[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
IMPROVING DRUG PRICING TRANSPARENCY AND
LOWERING PRICES FOR AMERICAN CONSUMERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MAY 21, 2019
__________
Serial No. 116-37
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-555 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.............................. 3
Prepared statement........................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement \1\..................... 6
Prepared statement........................................... 7
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 7
Prepared statement........................................... 8
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 9
Prepared statement........................................... 11
Hon. Eliot L. Engel, a Representative in Congress from the State
of New York, prepared statement................................ 121
Witnesses
Lisa Meengs Joldersma, Senior Vice President, Pharmaceutical
Research and Manufacturers of America.......................... 12
Prepared statement........................................... 15
Kristin Bass, Chief Policy and External Affairs Officer,
Pharmaceutical Care Management Association..................... 24
Prepared statement........................................... 26
Madelaine Feldman, M.D., Coalition of State Rheumatology
Organizations, Alliance of Specialty Medicine, President....... 33
Prepared statement........................................... 35
Frederick Isasi, JD, MPH, Executive Director, Families USA....... 43
Prepared statement........................................... 45
Mark Miller, Ph.D., Executive Vice President of Healthcare,
Arnold Ventures................................................ 53
Prepared statement........................................... 55
Douglas Holtz-Eakin, Ph.D., President, American Action Forum..... 70
Prepared statement........................................... 72
Submitted Material
H.R. 2064, to amend title XI of the Social Security Act to
require manufacturers of certain drugs, devices, biologicals,
and medical supplies, submitted by Ms. Eshoo................... 122
H.R. 2069, Stopping the Pharmaceutical Industry from Keeping
drugs Expensive Act............................................ 127
H.R. 2087, the Drug Price Transparency Act, submitted by Ms.
Eshoo.......................................................... 138
H.R. 2115, the Public Disclosure of Drug Discounts Act, submitted
by Ms. Eshoo................................................... 145
H.R. 2296, the FAIR Drug Pricing Act of 2019, submitted by Ms.
Eshoo.......................................................... 148
H.R. 2376, the Prescription Pricing for the People Act of 2019,
submitted by Ms. Eshoo......................................... 157
H.R. 2757, the CLAY Act, submitted by Ms. Eshoo.................. 162
----------
\1\ Mr. Butterfield presented Mr. Pallone's statement orally.
Letter of May 21, 2019, from Monica M. Bertagnolli, M.D.,
President, FACS, Fellow American Society of Clinical Oncology,
to Mr. Pallone and Mr. Walden, submitted by Eshoo.............. 168
Letter of May 21, 2019, from Lauren Aronson, Executive Director,
The Campaign for Sustainable Rx Pricing, to Ms. Eshoo,
submitted by Ms. Eshoo......................................... 170
Letter of May 21, 2019, from Nancy A. LeaMond, Executive Vice
President and Chief Advocacy and Engagement Officer, AARP, to
Mr. Pallone, et al., submitted by Ms. Eshoo.................... 173
Letter of May 21, 2019, from Bari Talente, Esq., Executive Vice
President, Advocacy, National Multiple Sclerosis Society, to
Ms. Schakowsky, submitted by Ms. Eshoo......................... 175
Letter of May 1, 2019, from Alliance of Specialty Medicine, et
al, submitted by Ms. Eshoo..................................... 186
IMPROVING DRUG PRICING TRANSPARENCY AND LOWERING PRICES FOR AMERICAN
CONSUMERS
----------
TUESDAY, MAY 21, 2019
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:34 a.m., in
the John D. Dingell Room 2123, Rayburn House Office Building,
Hon. Anna G. Eshoo (chairwoman of the subcommittee) presiding.
Members present: Representatives Eshoo, Engel, Butterfield,
Matsui, Sarbanes, Lujan, Schrader, Kennedy, Cardenas, Welch,
Ruiz, Dingell, Kuster, Kelly, Barragan Blunt Rochester, Burgess
(subcommittee ranking member), Upton, Shimkus, Guthrie,
Griffith, Bilirakis, Long, Bucshon, Brooks, Mullin, Hudson,
Carter, Gianforte, and Walden (ex officio).
Also present: Representative Schakowsky.
Staff present: Jacquelyn Bolen, Professional Staff; Waverly
Gordon, Deputy Chief Counsel; Tiffany Guarascio, Deputy Staff
Director; Josh Krantz, Policy Analyst; Una Lee, Senior Health
Counsel; Aisling McDonough, Policy Coordinator; Joe Orlando,
Staff Assistant; Alivia Roberts, Press Assistant; Tim Robinson,
Chief Counsel; Samantha Satchell, Professional Staff Member; C.
J. Young, Press Secretary; Mike Bloomquist, Minority Staff
Director; S. K. Bowen, Minority Press Assistant; Margaret
Tucker Fogarty, Minority Staff Assistant; Peter Kielty,
Minority General Counsel; Ryan Long, Minority Deputy Staff
Director; James Paluskiewicz, Minority Chief Counsel, Health;
and Brannon Rains, Minority Staff Assistant.
Ms. Eshoo. Good morning, everyone. The Subcommittee on
Health will now come to order. The Chair now recognizes herself
for five minutes for an opening statement.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Last week, our subcommittee held a hearing to essentially
follow the money in the drug supply chain. We came away with
much valuable information, but we also found there are many
secrets, secret decisions about how drugs are priced, secret
deals between drug companies and the PBMs, and secret
agreements between PBMs and insurers.
Today, we're considering seven bipartisan bills that
essentially unmask the secrets, that secret process, and ensure
that low-income seniors can afford their medications and build
on the drug-pricing package passed by the House last week.
The first and very important bill ensures that seniors can
afford their drugs. Representatives Cunningham and Bilirakis
introduced the Creating Lower Cost Alternatives for your
Prescription Drugs Act. The bill eliminates cost-sharing for
generic drugs for low-income Medicare enrollees and caps their
out-of-pocket costs for other drugs. Nearly 25 percent of
seniors who take drugs report it is difficult for them to
afford their medications. This bill will not only save seniors
money, it will also help save their lives in many instances.
The second group of bills exposes how drug prices are set.
The SPIKE Act, proposed by Representatives Horsford and Reed,
and the Fair Drug Pricing Act, proposed by Representatives
Schakowsky and Francis Rooney, require drug manufacturers to
justify large spikes in drug prices.
The Reporting Accurate Drug Prices Act, proposed by
Representatives Doggett and Buchanan, requires manufacturers to
report the average sales price of Medicare Part B, ``B'' as in
boy, drugs. This bill makes sure Medicare is paying the right
price for Part B drugs.
The Sunshine for Samples Act, proposed by Representatives
Chu and Nunes--all kinds of partners in this--directs companies
to report the price and quantity of the free samples of drugs,
devices, and medical supplies they give to healthcare
providers. The bill does not prohibit free samples. Instead, it
will help us to see how free samples influence drug pricing and
distribution.
The third group of bills exposes the deals between PBMs and
the other stakeholders in the drug supply chain. The Public
Disclosure Act of Drug Discounts Act, authored by
Representatives Spanberger and Holding, requires PBMs to report
the discounts they negotiate with drug manufacturers. This
transparency will help to ensure the discount is passed down
through the chain to patients. To patients--I want to
underscore that.
The Prescription Pricing for the People Act, authored by
Representatives Nadler and Collins, directs the FTC to review
PBMs' behavior and whether it is anticompetitive or not. At our
hearing last week, we learned that three PBMs control the
majority of the market, and those PBMs own large pharmacy
chains and specialty pharmacies, and we believe that has
potential conflicts of interest. With this bill, the FTC will
scrutinize PBMs to ensure there are not any distortions of the
market.
Last week, I said we needed to examine the system from
beginning to end because, in order to fix it, we have to
understand all the parts of it first, and then act. With these
seven bills today, I think we are taking important action. Each
bill is directed to reform the drug supply chain, and
transparency is only as good as the accountability and
enforcement that has to follow.
So, I want to welcome our witnesses, thank them for being
here today with us. We look forward to your important
testimony.
[The prepared statement of Ms. Eshoo follows:]
Prepared Statement of Hon. Anna G. Eshoo
Last week, our Subcommittee held a hearing to follow the
money in the drug supply chain. Instead of answers, we found
secrets.
Secret decisions about how drugs are priced. Secret deals
between drug companies and the PBMs, and secret agreements
between PBMs and insurers.
Today, we consider seven bipartisan bills that unmask the
secrets and ensure that low-income seniors can afford their
medications. The bills build on the drug pricing package passed
by the House last week.
The first and most important bill makes sure seniors can
afford their drugs. Representatives Cunningham and Bilirakis
introduced the Creating Lower Cost Alternatives for Your
Prescription Drugs Act. The bill eliminates cost-sharing for
generic drugs for low-income Medicare enrollees and caps their
out-of-pocket costs for other drugs. Nearly 25 percent of
seniors who take drugs report it is difficult for them to
afford their medications. This bill will not only save seniors
money, it can also save lives.
The second group of bills expose how drug prices are set.
The SPIKE Act, proposed by Representatives Horsford and
Reed, and the FAIR Drug Pricing Act, proposed by
Representatives Jan Schakowsky and Francis Rooney require drug
manufacturers to justify large spikes in drug prices.
The Reporting Accurate Drug Prices Act, proposed by
Representatives Doggett and Buchanan require manufacturers to
report the average sales price of Medicare Part B drugs. This
bill makes sure Medicare is paying the right price for Part B
drugs.
The Sunshine for Samples Act, proposed by Representatives
Chu and Nunes, directs companies to report the price and
quantity of the free samples of drugs, devices, and medical
supplies they give to healthcare providers. The bill does not
prohibit free samples. Instead, it will help us see how free
samples influence product pricing and distribution.
The third group of bills expose the secret deals between
PBMs and the other stakeholders in the drug supply chain.
The Public Disclosure of Drug Discounts Act authored by
Representatives Spanberger and Holding requires PBMs to report
the discounts they negotiate with drug manufacturers. This
transparency will help to ensure the discount is passed down
through the chain to patients.
The Prescription Pricing for the People Act authored by
Representatives Nadler and Collins directs the Federal Trade
Commission to review PBMs' anticompetitive behaviors. At our
hearing last week, we learned that three PBMs control the
majority of the market and those PBMs own large pharmacy chains
and specialty pharmacies, a potential conflict of interest.
With this bill, the FTC will scrutinize PBMs to ensure there
are not any distortions of the market.
Last week I said we needed to examine the system from
beginning to end because in order to fix it, we have to
understand it, and then we will act. With these seven bills
today, we're taking important action. Each bill is directed to
reform the drug supply chain, but transparency is only as good
as the accountability and enforcement that must follow.
Welcome to our witnesses and we look forward to your
testimony.
Ms. Eshoo. And now I recognizes the ranking member of the
Subcommittee on Health, Mr. Burgess, for five minutes for his
opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. I thank the chairwoman for the recognition.
We have convened this morning once again to address an
issue that affects and complicates the lives of many of our
constituents, that of drug pricing. When I return home to north
Texas and conduct meetings in my district office, I frequently
hear the very personal stories of individuals and families who
are struggling to afford their medications.
Unfortunately, solving this problem is not as
straightforward as you might hope. As exemplified by our recent
drug supply chain hearing, there are a number of stakeholders
and they are interwoven throughout the supply chain, making up
the existing convoluted system.
Our counterparts on the Ways and Means Committee have taken
a first pass at addressing transparency in H.R. 2113, the STAR
Act. On its face, transparency sounds like a useful and good
thing. In other markets in the United States, people can shop
around for goods and seek the best price or value. In
healthcare, that is more easily said than done because of the
intricate nature of the system, especially the drug supply
chain. It is especially important that, as we evaluate this
legislation, we consider the possibility of unintended
consequences for both the patient and for the market.
This committee laid the groundwork in 21st Century Cures
for the development and treatments and cures that really--until
the passage of that bill, some of those things were science
fiction and now they are becoming reality. Two and a half years
after Cures was signed into law, I am receiving meeting
requests from stakeholders who bring good news about how this
law is producing real results for patients.
We must strike this delicate balance with the policies that
we pass through this committee to ensure that they do not
dampen the success or deter future investment in biomedical
research and innovation. No surprise, I do have some thoughts
about Section 2 of H.R. 2113, which requires a notification and
public posting of companies that launch a drug at a price of
$26,000 or more. So, there are some newer therapies, and these
may be a single dose or a single shot, that can cure an
individual of a rare disease. The cost of research and
development and clinical trials that goes into these treatments
is immense. We must consider the potential impact that this
requirement could have on the industry. The incentives for drug
development in this space are working, but scaring companies
away from investing in such drugs does not serve patients who
might benefit from this innovation.
I am reminded of the comments of a former colleague who
served before I got here, J. C. Watts of Oklahoma, who said,
``you can attribute a lot of things to capitalism and capital,
but it's not necessarily courageous.'' So, if we make it
difficult, capital will go elsewhere. And yet, we want the
innovations in this space. So, the FAIR Act does not include
this launch-price trigger, and I think that is a good place to
start.
I would also like to take a minute and express some
concerns about Section 3 of H.R. 2113. This policy would
require manufacturers of drugs, devices, biologics, and medical
supplies to report on the samples they give to healthcare
providers each year, and this information would be publicly
posted. I fear that this policy could lead to a sort of public
shaming of companies that are trying to benefit patients.
Should such a policy deter manufacturers from providing samples
to physicians, I promise you, patients will be harmed.
As a physician, I can say that I have seen the benefits of
samples for patients firsthand. Sometimes a patient's insurer
requires a prior authorization process that delays the
patient's access to medication. A sample of the medication
allows the patient to begin receiving timely treatment.
Additionally, physicians may use samples in clinical decision
making. For example, if a new drug has come to market that may
work better for a patient, the doctor can use the sample to
establish whether or not the patient responds in an improved
way to the new drug without subjecting the patient to financial
burden or, if side effects develop, to an unnecessary purchase.
Again, I appreciate the bipartisan work that the Ways and
Means Committee has done. However, we are the Energy and
Commerce Committee. We should be in the vanguard. We should be
in the lead. And I believe there are some areas in this policy
that we need to think through a little more thoroughly.
I want to thank all of our witnesses in advance for their
thoughts on this legislation, and I look forward to working in
a bipartisan fashion.
I yield back my time.
[The prepared statement of Mr. Burgess follows:]
Prepared Statement of Hon. Michael C. Burgess
Thank you, Madam Chair. We have convened this morning once
again to address an issue that affects and complicates the
lives of many of our constituents--drug pricing. When I return
home to North Texas and conduct meetings in my district office,
I frequently hear the personal stories of individuals and
families who are struggling to afford their medications.
Unfortunately, solving this problem is not as
straightforward as we all would hope. As exemplified by our
recent drug supply chain hearing, there are various
stakeholders interwoven throughout the supply chain, making up
the existing convoluted system. Our counterparts on the Ways
and Means Committee have taken a first pass at addressing
transparency in H.R. 2113, the STAR Act.
On its face, transparency sounds like a useful and good
thing. In other markets in the United States, individuals can
shop around for goods and seek the best price or value. In
healthcare, that is more easily said than done because of the
intricate nature of the system, especially the drug supply
chain. It is especially important that as we evaluate this
legislation we consider the unintended consequences for both
the patient and the market.
This Committee laid the groundwork in 21st Century Cures
for the development of treatments and cures that Americans
have, until now, only dreamed were possible. Nearly two and a
half years after Cures was signed into law, I am receiving
countless meeting requests from stakeholders who bring good
news about how this law is producing real results for patients.
We must strike a delicate balance with the policies we pass
through this Committee to ensure they do not put a damper on
this success or deter investment in biomedical research and
innovation.
I do have some thoughts about Section 2 of H.R. 2113, which
requires a notification and public posting of companies that
launch a drug at a price of $26,000 or more. There are one-shot
therapies that can cure individuals of rare diseases, and the
cost of research and development that goes into these
treatments is immense. We must consider the potential impact
that this requirement could have on the industry. The
incentives for drug development in this space are working and
scaring companies away from investing in such drugs does not
serve patients who might benefit from this innovation. I am
pleased that Ms. Schakowsky's FAIR Act does not include this
launch price trigger.
I would also like to take a minute to express some concerns
about Section 3 of the H.R. 2113. This policy would require
manufacturers of drugs, devices, biologics, and medical
supplies to report on the samples they give to healthcare
providers each year, and this information would be publicly
posted. I fear that this policy too could lead to a sort of
public shaming of companies that are trying to benefit
patients. Should such a policy deter manufacturers from
providing samples to physicians, patients will be harmed.
As a physician, I can say that I have seen the benefit of
samples for patients first-hand. Sometimes a patient's insurer
requires a burdensome prior authorization process that delays a
patient's access to medication. A sample of the medication
allows the patient to receive more timely treatment.
Additionally, physicians may use samples in clinical decision
making. For example, if a new drug has come to market that may
work better for a patient, a physician can use a sample to
establish whether or not the patient responds better to the new
drug without subjecting the patient to whatever the financial
burden of the drug may be.
Again, I appreciate the bipartisan work that the Ways and
Means Committee has done, but I do believe that there are some
areas of this policy that we need to think through thoroughly.
Thank you to our witnesses for offering their thoughts on this
legislation, and I look forward to working on this in a
bipartisan manner.
Ms. Eshoo. The gentleman yields, and I thank him for his
opening statement.
I now would like to recognize the gentleman from South
Carolina, who is going to offer the chairman of the full
committee's opening statement.
Mr. Butterfield. Thank you, Ms. Eshoo.
Let me correct the record. I am from North Carolina.
Ms. Eshoo. I am sorry.
Mr. Butterfield. I know you Californians, whenever you hear
the word ``Carolina,'' you think of the South.
Ms. Eshoo. Well, we have north and south in California,
too. So, I should have been--I am sorry for not being accurate.
Mr. Butterfield. Thank you for your friendship.
Ms. Eshoo. A great State.
Mr. Butterfield. Thank you.
Ms. Eshoo. The great State of, right?
[Whereupon Mr. Butterfield read Mr. Pallone's statement.]
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Butterfield. Thank you, Ms. Eshoo, for holding this
latest hearing in our series on prescription drug pricing. I
say ``latest hearing'' because this is not the first and
certainly will not be the last.
Democrats are serious about the problem of rising drug
prices. It is a complicated problem, I acknowledge that. Its
consequences are very far-reaching.
I represent the 1st District of North Carolina, where many
hard-working families are struggling every day to afford the
basic necessities of life. Steep price hikes have the potential
to force these communities into decisions between paying their
bills and purchasing medications that are vital to their
health. All too often, these circumstances result in rationing
prescription drugs or the abandonment of treatment altogether.
And so, Madam Chair, I have long held that quality and
affordable healthcare is a basic necessity, a right that every
American must have equal access. Consumers should be able to
anticipate the price of their prescriptions and must be able to
rely on those prices to remain stable from year to year.
All of us understand that corporations exist to make a
profit. I have acknowledged that in many hearings and I
understand that dynamic. Pharmaceutical investment and
innovation have led to unprecedented breakthroughs in
treatments that have improved health outcomes and patient
quality of life.
However, unlike most consumer products, for many a
prescription is the literal difference between life and death.
Therefore, the need to fund new innovations must be balanced.
It must be balanced with the obligation to make medications
widely available and affordable to the public.
And so, we find ourselves here today, hopefully in a
bipartisan way, in pursuit of that goal; as Congress continues
to work with every entity along the pharmaceutical supply chain
to find practical solutions to the pricing issue that both
support innovation and reduce costs for consumers.
I look forward to today's discussion. I thank those who
have authored these amendments. And, in particular, I thank the
gentlelady from Illinois for her passion and her leadership on
this issue.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
Thank you, Chairwoman Eshoo, for holding this latest
hearing in our series on prescription drug pricing.
The problem of rising drug prices is a complicated one and
its consequences are far reaching. I represent the First
District of North Carolina, where many hard-working families
are struggling to afford basic necessities like housing,
childcare, and more than ever, their prescription drugs.
Steep price hikes have the potential to force these
communities into decisions between paying their bills and
purchasing medications that are vital to their health. All too
often these circumstances result in rationing prescriptions or
the abandonment of treatment altogether.
I have long held that quality and affordable healthcare is
a basic necessity, a right that every person in the United
States must have equal access to. Consumers should be able to
anticipate the price of their prescriptions and must be able to
rely on those prices to remain stable from year to year.
All of us understand that corporations exist to make a
profit. Pharmaceutical investment and innovation have led to
unprecedented breakthroughs in treatment that have improved
health outcomes and patient quality of life. However, unlike
most consumer products, for many, a prescription is the literal
difference between life and death. Therefore, the need to fund
new innovations must be balanced with the obligation to make
medications widely available and affordable to the public.
We find ourselves here today in pursuit of that goal as
Congress continues to work with every entity along the
pharmaceutical supply chain to find practical solutions to the
pricing issue that both support innovation and reduce costs for
consumers. I look forward to today's discussion.
Ms. Eshoo. I yield at this time to the gentlelady from
Illinois, Ms. Schakowsky.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. I thank the gentleman for yielding. And I
thank the chairwoman of this subcommittee for allowing me to
wave on to this hearing on a topic so important to all of us.
The pharmaceutical industry is worth almost $1 trillion,
and I believe they are holding American consumers hostage. Our
constituents are suffering and some are dying--we actually have
the names of the dead, some of them--because they can't afford
life-saving and life-enhancing drugs that they need.
And why have drug prices skyrocketed, sometimes a thousand
percent? Well, that is a really good question. And because drug
companies have hidden the price policies, consumers have no
choice but to pay the price, if they can--until now. My
legislation, the Fair Drug Pricing Act, H.R. 2296, is a
bipartisan, bicameral bill that will force the drug companies
to be transparent, which is the very least that we can expect
from them.
The bill does two things. Pharmaceutical manufacturers must
notify HHS and submit a transparency and justification report
30 days before they raise the price of certain drugs by more
than 10 percent or by more than 25 percent over three years.
The report will require manufacturers to provide the
manufacturing, research, and development costs for the drug,
net profits attributed to the drug, marketing and advertising
spending on drugs, and others.
Unlike H.R. 2069, the SPIKE Act, which is also being
considered today, my bill does not allow manufacturers to pick
and choose what information that they would like to disclose.
And unlike the SPIKE Act, my bill requires HHS to make all of
the nonproprietary information from these reports' public and
available to everyone online for everyone to see.
For the first time ever, this bill will offer taxpayers
nationwide notice of price increases and bring basic
transparency to the market for prescription drugs. The bills
being considered today are only a start, and transparency is
only a piece of the puzzle in bringing down the cost of
prescription drugs.
These bills are all bipartisan, and I am proud that
Representative Rooney joined me in reintroducing this. Senator
Baldwin and Senator Braun in the Senate are also doing this
bill. So, I hope that we will have positive consideration of
it.
And let me also enter into the record a very important
letter from the National Multiple Sclerosis Society,
representing people who are having trouble paying for the
spiked prices in their drugs.
I yield back.
[The prepared statement of Ms. Schakowsky follows:]
Prepared Statement of Hon. Jan Schakowsky
And thank you to both the Chairman and Subcommittee Chair
for allowing me to waive on to this hearing on a topic that is
deeply important to me.
PhRMA is opposed to any legislation that would require
pharmaceutical manufacturers to provide basic transparency to
the American people.
The pharmaceutical industry is worth almost ONE TRILLION
dollars and they are holding American consumers hostage.
Our constituents are suffering, and some are dying.
We have their names.
Because they can't afford the live-saving, life enhancing
drugs they need.
Why have drug prices skyrocketed?
Sometimes by 1000 percent?
That's a really good question.
And because drug companies hide their pricing policies,
consumers have no choice but to pay the price.
Until now.
My legislation, the FAIR Drug Pricing Act, H.R. 2296, is a
bipartisan, bicameral bill that will force the drug companies
to be transparent-which is the least we can expect from them.
The bill does two things.
Pharmaceutical manufacturers must 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 three years.
The report will require manufacturers to provide:
the manufacturing, research and development costs
for the drug;
net profits attributable to the drug;
marketing and advertising spending on the drug;
and other information that the Secretary decides
is necessary.
Unlike H.R. 2069, the SPIKE Act, which is also being
considered today, my bill does not allow manufacturers to pick
and choose what information they would like to disclose.
And unlike the SPIKE Act, my bill requires HHS to make ALL
of the non-proprietary information from these reports publicly
available online for anyone to access.
For the first time ever, this bill will offer taxpayers
nationwide notice of price increases and bring basic
transparency to the market for prescription drugs.
The bills being considered today are only a start, and
transparency is only one piece of the puzzle in bringing down
the cost of prescription drugs.
These bills are all bipartisan, and I am proud that
Representative Rooney joined me to reintroduce my bill this
Congress.
Senator Baldwin reintroduced the FAIR Drug Pricing Act in
the Senate earlier this month and was also joined by Senator
Braun.
The American people are crying out.
Prescription drug prices are literally killing them.
We must act, and we are being given the opportunity to do
so right now.
When the FAIR Drug Pricing Act passes, PhRMA will finally
have to answer to the American people.
I believe that we have a responsibility to protect and
serve the best interests of the American people.
Not the interests of extraordinarily wealthy pharma
executives and Wall Street investors.
Ms. Eshoo. The gentlewoman yields back. And now, I would
like to recognize the ranking member of the full committee and
offer my condolences to him on your Trailblazers. They played
well, but not good enough.
[Laughter.]
Mr. Walden. Really? This is how we are going to start?
[Laughter.]
Yes. Boy, and I was going to say nice things about you this
morning.
[Laughter.]
Ms. Eshoo. The gentleman is recognized for five minutes for
his opening statement.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. It was tough in overtime last night.
Ms. Eshoo. It was. It was.
Mr. Walden. And it was close.
Ms. Eshoo. It was a great game.
Mr. Walden. ``Close'' only counts in horseshoes, not
basketball, but we appreciate that, Madam Chair. Yes, thanks
for that reminder this morning.
[Laughter.]
Now let's get on about our serious business.
Patients need our help. They need our help to force down
the price of their medical care, especially when it comes to
the cost of drugs. And what good is a prescription if a patient
cannot afford to pay for their medicine? I mean, that is how it
kind of comes down. Drug pricing is, obviously, of great
concern to all Americans and to our President. It has come up
at nearly every one of the 20 town halls I have done so far
this year in my district. Blockbuster drugs come with budget-
busting prices.
Too often, prices continue to rise, and while there are
numerous reasons given, patients rely on these medications.
When market forces weaken or fail, then we need to step in with
Federal common-sense legislation.
And we have taken steps recently by passing into law a
requirement that companies pay the proper rebate under the
Medicaid program. We have passed the Orange and Purple Book
reforms on the House Floor. And while I remain dismayed by the
unnecessarily partisan approach, when the bill came to the
floor, we did reach agreement here through bipartisan
negotiations on several other provisions that will increase the
availability of generic drugs.
This subcommittee has also built off the foundation we laid
last Congress by examining how the Medicare program pays for
drugs and peeling back the layers of pharmaceutical pricing and
supply chain. And I thank the Chair for her leadership in that
regard.
I am glad we are examining legislation I hope we can find
bipartisan agreement on, but we must also ensure that in these
efforts we are actually pursuing policies that will provide a
benefit for patients. We have got to put the patient first. We
need to ensure that, as we work to shine a light on how drugs
come to market and are priced, that we realize that the market
must also be sustainable to produce the next generation of
cures and treatments.
We are living in an amazing time of innovation. It is
producing cures for conditions we didn't even have a name for
30 years ago. The promise of what lies ahead is truly
staggering in their ability to relieve human suffering from
conditions from hemophilia, to sickle cell, to muscular
dystrophy. We are on the cutting edge of solving all of those.
So, in our efforts to bring more transparency to the
system, which I support, we must inherently first do no harm.
For example, I am concerned that provisions of some of the
bills before us could actually allow manufacturers to back in
the rebates paid by their competitors or allow wholesaler
stockpiling that could lead to shortages in an attempt to
provide notification of price increases.
As I mentioned, this committee has been a leader, a leader
in encouraging the innovation that patients are benefitting
from today through our work on the FDA user fees and from the
work to pass the 21st Century Cures, led by my friend and
colleague, Fred Upton. While the results of those efforts are
truly remarkable, we also know that the cost of bringing a drug
to market, especially one that targets an orphan or neglected
disease, is high. We cannot ignore that. We should not randomly
categorize as bad actors those who have done what this
committee has, frankly, encouraged them to do, investing in
cutting-edge therapies like gene editing and regenerative
medicine, because their list price is over an arbitrary amount.
Because I can tell you, these new drugs improve or save lives,
and that is better than investing in just another me-too drug.
In that light, I believe any policies pursued by this
committee must put the patient front and center. That is why,
as currently drafted, I am concerned about some of the policies
that could have the risk of decreasing the ability of
physicians to provide patients samples of drugs, to help those
who cannot afford their medication, those who have prior-
authorization or coverage issues, from starting treatment, to
inform medical judgment, or help patients manage side effects
related to their current medication. Now I think working in a
bipartisan spirit, as we have done before, with the help of our
witnesses today, I am hopeful we can address these concerns.
And on a final note, thanks to Chairman Eshoo and thanks to
Chairman Pallone for exercising our committee's jurisdiction on
these bills. That is important, too. While most have been
marked up by other committees, we are, after all, the committee
of primary jurisdiction.
So, with that, Madam Chair, thanks for the hearing. Thanks
for your condolences on the Blazers. And I will yield back the
balance of my time.
[The prepared statement of Mr. Walden follows:]
Prepared Statement of Hon. Greg Walden
Patients need our help to force down the price of their
medical care, especially when it comes to the cost of drugs.
What good is a prescription if a patient cannot afford to pay
for their medicine?
Drug pricing is of great concern to all Americans. It's
come up at nearly every one of the 20 town halls I've held this
year in my district. Blockbuster drugs come with budget-busting
prices. Too often prices continue to rise, and while there are
numerous reasons given, patients rely on these medications.
When market forces weaken or fail, then we need to step in with
federal, commonsense legislation.
We have taken steps recently, by passing into law a
requirement that companies pay the proper rebate under the
Medicaid program. We have passed the orange and purple book
reforms on the House Floor. And while I remain dismayed by the
unnecessarily partisan approach when the bill came to the
Floor, we did reach agreement through bipartisan negotiation on
several other provisions that will increase the availability of
generic drugs.
This subcommittee has also built off the foundation we laid
last Congress by examining how the Medicare program pays for
drugs and peeling back the layers of the pharmaceutical pricing
and supply chain, and I thank the Chair for her leadership in
that regard.
I am glad we are examining legislation that I hope we can
find bipartisan agreement on, but we must also ensure that in
these efforts we are actually pursuing policies that will
provide a benefit for patients. We need to ensure that as we
work to shine a light on how drugs come to market and are
priced that we realize that the market must also be sustainable
to produce the next generation of cures and treatments. We are
living in a time of innovation that is producing cures for
conditions we didn't even have a name for 30 years ago. The
promise of what lies ahead is truly staggering in their ability
to relieve human suffering from conditions from hemophilia to
sickle cell to muscular dystrophy.
So, in our efforts to bring more transparency to the
system, which I support, we must inherently first, do no harm.
For example, I am concerned that provisions of some of the
bills before us could allow manufacturers to "back in" the
rebates paid by their competitors or allow wholesaler
stockpiling that could lead to shortages in an attempt to
provide notification of price increases.
As I mentioned, this committee has been a leader is
encouraging the innovation that patients are benefiting from
today through our work on FDA user fees and 21st Century Cures.
While the results of those efforts are truly remarkable we also
know that the cost of bringing a drug to market, especially one
that targets an orphan or neglected disease, is high. We should
not randomly categorize as bad actors those who have done what
this committee has encouraged them to do: invest in cutting-
edge therapies like gene editing and regenerative medicine
because their list price is over an arbitrary amount. Because I
can tell you, these new drugs improve or save lives. That's
better than investing in just another "me too drug."
In that light I believe any policies pursued by this
committee must put the patient front and center. That is why as
currently drafted I am concerned about policies that could have
the risk of decreasing the ability of physicians to provide
patients samples of drugs to help those who cannot afford their
medication, those who may have prior authorization or coverage
issues from starting treatment, to inform medical judgement or
help patient's mange side effects related to their current
medication.
Working in a bipartisan spirit, with the help of our
witnesses today, I'm hopeful we can address my concerns.
On a final note, thanks to you, Chairwoman Eshoo and
Chairman Pallone for exercising our Committee's jurisdiction on
these bills. While most have been marked up by other
committees, we are the committee of primary jurisdiction.
Ms. Eshoo. I thank the gentleman and he yields back.
I would like to remind all Members that, pursuant to
committee rules, all Members' written opening statements shall
be made part of the record.
I now would like to introduce our witnesses that have
willingly come forward today, and we appreciate each one of you
being here.
Ms. Lisa Joldersma--did I pronounce your name correctly? Is
here. She is the senior vice president, insurance and State
issues, for the Pharmaceutical Research and Manufacturers of
America.
And her son Garrett is here with us, too. So, I hope you
find this interesting, Garrett. If nothing else, you will know
the complicated business your mother is in. So, welcome to both
of you.
Ms. Kristin Bass, the chief policy and external affairs
officer with the Pharmaceutical Care Management Association,
welcome to you.
Dr. Madelaine Feldman, she is the president of the
Coalition of State Rheumatology Organizations, the Alliance of
Specialty Medicine. Thank you to you.
Mr. Frederick Isasi, executive director of Families USA,
welcome to you.
Dr. Mark Miller, the executive vice president of
healthcare, Arnold Ventures, welcome to you, sir.
And Dr. Douglas Holtz-Eakin, president of the American
Action Forum, welcome to you.
And our thanks to each one of you again for joining us
today.
At this time, the Chair will recognize each witness for
five minutes. So, the light that means the most is the red
light. That means, like when you are driving, you stop.
I think several of you have already testified. So, you know
what the system is.
Now I would like to call on Ms. Joldersma. You are
recognized for five minutes for your testimony, and we thank
you again for being here with us today. You may begin.
STATEMENTS OF LISA JOLDERSMA, SENIOR VICE PRESIDENT, INSURANCE
AND STATE ISSUES, PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF
AMERICA; KRISTIN BASS, CHIEF POLICY AND EXTERNAL AFFAIRS
OFFICER, PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION; MADELAINE
FELDMAN, M.D., PRESIDENT, COALITION OF STATE RHEUMATOLOGY
ORGANIZATIONS, ALLIANCE OF SPECIALTY MEDICINE; FREDERICK ISASI,
JD, MPH, EXECUTIVE DIRECTOR, FAMILIES USA; MARK MILLER, Ph.D.,
EXECUTIVE VICE PRESIDENT OF HEALTHCARE, ARNOLD VENTURES; AND
DOUGLAS HOLTZ-EAKIN, Ph.D., PRESIDENT, AMERICAN ACTION FORUM
STATEMENT OF LISA JOLDERSMA
Ms. Joldersma. OK. Thank you very much and good morning,
distinguished members of the subcommittee. And thank you,
Chairman Pallone, Chairwoman Eshoo, Ranking Member Walden, and
Ranking Member Burgess, for the invitation to testify today.
I am Lisa Joldersma, and I am senior vice president at the
Pharmaceutical Research and Manufacturers of America, or PhRMA.
As many of you know, PhRMA represents the leading research-
based biopharmaceutical companies.
Since the year 2000, our companies have collectively
invested half a trillion dollars in the search for new
treatments and cures, including more than $70 billion in 2017,
which I would note is an amount twice the entire operating
budget of the NIH. These investments yield breakthroughs and
continuous progress against both chronic and acute conditions.
Creating, discovering, and developing a new therapy is a
challenging, high-risk endeavor, with just 12 percent of those
molecules that enter clinical trials ultimately securing FDA
approval. In other words, of those molecules entering the
clinical trial phase, 9 times out of 10 we fail, and it is not
for lack of trying. The average cost to develop a new medicine
is $2.6 billion, and the entire process takes an average of 10
to 15 years from start through FDA approval. Despite these
difficult odds and increasingly challenging science, PhRMA
members persist, supported by private investment, and in
collaboration with others, including the NIH.
While medicine's importance to healthcare has grown
considerably over the years, the share of U.S. healthcare
spending attributed to drugs has been largely stable.
Prescription drugs consume roughly 14 percent of national
health expenditures today. That includes both drugs dispensed
at retail and administered in the hospital, and these are CMS
numbers from the National Health Expenditures data.
Growing reliance on generic medicines, which currently
represent 90 percent of all prescriptions filled in this
country, is a key element to keeping our prescription drugs
system affordable overall. And I would note that growth in
biosimilars, thanks to the leadership of many on this
committee, is expected to further help constrain costs moving
forward.
And yet, patients are really, really struggling to afford
their medicines. And I want to be really clear today that, for
our part, PhRMA accepts that a product's list price does
influence what patients pay. In today's world of multi-tiered
formularies, drug exclusion lists, and rising cost-sharing,
however, there are other entities that play a significant role
in what patients pay as well.
PhRMA is focused on changing the status quo and bringing
forward solutions that will sustain innovation, ensure safety,
and help patients. For too many patients today, even those with
insurance, they are struggling to afford their medicines, as
you all know well. This is the most pressing issue that we need
to work collectively to solve.
With regard to specific measures before the subcommittee
today, I will say that PhRMA supports greater transparency
across the healthcare system. We believe our industry already
makes a fair amount of information publicly available, but we
do understand that policymakers and purchasers are looking for
more from us. We will come to the table to help shape
meaningful transparency across the drug supply chain.
When evaluating alternative proposals, we really have three
questions in mind that help shape specific feedback that we
provide. First, is the measure likely to yield information that
will be helpful or meaningful to patients? Always patients
first. Second, does the measure give companies a reasonable
opportunity to comply? Is it prospective in nature? And
finally, are there appropriate protections for confidential and
proprietary information, so we can prevent harmful interference
in the market?
In closing, I would like to say that we do believe greater
transparency is an important part of the solution to the
problems we are discussing today, but they will not be enough
on their own. We also need to take steps to promote
competition, to address misaligned incentives in our current
system, and to explore ways to make insurance work better for
sick patients who need today's medicines and those who are
waiting for tomorrow's.
Thank you very much.
[The prepared statement of Ms. Joldersma follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. We thank you, Ms. Joldersma.
And now, I would like to recognize Ms. Kristin Bass for
five minutes of her testimony.
Welcome again and thank you.
STATEMENT OF KRISTIN BASS
Ms. Bass. Thank you, Chairwoman Eshoo, Ranking Member
Burgess, and members of the subcommittee.
I am Kristin Bass, the chief policy and external affairs
officer for PCMA, which is the trade association for the PBM
industry. I am pleased to be here today to talk about the
important transparency bills before the subcommittee and to
discuss how PBMs lower prescription drug costs for 200 million
Americans with health coverage through employers, labor unions,
health plans, Medicare, and Medicaid.
Every day in this country, people go to the pharmacy to get
needed drugs to make their lives better. PBMs' only mission is
to increase affordability and access to those drugs for
consumers and our clients. PBMs are an important link in a
chain that includes manufacturers, wholesalers, physicians,
pharmacies, and pharmacy service administrative organizations,
all working to get needed therapies to patients.
Within that chain, our companies are the only ones whose
mission is to help control costs. PBMs can only help lower
prescription drug costs for patients when there is sufficient
competition among drug companies. Where there are competing
clinically-equivalent brand drugs that will work equally well
for patients, PBMs negotiate rebates or discounts off the
manufacturer's list price to arrive at the lowest net-cost
drug. The rebates are, then, used by health plan sponsors to
reduce patient premiums, out-of-pocket costs, or both.
We are proud that our industry has delivered results.
According to Federal data, in 2018, overall U.S. spending on
drugs increased only 3.3 percent and, in 2017, four percent.
One large PBM reported a decline in costs for its clients in
2017. That is our industry's mission.
Yet, we know that today too many individuals still find
their drugs unaffordable. Driving more competition among drug
companies is the key to providing relief for patients. I want
to commend the subcommittee for your work on the CREATES Act
and legislation limiting pay-for-delay agreements.
Greater transparency can also be part of the solution, and
the PBM industry is supportive. We support transparency to
empower patients and their physicians. Our industry provides
real-time benefits tools, so physicians and patients know
immediately in the doctor's office what drugs are on formulary
and what the patient's cost-sharing will be.
PBMs are transparent to our clients, including how the PBM
is paid for its services and the negotiated rebates. And we
support transparency to policymakers. PBMs already report on
all price concessions, costs and fees in Medicare to CMS, and
we support legislation that would provide that data to
congressional advisors at MedPAC and MACPAC. And that is just
for our industry.
We would support additional transparency for others in the
supply chain, manufacturers, wholesalers, and the PSAOs. And
this gets us to the bills under consideration today. With
respect to H.R. 2115, we support aggregate reporting of
rebates. We urge the subcommittee to make sure manufacturers
cannot use public reports to calculate competitor's discounts
and avoid competition, and, thus, keep drug costs high, a risk
that has been validated by the FTC. We want to empower
patients, not drug companies. We have some ideas for how to
ensure maximum transparency without risking higher drug costs,
premiums, and cost-sharing, and are happy to work with
subcommittee staff on those.
With respect to H.R. 2376 and its provisions to direct FTC
to scrutinize our industry's business practices and level of
competitiveness, we welcome and support this review. While the
FTC has previously examined PBMs extensively and concluded that
we operate in a competitive market, to the benefit of consumers
and our clients, we are confident that additional FTC study of
our industry will further validate previous conclusions.
We strongly encourage the subcommittee to expand FTC's
review to all others in the prescription drug supply chain to
ensure a complete and transparent picture of all those who play
a role. In addition, increased manufacturing reporting can help
bring sunshine into their pricing and marketing practices, as
addressed in the bills that are the subject of today's hearing.
I will conclude by again commending the subcommittee for
considering ways to reduce prescription drug costs. We
appreciate the opportunity to testify, and I look forward to
answering your questions.
[The prepared statement of Ms. Bass follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you, Ms. Bass.
I now would like to recognize Dr. Feldman. You have five
minutes for your testimony, and thank you again for being here
today with us. You can proceed.
STATEMENT OF MADELAINE FELDMAN, M.D.
Dr. Feldman. Chairman Eshoo, Ranking Member Burgess, and
distinguished members of the subcommittee, thank you for
inviting me to testify on behalf of the Alliance for Specialty
Medicine, a nonpartisan coalition of national medical societies
representing more than 100,000 specialty physicians.
My name is Madelaine Torregano Feldman. I am president of
the Coalition of State Rheumatology Organizations and have been
a rheumatologist for 30 years. I practice full-time in New
Orleans.
I treat a variety of autoimmune diseases, but perhaps the
one I see the most often is rheumatoid arthritis, or RA.
Treatment for RA has changed dramatically since I graduated
from medical school. We used to be able only to provide
symptomatic relief, but now there are therapies that actually
help us halt the disease activity, stop joint destruction, and
even reduce the cardiovascular risks associated with rheumatoid
arthritis.
Lower-priced generics are always used first before the
specialty drugs. Now the list prices of these specialty drugs
have risen to the point where many patients can no longer
afford even their co-insurance, based on that list price. I
hope you will find it helpful my feedback as a practicing
physician.
I would like to first talk about the samples provision in
the prescription drug STAR Act. Section 3 would broaden the
scope of the Sunshine Act to include the total quantity and
value of samples in manufacturers' reporting. We are concerned
that this provision might have serious unintended consequences
for patient care. Let me tell you how we use these samples in
rheumatology.
It is important to stress the physicians; we derive no
financial benefit from the samples and, in fact, it costs us
resources in staffing and managing this very complex inventory.
Because patients can wait weeks to over a month before getting
final approval and, then, actually getting the prescribed
medicine, it is extremely important to have on hand these
samples to start the patients right away. I mean, it can make
the difference between saving a joint or not. We are also able
to see if the drug causes any tolerability issues, and all of
this at no cost to the patient or the payor.
In its June 2017 report, MedPAC recommended reporting on
samples to oversight agencies, researchers, payers, and health
plans under confidential data use agreement. They did not
recommend publishing it publicly online. I fear that broadening
MedPAC's recommendation to public online publishing will have a
chilling effect on manufacturers' willingness to provide us
with these samples because of the potential of false shame
campaigns on Twitter and the like. This can be harmful to the
doctor-patient relationship and undermines patients' trust in
their physicians. And I can tell you, sometimes that trust is
more important than the medication itself. In light of these
concerns, we urge Congress to more closely follow MedPAC's
recommendations to accomplish the important goals of H.R. 2113
without the bill's unintended consequences.
Next, I would like to briefly discuss Section 5 that would
increase transparency of PBMs. The current rebate system
creates perverse incentives to increase list prices that
everyone in the drug delivery system profits on except for the
patients. I would be happy to explain why competition actually
increases prices as opposed to decreasing them. I have seen
where some drugs with lower list prices are not allowed to be
on the preferred formulary.
Full transparency of price concessions to PBMs would shed
light on how the preferred formularies are designed and why
they can change every 6 to 12 months for no clinical reason and
actually stop payment for drugs that have stabilized my
patients.
Less egregious than that behavior is something that
happened a week and a half ago to one of my patients who it
took us nearly two years to find the right drug for his
rheumatoid arthritis. We had given him the generics and even
other specialty drugs. He was sent a notification from his PBM
asking him to switch to a completely different specialty drug,
one that had a completely different mechanism of action, like
asking a cancer patient in the middle of successful treatment
to change their drug.
In order to help us fully understand the financial
considerations that are overriding the clinical ones, we
support transparency, not only for the formulary rebates, but
all of the price concessions, admin fees, price-protection
fees, even if disclosures are only to regulatory agencies.
I have provided comments on two additional policies and
would be happy to answer any questions on those.
The Alliance for Specialty Medicine is truly encouraged by
Congress' bipartisan attention to drug pricing. While we
believe some policies under consideration may need changes to
avoid unintended consequences, we are supportive of increased
transparency in the drug supply chain.
Thank you so much for your consideration of our viewpoints.
[The prepared statement of Dr. Feldman follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you, Dr. Feldman.
I now would like to recognize Mr. Frederick Isasi for five
minutes for your testimony. Welcome and thank you.
STATEMENT OF FREDERICK ISASI
Mr. Isasi. Thank you so much, Chairman Eshoo and Ranking
Member Burgess. And members of the Subcommittee on Health,
thank you for this opportunity to speak with you today.
I am Frederick Isasi, executive director of Families USA.
For nearly 40 years, we have served as one of the leading
national voices for healthcare consumers, both in D.C. and on a
State level.
We are here today because American people are hurting.
Families across this nation are being put in terrible
positions, choosing between securing prescription drugs for
themselves, and their children, and their financial security.
The problem is growing worse every year. And what is most
important to say is that this problem was created by Congress
in our Federal patent and exclusivity laws, and only Congress
can solve it.
Our families needed you to act. Today's bills are a step in
the right direction, and we need much bolder action as well.
Let me give you a sense of what the suffering of our families
looks like.
Approximately one in three families, 80 million people,
have not taken prescription drugs as prescribed because they
simply cannot afford them. Some skip a dose, cut their pills in
half, and others simply get sicker.
We are one of the wealthiest nations in the world. We are
spending two or three times more than other wealthy nations on
healthcare. And yet, this is the life to which we subject our
nation's families.
So, what does it look like to be a family struggling with
drug costs? Let me tell you about Catherine from Wheeling,
Illinois. She worked hard. She had a career as a secretary. And
then, in her late fifties, she developed a cough and it wasn't
going away. How many of us have had similar problems? But,
then, within three months of going to the doctor for the cough,
she was told she had a rare lung disorder and that, without a
lung transplant, she wouldn't live to see the end of the year.
Her condition worsened.
Her doctors prepared her to die and Catherine prepared
herself to die. And then, she got the call; a new lung had been
found. She was going to live. This all happened about five
years ago, this incredible gift and a new chance at life.
But, unfortunately, her experience has turned into
something else. Catherine takes 36 pills a day, including anti-
rejection and pain medication. Catherine, a Medicare
beneficiary, has to ration her medications to make them last.
She spends an astounding $1,000 each month on her medications,
which is exactly half of her income. Think about what this
means. Catherine, after living through the experience of almost
dying, receiving a lung transplant, fighting for her life, is
left to spend half of her income to pay for medications.
You won't be surprised to know that Catherine sold her
home. She moved in with her parents. Her mom is 86 and her dad
just passed away at 89. She lives an extremely frugal life.
But, as her drug costs escalate year over year, she moves
closer and closer to financial ruin and deep poverty. At the
end of each year, she finds herself thousands of dollars short.
She lives each day with the anxiety of wondering how she will
find the money to pay for the drugs keeping her alive. That is
the life that Catherine lives with amazing grace and courage,
as do so many other Americans.
As Catherine struggles each day, the drug industry
continues to enjoy some of the highest margins in the nation,
making billions upon billions of dollars. And remember, the
reason their profits are so astronomically high is not that
they are inventing the best drugs for our families. It is
because Congress, all of you, continue to grant them the
ability to charge whatever they possibly can get. They abuse
Federal laws to extract higher prices. They can only do this
because of Congress' inaction.
And despite the astounding amounts of money they are
making, you will hear industry say that, if Government Acts to
stop these abuses, innovation will dry up. It is not true. Do
not be fooled.
How much are they spending on so-called innovation right
now? Of their trillion dollars--a trillion dollars in worldwide
revenue--are they spending 3-quarters on innovation? No. Are
they spending half? No. Are they spending at least a third? No.
Are they spending a fourth? No. Industry is spending less than
a fourth of their revenue on innovation, much more on marketing
and on profit. And, of course, all of their innovation is on
the backs of taxpayers who funded the underlying research.
Instead of innovating in drug development, they innovate in
their legal strategies to extend exclusivity. In fact, more
than 3-quarters of new patents are for existing drugs. Think
about that. From an industry glutted with money, where, indeed,
is the innovation?
Thank you for your work on the bills being considered
today. I am pleased to say that Families USA supports all the
bills under consideration. We believe that price transparency
can help families and policymakers better understand how prices
are set. However, these bills alone will not meaningfully
affect the price of drugs.
We strongly support the Doggett bill and other proposals
aimed at bringing down price. In the midterms a few months ago,
the American people sent a strong signal to Capitol Hill. An
astounding 82 percent of Republicans and 90 percent of
Democrats said taking action to lower prescription drug prices
should be a top priority for this Congress. Now is the time for
Congress to act boldly on behalf of their constituents.
Thank you for this opportunity to testify.
[The prepared statement of Mr. Isasi follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you, Mr. Isasi.
I now would like to recognize Dr. Mark Miller for five
minutes of his testimony, and thank you for being here. You may
proceed.
STATEMENT OF MARK MILLER, Ph.D.
Dr. Miller. Chairman Eshoo, Ranking Member Burgess, and
distinguished members of the committee, I appreciate you asking
Arnold Ventures to testify today.
Arnold Ventures is a philanthropy dedicated to reforming
dysfunctional markets and programs to assure a better return on
investment. We work to develop evidence and ideas to improve
public policy. We believe strongly in markets, but we also
believe in evidence-based intervention when markets fail.
With respect to drugs, our objective is to protect
innovation, but to explicitly lower the cost for the employer,
the taxpayer, and, most importantly, the patient. We believe
that there are strong reasons for the Congress to act. We spent
$470 billion on drugs in 2016. That number is expected to grow
24 percent by 2020. In Medicare Part D, we spend $100 billion
after rebates. That number is projected to double in the next
10 years. In Medicare Part B, we spend $30 billion. That number
has doubled since 2010. In Medicaid, we spend $30 billion net.
That number has increased 50 percent since 2011.
Meanwhile, at the Federal level, this is deficit-financed.
Three in 10 Americans can't afford their prescriptions, and 40
percent of U.S. families can't produce $400 in an emergency.
To that end, we urge the Congress to act comprehensively on
the drug issue.
No. 1, to curb patent abuses and other anticompetitive
behaviors, so that when a drug is available as a competitor, it
can actually get to market.
No. 2, remove market distortions through greater
transparency and reforming price inflationary actions, such as
the misuse of rebates and fees and the misuse of coupons.
No. 3, directly address high launch prices and price
increases for those drugs that do not have competitors through
such actions as reference pricing, negotiation, or inflation
rebates.
More precisely, with respect to Medicare Part D, consistent
with MedPAC recommendations, the committee should consider a
series of reforms to change the payment structure to increase
pressure on the PBMs to more aggressively negotiate for lower-
cost drugs; for example, by requiring the PBMs and the
manufacturers to pick up substantially all of the Part D
catastrophic cost. Concurrently, that policy should offer
greater protections to the beneficiary when they hit the
catastrophic cap.
Those proposed reforms also include modifications to the
copayment for the LIS, for the low-income subsidy population,
in order to encourage them to use lower-cost drugs when they
are available. That is the right policy direction, but those
policies need to be designed very carefully to assure that they
result in taxpayer savings and don't cut off access to
important drugs.
Where there is no competition and PBMs have no leverage
over prices, we would suggest that you consider such tools as
an inflation rebate, pricing to the clinical value of the drug,
or a negotiation strategy. These tools would allow the Medicare
program to address situations where the manufacturer has set
excessive prices in the absence of competition.
With respect to Part B, we would suggest moving from a
percentage-based payment to a flat fee, empowering physicians
to form their own purchasing groups to negotiate prices, and
consider lowering the overall payment using the average sales
price blended with an international price index.
Turning to the public justification of price increases,
there is value in that information as a policy source and as a
motivation for policy action. But, without additional action,
that in and of itself will not curb drug prices.
That said, a well-designed policy should set a minimum drug
price, trigger reporting on both a percentage and an absolute
dollar basis, require legal attestation of a ranking company
official, and avoid disclosing proprietary information.
With respect to the Sunshine Act, we recommend reporting
payments made to patient groups who often act as a proxy for
the manufacturers, and we would report the economic value of
the samples provided to physicians. However, if public
reporting can't be reached, at a minimum, the sample value
should be made available to oversight organizations and
researchers.
In closing, any policy that you undertake will involve a
number of difficult tradeoffs across stakeholders, and we know
that there will be stiff resistance from the status quo. But we
also know that the status quo has produced noncompetitive
behaviors, higher taxpayer spending, and higher prices for the
patients.
Arnold Ventures and its grantees stand ready to work with
you on these difficult issues. I would like to thank you for
your attention. I will look forward to your questions.
[The prepared statement of Dr. Miller follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you, Dr. Miller.
I was just sent a nice, handwritten note from my colleague,
Mr. Long. And I should have done this at the outset of our
hearing this morning. People are wondering what these yellow
roses are all about. Well, today is the 100th anniversary of
women's suffrage. And the suffragettes distinguished themselves
as the vote was being taken, I think the final vote in the
State of Tennessee. The suffragettes and their supporters wore
yellow roses. Those that opposed them wore red. So, we are
celebrating today, with the yellow roses, women gaining the
right to vote in our country, the 100th anniversary. So, that
is what the yellow roses are all about. We didn't attend an
early-morning wedding.
[Laughter.]
But, nonetheless, this is a great celebration.
So now, I would like to recognize Dr. Holtz-Eakin. Welcome
to you. You are an accomplished testifier.
[Laughter.]
And we look forward to your five minutes of testimony.
STATEMENT OF DOUGLAS HOLTZ-EAKIN, Ph.D.
Dr. Holtz-Eakin. Thank you, Chairwoman Eshoo, Ranking
Member Burgess, and members of the committee, for the privilege
of being at this important hearing.
Drug prices are a very important topic in the United
States. And I want to say a couple of things about the debate
in general, and then, a few remarks on the pieces of
legislation under consideration today.
The first thing I would emphasize is that, at least to my
eye, there is not a broad, general, widespread drug-pricing
problem. Instead, it is important to recognize that we have
some targeted areas with extreme drug-pricing issues, notably
in specialty drugs, largely in oncology drugs right now, and in
sole-source drugs that are off-patent. In thinking about
solutions, it is often best to identify the problems first, and
I would focus on those.
The second is that there is often relatively little clarity
about which price people are trying to effect, and there are
very different measures of price bandied about. There is the
list price of manufacturers, probably the most important price.
There is the net price post-rebate at which the drug is
acquired. And then, there is also the price a beneficiary
actually pays at the counter, including all the out-of-pockets,
the one that is probably the most important to the American
public. Thinking clearly about price allows you to avoid
situations where you simply shift costs, but don't change the
fundamental problem or address the issue itself.
And then, lastly, I think it is important to recognize that
this is a difficult world of tradeoffs. There are no simple
solutions because, in the end, there is a tradeoff between
financial incentives like prices and the innovation that has
made the United States the premier place for medical science on
the globe. And being cognizant of that as you go forward is
very important.
And secondly, for this hearing, the notion of transparency
is not an unambiguously good thing. There are moments where
transparency becomes quite costly and perhaps not worth it, and
also situations where it interferes with the incentives to
compete vigorously and to have fierce negotiation, which we
should want in our health markets, particularly our
pharmaceutical markets.
So, in looking at the bills under consideration today, I
think some concerns do arise. For example, the SPIKE Act, which
looks at backward-looking triggers for price increases or an
absolute value of $26,000 for a drug, that is not independently
the value of that drug, as Ranking Member Burgess mentioned in
his remarks. It does trigger a set of disclosures and
documentation that is quite intrusive and costly to produce.
And when combined with the potential for the Secretary to offer
a variety of different triggers backward-looking in launch
prices, it could be a quite costly measure or transparency,
with no particular accountability measure included that would
guarantee any effort on drug prices. And so, I would be
concerned about that.
The FAIR Act is similar in character. It has some, in my
view, virtues of targeting. It is forward-looking as opposed to
backward-looking, and I think that is an advantage in this
setting. It excludes rare disease and vaccines, focuses on
those drugs by physicians and hospitals, but has the same sort
of potentially costly structure. And so, I worry about the
transparency that generates no end result in those situations.
With regard to the samples, which has come up a couple of
times already, samples are very important to beneficiaries. I
think that has been documented. And so, you don't want to
damage this valuable source of drugs. I think it makes sense to
build on the existing reporting, rather than inventing new
reporting; provide the information to the FDA, and provide this
information to oversight and to professional researchers, so
that the information about the influence of samples on the
competition in the market is learned, but the damaging public
disclosure is avoided. And I think that is something that the
committee should think a little bit about.
Finally, with regard to providing public documentation of
drug rebates negotiated by PBMs, I really have two sets of
concerns. I understand why this committee should care deeply
about how well the Part D program is functioning. I am a long-
time fan of the Part D program, having been present at its
birth, and I think it is our best entitlement program. I
occasionally say I like it more than my children. I won't
repeat that today. Oops, it is too late.
But I don't think the same sort of information should be
provided for commercial transactions. These are in the end
private contracts, and I don't think they should be publicly
disclosed. So, collecting the information on Part D, making
sure that for Part D there is vigorous competition that is
effective is appropriate and should be done. Again, that means
proprietary information provided to oversight and to
researchers, not necessarily disclosed into the public domain.
So, I really do appreciate the chance to be here today.
These are in the end difficult issues on one of the most
important topics facing the American public. And I look forward
to the chance to answer your questions.
[The prepared statement of Dr. Holtz-Eakin follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Eshoo. Thank you very much, Dr. Holtz-Eakin.
And again, we all want to thank our witnesses for being
here today and the testimony that you have given.
We have now concluded those opening statements and we are
going to move to members' questions. Every member I think knows
that they have five minutes to ask questions of our witnesses.
And I will start by recognizing myself for five minutes.
Dr. Feldman, you said that PBMs have pushed you to
prescribe higher-priced drugs, is that right?
Dr. Feldman. Thank you.
What I have found is there are some drugs that have come to
market with lower list prices that have been unable to get onto
the formulary because their list price was too low. And what I
mean by that is, the price concession, for example, the rebate
would be the list price times the discount times the market
share.
Ms. Eshoo. So, the one on the list----
Dr. Feldman. Yes. So, yes, the lower list price----
Ms. Eshoo. You put on the table that PBMs pushed you to
prescribe a higher-cost prescription drug.
So, I want to go to Ms. Bass and say to you, what is the
answer to that?
Ms. Bass. Our companies always negotiate to the lowest net
cost.
Ms. Eshoo. So, why was she pushed to a higher-priced drug?
Ms. Bass. Because the lowest net cost of that drug was
lower than the drug with the lower list price.
Ms. Eshoo. So, the higher was lower, and the lower is
higher? I mean, I don't quite get this.
Ms. Bass. But, yes, it----
Ms. Eshoo. Maybe you can rephrase it?
Dr. Feldman. Yes. So, competition can raise prices or lower
prices. Because the price concession is the highest price
concession, which ultimately, they are calling the lowest cost,
sometimes to get at the highest price concession you need the
highest list price. And therefore, a drug with a lower list
price can't offer as big of a percent rebate. But I think that
shouldn't be how it is. I think the lowest list price should
get preferred status.
Ms. Bass. So, the way the math works on that, let me just
quickly say----
Ms. Eshoo. Quickly.
Ms. Bass [continuing]. If both drugs had different pricing,
but they came in at the same low net cost, that would be great,
but----
Ms. Eshoo. If they came in or you negotiated lower?
Ms. Bass. Our companies negotiate to the lowest net cost.
And if it is a lower list price drug that has the lowest net
cost, that is the preferred drug.
Ms. Eshoo. Well, there doesn't seem to be an agreement
here. Dr. Feldman is shaking her head in the negative.
Dr. Feldman, why do you think that drug manufacturers will
not give samples to doctors if there is a public reporting
requirement? I wasn't so clear on why you----
Dr. Feldman. Why I feel that way?
Ms. Eshoo. Yes.
Dr. Feldman. So, for example, it goes back to the list
price of the drug.
Ms. Eshoo. Well, I mean, because the FDA already requires
drug samples to be reporting. So, the reporting burden, at
least on the surface to me, I don't think would be a deterrent.
Dr. Feldman. I can tell you, if it actually worked to the
opposite--I mean, some of the samples that are given, the list
prices of those are $6,000 a month. And you usually get three
months at a time.
Ms. Eshoo. So, you are saying that it is better that people
don't know what it is and that , in turn, motivates samples
being contributed?
Dr. Feldman. What I fear is that, when it looks like the
pharmaceutical manufacturers are giving this much money to the
doctor, that it may make them not do that. However, if it had
just the opposite effect where everyone thought, oh, look how
generous pharma is, and it actually didn't affect the ability--
I just want to do whatever will keep the samples coming for our
patients.
Ms. Eshoo. I understand. I understand. I don't think that
the case has been definitely made on the point that you raise.
Maybe it will be, but I am not so----
Dr. Feldman. I understand.
Ms. Eshoo. I am not convinced.
We are looking for money. We are looking for savings across
the entire system, so that at the end of this chain, this
pipeline--and you heard members on both sides of the aisle say
this--so that the patient captures the savings, so that the
price at the counter goes down.
Now there are some things that are real market influencers,
and I want to examine this. I have thought for many years that
research and development is the top cost. But, as it turns out,
the marketing of drugs exceeds that; it outstrips it. And we
only, I think, actively study and market drugs that are on
patent. Is there any major drug company that advertises
generics? Anyone know the answer to that? I think I know the
answer. I stay up late at night. I haven't seen one, but I am
missing them; I don't know have the TV on at the right time.
I think that that kind of stands the system on its head
because it is a huge cost. And I understand costs. There are
many costs to bring a drug to market. But you know what? When
it exceeds research and development, which is absolutely
essential, I think that we have an issue here.
There is marketing to physicians and other healthcare
professionals. Is there anyone here that can put a price tag on
that? Do you know, Dr. Holtz-Eakin or Dr. Miller? No? Mr.
Isasi?
Mr. Isasi. What we know, this is very hard information to
get at, in part, because the pricing and the payments in
industry are so obfuscated. But we know that they are spending
maybe 20 to 25 percent of their revenue on----
Ms. Eshoo. Well, we know that marketing to physicians and
other healthcare professionals by companies increased from
$15.5 billion in 1997 to $20.3 billion in 2016. That is about a
30 percent increase.
Mr. Isasi. And it is much more than they are spending on
R&D; on innovating.
Ms. Eshoo. Does PhRMA want to weigh-in on this--wish to
weigh-in on it?
Ms. Joldersma. Yes, I do. Thank you, Chairwoman.
I would say at the outset that I think it is important to
check our facts. We do hear regularly that the pharmaceutical
industry spends more on advertising and marketing than we do on
R&D. And at least speaking for my membership, that is patently
false. Frequently, comparisons over State marketing
expenditures, because those expenditures are pulled from the
sales and general administration figures which includes a whole
host of things other than marketing----
Ms. Eshoo. Why don't you get us some definitive information
from your viewpoint?
Ms. Joldersma. Sure. I would be happy to do that,
absolutely.
Ms. Eshoo. That would be helpful to make part of the mix.
I have gone over my time. I now would like to recognize the
ranking member of the subcommittee, Dr. Burgess from Texas, for
five minutes for his questioning.
Mr. Burgess. Thank you.
And, Dr. Feldman, as I look online, you reference that you
have been practicing rheumatology for 35 years. I am a little
older than you are. So, I actually remember not only that there
wasn't much with which to treat rheumatoid arthritis, some of
the treatments we had were probably as hazardous as having the
disease itself. I mean, colloidal gold shots? Does anybody do
that anymore?
Dr. Feldman. Very rarely.
Mr. Burgess. And, of course, aspirin to toxicity, you raise
the dose until the ear-ringing became so loud that people
couldn't hear.
So, I, for one, am grateful that, as I look online, there
are--what?--eight or nine biologics that are available? I mean,
these are relatively-new medicines that really are game-
changers as far as providing not just relief for your patients,
but preservation of function, which previously wasn't
available. I mean, that is a good thing, right? We have got
nine agents that now are available to you.
I will confess, when I watch some of the ads on TV--and I
play a little game. I have one of the pharmacy pricing apps on
my phone. So, I type in the name of the drug. I, for one, would
like to see--I think Secretary Azar is onto something when he
says we ought to disclose what the cost to the patient would
be. I mean, look, when I see all those ads, and if I were
having to make a decision which drug to start, do I want the
one that Phil Mickelson is on or do I want the one Cyndi Lauper
likes to take? I don't know, I mean, as a patient, I don't know
how to judge that.
But I think that information could be helpful. It might
even be helpful to a physician to know that as well. Just going
down this list of medicines, they are all fairly expensive, but
some are more expensive than others. And if it is something you
are going to be on over the long term--but you correctly said
it would be wrong for a formulary or an insurance company,
anyone else, to change your patient's medication. That is the
practice of medicine, and we should not let that happen other
than by a physician.
Now, on the issue of advertising generics, look at my
State, and I assume most states are the same. I write a
prescription, and the pharmacist can actually substitute a
generic. Even if I write, ``Dispense as written,'' I don't know
whether they always agree with that. So, no, generics may not
be advertised, but at the same time the pharmacist has the
ability to substitute the generic equivalent for the patient at
the pharmacy counter, is that not correct?
Dr. Feldman. Yes.
Mr. Burgess. So, I mean, if I am in the business of selling
a generic, why would I advertise? I have got the good people at
Crestor already doing the ads for me. I don't need to spend my
money doing that.
I think that the thing is that you have got eight or nine
medicines that are now advanced treatments for rheumatoid
arthritis. And in your professional lifetime, certainly my
professional lifetime, at the beginning of our professional
careers those things were not available. So, it is a great
thing that they are available now.
I do not know how many trials there were that didn't work
out. I suspect there were. I don't know how you go back and
price that in. I suspect that that is difficult to do. You gave
a figure of what, 12 percent success rate? I mean, that is a
lot of dry holes that you are drilling in order to get the home
run. I want you to drill those dry holes. I think that is
important. I want you to have eight or nine medicines that not
just treat a patient's symptoms now, but preservation of
function.
And that was the whole purpose in doing cures. We are
getting to a place where things that were just unthinkable a
few years ago are now within our grasp. A single-shot therapy
to cure a disease that otherwise not just would bankrupt an
individual, but a family; perhaps even a health plan, and now a
single shot that can cure it. I don't know how you price that
in. We are going to have to figure that out, and that is why
these discussions are so important; because we do have to
figure that out for the future.
Sickle cell disease, which was featured on ``CBS 60
Minutes'' a couple of months ago, the cost for this therapy
that Dr. Collins referenced as a cure for sickle cell - I mean,
that is a big deal.
We heard in this very room at this very table in 2016 the
witness for the Sickle Cell Disease Association said there has
been no new sickle cell FDA-approved treatment in 40 years. So,
when we look at the cost of this new sickle cell therapy, when
we look at that cost, I think we have to look at it in light of
the fact that for 40 years we didn't improve at all. And what
was the cost over those 40 years where we didn't improve? And
we have got to somehow find a way to amortize that going 40
years into the future.
It is a good time to be in the business that you all are
in.
Ms. Eshoo. The gentleman yields back.
Mr. Burgess. And we appreciate so much you being here
today. We have got some tough decisions to make and we are
anxious to get on about making them, apparently.
Ms. Eshoo. Thank you, Dr. Burgess.
Mr. Burgess. I will yield back.
Ms. Eshoo. And the gentleman yields back. It is a pleasure
to recognize the gentleman from North Carolina, Mr.
Butterfield, for his five minutes of questioning.
Mr. Butterfield. Thank you very much, Madam Chair.
Let me just begin with Ms. Joldersma. I am sure I got that
wrong. I have a little trouble with names.
Ms. Joldersma. Joldersma.
Mr. Butterfield. OK.
Ms. Joldersma. Yes, not to worry.
Mr. Butterfield. I will just call you Lisa. How about that?
Ms. Joldersma. You can call me Lisa. I prefer it.
Mr. Butterfield. Yes.
Ms. Joldersma. Lisa J., if you will.
Mr. Butterfield. Yes. Thank you.
I am very pleased to hear that your member companies
support the whole notion of transparency. That is a very
important word now. It means sunlight. And thank you so much
for making that acknowledgment today, especially with respect
to prescription drug pricing.
I guess my question is sort of a reversed-type question.
What information would you consider to be inappropriate for
transparency?
Ms. Joldersma. That is a very good question.
Mr. Butterfield. Yes.
Ms. Joldersma. I think as many on the committee and other
witnesses have noticed, we do need to be concerned about very
commercially-sensitive information, proprietary information;
that if released publicly, could cause conduct distortions in
the market that we may not love. That is why I think both of
the transparency approaches on the table today do attempt to
protect proprietary and confidential information; and that is a
very, very good thing.
Mr. Butterfield. And I suppose you are struggling every day
to try to find a balance between those two interests?
Ms. Joldersma. Absolutely.
Mr. Butterfield. Would that be correct?
Ms. Joldersma. Absolutely.
Mr. Butterfield. What circumstances would require you to
significantly raise drug prices? I mean, what would be the
circumstances that would precipitate an increase in drug
prices, other than corporate profit?
Ms. Joldersma. Well, sure, there are many, many
circumstances.
Mr. Butterfield. Just give me two or three examples, yes.
Ms. Joldersma. Two or three examples? Increased costs,
increased supply chain, expanded indications, expanded value.
Maybe we learn that a drug is more effective than we previously
thought it was.
Mr. Butterfield. Wouldn't that be corporate profit?
Ms. Joldersma. No.
Mr. Butterfield. Yes, that would be separate from corporate
profit?
Ms. Joldersma. Yes. And I do want to talk about corporate
profit briefly. A lot of people say that this industry's
profits are far out of whack with other industries. And the
truth is, that is because traditional accounting measures are
not recognizing the high level of risk that this industry takes
on.
And when you are talking about a 90 percent failure rate,
the fact of the matter is, that 10 percent of the time when we
don't fail, yes, it is true that the investors, the private
entities that invest and that help us fund this very difficult
scientific search for cures----
Mr. Butterfield. Let me switch over to Ms. Bass. My time is
clicking away. Ms. Bass, in your testimony you discuss the need
to increase transparency in order to lower cost and improve the
overall quality of care. Do you acknowledge that rebate
practices are driving increased drug costs or do you dispute
that?
Ms. Bass. We would dispute that.
Mr. Butterfield. Are you suggesting that the PBMs are
sufficiently transparent or is there room for improvement?
Ms. Bass. As I testified, we are happy to report aggregate
rebates. We have the same concerns that others on the panel
have with respect to putting out information publicly that
would allow for tacit collusion. Often, when one competitor
learns that he or she has discounted more deeply than another
competitor, what happens is that competitor doesn't discount as
deeply the next time. And that is our big concern.
Mr. Butterfield. You are a nonprofit entity, if I am not
mistaken, a 501(c)(6)?
Ms. Bass. We are the trade association for the industry,
yes.
Mr. Butterfield. Which means that you are not in the
business to make a profit. You are in the business to,
according your 990 submission, you are in the business to lower
prescription drug cost and increase access.
Ms. Bass. Our trade association represents the companies
who are in the business to lower prescription drug costs and
increase access, yes.
Mr. Butterfield. But you have told the Internal Revenue
Service that your mission is to lower prescription drug costs.
That is on your Form 990 that you submitted.
Ms. Bass. It sounds like we need to amend our form to say
we represent the companies whose mission it is to lower
prescription drug costs and increase access.
Mr. Butterfield. Take a look at that, if you would, please.
Ms. Bass. I will. Thank you.
Mr. Butterfield. Dr. Miller let me switch over to you, if I
can. In your testimony, you discuss the importance of
transparency and the consequence of Congress' inability to act
to increase it. Why is transparency so important to
implementing effective reforms? And you will have 15 seconds. I
am sorry.
Dr. Miller. What I would say is I think transparency can
compel the issue forward. It may produce useful information for
the Congress and other policy actors to act. I don't think
transparency, in and of itself, will be enough to affect the
drug price issues that you are facing now.
Mr. Butterfield. Thank you.
I yield back. Thank you.
Ms. Eshoo. I thank the gentleman and he yields back. I now
have the pleasure of recognizing the ranking member of the full
committee, the gentleman from Oregon, Mr. Walden, for five
minutes.
Mr. Walden. Thank you, Madam Chair.
And I have got a question to Ms. Joldersma and Dr. Holtz-
Eakin and Dr. Feldman.
H.R. 2064 is an attempt to provide transparency, but I am
worried that the bill will have unintended consequences for
patients. Manufacturers of drugs and devices often provide
samples to providers that help low-income patients who may have
trouble accessing a therapy, either because they lack insurance
or an insurer does not provide robust coverage for a drug or a
device. Yet, this bill places new reporting requirements on
manufacturers. And my question is, doesn't this bill create a
perverse incentive for manufacturers to simply not provide
samples to physician offices? And can you describe how low-
income patients benefit from samples provided by drug and
device manufacturers, and any other unintended consequences?
And I would just throw that out to the three of you.
Ms. Joldersma. Thank you for that question.
Very briefly, I think there is a real question as to
whether this could cause the lessening of provision of samples.
I would also note that a significant amount of information is
already reported to the FDA with regard to samples. So, in some
respects, this is kind of creating a duplicate bureaucracy, if
you will, and a duplicate reporting. So, our preference would
be to work with what FDA already has.
Mr. Walden. To me, it also seems like a real convenience
when you're with your physician, and they say, ``Here, why
don't you take these, and then, go get this?'', and whatever.
Dr. Feldman, what is your view?
Dr. Feldman. Yes. You know, we agree with MedPAC's
recommendation under drug use confidential agreements. I mean,
it can be something as simple as mandated mail orders for
patients will deliver refrigerated drugs on the front porch in
New Orleans in the middle of the summer.
Mr. Walden. That would seem to be a problem.
Dr. Feldman. And the medication is destroyed. So, then, of
course, we can offer them samples.
Mr. Walden. OK. Dr. Holtz-Eakin?
Dr. Holtz-Eakin. Yes, I don't know that it would eliminate
the samples, but I think that is a risk you don't have to take.
I mean, there are ways to collect the data you are interested
in, have them available to researchers and oversight without
the public disclosure the people are worried about. I would
recommend that.
I guess the other thing I would mention is, there is
existing reporting for drugs, but this expands that to include
the devices. And I would think it would be worth the committee
asking itself whether it is worth doing that. That is a costly
new set of reporting, and I am not sure samples are all that
typical in the device world.
Mr. Walden. OK. That is a good point. And I think I don't
have too many people rushing me at town halls saying, ``Please
add more reporting requirements, more regulations, more
rules.'' Yet, we know there is a place for that, but I think we
have to be really judicious when we go down that path because
we don't want to create more bureaucracy, more time away from
caring for patients, and, also, I want to put the patient
first.
I know a lot of States have been passing legislation to get
to the bottom of why drug prices are increasing through price
increase disclosure legislation. But the bills we are talking
about today go beyond any State law currently on the books, I
believe.
So, my question would be, do you worry about the burden of
companies complying with a patchwork of 50 different State laws
plus a Federal law? And should Congress, if we go down this
path, consider preemption language? Ms. Joldersma, would you
like to comment on that?
Ms. Joldersma. Absolutely. I think we have seen
transparency legislation enacted now in seven or eight states.
Mr. Walden. Right.
Ms. Joldersma. Obviously, today we have two different
approaches before us.
Mr. Walden. Right.
Ms. Joldersma. There were competing approaches in the
Senate as well. So, certainly, harmonization of these reporting
requirements is a high priority, and preemption would be one
way to achieve that.
Mr. Walden. All right. Dr. Holtz-Eakin, do you want to
comment on this?
Dr. Holtz-Eakin. Drugs are nationally-traded commodities.
There should be a single set of rules that prevail across all
50 States. I think preemption makes a lot of sense.
Mr. Walden. OK. And on transparency and PBM reporting, my
question is, can you detail concerns of where too much
disclosure could be anticompetitive? I have heard this from
people. I am into disclosure. I am into public right to know. I
think the more out there, the better. But I also recognize
there comes a point where too much disclosure could actually
have an unintended and reverse consequence; if a consolidated
market was able to back in competitors' rebates, for example.
So, Dr. Holtz-Eakin, can you comment on that?
Dr. Holtz-Eakin. I think that is a real concern. If you can
identify the deal that your competitor is getting, that is
information that allows you the ability to perhaps negotiate
less vigorously and get a higher price. We never want to let
that happen. And so, all of these desirable attempts to ensure
that these markets are competitive and work on behalf of
beneficiaries, especially in Part D, I applaud. But disclosing
those individual contracts and deals is a step in the wrong
direction.
Mr. Walden. All right. Ms. Bass, could you comment on that
as well?
Ms. Bass. Sure. It sounded like you wanted specifics. And
what we would recommend would be making sure--the bill calls
for reporting by class--you would need to make sure that every
class had at least three drugs; otherwise, there wouldn't be
reporting because you could back into rebates.
We would want to make sure that the reporting was lagged,
preferably three years, again, to give a little bit of time
between contracts. And we would want to make sure it wasn't
PBM-specific, but across PBMs, for the same reason.
Mr. Walden. All right. I thank you all.
And I know the Chair has been quite generous with giving me
extra time, I guess in recognition of the Blazers' defeat. So,
we appreciate that generosity this morning.
Ms. Eshoo. All around nice man. All around good guy.
Mr. Walden. I yield back.
Ms. Eshoo. The gentleman yields back.
I just want to add something here. I believe that this
particular legislation, that it is referencing a class of
drugs. So, it is not one at a time. It is a class of drugs. And
I think that we have to, all Members are going to have to do a
deep dive on the actual wording and that is our job to do. But
I thought I would throw that in the mix.
Now it is a pleasure to recognize a real gentlewoman from
California, Ms. Matsui, for her five minutes of questioning.
Ms. Matsui. Thank you very much, Madam Chair.
And I want to thank all the witnesses for appearing before
us today.
We have been discussing in this committee that there is a
need for greater transparency--that is really a word that we
keep throwing around--but an entire drug supply chain that
really gives us clear insight into the formulary and
negotiations, price concessions, and market dynamics, that
ultimately drive up the price consumers pay for the medications
at the pharmacy counter.
Now drug price list increases have outpaced general
inflation, medical inflation, and overall wage growth for many
years. Lacking transparency, these price increases often seem
arbitrary, indiscriminate, and very confusing. I am
particularly interested today in discussing the trend of list
price increases for drugs that are already on the market. A
recent analysis found that prescription drug costs are
primarily attributable to year-over-year price increases for
drugs already on the market, not the introduction of new,
innovative therapies or improvements to existing medications.
And MedPAC has determined that, for high-cost Part D enrollees,
the growth in drug spending was largely due to increases in
average price per prescription filled.
Ms. Isasi, you mentioned in your testimony that increases
in invoice prices for current drugs under exclusivity have
generated $108 billion in revenues, and that without these
price increases, revenues would have been flat over the last
decade for brand pharmaceutical companies, and overall spending
on drugs would have fallen due to increased utilization of
generic drugs. That is a staggering statistic and speaks to the
motivations some manufacturers may have to raise prices for
drugs already on the market. Mr. Isasi, from your perspective,
what are the reasons that prices are increasing for drugs
already on the market?
Mr. Isasi. Thank you very much for the terrific question.
I think it is really important. You know, we, all of us,
want what is best for America's family, and we want to
incentive innovation in the development of new drugs. That is a
really important goal. But what we know is the current system
is not doing that. As you point out, what has happened is so
much of the pharmaceutical market share has migrated from
patented, name-brand drugs to generics. And the drug companies
are not developing the innovations that we need. So, instead,
they are just raising the prices on the remaining patented
drugs as fast and as quickly as they can.
And there are terrible examples of this. I mean, I will
give you one example. Just last year, Catalyst Pharma acquired
rights to Firdapse. It is a 20-year-old drug used to treat
neuromuscular disease. And the price increased to $375,000. The
drug was previously available from Jacob's Pharmaceutical and
could be purchased for free through an FDA program, right?
Those are the kind of abuses we are talking about.
Ms. Matsui. OK. Dr. Miller, do you agree?
Dr. Miller. Yes, I agree. I agree with the direction of
your conversation. The attention or where I would direct your
attention is, both in Part B and in Part D, you could consider
inflation rebates which would penalize back part of the revenue
that a manufacturer gets through its price increase. And you
could devote that money to giving greater patient protections.
Ms. Matsui. OK. So, Dr. Miller, it seems the rising prices
for a product that has been long on the market kind of
represents a market failure. Is this a typical market response
for products outside the pharmaceutical marketplace?
Dr. Miller. Well, as a general proposition, and what I
understand about how broad your question is, no, it is not a
typical. And insulin is, in particular----
Ms. Matsui. Right.
Dr. Miller [continuing]. A poster child for the problem.
Ms. Matsui. So, both Mr. Isasi and Dr. Miller, from your
perspectives, do you believe that research and development cost
significantly account for the drug price increases? And I think
I know the answer to that.
Dr. Miller. No.
Ms. Matsui. OK. What about high launch prices?
Mr. Isasi. No. And let me give you the example. Sovaldi is
a great example.
Ms. Matsui. Yes.
Mr. Isasi. Sovaldi was purchased by Gilead. They did not
develop the drug. Their Wall Street analyst said, charge ``X''
amount, and then, they almost quadrupled it. Right?
Ms. Matsui. Right. OK.
I have a PBM question. As I understand it, one way of PBM
to keep costs down for plans is by keeping patients' out-of-
pocket costs high. Simply put, what the plan pays as a net cost
for a drug is calculated as a list price minus the rebate,
minus the patient out-of-pocket share.
Dr. Miller, you mentioned some of the embedded incentives
in your testimony. From your perspective, how are drug supply
chain rebates preventing patients' cost-sharing from coming
down?
Dr. Miller. So, I mean, I want to be clear when I answer. I
do think there is a role for negotiation and there is a role
for a net price analysis and thinking through it, because those
savings can be spread more generally through the benefit. But,
given the current State of play, in particular, in Part D,
there are drugs being placed on preferred formularies because
of the rebate, and that is driving the out-of-pocket for the
beneficiary and making it hard for the patient to afford it at
the counter.
Ms. Matsui. OK.
Mr. Isasi. Yes, and to the chairwoman's earlier question,
when you were told, Chairwoman Eshoo, that the net cost was
lower, the question is, to whom? The net cost to whom?
Ms. Matsui. OK.
Mr. Isasi. Right? Not the beneficiary sitting in the
pharmacy.
Ms. Matsui. Right. OK.
I think I ran out of time. I yield back. Thank you.
Ms. Eshoo. Excellent.
The gentlewoman yields back. It is a pleasure to recognize
the gentleman from Michigan, Mr. Upton, the former chairman of
the full committee. Your time, five minutes.
Mr. Upton. Thank you, Madam Chair. It is a delight to be
here.
And I just have got a couple of questions. When we worked
on 21st Century Cures, we spent a whole lot of time about
thinking about policies that advanced new treatments for
patients who had no therapies available, sort of like what
former Chairman Walden said about sickle cell. But one of our
main goals was to reduce the burden of discovery and
development for small companies to ensure that new therapies
got to patients who literally had no hope.
So, I am a little bit worried about the SPIKE Act, which is
one of the bills that we are looking at today, looking at
perhaps an opposite approach. The bill sets an arbitrary launch
price level that triggers burdensome price reporting for
companies. Many of the drugs produced for the orphan diseases
are often developed by small companies. So, the price threshold
doesn't always account for rebates and discounts provided by
the manufacturers. If we are going to consider Federal price
reporting, shouldn't we keep the focus on price increases, what
was said a little bit earlier, rather than launch prices of
orphan drugs produced by smaller companies advancing cures? Dr.
Holtz-Eakin, what is your reaction to that?
Dr. Holtz-Eakin. A couple of thoughts. I mean, in the end,
I think it is important to focus on what the beneficiary ends
up paying, and often, there is a big gap between list and what
they pay. Often, they pay the list, and that is through the
rebate structure. So, I think thinking through that carefully
is important.
I do think that the kind of documentation that is
envisioned by the SPIKE Act is unprecedented. I have never seen
any kind of a request anywhere else in the economy; and for
smaller manufacturers, it is going to be quite burdensome. I
would be concerned about that.
And I don't see that this produces any particular pressure
on pricing. And so, it is a pretty expensive piece of
transparency that may or may not be effective.
Mr. Upton. So, my next question is concerned about the H.R.
2064, the Sunshine for Samples Act of 2019. It impacts both
drugs as well as devices. So, in 2017, MedPAC recommended that
Congress expand the Physician Sunshine Act and require drug
companies only. It didn't include medical device companies. So,
as you look at device companies, they often provide, I guess,
some free devices that are used, like prosthetics and others,
to measure, but really a device is a one-time deal. And what
are your reactions to including devices as well onto this bill
versus just pharmaceuticals?
Dr. Holtz-Eakin. I think it would make sense to not include
the devices, see how effective the bill would be, if it goes
forward on the drug front. And then, you could always revisit
that issue going forward. But devices are very different than
the drugs in terms of the one-time aspect. And there is no
existing reporting. So, that is the most costly part of what
would be envisioned on this.
And I would just again say, I think building on what is in
place as opposed to creating a new reporting channel makes a
lot of sense; and that you can have oversight and you can have
the FDA be required to provide the data to professional
researchers to make sure that samples are used for the
therapeutically-appropriate functions, and not to distort
physician decisions. That is really what you want to know. All
that can be done without putting this on a public website.
Mr. Upton. Thank you. I yield back.
Ms. Eshoo. The gentleman yields back. I now recognize the
gentleman from New Mexico, Mr. Lujan, for five minutes of
questioning.
Mr. Lujan. Thank you, Madam Chair.
Dr. Miller, you noted in your testimony that more and more
drugs are saving people's lives or vastly improving their
health outcomes and quality of life, are launching
unsustainable prices that are simply unaffordable. What tools
are currently available to control launch prices for the first-
in-class, sole-source, novel therapies, and are there any
mechanisms currently in place that constrain the price for
these drugs?
Dr. Miller. As a general proposition. I would say, no, that
the mechanisms are not in place. I think it goes back to some
comments earlier. When you grant a patent, you are granting a
monopoly and the company can come first to class and charge any
price.
I think the tools that I am trying to direct your attention
to in the testimony and some of my comments is, in Part D, you
might think of additional tools in the instances where you
don't have a competitor. Part D was created to exploit
competition and have the PBMs negotiate, but you are still
going to have drugs that don't have competition. And you might
want to think about things like pricing to the clinical value
of the drug or some kind of negotiations strategy.
Mr. Lujan. How should we better ensure manufacturers are
accountable to the public when setting prices for newly-
launched drug products?
Dr. Miller. Well, I think if you were to pursue the
mechanisms that I just mentioned to you, that would bring a
greater accountability at least a better price, to the Medicare
beneficiary and to the taxpayer, if that is what you meant.
Mr. Lujan. The question that we had last week at hearings
as well was the notion that there is a system that has been
established such that you post your launch price, which I
regard it as the highest price. And then, you have a lot of
negotiations. There are discounts. There are rebates. There are
other pieces that get to different lowest prices, if you will,
that you have for each partner. And I just have a hard time
understanding why we just don't get to that lowest price to
begin with. They know how low they are willing to go. They know
where they are going to be. So, if this is truly going to take
into consideration the impacts to the patient and lowering
costs, then that is where we should start.
Mr. Isasi. Is it Isasi?
Mr. Isasi. Isasi.
Mr. Lujan. Isasi.
Mr. Isasi. Yes.
Mr. Lujan. You noted in your testimony that the threshold
to trigger reporting requirements for newly-launched products
should be reduced from the current amount included in H.R. 2069
of $26,000, the median income of average Medicare
beneficiaries. Can you explain why Families USA would like to
see this threshold price reduced for reporting purposes?
Mr. Isasi. Yes, absolutely. Thank you for the question.
It is critically important that we understand that, as
these changes take place, industry is going to adapt, right?
And so, what we will find is all the launch prices will come in
just under whatever threshold is set. So, we have got to lower
the threshold to a threshold that is based on the actual
realities of the families who are in the benefit.
And to your earlier question, I also want to mention that a
lot of folks don't realize this, but from the industry's
perspective, even companies that aren't American, they start
here in the U.S. launching first here, because we are willing
to pay the highest price, twice, three times, four times more
than the rest of the world, right? They start here. They set an
incredibly high price. Then, they go out in the rest of the
world and negotiate because we don't negotiate.
Mr. Lujan. I still want to talk a little bit more about the
average Medicare beneficiary. One, I agree with your response
to the first question. That is a concern that I have as well.
How do we address that? And how do we set up a better
environment when it comes to fairness?
To the question that I asked Dr. Miller, the number of
people that are going to go without these therapies because
they can't afford them----
Mr. Isasi. That is right.
Mr. Lujan [continuing]. Which is growing in the United
States.
The advocacy that you are bringing forward in your
testimony about lowering the amount that is listed in H.R.
2069, the $26,000--and in your case, it would be a lower
number--but $26,000 is how much a family would make, would earn
in a year. And all that this is saying is, if you are going to
list your drug price higher than a Medicare beneficiary makes
in an entire year, you should say why. Does that sound fair?
Mr. Isasi. Very fair.
Mr. T4Lujan. Madam Chair, I think that, as we talk about
pricing care and the notion that, if you just leave it alone,
and if Congress walks away and no one wants to be a part of
this, that it will fix itself, it has not worked yet. And too
many people out there are suffering and they are getting hit
every day. And we should be reminded that we made a commitment,
when we went to the American people over the last two years,
that we would pass legislation to lower the cost of
prescription drug prices for the American people, and we had
better deliver on it.
And with that, I yield back.
Ms. Eshoo. Amen.
The gentleman yields back. I now would like to recognize
the gentleman from Virginia, Mr. Griffith, five minutes for
questioning, sir.
Mr. Griffith. Thank you very much, Madam Chair.
Let me say, so that everybody is clear, my Democratic
colleague just said that, you know, taking no action isn't
working. He is right. And we are going to have to take action.
And so, we will have to sort out what is the best action that
we can take. But I think both sides of the aisle are dedicated
to figuring out how we fix this. And there are all kinds of
different ways to do it and all kinds of issues.
Dr. Feldman, in your oral testimony, I was very taken with
what you were saying. You indicated you had a patient who had
gotten a call to change their drug. I believe it was for
rheumatoid arthritis, is that correct? And I want to know who
called them, not the individual's name, but was it the PBM? Was
it the insurance company? Who called them and said, ``Hey,
let's switch you over to this new drug''?
Dr. Feldman. It was the PBM, and they received a
notification in the mail.
Mr. Griffith. So, they received a notification in the mail
from the PBM. And were you ever consulted about that?
Dr. Feldman. No. In fact, the patient brought it to me and
said, ``I've been asked to switch to this drug, a lower-cost
alternative.'' And it is not necessarily a lower list price.
This happens all the time when you have midyear formulary
changes. Patients just get dropped. They won't even pay for it
anymore. So, this at least was slightly less egregious than the
complete exclusion of a drug from preferred formulary.
Mr. Griffith. But you also indicated that this drug was not
similar. It was not really an alternative for that patient. Can
you explain that to me?
Dr. Feldman. It treats rheumatoid arthritis, but it was not
a therapeutic equivalent drug. You know, there are different
mechanisms of action in the immune system. And the drug that
this patient finally ended up on affected T cells in a certain
way. This one was something, a different drug entirely that did
not affect the same part of the immune system. So, it would be
ridiculous for me to change it.
Mr. Griffith. So, let me try to break this down into more
simple terms that I can understand, and hopefully, the folks
back home who will be watching this later or watching it now
will be able to understand. So, antacids, I take Zantac because
I have lots of food allergies, and a lot of times a stomach
upset is caused by my allergies. That being said, Tums doesn't
do much for me, as a result of that, and Zantac has an
antihistamine in it. Are you saying that what they did was they
took him off the Zantac that had something that could help him
and moved him onto something like the Tums, which might be a
very good product for some people, but doesn't work for me? Is
that what you are trying to say?
Dr. Feldman. Scientifically, it is not the same----
Mr. Griffith. OK.
Dr. Feldman [continuing]. But, conceptually, yes.
Mr. Griffith. Conceptually? OK.
[Laughter.]
At least I got the concept.
Ms. Bass, all right, shouldn't PBMs at least be trying to
contact doctors? Look, my stomach upset is not a big deal. But
somebody that has got rheumatoid arthritis, that is a big deal.
Shouldn't the PBMs be contacting the doctor to say, for this
patient, does this switch make sense because we are trying to
save some money? Now I don't mind anybody trying to save some
money, but let's make sure it works for the patient.
Ms. Bass. So, in those kinds of situations, there are
definitely appeals rights for everybody in Medicare and every
private sector plan. And PBMs absolutely work with doctors to
figure out in that instance what the right thing is.
Mr. Griffith. But most patients don't understand the
appeals rights. They don't understand the appeals process. They
just know they have gotten this. And what about the cases like
Dr. Feldman said? In some cases, they don't even give you a
choice; it is a matter of ``We are no longer paying for the
drug that you have been on for the last four years or five
years that has been effective for you, and we are switching you
over to this drug. And you can pay for that other drug, if you
want to, but we are not paying for it.'' That really can be
disruptive, wouldn't you agree?
Ms. Bass. It sounds terribly disruptive, I agree.
Mr. Griffith. So, what can we do about that?
Ms. Bass. Again, there are exceptions in Medicare Part D,
and there are processes to go through. And in that instance,
the patient would have to go through that with his or her
physician.
Mr. Griffith. So, the physician and the patient are going
to have to have a lawyer to help them figure out the process,
is that what you are saying?
Dr. Feldman. And that is why we need the samples to
continue the patient on the correct medication because it can
take six to eight weeks to go through an appeals process.
Mr. Griffith. Thank you. So, that way, you have more time
to go through the appeals process. Well, that makes sense.
Thank you, Dr. Feldman.
How many different PBMs are members of your association?
Ms. Bass. Right now, there are about 15.
Mr. Griffith. About 15? So, across the country we have
about 15? Or how many PBMs do we have? Some of them probably
aren't members, I guess.
Ms. Bass. There are 66 full-service PBMs in the U.S., and
there are more organizations that provide PBM services.
Mr. Griffith. Does that seem like maybe we have got a
little monopoly going in the PBM industry?
Dr. Feldman. Three PBMs control nearly 80 percent of the
population.
Mr. Griffith. Yes, that is why I was asking the question.
And I understand you can't answer that because you have got an
association to represent. But the point is that, when we hear
testimony that the PBMs are asking our drug manufacturers to
raise the list price, and then, many of them get a percentage
of the cost of the drug for handling it, it looks like to me,We
have got, the fox is in the henhouse and we are going to have
to take some action.
I yield back, Madam Chair.
Ms. Eshoo. I thank the gentleman and he yields back. And
now, I would like to recognize the gentleman from Oregon, Mr.
Schrader, for five minutes of questioning.
Mr. Schrader. Thank you, Madam Chairman. I appreciate it
very much.
Yes, I would associate myself with the remarks of the last
two Members that talked because industry is, unfortunately, in
a situation where there are a lot of changes. The pricing
structure is completely opaque and very complex. I don't blame
anyone in any of the industry sectors for that. It has just
grown up that way. But, as a result, it calls for,
unfortunately, our work here to make it a little more
transparent. And everyone, apparently, loves transparency, but
what that means is in the eye of the beholder; is what we are
hearing now. So, that would be, unfortunately or fortunately,
our judgment call, hopefully based on hearings we have had. We
have had a number of hearings, and hopefully, will give the
American people some assurance that we are on their side and
trying to help, not stifle innovation, but at the same time
make sure they get the best deal possible out there.
Ms. Joldersma, I appreciate you being here. I appreciate
your discussion on the role that rebates may play and having a
higher list price drug get a preferable placement on the
formulary. Could you give any examples of medicines where you
think that might be the case?
Ms. Joldersma. Well, it is challenging for me, as a trade
association, to speak to what would really be a very
proprietary arrangement. But I can say that I noticed last week
one of our member companies did testify here and talk about the
difficulties it has had with formulary uptake after it did
lower the list price of one of its blockbuster medicines
really. So, there is that in the record.
I believe that other statements have been made on the
record in the diabetes space, where we have seen companies who
have launched authorized generics with the hope of being able
to lower that list price, and they, too, have faced some
challenges. So, there certainly are examples.
Mr. Schrader. All right. So, then, do you think public
disclosure of the discounts, including administrative fees,
would be helpful in preventing this?
Ms. Joldersma. So, yes, we do agree that more disclosure is
required in that, including administrative fees would be
important. We have seen the fees that manufacturers paid to
manufacturers increase enormously; really in the last several
years. And at least my read of the current statute is that a
whole swath of administrative fees are excluded from reporting
under Section 1150(a) that was enacted by the ACA.
Mr. Schrader. It seems a little bit like PBMs almost
double-dip. You have the rebate situation. The price
negotiating goes on. Then, there is also this administrative
fee, which seems a little inappropriate.
Ms. Bass, I appreciate the explanation of the role, at
least in your testimony, of the P&T committees and evaluating
all the clinical and medical evidence that is out there before
making coverage recommendations. Does cost and rebate amount
play at all in these determinations?
Ms. Bass. The P&T committees work solely on the clinical
efficacy of the drugs. And then, they give their
recommendations to the PBMs, and the PBMs then go and negotiate
to the lowest----
Mr. Schrader. So, if that is the case, then, how would you
explain the higher list price drug with a greater drug rebate
receiving a more favorable formulary placement oftentimes?
Ms. Bass. If the lower list cost drug came down as low on
the net cost basis, it would be on the formulary.
Mr. Schrader. So, it does have an impact, apparently? Do
you support increase in transparency in the fees, including
administrative fees I just talked about that you'll receive
from the pharmaceutical companies; and also, DIR payments that
go on with the pharmacies?
Ms. Bass. All of the fees and pharmacy DIR are reported in
Medicare Part D to CMS.
Mr. Schrader. So, you wouldn't object to them being public?
Ms. Bass. So, again, we have issues around public reporting
when it is very clear and would get at, would allow for tacit
collusion. But, in the aggregate, no.
Mr. Schrader. OK. A question for Dr. Feldman on the
samples. I listened to Dr. Burgess talk about his lack of
attention to the samples from the standpoint of what he is
going to prescribe. He knows what he thinks that patient needs
best. I would assume Dr. Bucshon would feel much the same way.
The samples, to your testimony--I was a veterinarian for many,
many years--do provide an opportunity for a patient to get
much-needed care they couldn't get otherwise in the interim. So
to me, the sample issue seems much to do about nothing. Is
there really a reason to collect all of this data and go down
that road, in your opinion?
Dr. Feldman. As long as it keeps the samples coming for the
patients that need them, I am happy. And I do have specific
examples of the question about a lower-price drug not getting
on the formulary, if anyone wants to know.
Mr. Schrader. Well, maybe we could get that to my office
after the hearing is finished.
Following up a little bit, would utilizing existing
frameworks for evaluating the quality of a physician and their
conduct, how they do things, be a suitable metric for lifting
prior authorization? You have testified about how that really
makes it difficult; ergo, these samples become important. We
are trying to find ways to lessen the requirements for prior
authorization. Are there some policies, either that a
physician's office, a hospital, whatever, follows that might
give us some guidance to help us help you?
Dr. Feldman. Yes. With specific guidelines and pathways
developed by certain physician groups, we can bypass PAs on
things from MRIs to certain drugs. And I think that is a
valuable way to make it easier for the patient to get the
proper medication.
Mr. Schrader. If we could get some of that, that would be
outstanding.
And I yield back. I am sorry.
Ms. Eshoo. The gentleman yields back. I now recognize the
gentleman from Indiana, Mr. Bucshon.
Mr. Bucshon. Thank you, Madam Chairwoman.
I was a surgeon before I was in Congress.
Ms. Eshoo. Dr. Bucshon, I am sorry.
Mr. Bucshon. Yes, thank you.
I would agree, Mr. Schrader, that the sample issue is a red
herring. I mean, I will just say, as a physician, the basic
premise that we practice medicine based on this type of thing
as a group is false. I would decide what type of medication
that a patient is on and, then, ask my staff, ``Hey, do we have
any samples of this?'', not the other way around.
The other thing is, from a PBM perspective, I don't like
restricted formularies, and I particularly don't like it when
non-medical people don't allow access to medications for
patients based on profit. And we have heard a lot of testimony,
and that may not be pervasive across the industry, but there
clearly is substantial evidence that that is happening.
And I don't believe it when people say that drug companies
aren't being called literally daily and talking about their
list prices and the margins and other things like that. That is
happening, and the incentives are just not aligned.
The last thing I will say, and then, I have a couple of
questions, is we have been going after providers now since the
last 1980s, cutting reimbursement to the people that actually
are in the arena taking care of patients. And it has solved all
our problems, right? It is the providers' fault. They make too
much money. They are doing too many procedures. They are
prescribing too many drugs. Well, the reason we haven't been
able to make a dent in medical prices--in fact, it is worse not
only in this, but other areas of medicine--is because that is
not the problem. And now, we have got shortages of physicians
nationwide as a result, including particularly in primary care.
Ms. Joldersma, as part of H.R. 2087, the Drug Price
Transparency Act, all drug manufacturers will be required to
submit information to the Secretary on the average sales price,
ASP, for physician-administered drugs coming under Medicare
Part B. However, it is my understanding that certain medical
devices that are reimbursed under the drug benefit could be
excluded from this requirement. In keeping with the spirit of
transparency and market-based pricing, is there opposition to
including a policy change to ensure all such devices reimbursed
as drug products also would be subject to ASP reporting?
Ms. Joldersma. From the perspective of PhRMA, no, there is
no opposition.
Mr. Bucshon. OK. Well, Chairwoman Eshoo, I hope we can work
together to address this issue and the legislation as it moves
forward.
And so, I just want to again, on the samples, Dr. Feldman,
you raised the issue, and again, is there any evidence in your
view anywhere that samples that are given to physician offices
have any effect on overall practice of medicine? And also,
doing this type of reporting, do you feel like it would do
anything to lower drug prices?
Dr. Feldman. I don't think it will do anything to lower
drug prices. And, no, they have absolutely no bearing on my
prescribing habits whatsoever.
Mr. Bucshon. Mr. Holtz-Eakin, do you think particularly
that the sample issue is a big enough issue that it would have
any substantial impact on lowering drug prices? As you pointed
out, the key here is out-of-pocket costs. That is what we are
trying to get down.
Dr. Holtz-Eakin. I don't think the sample issue drives
much.
Mr. Bucshon. Yes. So, there is just really, really no
evidence that that would be the case.
And I guess, Ms. Bass, what do you think of the
administration's proposed rule on rebates?
Ms. Bass. We don't think that the administration's proposed
rule on rebates will do anything to lower list prices.
Mr. Bucshon. How come?
Ms. Bass. Because the manufacturers set the list prices,
and the PBMs negotiate lower net costs, but PBMs are not
involved in list prices.
Mr. Bucshon. Don't get me wrong, I know that PBMs have a
value-added role in this whole thing. My personal view is that
the proposed rule, although the devil is in the details, is
something that is going to lower, going to take away the upper
pressure on list price. I mean, I know the PBMs all say that it
won't make any difference at all, but I would argue that it
does. I mean, what is your view on that?
Ms. Bass. We would respectfully have to agree to disagree.
We do think that there is a conversation to be had around the
use of the price concessions PBMs negotiate.
Mr. Bucshon. OK. Fair enough.
Ms. Bass. But, right now, they are used for premium in Part
D. And what the Secretary is trying to get at, I believe, in
part, aside from lower list, is to help people at the pharmacy
counter.
Mr. Bucshon. OK. With your indulgence, Madam Chairwoman,
Mr. Holtz-Eakin, you had a little comment on that?
Dr. Holtz-Eakin. Just from the economics of it, if you have
the ability to negotiate rebates, you ought to have the ability
to negotiate prices, and it is the same negotiation. It will be
more effective if the rule covered not just Part D, but the
commercial market as well. I mean, that would make a
difference.
Mr. Bucshon. I agree with that. Thank you.
I yield back.
Ms. Eshoo. The gentleman yields back.
Did you want to add something to that, Dr. Miller? You
looked like you were just ready to turn your microphone on.
Mr. Bucshon. Excuse me. I didn't recognize him to respond
to my question.
Ms. Eshoo. I am recognizing him. I am recognizing him.
Mr. Bucshon. OK. Fair enough.
Dr. Miller. I mean, we think the most credible analysis is
that it ends up in the Part D program, adding to the cost of
the taxpayer, and that it doesn't have a significant effect on
list prices.
Ms. Eshoo. Thank you.
I recognize the gentleman from California, Mr. Cardenas.
Mr. Cardenas. Thank you very much, Madam Chair, and thank
you for recognizing as the chair, as you have the right to do
so.
Also, I would like to thank the ranking member for having
this committee as well, to both of you.
I am very proud to serve on the Energy and Commerce
Committee and proud to say that we take the time to consider
many perspectives, so that we can move forward with meaningful
legislation. And the bottom line is that, right now, Americans
across the country are hurting. It is our job to tackle these
big problems like drug pricing to help all Americans, to give
them real choices that don't involve choosing between keeping
their families fed and keeping them healthy.
With that in mind, we have had several hearings now on
prescription drug pricing. One thing we have been hearing about
it is how efforts to cut costs are just not making it to the
everyday American citizen.
Ms. Bass, thank you for being here today.
I am interested in discussing how price concessions and
rebates directly impact consumers and whether insurance plans
or their beneficiaries are more likely to benefit from these
negotiated prices. You mentioned that plan sponsors can
determine how PBM-negotiated price concessions are used. Can
you explain some ways that health plans, and specifically
prescription drug plans, will use the rebates and other price
concessions that PBMs acquire?
Ms. Bass. Sure. Thank you for the question.
In Part D, the rebates are used, essentially, to buy down
the premium or to lower the premium and to keep it affordable
across all beneficiaries. In the commercial market, plan
sponsors use rebates across their health plan sometimes to help
offset hospital costs. In other instances, they think about the
rebates when they are setting their enrollees' cost-sharing.
So, your $10 generic copay and your, say, $30 preferred brand
copay, your health plan is probably taking into account the
rebates it gets when it determines that level of cost-sharing.
So, it goes sometimes toward premium, sometimes toward cost-
sharing. It depends on the plan. In Part D, it is almost always
for premium.
Mr. Cardenas. So, what you just described is, it could be
that, the biggest beneficiary of the system that we have today
might actually be favoring the decision making of an insurance
provider, not necessarily directly to the end-user, the
citizen?
Ms. Bass. I guess the way I would characterize it is, if
whoever the plan sponsor is decides to use it for premium, it
benefits all enrollees with a lower premium. If the plan
sponsor decides to put it toward cost-sharing, then it helps
the people who are using drugs that have rebates, and 61
percent of brand drugs do.
Mr. Cardenas. OK. All right. Are plan sponsors required to
disclose how they utilize price concessions?
Ms. Bass. In Medicare, every plan sponsor reports its
rebates, its fees, which we talked about earlier, to CMS; and
CMS is aware of how those are used. In the commercial market,
the PBM discloses to the plan sponsor what its rebates are; but
plan sponsors are not required to publicly disclose, or even
really--to the Secretary how they use the rebates.
Mr. Cardenas. OK. I would like to point out that, on H.R.
2376, the Prescription Pricing for the People Act would require
the Federal Trade Commission to study the role of PBMs in the
supply chain and report to Congress on recommendations. Do you
have any recommendations on how we can best ensure consumers
are directly benefitting from the cost savings generated by
price concessions and rebates negotiated by PBMs? Ms. Bass?
Ms. Bass. So, first of all, we welcome the FTC review. And
our recommendations are that, in Part D, you, as policymakers--
and, in fact, you are overseeing the plan sponsors--have a
conversation about should that money be used for reducing
premium, holding down the premium, or should it be used for
reducing cost-sharing? And that is a conversation you, as
policymakers, should have, and we welcome that conversation as
well.
Mr. Cardenas. Again, Madam Chair, I really appreciate the
opportunity for us to cover this very important issue. And
healthcare is complicated.
Earlier today I was able to meet with a young woman in my
office who actually grew up in my ZIP code. Very few people in
my ZIP code actually make it to four-year institutions. She
went beyond that and she is currently studying to be a doctor.
She is in her third year. And I asked her what motivated her.
And what motivated her was her little brother who passed away
from a non-diagnosed illness that he had since he was born. He
was a little boy when he died. And then, when her father got
very ill, she urged him to go to the doctor and he said, ``I
never want to see another medical bill again.'' And shortly
thereafter, he died from a heart attack.
My point is, here we have a young person as an example of
an American citizen who decided that is how I am going to try
to make the world a better place, by becoming a doctor. I hope
that we have that same urgency, as Members of Congress, to try
to get down to the bottom of these issues and to make the world
a better place for American citizens, and for everybody in this
country, by doing what we can in the way that we have been
appointed to do so or elected to do so.
So, again, thank you to the witnesses.
And thank you, Madam Chair. I yield back.
Ms. Eshoo. The gentleman yields back. Thank you for your
beautiful words.
I now have the pleasure of recognizing the gentleman from
Florida, Mr. Bilirakis, who has an important bill with Mr.
Cunningham, the Creating Lower Cost Alternatives for Your
Prescription Drugs Act. The gentleman is recognized for five
minutes of questioning.
Mr. Bilirakis. Thank you. Thank you, Madam Chair. I
appreciate it. Thank you for holding this very important
hearing.
We have had a couple of hearings on this issue, and we
should be focusing on this issue because this is what a lot of
our constituents care about. I have a lot of seniors in my
district and a large veterans population; and lowering
prescription drug prices is an utmost priority for me.
To that end, I want to ask a question of Dr. Holtz-Eakin.
To that end, the bill that I recently introduced, as Madam
Chair pointed to, alluded to, with Congressman Cunningham, the
Creating Lower Cost Alternatives for Your Prescription Drugs,
or CLAY, the CLAY Act, is a great first step, in my opinion,
modernizing Part D to lower prescription drug costs. However,
it is a first step, and I believe that modern Part D has been
an outstanding program, one of the greatest programs we have
had. And it has been below budget, like 40 percent below
budget, and it has helped out our seniors. But we must upgrade
it and modernize it.
I understand that AAF has a comprehensive proposal for
modernizing Part D. Would you please share your input with the
committee, Doctor, please?
Dr. Holtz-Eakin. Well, certainly we would be happy to
provide a copy of the paper that Tara O'Neill Hayes wrote, who
is here with me today.
It is similar in spirit to what Dr. Miller discussed in his
remarks, which is what we see in Part D is the most rapidly-
growing Government cost, taxpayer cost, is in the reinsurance
area. So, it is above the catastrophic maximum. And so, the
proposal, in essence, says: ``Why don't we have the
prescription drug plans and the pharmaceutical industry be
responsible for their share of the costs above that
catastrophic maximum, so that the incentives to have high-
priced drugs are diminished? Why don't we fully protect
taxpayers against their out-of-pocket by having a catastrophic
maximum where they don't owe any more past that? And then, have
a sort of typical 80/20 split for the remainder of the drugs,
so that PDPs have a real strong incentive to get PBMs to
negotiate on their behalf for the remainder of the drugs.''
Where typically they are not sole-sourced there is more
competition, and the possibility of vigorous competition is
much more likely. So, it is a good program. It is not broken.
It has been very successful. But we can sharpen the basic
negotiating incentives that were built into the program, make
it better going forward.
Mr. Bilirakis. Very good.
Again, Doctor, Congress developed incentives to encourage
development of rare disease therapies--and I work on that
issue--where innovation was previously almost nonexistent. How
might the SPIKE Act in its current form have an outsized impact
on future innovation for rare disease drug development? And how
can we best address this concern?
Dr. Holtz-Eakin. I guess I would say a couple of things.
You know I have my reservations about the SPIKE Act. I
mentioned them in my written testimony and in my opening
remarks. There is nothing about it, I think, that guarantees
lower drug prices. It is most likely to impact those startups
specializing in those kinds of drugs and where launch prices
are typically very high. And so, you will be above this
arbitrary threshold with that very high-value drug. And I worry
about diminishing those incentives.
Having said that, I just want to echo something Dr. Miller
said, which is I don't think transparency in the end is going
to deal with the places where we have high drug costs in the
United States. And the things under consideration today have
merit, but they are not ultimately the solution. It is
fundamental reforms of the type you talked about in Part D. I
think those are important in Part B, where there is no
particular reason to give 6 percent of the ASP to delivery of a
drug. That is uncorrelated with the cost of actually treating a
patient. So, reimburse for that instead. Those are the reforms
that I think will be more effective than just transparency.
Mr. Bilirakis. Thank you.
One other question. Often when discussing high drug prices,
we tend to focus on what is wrong without mentioning what is
going right to ensure we achieve the desired result in a way
that does not undermine the progress that has already been made
or produce other negative, unintended consequences. Can you
share with us what is currently working and how we might
double-down on these efforts?
Dr. Holtz-Eakin. As I noted at the outset, there is a
tradeoff between financial incentives like prices and
innovation. We are literally in an era with unprecedented
innovation in the capacity to treat illnesses that were not
previously deemed to be treatable. And all that is evidence of
the power of that incentive, and I think it is important to
hold onto that.
I also think it is very important to think ``price for
who?'' That has come up several times. And keep focusing on the
fact that in some cases--so, for example, with the rebate rule,
if, in fact, list prices don't go down, then there is a chance
that premiums will go up for everybody. But the people who are
going to be protected are those who have the biggest drug costs
and the most severe conditions. That is exactly what an
insurance program should do. And so, let's keep track of whose
price is being affected as much as prices in general.
Mr. Bilirakis. All right. Thank you very much.
I yield back, Madam Chair.
Ms. Eshoo. The gentleman yields back. I now would like to
recognize the gentleman from Vermont, Mr. Welch, five minutes.
Mr. Welch. Thank you.
Just starting to acknowledge something that Dr. Holtz-Eakin
said, we have made a lot of progress in pharma. Unfortunately,
the price is starting to kill us.
And I want to go to you, Ms. Joldersma. You mentioned that
R&D is a big deal; there are 9 failures for every one success.
And you said you spend a lot on R&D. My question is this: would
you, on behalf of your member organizations and companies,
provide to the committee specific and concrete information as
to how much each company claims it has spent on R&D, how much
it has spent on advertising, how much it has spent on stock
buybacks, and how much it has spent on the top five paid
compensation executives? Would you do that?
Ms. Joldersma. I would have to consult with my counsel to
know if----
Mr. Welch. This is not a mystery here. I mean, what is the
big deal? Pharma is claiming that it spends all its money on
R&D, but it won't show us the books. So, at a certain point,
count me as skeptical.
Now, Dr. Miller, I think your research shows that what
pharma claims it needs to spend is about 176 percent higher
than what actually is required in order for them to get the
return.
Dr. Miller. I just want to be clear that the research I am
citing is by other people. It was summarized in my testimony.
There were a couple of things that were said. The amount of
revenue that comes out of the United States alone exceeds
worldwide R&D investments by something like 70 percent. And
there have been studies that Arnold Ventures supported that
show that the costs of producing the drugs are less than being
claimed by the industry.
Mr. Welch. Suggesting it is an inflated claim by pharma?
Dr. Miller. Suggesting that.
Mr. Welch. I mean, Madam Chair, all of us, R's and D's,
whatever side we are on, we want to know what the facts are.
So, you won't answer me now. You have to go back to your,
quote, ``counsel''. Go back to your counsel and, then, answer
me, and tell us whether we are going to get that information.
But, while I am at it----
Ms. Joldersma. Sir, I would be happy to provide the wealth
of information that is already filed by our companies annually.
Mr. Welch. I do not want a ``wealth of information''. I
want four issues. One, R&D spending; 2, stock buybacks; 3,
advertising; 4, executive compensation. That is all I want, not
a ``wealth of information''.
Ms. Joldersma. I believe that is all available, and I would
be happy to provide it.
Mr. Welch. All right. While I am at it, I want to ask this
question: there is the justification of R&D. Sanofi increased
the price of its drug Lantus by 171 percent from $99 in 2010 to
$270 in 2018. That drug had been on the market since 2001.
Presumably, the R&D that was done to put that drug on the
market was done before 2001. How much R&D was part of the
justification for that explosion in the price between 2010 and
2018?
Ms. Joldersma. I am not sure of the answer, but I suspect
that it would be R&D for treatments and cures that we are still
waiting for, not for that product.
Mr. Welch. Give us the facts, all right?
Now, Dr. Holtz-Eakin, you have made some criticisms that I
actually think have merit about nibbling on the edges with
transparency. I want transparency when there is a claim that it
justifies the price increases. In some of the reporting, that
is a big hassle. In the heart of this, you have nibbled around
the edges, but what it reflects is the frustration that states
and payers are having to try to get some grip on how they are
getting hammered every year.
And my question is whether some of the suggestions Dr.
Miller makes you agree with, where we have to really bite the
bullet and have the Government play a role. Our Government is
the only one in the Western industrialized democracies where we
stand aside and let the consumer get hammered. Price
negotiation, would you be supportive of some of the price
negotiation suggestions that Dr. Miller is making to apply to
commercial as well as the PBMs and the rebates?
Dr. Holtz-Eakin. Let me disappoint you. I mean, when I was
CBO Director, we wrote any number of studies that said that
negotiation wouldn't lower spending. CBO just recently issued a
response to, I believe it was Senator----
Mr. Welch. Without a formulary. It is with or without a
formulary.
Dr. Miller, why don't you----
Dr. Holtz-Eakin. That is a key part of it, yes.
Mr. Welch. That is right.
Dr. Holtz-Eakin. It is a key part of it.
Mr. Welch. And you get savings with a formulary. The
formularies we have now are not done on behalf of the public.
They are done for the benefit of the PBMs.
Dr. Miller, give me your top three steps we have to take in
order to start bringing to heal these outrageous drug prices.
Dr. Miller. The first thing is, in Medicare Part D, adopt
the changes that have been recommended that bring more pressure
on the PBMs and change the risk structure, which both of us
agree on. There is a whole set of patent, anticompetitive
behaviors, legislation, that you are moving on; you need to
move on; you need to move further.
The last one-this is where we disagree potentially-on the
drugs where there is not competition, that is where we are
recommending that you think about things like negotiation and/
or reference pricing. And we think it can be done without
formulary exclusion; and I am happy to talk to you and your
staff about that.
Mr. Welch. Thank you.
I yield back. I thank the witnesses. I thank the Chair.
Ms. Eshoo. The gentleman yields back. I now recognize the
gentleman from Oklahoma, Mr. Mullin, for five minutes of
questioning.
Mr. Mullin. Thank you, Madam Chair.
And thank you for the witnesses to be here.
I am going to focus on the FAIR Act, and there is going to
be a little bit of a difference of approach. This is the
difference between the gentleman from Vermont and myself. We
both agree that drug pricing is too high, 100 percent. We 100
percent agree with that. We do agree there has to be something
done. The approach is what is different.
See, I believe in private industry. I believe that, when
the Government gets in things, the entry to the industry only
gets more difficult and the less competition is there at that
point. The more regulation that you put on the industry, the
less people are going to enter into that industry. It is just
matter of fact.
When you start looking at the FAIR Act, you start looking
at what it is wanting the companies to do. What that is, it is
just one step closer to what I think the ultimate goal is to
some Members in Congress, and that is to take over the industry
and be Government-run. That is the quickest way you can
possibly kill an industry.
I mean, when you look at the FAIR Act and it says they want
the total revenue and net profit generated from the qualifying
drug for each calendar year since the FDA approved it, the
total cost associated with marketing and advertising for the
drug, the total revenue and net profit of the manufacturer, not
the drug, for the manufacturer for 12 to 36 months, what does
that have to do with anything? The compensation for the
executives, what does that have to do with the Federal
Government? Since when does the Federal Government get into the
fact that they can limit the compensation for a non-Federal
employee? But that is exactly what the FAIR Act is going to.
What we want to do is figure out how Congress can make it
more competitive. See, Congress is not in the business of
creating businesses. We should not be in the business of
creating jobs. What we should be in the business of is creating
an environment for entrepreneurs to create jobs. When you allow
competition in the market, then you are going to start seeing
the competitive prices move downward.
Now, Dr. Miller, what you said a while ago, I think there
might be something that we can work on there. When you said
where Congress should maybe look at is when there is no one
else in the market, when it is a specialty drug. I could see
that. I could see where there could be a way for us to possibly
find an area to where we could help come up with a rebate or
come up where you kind of look at it with the insurance, with
someone with preexisting conditions, where we can help offset
maybe some of that cost. There could be some areas for us to
work on there.
And I agree there is plenty of bad actors here. I think
everybody has some stake to blame in this. And what I don't
want to happen is that Congress overreacts. And I believe that
is where we are moving, especially when you start looking at
the FAIR Act.
So, I am going to ask, ma'am, and I am going to do my best
with your name--Joldersma?
Ms. Joldersma. That will work.
Mr. Mullin. That will work? How do you actually pronounce
it?
Ms. Joldersma. Well, ``Yeldersma'' is how they would say it
in the homeland. So, you are exactly right. But we say
``Joldersma'' here in the U.S.
Mr. Mullin. Joldersma?
Ms. Joldersma. Yes.
Mr. Mullin. I am going to say ``ma'am.''
[Laughter.]
So, let me get into some questions, first of all, for you.
Is PhRMA opposed to reporting price increasing to the
Secretary?
Ms. Joldersma. No, in fact, it is already publicly
disclosed.
Mr. Mullin. OK. What kind of problems do you see with the
Fairness Act then?
Ms. Joldersma. With the FAIR Act?
Mr. Mullin. FAIR Act. Sorry. Yes, it is not Fairness Act.
That is another bill I am working on.
Ms. Joldersma. One leading concern is it is somewhat
ambiguous, but it appears that it could be applying
retroactively. Because one of the triggers is a 3-year trigger,
you know, you think about that. Taking, in fact, in 2019, we
are concerned that that is effectively imposing the requirement
going back to price increases that were taken three years ago.
That retroactivity seems not ideal and not a great precedent,
and it is certainly challenging to comply with the law in good
faith when the law was not even on the books at the time the
conduct occurred. So, that is probably our top issue.
Mr. Mullin. The FAIR Act requires, I believe, a 30-day
notice.
Ms. Joldersma. Yes, sir.
Mr. Mullin. Is that time acceptable or is there a better
timeframe for you?
Ms. Joldersma. So, it does require a notification of price
increases 30 days in advance. It goes to the Secretary. We are
concerned that that could lead to some negative behavior in the
market, including potentially opportunistic buying at the lower
price, stockpiling. That could lead to drug shortages, et
cetera. So, in general, we are very concerned with advanced
notice.
Mr. Mullin. Thank you.
With that, I will yield back. Thank you, Madam Chair.
Ms. Eshoo. The gentleman yields back. And now, I have the
pleasure of recognizing the gentlewoman from New Hampshire, Ms.
Kuster.
Ms. Kuster. Thank you, Madam Chair.
And thank you to all of you for your patience, bearing with
us.
So far, we have had multiple hearings on the critical issue
of our bipartisan efforts to lower prescription drug prices.
And the bottom line is simple: drug spending is placing an
undue burden on our constituents, patients across this country,
and taxpayers who are footing the bill for our public programs.
Mr. Miller, you mentioned in your testimony, `` whether we
like to admit it or not, we are actually rationing drugs in our
country. And in our current system, patients and payors are
forced to make difficult tradeoffs and choices.''
I want to step into, I understand there is no silver bullet
on bringing down the rising cost of drugs, but I do want to
focus in on your testimony, if I could, Mr. Miller. You
mentioned how transparency efforts under consideration would
not necessarily lead to lower drug prices, though they might
help us understand more clearly why drug prices are increasing
at the rates that they are. Do you believe that requiring
justification for launch prices and price increases will at
least slow the rate of growth in drug prices or that
pharmaceutical companies might reconsider price increases with
transparency?
Dr. Miller. I think you could have some small Sentinel
Effect. I think, ultimately, it doesn't stop the wave.
Ms. Kuster. So, your advice seems to be to go further than
that and go toward the negotiation of volume discounts. And in
particular, I am looking at the Medicare negotiation based on
leveraging volume discounts. And you mention Part D
negotiation. Can you elaborate on how Part D negotiation might
look? Especially taking into consideration the high cost of
drugs now with limited competition, it seems to me both the
patient and the taxpayer are paying more than they should.
Dr. Miller. OK. Yes, I will. But, very quickly, I just want
to remind you part of our recommendations are start to rebuild
the competition in the market. I don't want to forget that.
Ms. Kuster. OK.
Dr. Miller. That is a very important----
Ms. Kuster. And that is important.
Dr. Miller. Absolutely important.
Ms. Kuster. I concur.
Dr. Miller. We also think, in Part D, once again, bringing
the pressure to the PBMs and the manufacturers in the
catastrophic cap, to kind of force negotiations where, in fact,
you do have competitors, is very important. And then, I am
stepping into your question. OK?
Ms. Kuster. OK.
Dr. Miller. Sorry about that.
Ms. Kuster. Got it.
Dr. Miller. But, you know, you will still always be faced
with very expensive drugs that don't have competition. And so,
there are a few ways we would suggest that you might think
about that. One is you think about a reference price. So, we
look at the clinical value of the drug and say that the
Medicare program will cover this drug, but the price it will
pay and the beneficiary's copayment will be tied to the
clinical value.
Ms. Kuster. And let me just stop you there. Clinical value
maybe as compared to hospitalization or as compared to future
surgery? How do you determine clinical value?
Dr. Miller. Usually, what you are doing is talking about
the performance of the drug in and of itself on the value it
adds to the life of the patient. That is usually how that is
done.
Ms. Kuster. OK. Longevity or quality of life.
Dr. Miller. You could engage in other studies like
hospitalization watchful waiting, WAW, but mostly what we are
talking about here are clinical and cost-effectiveness analysis
that talk about extending the patient's life, that type of
thing.
Let me just give you one other to your question. You could
think of a negotiation process in which you set lanes for the
bids, so that you are saying there is some range of negotiation
between the manufacturer and the Government, but it is not
completely wide open. And you might use some of the clinical
effectiveness to set those ranges or international prices, some
set of considerations.
Why I am making this point is it is a way to try and get a
more rigorous process that CBO might give credit for.
Ms. Kuster. So, let me ask you this: do you think that the
Federal Government is taking maximum advantage of their volume
purchasing power, if you will, in the negotiations? I am just
wondering, for example, if we were to consolidate, say, for
Medicare and Medicaid, veterans, Federal employees, DOD, all of
these together, do you think that we could do better in the
price negotiation for the drugs where there is an equivalent,
where we are talking about competition?
Dr. Miller. I see. So, in this instance, you are moving the
conversation. You are not talking about the drugs that don't
have competition? You are talking about the drugs that do have
competition?
Ms. Kuster. Right.
Dr. Miller I haven't thought about it, and I just want to
say one thing. There are certain tradeoffs you would have to
contemplate in how you do that. For example, in Medicaid, there
are very large discounts. And so, if you move to a different
system, you have to ask yourself, do you lose those discounts?
Ms. Kuster. Right. Can you do better than that discount?
Dr. Miller. Yes, can you do better? And then, VA, which I
am very uninformed on, the same question. But a very----
Ms. Kuster. Just as a theoretical concept, would you agree
that the larger the volume share----
Dr. Miller. Yes, and that is exactly where I was going.
Just a straight economics, bigger volume, bigger ability to
extract discounts because it is harder to walk away.
Ms. Kuster. Thank you. I yield back.
Ms. Eshoo. The gentlewoman yields back. I now would like to
recognize the gentleman from North Carolina, Mr. Hudson, for
five minutes of questioning.
Mr. Hudson. Thank you to the Chair.
And thank you to our panel for being here today. This is
very informative.
Every time I go home, I hear from my constituents about
high drug prices. I will never forget the constituent I met
years ago who told me that she literally some months had to
choose between picking up her prescription and paying for
groceries. This is a problem.
And in this committee, we have a long history of bipartisan
work to address the most serious problems facing Americans. I
believe we should continue that work, but I am having a tough
time seeing what some of the policies that were proposed here
will accomplish for American patients.
Doing some rough, back-of-the-envelope math, I took one of
the most recent examples of a drug failure, Biogen's Alzheimer
drug, and looked at what it would take to recoup their
investment. Biogen spent $950 billion seeking a cure for
Alzheimer's that ultimately failed. It was disheartening for me
and many others, particularly those who have relatives with
Alzheimer's, but also illuminated what it takes to bring a drug
to market.
So, back-of-the-envelope math, let's say Biogen was
successful with the latest attempt. There are 5.8 million
people in the United States with Alzheimer's. So, assuming
every single one of them was able to access this drug, Biogen
would have to charge, roughly, $164,000 to break even on all
their research. This is, arguably, a bargain compared to not
only the roughly $350,000 of cost to care for an Alzheimer's
patient over a lifetime of the illness, but also the emotional
cost that families endure watching a loved one deteriorate
right before their eyes, as my family has experienced.
Under the SPIKE Act, this price or anything higher would
have triggered a naming-and-shaming exercise. What benefit does
this have for patients? Ideally, patients would be taken out of
the middle of this conversation.
And this brings me to my questions, which the first one I
will open to the entire panel. The FAIR Act includes high
penalties for noncompliance. Where should those penalties,
where should that revenue go to? As it is currently written, do
you see them going to benefit patients or is it going back to
the Treasury to be spent by politicians? Shouldn't they be
explicitly designated to help those who need it most and not
just go to the Treasury for Congress to spend? I would just
open it up to the panel, if anyone would like to talk on that.
Ms. Joldersma. We would agree. We would note that the fees
are quite high. And, yes, it would be ideal to have those fees
going to help patients.
Mr. Hudson. Anybody else? I see some nods. OK.
Dr. Feldman. It is kind of a no-brainer, back to the
patients.
Mr. Hudson. OK. I will assume everybody agrees.
Ms. Bass, in your testimony, you mentioned the real-time
benefit tools to help physicians and patients know what drugs
are on formulary and what the cost-sharing would be. How could
your industry, the PBM industry, facilitate making this a
reality?
Ms. Bass. So, those tools are already in use. And I think
one of the issues, everybody understands that it needs to be as
streamlined as possible for physician workflow. And so,
hopefully, the interoperability exercise that the
administration is currently undergoing will help make sure that
every physician has access and it works really quickly. But all
of our PBMs, most of our PBMs are making that product available
already in the marketplace.
Mr. Hudson. Great.
And, Ms. Joldersma. I hope I am not butchering your name. I
know lots of states have been passing legislation to get to the
bottom of why drug prices are increasing. But the bills we are
talking about today go beyond any State law currently on the
books. Do you worry about the burden of companies complying
with a patchwork of 50 State laws plus this Federal law?
Because if there ever was a time for preemption, it seems to me
like this would be it. What are your feelings?
Ms. Joldersma. Absolutely. There are, I think, seven or
eight different approaches already on the books in states.
There are additional states who are probably today considering
different approaches. We have different approaches that are
coming to light here in the Congress as well. And all of that
is just added cost that is not going to research and it is not
going to help patients. So, absolutely, harmonization/
preemption are high priorities.
Mr. Hudson. Great. Well, I appreciate that.
And, Madam Chair, I look forward to continuing to work with
you to focus on patients, and we have a long track record of
working together in a bipartisan way on this committee. I think
as long as we continue to focus on the patients and use common
sense, I think we can get there.
So, with that, I will yield back.
Ms. Eshoo. The gentleman yields back. And now, the
gentlewoman from California, Ms. Barragan, is recognized for
five minutes for her questioning.
Ms. Barragan. Thank you.
I want to follow up on that. You know, while we are here in
Congress drafting legislation and debating what to do, we have
seen States taking up legislation that shines light on
manufacturers' drug pricing. Part of that is attributed to the
fact that Congress isn't moving and Congress isn't doing
anything; that States are acting to help consumers and to help
people who are rationing their drugs.
In my own State of California, they passed a drug
transparency law in 2017. It requires drug companies to notify
health insurers and Government plans at least 60 days in
advance if they plan to increase a drug price by more than 16
percent in a 2-year period. Now the law also requires the
companies to explain the reason behind the increase in price,
with all of the information provided to the State made public
online for citizens to review.
Now PhRMA sued to block the California law. This may be
because the law was effective in shining a light on upcoming
price increases. For example, it showed that Valeant was going
to raise the price of a generic glaucoma medication by 63
percent and that Teva Pharmaceuticals planned a 49 percent
price increase for an inhaled solution to prevent asthma
attacks.
Ms. Joldersma, you testified that PhRMA supports
transparency. In this case, PhRMA sued to block this California
law that would have transparency. Did PhRMA sue to block the
California law because you are concerned about the unfair drug-
pricing policies of drug manufacturers?
Ms. Joldersma. No, we sued to block the California law
because we believe it is unconstitutional in at least two ways,
the Dormant Commerce Clause and, also, First Amendment
compelled speech. And we are also concerned about the impact
that that 60-day advance notification could have on the market;
given the opportunity it creates for bulk purchasing,
stockpiling, and----
Ms. Barragan. OK. Let me ask you another question. So, if
Congress passed that same law, you would have the same
concerns, is that correct?
Ms. Joldersma. Well, the Federal Government, obviously, has
different authority to regulate interstate commerce.
Ms. Barragan. I am just asking, if Congress passed the same
law, would you have the same concerns?
Ms. Joldersma. First Amendment compelled speech remains a
concern.
Ms. Barragan. OK. I am just going to take that as a yes,
because it is just a yes or no.
Ms. Joldersma. Yes.
Ms. Barragan. I have other questions I want to get to.
Ms. Joldersma. The answer to that is yes.
Ms. Barragan. Thank you very much.
Ms. Joldersma. Yes.
Ms. Barragan. So, during the drug supply chain hearing a
week ago, Amgen raised the issue of lowering the list price of
their cholesterol drug by 60 percent. However, PBMs have not
shifted this drug from high-cost formulary tiers to lower-cost
tiers which carry lower copayments.
Ms. Bass, you testified that the mission of the association
you represent, the PBMs, is to help control cost. So, do you
support patients having access to these lower-price drugs? It
seems that when you have a specific instance like in this one,
we are not seeing the movement.
Ms. Bass. So, I testified that the mission of our companies
is to provide access to lower-cost drugs. I can't speak to
specific company decisions with respect to these drugs, but our
companies negotiate to the lowest net cost and make their
decisions accordingly.
Ms. Barragan. OK. Well, thank you.
So, Mr. Isasi, I am dead-focused on trying to find
meaningful solutions to the drug-pricing problem. My
constituents continue to demand that we find a way to
significantly lower the price of medications. In your
testimony, you discuss that, while you are supportive of these
transparency bills, that transparency legislation alone will
not significantly affect the price of prescription drugs. You
go on to state that Medicare Part D negotiation should be
enacted as a meaningful step to lower prices. While you discuss
one specific negotiation bill in your testimony, I would like
you to focus on the policy generally. Do you have any
projections on the impact on drug pricing if we enact Medicare
Part D negotiation? And then, beyond Medicare negotiation, what
other policies should Congress pass to meaningfully lower
prices?
Mr. Isasi. Sure. Thank you very much for the question.
So, this question of the projected savings is very
difficult, in large part because industry has done a very good
job of veiling what the actual price is that we are paying, how
the monies are flowing; and so, it is a very, very difficult
thing to model.
But what we know for sure is that, in order for it to work,
something as simple as just saying ``the Government can
negotiate'' won't work. We need to have a serious way to put
teeth in negotiations to make sure that industry shows up and
in good faith negotiates. So, there are lots of policies. One
of them would be something like allowing others to produce a
drug if the pharmaceutical industry isn't willing to negotiate
a fair price. Another one is imposing a tax on excess profits,
things like that. So, there is a lot of different methods; but
you have to real teeth in negotiations or it won't work.
But what we do know is, just common sense, as I mentioned
earlier, the pharmaceutical industry starts in the U.S. when
they launch prices most often because they know we don't
negotiate. So, they get a very, very high price in the United
States, and then, they go around the rest of the world and they
start negotiating.
And so, for example, we know that we spend maybe 50 percent
or 100 times more than other countries on drugs, not all drugs,
but many drugs. For example, in Norway, Humira is almost twice
as much as what we are paying; Crestor is four times more in
Australia and in France. So, we know in those cases, Government
negotiation results in fourfold decrease in price.
And then, another thing we know is that, as I mentioned,
manufacturers start in the U.S. The last thing to say is, I
think there are three really important policies to think about
beyond negotiation. The first is to think carefully about those
increases in price year over year, because it is not just the
launch prices. We have heard that industry has had a really
hard time because so many of the drugs go to generic. So, they
just increase prices far above inflation year over year. So,
the idea of thinking about how price should be tied to
inflation year over year is really important.
Two, as Dr. Miller mentioned, we need to understand the
value of the benefit.
Ms. Eshoo. Excuse me to interrupt because it is over the
time, but there is also a 1:30 classified briefing for all
Members of the House. And I think that it is important that
everyone be able to get there.
So, the gentlewoman yields back. And I now would like to
recognize the gentleman from Georgia, Mr. Carter.
Mr. Carter. Thank you, Madam Chair, and thank you for
having this hearing. This is extremely important.
Thank you to each and every one of you for being here.
Dr. Feldman, earlier you had a conversation about list
price. And my colleague before me just mentioned about list
price, and we were taking about it.
Ms. Bass, you mentioned that your concern was net price.
Let me ask you, a copayment to a patient, is it based on list
price or net price?
Ms. Bass. Copayments are a set price.
Mr. Carter. Copayments are a set price? They could be a
percentage. Is that percentage based on a list----
Ms. Bass. Oh, sure.
Mr. Carter. Is that percentage based on the list price or
the net price?
Ms. Bass. Co-insurance is typically based--it depends on
the plan, but in Medicare, say, co-insurance is based on the
list price.
Mr. Carter. On the list price. So, if the list price is
higher, then the copay to the patient could be higher? Yes?
Ms. Bass. That math works.
Mr. Carter. That math works. Good. That is new math, but it
still works. Great.
Let me ask you, in Medicare Part D, also, patients go from
deductible to the donut hole, and then, into the catastrophic.
Is that based on list price or is that based on net price? It
is based on list price.
Ms. Bass. The deductible, yes.
Mr. Carter. So, the higher the list price, the quicker they
get into the donut hole; the quicker they get into
catastrophic. And if they get into catastrophic, then the
taxpayer is the one who is on the hook because they are paying
the majority of it, not the plan sponsor, not the insurance
company, correct? That is correct.
Let me ask you, Dr. Feldman, you mentioned, correctly, that
when Ms. Bass was asked about how many members or how many PBMs
there were in the nation, there were 66, I believe you said.
However, you mentioned that there were three PBMs that control
80 percent of the market, and that is correct. Not only that,
but also those three PBMs that control 80 percent of the market
also have an insurance company that they own and also have
pharmacies they own. In fact, that vertical integration carries
over into that.
You mentioned that you had some patients who came in and
had a letter that said that they had to change a particular
drug to something else that was on the formulary. Just out of
curiosity, any of those, the insurance or the pharmacy is owned
by that PBM, or would you know that?
Dr. Feldman. This was a particular PBM that is now owned by
an insurance company.
Mr. Carter. Exactly. So, in other words, the PBM is
directing that patient to use a drug on the formulary through
their mail order pharmacy or through their pharmacy. It may not
be a mail order. Because we know that Aetna owns Caremark, owns
CVS. We know that Express Scripts owns Cigna, owns Express
Scripts mail order. We know that Optum is owned by United and
has their own mail order as well.
So, what we are essentially talking about here is taking
money out of one pocket and putting it in the other pocket.
Because if you ask the PBMs where are these discounts, as the
chairlady likes to say, or rebates going, they say, ``well,
they are going to the plan sponsor to decrease the premium.''
Well, who is setting that premium? The insurance company that
they own in many cases. So, that vertical integration is
something that is very concerning.
Let me change gears here for just a second and ask Dr.
Miller and Dr. Holtz-Eakin: Earlier Ms. Joldersma was asked
about one of the parts of this bill that says that drug
companies would have to give notification before they went up
on a price. And there was concern about stockpiling. Are you
familiar with spread pricing and how that works, either one of
you?
Dr. Miller. Yes.
Mr. Carter. OK. And do you agree in her assessment that,
you know, if we know that if a pharmacy or a wholesaler knows
that a price is going to be going up, that there is a
possibility that they would stockpile those drugs in order to
buy them at a lower cost and, then, also to be able to keep
them, so that they can sell them at the higher price?
Dr. Miller. My own comments are--and I just want to preface
by saying I still don't think that the transparency has a huge
effect, but----
Mr. Carter. Did I ask you that? What I asked you about was
this fair pricing.
Dr. Miller. To the question that you are asking----
Mr. Carter. Thank you very much.
Dr. Miller [continuing]. I think I would say that I would
not do a prior notice.
Mr. Carter. You would not do a prior notice?
Dr. Miller. For the reasons that you are raising.
Mr. Carter. Thank you.
Dr. Holtz-Eakin. I would be concerned about that as well.
Mr. Carter. Absolutely. And I can tell you from firsthand
experience, and from having been in business and owning a
pharmacy for 30 years before I became a Member of Congress,
that was something we did all the time. If we knew the price
was going up, of course, we are going to buy it at the lower
price and stockpile it. So, there is a danger there, and I
would warn you very carefully in this legislation to be careful
of that. That is something that could happen.
Madam Chair, I want to thank you again for holding this
hearing.
And also, the Prescription Pricing for the People Act that
has the FTC, an investigation into potential anticompetitive
business practices and the PBM-pharmacy relationship, that is
an issue that our committee has asked the FTC to investigate.
And I hope, Madam Chair, that will come to us and that we will
have access to that report, so that this committee can look at
it.
Thank you, Madam Chair, and I yield back.
Ms. Eshoo. I thank the gentleman. He yields back. Recognize
the gentleman from Maryland, Mr. Sarbanes, for five minutes of
questioning.
Mr. Sarbanes. Thank you. Thank you, Madam Chair.
Thanks to the panel.
Mr. Isasi, I assume you are familiar generally with how,
for example, state-level insurance commissioners regulate the
premium hikes that health insurance companies bring on an
annual basis, where they ask for information to justify those
proposed increases. And then, as well, we see the example of,
say, electric utilities--sorry, I have a cold--who have to
justify any rate increases that they propose and provide a good
deal of information.
Do you have a sense of how the kind of information that we
have available to us from the pharmaceutical companies or the
PBMs compares to the kind of information that is available to
the public or to the commissions that operate in those other
arenas that I mentioned?
Mr. Isasi. It is a much poorer quality, because it is not
being collected to understand how the rates are being built. It
is just being collected.
Mr. Sarbanes. Yes. And I am increasingly intrigued by using
that example as a kind of reference point for the kind of
insight that we should be getting into the drug pricing.
Because, frankly, I think if you look at the impact on the
public of drug prices, it is hard to argue that it isn't as
extensive and permeating as those other things are, where we
bring a different kind of approach.
I wanted to ask Ms.--I can't see your name all the way down
there at the end----
Ms. Joldersma. Lisa.
Mr. Sarbanes [continuing]. Ms. Joldersma----
Ms. Joldersma. Call me Lisa.
Mr. Sarbanes [continuing]. And Ms. Bass, talk to me a
little bit about the excuse/explanation for resisting some of
the transparency measures that we have suggested, based on the
concern about proprietary information. What is the argument
there exactly?
Ms. Bass. I will start. So, I will cite OACT, the Office of
the Actuary, and CBO as well, in suggesting that if pricing
becomes public, which it would under the Secretary's rebate
rule, prices go up, OACT and CBO think, by about 15 percent. In
other words, competitors are not willing to discount as deeply
when they know the competition's less deep discount. And so,
prices, the net cost, the way we talk about it, float upward.
And probably there would be about, according to OACT and CBO--
and we think that is about right--a 15 percent loss, in effect,
of savings, or a 15 percent increase.
Mr. Sarbanes. Do you buy that, Mr. Isasi? And if you do buy
it, do you think the approach I was just discussing a moment
ago could be an antidote to the result that was just being
described; i.e., if that kind of transparency creates some
pressures in the direction Ms. Bass just suggested, then the
counter-pressure could be authority residing within some
Governmental entity to come in and push back on that? So, maybe
you could speak to that.
Mr. Isasi. That is right. So, that is the fundamental
question here: is it just transparency or is it transparency
with teeth? And I think it is really important to note that we
need to have transparency with teeth. We have to have an
ability for the Government to come in and say--and this is
what, again, 80 percent of Republicans, 90 percent of
Democrats, are asking for, right?--the Government to come in
and say, ``That's not a fair price. We will not pay it.'' You
have to combine both things together.
Mr. Sarbanes. Yes. Well, I am for transparency with teeth,
just for the record.
And maybe, Dr. Holtz-Eakin is for transparency with teeth.
He did wonder or worry about, or at least observe, that
transparency alone might not achieve the goals that we seek.
And I share some of that, those misgivings. But I think
transparency in combination with other measures we could take
would get us to a place that we want to get to on behalf of
Americans who are paying too much for their drugs.
With that, I yield back my time. Thank you.
Ms. Eshoo. The gentleman yields back. Now I would like to
recognize the gentleman from Montana, Mr. Gianforte.
Mr. Gianforte. Thank you, Madam Chair.
And thank you for the panel for being with us today.
I continue to hear from Montanans about the cost of their
prescription drug medications and the difficulties they face in
trying to pay for their drugs. During our first hearing on drug
prices this Congress, I spoke about a constituent in Great
Falls whose lupus medication had increased by hundreds of
dollars in recent years. The price increase put her and her
family, made them financially unstable. Unfortunately, her
story is not uncommon.
We need to find common-sense solutions, and I look forward
to finding those with my colleagues across the aisle, to make
drugs less expensive, increase transparency where it is needed,
and put patients first.
Although I appreciate the FAIR Act and understand what it
is trying to accomplish, as a business owner, when I look at
the list of reporting requirements in the bill, I do have some
concerns. It seems that there are requirements that
manufacturers might not be able to provide answers for.
Dr. Holtz-Eakin, can you speak to the challenges of
gathering the required information regarding research and
development and manufacturing costs?
Dr. Holtz-Eakin. Well, certainly I think the reporting
requirements are extraordinarily extensive. I have never seen
anything like it. And if you started today and had to go back,
you might not have the records in place to do it, especially
the smaller firms. Going forward, you would have to put in
place the sort of mechanisms to collect that on a regular
basis.
Mr. Gianforte. So, do you believe, based on the complexity,
that it might be the situation that certain firms would not be
able to comply with these new rules?
Dr. Holtz-Eakin. I would suspect that at the outset, yes.
Mr. Gianforte. OK. I am also concerned that the FAIR Act
gives the Secretary very broad authority to include other
information that the Secretary considers appropriate.
Typically, I would say, I am all in favor of flexibility for
the Secretary, but the list of regulations in the bill is
already incredibly robust. To me, it seems that if something
was left out or needs to be added, it should be done
legislatively as opposed to through the Secretary.
So, I just want to follow on, if I could, Dr. Holtz-Eakin.
Can you speak briefly to the estimated cost to consumers of
these regulations?
Dr. Holtz-Eakin. I don't have an estimate of the cost. But
I just want to echo something you just said. You can imagine
putting in place systems to collect the data because you want
to comply with the law, assuming it was passed. And then, the
Secretary changes the nature of the information that you have
to provide. You now are back at the starting situation where
you haven't collected it and you have to go back. So, it could
get progressively more costly if that is how it transpired.
Mr. Gianforte. OK. So, if you can't comment specifically on
cost, if all these new reporting requirements were signed into
law, and the Secretary decided there was more information that
he needed, how do you think that would affect new drugs coming
to market?
Dr. Holtz-Eakin. I think they would be more costly to
provide and they would be more expensive.
Mr. Gianforte. OK. Which is not the objective that we are
shooting for.
Dr. Holtz-Eakin. Yes.
Mr. Gianforte. A question, if I could, for the whole panel.
I support transparency across healthcare. I think that
consumers need to know exactly what they are paying for. It is
my understanding that the rationale behind these bills is that
the Federal Government is a large payor in the system today;
therefore, we need to know about price increases. That makes
sense.
I support the idea of flagging large increases in price,
but looking at the whole picture, pharmaceutical spending
accounts for less than 20 percent of what the Government spends
on healthcare. Are there other aspects of healthcare in the 80
percent that need to report price or fee increases as well to
the Federal Government? For example, do hospitals have to
report increases in surgical supplies or procedures that
Medicare is going to cover?
Dr. Miller. One thing to keep in mind is that hospitals on
the Medicare side do report a cost report and they do lay out
what their cost structures are. However, you have a very
similar situation in the hospital industry where you have high
degrees of consolidation and high prices escalating. So, there
is certainly a question that could be brought to bear in there.
Mr. Gianforte. OK. Other comments?
Dr. Feldman. From the physician's point of view, we are
told every year how much we are paid. So, that information is
already out there.
Mr. Gianforte. So, we should be arguing for, we should be
working for transparency in all areas? Anybody else who would
like to add anything?
Mr. Isasi. We strongly agree with that. And the problem of
price in healthcare is not just a pharmaceutical issue, but it
is a big pharmaceutical issue.
Mr. Gianforte. And I think our constituents expect us to
look at all of healthcare costs, certainly drugs-that is the
topic today-but more broadly.
Comments?
Ms. Joldersma. I would like to just follow up quickly on
something that Representative Sarbanes raised. He did mention
the rate review framework put into place for health insurers
and the fact that they have to give advance notice of
increases----
Mr. Gianforte. Unfortunately, my time is up, and I yield
back, Madam Chair.
Ms. Joldersma. It is only one year, not three.
Ms. Eshoo. The gentleman yields back. I now would like to
recognize the gentleman from Kentucky, Mr. Guthrie, for five
minutes.
Mr. Guthrie. Thank you very much. Sorry, I was in another
hearing on a committee that I am the ranking member of the
subcommittee. So, I wasn't here for a lot of discussion. So, I
will just ask a couple of questions. I know we are pushing
against a deadline here.
So, for Dr. Feldman and Dr. Holtz-Eakin, MedPAC recommended
that the information provided to the Secretary regarding
samples be shared with specific other entities. How might this
information be helpful to oversight agencies, researchers,
payers, and health plans? And how is selectively sharing this
information different from publicly posting it?
Dr. Feldman. Public posting it leaves it open to anyone
with any opinion to create a campaign on Twitter and various
social media, which can lead to really false impressions of
what the samples really do accomplish for patients.
Mr. Guthrie. OK.
Dr. Holtz-Eakin. I think that is the chief concern. And
professional analysis of the data should be welcomed.
Mr. Guthrie. OK. Thank you.
And everybody here wants transparency and lower drug
prices, but we have to get this right. So, if you are looking
at the SPIKE and the FAIR Act, the SPIKE and the FAIR Act use
different definitions for a manufacturer. While the FAIR Act
uses the proper Food, Drug, and Cosmetic Act definition, the
SPIKE Act uses a definition for a manufacturer that is
improper.
And, Ms. Joldersma, drafting concerns have been raised
that, while the intent of the drafters was to provide
discretion to the manufacturer on which materials would justify
their SPIKE disclosure, the language is not clear or
prohibitive that the Secretary cannot reject such a
justification or ask for additional disclosures from the
manufacturer. The question is, do you agree that this is an
issue, and if we pursue this bill, the language needs to be
clarified?
Ms. Joldersma. I do.
Mr. Guthrie. What are the issues that would happen if you
didn't clarify it?
Ms. Joldersma. I am sorry?
Mr. Guthrie. So, the issues, if it wasn't clarified, then
it would open up to----
Ms. Joldersma. If it wasn't clarified, I think that, given
the certification requirement in that bill, I think
manufacturers would believe they have to provide every single
thing listed as illustrative in the bill, regardless of whether
it was applicable to the actual increase or not.
Mr. Guthrie. So, as our colleague here defined,
manufacturer in the FAIR Act is the better route?
Ms. Joldersma. They both have issues that we would like to
work with the committee on.
Mr. Guthrie. OK. Thanks. Fair.
And one final question, Dr. Holtz-Eakin. You note in your
testimony that there are elements of transparency that can have
inverse market impacts. Can you explain this issue more and how
Congress can ensure helpful transparency is done while not
driving unwanted behavior?
Dr. Holtz-Eakin. You simply don't want to disclose the
outcome of other people's negotiations, so that competitors can
take advantage of it. So, that kind of transparency is actually
counterproductive.
Mr. Guthrie. What would be an example of that?
Dr. Holtz-Eakin. Well, if, for example, Mark cut a deal on
a big rebate for his drug and I found out about it, I would be
like, well, geez, I didn't get that rebate. And that would lead
that negotiation to have less vigor the next time around; they
may not give such a big rebate.
Mr. Guthrie. Well, thank you. I appreciate that.
And I will yield back.
Ms. Eshoo. The gentleman yields back. I will recognize the
gentlewoman from Illinois, who is the sponsor of the FAIR Drug
Pricing Act, Ms. Schakowsky, for five minutes. And I think
because Ms. Schakowsky is waved onto the subcommittee, that she
will be the last Member that is questioning. So, hold on,
testifiers; you are just about through.
Ms. Schakowsky. I thank the chairwoman for allowing me. I
will be as quick as possible.
This is what people with multiple sclerosis are facing, for
example, showing the increases over just three years in the
cost of their drugs. Betaseron went from $65,000 to $92,000 in
those three months. Avonex went from $62,000 to $88,000 in
these two months--in those three years. I am sorry.
You know, the whining that is going on about having to talk
about some transparency is really irritating to me. The drug
companies tell us all the time that it is about research and
development; it costs so much. How much? That is the question
in the FAIR Act, which is my bill. How much? If you are going
to use that as the excuse for raising the prices, then I think
we have an absolute right to know how much is being spent.
The ten top drugs that are advertised on television - and
we are going to see, because of the cooperation with the
President of the United States, those list prices next to the
drug on television - the ten top ones, every month it is either
between $500 per drug up to $17,000 per drug per month. And so,
we want to know how much are you really spending on marketing
and advertising.
Believe me, these are not extraneous questions. These are
what consumers want to know. They want to know the
manufacturing cost. They want to know how much money are you
making. ``I can't afford your medication,'' they say. And so, I
am going to get sick. And so, I want to know, how much are you
making off of me when I can actually pay for this?
So, really, the idea that transparency is going to cause
all these problems, and problems for consumers, I wonder if my
friend Mr. Isasi, whatever, could answer that.
Mr. Isasi. Isasi. No problem.
Ms. Schakowsky. Isasi? No Isis, OK.
Mr. Isasi. No, not Isis; Isasi.
I would say that we share your skepticism about this
concern, very much share this skepticism. And it is the very
least, as you say, when people's lives are hanging in the
balance and they are making decisions that in some cases end up
in their death because they can't afford their drugs. At the
very least, there could be more transparency about the way
these funds are flowing.
And I want to point out that the makers of the top 12 best-
selling drugs in the United States have filed, on average, 125
patents per drug; for an industry filing, 125 patents per drug.
It seems like a little transparency about how they are spending
their money isn't much of a burden.
Ms. Schakowsky. I really appreciate that.
We do have to go to a classified briefing.
I just want to say I think, at the very least, consumers
deserve transparency. But I also want to agree with you, it has
to be with teeth. We are going to do more than this getting
transparency. We are going to have to lower the cost of
prescription drugs. People are dying. They can't afford it. So,
this is just the beginning.
Thank you very much, and I yield back.
Ms. Eshoo. The gentlewoman yields back.
Pursuant to committee rules, Members have 10 business days
to submit additional questions for the record, to be answered
by the witnesses who have appeared. And I ask each witness to
respond as promptly and as fully to the questions that you
receive.
I ask unanimous consent to enter into the record the
following documents:
A letter from the American Society of Clinical Oncology
regarding H.R. 2296, 2087, and 2064.
A letter from the Campaign for Sustainable Prescription
Pricing in support of H.R. 2296, 2069, 2087, 2064, 2757.
A letter from the AARP in support of H.R. 2296, 2069, 2087,
2115, and 2064.
A letter from the National Multiple Sclerosis Society.
And a letter from the Alliance of Specialty Medicine
regarding H.R. 2113.
There aren't any objections. So, without objections, these
documents will be placed into the record.
Ms. Eshoo. I want to thank all of the witnesses once again.
You have been here for three hours. You have worked hard, and I
think that the hearing has been more than worthwhile,
recognizing that we have a great deal to do.
I also think that we need to really scrub your written
testimony because many of you really put forward worthwhile
ideas that we didn't get to ask questions, and they are
worthwhile and deserve the full attention of committee members.
So, with that, the House subcommittee will now adjourn.
[Whereupon, at 1:36 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared Statement of Hon. Eliot L. Engel
Madame Chairwoman Eshoo, thank you for holding today's
important hearing on drug supply chain transparency.
U.S. prescription drug spending rose by 41 percent between
2007 and 2017. While some of this growth was due to
innovation--such as CAR--T therapies and hepatitis C cures-much
of it can be attributed to price spikes. The price of insulin,
a century old drug, for instance, has doubled since 2012
without much change to the underlying formula.
Due to the lack of transparency, my constituents often get
a pricing surprise when they arrive at their pharmacy. This can
blindside consumers, putting them in situations where they have
to choose between filling a life-saving prescription or
purchasing other necessities.
The shroud of secrecy that veils the drug supply chain can
make it challenging even for experienced health care
professionals to determine the cost of a medication, let alone
average-day Americans. As with buying groceries, my
constituents deserve to know the cost of their prescription
drugs ahead of time.
I look forward to working with my colleagues on efforts to
shine light on this murky segment of our healthcare system.
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