[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]




 
                    TREATING THE PROBLEM: ADDRESSING
    ANTICOMPETITIVE CONDUCT AND CONSOLIDATION IN HEALTHCARE MARKETS

=======================================================================

                                HEARING

                               BEFORE THE

     SUBCOMMITTEE ON ANTITRUST, COMMERCIAL, AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        THURSDAY, APRIL 29, 2021

                               __________

                           Serial No. 117-19

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
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               Available via: http://judiciary.house.gov
               
               
               
            U.S. GOVERNMENT PUBLISHING OFFICE 
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                       COMMITTEE ON THE JUDICIARY

                    JERROLD NADLER, New York, Chair
                MADELEINE DEAN, Pennsylvania, Vice-Chair

ZOE LOFGREN, California              JIM JORDAN, Ohio, Ranking Member 
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
STEVE COHEN, Tennessee               LOUIE GOHMERT, Texas
HENRY C. ``HANK'' JOHNSON, Jr.,      DARREL ISSA, California
    Georgia                          KEN BUCK, Colorado
THEODORE E. DEUTCH, Florida          MATT GAETZ, Florida
KAREN BASS, California               MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         ANDY BIGGS, Arizona
DAVID N. CICILLINE, Rhode Island     TOM McCLINTOCK, California
ERIC SWALWELL, California            W. GREGORY STEUBE, Florida
TED LIEU, California                 TOM TIFFANY, Wisconsin
JAMIE RASKIN, Maryland               THOMAS MASSIE, Kentucky
PRAMILA JAYAPAL, Washington          CHIP ROY, Texas
VAL BUTLER DEMINGS, Florida          DAN BISHOP, North Carolina
J. LUIS CORREA, California           MICHELLE FISCHBACH, Minnesota
MARY GAY SCANLON, Pennsylvania       VICTORIA SPARTZ, Indiana
SYLVIA R. GARCIA, Texas              SCOTT FITZGERALD, Wisconsin
JOE NEGUSE, Colorado                 CLIFF BENTZ, Oregon
LUCY McBATH, Georgia                 BURGESS OWENS, Utah
GREG STANTON, Arizona
VERONICA ESCOBAR, Texas
MONDAIRE JONES, New York
DEBORAH ROSS, North Carolina
CORI BUSH, Missouri

        PERRY APELBAUM, Majority Staff Director & Chief Counsel
               CHRISTOPHER HIXON, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
                         AND ADMINISTRATIVE LAW

                DAVID N. CICILLINE, Rhode Island, Chair
                PRAMILIA JAYAPAL, Washington, Vice-Chair

JOE NEGUSE, Colorado                 KEN BUCK, Colorado, Ranking Member
ERIC SWALWELL, California            DARREL ISSA, California
MONDAIRE JONES, New York             MATT GAETZ, Florida
THEODORE E. DEUTCH, Florida          MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         W. GREGORY STEUBE, Florida
JAMIE RASKIN, Maryland               MICHELLE FISCHBACH, Minnesota
VAL BUTLER DEMINGS, Florida          VICTORIA SPARTZ, Indiana
MARY GAY SCANLON, Pennsylvania       SCOTT FITZGERALD, Wisconsin
LUCY McBATH, Georgia                 CLIFF BENTZ, Oregon
MADELINE DEAN, Pennsylvania          BURGESS OWENS, Utah
HENRY C. ``HANK'' JOHNSON, Jr., 
    Georgia

                       SLADE BOND, Chief Counsel
                      DOUG GEHO, Minority Counsel
                      
                            C O N T E N T S

                              ----------                              

                        Thursday, April 29, 2021

                                                                   Page

                           OPENING STATEMENTS

The Honorable David Cicilline, Chair of the Subcommittee on 
  Antitrust, Commercial, and Administrative Law from the State of 
  Rhode Island...................................................     2
The Honorable Ken Buck, Ranking Member of the Subcommittee on 
  Antitrust, Commercial, and Administrative Law from the State of 
  Colorado.......................................................     4
The Honorable Jerrold Nadler, Chair of the Committee on the 
  Judiciary from the State of New York...........................     6

                               WITNESSES
                                Panel I

The Honorable Amy Klobuchar, Senator, Minnesota
  Oral Testimony.................................................     9
  Prepared Testimony.............................................    11
The Honorable Charles Grassley, Senator, Iowa
  Oral Testimony.................................................    15
  Prepared Testimony.............................................    17
The Honorable Richard Blumenthal, Senator, Connecticut
  Oral Testimony.................................................    19
  Prepared Testimony.............................................    21
The Honorable John Cornyn, Senator, Texas
  Oral Testimony.................................................    23
  Prepared Testimony.............................................    25
The Honorable Mike Lee, Senator, Utah
  Oral Testimony.................................................    27
  Prepared Testimony.............................................    29
The Honorable Carolyn Maloney, Chair of the Committee on 
  Oversight and Government Reform
  Oral Testimony.................................................    32
  Prepared Testimony.............................................    34

                                Panel II

Leemore Dafny, Bruce V. Rauner Professor of Business 
  Administration, Harvard Business School, Harvard Kennedy School
  Oral Testimony.................................................    38
  Prepared Testimony.............................................    41
Michael Carrier, Professor of Law, Rutgers Law School--Camden
  Oral Testimony.................................................    59
  Prepared Testimony.............................................    61
Robin Feldman, Professor of Law, University of California 
  Hastings College of the Law
  Oral Testimony.................................................    71
  Prepared Testimony.............................................    73
Alden Abbott, Senior Research Fellow, Mercatus Center, George 
  Mason University
  Oral Testimony.................................................    79
  Prepared Testimony.............................................    81

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Materials submitted by the Honorable David Cicilline, Chair of 
  the Subcommittee on Antitrust, Commercial, and Administrative 
  Law from the State of Rhode Island, for the record
  Statement from Kristen McGovern, Executive Director, 
    Partnership to Empower Physician-Led Care....................   110
  Statement from George Slover, Senior Policy Counsel, Consumer 
    Reports......................................................   115
  Statement from the Purchaser Business Group on Health..........   118
  Statement from Marni Jameson Carey, Executive Director, 
    Association of Independent Doctors...........................   122

                                APPENDIX

Supplementary Materials from Michael Carrier, Professor of Law, 
  Rutgers Law School--Camden.....................................   130
Materials submitted by the Honorable David Cicilline, Chair of 
  the Subcommittee on Antitrust, Commercial, and Administrative 
  Law from the State of Rhode Island, for the record
  Statement from Patrick Kilbride, Senior Vice President, Chamber 
    of Commerce's Global Innovation Policy Center, for the record   265
  Statement from Christopher G. Sheeron, President, Action for 
    Health, for the record.......................................   267

                  QUESTIONS AND ANSWERS FOR THE RECORD

Questions submitted by the Honorable Eric Swalwell, a Member of 
  the Subcommittee on Antitrust, Commercial, and Administrative 
  Law from the State of California, for the record...............   280
Responses by Professor Robin Feldman to questions from the 
  Honorable Eric Swalwell, a Member of the Subcommittee on 
  Antitrust, Commercial, and Administrative Law from the State of 
  California, for the record.....................................   281
Responses by Professor Michael Carrier to questions from the 
  Honorable Eric Swalwell, a Member of the Subcommittee on 
  Antitrust, Commercial, and Administrative Law from the State of 
  California, for the record.....................................   282
Responses by Professor Robin Feldman to questions from the 
  Honorable Dan Bishop, a Member of the Committee on the 
  Judiciary from the State of North Carolina, for the record.....   283


                    TREATING THE PROBLEM: ADDRESSING



    ANTICOMPETITIVE CONDUCT AND CONSOLIDATION IN HEALTHCARE MARKETS

                        Thursday, April 29, 2021

                        House of Representatives

                 Subcommittee on Antitrust, Commercial,

                         and Administrative Law

                       Committee on the Judiciary

                             Washington, DC

    The Subcommittee met, pursuant to call, at 1:04 p.m., in 
Room 2141, Rayburn House Office Building, Hon. David Cicilline 
[Chair of the Subcommittee] presiding.
    Present: Representatives Cicilline, Nadler, Jones, Deutch, 
Jeffries, Raskin, Jayapal, Demings, Scanlon, Dean, Johnson of 
Georgia, Buck, Issa, Johnson of Louisiana, Steube, Bishop, 
Fischbach, Spartz, Fitzgerald, and Owens.
    Staff Present: Cierra Fontenot, Chief Clerk; John Williams, 
Parliamentarian; Amanda Lewis, Counsel; Joseph Van Wye, 
Professional Staff Member; Slade Bond, Chief Counsel; Phillip 
Berenbroick, Counsel; Ella Yates, Minority Member Services 
Director; Douglas Geho, Minority Chief Counsel for 
Administrative Law; and Kiley Bidelman, Minority Clerk.
    Mr. Cicilline. The Subcommittee will come to order without 
objection. The Chair is authorized to declare a recess of the 
Subcommittee at any time. Good morning, and welcome to today's 
hearing to examine consolidation and anticompetitive conduct in 
the healthcare industry.
    I am truly honored by my colleagues' presence, along with 
our esteemed Witnesses on the second panel.
    I would like to extend an especially warm welcome to my 
counterpart on the Senate Antitrust Subcommittee, Senator 
Klobuchar, who has been a real leader on these issues.
    I also want to extend a warm welcome to Senator Blumenthal, 
Senator Cornyn, and Senator Grassley, and to thank them for all 
their work to lower prescription drug costs and on several of 
the bills under discussion today. Of course, we may have to 
move the order around, depending on the schedule of the 
Senators.
    It is also a pleasure to welcome Senator Lee, the Ranking 
Member of the Senate Antitrust Subcommittee.
    Finally, I am very pleased to be joined today by our 
colleague in the House, Chair Maloney, who has led a serious 
and effective investigation into drug prices as the Chair of 
the Committee on Oversight.
    Before we begin, I would like remind Members that we have 
established an email address and distribution list dedicated to 
circulating exhibits, motions, or other written materials that 
Members might want to offer as part of today's hearing. If you 
would like to submit materials, please send them to the email 
address that has been previously distributed to your offices, 
and we will circulate the materials to Members and staff as 
quickly as we can.
    I would also like to remind all Members and our Witnesses 
that guidance from the Office of the Attending Physician states 
that face coverings are required for all meetings in an 
enclosed space, such as Committee hearings. I expect all 
Members on both sides of the aisle to wear a mask for the 
duration of today's hearing.
    I now recognize myself for an opening statement. Prior to 
the onset of the COVID-19 pandemic, our healthcare system was 
in a State of crisis. The cost of prescription medicine has 
increased by 200 percent in a short period of time, while 
Kaiser Health reported that a quarter of cancer patients in the 
United States could not afford their medicine. They had 
resorted to cutting their pills in half or skipping drug 
treatment entirely. Despite decades of rising costs, the United 
States ranked dead last in health outcomes among similar 
countries.
    In the wake of the pandemic, the healthcare sector has 
undergone a wave of consolidation across the entire industry, 
and all the while the cost of healthcare continues to 
skyrocket.
    In the second half of 2020, there were five mega-mergers in 
the pharmaceutical marketplace alone, adding up to nearly $100 
billion. Within the decade, the Centers for Medicare and 
Medicaid Services project that spending on healthcare in the 
United States will surpass $6 trillion, equal to nearly 20 
percent of U.S. gross domestic product.
    Despite ample evidence of rising costs and anticompetitive 
conduct in the pharmaceutical sector, the FTC has not attempted 
to block any of these deals, including the combination of 
Pfizer and Mylan's generic drug business into what is now the 
largest manufacturer of generics in the world.
    As then Commissioner Chopra and Acting Chair Rebecca Kelly 
Slaughter noted in a dissenting statement, there has not been a 
single instance in recent history where the agency has filed a 
complaint in Federal court seeking to halt a prescription drug 
merger. Under the leadership of Acting Chair Slaughter, the FTC 
recently launched an international working group to rethink the 
FTC's approach, which is a very promising step. In the hospital 
markets, the FTC has been more active in seeking to block 
mergers. The time and expense of bringing these cases over the 
past few years has stretched the FTC's razor thin resources to 
the breaking point.
    At the same time, executive compensation at healthcare 
firms continues to soar. The CEO of Tenet Healthcare, a for-
profit hospital giant with $399 million in profit last year, 
was paid $16.7 million in the same year that the company 
furloughed about 11,000 workers and received hundreds of 
millions in bailout funds. According to reports by The 
Washington Post, Genesis Healthcare--one of the largest nursing 
home chains in the country--rewarded their CEO with a 
multimillion dollar bonus, despite shortages of medical 
equipment for workers at their facilities and a higher COVID 
mortality rate than its major competitors. Finally, The New 
York Times reported earlier this week that the CEO of a chain 
of primary care physicians was paid $199 million last year 
alone.
    In other words, we are not seeing better care or more 
innovation as a result of consolidation and anticompetitive 
practices in the healthcare sector. It is far more likely that 
monopoly profits are contributing to a CEO's mega yacht than 
bringing new lifesaving drugs to market.
    As our Nation recovers from both the public health and 
economic effects of the pandemic, it is more essential than 
ever that we take these issues head-on. Our competition system 
is the backbone of promoting open and fair markets, and that is 
especially true here.
    In the pharmaceutical marketplace, the entry of generic 
drug competitors can reduce the cost of branded drugs 
exponentially. In hospital and healthcare insurance markets, 
competition not only lower prices, but it also improves the 
quality, availability, and affordability of care.
    In far too many cases, effective antitrust enforcement 
takes too long to deliver meaningful results to people in need. 
For example, some branded drug companies have abused safety 
protocols to delay generic entry, preserving their monopoly 
power for more than the decade. As Professor Robin Feldman has 
noted, even months of delay could be worth hundreds of millions 
of dollars in additional monopoly revenues as the generic sits 
on the sideline.
    While this anticompetitive conduct should violate the 
antitrust laws, even successful cases often take long to 
provide effective relief. In response to this crisis, we 
enacted the CREATES Act in December 2019, legislation I 
introduced with Senator Leahy, that will lower drug prices by 
billions of dollars. This law will help end the abuse of FDA 
safety protocols by branded drug companies and spur the entry 
of numerous lower cost alternatives. According to a recent 
report by the FDA, the CREATES Act has already increased 
generic and biosimilar competition to lower drug prices and 
simplified the process for market entry.
    In the final days of the 116th Congress, we also enacted 
the Competitive Health Insurance Act, legislation that repeals 
the longstanding exemption for the business of health insurance 
that has been on the books since 1945.
    In this Congress, we plan to build on these successes by 
moving legislation to address other forms of anticompetitive 
conduct and promote competition to healthcare markets.
    Yesterday, I reintroduced the Affordable Prescriptions for 
Patients through Competition Act together with Subcommittee 
Ranking Member Buck and Senators Cornyn and Blumenthal. This 
legislation addresses product hopping, a particular abusive 
form of conduct used by drug manufacturers to extend their 
monopolies by preemptively switching the market for a drug 
prior to the expiration of the patent. As the National 
Institute for Health has noted, there is often little or no 
therapeutic advantage for the switch. It only exists to block 
competitors from entering the market.
    For example, several years ago, the pharmaceutical company 
Actavis attempted to remove its blockbuster treatment for 
Alzheimer's disease and replace it with a ``new and improved,'' 
version in order extend its monopoly until 2029. The new 
version was simply a once daily dose instead of a twice daily 
dose, which may be helpful but does not warrant decades of 
additional exclusivity. This is not true innovation, and it is 
costing hardworking Americans.
    According to a recent report by Matrix Global Advisors, 
just five instances of product hopping alone cost working 
Americans $4.7 billion annually.
    My distinguished colleagues on the first panel will discuss 
several other proposals that address additional abuse of 
conduct from pay-for-delay agreements to citizen petition 
abuse.
    As Chair Maloney will testify today, her committee's drug 
pricing investigation uncovered new evidence of anticompetitive 
conduct underscoring the urgency for congressional action.
    In closing, the American people deserve a government that 
is in their corner fighting for them to take on drug 
profiteering and other barriers to affordable healthcare. Since 
the beginning of the 116th Congress, ending this moral crisis 
has been a top priority of mine as Chair of this Subcommittee, 
and a top priority for House Democrats to keep our promise to 
the American people to lower their healthcare costs.
    With that, it is my pleasure now to recognize the Ranking 
Member of the Subcommittee Mr. Buck for the purposes of making 
an opening statement.
    Mr. Buck, you may still be on mute.
    Mr. Buck. Does that work.
    Mr. Cicilline. It does indeed.
    Mr. Buck. I wanted to assure the Chair that I am going to 
go maskless, and I am socially distanced, approximately, 1,400 
miles away from Capitol Hill at this point. So, I appreciate 
the Chair's indulgence.
    Today's hearing focuses on the issues that are important to 
every American. Healthcare is a very large and important sector 
of our economy that accounts for almost \1/5\ of the United 
States GDP. According to the Centers for Medicare and Medicaid 
Services, America spends almost $3.8 trillion, or almost 
$12,000 per person, on healthcare. These sky-high costs are a 
result of many factors, including the misguided Obamacare 
legislation, a patchwork of often contradictory and burdensome 
Federal and State laws, and anticompetitive conduct by a host 
of actors in the healthcare sector but especially the 
pharmaceutical industry.
    I want to start by thanking our Witnesses today. It is 
always a pleasure to interact with our Senate colleagues and 
see the bipartisan nature of a legislation we will be 
considering in the future.
    I also want to thank Chair Cicilline for arranging this 
hearing and my friend from Colorado, Congressman Joe Neguse, 
for highlighting abuses in the pharmaceutical industry and 
finding ways to lower drug cost for consumers.
    Obamacare was sold to the American people as a means to 
make healthcare affordable and protect patients. Over the past 
decade, the exact opposite has materialized. Obamacare has 
resulted in the loss of doctors and insurance options, 
skyrocketing costs, and increasing consolidation and 
monopolization of insurance and hospital markets across the 
country. As we heard in Martin Gaynor's testimony before this 
Subcommittee last Congress, the two largest insurers have 70 
percent of the market in over one-half of all local insurance 
markets. There have been almost 1,600 hospital mergers over the 
past two decades, and there were nearly 31,000 physician 
practice acquisitions by hospitals from 2008-2012. At least a 
third of all doctors are now in hospital-owned practices.
    One particularly pernicious result of this failed law is 
the consolidation and closing of hospitals, especially in rural 
areas. This leaves people in rural America, like most of the 
people in my home district, with few options other than driving 
to facilities that are often hours away.
    A second factor that is driving up prices, destroying 
competition, and leaving patients with fewer choices is the web 
of inconsistent and often contradictory Federal and State laws 
and regulations. We all know the Federal system is a virtually 
unnavigable morass of laws, regulations, and guidance 
documents. This seems to increasingly be the case at the State 
level as well.
    The pandemic has shown the need for a more nimble and 
responsive healthcare system. That is not what we have in 
either the Federal or State level. Instead, we have an ossified 
system that seemingly can't get out of its own way.
    For example, the Trump Administration took critical steps 
to cut red tape and allow companies to develop extremely 
effective and safe vaccines to stop the pandemic in under one 
year. This previously unheard-of timeline highlights the need 
for permanent regulatory reform, as promising drugs for other 
diseases like cancer, cystic fibrosis, and multiple sclerosis 
continue to languish for years in a bureaucratic approval 
process.
    Further, many of the largest players use this regulatory 
framework to stifle smaller competitors, who rely on getting 
new medication to market to become profitable and remain in 
business. These smaller companies frequently end up bought by 
giant competitors because they do not have the funds to survive 
a decade-long FDA approval process.
    Lastly and probably more egregiously in terms of driving up 
costs and decreasing patient options are the examples of 
anticompetitive conduct and abuse of government process we have 
seen from the pharmaceutical industry.
    The three bills we are considering today will result in 
more competition and lower prices for patients.
    I want to thank Senators Grassley, Cornyn, and Klobuchar, 
and Blumenthal for their work on these important issues and for 
being here today to discuss these bills.
    In summary, the bills we are looking at today authorize 
regulators to investigate the abuse of citizen petitions which 
artificially delay the entry of generic competitors, curb the 
practice of using anticompetitive pay-for-delay tactics that 
artificially inflate prices for patients, and stop the brand-
name pharmaceuticals from playing games with their patents to 
extend the period of their monopoly while destroying the market 
for generics. These bills address the gamesmanship and abusive 
process we have seen in this market, they will help curb the 
price increases, and provide more options to the American 
supervisor. In sum, the underlying issue in each of these 
markets is the lack of competition and anticompetitive conduct 
exhibited by the biggest players.
    Our healthcare system is based on markets, and the system 
only works as well as the markets that underpin it.
    Mr. Chair, I am proud to cosponsor these three bills with 
you that will result in more competition, lower prices, and 
greater choice for patients.
    I yield back.
    Mr. Cicilline. Thank you to the Ranking Member.
    I now recognize the Chair of the Full Committee, the 
gentleman from New York, Mr. Nadler, for an opening statement.
    Chair Nadler. Thank you. The Judiciary Committee has a 
strong bipartisan tradition of promoting competition in 
healthcare markets. We have done this work to make healthcare 
services, particularly prescription drugs, more affordable for 
patients. We continue that tradition with today's hearing which 
will examine anticompetitive practices in this market, along 
with legislation to address it. I am pleased that we are joined 
by our distinguished colleagues from the Senate, and I thank 
them for their hard work on a bipartisan basis on the important 
legislation we introduced yesterday to lower prescription drug 
costs. I want to take this opportunity to congratulate Senator 
Klobuchar on her new book ``Antitrust,'' and to wish her well 
on its sales.
    All these bills are essential to help stop pharmaceutical 
companies from engaging in anticompetitive conduct, such as so-
called pay-for-delay agreements, citizen petition abuse, and 
product hopping. This conduct blocks or delays access to 
affordable medications without any offsetting benefits.
    I also want to extend a warm welcome to Chair Maloney, who 
has led one of the most comprehensive and in-depth 
investigations of drug prices in congressional history as Chair 
of the Oversight and Reform Committee. The investigation, which 
was originally launched by our late colleague, Chair Elijah 
Cummings, has already uncovered significant new evidence of 
pharmaceutical companies exploiting their market power at every 
turn, all at the expense of the patient.
    Today, one-quarter of Americans report that it is difficult 
to afford their medicines. In fact, exorbitant medical bills 
are one of the major causes of why Americans seek bankruptcy 
relief. It is painfully clear that the soaring cost of 
healthcare is also bad for the health and well-being of 
American families. It is unacceptable that many seniors cannot 
afford the arthritis medication they need to perform everyday 
tasks, such as buttoning their coat or opening a jar, without 
excruciating pain. It is unacceptable that hundreds of 
thousands of cancer patients are reportedly delaying lifesaving 
care, cutting their pills in half, or skipping treatment 
entirely because of high drug prices. It is unacceptable that 
people suffering from diabetes must worry about life-
threatening consequences of not being able to afford insulin 
because of its exorbitant costs.
    These trends have only worsened in the wake of the 
pandemic, which has brought tremendous economic hardship to our 
communities. It is time for this to change. As many experts 
have noted, including some of the Witnesses who will testify 
here today, the lack of competition in healthcare markets is 
one of the primary causes of escalating costs.
    In recent years, under Republican and Democratic 
leadership, the Subcommittee has held numerous hearings in this 
area, examining the topics of consolidation in the market for 
health insurance, competition in the drug supply chain, and 
anticompetitive practices by prescription drug companies. I am 
pleased that we are continuing that essential work today. One 
focus of our efforts should be lowering prescription drug costs 
by strengthening competition from lower priced generic drugs.
    According to the Federal Trade Commission, the first 
generic competitor to brand the product is typically offered at 
a price 20-30 percent below the brand price. Subsequent generic 
entry creates greater price competition with price drops 
reaching 85 percent or more off the brand price. In response to 
the threat of generic entry, which of course threatens the 
ability of branded drug companies to charge monopoly prices, 
branded companies have engaged in numerous anticompetitive 
tactics.
    This Committee has been and will continue to be active in 
stopping drug companies from reaping monopoly profits at the 
expense of patients' health. For example, I am proud to have 
reintroduced the Preserve Access to Affordable Generics and 
Biosimilars Act, which Senator Klobuchar, Chair Cicilline, and 
Ranking Member Buck to ban so-called pay-for-delay settlements. 
These anticompetitive agreements allow branded drug companies 
to pay off a generic competitor to delay entering the market 
with a lower cost generic product. As a result of this abuse of 
conduct, a brand name drug company gets to keep its monopoly, 
and the generic gets paid off with a portion of the monopoly 
profits, but the consumers inevitably lose.
    Although the Supreme Court in FTC v. Actavis held that pay-
for-delay agreements could violate the antitrust laws, the FTC 
has spent significant resources challenging what appear to be 
clear violations. This legislation would address that problem 
by requiring courts to view such agreements as presumptively 
unlawful.
    According to the nonpartisan Congressional Budget Office, 
this legislation would save American taxpayers at least 
hundreds of millions of dollars over 10 years due to the high 
costs imposed on our healthcare system by this anticompetitive 
conduct.
    I was pleased that this legislation passed unanimously out 
of the Committee in the last Congress, with strong support from 
then Ranking Member Collins. I hope it will receive similar 
support from my colleagues on the Committee in this Congress.
    I also look forward to addressing this issue together with 
our colleagues on the Energy and Commerce Committee in the 
weeks ahead.
    In closing, I thank the Chair for holding today's important 
hearing, and I welcome all our esteemed colleagues and 
panelists. I look forward to hearing their testimony, and I 
yield back the balance of my time.
    Mr. Cicilline. Thank you, Mr. Chair.
    It is now my pleasure to introduce the Witnesses on our 
first panel. Our first Witness is the Senior Senator from 
Minnesota and Chair of the Senate Judiciary Subcommittee on 
Competition Policy, Antitrust, and Consumer Rights, Amy 
Klobuchar, and soon to be an award-winning author.
    Additionally, Senator Klobuchar is Chair of the Democratic 
Steering and Outreach Committee as well as the Rules and 
Administration Subcommittee. She has served Minnesota for more 
than 20 years, first as a Hennepin County attorney from 1998-
2006, and since as United States Senator.
    Prior to entering public service, Chair Klobuchar was a 
partner at both Dorsey & Whitney and Gray, Plant, and Mooty, 
specializing in regulatory work in the areas of 
telecommunications.
    Chair Klobuchar received her bachelor's degree from Yale 
University and her J.D. from the University of Chicago Law 
School.
    Today's second Witness is Senator Charles Grassley, former 
Chair of the Senate Judiciary Committee, President Pro Tempore 
of the Senate, and Senior Senator from Iowa. Additionally, Mr. 
Grassley has Chaired the Senate Finance, Narcotics, and Aging 
Committees in his four decades in the United States Senate.
    Prior to being elected to the Senate in 1980, Mr. Grassley 
served in the Iowa House of Representatives from 1959-975 and 
the United States House of Representatives from 1975-1980.
    Before entering public service, Mr. Grassley worked farms 
and on factory floors in Iowa, first as a sheet metal shearer 
and then as an assembly line worker. Mr. Grassley received both 
his bachelor's and master's degrees from the University of 
Northern Iowa.
    Our third Witness is the Senior Senator from the State of 
Connecticut, Richard Blumenthal. He was elected in 2010 and is 
currently serving his second term. Prior to his election to the 
Senate, Mr. Blumenthal served Connecticut as Attorney General 
for 20 years, from 1991-2011--the longest tenure in the State's 
history--as a State Senator from 1987-1991, in the Connecticut 
House from 1984-1987, and as United States Attorney for the 
district of Connecticut from 1977-1981.
    He is also a 6-year veteran of the United States Marine 
Corps Reserves where he attained the rank of sergeant. Mr. 
Blumenthal received his bachelor's degree from Harvard College 
and his J.D. from Yale Law School.
    Our fourth Witness, Senator John Cornyn, is Chair of the 
Senate Judiciary Committee on Border Security and Immigration 
and the Senior Senator from the State of Texas. Senator Cornyn 
is currently serving his fourth term and was first elected to 
the Senate in 2002. He has served his State of Texas in a 
number of elected positions, including as Bexar County district 
judge, Texas Supreme Court, and Texas Attorney General. In the 
114th, 115th, and 116th Congresses, Mr. Cornyn served as a 
Senate Majority Whip. Senator Cornyn received his bachelor's 
degree from Trinity University, his J.D. from St. Mary's Law 
School, and his Master of Laws from the University of Virginia.
    Our fifth Witness, Senator Mike Lee, is the Ranking Member 
of the Senate Judiciary Subcommittee on Antitrust Competition 
and Policy and Consumer Rights, and a senior Senator from Utah. 
Mr. Lee is also the Ranking Member of the Joint Economic 
Committee. He was elected to the Senate in 2010 and is 
currently serving his third term. He spent years at the law 
firm Sidley Austin as an attorney specializing in appellate and 
Supreme Court litigation, and then as assistant United States 
attorney in Salt Lake City. He has clerked for Supreme Court 
Justices Samuel Alito on both the U.S. Court of Appeals Third 
Circuit and on the Supreme Court.
    Mr. Lee received both his bachelor's degree and his J.D. 
from Brigham Young University.
    The final Witness on our first panel is my distinguished 
colleague, the Chair of the House Committee on Oversight and 
Government Reform, Carolyn Maloney. Chair Maloney has 
represented New York's 12th district since 1992 and has served 
as Chair of the Committee on Oversight and Government Reform 
since 2019.
    A lifelong public servant, she worked for the people of her 
State at the New York City Board of Education and in the New 
York State legislature. In 1982, Chair Maloney was elected to 
the New York City Council, where she served for 10 years until 
her election to Congress.
    She has also served at various times as Vice Chair of the 
Joint Economic Committee, regional whip of the Democratic 
Caucus, and a Vice Chair of the House Democratic Steering and 
Policy Committee.
    Chair Maloney received her bachelor's degree from 
Greensboro College.
    We welcome all our very distinguished Witnesses on our 
first panel, and we thank them for their participation. I will 
ask the Witnesses to summarize your testimony in 5 minutes. To 
help you stay within that time, there is a timing light in 
Webex. When the light switches from green to yellow, you will 
have 1 minute to conclude your testimony. When the light turns 
red, it signals that your 5 minutes have expired. Of course, 
your full written testimony will be made a part of the record.
    With that, I now recognize the distinguished Senator from 
Minnesota, Senator Klobuchar for 5 minutes.

 STATEMENT OF THE HON. AMY KLOBUCHAR, A SENATOR FROM THE STATE 
                          OF MINNESOTA

    Senator Klobuchar. Well, thank you very much, Mr. Chair, 
Ranking Member. I assure you, Mr. Chair, if they ever make a 
movie out of my book, dream on, you will have a starring role.
    Thank you for your work on digital platforms, the 
bipartisan work in this Committee, and this incredible 
gathering you have put together to make the point that it is 
not just tech where we see this kind of consolidation. It is 
healthcare. It is everything from cat food to caskets.
    So, I got involved on the pharma side when I got a call in 
2008 from a pharmacist at Minneapolis Children's Hospital who 
said: ``You know, the price of this lifesaving drug for heart 
defects for kids, babies, newborn babies, has gone up from $85 
a treatment to $1,600 a treatment.''
    I am thinking that is impossible. I called the head of the 
hospital. I start looking into it. What happened was one 
company bought that drug, and then they cornered the market. 
They bought the other drug. Those were the only two drugs 
available, and they went to town and made a whole bunch of 
money.
    Even the FTC, they tried to take it on. We tried to take it 
on in Congress. AGs across the country tried to take it on. 
They ultimately failed. It took years--years--for a generic to 
develop.
    That is what we are dealing with. When newborn babies and 
their parents and all the hospitals in a country can't win a 
case, we better do something about it. I think you know some of 
the answers because they have come right out of the House.
    First, I would suggest negotiation of drug prices under 
Medicare, a bill that I lead with Representative Welch. I think 
it is a great idea. The President mentioned it last night. 
Doing something when it comes to drug reimportation is 
something that I know, Chair, many people have worked on over 
on this side. I also have worked on that bill with Senator 
Grassley. I know he is coming up next. That is a pretty 
important effort. There are efforts over here as well.
    Second, is protecting drug price competition and doing 
something about generics. You mentioned the CREATES Act, and 
the work we have to do to stop pay-for-delay. That is ripe for 
action. It is outrageous that we still have this practice going 
on where pharmaceuticals are paying their competitors to keep 
their products off the market, and there is more we can do on 
that, and you mentioned a few of those efforts, Mr. Chair.
    Finally, antitrust competition policy. Incredible 
consolidation has been going on. I am focused here--there are 
other aspects of healthcare--but on pharma. What I am thinking 
is when you look at what we are dealing with, when we have got 
the biggest companies the world has ever known in Facebook and 
Google now being sued by the FTC and by the Justice Department, 
this was a good thing. I am glad that Makan Delrahim and Chair 
Simons under the Trump Administration brought these suits. Now, 
they are being carried on by the Biden Administration.
    You can't just do that and expect these healthcare pharma 
issues to be taken care of without funding those agencies. 
Senator Grassley and I--he can mention this--have a bill to 
finally update our nation's antitrust laws regarding fees when 
it comes to mergers. This merger filing fee bill almost got 
done, as you know, Mr. Chair, at the end of the year in the 
budget with support from the White House. We need to get that 
done immediately. That will add significant resources to the 
two agencies, plus the appropriations policy.
    You cannot take on Big Pharma and Big Tech with Band-Aids 
and duct tape. You have got to give our enforcers the resources 
to do it.
    Then I would finally add the work we are all doing on going 
after exclusionary conduct, going after these mergers, changing 
the standards, and making sure that our laws are as 
sophisticated as the companies that are supposed to be serving 
consumers. Thank you, Mr. Chair.
    [The statement of Senator Klobuchar follows:]
    
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    Mr. Cicilline. Thank you, Senator.
    I now recognize the distinguished Senator from Iowa, 
Senator Grassley, for 5 minutes.

STATEMENT OF THE HON. CHUCK GRASSLEY, A SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. Thank you very much for the invitation, 
Mr. Chair. Millions of Americans started their day with a dose 
of prescription medication. Unfortunately, for many patients, 
those drugs aren't affordable, prescriptions are left at the 
pharmacy counter, and doses are skipped or rationed until the 
next paycheck. That is unacceptable.
    As Chair of the Finance Committee last Congress, I explored 
several approaches to reduce healthcare costs. Senator Wyden 
and I started by investigating insulin pricing. We found that 
the business practices in competitive relationships between 
manufacturers and middlemen, the pharmacy benefit managers, or 
PBMs, whatever you want to call them, have created a vicious 
cycle of pricing increases. PBM's spur drug makers to hike list 
prices to secure prime formulary placement and greater rebates.
    I also investigated the debt collection practices of 
nonprofit hospitals. I examined how these hospitals make 
financial assistance plans available to patients, and the 
patients can't even afford to pay. Nonprofit hospitals enjoy 
certain tax benefits because they are supposed to serve the 
needs of their communities and, particularly, patients with 
limited means. It is only fair that we ensure compliance with 
the laws if they get special treatment.
    I have worked with Senator Wyden on a prescription drug 
bill that would lower drug costs and at the same time save the 
taxpayers $95 billion. Our bill would cap out-of-pocket drug 
costs for seniors at $3,100. It would slow the growth of drug 
costs in the future while protecting innovation by keeping 
government out of the business of setting prices. The key part 
of the bill limits year-over-year increases to CPI, or 
approximately 2 percent today, as opposed to the usual 
increases of 5-10 percent every year. It is the only 
prescription drug bill that can get 60 votes in the United 
States Senate.
    I also believe that the importation of safe and affordable 
prescription drugs from Canada would lower healthcare costs. As 
you heard, Senator Klobuchar and I worked together on several 
bills. We have a bill to allow this, creating savings for 
consumers and injecting more competition into the 
pharmaceutical market.
    When I chaired the Judiciary Committee, I conducted an 
investigation into EpiPen's misclassification in the Medicaid 
Drug Rebate Program. My investigation started when a 
constituent contacted me about high EpiPen costs. Those 
constituent contacts and the resulting congressional 
investigation ultimately contributed to the implementation of 
the bipartisan bill that we call the Right Rebate Act.
    We must deter companies from engaging in activities that 
aim to reduce competition, including regulatory interference, 
pay-for-delay, product hopping, and rebate bundling, just to 
name a few. Again, Senator Klobuchar and I reintroduced our 
bill to combat anticompetitive pay-for-delay deals where brand 
drug companies pay their generic competitors not to compete.
    Senator Klobuchar and I also reintroduced our bill to 
reduce the incentives for branded drug companies to interfere 
with the regulatory approval of generics and biosimilars that 
would compete with their own products. The largest PBMs have 
merged with insurance companies. These conglomerates often own 
other players in the healthcare industry. It is important to 
determine whether consolidation helps patients, or as I 
believe, creates anticompetitive behavior and increased costs.
    I have also introduced a bill with Senator Cantwell to 
bring transparency to the PBM industry by requiring the Federal 
Trade Commission to study the effects of consolation on pricing 
and potential anticompetitive behavior.
    Further, Congress should codify regulations requiring 
hospitals and insurers to disclose their low discounted cash 
prices and negotiated rates to consumers before they receive 
medical care.
    We should pass Senator Braun's Price Transparency Act, 
which I cosponsored. We should work in a bipartisan, bicameral 
fashion to tackle the problems of rising healthcare costs. This 
hearing proves in a bicameral way that we are doing it.
    Thank you again for the opportunity to testify.
    [The statement of Senator Grassley follows:]
    
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    Mr. Cicilline. Thank you very much, Senator Grassley.
    I now recognize Senator Blumenthal, the distinguished 
Senator from the State of Connecticut for 5 minutes.

           STATEMENT OF THE HON. RICHARD BLUMENTHAL,
            A SENATOR FROM THE STATE OF CONNECTICUT

    Senator Blumenthal. Thanks so much, Mr. Chair.
    I want to begin by really very enthusiastically thanking 
you for your leadership on antitrust issues. What you and the 
Committee have done, along with the other Members, on the tech 
monopoly and predatory pricing and conduct issues is truly 
remarkable. I am sure that you will be doing the same here. I 
am proud to be a cosponsor with you of many of the measures 
that are coming before the Committee today.
    I just want to say how honored I am to join in sponsoring 
the No Stalling Act and to support the Preserve Access to 
Affordable Generics and Biosimilars Act led by Senator 
Klobuchar.
    Speaking of Senator Klobuchar, here is the book. Buy it. It 
is a big book. Serious. As the title indicates, it covers 
taking on monopoly power from the Gilded Age to the Digital 
Age.
    Now, in the Gilded Age, as you know, they divided up 
territory, and they fixed prices in smoked-filled rooms. Now, 
monopoly and predatory conduct are much more sophisticated and 
less visible because we live in the Digital Age. The effects 
are a matter of life and death. I am very much in favor of 
conduct remedies or misconduct remedies, the behavioral 
standards that we are going to hopefully write into law, 
including importing more drugs, requiring negotiation of 
Medicare pricing, other kinds of steps. One of them, by the 
way, is the bipartisan Affordable Prescription for Patients 
Act, which I have joined with Senator Cornyn on cosponsoring.
    At the end of the day, what is really needed here is a 
structural remedy. Break them up. That is the remedy that I 
have advocated on some of the Big Tech companies. Break them 
up. They have grown too big. It has given them monopoly power. 
They are misusing that power. I know what it is like to sue 
based on antitrust law, a monopolistic predatory power. I did 
it as Attorney General against Microsoft. It had an enormously 
important positive effect for consumers.
    So, I respectfully suggest that we need stronger 
enforcement of the laws we have. We also need to enhance and 
improve the laws with regard to our power of enforcement and 
provide more resources to the enforcers. In the FTC, in the 
Department of Justice, they need to be empowered to enforce the 
law more aggressively and effectively. We have seen too little 
of it in past years.
    Let me speak on the bipartisan Affordable Prescription for 
Patients Act. I thank Senator Cornyn for sponsoring this bill. 
It would eliminate the abuses of product hopping, which, for 
example, was demonstrated by Actavis when it feared that its 
patent would run out on an Alzheimer's disease medication. 
Instead of facing the fact that it would no longer have 
exclusivity, it issued a new product, supposedly, but really it 
was the old product, with an extended-release mechanism. It 
pulled the old drug from the market. It was able to continue 
charging monopoly prices as a result of it.
    This kind of practice is used with respect to countless 
drugs. They inflate prices. They deprive people of lifesaving 
medication. I am also pleased to be in partnership with 
Representatives Johnson and Issa in a House companion to a bill 
that shuts down the abuses of the patent dance, the product 
hopping patent dance. They have colorful names, but they are 
abhorrent to consumers.
    Patent dancing involves, in effect, resolving patent 
litigation quickly before a biosimilar is introduced on the 
market, which creates a pattern dispute resolution process and 
enables the manufacturer to continue with a lock on the market.
    So, I recommend tougher, more aggressive enforcement and 
structural remedies, but in the meantime these kinds of efforts 
to eliminate abuses of monopolistic power must be advanced. I 
thank you, Mr. Chair, and I yield.
    [The statement of Senator Blumenthal follows:]
    
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    Mr. Cicilline. Thank you very much, Senator Blumenthal.
    Now, I recognize Senator Cornyn, who is the co-lead of the 
Affordable Prescription for Patients Act, along with Senator 
Blumenthal, Ranking Member Buck, and myself.
    Welcome to the Committee. You are now recognized for 5 
minutes.

STATEMENT OF THE HON. JOHN CORNYN, A SENATOR FROM THE STATE OF 
                             TEXAS

    Senator Cornyn. Well, thank you, Chair Cicilline and 
Ranking Member Buck and Members of the Subcommittee. It is 
unusual to have this many Members of the Senate testifying in 
the House, but we are grateful for your invitation and the 
opportunity.
    After more than a year battling COVID-19, the light at the 
end of the tunnel is rapidly growing brighter and larger 
because of the astonishing scientific achievements that led to 
multiple, effective vaccines. As you know, more than half of 
the adults in America have received at least one dose. I look 
forward to the time when this vaccine helps put this virus to 
bed once and for all.
    I say this because it is important to recognize that 
American ingenuity, creativity, and innovation are remarkable 
qualities that has led to lifesaving discoveries. Alongside 
this innovation, we also have to have smart public policies 
that protect both the creators and the beneficiaries of these 
discoveries. There is no better example than prescription drug 
prices.
    As the cost of many prescription drugs have skyrocketed in 
recent years, countless of my constituents in Texas have 
reached out to share stories about the impossible decisions 
their families have had to make, which have only become more 
heart-wrenching over the last year. Not paying some of their 
bills, cutting pills in half, skipping doses, or not filling 
prescriptions altogether because they are simply too expensive. 
No family should have to make these types of difficult choices. 
That is why Senator Blumenthal and I have offered up the 
Affordable Prescriptions for Patients Act in the Senate. We 
have been proud to work with a bipartisan group of colleagues 
on both sides of the Capitol, and the strong bipartisan, 
bicameral support of this bill demonstrates just how 
commonsense these reforms are.
    Now, I know most of us haven't heard of the terms ``product 
hopping'' or ``patent thicketing'' in the past, but as you 
heard from Senator Blumenthal, this is the core of the problem 
that this bill attempts to solve.
    Product hopping occurs when a company develops a 
reformulation of a product that is about to lose its patent 
exclusivity and then pulls the original product off the market. 
This isn't done because the new formula is more effective but 
because it prevents generic competition. This simply needs to 
stop. The FTC should be able to bring antitrust suits against 
bad actors who deliberately game the patent system. This 
legislation will ensure that that is possible.
    Second is patent thicketing. This occurs when an innovator 
uses multiple overlapping patents with identical claims to make 
it nearly impossible for competitors to come to market. This 
abuse of the patent system comes at a high cost for patients. 
To solve this, our legislation would streamline the way drug 
manufacturers resolve patent disputes so lengthy legal 
processes don't stand in the way of competition. We are 
protecting patents rights, which are critical, but we are not 
letting these important issues get bogged down in the sludge of 
time-consuming and expensive litigation.
    We know companies are unlikely to pour extensive time, 
money, and resources into discovering new cures if, at the end 
of it, they can't recoup their costs. We can't allow bad actors 
to abuse the system for their financial gain either.
    We know there is bipartisan support for this bill, as I 
said, on both ends of the Capitol. I hope we can achieve the 
same success we did last year when this bill passed with 
bipartisan support, unanimous support in both the House and 
Senate Judiciary Committees.
    So, I am proud to be here with my colleague Senator 
Blumenthal to advocate for these proposals, and we look forward 
to working with all of you to bring down drug prices for 
American families.
    [The statement of Senator Cornyn follows:]
    
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    Mr. Cicilline. Thank you very much, Senator Cornyn.
    I now recognize Senator Lee for 5 minutes. I believe he is 
on the--

  STATEMENT OF THE HON. MIKE LEE, A SENATOR FROM THE STATE OF 
                              UTAH

    Senator Lee. Thank you so much. Thank you, Mr. Chair, and 
Ranking Member Buck, esteemed Members of the Subcommittee, 
thanks to all of you for asking me to speak today.
    As the leading Republican on the Senate's sister 
Subcommittee to this body, over the last decade, I have 
developed a tremendous appreciation for our country's antitrust 
laws and for the importance of competition policy to our 
national economy.
    Rising healthcare costs and limited healthcare options are 
leading concerns for Americans of all stripes, making 
competition in the healthcare markets particularly important. 
Now, I share the commitment of my colleagues who have joined 
you today in ensuring and protecting competition across the 
healthcare space. In 2016, I was honored to introduce, along 
with Senators Grassley, Leahy, and Klobuchar the CREATES Act, 
which was timely passed by Congress and signed into law by 
President Trump in 2019.
    As you know, the CREATES Act was designed to protect 
competition and to lower drug costs by ensuring that generic 
competitors have access to samples of certain brand-name drugs 
for the purpose of establishing bioequivalence for the FDA. The 
Congressional Budget Office estimated that the law will save 
taxpayers $3.8 billion over 10 years. Industry participants 
tell me that it is already improving generic competition.
    As this Subcommittee considers additional legislation aimed 
at ways to improve competition across various healthcare 
markets, I would urge you to follow the model that we made with 
the CREATES Act and that helped make the CREATES Act so 
successful. Light-touch reform to help align private incentives 
to benefit competition rather than government intervention that 
displaces competition with regulation.
    We should all examine our history to find the root causes 
of consolidation in America's healthcare industry and tackle 
the issue with incremental targeted fixes rather than a 
massive, one-size-fits-all approach. That in turn will require 
taking up a widened view of the factors that impact competition 
in healthcare markets, including existing Federal and State 
laws and regulations.
    If there is anything worse than a monopolist using its 
power to squelch competition and squeeze consumers, it is when 
that monopolist is a creature of government policy and power.
    We as elected representatives of the people, entrusted with 
enacting the laws, hopefully, in pursuit of justice and 
equality, have to always be vigilant against allowing the 
democratic process to be corrupted, even if inadvertently, to 
pick winners and losers.
    If we want to make reforms in this area, we sadly have no 
shortage of opportunities. At the State level, entry into 
hospital markets is frequently restrained by State certificate 
of need laws. These laws require potential market entrants and 
existing competitors to obtain approval or permission in 
advance from the State to build new hospitals or to expand 
current facilities. In some states, incumbent hospitals even 
have veto power over granting certificates to new entrants. 
This is crony capitalism, pure and simple. Patients everywhere 
have suffered for it where these laws have been in place.
    It is no wonder that the pandemic saw at least 24 states 
suspend or loosen their certificate of need laws. Imagine the 
benefits to healthcare and competition within healthcare if 
states just repealed those laws. Which we don't need anyway and 
harm people, in any event.
    Another common restriction at the State level are 
limitations on nurse practitioners, some of which make little 
to no sense and provide little to no benefit or additional 
safety to the patient. The conflict of interest is obvious. For 
many basic needs, nurse practitioners offer a comparable skill 
in service at a lower price. This is something that increases 
access to the healthcare for the most economically vulnerable.
    So, removing those sorts of restrictions would inevitably 
generate price and quality competition between nurse 
practitioners and physicians and improve costs and outcomes for 
patients across the country. This is one of those many areas in 
which we should just allow for people to do what they do best. 
Here in the case of nurse practitioners, take care of people 
without excessive government intervention. We would be better 
off without that intervention.
    Government intervention in healthcare has also had 
disastrous effects at the Federal level. Medicare has used 
Federal clout to strong-arm healthcare providers into agreeing 
to low reimbursement rates. Now, ordinarily, we should cheer 
lower prices. In this case, these so-called savings are really 
just subsidies paid for by insured and self-paid patients. This 
isn't healthcare reform. It is sort of Ponzi scheme. Medicare-
for-all would mean that there was no one left to pay the 
subsidy, and everyone would suffer. These artificial pricing 
pressures also mean that healthcare markets are not able to 
fully respond to competitive pressure and would have fewer 
resources to invest in expansion and innovation. As a result, 
consumers would have fewer options. Quality would go down; 
prices would go up.
    Obamacare has had a similar effect.
    Mr. Cicilline. Senator, if I could just ask you to conclude 
your testimony. You are well over time, but I wanted to 
accommodate you as much as I can.
    Senator Lee. Great. Thank you. So, we are all familiar with 
the promise that if you like your plan, you can keep it. This 
has turned out not to be true. So, it is always tempting in all 
of this to retrench into tribalism and push forward 
encompassing reforms, all-encompassing solutions that might 
only require floor time once. Our constituents deserve better. 
Then deserve a free-market approach where providers can respond 
to needs and demand.
    Antitrust enforcement and competition policy have 
historically been areas of bipartisan agreement. We know that 
vigorous competition is necessary. So, thanks for your close 
attention to keeping America's healthcare markets competitive. 
I thank you again for inviting me to join you today. I look 
forward to working with you today.
    [The statement of Senator Lee follows:]
    
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    Mr. Cicilline. Thank you, Senator Lee.
    Now, at the risk of offending our colleagues in the other 
Chamber, we did save the best for last.
    Chair Maloney, you are recognized for 5 minutes.

           STATEMENT OF THE HON. CAROLYN B. MALONEY,

          A REPRESENTATIVE IN CONGRESS FROM THE STATE

                          OF NEW YORK

    Ms. Maloney. Thank you so much, Chair Cicilline, Chair 
Nadler, Ranking Member Buck, and Members of the Subcommittee, 
thank you for holding this important hearing today and inviting 
me to testify about the Oversight Committee's findings of 
anticompetitive conduct in the pharmaceutical industry.
    At the onset, I want to commend the Subcommittee for its 
groundbreaking work on antitrust issues and also acknowledge 
the historic work of my friend and colleague in the Senate, 
Senator Klobuchar, and her heroic work in fighting rising 
prescription drug prices.
    The former Chair of my Committee, the late Elijah Cummings, 
cared deeply, as I do, about the issue of rising prescription 
drug prices. He understood that drug companies' exorbitant 
prices have devastated patients across our country, forcing 
many to make gut-wrenching choices between affording their 
medications and paying rent, buying food, or saving for 
retirement.
    For this reason, at the beginning of the 116th Congress, 
Chair Cummings launched an in-depth investigation into some of 
the largest and most profitable drug companies in the world. 
This investigation has remained one of my highest priorities 
since I took over as Chair.
    Over the last 2 years, we have reviewed over 1.3 million 
pages of internal company documents. Last fall, the Committee 
held hearings with six CEOs and released five staff reports 
summarizing our initial findings. Before I describe some of 
these findings, I want to recognize that we rely on the 
pharmaceutical industry to develop critical new therapies, 
cures, and vaccines. In exchange, our system grants these 
companies the exclusive right to sell their products for a 
limited number of years without facing competition from lower 
priced generic and biosimilar drugs.
    Unfortunately, brand-name drug companies have abused this 
system by engaging in blatantly anticompetitive strategies to 
extend their monopoly pricing for far longer than our system 
intended. Our Committee's investigation found that these 
strategies, combined with laws restricting Medicare's ability 
to negotiate directly for lower prices, have emboldened drug 
companies to target the United States for price increases while 
cutting prices in the rest of the world. Our system, in 
essence, is leading to higher and less affordable drug prices 
right here in the United States.
    In addition, our investigation found that pharmaceutical 
companies dedicate significant portions of their research 
budgets to coming up with new ways to suppress generic and 
biosimilar competition, rather than focusing on developing new 
therapies.
    By allowing these anticompetitive tactics to continue, we 
are paying more money and getting less innovation. Our 
investigation exposed the inner workings of the types of 
anticompetitive conduct your Subcommittee is seeking to combat.
    Here are just a few examples. One drug company, Teva, 
engaged in what is known as product hopping, using its monopoly 
market power to shift patients from one dose of its blockbuster 
MS drug Copaxone to another dose before generic competition for 
the first dose comes to market. Experts estimate this one 
product hop cost the U.S. Health System $4.3 billion.
    In another example, companies such as Amgen and Novartis 
entered into patent settlement agreements with potential 
generic competitors to delay their entry into the market. Amgen 
internally estimated that it collected $202 million in extra 
sales of the kidney drug Sensipar by delaying generic entry by 
just 10 weeks. Experts estimate that Novartis' delay of generic 
competition for its cancer drug Gleevec cost the U.S. market 
over $700 million.
    In my last example, executives at another company Celgene 
discussed how to leverage the high price of their cancer drug 
Revlimid to prevent other competitors from conducting 
productive cancer research.
    Our Committee's investigation also revealed damning details 
about other abuses like patent thickets, misuse of the Orphan 
Drug Act, and exclusionary contracting with pharmacy benefit 
managers. I encourage Members and the public to use these 
reports as a resource as they seek to combat rising drug prices 
in our country.
    I want to end by emphasizing that we are not done. My 
Committee is continuing to investigate abuses by the 
pharmaceutical industry. On May 18th, the Committee will hold a 
hearing with the CEO of AbbVie. AbbVie sells Humira, the 
highest grossing drug in the United States and the world. The 
Committee has obtained internal documents, previously not 
public, that show the tactics AbbVie has used to suppress 
competition for Humira and other drugs that maintain monopoly 
pricing in the U.S.
    I hope the Oversight Committee's findings are helpful to 
the Judiciary Committee as you consider legislation to address 
the pharmaceutical industry's anticompetitive practices and 
unsustainable, unfair, deceptive price increases. Thank you. I 
appreciate the opportunity to appear before you today and 
congratulate you on all your hard work in this area. I yield 
back.
    [The statement of Ms. Maloney follows:]
    
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    Mr. Cicilline. I thank the gentlelady for her testimony and 
can assure her that the extraordinary work of your Committee is 
very supportive of the work of this Subcommittee. So, we thank 
you.
    With that, I would like to thank each of our distinguished 
Witnesses on our first panel for their very valuable testimony 
today. You are now excused. We will hold briefly while staff 
will make the necessary accommodations for our second panel. We 
should just take a couple of minutes.
    Mr. Cicilline. The Committee will come back to order.
    It's now my pleasure to introduce the Witnesses on our 
second panel. Our first Witness is Dr. Leemore Dafny. Dr. Dafny 
currently serves as the Bruce V. Rauner Professor of Business 
Administration at the Harvard Business School and Harvard 
Kennedy School where she teaches courses on healthcare strategy 
and policy. Her research focuses on competitive interactions 
between patients and providers of healthcare, with a focus on 
antitrust competitive strategy and public policy.
    Dr. Dafny is a research associate of the National Bureau of 
Economic Research and is on the panel of health advisers to the 
Congressional Budget Office. From 2002-2013, she served as the 
deputy director for healthcare and antitrust at the FTC's 
Bureau of Economics, and has been published in various 
journals, including the American Economic Review and The New 
England Journal of Medicine. Dr. Dafny received her bachelor's 
degree from Harvard College and her Ph.D. from the 
Massachusetts Institute of Technology.
    The second Witness on our panel is Michael Carrier, 
Distinguished Professor and Codirector of the Rutgers Institute 
for Policy and Law. Professor Carrier has served at Rutgers 
since 2001 and was named codirector of the Institute for 
Information Policy & Law in 2013. He's widely published and has 
been featured in many journals, including the Chicago Law 
Review, the Michigan Law Review, the Columbia Law Review, and 
CPI Antitrust Chronicle. Professor Carrier is currently on the 
board of advisers to the American Antitrust Institute and is a 
contributing editor for the Antitrust Law Journal.
    Before joining the faculty of Rutgers, Professor Carrier 
spent 4 years at the firm of Covington & Burling, where he 
focused on antitrust, intellectual property, sports, and civil 
litigation. Professor Carrier received his bachelor's degree 
from Yale University and his J.D. from the University of 
Michigan Law School.
    The third Witness on our panel is the Arthur J. Goldberg 
Distinguished Professor of Law at the University of California 
Hastings College of Law, Professor Robin Feldman. She is also 
the director of the UC Hastings Center for Innovation. 
Professor Feldman has been published in many well-respected 
journals, including the New England Journal of Medicine and the 
Stanford Technology Law Review. She was elected to the American 
Law Institute in 2012 and has received both the William Rutter 
Award for Excellence in Teaching and the 1066 Foundation Award 
for Scholarship.
    Professor Feldman received both her bachelor's degree and 
her J.D. at Stanford University.
    Our last Witness today is Alden Abbott, the Senior Research 
Fellow at George Mason University's Mercatus Center. Before 
joining Mercatus, Mr. Abbot served as the Federal Trade 
Commission's General Counsel, representing the Commission in 
court. He has a long career of serving the Federal government 
at the FTC, the Department of Justice, and the Department of 
Commerce. He's also worked at The Heritage Foundation and 
BlackBerry Limited. Mr. Abbott was an adjunct professor at 
George Mason University's Antonin Scalia Law School for almost 
20 years and is widely published on competition, regulation, 
international trade.
    Mr. Abbott received his bachelor's degree from the 
University of Virginia, his master's in economics from 
Georgetown University, and his J.D. from Harvard Law School.
    We welcome all our distinguished Witnesses on our second 
panel and we thank you for your participation.
    I will begin by swearing in our Witnesses, and I ask our 
Witnesses that are testifying in person to rise. I ask our 
Witnesses testifying remotely to turn on their audio and make 
sure that we can see your face and your raised right-hand while 
I administer the oath.
    Do you swear or affirm under penalty of perjury that the 
testimony you're about to give is true and correct to the best 
of your knowledge, information, and belief, so help you God?
    Let the record show the Witnesses answered in the 
affirmative.
    Thank you and please be seated. Please note that your 
written statements will be entered into the record in their 
entirety. Accordingly, I ask that you summarize your testimony 
in 5 minutes. To help you stay within that timeframe, there's a 
timing light in Webex. When the light switches from green to 
yellow, you have 1 minute to conclude your testimony. When the 
light turns red, it signals that your 5 minutes have expired.
    I now recognize Dr. Dafny for 5 minutes.

                 TESTIMONY OF DR. LEEMORE DAFNY

    Dr. Dafny. Chair Cicilline, Ranking Member Buck, and 
distinguished Members of the Subcommittee, I thank you for 
holding this hearing and giving me the opportunity to testify 
on the subject of healthcare consolidation. My name is Leemore 
Dafny, and I'm an academic health economist with long-standing 
research interests in competition and consolidation. I'm a 
professor at the Harvard Business School and the Harvard 
Kennedy School, and I previously served as the deputy director 
for healthcare and antitrust in the Bureau of Economics at the 
Federal Trade Commission while on university leave. I'm on the 
panel of health advisers to the Congressional Budget Office, 
and I engage with regulators, policymakers, and businesses in 
my role as a faculty member and a healthcare antitrust expert.
    The United States spends a larger share of its GDP, nearly 
18 percent, on healthcare in any other country. Studies show 
that high prices, not the type or quantity of services 
consumed, nor the health of our population, are the primary 
driver of higher U.S. spending. International comparisons also 
show the U.S. lags other leading developed countries on most 
dimensions of healthcare quality. We are not receiving the 
highest possible value for our dollars, far from it.
    My focus today is healthcare providers, such as hospitals 
and physicians who jointly account for about half our 
healthcare spending. As you're aware, government programs like 
Medicare set prices for provider services like hospital 
admissions, but the private sector relies on market-based 
prices, and those prices are high and growing.
    Back in the late nineties, private prices were about 10 
percent higher than Medicare prices. By 2012, they were 75 
percent higher. Today, privately insured patients pay on 
average two times what Medicare pays for hospital care. These 
higher prices hurt patients and they hurt our economy.
    As a response to high prices, health insurance premiums and 
deductibles are rising. High deductibles mean people pay 
thousands of dollars out of pocket when they are unlucky enough 
to require care. Higher insurance premiums mean smaller 
paychecks.
    The key questions I'm here to answer is whether 
consolidation is driving these higher prices and what we can do 
about it. My answer to the first question is yes, studies show 
horizontal or same market consolidation results in higher 
prices for hospitals. It is also true for physician groups and 
for insurance premiums. The evidence on nonhorizontal 
healthcare mergers, such as mergers across providers or firms 
in different geographies or service categories, also shows 
prices in spending increased post-merger, in particular, after 
hospital systems acquire additional hospitals in the same State 
and after hospitals acquire physician practices. Antitrust 
enforcers regularly challenge horizontal margins, but 
challenges of nonhorizontal mergers are very rare, and in my 
recommendations, I suggest ways to enable such challenges.
    Let me be clear. The bad guys in healthcare are not 
hospitals or doctors or even insurers. The bad guy is a lack of 
competition, driven by consolidation.
    The COVID pandemic has shown us what is magnificent about 
our healthcare providers. They rose to the occasion and did all 
they could to meet patients' needs. They collaborated with one 
another in resourceful ways, but that doesn't mean they need to 
merge with one another now. If the pandemic stimulates even 
more consolidations, we'll face a different type of long-haul 
symptom of COVID, higher prices.
    To protect competition, I have three recommendations.
    First, strengthen our Federal enforcement agencies' ability 
to identify and review potentially anticompetitive conduct in 
mergers. You can do that by requiring more healthcare 
transactions to be reported, mandating insurers share 
healthcare claims data with Federal agencies, and increasing 
agency budgets.
    In real terms, appropriations in 2018 were 18 percent lower 
than in 2010. The recent increase has only kept up with 
inflation. Restoring and increasing funding will yield a return 
for years to come.
    Second, amend and strengthen the antitrust statutes. Ensure 
the statutes prohibit healthcare mergers that enable providers 
to exploit existing market power and are likely to harm 
consumers. The current wording or interpretation of that 
wording is enabling scores of transactions that are harmful to 
consumers to proceed.
    Third, ask the agencies to issue healthcare guidelines that 
set forth their interpretation of antitrust statutes in 
healthcare today. Regulators, private parties, and courts pay 
close heed to agency guidelines, so this has potential for real 
impact.
    Our healthcare providers have so many people working hard 
to help people live better lives. My recommendations are not 
aimed at making their work more difficult; they are aimed at 
creating a market context that brings out their best and 
rewards them for it.
    Thank you.
    [The statement of Dr. Dafny follows:]
    
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    Mr. Cicilline. Thank you very much, Dr. Dafny.
    I now recognize Professor Carrier for 5 minutes.

                  TESTIMONY OF MICHAEL CARRIER

    Mr. Carrier. Thank you very much.
    Drug prices are too high. One main reason why is that brand 
companies play all sorts of games, like product hopping, pay-
for-delay settlements, citizen petitions, and biosimilar 
disparagement. All these things harm consumers and there's no 
justification at all based on patents or innovation.
    At the same time, there is increasing consolidation. The 
industry is getting more and more consolidated, and the FTC has 
responded only by requiring the divestiture of overlapping 
products. Congress can Act to make consumers' lives better and 
will not touch innovation in the process. The CREATES Act is a 
great model. Chair Cicilline, I thank you for your leadership 
on this important bill which has had a significant effect.
    I also wanted to tie my remarks to what Senator Lee said. 
Senator Lee said that we wanted a ``light touch reform'' and 
``incremental targeted fixes.'' Every one of these pieces of 
legislation fits that description exactly.
    My name is Michael Carrier. I'm a distinguished professor 
at Rutgers Law School. I've spent my career focused on the 
intersection of the antitrust and the IP laws. I have written 
130 articles, am coauthor of the leading treatise on the topic, 
and really spend all my time thinking about these issues.
    The first thing that Congress can do is to address product 
hopping. Most reformulations by drug companies are fine. Most 
of the time there's innovation, and there is not a pending 
generic. Some of these reformulations are very concerning. Some 
of the reformulations make no sense at all other than harming 
the generic. Every time that the brand company makes a tiny 
switch from a capsule to a tablet or just adjusts the dose a 
little bit, the generic cannot be substituted at the pharmacy 
counter and so it has to go back to the drawing board and 
consumers are stuck paying high prices.
    Brand companies often have no good reason for what they are 
doing. In the Namenda case, the brand company pulled a $1.5 
billion drug from the market. In the Suboxone case, it 
disparaged its own product. Legislation being considered, H.R. 
2873, would address these issues. The courts have not figured 
out what to do with soft switches, which occur when the old 
drug remains on the market. This is the best piece of 
legislation to deal with the problem.
    Second is pay-for-delay settlements. Brand companies have 
paid generics to delay entry. There's no good reason for this, 
but even though the Supreme Court, in FTC v. Actavis, clearly 
said this violates antitrust law, the settling parties have 
come up with all sorts of reasons why their agreement is not a 
pay-for-delay settlement. This piece of legislation would be 
very important to give the FTC power to go to court and not 
have to spend a decade trying to prove something that is very 
difficult to prove. It also would solve some problems in the 
courts. Not every court gets Actavis right, and so that's why 
the legislation is so important.
    Third is citizen petitions. Citizen petitions are meant to 
raise legitimate concerns with the FDA. As it turns out, 
however, most of them are filed by brand companies and the FDA 
denies most of them. So, H.R. 2883 would be very helpful in 
giving the FTC power to go after this sham-related conduct to 
make clear that a series of petitions could be a sham and to 
show that the penalties are significant, which would increase 
deterrence.
    Fourth is biosimilar disparagement. In the biologics 
industry, which is the next big wave, there's not as close a 
relationship between the biologic and the biosimilar as there 
is between the brand and the generic. Biologic manufacturers 
have made all sorts of claims that the biosimilar is not 
identical, that maybe if you take it, something bad will happen 
to you. The courts have not shown that they're up to the task 
of getting this right. So, I would recommend a presumption that 
monopolists engaging in false advertising constitute 
monopolization.
    Fifth is mergers. There has been a ton of consolidation in 
the industry. The FTC has responded by focusing on the 
divestiture of overlapping products. I believe that there is a 
theory of unilateral effects that is well established that 
would cover what is going on here. So, the first thing I'd say 
is that there should be a presumption against mergers between 
large companies. If you look at these large companies, they 
have significant advantages in insurance and reimbursement, 
marketing and detailing, and financing. There's no good reason 
for them to merge.
    In terms of mid-size firms, even if I might not recommend a 
presumption, there are other factors to look at beyond the 
overlapping products. I'd consider factors like must-have 
blockbusters, rebate laws, and anticompetitive conduct. For 
example, the AbbVie-Allergan merger, all three of those were 
present, and that deserved more attention.
    Finally, generic mergers deserve more attention as well. 
Not every generic is doing what it was supposed to do. When it 
starts getting a lot of its revenue from the brand side, that 
alters its incentives and that should be considered.
    At the end of the day, the three pieces of legislation that 
this Committee is considering would make consumers' lives 
better and would not touch innovation.
    Thank you very much.
    [The statement of Mr. Carrier follows:]
    
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    Mr. Cicilline. Thank you, Professor Carrier.
    I now recognize Professor Feldman for 5 minutes.

                   TESTIMONY OF ROBIN FELDMAN

    Ms. Feldman. Mr. Chair and esteemed Members of the 
Committee, I'm honored to be here today to address an issue 
that is causing real pain for patients and for those who are 
trying to help them.
    Open and vigorous competition is the backbone of U.S. 
markets, but we're not seeing that in the pharmaceutical 
industry. We know pharma markets aren't working because we see 
monopoly pricing extend well beyond the statutory grant of 
exclusivity. That hurts patients who can't access affordable 
medicines and it burdens taxpayers.
    Quite simply, pharmaceutical companies are repeatedly 
gaming the system to protect and extend their monopolies. 
Companies are doing this through schemes to block generic 
entry, including product hopping, pay for delay, and citizen 
petition abuse. Companies string these games out one after 
another to maintain monopoly pricing. This Committee has an 
historic opportunity to address the problem.
    In describing this anticompetitive gaming, I would like to 
focus on a few key issues. First, many of the games, including 
product hopping, involve making some modification to an 
existing drug. The company then pushes the market to the new 
version, which is protected by shiny new patents. One can see 
this, for example, in the market for treating opioid use 
disorder when a company switched from tablets to melt-a-ways 
just before the patents expired.
    Now, these modification patents are often quite weak, and 
when generics fully challenge them in court, the generic wins 
three-quarters of the time. The challenge takes years, and in 
the meantime, there's no competition and prices stay high.
    Most important, when a company makes a modification to a 
drug, like changing a tablet from 20-40 milligrams, the R&D is 
far less than for the drug's initial discovery. A company 
should be able to earn its reward in the market for the 
modification. It's really the massive investment in the initial 
discovery for which government should intervene in the market, 
put its thumb on the scale, and give the company years of 
patent protection.
    These gaming opportunities also mean that much of the 
system is focused on repurposing old drugs rather than 
discovering new ones. In fact, 78 percent of the drugs 
associated with new patents aren't new drugs coming on the 
market; they are drugs we already have.
    Now, against this backdrop of repeated anticompetitive 
gaming, the pharma industry also has become increasingly 
consolidated. Pharma now outsources most of its R&D, generally 
by buying startup after startup. All this reduces the chance of 
disruption and competition in the industry.
    Antitrust law just hasn't kept up, either with the monopoly 
gaming or with the waves of mergers and buy-ups. Instead, 
courts and agencies tend to focus on a single behavior or a 
single startup purchase. That misses a lot. For example, if a 
dominant firm buys 100 companies, the likelihood that any one 
purchase harms competition is low. The likelihood that the 
pattern of acquisitions harms competition is much greater. The 
same is true with the pattern of behavior.
    Much of this monopoly gaming has blossomed just in the last 
15 years. It's not age old, and it's not inevitable. I am 
tremendously encouraged to see bipartisan efforts to address 
these critical needs and to help improve access to affordable 
prescription drugs for patients.
    Thank you.
    [The statement of Ms. Feldman follows:]
    
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    Mr. Cicilline. Thank you, Professor Feldman.
    I now recognize Mr. Abbott for 5 minutes.

                   TESTIMONY OF ALDEN ABBOTT

    Mr. Abbott. Thank you, Chair Cicilline, Ranking Member 
Buck, distinguished Members of the Subcommittee. Thanks for 
this opportunity to testify.
    As Chair Cicilline noted, I'm a former general counsel in 
the Federal Trade Commission. I served in other roles there as 
well. I also formerly served in the Antitrust Division of the 
Department of Justice.
    In my statement today I will focus on four points.

        (1)  Additional funding for the Federal antitrust agencies;
        (2)  granting the FTC's statutory authority over nonprofit 
        entities;
        (3)  what status antitrust statutory changes are appropriate;
        (4)  major legal reforms unrelated to antitrust.

    First, additional funding. Federal antitrust enforcement is 
a bipartisan endeavor, and the FTC Commissioner unanimously 
supports substantially increased funding for FTC enforcement. 
As already noted, in real terms, resources have diminished over 
the last decade for such enforcement at the FTC.
    I expect that the Biden Administration will recommend 
additional funding for the Justice Department's Antitrust 
Division as well.
    Acting FTC Chair Slaughter recently testified before the 
Senate Commerce Committee that FTC employment has remained flat 
despite a growing workload, with merger filing doubling in 
recent years. She noted that FTC resource constraints lead to 
difficult tradeoffs that may adversely affect the pursuit of 
some meritorious investigations. I can attest to the accuracy 
of her observation based on my personal experience as FTC 
general counsel.
    The problem of resource constraints is particularly acute 
in the case of healthcare merger review, given the increasing 
consolidation of healthcare institutions in recent years. 
Antitrust enforcers will need additional resources to ensure 
that this trend does not yield mergers that undermine the 
competitive process and harm consumers.
    Second, FTC authority over nonprofits. Many healthcare 
entities, particularly hospitals, are organized as nonprofits. 
FTC and Antitrust Division Clayton Act merger enforcement 
applies both to for-profit and not-for-profit enterprises. The 
FTC Act has not reached nonprofit corporations. Then FTC Chair 
Simons testified in 2019 that this limitation, which makes no 
logical sense, has prevented the FTC from examining problematic 
unilateral conduct by hospitals.
    In short, it's high time the FTC be given statutory 
authority over nonprofits.
    Third, legislative change. While a few marginal adjustments 
to the antitrust statutes appear appropriate, I believe the 
mainstream consensus consumer welfare approach in the major 
statute should be retained. I believe there's a risk that far-
reaching extensive statutory changes could generate costly 
welfare reducing uncertainty in antitrust enforcement.
    However, as noted already by a couple of speakers, targeted 
statutory amendments narrowly tailored to address specific 
competitive healthcare sector abuses may be appropriate in the 
right circumstances. For that reason, I testified in favor of 
the CREATES Act.
    Several distinguished scholars, including my fellow 
Witnesses, have advanced a number of thoughtful, additional 
targeted legislative proposals to address competitive problems 
affecting healthcare.
    I will not comment today on the merits of specific 
proposals, but I would respectfully suggest that before 
legislating, Congress seriously weigh whether the benefits of 
eliminating targeted harmful conduct will likely be outweighed 
by the cost of condemning and deterring specific instances of 
such conduct that could have benefited consumers.
    Fourth, nonantitrust issues. Major improvements to the 
competitive condition of the healthcare sector require far more 
than enhanced antitrust enforcements--and enhanced antitrust 
enforcement. Serious competitive distortions are posed by a 
host of State and Federal statutory provisions that bedeviled 
the healthcare sector, including as merely one example, State 
certificate of need laws that restrict competitive entry.
    The Federal antitrust agencies have over the years done an 
outstanding job in calling for statutory and legislative 
reforms to improve healthcare competition under Republican and 
Democratic Administrations. Enhancing competition in healthcare 
markets, whether through enforcement or legislative and 
regulatory reform, has been and should remain a nonpartisan 
endeavor.
    Thank you. I look forward to your questions.
    [The statement of Mr. Abbott follows:]
    
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    Mr. Cicilline. Thank you, Mr. Abbott.
    We will now--again, thank you to our Witnesses for their 
opening statements. We'll now proceed under the 5-minute rule 
for questions. I will begin by recognizing myself for 5 
minutes.
    Professor Feldman, in a recent op-ed you note that between 
1995 and 2015, the 60 leading pharmaceutical companies merged 
to only 10. As you note, this has resulted in a handful of 
manufacturers sourcing the vast majority of prescription drugs. 
So, my question is, why has there been so much consolidation in 
this industry? What are the effects of such extreme 
consolidation? To what extent do killer acquisitions pose a 
problem in the pharmaceutical markets?
    Ms. Feldman. Thank you. The closer we can get to a free 
market, the better we're going to do for competition and for 
lowering drug prices. The competition agencies in the United 
States have essentially taken the view that they can manage 
mergers by allowing for divestiture of pipeline products or 
other types of changes. It simply hasn't been effective. We 
need a far greater response to mergers and buy-ups at startup 
after startup. We also need a second look, where we look back 
at the mergers that have happened to see whether competition 
has actually improved or lessened, and then try to fix it.
    Mr. Cicilline. Thank you, Professor Feldman.
    Dr. Dafny, in your written testimony, you recommend 
implementing a legal framework, and I quote, ``to explicitly 
prohibit healthcare mergers that enable greater exploitation of 
existing market power and are likely to result in harm to 
consumers.'' What are some examples of mergers in the 
healthcare sector that are harmful to consumers but nonetheless 
go unchecked under current law? Secondly, do you think it would 
be helpful to shift the burden to merging parties to show that 
their merger would not result in higher prices or lower quality 
of care?
    Dr. Dafny. Chair Cicilline, I thank you very much for 
asking this question. Examples of harm that are occurring that 
are not currently being investigated or are not publicly or 
seriously so, when hospitals are buying up other hospitals, not 
in the exact same area but nearby areas, that show a dominant 
hospital in a town has a great reputation, high prices will buy 
up a community hospital in the suburbs and then instantly be 
able to roll that hospital on to its contract, raising prices, 
which all gets passed down to us. That's one example.
    Another example, hospital acquires a physician practice. 
Physician practice, everything's the same, puts up a sign, 
everything's the same for the patient, okay, which is what 
counts right here. Puts up a sign, says, you will now be also 
paying hospital facility fees for this service; increases 
prices.
    These transactions are proceeding unchallenged because 
either the statutes don't allow or the interpretations of those 
statues don't allow challenges to them on competition grounds.
    You second asked about shifting the burden. This is a good 
example where one could require the parties that are proposing 
such an acquisition to demonstrate why their transaction is not 
going to be harmful, as opposed to requiring the plaintiffs, 
the government, to demonstrate why it is going to be harmful to 
the standards that are currently required in the competition 
statutes.
    Mr. Cicilline. I take it you think that would be a good 
idea?
    Dr. Dafny. I do.
    Mr. Cicilline. Okay. Great.
    Professor Carrier, my last question, you explain in your 
testimony that product hopping causes patients to overpay by 
potentially billions of dollars annually for their prescription 
drugs. Can you explain why this product hopping is so harmful 
and how the Affordable Prescriptions for Patients Act 
legislation, which I introduced with Ranking Member Buck and 
Senators Cornyn and Blumenthal, would combat this abusive 
practice? Respond to the defense that pharmaceutical companies 
have expressed that preventing product hopping will somehow 
stifle innovation and block new treatments from coming to the 
market.
    Mr. Carrier. Sure. Product hopping is concerning because it 
evades the regulatory regime. Drug product substitution laws 
are designed to bring affordable generics to the market. When a 
brand company makes a tiny change just to avoid substitution, 
everybody suffers. The legislation would be very helpful in 
making clear that these soft switches, in which the old product 
is left on the market, that courts are not understanding is a 
problem. The legislation would be incredibly helpful for that.
    In terms of innovation, I'd say that, first, the 
legislation is quite targeted. There's a competition window 
that allows for challenges only in a short period of time. 
There are exclusions, and there are justifications. Also, this 
is limited to the FTC under section 5. The FTC almost never 
brings a case. At most it will be once every year or two.
    Then, finally, in terms of innovation, this is not the 
first time that the pharmaceutical industry has made this 
argument. I wrote an op-ed that showed that, going back to 
1961, every single time there's patent or antitrust legislation 
in this body, they say it's going to be the end the world. Now, 
there's a new variation based on COVID, but it's still the same 
thing. This is sort of like the boy who cried wolf.
    Mr. Cicilline. Thank you, Professor.
    I now recognize the Ranking Member of the Subcommittee, Mr. 
Buck, for 5 minutes.
    Mr. Buck. I thank the Chair. I would ask the Chair, I'd 
like to go last with my questions. If the Chair could recognize 
Congressman Issa, I would very much appreciate it.
    Mr. Cicilline. Happily. I recognize Mr. Issa for 5 minutes.
    Mr. Issa. Thank you. I want to thank the Ranking Member for 
letting me go out of order.
    The fact is I support this legislation in principle. I know 
that, as we go through the process, many companies can give us 
examples where they may want to have a nuance change but let me 
go through a couple of quick questions that may go the other 
direction. We'll start with Professor Carrier.
    Many of the changes that we're trying to thwart with this 
legislation are predictable and repeatable. If we cannot get, 
if you will, some of these commonsense reforms through, is 
there any reason that this body couldn't, for example, give a 
right of anyone not having a patent to put up barriers to, if 
you will, the obvious?
    You mentioned or it was mentioned in the earlier testimony 
that, for example, changing the dosage or the method of 
delivery, time release, each of these nuances that are 
currently going on at the end of a product life, and the 
opioids are famous for them, these are, in fact, patentable 
because we allow them to be patentable, and we don't bar them 
based on obvious. Yet, something--if you will, medicines 
continue to basically add these features that are predictable 
and repeatable, wouldn't. You say that it is certainly within 
our purview to, as a matter of law, define those as obvious if 
we can't get some sort of middle ground with pharma and their 
pattern of abuse?
    Mr. Carrier. You're absolutely right that the patent system 
is incredibly important. We need to make sure that we give the 
patent system the deference it deserves. At the same time, 
however, not every patent is valid. A lot of these patents are 
not on the active ingredient. The concerns with product hopping 
is that it is an evasion of the regulatory regime.
    I talked about the drug product substitution laws. The 
Hatch-Waxman Act, also included a whole bunch of provisions to 
increase generic competition. So, I view this as purely 
bipartisan legislation that is narrowly targeted, that will not 
affect innovation, and that will make consumers lives better.
    Mr. Issa. I want to do one more follow-up. In most areas of 
patent law, we all are used to the common statement that a 
patent, by definition, on its face, with the disclosure, has to 
be sufficient for someone of ordinary skill in the art to, in 
fact, duplicate the product.
    Please explain for the record why that does not occur in 
biologics today, and why the entire pattern of abuse where 
you're at the end of a patent life at the point in which a 
biosimilar would like to produce something and doesn't have, in 
some cases, even the medicine, but they don't have the ability 
to do it. Because, if I'm correct as a layperson, we have not 
forced the disclosure at the front end to meet that test that 
if someone of ordinary skill in the art can't on the face of 
the disclosure know how to duplicate the product.
    Mr. Carrier. You're absolutely right. What's going on with 
the biologics industry is not just patent protection, not just 
patent secrets, but there's also trade secret protection. So, 
even if, exactly as you mentioned, the patent system is 
designed to enable inventions, when a lot of the process of 
creating biologics is hidden under lock and key, it's hard for 
the biosimilar to figure that out. We have the patent system 
that's designed to serve a purpose. You don't usually have 
trade secrecy layered on top of that. That's what's going on 
here, and it's an additional reason why we're not seeing enough 
biosimilar entry.
    Mr. Issa. So, let me ask it as a final question. Certainly, 
I appreciate trade secrets, and manufacturing nuances are 
abundant in the electronics industry that I came from many 
years ago. In return for the bargain of providing a patent, the 
assumption would be that, again, someone of ordinary skill in 
the art with the information that, by definition, someone of 
ordinary skill in the art has, can duplicate the product.
    Should we be looking at an outright recognition that the 
trade secrets cannot, in fact, be allowed to create a barrier 
if you want the patent? For example, putting it in simple 
terms, Coca-Cola can't have a secret formula and patent the 
formula. Just a quick answer if you would, please.
    Mr. Cicilline. Yeah. The time of the gentleman has expired, 
but the Witness can answer briefly.
    Mr. Carrier. Sure. You're right. In most areas, and 
inventor needs to choose between patent and trade secret 
protection; in contract with biologics, one builds on top of 
the other. This is worth attention.
    Mr. Cicilline. The gentleman yields back.
    Mr. Issa. Thank you. I thank the Chair for the indulgence.
    Mr. Cicilline. Thank you. I now recognize the gentleman 
from New York, Mr. Jones, for 5 minutes.
    Mr. Jones. Thank you, Mr. Chair and to the Ranking Member, 
for your strong leadership. This has been a pleasantly 
bipartisan hearing thus far. I look forward to joining Mr. Issa 
in reforming our Nation's patent laws.
    I also want to thank the esteemed Witnesses on both of our 
panels today for joining us this afternoon. I am excited to be 
part of this vital effort to ensure that everyone in the United 
States of America can afford the prescriptions that they need.
    I also, of course, want to thank the sponsors of the three 
important bills before us today, for their leadership. Thanks 
to you, we have the opportunity to help patients and families 
across the United States, and I am so committed to working with 
you.
    Today, pharmaceutical companies are confronting the 
American people with a terrible choice: Miss rent payments and 
skip meals to pay for their prescriptions or go without the 
lifesaving medications that they need. I know the toll that 
takes firsthand, because when I was growing up, my family 
didn't always know if we could afford the healthcare that we 
needed. There is simply no reason, indeed no excuse, for 
leaving patients and their families struggling to get by just 
so that pharmaceutical profits can continue to soar.
    Professor Carrier, in your testimony today, you have 
illuminated a source of the crisis of high drug prices that we 
have not yet heard enough about, and that is the consolidated 
power of the biggest pharmaceutical firms. As pharmaceutical 
companies have expanded through mergers, they have raised drug 
prices higher and higher. I've been hearing that same message 
from a range of leading experts from the American Economic 
Liberties Project to my courageous colleagues like Katie Porter 
and, of course, our distinguished Chair, David Cicilline.
    To help clarify the stakes for everyone, could you share an 
example of a pharmaceutical merger that shows how these mergers 
can harm patients, families, and our communities?
    Mr. Carrier. Sure. Thank you for your attention to mergers, 
which are a really important issue. I would focus on the 
AbbVie-Allergan merger, where this received a lot of attention. 
At the end of the day, the FTC solution just came down to 
forcing the divestiture of a few overlapping products.
    When you think about the harm, however, it comes from more 
than just particular markets. So, in this case, both companies 
had blockbuster products in AbbVie's Humira and Allergan's 
Botox. When you get all these must-have products in one 
company, they have a lot of power to provide rebates to PBMs. 
That makes it harder for consumers who need to have these 
medications.
    At the same time, you have these rebates that make it 
tougher for any other competitor that can't compete with that 
broad range of products. You have some companies that are in 
antitrust hot water. For example, Abbvie has been accused of 
pay-for-delay settlements, and with Allergan, there have been 
concerns with tribal immunity and citizen petition challenges. 
There is a lot that's going on that's not captured by the 
current approach. I think that this harms consumers and, 
therefore, a new approach should be considered.
    Mr. Jones. Last month, acting FTC Chair Rebecca Kelly 
Slaughter declared that, quote, ``Given the high volume of 
pharmaceutical mergers, skyrocketing drug prices, and ongoing 
concerns about anticompetitive conduct in the industry, it is 
imperative that the FTC rethink its approach toward 
pharmaceutical merger review.''
    In your testimony, you called for imposing a presumption 
against mergers between large pharmaceutical companies. Can you 
explain your proposal further and tell us more about why a 
presumption against these mergers is so important to ensuring 
that everyone can afford the drug they need?
    Mr. Carrier. Absolutely. Patricia Danzon at Wharton and I 
have an article forthcoming in the Antitrust Law Journal where 
we look at pharmaceutical mergers and the key element of size. 
Size makes a really big difference. Basically, we conclude that 
there's no good reason for two large companies to merge. They 
have entrenched advantages in things like financing, marketing 
and sales, insurance, and reimbursement. You put that all 
together, and it makes it almost impossible for anyone else to 
compete. Plus, there's no good innovation reason for two large 
firms to merge.
    So, that's why we suggest a presumption against the merger 
of two large firms. With mid-size firms, I might not go all the 
way to a presumption, but I still would apply those factors. 
So, the size of the firm really needs to be considered.
    Mr. Jones. Thank you so much.
    Professor Dafny, let me ask you as well, how would it help 
patients if we made certain kinds of healthcare mergers 
presumptively unlawful?
    Dr. Dafny. I thank you for the question. If we took a set 
of healthcare mergers that are known typically to be damaging 
to consumers and insisted that the acquiring parties 
demonstrate that they are not going to damage consumers, that 
would save substantial regulatory resources.
    Mr. Jones. Thank you so much.
    Thank you, Mr. Chair. I yield back.
    Mr. Cicilline. The gentleman yields back.
    I now recognize the gentleman from Louisiana, Mr. Johnson, 
for 5 minutes.
    Mr. Johnson of Louisiana. Thank you, Mr. Chair. Thanks to 
all my colleagues. It is rare, as has been noted, for us to 
have bipartisan things to work on these days in Judiciary. So, 
this is a refreshing hearing that we've had so far.
    Mr. Cicilline. Mr. Johnson, I won't take this time away 
from you, but not rare on the Antitrust Subcommittee.
    Mr. Johnson of Louisiana. Oh, yes. I salute you for that, 
sir, and Ken Buck as well.
    Listen, this is a big problem, a big issue, and there's a 
lot to deal with. So, it's not even really fair to give these 
Witnesses just 5 minutes apiece and letting us ask some 
questions. Let me drill down into something that is of great 
concern to a lot of people, and that is the certificates of 
need issue. Let me ask Mr. Abbott, if he will, maybe describe 
what that is, and then talk a little bit about the 
anticompetitive effects of certificates of need.
    Mr. Abbott. Thank you for that question, Congressman. A 
certificate of need basically is a State law provision which 
states that any additional investments, say in a hospital, a 
healthcare facility, depending upon how it's defined, must be 
justified. Often you will have a panel that will decide if a 
particular investment is justified and is cost effective. The 
theory, if you find out about it, about certificates of need, 
is that a concern about scarce resources, overinvestment in 
certain resources, cost saving in short.
    The reality is, and the FTC and the Justice Department over 
the last 20 years have done many studies of certificates of 
need. They've shown that, in reality, certificates of need 
cause barriers to entry. It is a way, for example, that a 
powerful incumbent hospital might argue that, oh, well, you 
don't really need new beds, you don't really need new entry 
because our supply of hospital facilities is sufficient. That 
can prevent badly needed entry.
    Also, the existing certificate of need law prevented the 
FTC from doing anything about a merger to monopoly in the State 
of Georgia in the Phoebe Putney case. On the case, the Supreme 
Court, the relief to sort of before change in hands of assets 
required to get relief. Yet, certain divestitures were 
effectively blocked by a certificate of need law in the State 
of Georgia.
    This has been totally bipartisan, both Republican and 
Democratic Administrations, the FTC, and Justice Department 
have regularly submitted letters saying, we have found 
certificates of need to be anticompetitive and we recommend 
against them. They don't really do much into save resources at 
all. Their main effect really is to limit competition, which 
we've already heard can raise prices and reduce quality.
    Mr. Johnson of Louisiana. Very good. So, if we [inaudible] 
particular service, just in layman's terms, how would that 
improve the healthcare experience for the average consumer over 
time? I mean, the presumption is it would unleash more 
competition. Right? I mean, is that oversimplifying it?
    Mr. Abbott. Yes, Congressman. Indeed, it would. It would 
allow new entry in markets. It would allow the market to decide 
about how many beds are needed, what new facilities can be 
brought forth, say it's an imaging facility, and it would 
prevent particularly rural or regional monopolies from 
entrenching their market power.
    As I mentioned, that was a problem in Georgia. So, I think 
that's a particular issue. I don't have the specific numbers in 
front of me, would be glad to provide them to you. As I say, I 
think there has been a lot of research. The research that I am 
aware of unequivocally has shown that this tends to be 
anticompetitive and drive up prices.
    Mr. Johnson of Louisiana. I appreciate that. If it will not 
be too much effort, if you could supply that to us after the 
hearing [inaudible] because we need real ammunition and 
evidence for making these changes and that would be a big help.
    I'm having technical glitches, Mr. Chair, so I yield back. 
Thank you.
    Mr. Cicilline. The gentleman yields back.
    Mr. Raskin, if you turn on your camera, you are next. If 
not, we'll move to Ms. Jayapal.
    Mr. Raskin. Yes. Thank you, Mr. Chair. I didn't realize I 
was coming up. Thank you so much.
    A number of our colleagues have remarked upon the pleasant 
bipartisanship of this hearing. I wonder if we'd take a moment 
to reflect on what that means historically. I know that 
socialism has become part of the political dialogue in America 
today. I wonder if we could examine the way in which antitrust 
enforcement really became an answer to socialists who were 
saying that we needed to take over the big businesses because 
they were so out of control. The progressive response--
progressives meaning both Republicans like Teddy Roosevelt and 
Democrats like Franklin D. Roosevelt--was to say, let's break 
up the big businesses to make sure that there's real 
competition.
    I'm wondering, Professor Feldman, perhaps if you would 
reflect for a moment on the development of antitrust law as a 
response to other efforts to deal with the problem of monopoly 
power in the country.
    I think you're muted.
    Ms. Feldman. Thank you. Markets need to be fair, open, and 
efficient if we are going to have the type of free market 
economy that you envision there. The antitrust laws are an 
essential partner for making sure we can do that. 
Unfortunately, antitrust laws haven't kept up with the 
sophistication that has happened in the healthcare field along 
the way and with the games that have developed. If we want 
antitrust to be an effective tool and to guarantee the free 
market that we all would like, we're going to have to update 
it.
    Mr. Raskin. On that point, it does seem as if within the 
antitrust field we're always playing catch-up with the various 
innovations by businesses or would-be monopolists to take 
advantage of their power. I suppose that's built into the 
system too.
    Is there any way that we can create an antitrust system 
that is more readily and nimbly responsive to the kinds of 
things that people have been talking about today, the kinds of 
schemes that are derived to take advantage of market power?
    Ms. Feldman. It's always more difficult for government to 
stay ahead, particularly for a body like Congress that is 
deliberative. I believe one has to pass legislation that has 
two parts. One is examples of specific, targeted behaviors that 
are inappropriate, and another is sufficient language that 
gives the agencies the space they need to respond as new games 
develop.
    Mr. Raskin. Okay. Thank you.
    Professor Dafny, let me ask you this question, what have we 
learned from many decades of antitrust legal enforcement as to 
what the most effective ways are to make government more 
rapidly and readily enabled to deal with the kinds of schemes 
that you're talking about?
    Dr. Dafny. Thank you for the question, Representative 
Raskin. So, to just elaborate on the previous query, there 
needs to be an incentive not to play games. When those 
incentives to play games exist, when incentives to merge for 
the purpose of raising price because we are willing to pay 
whatever price is charged or the increase in price, when those 
incentives exist, that's when people play games. That's when 
mergers happen.
    How do you prevent them? Research shows, you know, that a 
lot of mergers that have been able to go through under the 
current enforcement regime have caused substantial price 
increases. So, if we strengthen enforcers' hands by increasing 
the reportability of transactions, because there's evidence 
that they are not typically challenged below the threshold, if 
we reduce the burden of proof in certain transactions, and if 
we explicitly make unlawful certain practices that are gaming, 
I think we'll end up with better outcome.
    Mr. Raskin. All right.
    So, Mr. Chair, I just want the record to demonstrate that 
both parties here are looking for effective public action to 
guarantee real market competition. No party, either Republican 
or Democrat, seems to be looking for a government takeover of 
the healthcare sector or any other business sector. This is 
very much within the tradition and mainstream of American 
progressive, legal, and policy action.
    I yield back to you.
    Mr. Cicilline. The gentleman yields back.
    I now recognize the gentleman from Florida, Mr. Steube, for 
5 minutes.
    Mr. Steube. Thank you, Mr. Chair.
    My questions are for Mr. Abbott. Beyond certificate of 
needs, Mr. Johnson asked you about that, can you further 
discuss State policies that might be labeled as, quote, 
``anticompetitive,'' or are these purely State issues, or is 
there a role for Congress to play?
    Mr. Abbott. Well, thanks for that question, Congressman. 
Certainly, there are occupation licensing restrictions that 
unnecessarily restrict competition certainly in healthcare. A 
good example is restrictions on a nurse practitioner practice. 
We see that there are some--many boards, health-related boards 
in States that have limited competition without any good 
justification. For example, on a North Carolina dental board 
case, which FTC won before the Supreme Court, this was a case 
where you had a dental regulatory board dominated by dentists 
that, in effect, passed the regulation, effectively preventing 
clinics providing whitening services without the involvement of 
a dentist. Obviously drove prices up.
    South Carolina, there were dental board restrictions, again 
examined by the FTC, that prevented services being offered by 
dental hygienists to poor people in rural areas without the 
presence of a dentist. That tended to raise costs and limit 
valuable dental services.
    In general, occupational licensing is a big problem. I 
think this, again, is bipartisan. The Obama Administration 
recommended major occupational licensing legal reforms in 
summer of 2016, and it certainly might be--I know Senator Lee, 
I think, supported legislation that would allow people in the 
Armed Forces that had a spouse who would not need to get 
licensing elsewhere.
    Given the interstate nature of movement of many American 
professionals is an argument. You could have nationwide 
licensing of positions or at least lowering your barriers for 
States that unnecessarily delay new licensing of positions in 
particular States.
    I won't get--it's a rather complicated topic, but the 
certificate of public advantage by which a State may give an 
antitrust immunity for businesses that want to merge or 
consolidate, that also may have helped consolidations. The 
argument there was that this was to promote better outcomes and 
efficiencies. Again, I think some economists say there's little 
evidence of that.
    So, in short, there are a number of restrictions, State 
restrictions, some of which could be preempted, if Congress 
wanted to do that.
    Mr. Steube. It's my understanding that the Trump 
Administration HHS issued a final rule on Medicare part F. Can 
you talk about the current status of that rule, and whether it 
would help with the issues that we're discussing today, in 
particular, realigning incentives in healthcare?
    Mr. Abbott. I apologize, Congressman, I'm really not an 
expert on details of that rule. I'm glad to get back to you and 
provide a response for the record.
    Mr. Steube. That's fine. I can move on to my next question.
    You address ObamaCare or the Affordable Care Act in your 
testimony and note that it accelerated the consolidation of 
hospitals, health systems, and medical groups. Could you 
explain on why this has been detrimental, particularly to 
consumers and patients?
    Mr. Abbott. Right. Well, there's certainly some research by 
a number of economists that suggest that the incentives--it did 
create incentives for consolidation and that those incentives 
could--tended to, in an increased concentration indeed and also 
the set of reimbursement rules. Again, I'm not a full expert on 
that. I just know I've seen literature suggesting that that was 
the case. Again, I'm glad to provide more details. It's a 
complicated topic. I'm more of a pure antitrust person, but 
I've certainly seen that literature from a number of economists 
whom I view as reputable.
    Mr. Steube. Well, let me take it a little broader. What are 
the dangers of broad-sweeping antitrust laws to address very 
narrow healthcare issues? How can the problems discussed today 
be addressed in an appropriately narrow way?
    Mr. Abbott. Well, I think the danger with broad laws, for 
instance, generally reversing presumptions and mergers or 
presumptions against mergers of a certain size or changing the 
language of section 2 of the Sherman Act, some of the proposals 
out there apply to all industries. Healthcare is unusual 
precisely because they have a combination of extensive State 
and Federal regulation. A lot of payments going, as you see, 
through Medicare and Medicaid involving government involvement. 
You've got State licensing restrictions, you've got Federal FDA 
restrictions, HHS restrictions. This combination of--you had 
Hatch-Waxman Act, which created incentives for gaming.
    This combination of laws enacted even with the best of 
intentions created opportunities for regulations and laws to 
strategically be used to harm entry or deny competition.
    Mr. Cicilline. The time of the gentleman has expired, so I 
just ask the Witness to wrap up your answer, please.
    Mr. Abbott. Yes, sir. Yes, Mr. Chair. So, that basically is 
it.
    Mr. Cicilline. I thank the gentleman. The gentleman yields 
back.
    I now recognize the distinguished gentleman from New York 
and the author of the Stop Stalling Access to Affordable 
Medications Act, Mr. Jeffries, for 5 minutes.
    Mr. Jeffries. I thank the distinguished Chair for your 
great leadership. I also thank Ranking Member Buck for his 
leadership, particularly as it relates to this issue of citizen 
petition abuse.
    Professor Carrier, the FDA has a citizen petition process 
that was meant to provide for an opportunity to raise 
legitimate concerns about the health and safety of a new 
prescription drug or device that's under review by the agency. 
Is that right?
    Mr. Carrier. That's correct.
    Mr. Jeffries. This process does seem to make sense in 
theory, consistent with its intent. Is there reason to believe 
that it has been increasingly abused in an anticompetitive 
manner by brand name drug companies as part of an effort to 
delay the entry of generics onto the market?
    Mr. Carrier. Absolutely. I've conducted two empirical 
studies of all citizen petitions filed between 2001-2015. My 
most recent one found that of the 505(q) petitions, which are 
petitions against a pending generic, the FDA denies 92 percent. 
That figure rose to 98 percent, 49 out of 50, when they were 
filed at the last minute. So, this certainly is an abuse.
    Mr. Jeffries. So, the overwhelming majority of petitions 
filed actually are found to be frivolous or at least lacking 
merit. Is that correct?
    Mr. Carrier. Exactly, yes.
    Mr. Jeffries. Now, this would be one thing if this were 
citizens actually using a legitimate process that was put into 
place. Could you tell us what your study has found in terms of 
who actually is filing these petitions?
    Mr. Carrier. The brand firms are the ones that are filing 
these petitions. Ninety-two percent of these 505(q) petitions 
were filed by brand firms. There are almost none that are filed 
by individual citizens.
    Mr. Jeffries. So, the brand firms are actually filing these 
petitions, subsequently found to be almost always meritorious, 
and that results in the delay of lower cost generic drugs being 
brought to the market. Is that right?
    Mr. Carrier. Yes. Because as frivolous as a citizen 
petition is, the FDA has never summarily denied one on its 
face. The FDA has that power, but it has never used it, because 
it has to review these long petitions, with lots of scientific 
language. The FDA can't resolve these immediately and that 
delays generic entry.
    Mr. Jeffries. So, how does this stalling tactic adversely 
impact the consumer?
    Mr. Carrier. Every day that a consumer does not have access 
to an affordable, generic medicine is a bad day for that 
consumer. Citizen petitions are used, along with other conduct, 
like product hopping and pay-for-delay settlements, to make it 
harder for consumers to afford the medications that they need.
    Mr. Jeffries. So, generic drugs generally cost 80-85 
percent less than the brand-name drugs on average. Is that 
right?
    Mr. Carrier. Yes.
    Mr. Jeffries. So, this will be part of the reason why 
adversely delaying the arrival of generic drugs onto the market 
clearly has a significant financial impact on the consumer?
    Mr. Carrier. Absolutely. Every day of delayed generic entry 
harms the consumer.
    Mr. Jeffries. Now, is there any explanation that has been 
offered by the brand-name companies as to the justification to 
engage in this type of frivolous practice?
    Mr. Carrier. Well, they claim that they are raising safety 
concerns. When courts look at this, they often find that it's a 
sham. Sometimes there's no good reason for what they're doing. 
Oftentimes, companies hide behind the First amendment and 
petitioning immunity. At the end of the day, when they're 
asking the generic to do something they don't do themselves, or 
they knew about an issue and waited years to raise it, that 
raises some real questions about what they're doing.
    Mr. Jeffries. Thank you for your work. Thank you for your 
testimony. In the past, this Committee has unanimously moved 
forward legislation to address this egregious practice with the 
support of the Chair of the Subcommittee as well as the Chair 
of the Full Committee. We have reintroduced legislation to 
address this. It is being championed on the other side of the 
aisle by Ranking Member Buck. We look forward to addressing 
this egregious practice again. Thank you for your testimony.
    Mr. Carrier. Thank you.
    Mr. Cicilline. The gentleman yields back.
    I now recognize the gentleman from North Carolina, Mr. 
Bishop, for 5 minutes.
    Mr. Bishop. Thank you, Mr. Chair.
    I too am glad for the bipartisan approach here and the 
uniform commitment to improving competition healthcare market. 
I think that--when I was a State legislator for 5 years, I was 
a consistently pro-CON repeal. I favor, I think the three bills 
that have been discussed today are no-brainers.
    I want to take up something that Mr. Steube mentioned, I 
and I thought I was sort of prepared for this hearing, and then 
saw some materials that suggested there's something to it.
    In 2014, Scott Gottlieb talked about a flurry of takeover 
transactions in the healthcare space set in motion by the 
Affordable Care Act. The Wall Street Journal described in the 
next year 2015, 5 years after the Affordable Care Act helped 
set off a healthcare merger frenzy, the pace of consolidation 
is accelerating.
    I even understand, looking at some other material here that 
the architects of the Affordable Care Act were condensed, the 
consolidation in healthcare relief to decrease healthcare 
spending by eliminating duplications, standardizing treatment 
protocols, and incentivizing better utilization. So, that is to 
say not only did the law encourage consolidation throughout the 
healthcare space as a matter of result; it was intended to do 
so on the theory that that would result in lower cost in price.
    So, maybe, Professor Feldman, I certainly have liked what 
you had to say about markets. I wonder is that true of the ACA? 
If it is, are we not engaged in sort of a Sisyphean or futile 
task to try to advance competition in the healthcare space if 
the primary design of the healthcare system through ACA is 
designed to promote consolidation?
    Mr. Cicilline. Professor, I believe you might be on mute.
    Ms. Feldman. My apologies. I am having a little bit of an 
equipment problem here. So, I have sometimes been asked whether 
it might be better to just give up competition in the 
healthcare space, whether you're talking about hospitals or 
pharmaceuticals because it's too difficult, it's too 
complicated, it's already layered with too many regulations. 
Personally, I don't believe that. I believe that even if it is 
not perfect, the closer we can get to competition, and the more 
we can make the changes that will encourage that competition, 
the better off our patients will be.
    So, I understand there are pressures throughout the system, 
but I think we have extraordinary opportunities to try to Act 
in the patient's interest.
    Mr. Bishop. Do you have a view as to whether the ACA does 
promote consolidation or not.
    Ms. Feldman. It's an interesting question, sir. I would 
love to take the time to think about that and come back to you 
with a thoughtful response.
    Mr. Bishop. Okay.
    Let me go to Dr. Dafny then and see if you have a few of 
that question. Dr. Dafny.
    Dr. Dafny. Certainly. Well, it's been 10 years since the 
ACA was passed. We have seen enormous consolidation during that 
period. There's no evidence that it's causal. Right? So, we 
don't have a counterfactual State of the world of what would 
have happened, and there was a lot of activity before.
    What I will say is that the Act promoted coordination of 
multiple providers, and that some people have invoked it as a 
reason for a merger: If I am going to be responsible for the 
whole episode of care, then I ought to own all the components 
of the delivery system. The problem is that a lot of those 
transactions have not been about the whole episode of care: 
That is, the physician, the hospital, the rehab clinic, and 
home health. It's been a lot about buying up the same of what 
you do and more horizontal consolidation.
    Mr. Bishop. Is it possible, Dr. Dafny, that if you promote 
consolidation, let's say, among the healthcare plans, and then 
you are robustly enforcing antitrust law as against hospital 
systems or pharmaceutical company that you might produce 
distortions that would be problematic?
    Dr. Dafny. I believe you just asked, would it be better--
problematic to consolidate the health insurers while keeping 
the provider sector competitive. My answer would be that yes, 
that would concern me. There is evidence that when insurers are 
larger, they tend to negotiate lower prices, but there's no 
evidence they pass those on down to consumers. Think about it. 
What's the incentive if you don't have very many rivals as an 
insurer, why would you pass on savings?
    Mr. Bishop. Yeah. I am inclined to yield, if I have any 
time left, to the gentleman from Maryland to address this 
because he might be more even on the point. I find that to be a 
fascinating issue that we are--because I believe in competition 
in the healthcare space. Glad we interested in it on a 
bipartisan basis; confused if ACA was designed in part to 
impair it. I yield back because my time is out.
    Mr. Cicilline. The gentleman yields back.
    I now recognize the gentlelady from Washington, Ms. Jayapal 
for 5 minutes.
    Ms. Jayapal. Thank you, Mr. Chair, for a very important 
hearing. I think we all understand that when components of 
consolidation in healthcare promised us better quality of care, 
the reality that we got is that patients had been forced to pay 
exorbitantly high medical costs in exchange for worse care. We 
see a system that's plagued with unregulated mergers, hospital 
closures, skyrocketing healthcare costs only exacerbated by 
COVID-19.
    At a time in which healthcare services are needed the most, 
medical institutions serving low-income communities, 
communities of color, rural communities, have fared worse than 
wealthier institutions, despite serving patients who have 
suffered a disproportionate rate of COVID-19 infections and 
deaths. So, I think the issue of consolidation is actually 
deeply tied to the issues of health inequity for so many 
communities.
    Dr. Dafny, in your article, ``Health Care Needs Real 
Competition,'' you mentioned that, quote, ``The U.S. Healthcare 
System is inefficient, unreliable, and crushingly expensive.'' 
Has the lack of fair competition contributed to these issues, 
and if so, how?
    Dr. Dafny. I thank you for the question Representative 
Jayapal. Absolutely. Unequivocally, the source of our higher 
spending is not the health of our population, not that we use 
more services but that we pay higher prices for them. Now, 
there's some difference in the intensity of the service and the 
technology. You could debate a little bit the level. The growth 
in prices, the explosion in commercial prices that has 
coincided with what Representative Bishop was observing, the 
increasing consolidation of the healthcare sector, that's 
unmistakable. Then later on academic research that looks really 
at what happened when there is a discrete change in 
consolidation, and there is significant evidence across a range 
of sectors, both providers and insurers, that increasing the 
market power enable higher prices and is the driver.
    Ms. Jayapal. Just for people who are listening, how does 
hospital consolidation affect their quality of care, patient 
choice, patient experience, even what effects does it have on 
small businesses?
    Dr. Dafny. Right. A couple of ways. First, it affects 
spending. Right? Because it's going to pass through higher out-
of-pocket spending. When you have increases your deductible, 
burdens the employers because they have higher premiums.
    Second, reduction in your options. A reduction in--there's 
evidence of a reduction in patient experience, and no evidence 
of improvements in clinical outcomes or other process measures.
    Ms. Jayapal. In your testimony, you also noted the role of 
nonprofit hospitals. Nonprofit hospitals are often considered 
charitable institutions. In 2019, 66 percent of all hospital 
and health system mergers and acquisitions involved nonprofit 
entities.
    In the upcoming documentary, ``InHospitable,'' directed by 
Sandra Alvarez, the fact that nonprofit hospitals behave like 
for-profit hospitals is discussed. Can you talk a little bit 
about how nonprofit and for-profit hospitals engage in similar 
behaviors to maximize profits, if you think that's true? Or if 
you don't, explain why that's not the case.
    Dr. Dafny. Not-for-profits and for-profits in healthcare 
are in the same industry. Even if not-for-profits are not 
seeking to return those profits to shareholders, they need to 
break even, and they also have other sources where they put 
those profits. Sometimes salary, but often just the program 
that they deem to be valuable, which might not be what your 
taxpayer wants to pay for.
    Certainly, the research has not found that not-for-profits 
are increasing prices less after mergers and that--so I would 
put that out there.
    What we should not have is a difference in terms of 
enforcement vis-a-vis the not-for-profits. The fact that the 
FTC is not permitted to challenge anticompetitive conduct by 
not-for-profits is nonsense.
    Ms. Jayapal. So, did you get cut off or what?
    Dr. Dafny. Nope. I'm brief.
    Ms. Jayapal. Oh, okay. Great. So, I mean, I guess you're 
getting at this. I wanted to ask you if these large 
consolidated nonprofit systems do require antitrust scrutiny 
due to their tax-exempt status. Can you say a little bit more 
about that?
    Dr. Dafny. Well, two items. First, is they absolutely 
require antitrust scrutiny. The authorities have brought a 
number of cases, challenges, and have succeeded in many of 
them.
    The second is that there are other statutes that State 
attorneys general can enforce to try to ensure the not-for-
profits are fulfilling the community benefit standard.
    Ms. Jayapal. So, very quickly, just on private equity 
firms, because my time is out, how can antitrust laws and 
regulations be strengthened for better oversight to prevent 
harmful nonhorizontal mergers in healthcare?
    Dr. Dafny. More reporting and, when appropriate, shifting 
the burden: Have the party demonstrate why the transaction is 
not harmful.
    Ms. Jayapal. Thank you so much, Dr. Dafny.
    I yield back, Mr. Chair.
    Mr. Cicilline. The gentlewoman yields back.
    I now recognize the gentlewoman from Minnesota, Ms. 
Fischbach, for 5 minutes.
    Ms. Fischbach. There we go. I got it unmuted. Thank you so 
much, Mr. Chair. I just wanted to ask a little bit about to Mr. 
Abbott about the Federal role in State restrictions. I know 
that Congressman Steube asked a little bit about the 
certificates of need, but maybe he can talk a little bit more 
about the Federal role in the State restrictions as related to 
the healthcare competition.
    Mr. Abbott. Well, thank you very much, Congresswoman, for 
that question. The Federal role, I think, part of it is 
competition advocacy, but not always successful. As I think I 
indicated, the FTC and Justice Department have advocated a 
repeal of CON laws because they--and I am just--on a bipartisan 
basis.
    Now, to the extent that CON laws are viewed as having a 
harmful effect on interstate commerce in principle and because 
they harm the competitive process, you could have an argument 
for Federal preemption if the Federal government wanted to do 
that. Similarly, with COPA laws. The Federal government has 
chosen not to do that. Certainly, part of the problem--and of 
course, these laws have some defenders--is that they were in a 
way special interests. Incumbents can take advantage of them to 
forestall competition.
    Occupational licensing should be a no-brainer, in my view, 
but it's not. There has been some litigation against State 
occupational licensing restrictions on constitutional grounds 
by the Institute of Justice, for example. There is no really 
good reason that I'm aware of why artificial restrictions on 
nurse practitioners, on other medical providers, limitations on 
not science or based on activities, as I say, of dental 
hygienists should be maintained. Again, this gets sensitive 
because it goes to the nature of State licensing, which is 
historically a State function.
    So, I think the Federal government certainly should look at 
those excessive conditions and, particularly, how State 
regulation interacts with Federal law and undermines the 
concern about consolidation, certainly, that may have some 
effect on consolidation as well because it denies--CON laws, 
for example, may preclude a new entry.
    Ms. Fischbach. Thank you. I will just say, I know that a 
couple of people have mentioned that consolidation. I guess it 
hasn't been mentioned, I don't think, that regarding the fact--
I represent a rural district, and so consolidation really does 
affect those rural districts and rural healthcare in general.
    Mr. Abbott, maybe just briefly, I only have another minute 
or so. Maybe you could talk a little bit about how the 
regulation compliance costs and all the regulatory costs that 
those healthcare providers experience whether it's hospitals, 
pharmaceuticals, or--but how do those create barriers to entry 
and make competition
harder?
    Mr. Abbott. Right. Well, competition, you're asking in 
addition to the restrictions I already mentioned? Additional 
restrictions?
    Ms. Fischbach. Yeah, and well, kind of that regulation, and 
we just have--I wanted to keep it short because I only have a 
minute or so, but just if there was anything on that 
regulation, those regulatory issues.
    Mr. Abbott. Right. I think regulatory--I think major 
reforms for occupational licensing I have already mentioned. 
When I was asked earlier, Congresswoman, about--this is on 
State regulation. It's Federal regulation about Obamacare. One 
article I would mention by Christopher Pope of the Heritage 
Foundation. I'll describe some of the ways in which accountable 
care organizations and--tended to promote, like it or not, 
consolidation by disbursing capitated payments for integrated 
organizations, to provide all-inclusive packages to Medicare 
employees, and encouraging vertical integration, and also some 
horizontal integration.
    I would be glad to provide additional information on how 
Federal and State regulations may have diminished competition. 
It's a very complicated topic. Lots of my colleagues at the 
Mercatus Center, have written about that.
    Ms. Fischbach. Well, thank you very much, Mr. Abbott.
    Mr. Cicilline. The time of the gentleman has expired.
    The gentlewoman now yields back.
    I now recognize the distinguished gentleman from the State 
of Florida, Mr. Deutch, for 5 minutes.
    Mr. Deutch. Thank you, Chair Cicilline. Thank you for your 
leadership of this Subcommittee and thank you for using that 
leadership to focus on affordable healthcare for the American 
people. It's clear to me that the sticker shock Americans are 
seeing when they fill a prescription or discharge from the 
hospital isn't a product of supply and demand.
    Healthcare markets are broken. In the prescription drug 
market, gaming and abusing the patent system robs us of 
innovative new therapies. We have a responsibility to stop this 
profiteering that is leaving too many Americans either broke or 
sick or both.
    This is urgent, and I acknowledge that for me and, Mr. 
Chair, for you, and for so many of us on this Subcommittee, we 
agree completely with the President when he said last night 
that we should give Medicare the power to negotiate directly on 
behalf of the beneficiaries to get fair drug prices.
    This hearing is focused on the things that all of us, I 
believe, agree on--things that Judiciary Committee approved 
last Congress. So, we need to keep up the momentum to get these 
bills done this year.
    With that, Professor Carrier, I wanted to ask you, amid the 
COVID-19 health emergency, the opioid overdose epidemic is 
surging. According to provisional data from the CDC, over 
81,000 drug overdose deaths occurred in the United States in 
the 12 months ending in May 2020, the highest number of 
overdose deaths ever recorded in a 12-month period. One of the 
best tools to help people find recovery and save their lives is 
medication-assisted treatment.
    Now, you mentioned that one of the drugs used to treat 
opioid-use disorders is Suboxone. Can you explain the story of 
what the drug company did when the patent was about to expire?
    Mr. Carrier. Absolutely. So, thank you for the question.
    Suboxone is a poster child for all this anticompetitive 
conduct being used together. So, first, we begin with product 
hopping. Initially, the medicine could be taken in tablet form. 
Then the company said, you know what, we're going to switch it 
to a film form. When it did that, even though the patients 
preferred the tablets because they were easier to take--the 
film was irritating, it would blow in the wind, children would 
ingest it, so it was actually less safe--nonetheless, what the 
manufacturer, Reckitt, said was that the tablet was the one 
that wasn't safe.
    The film is what the kids are putting in their mouths, but 
Reckitt is saying the tablet is not safe. So, it switches the 
market. It gives up all those sales from the tablet that 
everybody likes, and then it goes to stage 2. Stage 2 is the 
citizen petition. Reckitt files a petition with the FDA, asking 
the agency to withdraw the tablets. Now, these are the tablets 
that it had been selling for years, and it never said there was 
a safety problem. The court said that this is a joke. This is 
objectively baseless because you dismissed the safety concern 
less than 1 month before when you told the FDA that the product 
was, quote, ``successful and needed no further changes.'' This 
was so concerning that the FDA referred this to the FTC for an 
antitrust investigation.
    So, there you have a product hop together with a citizen 
petition, disparaging your own product that you have been 
selling for years, and then together with that, you have a REMS 
program that delayed generic competition. Again, the CREATES 
Act is designed to deal with the REMS program. It's gotten a 
whole lot better.
    In that one example--and again, this is real harm and 
people are really suffering--you have a drug company putting 
together at least three significant types of anticompetitive 
conduct.
    Mr. Deutch. Can you just tell us what was the annual sales 
for Suboxone?
    Mr. Carrier. I do not know off the top of my head the 
annual sales.
    Mr. Deutch. My understanding is it's close to $700 million. 
When you say that it makes no sense when pharmaceutical 
companies use these product hopping strategies, what does that 
mean? Help us understand that.
    Mr. Carrier. In antitrust law, there is a very, very 
conservative test called the no economic sense test, which 
says: Defendant, monopolist, if you have any reason at all for 
doing what you're doing other than harming a rival, then it's 
fine. So, it's more deferential than the rule of reason. Under 
the rule of reason, courts balance anticompetitive against pro-
competitive effects. The no economic sense test is as 
conservative as you could get. By the way, again, most 
reformulations are fine; 80 percent take place outside what's 
called the generic window when we expect generic competition to 
happen. So, we're just talking about a really small handful. 
Those small handful are completely anticompetitive. They 
undercut the regulatory regime, and there's no excuse at all 
for it.
    So, when I say there is no economic sense, there is 
literally no reason that Suboxone would badmouth its own 
product, would sell tablets for years, and then say: ``Oh, FDA 
take this off the market because it's unsafe.''
    That makes no sense at all other than harming generic 
competition.
    Mr. Deutch. That's why we're here today, Mr. Chair. Thanks 
so much for calling this hearing, and I thank the Witnesses.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the gentlewoman from Indiana, Ms. Spartz, for 5 minutes.
    Ms. Spartz. Thank you, Mr. Chair and Members of the 
Committee.
    I appreciate this discussion. Actually, as someone who 
worked on major healthcare reform in the State of Indiana and 
also worked in Fortune 500 world, I can tell you we have a huge 
monopoly problem in healthcare markets, enormous amount of 
horizontal, vertical integration, dominance of health systems, 
aggressive vertical mergers, hostile takeovers, ton of 
anticompetitive clauses, CRN, all or nothing, gag clauses, TRN. 
It's really problematic. It's really in the whole healthcare. 
We're talking about prescription drugs. It's only 10 percent of 
healthcare. Over half of healthcare is actually hospital and 
professional services. We have to have that discussion too.
    If you look at when it started, it actually started after 
World War II due to government interventions, when they start 
doing wage and price controls. Then we continued doing them 
more and more until the Affordable Care Act did actually very 
conscious effort to consolidate more, and it really took it to 
the next level. Then so we created, as Friedman said, political 
entrepreneurship due to partially socialized medical care when 
now this, people, politicians compete for votes by offering 
government services, special interest groups are fighting with 
each other in political arena. It was protectionist, and they 
want to shield themselves from market competition and kind of 
shift the cost like hot potatoes. So, this consolidation in 
government interventions led to rise of oligopolies in every 
market, but healthcare market is really bad.
    So, we're looking at some of these bills. I think these are 
good initiatives. They're really a top-down, not bottom-up 
approach. We're not looking at the causes but treating symptoms 
and consequences of bad policies. If you look at sham citizen 
petition, why we're not talking about FDA? If we are looking, 
since settled, why our agency have friendly settlements much as 
they do include some of the stakeholders, and actually Senator 
Grassley and I are working on some bill. We just filed a bill. 
Hopefully, this Committee can support it. If we're looking at 
product hopping, why don't we look at patent law? Our America 
Invents Act created a lot of advantages for larger stakeholders 
in our intellectual property laws.
    So, my question is--I will maybe ask Mr. Abbott--are there 
any approaches that we can do in the bottom-up that actually 
will be way more effective than constantly just kind of picking 
losers and winners and have more government interventions where 
we will see how it's going to be effective? I am supportive of 
doing something. I am actually not against this bill, but I 
think it's a piecemeal approach, and it's not going to help. Do 
you have any other ideas, Mr. Abbott, what we can do?
    Mr. Abbott. Well, thank you, Congresswoman, for that 
question. It certainly, as I say, may seem simplistic, but I 
think that regulatory reform and competition advocacy are very, 
very important, including on issues affecting potential reform 
to the ACA. Now, there were efforts from Federal Trade 
Commission in the last Administration to work with HHS to see 
what they could within the regulatory system do to--and I was 
not intimately involved at all, but some of my colleagues and 
the FTC were involved in policy office, working with HHS to try 
to see if they could reduce the regulatory costs and 
disincentive--and the incentive really, as you suggested, to 
potential consolidation.
    Again, if we view this as a bipartisan matter, there are a 
lot of regulatory improvements that could be had. I would 
certainly think that FTC has 70 Ph.D. economists. Many of them 
have spent a lot of time thinking about the healthcare system. 
I would hope that they could perhaps be given a greater role in 
policy advocacy, working with the Executive Branch, and also 
openly filing advocacy letters with the State. Obviously, it's 
a new Administration. We'll have to decide how it wants to 
allocate its resources. I think that is perfectly consistent 
with the policy also of trying to be very aggressive and going 
after anticompetitive transactions, which Acting Chair 
Slaughter had said. I think they could go hand in hand.
    Ms. Spartz. I yield back. Thank you.
    Mr. Cicilline. The gentlewoman yields back.
    I now recognize the gentlewoman from Pennsylvania, Ms. 
Dean, for 5 minutes.
    Ms. Dean. Thank you, Mr. Chair.
    Man, oh, man, I am impressed with these two panels. Thank 
you for assembling all these terrific testifiers, Senators, 
Members of the House, and all these experts.
    I want to follow up on something that many have touched on 
but, most recently, Representative Deutch.
    Professor Feldman, I am looking at--and I am going to study 
more closely your article entitled, ``May Your Drug Price Be 
Ever Green,'' published in the Journal of Law and Biosciences. 
It was in December of 2018. I want to examine the problem of 
orphan drug pricing and the protection of orphan drug--of the 
Organ Drug Act and how it has been really misapplied to the 
detriment of the marketplace, to the detriment of patients very 
often.
    I have introduced legislation, the Fairness in Orphan Drug 
Exclusivity Act, which would carefully and narrowly close a 
current loophole in the Orphan Drug Act.
    The second criteria of the Orphan Drug Act allow a 
manufacturer to qualify for organ drug designation if there are 
more than 200,000 patients affected, but if the manufacturer 
has no reasonable expectation to recoup costs.
    Unfortunately, a company approved under this criterion, as 
we have seen and you have talked about, can grandfather 
themselves into an orphan drug designation if a newly approved 
product has the same active ingredient regardless if the 
company now has the ability to recoup costs.
    I was looking at just even the beginning of your article in 
which you analyzed more than 60,000 drug data points from 2005-
2015, and you said that the results show a startling departure 
from the classical conceptualization of intellectual property 
protection for pharmaceuticals. Rather than creating new 
medicines, pharmaceutical companies are largely recycling and 
repurposing old ones. Specifically, 78 percent of the drugs 
associated with new patents were not new drugs.
    Would you just comment on this use, this narrow use of 
orphan drug exclusivity, what it's doing to the marketplace, 
and would a closing of that loophole, the misuse of the very 
Act that is supposed to bring drugs to market for patients who 
otherwise have, you know, rare disease or the company has no 
ability to recoup costs, is now being misused, protecting 
companies to make billions of dollars?
    Ms. Feldman. Thank you for the question. The Orphan Drug 
Act was intended for when companies could not possibly recoup 
their costs, but, instead, we're seeing big-dollar returns. So, 
for example, in 2015, out of the 10 drugs with the highest 
annual sales revenue, 7 were orphan drugs. To paraphrase an old 
opera, today everyone claims to be an orphan.
    Closing that loophole that you talked about would go a long 
way for helping people who are suffering from opioid-use 
disorder and other patients who are struggling to reach 
affordable medications.
    Ms. Dean. I really appreciate that. The area of opioid 
overdose and death is one that is near and dear to my heart. As 
Representative Deutch pointed out, in this pandemic, the number 
of deaths from opioid overdose is dramatically up. It is 
possible that number in the 12 months of the pandemic will 
reach 100,000 people in this country dead. So, we need 
manufacturers and pharmaceutical companies who want to be a 
part of the solution, not a part of just the profits.
    So, if you would broaden it out, what does this lack of 
competition, this protection of marketplace and lack of 
competition do more broadly?
    Ms. Feldman. The problem is access to affordable 
medications for our patients. When we allow drug companies to 
extend their monopoly pricing long past the time of the 
original patent grant, to pile on protections one after 
another, we prevent patients from getting access to that 
medication. That's extraordinarily important for our healthcare 
in this country.
    Ms. Dean. Something that you talked about was slicing up, 
you called it the salami slicing.
    Ms. Feldman. Salami slicing.
    Ms. Dean. Thank you. Can you describe that phenomenon and 
how that's getting in the way of access to medication at 
affordable prices?
    Ms. Feldman. The Orphan Drug Act is intended to apply to 
drugs that reach only small populations. So, companies slice 
and dice up their populations and then apply for serial orphan 
drug designations. We have to differentiate between marketing 
and innovation. Here, companies haven't created something new; 
they just figured out how to adapt it to a new market, how to 
sell it differently. We don't give patents for marketing.
    Ms. Dean. Well, I really appreciate your work and the work 
of all the esteemed testifiers.
    I also want to compliment the entire subcommittee. It is a 
bright moment of bipartisanship where we're recognizing 
Democrats, Republicans, that this is an issue that's really 
important. That's why I have enjoyed Republican support on my 
bill, a bill that would close the loophole by requiring a 
company when applying for the new product to demonstrate their 
ability or inability to recoup development costs, preserving 
the incentives to develop products to treat rare diseases. We 
don't want to have any impact on the ability to incentivize R&D 
about around rare diseases. We do need to close the loophole.
    With that, Mr. Chair, I thank you, and I yield back.
    Mr. Cicilline. That is why we welcomed with open arms your 
wonderful addition to our Subcommittee. Thank you for those 
kind words.
    I now recognize the gentleman from Wisconsin, Mr. 
Fitzgerald, for 5 minutes.
    Mr. Fitzgerald. Thank you, Mr. Chair.
    Senator Cornyn in the first hearing kind of alluded to 
this. I just wanted to underscore it once again, which is the 
amazing speed that we have seen from the pharmaceutical 
companies when it comes to COVID and the development of the 
vaccines. I worried sometimes we kind of lose sight of that.
    I do support the bill, and I think it is something that's 
overdue. I just want to proceed with caution, I guess, and make 
sure that we do this right.
    The first thing I would say for Mr. Abbott is, what we did 
experience, many different facets of life changed during COVID, 
and one of them was that occupational licensing laws were 
waived as a result of COVID. What I am wondering is, if there 
is any examples out there of laws that policymakers, that we 
should look at before we reinstate them? Because it might be an 
opportunity--maybe it's not. It might be an opportunity to kind 
of revisit some of these licensing laws and make some changes 
there both at the Federal and State level.
    Mr. Abbott. Thank you, Congressman.
    I certainly--I think you're right about licensing laws. 
Obviously, there are certain minimum safety standards that are 
required in medicine. There are many, many licensing laws that 
prevented, as I say, interstate movement. For example, why 
couldn't there be some sort of interstate compact or, better 
yet, some sort of national standard for medical licensing? That 
could allow for easier entry and movement and easier service of 
rural clinics that--there is the issue about, that was raised 
about rural hospitals. Certainly, closure is a problem there. 
The antitrust agencies do recognize that small hospitals can 
generally merge, free from antitrust scrutiny, except in most 
extraordinary cases. That doesn't deal with the problem of 
closures and some loss of revenues due to the COVID crisis.
    I mentioned already certificate of need laws. I think one--
some leading economists suggest that any subsidies through the 
ACA should probably--if you could, be redirected more towards 
patients, not providers, better allow patients to shop around. 
In fact, nationwide provision of insurance looking at State--
regulatory State commissions that unnecessarily limit insurance 
policies, that has been called for a sort of sensible reform 
given the interstate nature of that, among other things.
    Mr. Fitzgerald. Very good.
    Just one quick question for Dr. Feldman as well. Over the 
last couple of weeks, I have met with a number of grocery 
stores in my district. Some are single store operators, and 
then there's some that are local chains. I would say State 
chains of grocery stores. I didn't meet with kind of the big 
box ones that we're familiar with.
    In that environment, what they were all trying to relay to 
me was that there were supply chains that changed and were kind 
of segregated out as a result of COVID. It shined a white-hot 
spotlight on their industry and was fascinating, kind of 
getting their feedback. They were worried that some of the 
antitrust in that area is just--it was created in the 1930s. It 
has outlived its usefulness. I am wondering, in the discussion 
we had here today, I mean, you can go too far too. I am just 
wondering if you have any comment on that.
    Ms. Feldman. Thank you, sir. It is important that antitrust 
keep pace with changes over time in many different ways. I was 
struck by that question and with your earlier comment about the 
COVID-19 vaccines. Keeping all the experiences that we've had 
in mind so far, the COVID vaccines are a spectacular example of 
science in action, but also of government-industry 
participation. After all, government funding here and at 
academic institutions across the world helped bring this great 
innovation forward. It's a good reminder that patents are not 
the only important way that governments can promote 
competition. It's important for us to have government funding, 
and to increase government funding for basic research but also 
to provide incentives for all students from elementary school 
to graduate school, to enter science careers. Our future 
depends on those types of initiatives, not just the patent 
system.
    Mr. Cicilline. The time of the gentleman has expired.
    Mr. Fitzgerald. Mr. Chair, I yield back.
    I now recognized the distinguished Ranking Member of the 
Antitrust Subcommittee, Mr. Buck, for 5 minutes.
    Mr. Buck. Thank you, Mr. Chair. I take it I'm on right now?
    Mr. Cicilline. Yes, you are, Mr. Buck.
    Mr. Buck. Thank you. Professor Dafny, I want to direct 
these questions to you, and it really is a follow-up on 
questions that Congresswoman Jayapal asked. I have noticed in 
the nonprofit area of hospitals, that the salaries for top 
executives are, in my view, excessive. When I think of a 
nonprofit, I think of United Way. I think of gun rights groups, 
gun control groups. I think of environmental groups, I think of 
private property rights groups. They rely, for the most part, 
on fundraising for their revenue stream, sometimes on 
government grants, sometimes on other programs, but oftentimes 
on fundraising. When there are issues--and there have been I 
think with United Way a few years back where there was an 
allegation of excessive salary or benefits or expenses, and I 
know there was recently with a gun rights group also--the 
funding source sort of dries up. The fundraising is more 
difficult, if you will. That's not the case with hospitals. For 
the most part, hospitals--I know of some hospital benefit 
events. For the most part, hospitals receive revenue from the 
services that they provide.
    I am wondering if there is a way for the Antitrust 
Subcommittee to look into this area as one of the rising costs 
in resulting costs for healthcare in this country.
    I have to tell you, when the CEO of Apple or the CEO of 
Microsoft or the CEO of other companies make a lot of money, 
I'm okay. They have a board of directors. They have a profit 
incentive, and there is some downward pressure on their high 
salaries. I don't know that there is in this area, and I just 
want to get your thoughts. As a small government conservative, 
I don't want a regulatory agency overseeing salaries for 
hospitals or other healthcare entities. As a taxpayer advocate, 
I also don't want to see a lot of taxpayer money going to pay 
costs when these folks are making so much money. Any thoughts 
on that?
    Dr. Dafny. Just briefly. Thank you for the question, 
Representative Buck. I am not familiar with what's with any 
statutes that might restrict the compensation. I would add the 
compensation for executives at nonprofit insurers are quite, 
quite high. I would say that, just as is the case with regular 
for-profit businesses, it's about the boards. If the boards--
they have compensation committees as well--are benchmarking 
against other similar CEOs and they approve the salary, then 
that's kind of what the market price is for someone with that 
skill.
    I would say that the enterprises are very large in the 
billions of dollars. So, personally, my concern was more with 
what the total amount that is being charged is ending up and 
less with the specific compensation of the executives that 
belong. I would say that they ought to be touchable by a State 
enforcement of community benefit profit loss.
    Mr. Buck. So, often boards of directors are appointed by, 
or at least recruited by, the former boards of directors or the 
high-ranking executives. So, often--
    Dr. Dafny. A rise in governance problem, right?
    Mr. Buck. Yeah, and so, often in these areas, the high-
ranking executives are treated like the shareholders in a for-
profit company. The excess revenue is distributed to those at 
the top of the organization, and it's very concerning. You 
raised insurance, nonprofit insurers, and I am not trying to 
pick on the hospitals, but it just seems like there has to be 
some mechanism to try to keep those salaries in check so that 
we have a more responsible expenditure of Federal funds.
    I would love to talk to you offline about this.
    Frankly, Mr. Chair, I would love to have a dialogue with 
you, also, on this issue, because I think it really goes to the 
cost of healthcare--part of the cost of healthcare in America. 
I yield back.
    Mr. Cicilline. Absolutely, Mr. Buck, and I look forward to 
our ongoing discussion on that really critical issue.
    At this time, I will seek unanimous consent to add a number 
of letters and statements regarding the Committee's work to 
address anticompetitive conduct in healthcare markets to the 
record.A statement from Kristen McGovern, the Executive 
Director of the Partnership to Empower Physician-Led Care;a 
statement for the record from George Slover and Sumit Sharma 
from Consumer Reports;a statement for the record from the 
Purchaser Business Group on Health; anda statement for the 
record from Marni Jameson Carey, Executive Director of the 
Association of Independent Doctors.
    Without objection.
    [The information follows:]



      

                      MR. CICILLINE FOR THE RECORD

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    Mr. Cicilline. Before I close, I just want to say thank 
you, again, to our extraordinary panel of Witnesses for your 
testimony that I think really helped to inform the work of this 
Committee and will allow us to really make some progress on 
reducing the cost of prescription drugs in this country in a 
bipartisan way.
    So, with deep, deep gratitude, I thank you for your 
presence here today.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the Witnesses or 
additional materials for the record.
    With that, the hearing is hereby adjourned.
    [Whereupon, at 3:53 p.m., the Subcommittee was adjourned.]



      

                                APPENDIX

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                  QUESTIONS AND ANSWERS FOR THE RECORD

=======================================================================


                  Representative Eric Swalwell

                House Committee on the Judiciary

 Subcommittee on Antitrust, Administrative, and Commercial Law 
              Thursday, April 29, 2021; 1:00 p.m.

   Hearing: Treating the Problem: Addressing Anticompetitive 
        Conduct and Consolidation in Health Care Markets

       Question for Pressor Robin Feldman, Leemore Dafny,
                      and Michael Carrier

I represent Veeva Systems, a cloud computing company in the 
healthcare space. It has alleged, in a lawsuit as well as 
communications with my office and the Federal Trade Commission 
(FTC), certain antitrust abuses in the healthcare industry. 
Specifically, it complains that one company, IQVIA, which 
maintains an enormous database of global sales and reference 
data on doctors and prescriptions of pharmaceuticals, is a 
monopolist which is refusing to allow bio-tech and 
pharmaceutical companies that use software that competes with 
IQVIA to have access to this vital warehouse of data.

Without commenting on the merits of Veeva's allegations, how 
can it be damaging to competition when a monopolist refuses 
competitors access to data or information needed to compete? 
Can such an action be an abuse of monopoly power?


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