[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
PROFITS OVER CONSUMERS: EXPOSING
HOW PHARMACEUTICAL COMPANIES GAME
THE SYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION AND COMMERCE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 19, 2019
__________
Serial No. 116-63
Printed for the use of the Committee on Energy and Commerce
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
45-263 PDF WASHINGTON : 2022
-----------------------------------------------------------------------------------
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 Consumer Protection and Commerce
JAN SCHAKOWSKY, Illinois
Chairwoman
KATHY CASTOR, Florida CATHY McMORRIS RODGERS, Washington
MARC A. VEASEY, Texas Ranking Member
ROBIN L. KELLY, Illinois FRED UPTON, Michigan
TOM O'HALLERAN, Arizona MICHAEL C. BURGESS, Texas
BEN RAY LUJAN, New Mexico ROBERT E. LATTA, Ohio
TONY CARDENAS, California, Vice BRETT GUTHRIE, Kentucky
Chair LARRY BUCSHON, Indiana
LISA BLUNT ROCHESTER, Delaware RICHARD HUDSON, North Carolina
DARREN SOTO, Florida EARL L. ``BUDDY'' CARTER, Georgia
BOBBY L. RUSH, Illinois GREG GIANFORTE, Montana
DORIS O. MATSUI, California GREG WALDEN, Oregon (ex officio)
JERRY McNERNEY, California
DEBBIE DINGELL, Michigan
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
----------
Page
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 1
Prepared statement........................................... 3
Hon. Cathy McMorris Rodgers, a Representative in Congress from
the State of Washington, opening statement..................... 3
Prepared statement........................................... 5
Hon. Debbie Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 6
Prepared statement........................................... 7
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 8
Prepared statement........................................... 10
Witnesses
Michael A. Carrier, Distinguished Professor, Rutgers Law School,
CO-Director, Rutgers Institute for Information Policy and Law.. 11
Prepared statement............................................... 14
Answers to submitted questions............................... 88
David E. Mitchell, Founder, Patients for Affordable Drugs,
Patients for Affordable Drugs.................................. 17
Prepared statement............................................... 19
Joanna M. Shepherd, Professor of Law at Emory University School
of Law......................................................... 31
Prepared statement............................................... 34
Answers to submitted questions............................... 90
Jeffrey K. Francer, Senior Vice President and General Counsel,
Association for Accessible Medicines........................... 47
Prepared statement............................................... 49
Answers to submitted questions............................... 99
Submitted Material
Research of Generic Drugs, Used Textbooks, and the Limits of
Liability for Product Improvements, by Timothy J. Muris and
Jonathan E. Nuechterlein, George Mason University, submitted by
Ms. Schakowsky \1\
Article of December 2018, ``May your drug price be evergreen'',
by Robin Feldman, published in the Journal of Law and the
Biosciences, submitted by Ms. Schakowsky \2\
Article ``Product Hopping: A New Framework'', by Michael A.
Carrier and Steve D. Shadown, submitted by Ms. Schakosky \3\
----------
\1\ Research paper by Timothy J. Muris, George Mason University
is available at https://docs.house.gov/meetings/IF/IF17/
20190919/109970/HHRG-116-IF17-20190919-SD003.pdf.
\2\ Article on ``May your drug price be evergreen'' is available
at https://docs.house.gov/meetings/IF/IF17/20190919/109970/
HHRG-116-IF17-20190919-SD004.pdf.
\3\ Article on ``Product Hopping: A New Framework'' is available
at https://docs.house.gov/meetings/IF/IF17/20190919/109970/
HHRG-116-IF17-20190919-SD005.pdf.
PROFITS OVER CONSUMERS: EXPOSING HOW PHARMACEUTICAL COMPANIES GAME THE
SYSTEM
----------
THURSDAY, SEPTEMBER 19, 2019
House of Representatives,
Subcommittee on Consumer Protection and Commerce,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:30 a.m., in
room 2322 Rayburn House Office Building, Hon. Jan Schakowsky
(chairwoman of the subcommittee) presiding.
Members present: Representatives Schakowsky, Castor,
Veasey, Kelly, O'Halleran, Blunt Rochester, Soto, Rush, Matsui,
McNerney, Dingell, Rodgers (subcommittee ranking member),
Upton, Burgess, Latta, Guthrie, Bucshon, Hudson, Carter,
Gianforte, and Walden (ex officio).
Also present: Representative. Sarbanes
Staff present: Jeffrey C. Carroll, Staff Director; Evan
Gilbert, Press Secretary; Lisa Goldman, Senior Counsel; Alex
Hoehn-Saric, Chief Counsel, Communications and Protection;
Megan Howard, FDA Detailee; Jerry Leverich, Senior Counsel; Dan
Miller, Senior Policy Analyst; Alivia Roberts, Press Assistant;
Tim Robinson, Chief Counsel; Chloe Rodriguez, Policy Analyst;
Benjamin Tabor, Staff Assistant; Mike Bloomquist, Minority
Staff Director; Bijan Koohmaraie, Minority Counsel, Consumer
Protection and Commerce; Tim Kurth, Minority Deputy Chief
Counsel, Communications and Technology; James Paluskiewicz,
Minority Chief Counsel, Health; Brannon Rains, Minority Staff
Assistant; and Kristen Seum, Minority Counsel, Health.
Ms. Schakowsky. The Subcommittee on Consumer Protection and
Commerce will now come to order.
The Chair now recognizes herself for 5 minutes for an
opening statement.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Throughout today's hearing, you will hear many different
terms used to describe the problem that we are trying to
address today--product hopping, hard switching, soft switching,
and evergreening. But whatever the word is or the phrase, the
bottom line is this: drug manufacturers are gaming the system
to make more money at consumers' expense, and that has to stop.
Big Pharma says that high-priced and high prices and
exclusivity are essential to innovation. But competition is
actually more central to innovation, and the opposite of what
Big Pharma wants. Experts suggest that about 78 percent of the
drugs that get new patents are not new drugs. They are new
patents for existing drugs.
Instead of truly innovating, drug manufacturers are taking
advantage of the anticompetitive environment we have created by
recycling old medicines into new formulas--into new formations.
The problem goes beyond several bad actors, and you will
hear about over--that you will hear about over and over again
today--Humira, Revlimid, Suboxone, just to name a few.
The 100 best-selling drugs on the market, about 70 percent
have their protective--had their protection extended at least
once, and about 50 percent have had their protections extended
more than once. Many companies are actually withdrawing new--
withholding new and beneficial discoveries about their drugs
from consumers until they can use the innovation to block
competition.
Mr. Carrier's testimony provides a series of alarming
examples. One manufacturer's main reason for not seeking FDA
approval for off-label uses of their drug was that it ``wanted
to reserve them for a promotional campaign for its reformulated
product.''
Another manufacturer obtained FDA approval for a once-daily
version of their Alzheimer's treatment but waited three years
until generic competition for their twice-daily drug was
imminent before they released it. Big Pharma actually blocked
the innovation that they claimed to treasure--innovation that
could have helped patients until the time was most profitable.
I am proud to preside over this hearing in the Consumer
Protection Subcommittee because Congress must take direct
action to protect American consumers from the deceptive
commercial actions that the drug manufacturers take to gouge
consumers.
FDA is responsible for protecting public health by ensuring
the safety, efficacy, and security of drugs. FDA does not
adjudicate patient claims, and I agree with the agency's
conclusion that they should not be tasked with doing so. And
though the FTC has brought some cases for anticompetitive
practices, it does not have explicit authority to challenge
anti-competitive hard and soft switches.
Americans should not have to hope that the FTC can stop
Pharma's gaming of the prescription drug market. They should be
able to count on it. And Americans should not have to wait
years for costly lawsuits to play out and find that the generic
has decided to settle with the brand name company for a hefty
sum to keep their drug off the market, also known as pay-for-
delay.
So I look forward to learning from our witnesses today as I
craft a bill to protect consumers from Big Pharma's gaming
tactics. This legislation will encourage the courts to view
these gaming practices as anti-competitive and discourage
manufacturers from engaging in these types of practices to
begin with.
So we owe it to the American people, and I will be doing
everything I can in my power to do so. So I yield back my time.
[The prepared statement of Ms. Schakowsky follows:]
Prepared Statement of Hon. Jan Schakowsky
Throughout today's hearing, you will hear many different
terms used to describe the problem we are trying to address:
``product hopping,'' ``hard switches,'' ``soft switches,'' and
``evergreening
But whatever the word or phrase, the bottom line is: drug
manufacturers are gaming the system to make more money at
consumers' expense.
Big Pharma says that high prices and exclusivity are
essential to innovation.
But competition is actually most central to innovation--and
the opposite of what Big Pharma wants.
Experts suggest that about 78% of the drugs that get new
patents are NOT new drugs.
They are new patents for existing drugs.
Instead of truly innovating, drug manufacturers are taking
advantage of the anticompetitive environment by recycling old
medicines into new forms.
The problem goes beyond several bad actors you will hear
about over and over again today-Humira, Revlimid, Suboxone,
Namenda, Prilosec.
Of the 100 best-selling drugs, about 70% had their
protection extended at least once, and 50% have had their
protections extended more than once.
Many companies are actually withholding new and beneficial
discoveries about their drugs from the consumers until they can
use this innovation to block competition.
Mr. Carrier's testimony provided a series of alarming
examples:
One manufacturer's main reason for not seeking FDA approval
for off-label uses of their drug was that it ``wanted to
reserve them for a . . . promotional campaign for its
reformulated product.''
Another manufacturer obtained FDA approval for a once-daily
version of their Alzheimer's treatment, but waited three years,
until generic competition for their twice-daily drug was
imminent, before releasing it.
Big Pharma actually blocked the innovation they claim to
treasure--innovation that could have helped patients--until it
was most profitable.
I am proud to preside over this hearing in the Consumer
Protection subcommittee because Congress must take direct
action to protect American consumers from the deceptive actions
that drug manufactures take in their commercial practices.
FDA is responsible for protecting public health by ensuring
the safety, efficacy, and security of biological products,
including drugs.
FDA does not construe patent claims, and I agree with the
agency's conclusion that they should not be tasked with doing
so.
And though the FTC has brought some cases for anti-
competitive product hopping, it does not have explicit
authority to challenge anticompetitive hard and soft switches.
Americans should not have to hope the FTC can stop Pharma's
gaming of the prescription drug market--they should be able to
count on it.
And Americans should not have to wait years for costly
lawsuits to play out--or find that the generic has decided to
settle with the brand company for a hefty Pay-for-Delay sum.
I look forward to learning from our witnesses today, as I
craft legislation to protect consumers from Big Pharma's
evergreening tactics.
Such legislation will set a precedent that I hope will
force courts to recognize the consumer harms in
evergreening,
and discourage manufactures from engaging in their
anticompetitive practices to begin with.
We owe it to the American people to stop these practices,
and I will do everything in my power to do so.
The Chair now recognizes Mrs. Rodgers, our ranking member
for the Subcommittee on Consumer Protection and Commerce, for 5
minutes for her opening statement.
OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mrs. Rodgers. Thank you, Madam Chair. Good morning and
welcome to everyone to the Consumer Protection and Commerce
Subcommittee. I am proud that America has led the world in
research, cutting edge therapies, cures, saving lives, and
improving the quality of lives for countless here in America
and around the world.
I am also proud of the work of this committee in passing
21st Century Cures, bipartisan legislation that will continue
to keep us at the forefront. This really is an exciting time,
but there are so many possibilities for every disease, every
condition, and patients should always be put ahead of corporate
profits.
So we need to make sure certain companies are not gaming
the system to increase profits at the cost of patients.
Patients should also be put ahead of government actions that
limit access to lifesaving treatment.
Product hooping occurs when a drug company attempts to
switch patients from an older version of a drug to a newer
version. Sometimes they withdraw the old drug and replace it
with a new modified drug. Or they keep the old drug on the
market and shift the market towards a new drug with a new
marketing strategy.
The concern here is when bad actors use this tactic to game
the system and limit consumer choices with unaffordable costs.
We should be focusing on addressing those instances without
harming innovation. So bad actors who are intentionally acting
to monopolize the market and limit patient choice are held
accountable.
But not all product withdrawals or modifications are anti-
competitive. Bringing improved drugs to the market to compete
with older products is often what we need. It gives patients
access to more medications and treatments, and oftentimes in a
safer, more effective way to heal.
For instance, there is a drug treatment for degenerative
muscular disease that has required a delivery of the needle
through the eye. The company later developed a method for doing
it in the arm. Now I don't know about any of you, but I think I
would prefer to have it in my arm. Yet under some current
proposals, bringing the safer and preferred delivery could be
labeled ``anti-competitive.'' If a shot in the arm sounds
better to you, too bad. Government regulations say no. That is
not how it should be.
Increasing access to affordable treatments and prescription
drugs usually is a bipartisan issue. The Energy and Commerce
Committee unanimously passed several bills this year tackling
drug prices. Unfortunately, they were packaged with another
group of bills related to the Affordable Care Act that made it
partisan when it came to the floor.
But I am proud that this administration has done more to
lead in reducing the cost of prescription drugs than, well,
any--probably at any time. In fact, prescription drug costs are
coming down in America, and this administration has led to
breaking records for the amount of generic drug approvals at
the FDA, bringing down costs.
This year, for the first time in a long time, prescription
drugs overall have decreased. And to build on this process,
Energy and Commerce, through the Health Subcommittee, should be
encouraging our medical companies to invest in R&D that will
save lives.
Product hopping fixes that are broad or ambiguous will
discourage this. So as we move forward, I encourage this
committee to be precise. If we are not, the government will
hinder innovation, America will fall behind, and patients--
patients--will be left waiting for the cures that they long
for.
Nearly two-thirds of new drug approvals are for incremental
innovations. They should be welcomed and protected, not
demonized. On average, each new drug saves more than 11,000
lives each year. If we stop innovating, we risk dire
consequences. Improvements from each new drug can also
eliminate almost 20 billion in lost wages by preventing lost
work due to illness. For every incremental dollar spent on new
drugs, total medical spending decreases by more than $7.
Americans benefit from innovation, and our healthcare
system saves money because of it. Again, the U.S. is leading
the world in medical innovation, developing more lifesaving
treatments and cures than any other nation in the world. Our
committee has a history of working in a bipartisan cooperation.
Any proposal hopefully considered under regular order must
encourage innovation and go after the clearly anti-competitive
practices.
Thank you, and I yield back.
[The prepared statement of Mrs. Rodgers follow:]
Prepared Statement of Hon. Cathy McMorris Rodgers
Good morning and welcome to the Consumer Protection and
Commerce Subcommittee where today we focus on a healthcare
competition issue: product hopping.
Patients should always be put ahead of corporate profits,
so we need to make sure certain companies are not gaming the
system to increase profits at the cost of patients.
Patients should also be put ahead of government actions
that limit access to their life-saving treatments.
Product hopping occurs when a drug company attempts to
switch patients from their older version of a drug to a newer
version.
Sometimes they withdraw the old drug and replace it with a
new, modified drug, or they keep the old drug on the market and
shift the market towards the new drug with a new marketing
strategy.
The concern here is when bad actors use this tactic to game
the system and limit consumer choices with unaffordable costs.
We should be focused on addressing those instances without
harming innovation--so bad actors who are intentionally acting
to monopolize the market and limit patient choice are held
accountable.
But not all product withdrawals or modifications are anti-
competitive.
Bringing improved drugs to the market to compete with older
products is exactly what we want.
It gives patients access to more medications and
treatments, and often times a safer and more effective way to
heal.
For instance, there's a treatment for a degenerative
muscular disease that required delivery through a needle into
the eye.
The company later developed a method for the arm.
I don't know anyone who would prefer a shot in their eye.
Yet--under some current proposals--bringing the safer and
preferred delivery could be labeled anti-competitive.
If a shot in the arm sounds better to you, too bad.
Government regulations say ``no.''
That's not how it should be.
Increasing access to affordable treatments and prescription
drugs usually is a bipartisan issue.
Energy and Commerce unanimously passed several bills this
year tackling drug pricing only to have them packaged into a
partisan messaging bill on the floor.
Fortunately, the Trump Administration has led on this front
and is breaking records for the amount of generic drug
approvals at the FDA.
This year, for the first time in a long time, prescription
drug prices have decreased overall.
To build on this progress, Energy and Commerce, through the
Health subcommittee, should be encouraging our medical
companies to invest in R&D that will save lives.
Product hopping fixes that are broad or ambiguous will
discourage this.
We must be precise.
If we aren't, the government will hinder innovation,
America will fall behind world-wide, and patients will be
waiting for the cures they need.
Nearly two-thirds of new drug approvals are for incremental
innovations.
They should be welcomed and protected, not demonized.
On average each new drug saves more than 11,000 lives each
year.
If we stop innovating, we risk dire consequences.
Improvements from each new drug can also eliminate almost
$20 billion in lost wages by preventing lost work due to
illness.
Plus, for every incremental dollar spent on new drugs,
total medical spending decreases by more than seven dollars.
Americans benefit from innovation and our healthcare system
saves money because of it.
Again, the U.S. has led the world in medical innovation,
developing more life-saving treatments and cures than any other
nation.
Our Committee has a history of bipartisan cooperation in
building America as the global leader and no one here wants to
reverse progress we've made because of the 21st Century Cures
Act.
Any proposal--hopefully considered under regular order in
our Health subcommittee--must encourage this innovation and go
after clearly anticompetitive practices.
Thank you and I yield back.
Ms. Schakowsky. The gentlelady yields back.
And in lieu of the full committee chairman, Mr. Pallone,
the Chair now recognizes Mrs. Dingell for 5 minutes for an
opening statement.
OPENING STATEMENT OF HON. DEBBIE DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mrs. Dingell. Thank you, Madam Chair. Today we are
examining an often-overlooked issue in the drug pricing debate
known as product hopping or evergreening. As the Energy and
Commerce Committee works together, that is important. That is
what we should all be proud of, that we have, in many cases, to
provide relief to Americans from the high cost of prescription
drugs. We can't leave any stone unturned in examining ways to
address this issue.
All of us have heard from constituents who are forced to
cut pills in half, choose between paying for medication and
rent, or avoiding taking needed medicines entirely due to cost.
And we can't stop innovating and researching, but we need
to make sure--I continue to be horrified for these young
children. And we talk about insulin, which is one of the ones
we have to talk about, but the inhaler that now costs $700, the
EpiPen. People that can least afford it and don't have
insurance are many times the ones that need these medicines
more than anybody.
And part of the reason these costs remain so high is due to
the loopholes and tactics that some pharmaceutical companies
use to delay competition from generic drug manufacturers.
Competition is crucial to lowering prescription drug prices and
improving America's access to lifesaving medication.
When generic drugs enter the market in the United States,
prescription drug prices fall dramatically--try, up to 90
percent. And this is how a market should work, by rewarding the
innovation and promoting competition, and then the American
people benefit.
Unfortunately, we have been seeing increasing examples in
recent years of pharmaceutical companies exploiting the current
structure of our Nation's regulatory and patent system to block
competition and keep drug prices high through practices like
product hopping.
Product hopping or evergreening is the reformulation of a
drug by a brand-name manufacturer to delay competition and
protect protection for profit. This often just includes minor
changes, like reformulating a capsule to a tablet, small
changes in the dosing, the strength of a branded drug, other
changes that have little effect or therapeutic value.
Timed correctly, and combined with tactics like removing
the older version of the drug from the market or aggressively
marketing the new version of the product, pharmaceutical
companies can and do successfully block competing generic
products from the market. And the reason that this happens is
simple: a blockbuster drug can bring in hundreds of millions of
dollars each year in sales while under patent protection.
In fact, a 2016 study found that these sorts of tactics to
delay the generic competition cost Americans at least $5.4
billion annually. Currently, there is little recourse against
this when it happens. The FTC's authority to address product
copying is limited and unclear. And as a result, product
copying and similar practices have proliferated in recent
years.
It is my hope that today's witnesses will help us all learn
more about product hopping, yet their expertise and knowledge
will point us toward a solution that addresses this problem. I
want to thank them all for being here.
Inaction on this issue is not an option. High healthcare
and prescription drug costs affect all of us, regardless of our
background or party. I know just from having to buy more than
20 different prescriptions for John per month--and I had two
insurances and Medicare--what that cost is. Think of the mother
working two jobs with a child that has asthma and has to buy a
$700 inhaler.
This is an issue where bipartisan action is necessary and
needed. I know my colleagues share my concern, and it is my
sincere hope that this hearing forms the basis for future
actions and reforms.
Thank you for being here, and I yield back.
[The prepared statement of Ms. Dingell follow:]
Prepared Statement of Hon. Debbie Dingell
Today, we are examining an often-overlooked issue in the
drug pricing debate known as product hopping or evergreening.
As the Energy and Commerce Committee works to provide
relief to Americans from the high cost of prescription drugs,
we must leave no stone unturned in examining ways to address
this issue.
All of us have heard from constituents who are forced to
cut pills in half, choose between paying for medication and
rent, or avoiding taking needed medicines entirely due to cost.
Part of the reason these costs remain so high is due to the
loopholes and tactics that some pharmaceutical companies use to
delay competition from generic drug manufacturers.
Competition is crucial to lowering prescription drug prices
and improving Americans' access to lifesaving medication. When
generic drugs enter the market in the United States,
prescription drug prices fall dramatically, by up to 90
percent.
This is how a market should work--by rewarding innovation
and promoting competition, the American people benefit.
Unfortunately, we have seen increasing examples in recent
years of pharmaceutical companies exploiting the current
structure of our nation's regulatory and patent system to block
competition and keep drug prices high through practices like
product hopping.
Product hopping, or evergreening, is the reformulation of a
drug by a brand-name manufacturer to delay competition and
protection their profits.
This often includes minor changes, like reformulating a
capsule to a tablet, small changes in the dosing or strength of
a branded drug, or other changes that have little effect or
therapeutic value.
Timed correctly, and combined with tactics like removing
the older version of the drug from market or aggressively
marketing the new version of the product, pharmaceutical
companies can--and do--successfully block competing generic
products from the market.
The reason that this happens is simple--a blockbuster drug
can bring in hundreds of millions of dollars each year in sales
while under patent protection.
In fact, a 2016 study found that these sorts of tactics to
delay generic competition cost Americans at least $5.4 billion
annually.
Currently, there is little recourse against these types of
abuses. The FTC's authority to address product hopping is
limited and unclear. As a result, product hopping and similar
practices have proliferated in recent years.
It is my hope that today's witnesses help us all learn more
about product hopping, and that their expertise and knowledge
will point us toward a solution that addresses this problem. I
would like to thank them all for being here.
Inaction on this issue is not an option. High healthcare
and prescription drug costs affect all of us, regardless of
background or party. This is an issue where bipartisan action
is necessary and needed.
I know my colleagues share my concern, and it is my sincere
hope that this hearing forms the basis for future action and
reforms.
Ms. Schakowsky. The gentlelady yields back, and now I
recognize Mr. Walden, ranking member of the full committee, for
5 minutes for his opening statement.
OPENING STATEMENT OF HON. GREG WALDEN A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Good morning, Madam Chair.
Ms. Schakowsky. Good morning.
Mr. Walden. Thank you for having this hearing. It is really
important. We do look forward to the testimony from the
witnesses. Obviously, this committee has a long history of
going after these issues and stopping bad behaviors where we
have led on surprise medical billing, having a discussion about
that; we passed that out of here unanimously.
We rewrote the full FDA user fee agreements trying to get
generics to market sooner. We did that in a bipartisan
unanimous way--I think it passed. They were able to put 971
generics into market last year, record number in a single year,
so we believe in bringing competition to the market.
We have jointly worked together on Cures, 21st Century
Cures. And, you know, there is more work to be done there going
forward, but I think that was pretty much almost unanimous.
There were a couple of holdouts, I think, in the House. But
because investing in medical research and all that leads to
drugs and new treatments and precision medicine--as, my friend
from Michigan said, these diseases, these problems, hit us
regardless of background or party.
We were together in this committee on CREATES, stop bad
behavior. Unfortunately, after I left our good committee of
Energy and Commerce, it got wrapped up in partisan politics and
the poison pills were added on the floor. Otherwise, it would
have passed unanimously. The same on pay to delay and fixing
that. It got wrapped up and made poison on the House floor.
And I guess as we deal with this issue and get into these
individual problems, what troubles me this morning is we have
now been told we are going to have a hearing in the committee
next week, Wednesday, on legislation to completely rewrite how
we get our drugs and what we pay for them and how the
government operates.
And tragically, Republicans have been completely excluded
from any of those discussions. Completely. It has been done out
of the Speaker's office behind closed doors. And I don't know
if you have a copy of the bill, Mrs. Dingell, Ms. Schakowsky,
or anybody else. I don't. We have seen a summary. But it tells
me, unfortunately, this has gotten shifted over to be a
partisan political issue, not a solution for pharmaceutical
costs gone wild.
And I would hope that before we notice hearings, and I
would hope before we take this up next Wednesday, that we would
have a chance to read through the bill. I am deeply
disappointed we were not asked to be part of any discussions
leading up to it, and I know in some of the press clippings I
have seen already, some of you are not happy, and some of you
maybe haven't seen the bill either. But that is no way to deal
with both helping our consumers and making sure we don't trash
innovation.
We have proven our ability on this committee. This great
Energy and Commerce Committee is coming together on these
issues and letting the committee process work. But I think we
have all seen in our parties over time, when things get crafted
outside of our environs, they don't always get it right.
And then we are going to get jammed with a bill that we are
going to have very little time to review, and then come back,
and I am told mark up and vote on. And I just beg you and plead
with you; it doesn't have to be this way. It doesn't have to be
this way.
To your point, Mrs. Dingell, these diseases, they affect us
all. What you went through with John, what I went through with
my parents and my wife's mother, who had severe rheumatoid
arthritis. The poor thing passed away years ago, and she had to
deal with this her entire life. And we have all been hit by it.
My wife used to carry EpiPens, and then they became so
expensive her doc said, ``Well, you can probably get away with
a little Benadryl.'' Our son, as a youth, had an inhaler
because he had youthful asthma. Fortunately, he outgrew it.
We all went after EpiPen. We all went after these things.
We can all go after really good public policy in this sector,
too. But, please, let us be part of it. Let us be part of these
discussions.
We have really bright, capable people, as you know, on this
side, as you do on your side. Don't exclude us from the
legislative process. Don't spring a hearing for next Wednesday
and not even give us the legislative text, just somebody's
document on what it may be or not be.
That is not in the great traditions of this committee, and
it is not in the best interests of public health and solving
this problem we have. You have a President that is fully
committed. I have never--you can like or dislike Donald Trump;
I have never seen a President more engaged on this issue about
bringing down pharmaceutical drugs.
There is an opportunity to be had here to achieve great
results that will benefit our consumers, maintain innovation,
and keep America in the lead. And I hope that partisan politics
do not snuff that out. And with that, I yield back.
[The prepared statement of Mr. Walden follow:]
Prepared Statement of Hon. Greg Walden
Good morning, Today's hearing is focused on the
pharmaceutical industry and the practice known as product
hopping.
There's no question that Americans pay too much for their
healthcare, including the cost of prescription drugs. Over the
past few years, we have made significant efforts to lower the
cost of prescription drugs for consumers by advancing key
priorities that are now law, including the 21st Century Cures
Act, and a reauthorization of the generic drug user fee program
in the FDA Reauthorization Act. And it is already working--last
year FDA approved a record number of generic drugs, driving
competition and giving consumers more choices. Republicans will
continue to push for legislation that promotes competition,
lowers the out-of-pocket cost for consumers, and establishes
transparency and accountability in drug pricing.
But we should also acknowledge the investment required by
the industry to remain the global leader in developing
innovative and essential treatments and the effort and
ingenuity necessary to counter evolutions occurring in the
diseases themselves.
On average, it costs companies more than $2.5 billion to
bring a new drug to market, but only about 20 percent of the
marketed drugs ever earn enough to recoup those costs. And once
the patent exclusivity period is over, brand companies face the
likely loss of roughly 80-90 percent of their sales to generic
versions of their drug.
In large part, this is due to state substitution laws.
Every state has a substitution law that requires or allows
pharmacists to offer a generic drug when a patient presents a
prescription for a brand drug. However, if the brand drug and
generic drug are not the same, such substitution laws do not
apply.
For example, if a drug is not bioequivalent--meaning it is
able to be absorbed into the body at the same rate or
therapeutically equivalent--meaning it has the same active
ingredient, form, dosage, strength, and safety profile, then
state substitution laws do not apply. Some argue that brand
drug makers engage in product hopping to usurp these state
substitution laws and ensure patients use their brand drug.
Product hopping occurs when brand pharmaceutical companies
attempt to switch customers from an older version of a drug to
a newer version. Typically, the newer drug has a longer patent
exclusivity life which helps pharmaceutical companies maintain
their market position and ultimately recoup the cost of
developing new drugs.
There are two types of product hopping: a hard switch and a
soft switch. In a hard switch, a brand company completely
withdraws their product from the market to enter a new product.
A soft switch occurs when a brand company keeps their older
product on the market but shifts marketing efforts to the new
drug.
Courts have been clear that a product withdrawal or
improvement alone is not anticompetitive. Rather whether
product hopping is anticompetitive or not relies heavily on the
specific facts and circumstances of any given incident and
requires some additional wrongful conduct.
To be clear, innovating and replacing older drugs is part
of the normal competitive process that companies engage in
routinely. We must be cautious about disincentivizing
innovation. We know that brand drug companies incrementally
improve their drugs all the time and that we see great societal
benefits from such improvements. Most innovation by drug makers
involves the development of next generation improvements, which
may include new products that expand therapeutic classes, or
increase available dosing options, or remedy physiological
interactions of known medicines, or improve other properties of
existing medications. These are good things. We benefit from
them. In fact, according to the World Health Organization, more
than 60 percent of all drugs deemed necessary for combatting
prevalent diseases are the result of incremental innovation.
Today's discussion is important, and I am thankful to the
panel and to those that traveled to be here with us today.
Before I yield, I would like to say there is a form of
product hopping I do support--and that is a product hop to a
legislative hearing on autonomous vehicles or a hearing on
privacy, so I'll just say I associate myself with Mrs. Rodgers'
remarks in that regard. We know there is bipartisan support for
those two initiatives, and I know the subcommittee members are
eager to work on them.
I look forward to hearing more from you all. Thank you. I
yield back.
Ms. Schakowsky. The gentleman yields back.
The Chair would like to remind Members that, pursuant to
committee rules, all Members' written opening statements shall
be made part of the record.
And now I would like to introduce our witnesses for today's
hearing. Mr. Michael A. Carrier, distinguished professor at
Rutgers Law School, and co-director of the Rutgers institute
for Information Policy and Law.
We have Mr. David Mitchell, founder of Patients for
Affordable Drugs and Patients for Affordable Drugs NOW.
We have Ms. Joanna Shepherd, professor of law at Emory
University School of Law.
And Mr. Jeffrey Francis, senior vice president and general
counsel of the Association for Accessible Medicines.
We want to thank our witnesses for joining us today. We
look forward to hearing your testimony. And at this time, the
Chair will recognize each witness for 5 minutes to provide
their opening statements.
Before we begin, I just want to explain or remind people
about the lighting system. In front of you is a series of
lights. That light will initially be green at the start of your
opening statement. The light will turn yellow when you have 1-
minute remaining. Please begin to wrap up your testimony at
that point. And the light will turn red when your time expires.
So, Mr. Carrier, you may begin, and you are recognized for
5 minutes.
STATEMENTS OF MICHAEL A. CARRIER, DISTINGUISHED PROFESSOR,
RUTGERS LAW SCHOOL, CO-DIRECTOR, RUTGERS INSTITUTE FOR
INFORMATION POLICY AND LAW; DAVID E. MITCHELL, FOUNDER,
PATIENTS FOR AFFORDABLE DRUGS, PATIENTS FOR AFFORDABLE DRUGS
NOW; JOANNA M. SHEPHERD, PROFESSOR OF LAW, EMORY UNIVERSITY
SCHOOL OF LAW; AND JEFFREY K. FRANCER, SENIOR VICE PRESIDENT
AND GENERAL COUNSEL, ASSOCIATION FOR ACCESSIBLE MEDICINE
STATEMENT OF MICHAEL A. CARRIER
Mr. Carrier. Thank you, Chairwoman Schakowsky, and Ranking
Member Rodgers. Thank you for holding this hearing. Drug
companies play games to increase profits, and one of those
games is product hopping. The product hopping that I am talking
about today, if we deal with it, it is not going to touch
innovation at all, but it will bring lifesaving medications
into the hands of consumers.
My name is Michael Carrier. I am a distinguished professor
at Rutgers Law School. I study this area. I have written 115
articles, 60 on pharmaceutical antitrust law. I am quoted in
media and courts all the time.
The first point here is that generic competition is
crucial. When a generic enters the market, the price can fall
90 percent overnight. And so, that is a central part of the
Hatch-Waxman Act. The Hatch-Waxman Act says that the generic
can rely on the brand firm's clinical studies because we want
to have generics on the market. That does really good.
That is also why we have state substitution laws. Every
state in the country has a substitution law that says you can
automatically substitute a generic for a brand version, and
that is crucial as well.
And the reason we need all of this is something called the
price disconnect. There is no other industry where you don't
have one party that makes the price-quality determination. You
have the doctor that decides what drug to prescribe, and you
have the patient or insurance company that pays for it. And
with that disconnect, there is a lot of room for anti-
competitive games.
Now, it is not the case that every single reformulation is
a problem. And Ranking Member Rodgers, I completely agree with
you that we cannot go after serious innovations. If you have
something that initially is in the eye, and then you do it in
the arm, that is a really good innovation. That won't be
touched by any of the cases in the court system by any
legitimate legislation that your committee considers. That is a
real change.
And in fact, 80 percent of the changes take place at a time
that we don't expect a generic to be on the market because drug
companies make changes all the time, and most of the changes
are good. It is just those few bad apples, the few one or two
percent--and that is all it has been in the cases, one percent
of the cases. There is not going to be that much brought.
But in those cases, there is nothing new at all. There is
no new customer. There is no competition with another brand
firm. All that happens is that the change is made to keep the
generic off the market. And so the legislation that is
considered here really can be reasonable.
One of the concerns here is that every time that a brand
company switches from one version of a drug to another, from a
capsule to a tablet, or a 150-milligram dose to a 140-milligram
dose. The generic has to go back to the drawing board,
reformulate the drug, get FDA approval, and be subject to
patent litigation, so every single time, it is kept off the
market for years. And this has significant effects on
consumers.
And so one study found that $28 billion worth of drugs were
subject to product hopping. In my testimony, I mention several
of them--overpaying $1.7 billion for Namenda, and hundreds of
millions of dollars for other drugs. I talk about prices that
are so high. Adasuve is $4,500. Put together the component
parts yourself; it is $45. It really hurts consumers when they
have to pay a lot more than they should be paying.
I mentioned the five cases that have gone on in the court
system. Let me just mention one--Suboxone. Suboxone deals with
opioid dependency. It is a very important drug. Reckitt, the
brand manufacturer, switched from one version, the tablet, to
another version, the film. The tablet was a better version.
Consumers liked it better. It didn't have safety concerns. In
the film a kid, puts it in their mouth, and it dissolves
instantly.
Nonetheless, the drug company said the old version is the
unsafe one. Let's pull it off the market, even though it is
actually safer. They jacked up the price for the old one, even
though it was cheaper to make than the new one, and they knew
that they would give up profits, but they just did this to keep
the generic off the market.
And so there are some really concerning examples of what is
going on here. Of course, we have to worry about innovation,
but it is not the case that taking away antitrust liability
would help innovation in a lot of these cases. As we have
heard, the brand company withholds the innovation for years
until the generic is about to enter the market, and then it
springs it on the market.
There are reasonable solutions here. The Senate Judiciary
Committee passed a product hopping bill 22 to nothing,
completely bipartisan, deals with hard switches in which the
old drug is removed from the market, soft switches in which the
old drug stays on the market, gives the drug companies every
defense that they could want in terms of showing that it makes
some sense at all for what they are doing. So there is
reasonable bipartisan legislation to be had here.
So at the end of the day, drug companies call this life-
cycle management. It is not. It is really just keeping the
gravy train of trivial tweaks flowing. What this committee can
do, can really not touch innovation at all while making
consumers' lives better.
Thank you.
[The prepared statement of Mr. Carrier follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you very much, Mr. Carrier.
And now, Mr. Mitchell, you are recognized for 5 minutes.
STATEMENT OF DAVID E. MITCHELL
Mr. Mitchell. Chair Schakowsky, Ranking Member Rodgers,
members of the committee, I am honored to be here.
I am David Mitchell. I am founder of Patients for
Affordable Drugs. More importantly, I have an incurable blood
cancer called multiple myeloma, and prescription drugs are
keeping me alive. Every two weeks, I spend half a day at a
clinic getting an infusion of drugs that, unfortunately, are
slowly failing.
So last night, I started taking a new oral chemo drug.
Together, my drugs carry an annual list price of $875,000 a
year. I have relapsed twice. Eventually, I am going to run out
of options. So the importance of innovation is not theoretical
to me. It is literally life and death.
But my experience has taught me one irrefutable fact, and
that is drugs don't work if people can't afford them. That is
why today's hearing is so important.
Take AbbVie and the cholesterol drug TriCor, Catherine of
Minneapolis told us, ``My price for TriCor went up hundreds of
dollars per month. The pharmacist whispered to me that if the
doctor had changed the order to 160-milligram tabs and I broke
it in half for the 80-milligram dose, it would only have cost
me 40 bucks.'' Catherine didn't know it, but she was describing
a classic case of product hopping.
But to address the problem of out-of-control prices, we
really have to come to grips with some larger facts. Despite
what drug companies tell us, sky-high prices are not about
innovation. Multiple studies show there is no correlation
between the costs of R&D and the price that is assigned to a
drug. And taxpayers' foot a huge portion of the bill for basic
science that leads to new drugs.
Every single drug approved by the FDA from 2010 to 2016 was
based on science funded by taxpayers through the NIH.
Meanwhile, independent analyses show that nine of ten drug
companies spend more on advertising and marketing than they do
on R&D.
Why do drug companies charge so much? Because they can.
Yes. As drug companies should make a profit when they develop
innovative drugs, but we are way out of balance, and it is
costing us all in our family finances, our health outcomes, and
our lives.
So I want to suggest three things we could do to rebalance
the actual risk of innovation with a fair price for patients.
Reform patent law, including provisions to stop product
hopping; end the days of monopoly pricing power without
taxpayer negotiation; force transparency from drug middlemen.
Let's start with patent law. Brand drug companies are
abusing our system to extend their government-granted
monopolies and block competition. There is a whole array of
tactics. Product hopping is just one.
The classic version has been described by Professor
Carrier, so I won't go into that.
When faced with patent expiration and generic competition
on its blockbuster drug Suboxone, the maker changed from a
tablet to a film that dissolved under the tongue. Professor
Carrier described it.
We heard from a California woman named Janice. She was
supporting her son recovering from opioid use disorder. During
this time, she paid over $250 a month for Suboxone. She was
forced to take out a loan and depleted all of her savings to
pay for this medication.
Now, there are bills in Congress this year that offer
solutions. I would be glad to discuss them in the Q&A. Yes. In
all that we do, we have to address--in all that we do to
address product hopping; we have to ensure that we reward
genuine innovation and stop anti-competitive practices.
Next, we need direct Medicare price negotiations. We pay
two to three times what other countries pay for the exact same
drugs. One big reason is that they negotiate; we should, too.
And, finally, we need more transparency around PBMs. These
huge companies cut deals that determine how much patients pay,
but it is all secret.
Right now, there is a fundamental question that drug
companies want us to ask about drug prices. What are we willing
to pay to save a life? And I can tell you, that is easy. When
it is your child on the gurney who can't breathe, when it is
your cancer, the answer is: anything.
But that is the wrong question. The right question is: what
is the amount of money that drug companies should be making on
these drugs?
With hundreds of clinical trials underway for exciting new
cell and gene therapies that are coming to market at a half a
million dollars or as much as $2.1 million, we cannot afford to
pay just any price that drug companies demand. Neither American
families nor our healthcare system can afford that.
I feel incredibly grateful to be here today, alive and
representing patients from all across the country. I believe
the moment is at hand that we can address this problem, and
with bipartisan support, we will.
Thank you for having me.
[The prepared statement of Mr. Mitchell follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. We are glad you are here and alive as well.
Thank you for your testimony.
And now I want to recognize Ms. Shepherd for her 5-minute
statement. Thank you.
STATEMENT OF JOANNA M. SHEPHERD
Ms. Shepherd. Thank you. Chairwoman Schakowsky, Ranking
Member Rodgers, and distinguished members of the subcommittee,
thank you for the opportunity to testify today about product
hopping and the pharmaceutical industry.
My name is Joanna Shepherd. I am a professor of law at
Emory University, and I hold a Ph.D. in economics. My research
focuses on various topics in law and economics, including
competition and the healthcare industry.
Replacing older drugs for newer drugs is generally part of
the normal competitive process. According to the World Health
Organization, over 60 percent of drugs deemed necessary for
fighting common diseases are the result of incremental
innovations.
Most of this activity is pro-competitive. Consumers have
access to more products, and newer products are likely to be
safer and more effective. We should encourage drug companies
both to invest in improving their products and to bring those
drugs to market when they are available.
However, when certain conditions are met, some product hops
may be anti-competitive, coercing consumers to switch drugs and
depriving them of choice. It sounds like this committee is very
interested in finding that balance where we are preventing
these anti-competitive measures but also protecting innovation
that is so vital to the consumers--American and around-the-
world consumers of pharmaceutical drugs.
In this testimony, I am going to focus on how to achieve
that balance. My testimony is based on both court decisions and
rulings in past cases, and also existing competition law. I
will explain that a hard switch that eliminates consumer choice
with no offsetting consumer benefit is likely an anti-
competitive product hop.
Similarly, a soft switch that significantly interferes with
consumer choice, to the point that it effectively eliminates
it, with no offsetting consumer benefit, is likely anti-
competitive as well.
So when, in a hard switch, is consumer choice eliminated?
This happens when consumers are coerced into switching to the
new product because there are no available alternatives to the
original product. This would occur, for example, if an older
drug is pulled from the market right before its patent expires
so that the generics waiting to enter the market could not use
automatic substitution laws to penetrate the market of the
older drug. In this situation, consumers would effectively have
no choice but to switch to the new drug.
In contrast, a hard switch would not eliminate consumer
choice, if it occurred after generics had already penetrated
the market. In this situation, patients would already be
accustomed to taking the generic versions of the drug, so
replacing the older drug would not coerce them into switching
from the generic they had already been taking.
In fact, in this case, the product switch would be pro-
competitive because it would give consumers more choice. They
would still have the generic version of the old drug, plus
newer drugs available.
A hard switch would also not eliminate consumer choice if
brand companies replaced a drug that had plenty of patent life
remaining and no generics anywhere on the horizon. This switch
would also not reduce consumer choice because consumers would
have had one drug to choose from before and one drug to choose
from after.
These examples suggest there is a very specific window
during which a hard switch can be presumed to be anti-
competitive. For conventional small molecule drugs, this window
likely starts around the time a generic file an acceptable ANDA
containing a paragraph four challenge. The window ends
approximately three or so months after generic entry because
research shows that within three months of generic entry,
generics have captured about 70 percent of the brand drug's
market share. So maybe you want to, you know, flex that a
little bit, but it is around that time.
Outside of this window, however, a hard switch would
generally not eliminate consumer choice.
Moving on to a soft switch, when is consumer choice
significantly interfered with to the point that it is
effectively eliminated? This happens when consumers have no
practical alternative but to switch to the new product.
For example, if brand drug companies communicate fabricated
safety concerns about an older product to doctors, as they did
in the Suboxone case, then patients effectively would have no
choice but to switch to the new drug.
Similarly, if a brand company destroys inventory of the
older drug, the consumers would effectively have no choice.
However, a soft switch would not significantly interfere with
consumer choice, if the brand company engages in standard
business practices that typically accompany the introduction of
new products. These include reallocating marketing efforts,
offering price discounts or samples, so patients will try the
new product, or encouraging doctors in a legal way to direct
patients to these new products.
While these practices may shift market share, they do
nothing to eliminate the availability of the older drug or to
coerce patients into switching. Moreover, because the older
drug remains freely available for doctors to prescribe,
generics can continue to take advantage of automatic
substitution laws.
So in a soft switch, the degree of interference to
effectively eliminate consumer choice will typically require
some other wrongful conduct that unfairly disadvantages the
original product. If it does not unfairly disadvantage the
original product, then patients and their doctors can choose
which drug they prefer.
Finally, I will end with a word of caution. Legislation to
define what activity constitutes anti-competitive product
hopping could potentially reduce healthcare spending and spur
innovation by clearing up current ambiguity in the case law.
However, if the legislation is too broad, in that it covers
too many standard business practices or too vague, and that
drug companies can't predict what behavior will lead to
significant litigation, then the legislation will end up
reducing innovation. This can have long-term negative effects
on consumer health and healthcare spending.
Thank you.
[The prepared statement of Ms. Shepherd follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you very much.
And now let me welcome Mr. Francer. I pronounced your name
wrong before, and I want to get it right. And you are
recognized for 5 minutes.
STATEMENT OF JEFFREY K. FRANCER
Mr. Francer. Thank you, Chairwoman Schakowsky, Ranking
Member Rodgers, members of the subcommittee. Thank you for
holding this important hearing today and for the committee's
sustained efforts to bring down prescription drug pricing.
As stated before, my name is Jeff Francer. I am the general
counsel of the Association for Accessible Medicines. We are the
Nation's leading trade association for manufacturers of FDA-
approved generic and biosimilar medicines.
Competition through the introduction of generic and
biosimilar methods is a proven solution to lowering the cost of
prescription drugs for patients. However, the continued
availability of generic medicines is in jeopardy. Current
market realities, combined with anti-competitive tactics,
threaten the long-term stability of generic and biosimilar
manufacturers.
Increasingly, brand-name drug companies are building patent
thickets around their drugs, not just for the original
innovation but for smaller changes that may not be deserving of
decades-long monopolies. To cite just one example, Lantus, an
insulin treatment for diabetes, is protected by 49 patents; 95
percent of them were filed after the drug was approved. While
Lantus was approved in the year 2000, it has patent protection
out now to 2031.
This problem significantly impairs competition and, not
surprisingly, increases drug costs for patients. One anti-
competitive tactic that we are discussing today is called
product hopping. As discussed previously, product hopping
occurs when a brand drug company seeks to switch patients to a
new version of its drug just before the original one becomes
subject to competition.
In many cases, the switch is forced on patients because the
brand-name drug companies stop selling the original medicine,
and this is called the hard switch. The main goal of such
switches is not to protect our health. Instead, these switches
are designed to extend the brand-name drug company's monopoly
pricing and to delay competition.
Several cases illustrate the potential anti-competitive
effects of product hopping. Namenda is a treatment for
Alzheimer's. Ahead of competition, the brand-name drug company
attempted to withdraw its immediate release formulation from
the market. The company then tried to switch patients to its
new extended release formula.
The drug company did so knowing that physicians would be
highly reluctant to switch patients back to the earlier
formulation if lower-cost generics were later approved, and the
brand-name company's own documents confirm this.
One of the drug company's employees stated, and I quote,
``If we do the hard switch, convert patients and caregivers to
once-a-day therapy versus twice a day; it is very difficult for
generics to then reverse commute back.''
Another troubling example that we have discussed is
Suboxone. In the middle of one of our worst public health
epidemics, the brand-name drug company delayed patient access
to a more affordable version of this opioid treatment. Put
simply, product hopping tactics employed by some brand-name
companies delay generic and biosimilar competition, and this
keeps drug prices in the United States the highest in the
world.
Here is why. First, product hopping impairs automatic
substitution. Under many state laws, a generic can
automatically be substituted for the brand-name drug at the
pharmacy counter if it is therapeutically equivalent to the
brand.
By changing the dosage form or the strength of the brand
drug, pharmaceutical companies ensure that generic companies
will not be therapeutically equivalent and, therefore, not
substitutable.
Second, brand-name drug companies are able to delay patient
access to lower-cost medicine by patenting minor modifications.
To address these anti-competitive tactics, AAM supports
legislative changes to strengthen competition. Any legislation
should be carefully calibrated and not overly broad, as we just
discussed.
AAM is supportive of innovation, and we recognize that many
changes to existing medicines result in meaningful health
benefits.
In closing, AAM encourages the committee to consider
several options, including ensuring a date certain for generic
and biosimilar competition, accelerating the biosimilar patent
dance in the BPCIA, harmonizing Hatch-Waxman with the America
Invents Act, requiring more timely FDA action on biosimilar
labeling carve-outs, and ensuring that generics and biosimilars
are fully available to patients.
I describe each of these solutions in more detail in my
written testimony, and AAM would be glad to work with the
committee on each of them.
In closing, I thank you for the opportunity to testify, and
I also just learned this morning that today is Mr. Mitchell's
20th wedding anniversary. And I wanted to say for the record,
Happy Anniversary.
[Applause.]
Mr. Mitchell. Thank you.
[The prepared statement of Mr. Francer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thanks for updating us about that.
Congratulations.
So we have concluded witness opening statements, and at
this time we will move to member questions. Each member will
have 5 minutes to ask questions of the witnesses, and I will
start by recognizing myself for 5 minutes.
It is clear from the testimony that we have heard today
that Congress has an opportunity to act to combat the gaming
tactics of Big Pharma. And I just wanted to say that I do
appreciate what seems to be the unanimity of carefully crafting
legislation, and that is what I am currently trying to do to
prohibit the actions that will soon be considered by the--these
actions considered by the subcommittee.
The legislation has a two-fold purpose. First, it will
provide the Federal Trade Commission with authority to take
action against a manufacturer engaged in product hopping; two,
to seek remedies for these tactics, like the collection of
unjust profits that a drug manufacturer gained as a result of
inappropriate product hopping.
And second, my bill will allow for greater transparency in
drug pricing. The bill will let's see--well, the goal of this
list is to provide the American taxpayers with the transparency
that they deserve and to provide physicians with a public
database to research drug information because--before decisions
to prescribe them to their patients over generics.
So, Mr. Carrier, does the FDA currently maintain a list of
products that are substantially similar, other than a minor
change in formulation?
Mr. Carrier. No, it does not.
Ms. Schakowsky. Is there currently a straightforward online
resource that physicians can rely on to corroborate the things
that Pharma sales representatives are telling them about the
drugs?
Mr. Carrier. No. I am not aware of anything like that.
Ms. Schakowsky. Is there a common resource that patients
could use to confirm whether they need a reformulated brand
drug over a generic?
Mr. Carrier. No, there is not.
Ms. Schakowsky. Thank you.
Again, Mr. Mitchell, I want to thank you so much for coming
and sharing both your personal story and the story of so many
others. You said that you started on a new chemo drug just last
night. How much does that drug cost, and what is your out-of-
pocket cost?
Mr. Mitchell. This drug is called Pomalyst. Twenty-one
capsules in this bottle that I take 21 days off, and then seven
days--21 days and then seven days off, about $17,200 list. My
out-of-pocket under Part D is going to be north of $13,000 a
year for this drug. That is one drug that I take.
Ms. Schakowsky. My goodness. Can you tell us why
transparency around product hopping and reformulations would be
helpful for you as a patient and for your physicians?
Mr. Mitchell. When a company does what has been described
here by the experts on both of my sides, it can result in a
product that does not deliver any improvement for me,
clinically or therapeutically, may not reduce side effects, and
may do nothing to help me.
So having that database that you have described available
from my physician, or from myself, to be able to go online and
find out, is this the same drug? Did it really change? Does it
deliver any incremental benefit? It would be very helpful in
sizing up choice-making and my ability to have a conversation
with my physician about whether that is the right drug for me.
Ms. Schakowsky. I wonder if you wanted to add anything, why
you believe evergreening is among the most critical of the
issues for patients.
Mr. Mitchell. As I said in my opening statement, innovation
is critical important to me. It is not a theoretical matter. I
need them to invent new drugs, or I am going to die sooner than
I hope to.
So when drug companies can evergreen, extend life
inappropriately on an existing product, or build a patent
thicket around their product, so we can't get a new drug, a
generic drug to market, when they can extend the life and
profitability of old drugs, they do not spend their money to
invest in new drugs.
So, for me, having them have to compete and having them
have their period of time under Hatch-Waxman or under the ACA
or under the Orphan Drug Act run out; in terms of their patent
and exclusivity, so that they need to invest in new drugs,
helps me.
Ms. Schakowsky. Thank you so much.
I now want to recognize Mrs. Rodgers, subcommittee ranking
member, for 5 minutes to ask questions.
Mrs. Rodgers. Thank you, Madam Chair. And to our panel, I
want to say thank you. I completely agree that we should be
holding companies accountable for anti-competitive behavior. I
believe that this Congress should pass legislation to increase
transparency and accountability of PBMs, the middlemen within
this whole system.
I also want to associate myself with Representative Greg
Walden's opening statement. The fact that next week we are
having a hearing on a major bill to address the cost of
prescription drugs in America that we haven't even seen yet, I
believe, is making a point, not solving a problem.
This committee has a rich history of working together to
solve problems. And to my colleagues, Republicans, and
Democrats, I really ask us all to dig deep. It seems like we
are becoming very good at playing partisan politics.
Republicans blame the Democrats, and the Democrats blame the
Republicans. I am personally weary of it. And in the meantime,
people despair.
You know, I am giving a lot of thought to the increased
suicides we are seeing in America. People are despairing. And
as we fail to act on behalf of the people that elected us, we
are failing the people of this country. We should be giving
people hope. Hope for so many who are sick, who are combating
diseases, or live with a disability, the hope comes through
research, and it comes through breakthroughs. It is not going
to come through a bill that is passed by one party that goes
nowhere.
So this committee worked in recent years to advance--well,
bipartisan--to advance the FDA Reauthorization Act, which
provided FDA with new tools and pathways to bring generic
brands to market.
And we heard today how important this is. This
administration has proved--has successfully approved 781
generic drugs in 2018, which was a 90 percent increase from
just four years prior.
So, Mr. Francer, I wanted to ask just--would you address
what you think this--how much of an impact this is having as
far as increasing the competition. That is important to holding
these companies accountable.
Mr. Francer. Yes. Thank you very much for the question.
Generics and biosimilars can bring enormous savings to patients
like David Mitchell and all of us. They brought about $300
billion in savings through the whole health system last year
when you compare the brand price versus the generic price.
The turnover in competition is critical to allow that, and
of course, the innovative drug has to have the ability to have
a return on its investment. That said, I wanted to call your
attention to an increasing problem whereby Medicare Part D
plans increasingly aren't even covering the generics when they
are launched, and that is something that we have to make sure
that when there is this turnover to competition, patients and
taxpayers can get the savings there.
Mrs. Rodgers. Absolutely. Thank you. Thank you for that.
That is helpful.
Dr. Shepherd, understanding that we have seen and know how
important competition is, how can we balance the important need
for innovation and drug improvements with ensuring generics can
continue to compete?
Ms. Shepherd. I think that balance is very important. I
think it would involve, you know, obviously, defining what is
anti-competitive conduct, and that being the activity that the
legislation addresses, and that potential remedies would
address, but also being extremely clear about what that is and
what would not be considered anti-competitive, so that any
legislation is not too broad that it covers standard business
practices or is not so vague that pharmaceutical companies who
are often making investment decisions and R&D 10 or so years
before they would ever have a ruling on whether or not their
activity is anti-competitive, they can actually predict what
they are doing and if it makes sense to invest hundreds of
millions of dollars in a new drug because they can reliably
predict that it will not be considered anti-competitive under
legislation.
Mrs. Rodgers. We understand that replacing older drugs with
newer, better products is not, alone, anti-competitive, but may
deter competition in the future. When do such actions become
anti-competitive?
Ms. Shepherd. I think for a hard switch, I think that the
window is very important. So are there generics imminently
about to enter or have they just recently entered but they
haven't gained hold yet? I think that is important.
And the soft switch, I think what is really important is,
is there other wrongful conduct like falsely disparaging the
old product in the Suboxone case, or some other sort of
wrongful conduct? It can't just be that introducing a new
product and leaving the old product on the market is anti-
competitive. It has to be more.
Mrs. Rodgers. Thank you. Thank you very much.
I yield back.
Ms. Schakowsky. Let me just say to our ranking member, I
feel that on this subcommittee where we have a very broad
jurisdiction, we have been able to pass some important bills,
like we did last week. And I hope going forward, as with this
piece of legislation, that we can work together on that. I
think there is a lot of unanimity among our witnesses today,
and I think that can be true of us as well.
So I am hoping to maintain an atmosphere on all of the
bills--of bipartisanship on all of the bills that we deal with.
So the Chair now recognizes Congresswoman Castor for 5
minutes.
Ms. Castor. Well, thank you, Chairwoman Schakowsky. Thank
you for organizing this hearing on how drug companies are
gaming the system. Consumers know this. I hear it all the time
from the families who I represent back home in Florida. They
are paying astronomical amounts of money for their prescription
drugs, and it is unconscionable in America that drug prices are
so high that it is driving some families into bankruptcy and
into debt.
In many cases, these drug prices are artificially high.
Drug companies are gaming the system, and as our witnesses have
illuminated--and I want to thank you all for your illuminating
testimony--brand- name drug companies engage in this outrageous
monopolistic practice known as product hopping. Product hopping
occurs when one pharmaceutical company's drug is about to lose
its government guaranteed exclusivity, so the company
introduces a slightly different drug with the purpose of
keeping much cheaper drugs--generic drugs--out of the market.
And this practice has gotten so harmful that the Federal
Trade Commission and the courts have stepped in to stop it, and
now we need to develop some legislative remedies as well.
Manufacturers are doing this in order to delay or
altogether frustrate competition against their products, and
consumers are paying the price.
Let's talk about a real-world example, the drug Namenda
that was used to treat--that is used to treat dementia
associated with Alzheimer's. A recent court found that Forest
Laboratories, the manufacturer, had engaged in both a soft
switch and a hard switch to thwart generic competition.
The case revealed that Forest acknowledged that it would
convert patients and caregivers to a once-a-day therapy versus
a twice-a-day therapy if it made a hard switch, and most
troublingly, that they knew this. It is very difficult, then,
when a generic is introduced to get the patients to convert
back.
So the market analysis uncovered that in the Namenda
proceedings Forest Labs' own data showed that a soft switch in
their case would switch only 30 percent of patients to the
newer, more expensive product, but the hard switch would move
80 to 100 percent of patients.
Forest Labs, in this case, actively and brazenly sought to
undermine generic uptake. In reality, this meant that Forest
Labs unfairly profited off of Alzheimer's patients. This is
what is going on, and this is unconscionable.
So I want to ask our witnesses for their help. Mr. Carrier,
could you please describe the kind of behavior that constitutes
a hard switch again and maybe give us another example?
Mr. Carrier. Sure. So a hard switch is when the drug
company removes the old version from the market, and so there
are several cases that involve--it is the Doryx case, the acne
drug in the Third Circuit, involved the brand company pulling
the old version off the market. The hard switch, the old one is
gone. The soft switch, the old one technically remains on the
market.
Ms. Castor. So, Dr. Shepherd, you had--in your testimony to
us, you highlighted a possible remedy, possible fix for this.
Is there a downside for consumers if a hard switch approval is
delayed until after the generic is introduced on the market?
Ms. Shepherd. No. There is not a downside for--if it is
just after the window and generics have been able to come in,
there shouldn't be much of a downside for consumers.
Ms. Castor. And there is nothing in the law that regulates
that now.
Ms. Shepherd. No.
Ms. Castor. Is that right?
Ms. Shepherd. Yes.
Ms. Castor. So, Chair Schakowsky, I would recommend that
for your bill as you develop it. That seems to be one answer.
Mr. Carrier, do you agree?
Mr. Carrier. So I have offered in my scholarship a generic
window that is very important, because if the brand company
makes a change at a time that you don't expect the generic to
be on the market, I say it should be automatically legal. And
so my window is a bit different than Professor Shepherd's, but
I do want to give the brand every benefit of the doubt when
there is no generic about to enter the market.
Ms. Castor. Thank you very much. I yield back.
Ms. Schakowsky. The Chair now recognizes Mr. Latta for 5
minutes.
Mr. Latta. Well, thank you, Madam Chair. And thanks very
much for holding today's hearing, and thanks very much to our
witnesses for being with us today. And no one can deny that one
of the greatest concerns that the American public out there has
is the price of prescription drugs. I have long believed that
this Congress must take action and work in a bipartisan fashion
to address the rising cost of prescription drugs.
At the same time, we should be supporting, not hampering,
efforts that seek to improve the treatment of diseases and
health issues.
If I could start my questions with you, Dr. Shepherd. In
your testimony, you go into great detail about explaining the
difference between the hard switching and soft switching of
products. And on the hard switches, you mention an exception
for when a new product is safer or significantly more
effective.
Would you go in more detail about this exception or give
any examples of when companies have developed a new product and
compelled consumers to seek it out by pulling the old product?
Ms. Shepherd. Sure. So I would include, you know, either a
product that is clearly safer or significantly more effective
as allowing a switch that would otherwise be within this window
that we all seem to agree, you know, should be important. And,
you know, there is numerous examples of products that have been
pulled and new ones put on, whether or not there is some sort
of FDA finding that some small component is not as safe as was
originally believed, and so the new drug is made with new
compositions that are found to be safer.
And there is even other kinds of examples where things that
we may originally think of as very small formulaic tweaks that
shouldn't matter end up mattering a lot. So, for example,
current antimalarial drugs, the tweaks that were made to it
included combining two drugs, so patients take one drug instead
of two, extending the shelf life, and making a new pill that is
dissolvable in water.
And each of those sound so simple, and like clearly
somebody is trying to take advantage of something, but they end
up mattering so much. I mean, shelf life matters in tropical
climates. When a drug can be dissolved in water, that means
infants can take it, who are most vulnerable to malaria. And
combining two drugs into one is really important to reaching
people where there is an issue of cost and availability of
drugs.
And so we just need to be careful about what we define as
improvement in efficacy because in different situations some
things can matter a lot, but they wouldn't in others.
Mr. Latta. Let me follow up with another question for you.
You also stated that there are dangers with introducing
legislation to regulate this issue because it could reduce the
innovation and increase spending.
Do you see a benefit in allowing the courts to continue to
interpret the statutes that are already on the books, or in
determining anti-competitive behavior and practices instead of
adopting any new legislation?
Ms. Shepherd. I think new legislation could certainly make
things a little bit more clear. I mean, there is a lot of
similarity between the only two Circuit Court decisions we have
on this issue, but there is also some disagreement, and I think
there is uncertainty in the industry. So I think that
legislation that minimizes this uncertainty would definitely be
helpful to both innovation and to consumers.
Mr. Latta. And, again, what are some of those unintended
consequences that are out there that can arise if Congress,
instead of the courts, might be the ones trying to regulate the
soft switching of the products?
Ms. Shepherd. Well, unintended consequences, I think if the
legislation was too broad, and so by its language caught up
behavior that could lead to true product improvement and not
just these kind of sham innovations that we seem to all agree,
you know, is an issue. So I think overly broad legislation
would be a problem.
And also, if it I guess codifies ambiguity, that would be a
problem as well, because that actually could even increase the
vagueness in the current law from what we have today if the
legislation is too kind of vague about what is anti-competitive
and what isn't.
Mr. Latta. Well, thank you.
Madam Chair, I know the clock hadn't started when I started
my questioning, and so I am going to yield back the balance of
whatever time is remaining.
Ms. Schakowsky. I am now recognizing Mr. Van Hollen--
O'Halleran, sorry--I will get these names right--for 5 minutes.
Sorry.
Mr. O'Halleran. Thank you, Madam Chairwoman, and Ranking
Member McMorris Rodgers, for holding this hearing on this
incredibly important topic, one that I hear a lot about from
individuals, from families in the 1st Congressional District of
Arizona.
I have attended 24 town halls this year alone, and the
exorbitant cost of healthcare, particularly prescription drugs,
is the number one issue I hear about from constituents. I am
pleased that Chairman Pallone and Chairwoman Schakowsky are
committed to advancing legislation that would address this
serious issue.
As we consider proposals this month that aim to lower the
cost of prescription drugs, I believe it is important that we
adopt an approach that encourages innovation and competition
while ensuring that the cost savings are appropriately passed
down to the consumers.
After hearing your testimony today, I have a number of
questions here. But you basically have helped confuse the
issue, not because of you but because of the seriousness of
this issue and how the system is put together. I think this
would be a great time for about an 8-hour session with all four
of you, but we can't do that today.
So what I would like to do is go down the table. I am
concerned about the case law and how we could affect it or not
affect it if we don't do it. I am concerned about the direction
we are going in. It is obvious just negotiating drug prices is
not the bottom line of what we have to accomplish here in
Congress, that we have to identify how the system cannot be
worked and manipulated to counter any price changes.
And so if I can get your opinions and ideas and concepts, I
would like to start out with Mr. Carrier.
Mr. Carrier. This is one of the most important drug issues
that you all can address. I have no faith that courts are going
to get it right when they keep focusing their analysis on
choice and coercion and saying, oh, consumers have a choice
because there are two products on the market. That is what the
courts have done.
In the Walgreens case, in the Asacol case, they said
consumers have a choice because there are two products on the
market. This is not about consumer choice when you have a price
disconnect. There is one party that selects the drug. There is
another party that pays for it. So by making clear that a soft
switch can present anti-competitive harm, that is a real
benefit that this committee can do.
Mr. O'Halleran. Mr. Mitchell?
Mr. Mitchell. Thank you. I think that Congress passed
Hatch-Waxman to balance the need for innovation and allowing
markets and competition to lower the price after a period of
exclusivity. When drug companies try and bend or abuse that
framework, then we are not getting the benefits of the Hatch-
Waxman framework.
So when a practice by a brand drug company that is
essentially bringing a drug to market with no clinical or
therapeutic improvement for patients, when they bring that to
market, in order to defeat generic competition, and especially
to defeat state substitution laws, which were put in place to
make Hatch-Waxman have more of an engine, then that would be a
time when the courts should be told this is a clear case of
abuse.
Mr. O'Halleran. Ms. Shepherd?
Ms. Shepherd. Yes. I would make two points. I think that
the window is very important. We all seem to agree that, you
know, the circumvention of the automatic substitution laws is a
big part of the problem, and so there is a window in which that
is important. And so limiting any sort of kind of presumption
of anti-competitive behavior to that window I think would
eliminate a lot of the problems that we are concerned with.
And then, second, on the soft switch, I think that is where
there is the real risk of catching too many behaviors that we
would just consider normal business behaviors. And so I think
defining what needs to be present in a soft switch, what kind
of wrongful conduct are we considering as presumptively anti-
competitive. I think that would be very important as well.
Mr. O'Halleran. Mr. Francer?
Mr. Francer. Yes. As the whole committee is looking for
solutions, I would also look towards, how do we make the patent
system more effective and less of a blockade? This committee
passed the BPCIA, which was the Biosimilars Pathway, and we are
seeing that dozens and dozens of patents are really blocking
the availability of these drugs, which are essentially the
generic versions of these very expensive biotech drugs.
I would try to accelerate the patent dance that occurs and
try to deal with the costly litigation, which is slowing down
these approvals and their ability to get on the market.
Mr. O'Halleran. Thank you.
And thank you, Madam Chair. I yield.
Mr. Soto [presiding]. The gentleman yields back.
The Chair now recognizes Mr. Bucshon.
Mr. Bucshon. Thank you. I appreciate that. I was a surgeon
before I was in Congress, so this is kind of very--I have a
very strong interest in this. First, I want to say I associate
myself with Ranking Member Walden's statement, and I would
implore us to bring bipartisan bills passed unanimously out of
this committee to bring down drug prices to the floor for a
vote.
And we see today we have an introduction of a very partisan
big government bill as it relates to drug pricing, so it may be
clear--it is kind of clear to me, at least at the leadership
level on the majority side, that there may not be much interest
in actually getting something signed into law but to play
politics primarily against the President.
That said, you know, I am interested in bipartisan
solutions, and I think everyone on this subcommittee and the
Health Subcommittee are. I am very proud of this committee and
the fact that we have worked in a bipartisan way for many, many
years on very tough issues and found common ground, and I think
we can on drug pricing issues also.
As has been mentioned by both sides, this is a front burner
issue for everyone that I represent. When I talk to people out
there, healthcare costs, specifically drug prices, is one of
their top issues for an American family sitting around the
kitchen table looking at their budget.
And so I am hopeful and optimistic that we can address it.
And I appreciate all of your testimony today. I found a lot of
harmony in the testimony across everyone. I think there are
nuanced differences in the approach to maybe address the
problem, but they are not that far apart, which I think gives
us a great opportunity in this subcommittee to really find
common ground to address it.
A couple of things. Dr. Shepherd, minor changes--``minor
changes'' to existing drugs that can't be justified by
innovation and drives up cost to consumers, do you think that--
you know, first of all, do you agree that that is happening a
lot?
And also, who is best positioned to determine what
constitutes a minor change? Because everything here and what we
do, and in your legal profession, the language matters, right?
So who is best positioned to assess what minor changes might be
and what the benefit or detriment to the consumer is?
Ms. Shepherd. Sure, sure. Well, I guess I will answer your
last question first. I mean, I would say it is absolutely the
market. You know, there is a lot of drugs we can look at. I
will--two examples I might say would be NSAIDs and
antidepressants--that there is a lot of different drugs on the
market. They are often just slightly tweaked versions of each
other, but what we find, what doctors find, is that different
patients, for whatever body chemistry, you know, reasons, react
very differently to different drugs.
And we may--you know, I could imagine if there is a court
ruling early on, they may think, oh no, this is just a minor
tweak; it is not worth it. Therefore, you know, we could
presume that there is anti-competitive behavior associated with
it.
But it oftentimes time for the market to realize that
different people do react very differently to whether it is
these important drugs or it is contraceptives or things like
that. Different things have different effects, and the markets
and the doctors and the consumers are in the best position to
judge that.
Mr. Bucshon. I mean, statin agents as an example.
Ms. Shepherd. Yes.
Mr. Bucshon. I take a statin agent. I have tried every one
of them except the one that I am on, and couldn't take the
others.
Ms. Shepherd. Right.
Mr. Bucshon. And many of them are very similar.
Ms. Shepherd. Yes.
Mr. Bucshon. But slightly different.
Ms. Shepherd. Right.
Mr. Bucshon. Mr. Carrier, do you want to comment on that?
Mr. Carrier. Sure. So I don't think courts should be in the
business of determining if a change is minor or not.
Mr. Bucshon. OK.
Mr. Carrier. And I don't think anyone believes that. On the
other hand, you can see, if the change is about the same--so
think Suboxone. They switch from a tablet to a film, and when
they go to the FDA and say, ``Please approve my film,'' they
never did any studies for film. They said, ``Oh, rely on the
tablet studies, and they are basically the same.''
So sometimes it is part of an overall effort where you
badmouth your own product, you jack up the price, you do
everything else; that comes to the fore. But I don't think a
court, in any of this legislation, has to decide if it is a
minor change or not.
Mr. Bucshon. Yes. I mean, that change specifically could be
that if you take an oral version, your gastrointestinal tract
doesn't tolerate it well versus if you take a mucosal membrane
absorption product, that you can tolerate it. But what you are
saying is they should be able to show that, and then that is a
justifiable substantial improvement in the product, and that is
what you are kind of saying.
Mr. Carrier. Absolutely. Yes.
Mr. Bucshon. OK. I yield back. Thank you.
Mr. Soto. The gentleman yields back.
The Chair now recognizes Ms. Blunt Rochester.
Ms. Blunt Rochester. Thank you, Mr. Chairman. And thank you
to Chairwoman Schakowsky and Ranking Member Rodgers for holding
this hearing and thank you to the witnesses for a very
important hearing.
You know, we have this theme about gaming the system, and
throughout Energy and Commerce has really been looking at this
whole issue of drug pricing and trying to figure out why these
prices are so high.
And I think one of the things that you said, Mr. Mitchell,
for me stuck out as a thing that I am holding in the back of my
mind throughout this hearing, and that is you said, ``Drugs
don't work if people can't afford them.'' I mean, that is the
bottom line, and that is what I hear from my constituents. If
you can't afford them, what is the point?
And so we thank you for your testimony. We thank you for
sharing your story. You represent a lot of people in our
country that are grappling every day.
I would like to start my questions with Mr. Carrier. You
talked about the price-disconnect and the fact that the drug
marketplace is different than other marketplaces. It is not
like automobile, you know, marketing or anything like that. And
that this difference makes it especially susceptible to clever
advertising manipulations.
What about this marketplace makes it susceptible to the
manipulations and other anti-competitive practices?
Mr. Carrier. Thank you for the question. The problem here
is that there is no other industry where you don't have a
single party making the determination of price and quality. So
in any other market--let's say the paperclip market--a new
paperclip comes on the market, and it is ten percent better
than the old paperclip.
Is it worth the increase in price? Let's say it is 25
percent more price. When you walk into the store, you can make
that decision? Well, it has improved, but it costs this much
more. So, therefore, I will or will not buy it. You don't have
that in the pharmaceutical industry because the doctors are the
ones subject to all of the advertising and the doctors don't
have to think about cost when they prescribe it.
It is the patient or the insurer that has to do it. And so
that is why doctors are subject to all of this advertising. It
really makes a difference. There are empirical studies out
there that show that when doctors are subject to all of this
advertising, they are more likely to prescribe the drug, and
that is why it is a real problem here. It is not really about
coercion or choice. It is about a really price-disconnected
market.
Ms. Blunt Rochester. And to follow up on the chairwoman's
question on transparency, would greater transparency for
reformulations improve innovation? And how?
Mr. Carrier. I think so. So let's say that you have the FDA
that has to list all of the reformulations. So you are drug
company. You change your product. You list it on the FDA's Web
site. You show what is different about it. You show that you
engaged in really interesting clinical trials that come up with
a whole bunch of improvements. That is something that is worth
knowing. We don't have that now. Transparency could help.
Ms. Blunt Rochester. Great. And I want to also shift a
little bit to, one thing I know for sure is that drug patents
and approvals are incredibly complex, and it is clear that some
actors have taken advantage of the system to drive up these
prices and ultimately reduce access to affordable healthcare
for Americans.
This question is to the panel. How do the physicians and
individuals find out about these reformulations? That is number
1.
And then, are there ways that we can use the available
resources to improve physician education or even consumer
awareness? And maybe we will start with Mr. Francer.
Mr. Francer. Sure. Well, I think it can be very difficult,
actually, to find out about some of the changes, which is why
some of the suggestions for improved transparency would be
helpful. I think often physicians are finding out from
communications directly from the drug company. You can find out
some of them from the FDA Web site. But as was discussed
before, it can be very difficult to learn about some of them.
Ms. Blunt Rochester. Mr. Mitchell?
Mr. Mitchell. Clearly, physicians are learning through
medical journals, but they are also learning from detailers who
are coming from pharmaceutical companies to explain why a given
drug is superior. Likewise, I know a lot of people with
diseases at this point, chronic or acute, and they go out and
try and research.
And so they will look around to see if there is something
that helps them understand, is this drug in fact superior? What
are the side effects that come with it? And so having a
database where you could go look, especially in situations
where there are minor changes taking place, would be helpful.
Ms. Blunt Rochester. Right, right. Anyone else from the
panel?
Ms. Shepherd. I agree.
Mr. Carrier. Yes. So drug companies are the ones that tell
the doctors, and that is why they have so much power here.
Ms. Blunt Rochester. Gotcha. Back to the awareness piece, I
think that you said people are basically doing it on their own
and really with no help from the government. I have one more
question, but I will submit it for the record. Again, thank you
so much for your time and for your testimony.
And just on the hope piece, this committee passed out of
committee after markup before the recess 25--I think 25, 24,
bipartisan bills, and many people didn't hear about that. And
so if I want to put one other thing on the record, there are
things that we are doing together, and I think this is an area
where we all feel there is a need to help the American people.
Thank you so much. I yield back.
Mr. Soto. The gentlelady yields back.
The Chair now recognizes Mr. Carter for 5 minutes.
Mr. Carter. Well, thank you very much, and I appreciate
every one of you being here. This is an extremely important
subject, something that we have been concentrating on on this
full committee, both in Health Subcommittee and on this
subcommittee as well, and certainly something the American
people need help with.
And no one knows that better in Congress than I do, because
currently I am the only pharmacist serving in Congress. So I
have lived this. I have been the one on the other side of the
counter who has had to tell the patients how much their
medication is. So this is extremely important, as you can
imagine, to me.
Mr. Francer, I want to start with you and ask you, I am
happy to be talking about the anti-competitive behaviors that
are used. But I think we would be making a mistake if we didn't
look at the whole piece of the puzzle, and I want to do that.
You discuss in your written testimony the problems around
rebates. In fact, you said, ``Recent analysis found that
Medicare drug plans are increasingly shifting generic drugs
from tiers with lower co-payments for patients to brand tiers
with higher co-payments and co-insurance.'' And this is the way
that these PBMs are doing this, and this is the way that it is
increasing costs, particularly to the patients, increasing
their co-payments.
Can you just explain how these rebate agreements work very
briefly?
Mr. Francer. Yes. And thank you very much for the question.
This is a case in which the system is failing patients. When
you go to the pharmacy counter and meet with, you know, your
former colleagues, you know, you expect that if you are going
to get the generic version it is going to be pretty cheap. And
it has taken a long time for it to get that way, but finally
there is competition.
We, in our industry, have been surprised by recent findings
that more and more the generics are being put on these higher
co-pay tiers, so that it could actually be more expensive to
the patient at the pharmacy counter to get the generic than the
brand. I think this is something that the committee should look
at, whether it is for Medicare, and then to look at the whole
system.
Mr. Carter. You are exactly right. I mean, I was appalled
at times to see that a generic would be on a higher tier than a
brand-name would. And I knew the reason why the pharmacist is.
I knew it was because the PBM was getting a higher rebate. No
other reason except for that, and that is something that it is
hard to articulate to someone who doesn't necessarily
understand it.
Now, most of the members of this committee get it and
understand it. A lot of the members of the Energy and Commerce
Committee understand it. But once you get outside of that,
there are very few who do, and it is hard to explain that and
getting in the weeds enough to where we can explain it.
How widespread do you think this is?
Mr. Francer. Well, we are finding actually more and more.
We are going to be releasing a paper next week that goes into
more detail on this, but it is becoming an increasing problem.
Number 1, the generic just not being covered at launch. And,
number 2, this placement on tiers.
So I am happy to provide that for the record and to give
you more information.
Mr. Carter. Good, good. So what about biosimilars? We had
Dr. Gottlieb, Dr. Scott Gottlieb, when he was with the--when he
was the director--commissioner of the Food and Drug
Administration, he had suggested that this was one of the
problems and that the abuse of the rebate system was blocking
out a lot of affordable biosimilars.
Would you agree that that is happening there as well?
Mr. Francer. Well, there is a fairly well-known case in
which there is litigation between Pfizer, which is trying to
put a biosimilar on the market, and Johnson & Johnson, which
has the innovative drug. And evidently the rebate situation has
essentially made it extraordinarily difficult for the
biosimilar to get on the market.
Again, this is a failure of the system. This isn't the way
it is supposed to work.
Mr. Carter. How can we fix it?
Mr. Francer. Well, I think in that case, we have to make
sure that you treat biosimilars in a way that incentivizes
their uptake, whether it is sharing the savings with the
physicians or whether it is making sure that they are on the
preferred tier.
There are a lot of different types of solutions, and we
would be happy to work with you on it.
Mr. Carter. You know, I get so frustrated because we meet
with Medicare and we meet with the staff, and we explain it to
them, and they say, ``Yes, we know. We know.''
You know and you are not doing anything about it.
``Well, if we do something about it, they will just do
something else in another area.'' It is like squeezing a
balloon. It is just going to go somewhere else.
You know, I really get passionate about this and really get
upset about it, as you can imagine, because when you--I have
spent over 30 years as the one on the other side of the counter
having to explain this to people. I am the one who had to see
the mother in tears because she couldn't afford the medication
for her child.
I am the one that saw the senior citizens who were trying
to decide, literally--and I am not exaggerating--trying to
decide whether they were going to buy groceries or buy their
medication.
What is happening now with the pharmacy benefit managers,
the PBMs, the lack of transparency in the drug supply chain, is
criminal. And until we get the resolve in Congress to do
something about it, it is going to continue on.
Thank you, Madam Chair, and I yield.
Mr. Soto. The gentleman yields back.
The Chair now recognizes Mr. McNerney for 5 minutes.
Mr. McNerney. I thank the chair, and I appreciate my
colleague from Georgia's passion on this issue. And I
appreciate the testimony. It has been very illuminating, so I
appreciate that.
Each of you has acknowledged how product hopping impacts
generic uptick and the market generally. The lack of
competition in the market directly affects prices that
consumers pay for their drugs. And to that point, Professor
Carrie has shared some data from some well-known product hops,
and I appreciate that, Professor.
The FTC has acknowledged that product hopping is an abuse
of the regulatory system, and that it hurts consumers, and the
FTC has acted in cases to enforce some of the most egregious
practices. I would like to learn more about what the FTC has
done and how Congress can ensure that the FTC has the authority
it needs to stop product hopping.
So I am going to start with Professor Carrier. Can you
explain what enforcement authority the FTC currently has to
address product hopping?
Mr. Carrier. So the FTC can go after these cases in court
under its jurisdiction, and it has used that authority in the
pay-for-delay settlement area. It has barely used it with
product hopping. There is a 50 million piece of the Suboxone
billion dollar settlement that was product hopping. That is the
first time the FTC dealt with it, but legislation that you
would consider it potentially and that the Senate Judiciary
Committee consider it, will be incredibly important.
The FTC does not use its authority a lot. Six times in 20
years is the only time it has brought a pay-for-delay case. But
in the most egregious cases, it could be incredibly important.
Mr. McNerney. Very good. Thank you. What additional
measures should we consider to further clarify their
authorities?
Mr. Carrier. So one other thing that you could do is to ask
the FTC to do a report on product hopping.
Mr. McNerney. That was my next question. Should they do a
report?
[Laughter.]
Mr. Carrier. Absolutely. And so one of the difficulties
here is that it is a nuanced subject. And when you hear about a
soft switch, you think, oh, maybe it is OK because there are
two products on the market. Let's get evidence on how soft
switches can be bad. Let's get evidence on how these concerning
switches make no economic sense whatsoever. There is a test to
apply. It makes no sense, other than keeping the generic off
the market.
The FTC is uniquely situated to get all of this
information. And just to go back for one second to
Representative Carter's question, PBMs are a part of the
problem here. They should be solving the price quality issue,
and they are not. And we can still deal with this while still
dealing with PBMs.
Mr. McNerney. Thank you.
Professor Shepherd, would you like to make a comment on
this?
Ms. Shepherd. No. No, I would agree with that. I mean, I
think that some--you know, there has been some kind of like
small reports, but I do think a larger study of the problem
would help us get our head around how many times are there an
innovation that we might consider incremental that are
happening within this window, have no other offsetting benefit,
and we can presume them to be anti-competitive. So I would
agree that----
Mr. McNerney. Well, it is interesting. Professor Carrier
just said there is only six times that they have prosecuted
product hopping. What singles out those six cases that made the
FTC decide to go after them?
Mr. Carrier. So it really--so six pay-for-delay cases, the
FTC has been on the front lines of this for 20 years. They
really choose the most egregious examples. And so these are the
worst ones, like in the Cephalon case where the brand company
paid the generics $300 million, just half the market, use that
period of time to switch the market from the old version to the
new version. By the way, product hopping and settlements work
together a lot of the time. They really picked the most
egregious example.
So for anyone worried about innovation, if we are giving
authority to the FTC, look to pay-for-delay settlements. They
have had this authority for 20 years. They bring one case every
three years. This is not going to be an avalanche of
innovation-hurting activity.
Mr. McNerney. So do you think the FTC just lacks resources,
or----
Mr. Carrier. Yes. I think that these cases are big cases.
You have the largest firms on the other side. Antitrust
litigation goes on for years. The FTC certainly could use more
resources.
Mr. McNerney. Thank you.
Dr. Francer, or Mr. Francer, do you believe that sensible
legislation can be crafted that would use market forces to
bring drug prices in the U.S. in line with the average
international market price?
Mr. Francer. Well, I think that what we are talking about
today, there is actually a lot of consensus on this panel to
let competition work. And I am hopeful that the committee will
continue to work in that way.
Mr. McNerney. All right. I am going to yield back, Mr.
Chairman. Thank you.
Mr. Soto. Mr. McNerney yields back.
The Chair now recognizes Mr. Gianforte for 5 minutes.
Mr. Gianforte. Thank you, Mr. Chairman.
Skyrocketing costs of prescription drugs are making it more
difficult for Montanans to prosper. I am committed to finding
commonsense solutions to this problem. Competition is
incredibly important, as we have discussed here today, in any
marketplace. And I am glad that we have passed many bills out
of committee to increase generic competition for generic drugs.
I am also encouraged by the work of the Trump
administration that they have been doing in this area. The FDA
has approved more generics than ever before, and it is driving
down costs of medications.
We need to find commonsense solutions that make drugs less
expensive, increase transparency where it is needed, and put
patients first.
I want to focus on biosimilars. They hold enormous
potential to lower prescription drug prices and enhance patient
access to lifesaving cures. I am working with Representative
Schrader to help bring down biosimilars--more biosimilars to
market and get them in the hands of patients.
That is our bill. The Biosim Act will temporarily increase
the reimbursement for biosimilar drugs for the average price of
the drug plus six percent, increase it to the average price
plus eight percent, to help utilization.
I know the FDA has approved 24 biosimilars since 2015, but
only nine are in the hands of patients now. That is a problem;
we want to fix it.
Mr. Francer, what are the barriers to getting more
biosimilars in patients' hands?
Mr. Francer. Yes. Thank you for the question. I just want
to give you one example. The drug Humira, this is a drug that
is an incredible treatment. It was approved in 2002, and so it
had its 12 years of exclusivity. That was over in 2014.
Its compound patent expired in 2016, yet they have 136
patents surrounding competition for this drug. And the drug
takes in more revenue every year than all of the NFL teams
combined. We need to do something about our patent system and
making sure that drugs don't have a limitless monopoly to have
competition.
Mr. Gianforte. OK. Thank you.
Ms. Shepherd, in your testimony, you suggest that whether
product hopping is anti-competitive is highly situational
dependent. Can you please explain what you mean by that?
Ms. Shepherd. Sure. You know, with the hard switch, it
depends on when the switch is actually happening. Certainly, if
a drug company removes their drug from market years after there
has been generics in the market, it is not going to affect the
availability of these generics to patients, or if they remove
their product years before there is a generic even on the
horizon, it is presumably just an improvement that they find
necessary. And it is not impeding competition in any way.
And then with the soft switch, I think it depends so much
on what is the behavior that is associated with it. Just
introducing a new product, leaving the old one on the market,
and even advertising the new product, you know, very
aggressively. That is not--there is nothing anti-competitive
about that. There is plenty of choice. Both products are on the
market. Automatic substitution laws work. It is when there is
some other clearly wrongful conduct that accompanies a soft
switch that it would be anti-competitive.
Mr. Gianforte. So if we want to introduce a bill that
prevents anti-competitive product hopping, how can we ensure
that we are not capturing legitimate actions and get swept up
with the anti-competitive stuff?
Ms. Shepherd. Well, again, you know, I think on the hard
switch, defining the window is important. I think on the soft
switch, just being extremely clear about, what is the behavior
that will unfairly disadvantage the older product. And when we
look at most court decisions, they have often--and the FTC, in
addition, has commented on this--that it typically will require
some other sort of wrongful conduct that accompanies the soft
switch.
Mr. Gianforte. Yes. Could you give a couple of examples of
past product improvements that could have been considered
illegal under an overly broad approach to anti-hopping.
Ms. Shepherd. Sure. Well, I mean, when we look at--you
know, I mentioned the antimalarials earlier. But when we look
at the history of oral contraceptives, birth control pills,
they have--over the last multiple decades they have slowly come
down in dosage.
Now, a lot of people would say a slight tweak in dosage,
that is just an unimportant little improvement that doesn't
offer real benefits, but over time those add up. And, in fact,
we have, you know, statements from the--hold on one second--the
National Research Council that says the cumulative effect of
incremental innovation is often more transformational than a
first in class or radical innovation.
And so, you know, we just need to be careful. When these
small improvements may one at a time look not so important,
they do add up to being very important.
Mr. Gianforte. OK. I want to thank the panel for your
testimony today. I appreciate your helping with this. It is
critically important that we get prescription drug prices down,
so I appreciate it.
And with that, I yield back.
Ms. Schakowsky [presiding]. The gentleman yields back.
Thank you, Mr. Soto, for being in the chair. You are next
for 5 minutes.
Mr. Soto. My pleasure, Madam Chair.
First, I just want to get a clarification, because I have
been a little confused about it. Is evergreening and product
hopping the same thing? Or is it two different things? Mr.
Carrier, my fellow Scarlet Knight, it would be great to hear
from you first.
Mr. Carrier. So evergreening is used more loosely to refer
to not only product hopping but patent thickening as well. So I
would focus on product hopping as the switch from one version
to another that really makes no good reason, whereas
evergreening is more the life cycle management practice that
drug companies use in many places.
Mr. Soto. Thank you for that. I wanted to--obviously, this
committee has worked on pay-for-delay, updating the Orange and
Purple Books. We are now looking at product hopping and
evergreening.
Is there any other unfair deceptive trade practices to
extend patents that exist right now that we haven't covered
yet? And we will start with you and we will go across to hear
from everybody. Mr. Carrier.
Mr. Carrier. So I would like to continue the discussion on
biosimilars. There are not enough biosimilars on the market
today, and there are so many hurdles, not just the patent
thicket that Mr. Francer talked about, but also the rebates
that he talked about, the cost of developing the drug, and
disparagement.
Biologic companies are disparaging biosimilars, saying,
``Oh, you could take this, but you might die,'' or something
like that when under the statute you are not allowed to do
that. And so that is one other thing to keep in mind.
And, again, everything else that you have dealt with on
sample denials, pay for delay, and citizen petitions I would
say as well are very important.
And the final piece is the PBM piece. Representative Carter
made a great point that PBMs are not putting drugs on the
formularies because they are better drugs. They are putting
drugs on the formularies because they are getting a big payout
from the brand company.
And sometimes we hear, ``Well, we can't do anything about
brand companies because it is the PBM problem. We can't do
anything about PBMs because it is a brand company problem.'' Do
both. You can do both. You can solve everything we have talked
about this morning, and you can also deal with the PBMs, and
those are complimentary approaches.
Mr. Soto. Mr. Mitchell, any additional unfair deceptive
trade practices that we haven't covered in our initial list?
Mr. Mitchell. I will just pick up on what Professor Carrier
just said. It is outrageous for me, as a patient, that I can't
know if the preferred drug on a formulary is there because it
is the most effective drug, the least expensive drug among
equally effective options, or if it is simply there because the
brand drug company paid the PBM a big rebate, a kickback, which
you give safe harbor to under law. That is not a good way to
run a railroad. That is not a good way to do healthcare for
people.
So when Mr. Carrier says, ``You could do both,'' this is a
brand problem and a PBM problem. Fix it, so I can depend that
the PBM is taking care of me and not his profit needs.
Mr. Soto. Ms. Shepherd, any additional gamesmanship
happening to extend patents that either you would like to
elaborate on or that we haven't discussed yet?
Ms. Shepherd. No. I think Professor Carrier made the point
about the citizens' petitions and the sample availability, but
I would also reiterate, I have done quite a bit of work on the
PBM rebate issue as well. And so that is creating this just
kind of absurd incentive within the market that a lot of people
don't understand how responsible those rebates are for the
actual list price increases we are seeing.
Mr. Soto. Thank you. And Mr. Francer.
Mr. Francer. So agree with what Professor Shepherd just
mentioned, and the only one I would add is find a way to move
up the biosimilar litigation, so that it can happen earlier and
so that it is not blocking availability.
Mr. Soto. Now it would be great to hear from you all about
a new bill that was just filed today to allow Medicare and the
HHS Secretary to negotiate drug prices. It would be great to
hear a show of hands. How many people--how many of you believe
that if we allow the HHS Secretary to negotiate Medicare drug
prices that that would lower prices for the market overall?
Raise your hand. OK.
Secondly, if we focused on 250 of the most used, most
expensive drugs, do you think that is a good start to lowering
drug prices? Raise your hand if you agree with that statement.
OK.
Finally, it would be great to hear from you, Mr. Carrier. I
know you mentioned a little bit of--a lot of these issues, but
if you--how key is it for Medicare to be able to negotiate a
lot of these prices?
Mr. Carrier. So I have not studied this issue as much as
the others, but I do think it is important to negotiate.
Mr. Soto. OK. And Mr. Mitchell?
Mr. Mitchell. Well, we pay two to three times in this
country what people pay in other countries. And the principal
reason is that every other country in the world negotiates
directly with drug companies; we don't. If PBMs were doing such
a good job on my behalf negotiating for Part D, for example,
why am I paying so much more than those other countries? So we
think that just in the same way that the Federal Government
negotiates for everything it buys--aircraft carriers, copying
paper--that we should be negotiating drug prices as well and
using our purchasing power to help American people get a better
deal.
Mr. Soto. Thank you. My time has expired.
Ms. Schakowsky. Thank you.
Mr. Guthrie, you are recognized for 5 minutes for
questions.
Mr. Guthrie. Appreciate it very much. I wish I had been
here for this full discussion. But there is another committee
meeting--subcommittee meeting downstairs, and the chair and I
just--she was just down there as well, so sorry for not being
here for the full discussion. But I am the ranking member of
the Oversight and Investigations Committee, which is meeting,
not today, but we are currently examining the increases in
insulin prices, particularly the list price versus the--list
price versus the discount, what people, what the
pharmaceuticals or the insurance company actually pays.
And we looked at that one because it is not--it has been
around for 100 years. It is not part of the innovation, big
innovation. There is great innovation in diabetes. But what is
going on in healthcare, we are getting incredible innovations
in pharmaceuticals. You mentioned Humira. You mentioned--and I
know that is a little dated, but you can cure Hepatitis C with
a pill now. I know it is a procedure we can cure sickle cell
anemia.
So we look at just the healthcare, in general. So my
concern is we--and I really pushed with Chair DeGette to go
look at insulin because we need to get to the bottom of it. But
what I am concerned about--and, Ms. Shepherd, I think some of
your looks and research you look into this--is as we move
forward--and some are going to say, We don't care about the
unintended consequences. We are paying too much money.''
But the unintended consequences would be to kill innovation
that we have. I think some of the other countries do negotiate
for drug prices, but they also limit formularies. And so we can
have that tradeoff as the Congressional Budget Office has said.
If you want cheaper prices on Medicare Part D, the only way you
are going to get it cheaper is if you limited formularies, even
if you negotiate, which means limit what people can have in
choice.
So I guess my question I am getting to is, how do we find
the appropriate balance, Ms. Shepherd, between the need for
innovation and the need for the competition to bring the prices
down? Can we have both?
Ms. Shepherd. I think we can. I mean, you know, each side
might have to give a bit, but I think it is possible. I think
it depends on just crafting extremely clear legislation that
makes it clear what is and what is not anti-competitive, making
sure you are not capturing any improvements that could be
innovative.
Mr. Guthrie. So what would be the ambiguities in some--I
know in your testimony you talk about ambiguities in law could
limit innovation. So what are some of the ambiguities that you
would want to see clear in a piece of legislation that----
Ms. Shepherd. Sure.
Mr. Guthrie. You were right where you were going. I just
want to----
Ms. Shepherd. Yes, yes, yes.
Mr. Guthrie [continuing]. My next question.
Ms. Shepherd. So, for example, if let's say in regards to a
soft switch, the legislation says ``any soft switch that
unfairly disadvantages the old product.'' Like I have no idea
what that means. And, you know, disadvantage, I mean, I think
most new product innovations disadvantage in some way older
products because there is more competition on the market.
Unfairly? That is not a term we see described anywhere to
really judge what that would be. And so I would just caution
the subcommittee to think very clearly, maybe with precise
examples or some real way to kind of--to judge what would
constitute an unfair disadvantage rather than just throwing it
out with a bunch of ``mays'' instead of ``wills,'' so that
nobody really knows what it is.
Mr. Guthrie. OK. Should the number of generics that already
enter the market be a factor in determining whether or not
removal of the brand product is anti-competitive?
Ms. Shepherd. No. That is not really--as long as one
generic is on the market, automatic substitution laws are
working. And more generics, all that is going to do is--will
bring down the price, and that is important But as long as
there is one on the market, there is nothing stopping more from
coming into the market.
So that is kind of irrelevant from whether or not the
automatic substitution laws have kicked in and have started
working.
Mr. Guthrie. OK. Mr. Mitchell, you had a comment?
Mr. Mitchell. Yes, sir. I think one of the things that is
important there is, was it a hard switch? Because if they
pulled the old product, then there is nothing for a doctor to
write me a prescription for that is substitutable? And so that
is the kind of, you know, specific act that you guys could
clarify on.
Mr. Guthrie. OK. Yes, Mr. Carrier?
Mr. Carrier. And just to make even clearer, the no economic
sense test is the most conservative test in antitrust law. It
says, ``Drug company, you win, as long as you have one reason
other than keeping the generic market.'' Much more deferential
than the rule of reason. That unifies hard switches and soft
switches.
In the five cases that have been litigated, there has been
no reason. Why pull a billion dollar drug off the market? Makes
no sense. No economic sense. Unifies hard and soft switches and
does not touch innovation.
Mr. Guthrie. Thanks. Thanks.
Mr. Francer, do you have any comment on that? You are the--
and Ms. Shepherd?
Ms. Shepherd. Yes. On that comment, I think that the no
economic sense, I think that is very difficult to
operationalize for various reasons. You know, pharmaceutical
companies have a lot of overhead. They do a lot of R&D that
isn't designated to a specific drug. It is spread out across a
lot of drugs.
And so the no economic sense test is going to require a
pharmaceutical company to produce what are the specific costs
of this drug, and what are the specific benefits. It is very
difficult for them to do.
In addition, I just wonder if it doesn't--it is not going
to encourage gaming. I mean, that would give pharmaceutical
companies the incentive to spend less on R&D--not what we want
them to do--in order for the benefits to be more likely to
exceed the cost. And so it just--I worry about how that could
be operationalized.
Mr. Carrier. And just to respond, if you look at the
litigated cases, these are not close calls. I know there was a
paper written a few days ago criticizing my test, but the cases
that have been litigated involve TriCor, a $200 million drug
pulled off the market; Nexium, a $4 billion drug; $1.5 billion
in Namenda. These are not close cases. The companies are
pulling off blockbuster drugs, and there is no sense whatsoever
that this makes any sense at all.
Mr. Guthrie. OK. Thank you.
My time has expired, and I will yield back. Thank you.
Ms. Schakowsky. Thank you. Well, all time for questioning
has expired. I certainly want to thank all of our--oh, I am so
sorry. I yield 5 minutes to Mr. Sarbanes. Forgive me.
Mr. Sarbanes. Thank you. Thank you, Madam Chair. Thank you
for the opportunity to waive onto the committee today on a
very, very important topic.
Mr. Mitchell, I wanted to ask you some questions. First,
thanks for your testimony, and thanks for sharing your personal
story and then channeling that into the effective advocacy that
you have offered----
Mr. Mitchell. Thank you.
Mr. Sarbanes. On so many different venues. You have been
pushing on this issue of lower drug prices for a long time, and
you are frustrated, I am sure, as I am, by the lack of progress
that we have made in terms of addressing the prices of drugs
and producing meaningful drug legislation that can push back on
industry and prevent these anti-competitive practices that have
been detailed today, including product hopping and other things
of that nature.
Tell me what you think is creating the barriers up here in
Congress when it comes to passing and enacting legislation that
would make a meaningful difference with respect to bringing
down the cost of drugs for patients.
Mr. Mitchell. I believe that there is one and a half drug
company lobbyist for every one of you in Congress right now.
Mr. Sarbanes. I think it is three, actually.
Mr. Mitchell. I believe that by definition--and the
economists flanking me can correct me if I am wrong--by
definition, monopoly industries have unlimited resources to
sustain the monopoly with political power. That monopoly power
is being mobilized forcefully to block anything that will
effectively lower the list prices of prescription drugs.
And, remember, we can talk about PBMs, we can talk about
hospital markups, and we can talk about markups by doctors. The
headwaters of this problem is the list prices that are set by
the drug companies. Nobody sets list prices except the drug
companies. If we lower the list, everybody who is making a
percentage markup downstream will make less money, and it can
go back to lower prices for people like me.
So those are the barriers I think that are chief in the
way--chiefly in the way of reform.
Mr. Sarbanes. Well, I agree with you, you won't be
surprised to hear, 100 percent on that. I have kind of made
myself a student of how the special interest ecosystem has
developed here in Washington. Nobody has manipulated that more
effectively than the pharmaceutical industry in the ways that
you just described.
According to the Center for Responsive Politics, that
industry spent more on lobbying last year than any other
industry--$280 million--and in the 2018 election cycle donated
over $41 million to federal candidates and federal committees.
You just made the point about the number of lobbyists that
are deployed here on behalf of the industry, some 1,400
lobbyists last year, according to the Center for Responsive
Politics. So we are actually being--we are actually being
teamed at three to one ratio, which is even more than you
suggested, and it is all about protecting the bottom line.
Mr. Mitchell. Well, if I may add, the scare tactics really
offend me as a patient. You know, socialism, I am not going to
get the drugs I need. There will be no innovation. I am going
to die. There is room to lower drug prices. The pharmaceutical
industry has profits that run in excess of two times the S&P
500.
There was a piece today in Axios that said that they are
getting 20 percent of the profits in the healthcare system
based on 20 percent of their revenues. Fifty percent of the
profits, I am sorry, based on 20 percent of the revenues. There
is money in the system to lower drug prices, allow us to have
innovation, especially given that taxpayers pay so much of the
money for innovation, to get lower drug prices. It is not going
to make the world collapse on us as patients.
But they are shameless in the ways that they go out and lie
and try and scare people, that if we actually lower drug
prices, so people don't have to die because they can't afford
their insulin, that somehow more people are going to die.
Mr. Sarbanes. Well, I appreciate that. I think you are
right on the money. And, you know, it is hard sometimes to
completely diagnose how this influence-peddling system works up
here. I think it is a combination of conscious active decision-
making on the part of industries like the pharmaceutical
industry, to protect the bottom line and to maximize their
profits. And they make those judgments along the way.
But I also think what operates here is this kind of self-
perpetuating system of influence, which makes it hard, even for
the more enlightened people within some of these industries and
companies, who might want to approach things in a different
way, to break free of that model. It just keeps churning and
churning and churning.
And it is up to us here, who are the ones at whom those
efforts are being directed day in and day out to take action to
diminish undue influence that comes from these special
interests and lift up and expand the influence of the average
person out there. And if we can do that, we will be able to
address many of the issues I think that you all have brought to
us today.
So thank you for your testimony, and I yield back to the
Chair.
Ms. Schakowsky. Thank you, Mr. Sarbanes.
So, once again, let me just thank our witnesses for
participating in this hearing. I think we learned a lot today,
especially the kinds of things that we should watch for as we
work on legislation. And certainly we learned about the
expertise at hand on this panel when we do so.
I hope my colleagues will all work with me to address this
issue of gaming the system and do it right. The time I believe
to act is now.
I remind Members that, pursuant to committee rules, that
they have ten business days to submit additional questions for
the record, to be answered we hope by the witnesses who have
appeared, and prompt replies to any of the questions that you
may receive.
And now I request unanimous consent to enter the following
into the record, other informational material. And without
further objection. A research paper by Timothy J. Muris of
George Mason University, a journal article published in the
Journal of Law and Bioscience titled ``May your Drug Price be
Evergreen,'' and a journal article titled ``Product Hopping: A
New Framework.''
Ms. Schakowsky. And with that, the Subcommittee on Consumer
Protection and Commerce is adjourned. Thank you.
[Whereupon, at 12:27 p.m., the subcommittee was adjourned.]
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