[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

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                        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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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      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.

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