them involved delayed entry.
Might not be payment, still delayed entry. Your legislation
would solve the problem.
Ms. Barragan. Thank you, I yield back.
Ms. Eshoo. I thank the gentlewoman.
I now would like to recognize Mr. Carter of Georgia for 5
minutes of questions.
Mr. Carter. Thank you very much, Madam Chair, and thank all
of you for being here. Currently, I am the only pharmacist
serving in Congress and have over 30 years of experience in
practicing pharmacy. This is a real problem, getting generics
to the market. I have seen prices on brand-name drugs drop
dramatically whenever generics entered the market. And that is
why we need to get it there as soon as we can.
I have so much respect for the pharmaceutical manufacturers
who devote and invest in research and development. I have seen
nothing short of miracles in my years of practice, that have
come out as a result of research and development. However, when
a drug is too expensive, and not accessible or affordable, it
does no one any good whatsoever. So that is why this is so very
important.
I will tell you that I find some of this discussion--in
fact, I find much of this discussion more lawyerly than I do
pharmacy. So out of all due respect, I am just a little bit
taken aback by the legal aspects and how this ever got to this
point. But at the same time, that is where we are, so that is
what I am going to deal with.
Mr. Davis, I am going to start with you, because quite
honestly, you confused me earlier. Mr. Burgess asked you about
the CREATES Act, which I think we all agree needs to be done
and needs to be done as soon as possible. However, last
session, we had an agreement where everyone was on the same
page, and now, all of a sudden, this has changed somewhat,
where not everyone is on the same page. And you confused me in
your answer to him. Which one do you support, or do you support
both of them?
Mr. Davis. I believe that the CREATES Act, as has been
introduced, we support the CREATES Act----
Mr. Carter. As has been introduced here, that we are
looking at here----
Mr. Davis. I will have to go back and will report back to
you, Congressman, about any significant differences. I don't
believe there are significant differences between what was
introduced in the last Congress and this provision----
Mr. Carter. Well, that is where I get confused at because
we are told there are some things that are different. And out
of all due respect, if you will just get back with me and let
me know, I would appreciate that.
But would you agree--and Ms. Kennedy, you might be able to
answer this, too--do you ever do any of the 180-day exclusive,
or do you just primarily do after everybody is eligible?
Ms. Kennedy. We do not have the--we do not have the
resources to fight the big litigation, and so, no, we haven't
taken a part of the 180-day exclusivity, except for in one case
where we are the manufacturer of record for someone who did
fight the patent challenges, a company named Apotex. We
manufacture for them, a product called Budesonide, a
corticosteroid. That is the only time.
Mr. Carter. OK. Well, as was mentioned, Representative
Schrader and I have bipartisan legislation, the BLOCKING Act,
that we feel like is good legislation. It is going to make a
difference. And that is the key here--how do we make a
difference.
You know, of all the committees in Congress, I would submit
to you that the Energy and Commerce Committee works in a more
bipartisan fashion than any other committee, and I have always
been very proud of that. And I continue to be proud of that,
and I hope that in this session, we will continue that. That is
why this legislation, the BLOCKING Act, that Representative
Schrader and I are cosponsoring, is so very important to me,
and I want to see us continue with that.
But back to the CREATES, if a--if a generic company asks of
a brand manufacturer, I need samples, and they provide it, and
there are no other kind of agreements or no other kind of
stipulations, should they have the right to still sue? Because
if a brand-name manufacturer provides them with everything they
have been asked for, shouldn't that be enough? Anyone want to
tackle that?
Mr. Carrier. So----
Mr. Carter. Anyone want to tackle that?
Mr. Carrier. Yes, the problem is that they are not getting
the samples. So----
Mr. Carter. No, no, no, no, that is not what I asked, Mr.
Carrier. I said that if they got the samples and if we required
it as part of the CREATES Act, said you have to give the
samples, and if you give the samples, then you have no other
excuse. You have 180 days, at that point.That is what I asked.
Mr. Carrier. So if the brand company is giving the sample,
that is fine. The problem is----
Mr. Carter. OK.
Mr. Carrier [continuing]. Now they are not.
Mr. Carter. OK. But if we say that they have complied and
they have given the samples, then isn't that a no-brainer? Mr.
Davis?
Mr. Davis. Just so I understand correctly, Congressman, you
are saying that the originator would give the samples----
Mr. Carter. Right.
Mr. Davis [continuing]. To the generic manufacturer?
Mr. Carter. And there is no other kind of stipulations. If
they----
Mr. Davis. Would give them? That is actually what we are
trying to address here, is----
Mr. Carter. Right, exactly.
Mr. Davis [continuing]. They are not. And often times it
comes down to--and I would also suggest that it is not an issue
of where generics are asking for them. They are willing to
purchase them at fair market price.
Mr. Carter. OK, I have got 5 seconds left. I just want to
mention again that the BLOCKING Act is a perfect example of us
working in a bipartisan fashion, and I hope that is what this
committee will do.
Also, tomorrow I am going to be introducing more
legislation that is more bipartisan, that Mr. Welch and I are--
and Mr. Gianforte, we are all cosponsors on this. It is called
the Payment Commission Data Act. This will allow MedPAC and
MACPAC to get the pricing information from Medicare and from
CMS, in order to make recommendations to Congress that we need.
So I hope you will be looking out for that as well.
Madam Chair, thank you very much for your indulgence, and I
yield back.
Ms. Eshoo. You don't have anything to yield back. It is a
term we use around here. I thank the gentleman.
I now would like to recognize a new member of the Energy
and Commerce Committee, and we are thrilled that she is high
value added to our subcommittee, the gentlewoman from Delaware,
Ms. Blunt Rochester.
Ms. Blunt Rochester. Thank you so much, Madam Chairwoman,
and thank you specifically for this important hearing on drug
pricing. I also want to thank the panel for your testimony.
I would like to focus our attention on generic drugs and
their potential, through market competition, to lower drug
prices for American consumers. We have heard today that one of
the best ways to reduce drug prices is to ensure generics can
come to market as soon as possible, after patent and
exclusivity periods expire.
Generic market entry saved $265 billion in 2017, including
$82.7 billion for Medicare alone, or $1,952 per enrollee. In
fact, according to one estimate, the average drug price
decreased by 50 percent in the first year of generic entry,
with an 80 percent reduction within 5 years.
I am especially concerned about the impact on patients,
when generic drug developers are unable to develop their
products due to difficulties with access to samples, as was
just stated.
I recently had a constituent write to me about her
experience trying to purchase an asthma inhaler she had been
using for 20 years. She found that starting in January 2019,
the copay for her inhaler had more than doubled. She explored
paying out of pocket, but the costs would have been more than
twice her new copay. She looked for a generic but found there
was none.
These samples are vital to the development of their
applications and without them, they will not be able to come to
market. Both the CREATES Act and the FAST Generics Act attempt
to deal with this problem.
Mr. Barrueta, do the bills before the committee today
constitute meaningful progress in the drug-pricing debate, and
from a payer perspective, how do generics and biosimilars help
with cost containment?
Mr. Barrueta. Thank you for the question. I would say, yes,
these bills are very important. You know, certainly CREATES, as
we said before, needs to get going and get that across the
line, and that will be enormously helpful. From a coverage
standpoint, generics are crucial. Getting generics on the
market in a timely way enables us to continue to provide as
comprehensive benefits as we can, so that as we have an orderly
process of brand-name drugs becoming eventually generically
available, it helps us afford the newer drugs that are coming
along as well. So it is absolutely essential to provide
stability and access for consumers.
Ms. Blunt Rochester. I asked the question about cost
containment, I actually served as State personnel director in
the State of Delaware and trying to contain cost is a pivotal
area.
Of the solutions that the committee is considering today,
which would you say have the most direct, immediate impact on
high drug prices?
Mr. Barrueta. Again, I think CREATES, getting that done,
getting the REMS issue cleared up, I think that will help
enormously.
Ms. Blunt Rochester. And I guess I want to just shift, I
know there has been conversation about patents and our patent
system. And we know of the high value of patents and also some
of the challenges. Can you share with us policies that you
think we should be considering in regard to our patent system?
Mr. Barrueta. That is a--that is a good question and it is
a challenging question. You know, the patent laws are crucial.
I do--I personally feel that we assume that the law that is in
place is something that has been set in stone and shouldn't be
revised. We have seen, particularly in the pharmaceutical
space, fundamental changes in the economics of the
pharmaceutical industry. We have seen incremental extensions in
terms--in the 1990s, we saw patents extended from 17 to 20
years. We have seen similar activities around market
exclusivities, and it has crept and crept and crept.
What we really want to do is make sure that we are
providing innovation--that we are providing incentives to
maximize innovation. Maximize innovation, and at the same time,
promote access. And there has been a case made for many years
that if you over---if you overprotect certain things, if you
provide too much of an incentive for something in the short-
term, it actually detracts from the incentive to innovate more.
So we want to make sure we are achieving the right balance to
optimize innovation in the pharmaceutical industry. It is a
great industry, we need to make sure that it is very healthy in
delivering what is possible for American consumers.
Ms. Blunt Rochester. And my last question is for Mr.
Boutin--did I pronounce that correctly?
Mr. Boutin. Sure.
Ms. Blunt Rochester. You know firsthand how important it is
that patients are able to afford their medications, and in your
testimony, you mentioned that studies have shown that multiple
generic drugs on the market dramatically lower drug prices. Can
you speak briefly, or actually follow up, with the entry of
multiple generics on the market, how it could benefit patients
and how Congress could help increase generic utilization?
Mr. Boutin. So quickly, as a patient advocate, I am sick
and tired of other stakeholders using patient safety to justify
their actions when it harms patients. We support CREATES. We do
not see a safety concern. And when you have multiple generics
on the market, you see a dramatic reduction in out-of-pocket
costs to the patient, their family. It has huge implications
for their livelihood.
Ms. Blunt Rochester. I am out of time. Thank you so much,
Madam Chairwoman.
Ms. Eshoo. Thank you.
And now we recognize Mr. Gianforte from Montana for 5
minutes of questioning.
Mr. Gianforte. Thank you, Madam Chair, and thank you to the
panel for being here. This is a very important topic. We are
seeing skyrocketing prescription drug prices that are difficult
for Montanans and certainly all Americans.
Just last month, I was talking with a constituent in Great
Falls, Montana, who saw her lupus medication increase
significantly. It got in the way of her continuing to run her
small business and, ultimately, created financial instability
for her family. So this is a very important topic we are
discussing.
I fully believe that everyone in this chamber is committed
to working to get lower drug prices, and I am committed to
finding commonsense, bipartisan solutions. To that end, I have
been working with my friends on the subcommittee here--Mr.
Carter, Mr. Welch--and tomorrow we will be introducing a bill
specifically around drug-price transparency, which I think is a
step in the right direction.
I look forward to continuing to find innovative and
creative ways to solve this problem and working across the
aisle to promote them.
I want to start with the CREATES Act, and, Mr. Karst, I
have a question if I could. I have two questions, if you could
just give me a yes, no, these are easy questions, all right?
Mr. Karst. Yes.
Mr. Gianforte. So in 2012, the FTC voted to allow the
commission to pursue recovery of ill-gotten gains, more
frequently than it had in the past. When pursuing such
recovery, the FTC attempts to recapture the profit--key word
``profit''--made by the company due to its anticompetitive
behavior. Is that correct?
Mr. Karst. I believe so, but I don't know for sure, quite
honestly.
Mr. Gianforte. Yes, my information says that that is
correct, that they were able to go after the profit of a
company.
Do you know of any Federal statute that allows for
recapture of a company's revenue, rather than profit, derived
from anticompetitive behavior?
Mr. Karst. Honestly, I am not a competition attorney, food
and drug attorney. That being said, I can't think of any off
the top of my head.
Mr. Gianforte. OK. And I just want to point out, that
essentially this CREATES Act that we are considering would
basically put all of the revenue of all drug companies in play
for potential lawsuits and capture. And just in my own
experience in business, when you have a big pot, it tends to
encourage litigation. I have grave concerns about this. You had
stated in your testimony, we want to do no harm, and yet
creating a target to go after all of the revenues of all drug
companies seems to be a step in the wrong direction.
Mr. Kushan, as I read moving to pay-for-delay, as I read
the pay-for-delay bill we are considering, I see it would apply
retroactively to existing agreements. I have fundamental
concerns here with deciding that a behavior that has been
lawful for some number of years, and had been the basis of
business decisions, would now be open to litigation and
lawsuits, particularly because it has been lawful behavior in
the past.
This provision seems like it is opening up a can of worms.
I am just interested--I am not a lawyer, but I would be
interested in your perspective on this. Can you give us a sense
of any concerns you may have with the change that we are--is
being proposed under this bill?
Mr. Kushan. Thank you. So the idea of opening up or voiding
one of the settlement agreements after the parties have kind of
moved on, you know, is essentially what you are doing, is, you
have a patent fight, you come to a settlement, and then the
generic launches, the parties have moved on.
When the companies enter into that settlement agreement,
the innovator's going to make some calculus about what is
appropriate for the market launch. They are going to withhold
use of their patents that they might otherwise be able to use,
and then you obviously see the product going generic.
We also--I think everybody recognizes on the panel that
within a year of the generic going onto the market, you know,
the innovator's out. The market share of the innovator goes
down to 7 percent or 9 percent. So it is kind of an irrevocable
consequence to the innovator. So you can see some very
significant disruptions, the business planning of both parties
if those settlements fall apart.
Mr. Gianforte. In the limited time I have, I want to stay
on patents for a second. In our technology business, we were
subjected to a couple of dozen, frivolous, patent-related
lawsuits that sucked resources away from research in our
business. We have heard a lot about a patent abuse. Could you
just briefly talk about patent abuses that you have seen, and
what we should do about it?
Mr. Kushan. Well, obviously, we want to make sure that we
don't have patent litigation where the patents are not valid or
are not infringed. I mean, you have to--that is the essence of
the patent fight. You have to make sure that you are fighting
about valid patents, and if you can find a way to avoid
burdening courts, burdening the parties with the litigation,
you always want to find a solution that drives parties to that
outcome.
And I think it is important that we look at these patent
scenarios. You really, unfortunately, have to drill into what
the parties are doing, and not make kind of a blanket
assumption that a patent assertion is bad or good. You have to
just look at the merits.
Mr. Gianforte. OK. My time is expired, and I yield back,
Madam Chair.
Ms. Eshoo. I thank the gentleman. It is a pleasure to
recognize the gentleman from Illinois, Mr. Rush.
Mr. Rush. I want to thank you, Madam Chairwoman, and I am
pleased the subcommittee, included my legislation, H.R. 1499,
the Protecting Consumer Access to Generic Drugs Act in this
important discussion on how best to lower the price of
prescription drugs.
No American should be forced to make the choice between
paying their bills and buying their pills. For too long, brand-
name drug companies have reaped the benefits of limited
competition, which forced consumers to pay more for their
medications. My bill prohibits the practice of, quote, ``pay-
for-delay,'' end of quote, in which brand-name drug companies
compensate generic drug manufacturers to delay the entry of
cheaper drugs into the market.
I was pleased that a version of this legislation was passed
out of this committee during consideration of the Affordable
Care Act, but, unfortunately, it was not included in the final
bill. So I am proud to continue my fight to stop drug companies
from rigging the system in order to take advantage of
hardworking Americans, and I am pleased that advancing market
competition is a priority for this subcommittee.
Madam Chair, I ask for unanimous consent to submit two
letters in support of my bill into the record.
Ms. Eshoo. So ordered.
[The information appears at the conclusion of the hearing.]
Mr. Rush. Thank you.
My question is for Professor Carrier. In your testimony,
you said that brand-name pharmaceuticals who pay generics to
delay entry into the market cost consumers $3.5 billion a year.
Can you briefly expand on how you reached this $3.5 billion
figure, and how we know the high prices are due to the lack of
generic competition?
Mr. Carrier. Sure. So the Federal Trade Commission is the
expert on this issue, and they submitted a report a few years
ago, where they figured out how much consumers are paying too
much each year, and they calculated that it was $3.5 billion a
year.
Mr. Rush. And you concur with that?
Mr. Carrier. I do.
Mr. Rush. All right. Mr. Boutin, in your testimony, you
said that the National Health Council evaluated almost 200
policy proposals that aim to reduce the cost of healthcare and
found that the most expensive policies increased generic drug
competition. Can you speak to whether my bill, H.R. 1499, which
addresses the presence of pay-for-delay, whether my bill would
be expected to increase competition and lower the cost of
prescription drugs?
Mr. Boutin. Certainly. Competition is the key to driving
down costs. There is no question about it. When you look at the
patent settlements, there is clearly a spectrum. Clearly some
that work well, but--that will actually bring benefit to
patients, but there are clearly some that do not, and we need
to actually root them out. So we are supportive. Thank you.
Mr. Rush. Thank you.
Mr. Barrueta, how do you see this pay-for-delay problems
impacting drug prices for your members, and do you think that
legislation is necessary to formally deter or outlaw these
agreements?
Mr. Barrueta. I would say, you know, particularly in some
of the more expensive products that we are still seeing
branded, that are widely available in Europe and elsewhere,
whatever is going on, and it does look--I imagine pay-for-delay
is some piece of that--I think we should be moving as quickly
as we can to make sure that those transactions are
appropriately adjudicated and moving it forward so that we are
not waiting for an extensive, lengthy, legal process to get
that done. So I think this is a step in the right direction.
Mr. Rush. Thank you, Madam Chair. I yield back.
Ms. Eshoo. I thank the gentleman.
I now would like to recognize the gentleman from Illinois,
my friend, Mr. Shimkus.
Mr. Shimkus. Thank you, Madam Chairman, it is great to be
here. Sorry, I was doing a very simple issue of toxic chemicals
upstairs, so I am glad to come down here for a more simpler
debate.
So I am going to ask a question to the whole panel.
Obviously, there is a big panel here, if you can kind of keep
it as short as possible because there are like two or three
more I want to try to get to. I understand that there is broad
support for the CREATES and FAST Act because of the concern
that brand manufacturers game the REM system.
However, we can have a tremendously productive generic
market. So I think we can also acknowledge that in the majority
of situations, brand manufacturers must be willingly providing
samples to generic developers. Does anyone on this panel agree
that in most cases, samples necessary for equivalence testing
are provided without FDA intervention or litigation?
Anybody? Ms. Kennedy just go across. If you don't want to--
you can't--it is not in your purview, that is fine.
Ms. Kennedy. Could you repeat the--could you repeat the
part about FDA intervention? I think you asked, are they being
provided, and, no, to my knowledge, the FDA has no part in
that. But make sure I heard you----
Mr. Shimkus. Are they being provided--does the FDA have to
intervene for it to be provided, or does it have to be
litigation?
Ms. Kennedy. I don't think that has fully been determined.
I think that is why we are here in this panel because we have
got all manner of issues taking place, you know, really
disincentivizing us.
Mr. Shimkus. OK. Mr. Davis, I think you understand.
Mr. Davis. Congressman, thank you for the question. I don't
know of and will look at the number of times where there has
been a transfer or sale. I know that there have been at least
170 complaints over 55 products where it hasn't happened.
Mr. Shimkus. OK. Great.
Mr. Barrueta?
Mr. Barrueta. That is as good as I can do. So you can keep
going.
Mr. Shimkus. OK.
Mr. Boutin. Same here. I will add that we do hear from
companies when they are looking to do comparative tests on
their products. They also have difficulty getting samples.
Mr. Shimkus. OK.
Mr. Karst. I imagine there are cases where product is
provided, but of course you see the numbers FDA has put out and
others have been talking about. So it is an issue.
Mr. Kushan. I don't have any personal experience in this
space. I think one thing that might be helpful is to actually
reach out to the different sectors to see what the experiences
are, to see how frequent it is.
Mr. Shimkus. OK.
Mr. Kushan. You know, I hear the examples that are given,
and it strikes me that, you know, there are many more
situations where there aren't even----
Mr. Shimkus. Thank you.
Mr. Carrier?
Mr. Carrier. I don't know how many times the samples have
been provided, but on the website, it says 173 times it has not
been provided, and the person who would know best, the
Commissioner of the FDA, is trying to do everything about it,
showing that it is a real problem.
Mr. Shimkus. OK. So then I am going to transfer, following
up on Mr. Welch's question--and this is to Mr. Davis--about
CREATES versus FAST Generics, does AAM have an opinion on
whether revenue or treble damages is a preferable approach, and
can you explain why?
Mr. Davis. Thank you, Congressman. We do not have a
position on that. We just want to make sure that the end
product, the legislative vehicle that is moved forward
ultimately has a sufficient enforcement mechanism on the back
end such that this problem is eliminated.
Mr. Shimkus. OK. Going back to you, Mr. Davis, your member
companies have been saying their profit margins are getting
smaller and smaller given the high cost of litigating patents
and to the--to the bitter end. Shouldn't we have--be concerned
that limits on settlements will lead to fewer generics
challenging brand drug patents and inhibit generic competition
and resulting cost savings?
Mr. Davis. Thank you, Congressman. It is a concern that the
inability, and I think as Ms. Kennedy also testified previously
that in the current environment we are in, given the amount of
patents that can be filed late stage against an innovator
product, that taking away the ability to settle is likely to
have the unintended consequence of keeping certain specialty
medications on the market longer without competition.
Mr. Shimkus. OK. And let me try to get this last one in.
Mr. Barrueta, your organization is not just a payer, your
organization is also made of healthcare providers. Know that
not all drugs are created equal, and some have particular
dangers and even deadly effects when not handled properly. When
it comes to these exceptional dangerous products do you think
that anyone seeking possession of them should be required to
demonstrate to the FDA their ability to properly safeguard the
use of these products?
Mr. Barrueta. Absolutely. And, in fact, we do have a
specialty pharmacy operation that has the capacity to comply
with REMS' requirements, and sometimes we are not permitted to
actually do that because of commercial choices that the
manufacturer is making, which actually impairs the ability to
get these drugs in an orderly way to our patients. So but the
answer to your question is yes.
Mr. Shimkus. So this might have been as difficult as toxic
chemicals, so I wish I would have been here, but thanks for
letting me join at the last minute.
Ms. Eshoo. I thank the gentleman. I now have the pleasure
of recognizing the gentlewoman from Illinois, Ms. Kelly.
Ms. Kelly. Three Illinois in a row. Thank you, Madam Chair,
and I ask for unanimous consent to submit a letter from
Advocate Aurora Health for the hearing record.
Ms. Eshoo. I am sorry, I didn't hear you.
Ms. Kelly. I ask for unanimous consent to enter in----
Ms. Eshoo. So ordered.
[The information appears at the conclusion of the hearing.]
Ms. Kelly. OK. I want to spend some time talking about my
bill, the Orange Book Transparency Act. We talked about the
Orange Book already, but can you, Mr. Carrier, talk about how
the how does the FDA receive the information to put into the
Orange Book?
Mr. Carrier. Sure. So the Orange Book is very useful. As a
collection of drugs and patents it puts generic companies on
notice. It gives brand companies a lot of benefits in terms of
an automatic stay and other benefits to keeping generics at
bay. The benefits of this legislation, and thank you for
introducing it, is that it makes clear that when a patent is
found to be invalid that it is no longer blocking generics from
the market.
And so you have an Appellate Court decision, which is
basically the final word on the issue. You have a PTAB
decision, which is upheld seven out of eight times. It is only
13 percent of the time that it is not upheld by the Federal
Circuit. This is important information to have. The brand
companies should not be keeping the generic off the market when
the patent is no longer any good.
And I am also grateful for the attention to device patents.
You look at the EpiPen, you look at insulin pens, and you say,
well, why is the price so high? Well, because patents keep
getting listed in the Orange Book, and every time the patent is
in the Orange Book you keep the generic away, an automatic 30-
month stay. There is a lot of power that the brand companies
have, so this is very important legislation.
Ms. Kelly. And then what is the FDA's role in maintaining
and updating it?
Mr. Carrier. So the FDA collects this information, but it
has said that it only has, quote, a ministerial role. It is not
going out and litigating every patent. It is not even going out
and looking in the court system to see what has happened. And
so sometimes this arises in the courts, and the FDA says we are
just ministerial, we mark it in the book, we do nothing more
than that, and that is why this legislation is important.
Ms. Kelly. And how can this resource be used as a barrier
to generic entry, and how is it abused by companies?
Mr. Carrier. The problem is that a brand company by listing
a patent in the Orange Book forces the generic to do a whole
bunch of things. For starters, it is kept off the market for 30
months. Another hurdle is by having to list one of four
certifications that you are going to wait for the patent to
expire, that you have to challenge the patent saying it is
invalid or noninfringed. The brand company can sue the generic
even before the generic enters the market. A paragraph 4
certification counts as an act of patent infringement, and so,
this is a concern that the brand company can list these
patents, and a REMS patent is another example, as well. It is
it is not a patent on innovation, it is a patent on how your
label is set up where using a computer in a hospital system,
this has nothing to do with innovation, this can really harm
generics.
Ms. Kelly. And are there any additional policy changes that
Congress should be considering to ensure that this list is not
being misused by drug manufacturers? And after you answer if
anybody else wants to answer is fine.
Mr. Carrier. So I think focusing on these requirements of a
determination by a court, an Appellate Court or a PTAB is very
useful, the device patents, and I would add REMS patents to the
list, as well. REMS patents have nothing to do with innovation.
They should not be listed in the Orange Book.
Mr. Kushan. Just on a couple of points, so the PTAB
statistics are a little misleading because the trend line is
going way down on institution and the increase in instances of
reversals. The real problem with anchoring a decision to remove
one of the patents from the Orange Book because of a PTAB
outcome is that it may get changed, it may get reversed. And
that is happening with more frequency, so, you know, from a
certainty perspective not just for the innovator but for the
generic we don't want to have--one of the essential points of
the Hatch-Waxman scheme is that you are going to resolve the
patent fight before the generic launches because you don't want
to disrupt the marketing of the generic once it is on the
market. That is the essence, that is the beauty of the Hatch-
Waxman listing scheme. So if you have scenarios where you are
going to take a patent out of the Orange Book, launch the
generic, then the innovator wins after appeal, you have to pull
the generic potentially from the market. That is very
disruptive for everybody. And that is why we want to have final
outcomes that aren't going to change.
Mr. Karst. And just one point of clarification on Mr.
Carrier's testimony, even though the Transparency Act does say
that an invalid patent, one that is ruled invalid would have to
come out of the Orange Book, the FDA actually will not take it
out of the Orange Book if there is a generic applicant who has
180-day exclusivity pending on that. So the agency has to
maintain that in order to maintain that first applicant's
exclusivity, so just to be clear on that point.
Ms. Kelly. OK. Thank you very much. It is clear to me that
we must act to clarify the role of the Orange Book and prevent
abuse of this important resource. I look forward to working
with stakeholders to strengthen the role of the Orange Book and
close loopholes that allow it to be misused.
I yield back.
Ms. Eshoo. I thank the gentlewoman and thank her for her
work for her work product. Let's see, I think is he next? I
would like to recognize Mr. Raul Ruiz from the beautiful,
magnificent State of California.
Mr. Ruiz. Right on, chairwoman. California is definitely
the best State in the Nation.
Mr. Boutin, I want to thank you for joining us today to
share your experience representing a coalition that brings
together over 160 million patients with chronic diseases and
disabilities. I think all members of this committee have heard
loud and clear from our constituents that the rising costs of
prescription drugs is forcing them to make tough decisions
about their healthcare and the care of their family members.
Both in the farm worker community where I grew up in the
Coachella Valley, and when I was practicing in the emergency
department I saw many families who had to choose between
filling their prescriptions and putting food on the table.
In fact, I will tell you a story. I was doing some policy
work out in the rural community church and after I left, I
noticed one of the participants digging in the trash and I went
over and I said, what are you doing? This was before I ran for
Congress. And she is like, I am collecting cans. I said, Why.
She said I have to pay for my diabetes, my insulin medication,
and she said, but don't worry, doctor, I only take half my dose
so that I can make it last, and you know what dangers that
imposes. So, you know, she rationed--many people ration their
medications or delay filling prescriptions all together.
As a doctor I know firsthand the long-term impacts these
decisions may have on a patient's health and the healthcare
system at large, as well as the immediate risk posed to these
patients. Addressing this problem will require us to work
together both across the aisle and the country, and it will
also require a range of policy solutions. There is no one-size-
fits-all.
I am pleased that the committee under your leadership,
Congresswoman Eshoo, is examining a number of policies that
will help to encourage generic competition. Generic competition
is one of the best evidence-based methods to control the cost
of drugs. In 2017 the use of generics in Medicaid alone saved
$40.6 billion or $568 per patient. Likewise, the use of
generics in Medicare saved taxpayers $82.7 billion annually,
and it is estimated that expanded generic use would save
Medicare even more up to $14 billion, $14 billion per year.
While not a silver bullet, generic competition is vital in
saving money for taxpayers and out-of-pocket costs for
patience.
Mr. Boutin, you noted in your testimony the story of
Mackenzie and her struggle with the high out-of-pocket costs
and how generic entry has helped to adhere to her medications
and stay healthy. The national--my question is how would
increased generic competition help your members? And I know
that the National Health Council represents a wide array of
patients with multiple health conditions, so how would generic
competition help your members?
Mr. Boutin. So there are 160 million people in the United
States living with one or more chronic conditions. Many of them
use medications to treat those conditions. Many of them rely on
generics. When they have the generics, they are able to
dramatically drive down their costs. We have done a great job
of expanding access to insurance. We have an incredible number
of people who are underinsured who are running into out-of-
pocket expenses that are to your point causing them to make
decisions about rent, about food, about foregoing that for
their family's college or education. The decisions that they
are making are becoming huge and the long-term costs are huge.
Mr. Ruiz. How much costs are they bringing home in savings?
Mr. Boutin. When they are able to take generics, they can
reduce their costs often down to $5 per prescription and
sometimes even less.
Mr. Ruiz. From down to from what initial price?
Mr. Boutin. It can be anywhere from $60 and sometimes as
high as several hundred, and there are some extreme cases where
it can be even higher than that.
Mr. Ruiz. And I believe we both would agree that increasing
generic and biosimilar competition is only part of the solution
to lowering costs, and there are also needs to be more
awareness of the availability of these treatment options. So
what actions do you think this administration or Congress
should be taking to ensure that patients and healthcare
providers are aware of available generic and biosimilar
medications?
Mr. Boutin. Systemwide transparency, so the people have a
meaningful opportunity to understand what the options are. We
need to provide that transparency in the relationship with
their providers and with a pharmacist. So it needs to happen in
real time. Technology can enable that.
Mr. Ruiz. Excellent. One thing I was struck by in your
testimony was the fact that 43 percent of generic drugs or
about 700 have been approved by FDA since January 2017 but
still are not available on the market. So what policy solutions
does your organization support that would help to reverse this
trend?
Mr. Boutin. An important issue that needs to be addressed
is looking at how we fundamentally pay for generics. We have a
process that drives them down to a commodity to drive the price
down low, which is good, but if it reaches a point where it
creates a disincentive for additional generics to come into the
market.
If we were to look at how we could elevate the price only
slightly, we are not talking about major tweaks to drive
additional entrants into the market and ensure vibrant
competition, we would save dramatic amounts of money because
people would actually be able to take their medications and not
drive long-term costs to the health system.
Mr. Ruiz. Thank you.
Ms. Eshoo. I thank Mr. Ruiz, and it is a pleasure to
recognize the gentleman from Maryland, Mr. Sarbanes, my
favorite Democratic Greek.
Mr. Sarbanes. Thank you very much. I appreciate that. I
want to thank the panel for your testimony. Mr. Carrier, I
wanted to talk to you a little bit more about the pay-for-delay
deals. We have had quite a bit of discussion about it so far
today. In full disclosure I strongly support, as you probably
are surprised to hear, Congressman Rush's proposal.
As we have heard a number of times according to the FTC
these agreements were estimated to cost consumers, between 2010
and 2020, about three and a half billion dollars in increased
drug costs, and you have spoken to that today. And the Supreme
Court did in the Actavis case note that these types of
agreements are anticompetitive, but they still happen. They
still continue to occur. We know that there is a lot of time
and energy that has to be expended by the FTC in conducting a
review, and in a sense, they are doing these reviews from
scratch without being able to operate with a presumption that
is leaning against them based on their anticompetitive nature.
So it is really a kind of case-by-case thing, which takes a lot
of the commission's time and focus.
Can you just describe a little bit why the Actavis decision
may or may not have been sufficient in terms of discouraging
these pay-for-delay settlements, why we are at a point where
they continue to go on with the anticompetitive impact that it
has?
Mr. Carrier. They continue to go on because brand companies
and settling generic companies are dancing together to go back
to the analogy that started this hearing. It is in the interest
of the brand and the settling generic to agree not to enter the
market with a generic maybe getting more money than it would
have gotten by entering the market.
The Supreme Court made clear that these agreements could
have anticompetitive effects. The Supreme Court rejected a lot
of the arguments we have heard this morning about settlements
being good and entry before the end of the patent, that was all
rejected by Actavis, and it has no reason coming up right now.
Nonetheless, there is a lot of play in the joints, and
there is reason for brand companies to try to do everything
possible to sow ambiguity. And sometimes you see courts getting
it wrong. Sometimes courts focus on the patent. Sometimes
courts say risk aversion is a good thing, entry before the end
of the patent is a good thing, and so courts are still
struggling with these issues and making clear that the
agreements are illegal would be very helpful.
And if I could just say one thing on retroactivity because
that has come up a lot, as well, and so the bill is absolutely
clear that there is no penalty until after the date of the
agreement, and the only retroactive part goes back to June 17,
2013, the date of Actavis.
So it is only retroactive if you are going to ignore the
Supreme Court. The Supreme Court said it was illegal to enter
into pay-for-delay settlements, and so, there is complete
notice that the parties then would be violating the law.
Mr. Sarbanes. Thank you. And the value of creating a kind
of bright line standard here makes a lot of sense to me.
Obviously, it would put the agency in a much stronger position
because it would come to these cases and these pay-for-delay
deals with a presumption that they are anticompetitive, they
are illegal and would be able to take the kind of steps of
enforcement and oversight that that would provide.
And I know that--I know that there have been some pretty
stark examples here. Humira entered into eight different patent
settlement agreements. I was very happy to work on a
Biosimilars Competition Act that we were able to get passed
into law last year as you may know. Before that they weren't
even required to report these kinds of settlements to the FTC.
But I think what Congressman Rush has proposed makes
perfect sense in the wake of the Actavis case. It makes perfect
sense when you look at the burden that it places on the FTC to
have to do this review on a case-by-case basis, and what the
new authority that they would come with if we were to put
Congressman Rush's bill in place.
So I very strongly support it, and I appreciate the
testimony that you have offered today, which certainly provides
further justification for the proposal.
And with that I would yield back my time to the
gentlewoman.
Ms. Eshoo. I thank the gentleman and especially for his
patience because this has been a long hearing. And speaking of
patience the tenacious, the patient gentlewoman from Illinois,
Ms. Schakowsky, for 5 minutes of questioning.
Ms. Schakowsky. I want to thank you again, Madam Chair. I
am waiving on to this subcommittee, and you have been very
generous in that, and I appreciate it so much.
In the 114th Congress I first introduced the FAIR Drug
Pricing Act, which would require pharmaceutical manufacturers
to notify HHS and submit a transparency and justification
report 30 days before they increase the price of certain drugs
by more than 10 percent or by more than 25 percent over 3
years.
Though the bill will not prohibit manufacturers from
increasing prices it will for the first time give taxpayer
notice of price increases and bring basic transparency to the
makers of prescription drugs. And so I reintroduced this
legislation in the last Congress, and I plan to do so in the
coming weeks.
Mr. Barrueta, do you believe that this very basic form of
transparency could ultimately lower prescription drug prices
for Americans?
Mr. Barrueta. I think absolutely. We have been eagerly
pursuing legislation of this nature at the State level in a
number of States in which we operate, and having I think a
national law would significantly encourage manufacturers to at
least know that the people will know how their pricing and why
they are claiming to price it. And----
Ms. Schakowsky. I feel like we have been beat over the head
so many times by, oh, we have to charge this much because of
research and development, and we know nothing about how much
the drug actually costs to make. I hope we can pass that.
Under current law brand pharmaceutical manufacturers are
able to extend the length of the patent protection on their
brand drug products by introducing a reformulated version of
the same medication, which then receives extended exclusivity.
This practice commonly referred to as evergreening often
involves really no change to the drug's clinical effectiveness,
and the extended patent protection can often be achieved, for
example, by simply reformulating an immediate-release product
into an extended-release pill.
This practice of taking the same medication and changing
its delivery is estimated to cost Medicare--the Medicare
program approximately a billion dollars per year in additional
drug costs.
Mr. Carrier, I wanted to ask you, given that evergreening
incentivizes brand drug manufacturers to intentionally delay,
we talked a bit about pay-for-delay, but this is another way to
get at it, would--so let me get your comment on that. What are
the policy changes that you believe should be considered?
Mr. Carrier. I think that Congress can do two things. One
is to give the FTC power to investigate the phenomenon. So
usually what happens in the courts is it falls into one of two
situations. One is called the hard switch, the other is called
the soft switch. With the hard switch the brand company is
pulling the old drug off the market, and the courts say oh,
that is bad because you are going from two down to one. With a
soft switch they leave the old drug the market, and courts say
oh, that is good because you have two drugs to choose from.
The problem is that these are unique markets, they are
characterized by a price disconnect where the decisionmaker is
different than the buyer, and so the FTC should look into this
conduct to show that soft switches can be anticompetitive, as
well.
And the only other thing I would say is to think about
offering a test that I have offered called the no economic
sense test. Rather than the rule of reason, let's give the
brand company every benefit of the doubt. If there is any
reason at all for your switch, then we will allow it. We just
can't allow it where the only reason is to keep the generic off
the market.
Namenda, the brand company pulls a $1.5 billion drug off
the market. Suboxone, the brand company disparages its own
product. Why does it do this? The only reason is to hurt the
generic. That is not allowed. That should be an antitrust
violation. Congress can do something about that.
Ms. Schakowsky. Well, actually, my subcommittee deals with
the FTC and those kinds of questions, and so I am hoping we can
deal with evergreening in that way. All right. I want to say
that I do support all the bills that have been suggested today,
and I really look forward to working with you, Madam Chair.
Thank you. Bye. I yield back, not bye.
Ms. Eshoo. I thank you, and good-bye. I will see you on the
floor. I thank the gentlewoman.
Let me offer my sincerest thanks to each one of you. I
notice that you were looking at your watch--oh, who is back?
Oh, I am sorry. The gentleman from Florida, Mr. Soto, last but
not least.
Mr. Soto. I will be brief, Madam Chair. I know----
Ms. Eshoo. That is music to our ears.
Mr. Soto. We are getting to voting soon. You know, we live
in an amazing time where diseases and conditions that would
have easily killed our grandparents or great grandparents or
parents are now things that people readily survive from because
of the great research done in the United States, and in
countries, only a few in Europe and Japan and other places that
are really changing the world. And I believe we have to bend
the arc of prescription prices without breaking the innovation
arc in the process, so it really is quite the balance.
I want to start out by just talking a little bit about some
constituents who have been concerned about diabetes medication.
Jeff Dunlop from my district said imagine being extorted into
paying a 15 to $20 fee every day of your life in order to stay
alive, welcome to Type 1 diabetes. Obviously, there is a
frustration on behalf of patients who are now taking advantage
of these lifesaving drugs.
So I just want to hear from each of you from this specific
scenario of diabetes medication, whether you think making
generics more accessible and competitive would be helpful in
this scenario and why, and we will start from the left.
Ms. Kennedy. I am not in the diabetic space, but I am in a
space very near and dear to that one, and that is COPD. Often
times both--patients have both problems. I would suggest that
everything we have discussed here today to involve more
competition and let Americans do what Americans do, which is
appreciate capitalism gets us to where we need to be, and I
support all of the things that have been introduced today that
really upholds that spirit of competition.
Mr. Soto. And Mr. Davis?
Mr. Davis. Congressman, thank you for the question. I think
the story you shared about your constituent just reinforces how
vital it is, and I said earlier that issues related to insulin
are sort of the perfect storm of what is not working. Whether
it is the rebate scheme, whether it is late staging patenting
or this regulatory challenge that we have heading into March of
2020, they are all issues that need to be resolved so we can
get biosimilars to market.
Mr. Soto. Mr. Barrueta?
Mr. Barrueta. Absolutely, completely agree. It is one of
the biggest problems that we have and that is a big reason why
we are here is to start working on exactly insulin.
Mr. Soto. Mr. Boutin?
Mr. Boutin. Agreed and systemwide transparency so we
understand how products flow and how they are priced so that we
can effectively get the most effective product that works and
the most effective in terms of cost to patients.
Mr. Soto. Thanks. Mr. Karst?
Mr. Karst. If you agree that greater competition yields
lower prices absolutely, which is why it is important to
preserve 180-day exclusivity, which is why I would really
oppose the BLOCKING Act.
Mr. Soto. Mr. Kushan?
Mr. Kushan. So certainly, everybody supports a generic
drug's role in driving prices down. I think what we all hope
for is the technology that we are living with today gives you
the solution that you don't need to take that drug every day.
We are seeing cures for diseases that were uncurable before
delivered by biotech and these amazing innovations.
So we want to make sure that we drive both solutions. We
want the solutions that solve the bigger problem, which is
having to take drugs every day, and that--now we are living in
an era, which is amazing that we can get cures to things that
nobody could have imagined before.
Mr. Soto. Thanks. And Mr. Carrier?
Mr. Carrier. So first focus on PBMs and formularies and
what products appear on the formulary, and second, deal with
the patent issue.
So IMAC has put out a report that shows that the Lantus
insulin injector pen has 74 patents, 95 percent of which were
introduced after the device entered the market. And so the
Orange Book Transparency Act would go a long way towards
dealing with this in focusing on devices being listed in the
Orange Book.
Mr. Soto. Thank you. I appreciate it. I know Mr. Dunlap
back in my district appreciates your responses, as well, and I
yield back.
Ms. Eshoo. I thank the gentleman.
Let me once again thank all the witnesses. Legislative
hearings are very important, and while this was long, each one
of you are really value added to this because, number one, all
of your experience and your knowledge no one can say to any one
of you you don't know what you are talking about, but it takes
it a step further in terms of where you were hesitant, what you
support, the recommendations that you were making to us on the
seven bills in order to improve them.
So I can't thank you enough. This is a worthy experience on
behalf of the American people, and I would also like to add
that I hope from where you sit that Members from both sides of
the aisle are a source of inspiration to you for the work that
they are doing together in order to produce legislative
products that are going to, again, be worthy of the American
people. I think that we are a can-do committee, and that we can
certainly bring the costs down, close the loopholes, protect
the innovation.
The United States of America is the leader in the world.
You can't--no one can point to any other country that produces
the--you know, lifesaving and cures turning death sentences
into chronic conditions, so I think that we can lower prices,
protect what I just described and obviously keep competition in
the system because that always brings down prices. So I hope
that we have been a little bit of a source of inspiration to
you.
I have a homework assignment for you though, and I think
every member was asking for this. You made some very important
recommendations of how we could improve the bills. I ask that
each one of you send us your bullet points. It can be on one
bill. It can be on all seven. It can be four, whatever it is,
but I really want to--and all the Members do want to review
that. We don't want it to be lost, and I think that it would
be, again, very good ideas.
Does the gentleman from Indiana want to say anything? No?
All right.
At this point I am asking for unanimous consent to submit
the following documents for the record. Bear with me, it is a
long list. I will read as fast as I can. Letter of support from
AARP for the CREATES Act and the Protection Consumer Access to
Generic Drugs Act of 2019, a letter of support from AFSCME.
Mr. Griffith. Madam Chair, I move that we waive the reading
of the documents and accept them without objection.
Ms. Eshoo. I thank the gentleman.
Ms. Eshoo. With that I think that we will adjourn now. It
is lunchtime. Thank you everyone.
[Whereupon, at 1:35 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared Statement of Hon. Jeff Duncan
Madam Chairwoman, thank you for giving me the opportunity
to be here today. I would like to use my time to introduce the
President, CEO and owner of Nephron Pharmaceuticals, and my
good friend and fellow South Carolinian, Ms. Lou Kennedy.
Nephron Pharmaceuticals moved their headquarters to South
Carolina in 2017, and employees over 600 people locally, all
with a variety of skill sets. It is important to note that Lou
is strongly supportive of our local veterans. Nephron hires a
significant amount of veterans to the corporation, as they're
already primed to follow a chain of command in the work
environment. Lou is also supportive of the University of South
Carolina, where Nephron recently established the Kennedy
Pharmacy Innovation Center in conjunction with the University's
Pharmacy School.
Lou is very active outside of the corporation, where she
serves on a number of different business and civic boards
including the South Carolina Chamber of Commerce. I am so proud
of the work that Lou is doing for our home state and know that
she will make South Carolina proud testifying before this
committee today. Thank you, Lou, and thank you Madam
Chairwoman.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]