[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


    EXAMINING IMPLEMENTATION OF THE BIOLOGICS PRICE COMPETITION AND 
                             INNOVATION ACT

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

                                 HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 4, 2016

                               __________

                           Serial No. 114-114
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                 Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
BRETT GUTHRIE, Kentucky              GENE GREEN, Texas
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington   JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILLY LONG, Missouri                 JOSEPH P. KENNEDY, III, 
RENEE L. ELLMERS, North Carolina         Massachusetts
LARRY BUCSHON, Indiana               TONY CARDENAS, California
SUSAN W. BROOKS, Indiana             FRANK PALLONE, Jr., New Jersey (ex 
CHRIS COLLINS, New York                  officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
    Prepared statement...........................................     5
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     7
    Prepared statement...........................................     8

                               Witnesses

Janet Woodcock, M.D., Director, Center for Drug Evaluation and 
  Research, Food and Drug Admiistration, Department of Health and 
  Human Services.................................................    10
    Prepared statement...........................................    12
    Answers to submitted questions \1\...........................    72
Sean Cavanaugh, Deputy Administrator and Director, Center for 
  Medicare, Centers for Medicare and Medicaid Services, 
  Department of Health and Human Services........................    24
    Prepared statement...........................................    26
    Answers to submitted questions...............................    73

                           Submitted Material

Draft questions for hearing, submitted by Mr. Green..............    51
Letter of February 3, 2016, from Seth Ginsberg, President, Global 
  Healthy Living Foundation, to Mr. Pitts and Mr. Green, 
  submitted by Mr. Pitts.........................................    54
Statement of the National Association of Chain Drug Stores, 
  February 4, 2016, submitted by Mr. Pitts.......................    57
Report of Industry Standard Research, ``ASBM Labeling Survey,'' 
  February 2015, \2\ submitted by Mr. Shimkus
Report of Industry Standard Research, ``Biosimilars Naming and 
  Labeling: A Study of U.S. Pharmacists,'' October 2015, \3\ 
  submitted by Mr. Shimkus
Letter of December 21, 2015, from Hon. Brad R. Wenstrup, a 
  Representative in Congress from the State of Ohio, to Stephen 
  Ostroff, Acting Commissioner, Food and Drug Administration, 
  submitted by Mrs. Ellmers......................................    64
Statement of the Coalition of State Rheumatology Organizations, 
  February 4, 2016, submitted by Mrs. Ellmers....................    67

----------
\1\ Dr. Woodcock's response has been retained in committee files 
  and also is available at  http://docs.house.gov/meetings/IF/
  IF14/20160204/104408/HHRG-114-IF14-Wstate-WoodcockJ-20160204-
  SD005.pdf.
\2\ The information has been retained in committee files and also 
  is available at  http://docs.house.gov/meetings/IF/IF14/
  20160204/104408/HHRG-114-IF14-20160204-SD010.pdf.
\3\ The information has been retained in committee files and also 
  is available at  http://docs.house.gov/meetings/IF/IF14/
  20160204/104408/HHRG-114-IF14-20160204-SD009.pdf.

 
    EXAMINING IMPLEMENTATION OF THE BIOLOGICS PRICE COMPETITION AND 
                             INNOVATION ACT

                              ----------                              


                       THURSDAY, FEBRUARY 4, 2016

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:30 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Joseph R. 
Pitts (chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Guthrie, Whitfield, 
Shimkus, Blackburn, Lance, Bilirakis, Long, Ellmers, Bucshon, 
Brooks, Collins, Barton, Green, Schakowsky, Butterfield, 
Castor, Sarbanes, Matsui, Schrader, Kennedy, Cardenas, and 
Pallone (ex officio).
    Staff present: Leighton Brown, Press Assistant; Rebecca 
Card, Assistant Press Secretary; Paul Edattel, Chief Counsel, 
Health; Carly McWilliams, Professional Staff Member, Health; 
Katie Novaria, Professional Staff Member, Health; James 
Paluskiewicz, Professional Staff Member, Health; Graham 
Pittman, Legislative Clerk; Chris Sarley, Policy Coordinator, 
Environment and the Economy; Jennifer Sherman, Press Secretary; 
Adrianna Simonelli, Legislative Associate, Health; Heidi 
Stirrup, Policy Coordinator, Health; John Stone, Counsel, 
Health; Sophie Trainor, Policy Advisor, Health; Christine 
Brennan, Democratic Press Secretary; Jeff Carroll, Democratic 
Staff Director; Tiffany Guarascio, Democratic Deputy Staff 
Director and Chief Health Advisor; Samantha Satchell, 
Democratic Policy Analyst; Matt Schumacher, Democratic Press 
Assistant; Kimberlee Trzeciak, Democratic Health Policy 
Coordinator; Arielle Woronoff, Democratic Health Counsel.
    Mr. Pitts. The subcommittee will come to order. The 
chairman recognizes himself for an opening statement.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Biologics are used to treat a number of serious diseases 
and conditions and have improved the lives of millions of 
Americans. They are produced from living cells using 
biotechnology and are often significantly more time consuming 
and resource intensive to consistently manufacture than small-
molecule, chemical drugs. Due in large part to these 
complexities, biologics tend to be more expensive and why the 
traditional generic approval pathway is not suited for bringing 
lower-cost alternatives to market.
    In 2009, this committee passed the Biologics Price 
Competition and Innovation Act, BPCIA, by a vote of 47 to 11. 
Enacted in 2010, BPCIA established a new abbreviated pathway at 
FDA for biological products determined to be biosimilar to or 
potentially interchangeable with a previously approved 
reference product.
    FDA approved the first biosimilar in March 2015. It is 
convening an advisory committee next week to consider a second 
application. And while there are close to 60 additional 
proposed biosimilar products enrolled in FDA's Biosimilar 
Development Program, the Agency has yet to issue guidance 
documents on several key policy issues that could have a 
significant impact on patient safety, prescriber decision 
making, and market competition.
    I look forward to hearing from Dr. Woodcock about where 
these documents are in the review process. And I would like to 
walk away from today's discussion with a better understanding 
of the Agency's current thinking on issues such as naming, 
labeling, and interchangeability.
    Meanwhile, in preparation for biosimilars coming to market, 
the Centers for Medicare and Medicaid Services recently issued 
payment guidance related to Medicare Part B for biosimilars. 
Members will want to understand the implications of this broad-
payment policy and if it will account for variations and 
differences between biosimilar products and moreover, what 
might that payment policy mean for the eventual growth of this 
market and innovation.
    With both witnesses here, we will be able to explore how 
could or should pending issues before FDA, for example, naming 
and interchangeability, impact the reimbursement policy under 
the Medicare program as well as access and portability for 
beneficiaries.
    The committee will have an opportunity to hear directly 
from FDA and CMS on their progress with implementation of BPCIA 
and future outlook.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    Biologics are used to treat a number of serious diseases 
and conditions and have improved the lives of millions of 
Americans. They are produced from living cells using 
biotechnology and are often significantly more time consuming 
and resource intensive to consistently manufacture than small-
molecule, chemical drugs. Due in large part to these 
complexities, biologics tend to be more expensive and why the 
traditional generic approval pathway is not suited for bringing 
lower cost alternatives to the market.
    In 2009, this committee passed the Biologics Price 
Competition and Innovation Act (BPCIA) by a vote of 47 to 11. 
Enacted in 2010, BPCIA established a new abbreviated pathway at 
FDA for biological products determined to be ``biosimilar to'' 
or, potentially, ``interchangeable with'' a previously approved 
reference product.
    FDA approved the first biosimilar in March 2015 and is 
convening an advisory committee next week to consider a second 
application. And while there are close to 60 additional 
proposed biosimilar products enrolled in FDA's Biosimilar 
Development Program, the agency has yet to issue guidance 
documents on several key policy issues that could have a 
significant impact on patient safety, prescriber decision-
making, and market competition.
    I look forward to hearing from Dr. Woodcock about where 
these documents are in the review process and would like to 
walk away from today's discussion with a better understanding 
of the agency's current thinking on issues such as naming, 
labeling, and interchangeability.
    Meanwhile, in preparation for biosimilars coming to market, 
the Centers for Medicare and Medicaid Services (CMS) recently 
issued payment guidance related to Medicare Part B for 
biosimilars. Members will want to understand the implications 
of this broad payment policy and if it will account for 
variations in differences between biosimilar products and 
moreover, what might that payment policy mean for the eventual 
growth in this market and innovation.
    With both witnesses here we will be able to explore how 
could or should pending issues before FDA, for example, naming 
and interchangeability, impact the reimbursement policy under 
the Medicare program as well as access and affordability for 
beneficiaries?
    The committee will have an opportunity to hear directly 
from FDA and CMS on their progress with implementation of BPCIA 
and the future outlook.
    I yield the balance of my time to the chairman emeritus, 
Mr. Barton.

    Mr. Pitts. I yield the balance of time to Chairman Emeritus 
Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman, for holding this 
hearing. And thank you for holding it at 10:30 where I can 
actually be on time. I appreciate that.
    Six years ago, I co-authored, along with Congresswoman Anna 
Eshoo, the Biologics Price Competition and Innovation Act, 
commonly known as BPCIA, which just as an aside you would have 
thought we would have come up with a better name than something 
like that.
    Today, we sit as a subcommittee with numerous concerns 
about the implementation or more appropriately the lack thereof 
of this important piece of legislation. Only one biosimilar has 
been approved. Numerous products are waiting to proceed through 
the approval process and many physicians, patients, and 
concerned individuals like myself are concerned with the lack 
of progress.
    We all agree that it is important for FDA to get it right, 
but most of us think it is also time for FDA to get on down the 
road and decide exactly how to proceed with the approval 
process. There have been seemingly unending delays that are 
frustrating to legislators, innovators, doctors, and patients. 
I have sent letters to the FDA, OMB, and CMS, expressing these 
frustrations. I am concerned that the CMS decision regarding 
reimbursement for biosimilars to be the average sales price for 
all biosimilars plus 6 percent of the Reference Product ASP. 
This approach undermines the real intent of the legislation.
    We want to foster a robust biosimilar market. CMS' approach 
eliminates any financial incentives in reimbursement for 
biosimilars by potentially forcing doctors and patients to use 
one non-interchangeable biosimilar in place of another based on 
price alone. This is detrimental because all biosimilars, as we 
all know, are not equal. By definition, they are not equal. I 
cannot overstate the importance of treating each biosimilar 
individually rather than as if they were a generic drug.
    I am also concerned about the lack of FDA guidance 
regarding interchangeability in naming. Due to the absence of 
any such guidance, the FDA approved a biosimilar, Zarxio, with 
a placeholder name 6 years after the bipartisan, bicameral 
BPCIA was signed into law. We are still waiting and this is 
simply unacceptable.
    Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the ranking member on the subcommittee, Mr. Green, 
for 5 minutes for his opening statement.
    Mr. Green. Thank you, Mr. Chairman. Before I start, I would 
like to have unanimous consent to place in the record a letter 
from Biosimilar Council and ask unanimous consent.
    Mr. Pitts. With no objection, so ordered.
    [The information appears at the conclusion of the hearing.]

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you and good morning. Dr. Woodcock, 
welcome again, and Mr. Cavanaugh, thank you for being here.
    Today's hearing is the first we have had in the House of 
Representatives on biosimilars since the passage of the 
Biologics Price Competition and Innovation Act, or BPCIA, as 
part of the Affordable Care Act in 2010. It is particularly 
timely because the FDA is both developing the standards for 
approval of biosimilars and reviewing and acting on a growing 
number of applications for approval. At the same time, CMS 
recently released its final Physician Pay Schedule, PFS rule, 
which detailed the Medicare Part B payment methodology for 
biosimilars. Determinations on biosimilars that are approved, 
regulated, and reimbursed is critical to the success of this 
new and emerging market and must be in alignment to facilitate 
our robust, safe, and competitive marketplace.
    As we know, biologics place an important and growing role 
in our healthcare system. They arguably represent the future of 
therapeutics and hold immense promise to further transform the 
way we treat and prevent diseases.
    According to the RAND Corporation, world-wide sales of 
biologics were $46 billion in 2002, representing 11 percent of 
the global pharmaceutical market. Experts are predicting that 
by 2017, biologics are expected to grow to between $205 to $235 
billion, representing approximately 20 percent of the global 
pharmaceutical marketplace.
    Recognizing a need for non-innovative biologics is 
analogous to the generic drug market facilitated by Hatch-
Waxman. And I worked with then Representative Tammy Baldwin and 
former representative and now Governor, Jay Inslee, years ago 
to introduce a bill proposing a pathway for approval of 
biosimilars, not long after the BPCIA became law, paving a way 
for injection of competition in the biologics space.
    I know we all agree that competition is good for patient 
safety, consumer choice, and drive savings for consumers and 
the healthcare system at large. There are a number of 
outstanding issues on how these will be evaluated and treated 
by the FDA including naming, interchangeability, labeling, and 
exploration.
    The complexity of these issues are difficult to overstate 
and I thank FDA for their on-going efforts to develop policies 
on these questions. However, decisions on these major questions 
should not be on a case-by-case basis and it is time for the 
FDA to articulate clear guide rails and principles to industry 
and the public so that rules of the road are established and 
understood.
    Public and provider trust in the safety of biosimilars is 
vital to the success of this market. Acceptance of some 
generics did not happen overnight. Only through a public, 
transparent process of developing guidelines and rulemaking 
will the public trust be earned.
    I look forward to hearing from FDA on the status of these 
policies and how the Agency is moving these efforts forward.
    Recently, CMS detailed how biosimilars would be treated 
under Medicare Part B and I have serious concerns about the 
final rule. While I appreciate the Agency's desire to control 
costs, I fear that in this instance it would undermine this 
infant market and create a race to the bottom. If all 
biosimilars are on the same blended code, we actually 
disincentivize companies for investing in further trials for 
additional indications and would drive folks away from this 
market that we are trying to foster.
    Robust competition will ultimately realize the most 
sustainable, significant savings for the program and the best 
for patients. This rule seems in conflict with the efforts of 
the FDA to foster the biosimilars marketplace. I look forward 
to hearing from CMS on how this determination was made, 
responses to the concerns about potential undermining of the 
biosimilars market and I thank you all for being here today. 
And I yield back the balance of my--well, does anybody want a 
minute on our side? No? OK. I yield back my time, Mr. Chairman.
    [The prepared statement of Mr. Green follows:]

                 Prepared statement of Hon. Gene Green

    Good morning and thank you all for being here.
    Today's hearing is the first we have had in the House of 
Representatives on biosimilars since passage of the Biologics 
Price Competition and Innovation Act (BPCIA) as part of the 
Affordable Care Act in 2010.
    It is particularly timely because the FDA is both 
developing the standards for approval of biosimilars and 
reviewing and acting on an increasing number of applications.
    At the same time, CMS recently released the final Physician 
Fee Schedule (PFS) rule, which detailed the Medicare Part B 
payment methodology for biosimilars.
    Determinations on how biosimilars are approved, regulated 
and reimbursed at all critical to the success of this new, 
emerging market, and must be in alignment to facilitate a 
robust, safe, and competitive marketplace.
    As we know, biologics play an important and growing role in 
our health care system.
    Arguably, they represent the future of therapeutics and 
hold immense promise to further transform the way we treat and 
prevent disease.
    According to the RAND Corporation, worldwide sales of 
biologics were $46 billion in 2002, representing 11 percent of 
the global pharmaceutical market.
    Experts are predicting that by 2017, sales of biologics are 
expected to grow to between $205-235 billion, representing 
approximately 20 percent of the global pharmaceutical 
marketplace.
    Recognizing the need for non-innovator biologics analogous 
to the generic drug market facilitated by Hatch-Waxman, I 
worked with then Representative Tammy Baldwin and former 
Representative Jay Inslee years ago to introduce a bill 
proposing a pathway for the approval of biosimilars.
    Not long after, the BPCIA became law, paving the way for 
the injection of competition into the biologics space.
    I know we all agree that competition is good for patient 
safety and consumer choice, and drives savings for consumers 
and the health care system at large.
    There are a number of outstanding issues on how biosimilars 
will be evaluated and treated by the FDA, including naming, 
interchangeability, labeling and extrapolation.
    The complexity of these issues is difficult to overstate, 
and I thank FDA for their ongoing efforts to develop policies 
on these questions.
    However, decisions on these major issues should not be made 
on a case-by-case basis, and it is time for FDA to articulate 
clear guardrails and principles to industry and the public so 
that the rules of the road are established and understood.
    Public and provider trust in the safety of biosimilars is 
vital to the success of this market.
    Acceptance of generics did not happen overnight--only 
through public, transparent processes of developing guidances 
and rulemaking will the public trust be earned.
    I look forward to hearing from FDA on the status of these 
policies and how the agency is moving these efforts forward.
    Recently, CMS detailed how biosimilars will be treated 
under Medicare Part B, and I have serious concerns with the 
final rule. While I appreciate the agency's desire to control 
costs, I fear that in this instance, it could undermine this 
infant market and create a race to the bottom.
    If all biosimilars are in the same blended code, we 
actually disincentive companies from investing in further 
trials for additional indications, and will drive folks away 
from this market we are trying to foster.
    Robust competition will ultimately realize the most 
sustainable, significant savings for the program and new 
options for patients.
    This rule seems in conflict with the efforts of FDA to 
foster the biosimilars marketplace, and I look forward to 
hearing from CMS about how this determination was made and 
responses to concerns about the potential undermining of the 
biosimilars market.
    Thank you all for being here today, and I yield back the 
balance of my time.

    Mr. Pitts. Thank you. And I would like to ask unanimous 
consent to submit the following documents for the record: 
statements from the Global Healthy Living Foundation and the 
National Association of Chain Drug Stores. Without objection, 
so ordered.
    [The information appears at the conclusion of the hearing.]
    The Chair now recognizes the vice chair of the full 
committee, Ms. Blackburn, for 5 minutes for her opening 
statement.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Ms. Blackburn. Thank you, Mr. Chairman. And I want to say 
welcome. We are delighted to have you all here. And we do have 
some questions about what is transpiring.
    And Dr. Woodcock, I want to come to you first. As you have 
heard from statements on both sides, we realize that this is 
essential, that the biosimilars are going to fill a place. It 
is an emerging component, but I want to go to one thing you 
said in your written testimony. And that is this, ``Stakeholder 
confidence is essential to the success of the biosimilar 
program.'' This is something I am going to come back to you on.
    When I talk to innovators that are in Tennessee, what they 
are confused about is the lack of certainty. The chairman 
mentioned to you about the documents and the lack of guidance, 
where you all are in the process. So the hearing today is 
important because of that. These innovators are looking to get 
some certainty. These are complex decisions. We appreciate 
that. We know that this is a new class of medicines.
    And that brings me to my second point and Mr. Cavanaugh, I 
will discuss this with you as we move forward with the hearing. 
Looking at the realization, biosimilars and generics are not 
the same thing. And we want to be certain that you all are 
addressing this in the appropriate manner. We appreciate your 
written testimonies. We look forward to digging down with you 
on some questions and maybe some things that we are going to 
request for a written answer.
    And Mr. Shimkus, I am going to yield the balance of the 
time to you.
    Mr. Shimkus. You are so kind. Thank you. Because I want to 
make sure that we submit for the record, Mr. Chairman, I have 
two surveys both by--for the Alliance for Safe Biologic 
Medicines and one is a physician survey. One is a pharmacist 
survey. If our goal is to ensure access to these products and 
to the marketplace, shouldn't we enact a transparent labeling 
policy that creates confidence in the healthcare market? So if 
you would share these with the minority and accept these, I 
would for the record appreciate it. And that is all I have. 
Thank you.
    Mr. Pitts. All right, they will take a look at them and we 
will come back to that.
    The Chair now recognizes the ranking member, Mr. Pallone, 
for 5 minutes for an opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing and also thank Dr. Woodcock and 
Director Cavanaugh for being here to discuss the implementation 
of the Biologics Price Competition and Innovation Act.
    Biosimilars hold enormous potential to offer patients with 
serious and life-threatening diseases access to more treatment 
options and potentially lower cost options. And I look forward 
to hearing your testimony today about how FDA and CMS are 
working to establish a clear pathway for approval, as well as 
an appropriate reimbursement structure. These are both critical 
elements to ensuring the success of this market.
    The use and sale of biologics continues to rise here in the 
United States and elsewhere. By 2017, sales of biologics are 
estimated to be between $205 and $235 billion, approximately 20 
percent of the global pharmaceutical marketplace. And this is 
why encouraging and facilitating competition is so critical.
    While biosimilars have been available in Europe for some 
time, Congress did not establish an abbreviated pathway here in 
the U.S. until the passage of the act as part of the Affordable 
Care Act in 2010. And I supported the creation of the pathway 
for biosimilars and for empowering FDA with the authority and 
resources to ensure that biosimilars are safely available here 
in the United States for the patients that need them most.
    I was pleased when FDA approved the first biosimilar, 
Zarxio, in March 2015. And this action demonstrated that the 
approval process is working. But I have also heard that greater 
clarity is needed from the FDA.
    Since 2012, FDA has issued important guidance meant to 
inform industry sponsors that they consider developing 
biosimilar products including scientific and quality 
considerations. Additional guidance is still needed though, 
particularly in the areas of developing and marketing 
biosimilars, guidance on interchangeability, labeling, and 
naming are still outstanding. And FDA's thinking in this area 
will be vital to companies looking to enter the biosimilars 
market.
    We have seen how our healthcare system has benefitted from 
the competition that comes with a robust market. Competition 
has helped to lower healthcare costs for small- molecule drugs, 
saving the U.S. health system $254 billion in 2014. And it is 
my hope that we continue to do all we can to lay the foundation 
for these types of savings.
    Our Federal health programs will also play a large role. 
CMS has the ability, through both Medicare and Medicaid, to 
encourage this new marketplace and that is why I was concerned 
that CMS finalize the Part B payment policy for biosimilars 
last year combining all biosimilars into one average sale price 
calculation and payment code. I worry that this inappropriately 
treats biosimilars like generic drugs and will disincentivize 
manufacturers from entering the biosimilars marketplace because 
biosimilars are not generics. Each is its own unique product. 
And biosimilars go through a much more stringent approval 
process. In fact, Medicare Part D and Medicaid both acknowledge 
this in their respective programs.
    This marketplace is only just emerging with only one 
approved biosimilars, so it is important that we hear from both 
FDA and CMS, not only about what they are doing in the space, 
but how they are coordinating to ensure that the biosimilar 
marketplace is both safe and robust.
    I just wanted to add one thing. I think all of you know 
that the issue of drug pricing continues to rise in terms of 
the concerns of the American public. Our Democratic Steering 
and Policy Committee actually had a hearing on drug pricing. 
And at that hearing, I was concerned to hear--I think I asked a 
question about generics and I was told by the witnesses there 
that generics increasingly are not a way of reducing prices 
because of the changes that are occurring in the marketplace. 
And so I do worry that it is important in the case of 
biosimilars or generics that that continue to be a way of 
reducing drug pricing. If it isn't, then we are going to have 
even more of an outcry that prices are too high and that there 
should be some kind of intervention by Congress or by the 
Federal Government in the marketplace.
    So I think that this is an issue. Even though we are 
talking about biosimilars today, Mr. Chairman, this is part of 
a larger issue of Americans being very concerned about drug 
pricing. And of course, it has entered into the presidential 
sweepstakes or whatever, as well. So you know, this is an 
important hearing, not only in terms of what is happening to 
biosimilars, but just the larger issue of drug pricing. Thank 
you, Mr. Chairman.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    Good morning. Thank you Mr. Chairman for holding this 
hearing today, and thank you to Dr. Woodcock and Director 
Cavanaugh for being here to discuss the implementation of the 
Biologics Price Competition and Innovation Act.
    Biosimilars hold enormous potential to offer patients with 
serious and life-threating diseases access to more treatment 
options, and potentially lower cost options. I look forward to 
hearing your testimony today about how FDA and CMS are working 
to establish a clear pathway for approval, as well as an 
appropriate reimbursement structure. These are both critical 
elements to ensuring the success of this market.
    The use and sale of biologics continues to rise here in the 
United States and elsewhere. By 2017, sales of biologics are 
estimated to be between $205 and $235 billion, approximately 20 
percent of the global pharmaceutical marketplace. This is why 
encouraging and facilitating competition in this space is so 
critical.
    While biosimilars have been available in Europe for some 
time, Congress did not establish an abbreviated pathway here in 
the U.S. until the passage of BPCIA as a part of the Affordable 
Care Act in 2010. I supported the creation of a pathway for 
biosimilars, and for empowering FDA with the authority and 
resources to ensure that biosimilars are safely available here 
in the U.S. for the patients that need them the most. I was 
pleased when FDA approved the first biosimilar, Zarxio, in 
March 2015. This action demonstrated that the approval process 
is working, but I've also heard that greater clarity is needed 
from FDA.
    Since 2012, FDA has issued important guidance meant to 
inform industry sponsors as they consider developing biosimilar 
products, including scientific and quality considerations. 
Additional guidance is still needed, though, particularly in 
the areas of developing and marketing biosimilars. Guidance on 
interchangeability, labeling, and naming are still outstanding, 
and FDA's thinking in these areas will be vital to companies 
looking to enter the biosimilars market.
    We've seen how our health care system has benefited from 
the competition that comes with a robust market. Competition 
has helped to lower health care costs for small-molecule drugs, 
saving the U.S. health system $254 billion in 2014. It is my 
hope that we continue to do all we can to lay the foundation 
for these types of savings.
    Our Federal health programs will also play a large role. 
CMS has the ability through both Medicare and Medicaid to 
encourage this new marketplace. And that's why I was concerned 
that CMS finalized its Part B payment policy for biosimilars 
last year combining all biosimilars into one average sales 
price calculation and payment code. I worry that this 
inappropriately treats biosimilars like generic drugs and will 
disincentivize manufacturers from entering the biosimilars 
marketplace. Biosimilars are not generics; each is its own 
unique product, and biosimilars go through a much more 
stringent approval process. In fact, Medicare Part D and 
Medicaid both acknowledge this in their respective programs.
    This marketplace is only just emerging, with only one 
approved biosimilar. So it's important that we hear from both 
FDA and CMS not only about what they're doing in this space, 
but how they are coordinating to ensure that the biosimilar 
marketplace is both safe and robust.
    I look forward to hearing more today. Thank you.

    Mr. Pitts. The Chair thanks the gentleman. That concludes 
the prepared opening statements. As usual, all members' written 
opening statements will be made a part of the record.
    Without objection, the two documents that Mr. Shimkus asked 
to enter in the record are ordered to be entered into the 
record. \1\
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    \1\ The information has been retained in committee files and also 
is available at  http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=104408.
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    We have one panel today. On our panel, we have Dr. Janet 
Woodcock, Director, Center for Drug Evaluation and Research, 
Food and Drug Administration; and Sean Cavanaugh, Deputy 
Administrator and Director, Centers for Medicare and Medicaid 
Services. Thank you very much for coming today. Your written 
testimony will be made a part of the record. You will each have 
5 minutes to summarize your written testimony.
    And Dr. Woodcock, you are recognized first for 5 minutes.

 STATEMENT OF JANET WOODCOCK, M.D., DIRECTOR, CENTER FOR DRUG 
    EVALUATION AND RESEARCH, FOOD AND DRUG ADMINISTRATION, 
 DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND SEAN CAVANAUGH, 
DEPUTY ADMINISTRATOR AND DIRECTOR, CENTER FOR MEDICARE, CENTERS 
 FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND 
                         HUMAN SERVICES

                  STATEMENT OF JANET WOODCOCK

    Dr. Woodcock. Thank you, Mr. Chairman and members for 
allowing me to be here today and testify.
    Biological products are used to treat patients who have 
serious and life threatening medical conditions such as 
rheumatoid arthritis, cancer, serious gastrointestinal 
diseases, and so forth. It is important for the health of the 
public to have access to safe, effective, and affordable 
biological products. Biosimilars can provide more treatment 
options to patients and possibly lower treatment costs 
resulting in better access.
    FDA, in general, and I personally have long supported 
getting the availability of a biosimilar pathway and we were 
very pleased when Congress enacted this pathway. I have been 
involved in the developing of biological therapeutics myself 
for about 30 years, and I have seen the transformation they 
have caused in healthcare in some areas.
    I am a rheumatologist, and biologics have totally changed 
the face of rheumatology. We used to have patients in 
wheelchairs lined up in our clinics. And we were talking about 
joint replacements. We were talking about nursing home care. 
And now instead of talking about that, we talk about treating 
to remission, how to make the disease go away, how to make 
those folks function as if they weren't sick. It has been a 
miraculous transformation. But this needs to be accessible to 
all Americans, not inaccessible to some because of cost.
    Since the biosimilars pathway was created in 2010, we have 
actually seen a lot of progress. Now much of this progress is 
under the hood, so to speak, because the law required that 
biosimilar drugs be found biosimilar to a reference U.S. 
product, which meant that they had to study it to the products 
that were on the U.S. market, and it takes an amount of time. 
But we did approve the first biosimilar in 2015.
    We have an advisory committee coming up next week for 
another biosimilar for the advisory committee to consider, and 
there are almost 60 programs under development in various 
stages. They have talked to us and we know of perhaps several 
dozens of others where they have reached out to us, but haven't 
engaged in our process.
    I know people are anxious to see more progress and more 
certainty. I do understand that about the pathway.
    Now, if you look at small-molecule generics, as we just 
said, they have been successful. Over 88 percent of dispensed 
prescriptions in the U.S. are generic drugs and actually they 
are continuing to save a lot of money. There are a small number 
of products that do not have generic competition still and they 
may have price increases. But this has been a very successful 
program, the generic program. But if we compare it, we did not 
have success overnight in that program. It took a while to 
establish the parameters, to get the industry to the state they 
need to be and to get the acceptance of the clinical community. 
So I think maturity of the industry and gaining confidence of 
the healthcare community was really critical to this 88 percent 
of dispensed prescriptions being generics.
    To earn and to sustain both physicians' and patients' 
confidence in biosimilars and interchangeable products, we must 
apply a scientifically rigorous review process and approval 
standard that people believe in and trust because these 
products have been life changing for many people and they don't 
want to sacrifice any performance. And we don't intend that 
they would sacrifice any performance if they take a biosimilar.
    Although the first biosimilar is now marketed, there are a 
lot of legal, technical, and policy challenges ahead. Some of 
them you have raised, about various policy issues that must be 
resolved. We fully recognize that and intend to do it, but I 
will assure you that there is a bright future ahead for our 
biosimilars program and I believe it is going to provide the 
same access to important medications that our current generics 
program is doing and really a benefit of the health of the 
public.
    I am happy to answer questions.
    [The statement of Dr. Woodcock follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. The Chair thanks the gentlelady.
    I now recognize Mr. Cavanaugh for 5 minutes for your 
summary.

                  STATEMENT OF SEAN CAVANAUGH

    Mr. Cavanaugh. Thank you, Mr. Chairman, and members of the 
subcommittee. I appreciate you inviting me here today to talk 
about Medicare Part B payment policy for biosimilars.
    As you know, the Affordable Care Act created an abbreviated 
pathway for approval of biosimilars by the FDA and it created a 
provision for the establishment of Medicare payment policies 
for these products. Biosimilars hold great promise for all 
Americas including Medicare beneficiaries and we are committed 
to policies that will provide fair payment in a healthy 
marketplace.
    In 2014, Medicare Part B spent $21.5 billion on 
prescription drugs with the top 15 products accounting for 
$11.5 billion in its total. Eleven of those 15 products were 
biologics and the top 6 products were all biologics and each 
one of those contributed over $1 billion in spending.
    CMS has an obligation to make sure taxpayers' dollars are 
used responsibly. This includes creating good payment policy 
and making appropriate coverage decisions that provide access 
to innovative services and treatments while incentivizing these 
treatments and delivery models that are efficient.
    When the first biosimilar entered the market last year, we 
quickly assigned a billing code to facilitate Medicare 
beneficiaries' access to this new therapy. And we began an 
outreach process to the provider community to make sure we 
could share with them guidance on how to submit claims for the 
new biosimilar product.
    Also as several of you have noted, last year in our annual 
Physician Fee Schedule rulemaking, we proposed and finalized a 
policy that promotes fair payment in a healthy marketplace. It 
was important that we implement a Medicare payment policy for 
biosimilars now before the second biosimilar for any reference 
product becomes available to provide certainty for providers 
and suppliers who will be billing Medicare for these products 
in the near term.
    The statute provides for payment for biosimilar products in 
the same manner as the statutory methodology for multi-source 
drugs where more than one drug product is included in the same 
billing code. We are confident that our interpretation of the 
law is sound and it represents good policy that will facilitate 
innovation and competition in the market.
    We implemented this new policy through our normal 
rulemaking process. We solicited, thoroughly reviewed, 
responded to, and in some cases modified our proposed policy 
based on comments from the public. For example, in 
collaboration with our colleagues at the FDA and in response to 
public comments, we implemented a requirement for claims for 
biosimilars to include a modifier that identifies the 
manufacturer of the specific product. We recently published 
guidance on the use of this modifier on our Web site. This will 
allow us and others to track which specific biosimilars a 
beneficiary receives.
    Overall, the availability of generic drugs in competition 
with each other and with branded products, has improved price 
and availability of drugs. Competition among biosimilars can do 
the same for Medicare beneficiaries. Like multiple-source 
drugs, CMS sees biosimilars competing for market share with 
each other as well as competing with the referenced product. 
Encouraging this competition reflects a top priority at CMS.
    The field of biosimilars holds great promise for future 
improvements in health, value, and outcomes. We believe 
patients, manufacturers, providers, insurers, and Government 
all share a common goal to foster a healthcare system that 
leads in innovation, delivers affordable high quality 
medicines, and results in healthier people. CMS policies will 
continue to ensure Medicare beneficiaries have access to 
biosimilars and other innovative treatments.
    As more biosimilars are approved, we will monitor 
developments in the market and consider refinements to our 
policy as needed based on experience with this new segment of 
the market. We look forward to continuing to work with this 
committee, to gathering information from providers, suppliers, 
and other stakeholders to better inform our guidance and 
regulations in the future.
    Thank you, and I look forward to your questions.
    [The statement of Mr. Cavanaugh follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. The Chair thanks the gentleman. Thank you for 
your opening statements. I will begin the questioning. I 
recognize myself for 5 minutes for that purpose.
    Dr. Woodcock and Mr. Cavanaugh, can you please explain how 
your two agencies have been coordinating on implementation 
efforts and discussing policies that could impact each of your 
agencies' decisions?
    Dr. Woodcock.
    Dr. Woodcock. Yes. We work very closely together on those 
matters where our jurisdictions may interact with one another 
or where they impact. We certainly have had long conversations 
about the need for safety tracking of these products and I 
think CMS was very helpful to us in enabling this identifier so 
that claims data will have some sort of identification so that 
we can track these products that are paid for by Medicare.
    We have worked together on numerous activities where 
needed, but generally, we are on a scientific track and they 
are taking care of beneficiaries.
    Mr. Cavanaugh. Yes, I would add to that that as the FDA has 
worked through its processes for the naming convention for 
biosimilars, they have repeatedly kept us in the loop to make 
sure we understood what was going on, solicited comments. We 
actually don't take a position on the naming convention, but 
they have been generous in their consultation.
    And biosimilars, our collaboration really builds on a 
legacy of work. We collaborate in the regulation of lab safety. 
We recently implemented a process of parallel review, when the 
FDA is approving products and we can do a coverage decision for 
Medicare at the same time. So I am sure there are improvements, 
but there is a history here of working together and a 
commitment to continuing that.
    Mr. Pitts. Has FDA ever sat down with CMS to walk through 
the many fundamental differences between biosimilars and 
generic drugs?
    Dr. Woodcock. Yes. Yes, many times. Medical staff at CMS 
are very well aware of all these and have been privy to many of 
our discussions about them.
    Mr. Pitts. Dr. Woodcock, FDA has spent several years now 
grappling with policy decisions on how a biosimilar should be 
named and labeled in relation to its reference product, 
particularly if it is approved for different indications and if 
there are other biosimilars for the same disease or condition. 
Are you concerned that these nuanced decisions could be 
undermined by CMS' decision to lump them all together for 
coverage and reimbursement purposes like they were generic 
drugs?
    Dr. Woodcock. Being able to track for purposes of safety 
and attributability is different than the payment. So the issue 
of tracking has been resolved by what CMS has done with the 
modifiers. And I am not competent to talk about how 
reimbursement is arranged.
    Mr. Pitts. Mr. Cavanaugh, in its draft naming guidance, FDA 
seems to make the case that distinguishing biosimilars from 
their reference product and other biosimilars is critical to 
patient safety. If this is the case, why did CMS not share this 
view and take the opportunity to have different billing codes?
    Mr. Cavanaugh. As Dr. Woodcock said, they have been very 
generous in their time helping us make sure we understand 
completely the clinical and therapeutic distinctions between 
generics and biosimilars. What CMS has put policy out on, 
though, is on payment and coding and physicians don't typically 
look through billing codes in order to understand which product 
they are ordering. It is a very different process.
    So as Dr. Woodcock suggested, and I would agree with, there 
is really no disagreement here and no conflict in that payment 
policy which has to be informed by the clinical, but it doesn't 
have to be entirely reflective of the clinical distinctions.
    Mr. Pitts. Well, combining all products under one code 
inherently removes some incentive for biosimilar companies to 
develop data on specific indications or seek 
interchangeability. Did CMS consider these impacts on 
innovation?
    Mr. Cavanaugh. We did. The purpose of our policy was to 
spur innovation and we believe it will do that. You know, the 
fact that there are multiple products under the same billing 
code in the generic market has not, I think, depleted 
innovation or competition. In fact, the history of the generic 
market is robust competition and a lot of products being 
developed, not immediately as Dr. Woodcock said, but we think 
it is a sound policy and we think it will spur innovation, not 
hinder it.
    Mr. Pitts. Thank you. The Chair now recognizes the 
gentleman, Mr. Pallone, for 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman. I wanted to ask Dr. 
Woodcock some questions. FDA has been criticized for not being 
transparent in the development and implementation of the BPCIA. 
FDA has also been criticized for not releasing guidances more 
quickly and not doing enough to educate patients and healthcare 
professionals. Obviously, these critiques are significant, 
given that the BPCIA was enacted in 2010. I guess we had an 
estimate from the Congressional Budget Office of the $7 billion 
savings in the first 10 years, OK? So a lot is at stake. And of 
course, I talked earlier about the whole issue of drug pricing, 
being sort of a national priority right now.
    So how much money did Congress appropriate for the program 
that has the potential to provide so much savings? And will the 
funding FDA has received from Congress and industry be 
sufficient to keep up with the growing interest in the 
development of biosimilars?
    Dr. Woodcock. Congress did not appropriate any additional 
funding for us to do the biosimilar program.
    Mr. Pallone. I didn't hear you, Dr. Woodcock.
    Dr. Woodcock. Congress did not appropriate any additional 
funding for the biosimilar program. They put in place the 
ability 2 years later for us to enact a user fee program. When 
that user fee program was put in place, it was stipulated that 
we take $20 million out of our existing BA budget and put it 
into the base. But that was not additional funds. Those were 
the funds we had to take from other activities such as OTC 
monographs, compliance activities, and so forth.
    And of course, when we put the user fee program into place, 
there really wasn't an existing market, unlike the prescription 
drug user fee.
    Mr. Pallone. Right.
    Dr. Woodcock. Or the MDUFA or GDUFA, and so we couldn't 
bill an industry that didn't exist. So we put in place a 
staggered fee structure for development meetings that we have 
been enacting and we have collected monies from that to help 
build the program. But of course, that has been only in the 
latter parts of the program.
    Mr. Pallone. Well, then I guess the larger question which I 
am trying to get at is to what extent is this funding or lack 
of funding not working and making it more difficult in terms of 
having a backlog of applications, increasing review time lines, 
and contributing in some way to some of the criticism? And what 
do you need? What do you suggest we do so that you have enough 
money?
    Dr. Woodcock. We have begun to collect more monies under 
the user fee program. In FY13, we finally had collected $6 
million, so that was the extent of the program. In fiscal year 
'14, we collected $13 million; and last year, FY15, $23, 
million, $23.8 million. So we are beginning to build. And as 
drugs get on the market, biosimilar drugs, we will be able to 
have a different, perhaps more robust funding for this program. 
But this program was not funded by appropriations.
    Mr. Pallone. OK, but I guess what I wanted to ask and I 
don't have a lot of time, specifically, to what extent, because 
you don't have this money, is that contributing to the backlog, 
you know, the not releasing guidance, not having enough 
education, development implementation of the program? And what 
do you suggest we do in order--we are getting all these 
criticisms, and it sounds to me, although you haven't said so, 
that part of it is a lack of funding?
    Dr. Woodcock. Well, you know, what has been is water under 
the bridge. Going forward, we do expect to release drafts or 
many finals of this guidance in this current year, this coming 
year. So hopefully, some of these criticisms will be addressed, 
although these are controversial issues.
    Clearly, had we had more staffing and funding at the get-
go, and we could have set up a program in 2010, then we would 
have been better off now. However, what I am concerned about is 
that this program is going to explode, that we are going to 
have--we are seeing multiple entries potentially for many of 
the existing biosimilars. Those top 6 or 11 or whatever. 
Naturally, there are people who would like to have a part of 
that market or compete into that market. And I am concerned 
that we will not have the staff because we are always waiting 
to catch up.
    Mr. Pallone. All right, well, this sounds--I have got 3 
seconds left. Sounds to me like you need some kind of 
appropriation and having the industry pay a fee is not good 
enough. But I guess you are not going to tell me you need the 
appropriation.
    Dr. Woodcock. I can't comment on that.
    Mr. Pallone. I know you can't. But that is what it sounds 
like. Thanks.
    Mr. Pitts. All right. The gentleman's time has expired. The 
Chair now recognizes the chair emeritus of the full committee, 
Mr. Barton, 5 minutes for questioning.
    Mr. Barton. Thank you, Mr. Chairman, And I wish that 
Congresswoman Eshoo was a member of the subcommittee because, 
while I know a little bit about this, Anna is really the expert 
on this issue. She and I are the authors of the bill that got 
put into the Affordable Care Act.
    It looks to me like we have two issues here. We have an FDA 
issue, you are right, seeing Ms. Woodcock. We have an FDA issue 
about how to approve them and then we have a CMS issue on how 
to charge for them. If you don't get the approval process 
right, it doesn't matter what you charge for them because there 
is nothing to be used. But if we can get the approval process 
right, it doesn't matter unless we get the charging 
reimbursement process right because if you set a reimbursement 
process that there is no incentive to create the drug in the 
first place, the biosimilar, nobody is going to do it.
    And on the approval, I would give the FDA a C+, maybe a B-. 
I think your heart is in the right place. I know you, ma'am, 
based on my interchanges with you in the past, plus what you 
said in your opening statement, you want to get it right and 
you want to get it done.
    With regard to CMS, I would give you a D-minus. The only 
reason I won't give you an F is because at least you are 
trying. You have got something out there. I guess to go back to 
the FDA, we need some labeling guidance.
    The first biosimilar, Ms. Woodcock, that the FDA has 
approved, the labeling is just not as complete as it should be, 
as transparent as it should be. Could you comment on that? Does 
your agency plan to address the labeling issue and try to get 
it better?
    Dr. Woodcock. Yes. We do plan to issue draft guidance. We 
have many opinions on how the label should be. We have received 
much input from stakeholders and that is one of the guidances 
that we would like to get out this year as a draft.
    Mr. Barton. So to clarify, you do plan on changing that 
specific label?
     Dr. Woodcock. We will issue a draft and then we need to 
issue a final and get a policy together. And then the labels 
will conform, all labels would conform to that. If you recall, 
the statute that was enacted was considered to be self-
implementing, as I understand, without guidance.
    Mr. Barton. But you still have to do it.
    Dr. Woodcock. Well, we are approving, as they become 
available, we will approve biosimilars regardless whether we 
have final guidance out or not. That does create more ambiguity 
and so perhaps the language in the statute that considered, it 
was a self-implementing program, was a little optimistic in the 
sense that----
    Mr. Barton. That is true. I will accept that.
    Dr. Woodcock. There were a lot of policy issues that we 
needed much more detailed discussion and settling on to move 
forward with the robust program, and I think that always 
happens with these types of complex programs. But we do plan to 
get labeling. I have been personally involved in many 
discussions about this. We understand the issues and the 
positions of the various parties and we will put something out 
that people can comment on.
    Mr. Barton. OK, now I need to ask Mr. Cavanaugh a question, 
but before I get off of FDA, can you comment on the 
interchangeability that basically nothing has happened with 
regard to interchangeability and what the FDA's plans are? I am 
talking to the FDA representative.
    Dr. Woodcock. Yes. We also plan to put out guidance on 
interchangeability, draft guidance. We have discussed 
interchangeability in our scientific considerations and our Q&A 
guidances already that are out there. So there is quite a bit 
of discussion because companies may need to do the scientific 
work during their development program. But we plan to put out a 
specific guidance on interchangeability and we hope to get that 
out this year as well as a draft.
    Mr. Barton. And finally, Mr. Cavanaugh, I apologize for 
lack of time here, but I understand where CMS is coming from. 
You want to have a fair pricing scheme, reimbursement scheme, 
but biosimilars are different than generics. You understand 
that and your agency understands that?
    Mr. Cavanaugh. We do.
    Mr. Barton. If you don't allow for some differentiation 
since it is more expensive to create, you are not going to 
create an incentive to do the drug and to do the biosimilar in 
the first place. Does your agency have any plans to go back and 
revisit their initial decision on how these are priced?
    Mr. Cavanaugh. Thank you for the question. In the 
regulation we published last year, we did indicate that we 
would monitor the market closely and that we would do 
rulemaking in the future. We thought that our payment policy 
was not accomplishing what we were expecting it to. So there is 
that possibility.
    I want to return to your point, though. From a clinical 
perspective, you are right and CMS knows biosimilars are not 
the same as generics. However, from a regulatory and market 
perspective, there are some similarities. These similarities 
were pointed out in the Senate Committee Report that they are 
approved in similar processes and that they refer to an 
existing product's evidence. They are going to compete with a 
reference product and against each other. So from a market and 
a regulatory perspective, there are similarities. From a 
clinical therapeutic perspective, there are similarities and 
differences. And we recognize all of that and we think that 
translates into the payment policy.
    We created similarities to how generics are priced, but 
there are differences as well. We don't have the original 
reference product in the same code with the same ASP. So there 
are differences, but we did think the analogy to generics from 
a payment perspective was reasonable.
    Mr. Barton. My time has expired. I thank the Chair for the 
courtesy.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentleman from Oregon, Mr. Schrader, for 5 
minutes for questions.
    Mr. Schrader. Thank you, Mr. Chairman, I appreciate that. I 
appreciate the witnesses being here.
    I am concerned about the market developing. You have 
testified, both of you, to that effect and it seems to be a 
nascent market that has yet to be mature and don't want to 
stifle the competition, don't want--and you are struggling with 
payment policy, trying to figure out what is the best way to 
encourage good competition, hopefully to build the market and 
ultimately at the end of the day, drive down prices safely for 
people. It is nice that the ACA allows this opportunity and we 
are able to get this type of legislation and apparently it has 
been on a dais, if you will, for a long, long time. So that is 
good.
    Dr. Woodcock, you are not in the payment policy business 
particularly, but could you talk a little bit about interaction 
between you and CMS in terms of how to interpret the previous 
generic policies and since this is not a generic situation, how 
you came about working with Mr. Cavanaugh, your contemporary on 
the other side, to develop the best payment policy for the 
biosimilars?
    Dr. Woodcock. CMS consulted us more on what the biosimilars 
were medically and clinically rather than how they should be 
paid for because that is not our expertise. And we interact 
with their medical staff who have a very clear understanding, I 
think, of the parameters of how we are analyzing the 
biosimilarity, what the standards are for biosimilarity and 
what the standard is going to be for interchangeability and the 
clinical performance that is expected from both of those. And 
the fact that in some cases we may not include all the 
indications in a biosimilar's label that are in the innovator 
label for various reasons. So they are aware of all of the 
scientific and clinical parameters in the course of making 
their decisions.
    Mr. Schrader. I guess for Mr. Cavanaugh, you talked a 
little bit about these modifiers. Could you elaborate? I am 
concerned by lumping all the biosimilars together that if there 
is adverse reactions and stuff that can happen to any product, 
for goodness sakes, how are you going to tease that out? Could 
you elaborate a little bit?
    Mr. Cavanaugh. Certainly, and thank you for the question. 
This is an issue that we were sensitized to through our 
conversations with the FDA which is when they are trying to 
monitor adverse reactions, they often look in large databases 
of claims to try to figure out which patients receive which 
product and then look in future claims or in other databases to 
see whether they had adverse reactions. And they made us 
sensitive to if the only indicator of multiple biosimilars was 
a common number, they would not be able to distinguish between 
the product which is important here.
    So what we did was, working with them, say, well, we will 
keep the same billing code, but we will have a modifier that is 
specific to each manufacturer so that when you do query our 
databases and you see a patient that had an adverse 
consequence, you will know which manufacturer's product they 
got. And so that is how we expect it to work and we have 
confidence that it will work.
    Mr. Schrader. Biosimilars are paid for by the Government in 
several different programs, such as Medicaid Part D and Part B, 
apparently. Why do we have different methodologies in each of 
those? I understand some are intrinsic to the programs 
themselves, but there is enough variation. Biosimilars are 
treated, frankly, very differently in the other two programs 
than they are here. And they are kept individual. One 
biosimilar is not treated the same as another biosimilar. Why 
have you chosen to do it differently in Part B?
    Mr. Cavanaugh. Thank you for that question. The answer is, 
as you were suggesting, there are different programs, but more 
importantly than being different programs, there are different 
statutes behind each of the programs. I have responsibility for 
both Medicare Part B, but also Part D.
    The statute that created the payment methodology for 
biosimilars in Part B is Section 1847A, large A. That is very 
specific to Part B and has nothing to do with Part D and 
rebates and payment prices there. So I think it all derives 
from very different statutes. In an ideal world, you would have 
harmonization across these, but occasionally we find that there 
are not consistencies across programs and that is not always a 
bad thing. I think here it created an opportunity for good 
policy.
    Mr. Schrader. I think the policy is being put ahead of the 
marketplace right now, maybe down the line as you alluded to, 
but that might be appropriate. But I am very worried that with 
all the differences that we currently have, it is confusing and 
makes it difficult for drug manufacturers to step up and try 
and create these wonderful drugs for our citizens. With that, I 
will yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
the gentleman from Kentucky, Mr. Guthrie, for 5 minutes for 
questions.
    Mr. Guthrie. Thank you, Mr. Chairman. Thank you both for 
coming. I guess my questions are similar to what Mr. Pitts has 
said and what Mr. Barton asked Mr. Cavanaugh. And it is the 
payment policy. We are using a similar policy for generic 
small-molecule drugs are you said for biosimilars. And you 
said, I think to Mr. Barton, there are similar market 
characteristics you are looking at and you recognize there are 
different clinical characteristics that the FDA is concerned 
with. And that gets to all biosimilars are not tied--not all 
biosimilars are tied to the same product or the same reference 
product.
    And so my question is this. It is the concern about the 
payment policy and the clinical differences that you recognize 
exist? And we have heard from physicians. We have heard from 
patient groups, biosimilar manufacturers, a lot of different--
at least one insurer, that this policy could lead to a couple 
of unintended consequences. One would be inappropriate 
switching between biosimilars, switching to a lower cost that 
is not the same, and as well as a less vibrant biosimilar 
market altogether.
    I believe some of these were stakeholder concerns that were 
raised during the process and wonder why you moved forward and 
did you consider these warnings?
    Mr. Cavanaugh. Thank you for these questions. We did 
consider these because we received these in the public comment 
process and we thought very deeply about each of those issues.
    First of all, the concern about a less vibrant market. I 
mentioned some statistics earlier, but in Part B the top six 
drugs that we spend money on are all biologics. We spend over 
$1 billion on each of them. I think that alone creates the 
opportunity for a very vibrant market in biosimilars and I 
think that is why you are seeing the level of interest that the 
FDA is seeing in approving products.
    As far as inappropriate switching, first and foremost, 
physicians do not order biologics or other drug products by 
billing code. And Dr. Woodcock is a physician and can 
extrapolate on that. And similarly, pharmacists do not derive 
what switching they are allowed to do based on billing codes. 
There are other conventions in place. So we fought long and 
hard about that concern. We talked to our pharmacists. We 
talked to our physicians. We talked to the FDA and thought that 
we had heard that publicly that that was not a concern.
    Mr. Guthrie. So FDA is not concerned that that could come 
to pass, those--the two things I just mentioned could happen?
    Dr. Woodcock. Well, again, what we are seeing would be that 
a biosimilar would be either written by a physician, by the 
name, right, or it would be switched. If it were 
interchangeable, it would be switched at the pharmacy level 
based on our Purple Book where we said it was interchangeable. 
So those are the processes we see and with the e-prescribing 
and so forth, there are menus that come up and those have to do 
with the name of the product.
    Now I don't know, I have been out of practice too long to 
know how this reimbursement loop which has really gotten very 
complex recently, how that would impinge. But that is how the 
ordering would be done.
    Mr. Guthrie. Well, thanks. I have another question. So Mr. 
Cavanaugh, I noticed that you treat biosimilar as a multi-
sourced product for the purpose of payment. However, they are 
treated as a single source for the purpose of the Medicaid 
rebate. Can you explain the contradiction or apparent 
contradiction, I guess?
    Mr. Cavanaugh. Certainly. It all derives from these being 
different programs and different statutes that authorize 
payment. I am on the Medicare side of CMS so I am not as 
conversant in the Medicaid statute, but as I mentioned earlier, 
the statute that created the authority for payment for 
biosimilars is very specific to Part B drugs. And so it by 
definition would not apply to Medicaid or Part D and so I think 
any difference is derived from the statutory differences.
    Mr. Guthrie. It is kind of a contradiction to have multi-
source one way and single the other. Something needs to be 
corrected or fixed. Maybe it needs to be fixed statutorily?
    Mr. Cavanaugh. They are not consistent, but again, the 
statutory authorities are different.
    Mr. Guthrie. OK. Well, Mr. Chairman, I yield back the 
balance of my time.
    Mr. Pitts. I thank the gentleman. I now recognize the 
gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for 
questions.
    Ms. Schakowsky. It is really exciting that in recent years 
that we have seen such breakthroughs in drugs entering the 
market that creates such hope for treatment or cure for 
illnesses of millions of Americans. But the cost of these 
drugs, I want to focus on that because I think it is simply 
unaffordable for far too many people.
    In 2013, the average cost of specialty drugs was over 
$53,000, an increase of 193 percent from 2005. And this average 
drug cost is greater than the median U.S. household income, 
more than double the median income for Medicaid beneficiaries 
and nearly time and a half--as much as the average Social 
Security retirement benefit. And a recent Kaiser poll found 
that 73 percent of Americans believe the cost of prescription 
drugs is just simply unreasonable.
    And so it is clear that we need additional Federal 
authorities to combat this growing problem and that is why I 
introduced the Medicare Fair Drug Pricing Act which would 
require HHS to negotiate the price of biologics and sole-
sourced drugs covered by Medicare Part D, one possible 
solution.
    The high drug costs are a problem for both Medicare Part D 
and Part B. Mr. Cavanaugh, you well know, in 2010 biologics 
accounted for $8.3 billion or nearly 43 percent of all Part B 
drug spending and that number is likely to rise. High-cost 
biologics are continued to enter the market. I am happy that 
the biologics are entering the market. Medicare beneficiaries 
are also struggling to afford the copays that are associated 
with these drug prices.
    In addition to enhancing HHS's ability to control drug 
costs, we need to ensure that we have a robust marketplace for 
biosimilars. Several studies estimate the projected savings 
from the approval of biosimilars for current high-cost 
biologics to be anywhere from $44 billion to $250 billion over 
10 years. We have an opportunity here to expand access to life-
saving drugs and lower costs for patients.
    Dr. Woodcock, as a rheumatologist, you were talking about 
the exciting new drugs, but you were also talking about the 
cost. Are you aware of people who have been actually turned 
down, in other words, walking away from the pharmacy? I have 
talked to some pharmacists about people who do walk away.
    Dr. Woodcock. Yes, I am aware of it. And I am aware of what 
my colleagues currently go through now to try to get their 
patients drugs that are indicated for the condition by FDA.
    Ms. Schakowsky. It is a huge concern. Mr. Cavanaugh, how 
have biologics, I know you talked a bit about that, contributed 
to the increase in Part B spending on drugs, Medicare Part B?
    Mr. Cavanaugh. So Part B, like the rest of the drug world, 
has been going up faster than the rest of the healthcare 
economy. It has put a strain on the Medicare program. The 
biologics in Part B are the vast majority of the spending. I 
mentioned that the top six drugs in total spending, each 
individually is over $1 billion, and they are all biologics.
    And so the Agency shares your concern and I think you have 
expressed the right balance which is as Dr. Woodcock said, 
therapeutically some of these are terrific products and they 
change lives and improve lives and we don't want to lose that 
at all. But we want to balance it with making sure everybody 
has access and that comes through affordability.
    Ms. Schakowsky. I just want to say in some ways I feel like 
the feelings of an individual that is almost worse and more 
painful to know that there actually is a treatment or a cure 
out there that they can't afford and thinking there isn't one. 
It is right there, I can see it, I can feel it, I know it would 
help me, but I simply can't afford to get that. And I think 
that we have to address that problem.
    What are the solutions so that Part B, Part D is not going 
to go bankrupt, that insurance companies will be able to afford 
to provide the help that people are going to get. What are we 
going to do? Either one, both.
    Mr. Cavanaugh. Again, I just want to reiterate that we 
share your concerns. As you may know, last year, Secretary 
Burwell and Administrator Slavitt convened a listening session. 
So we have been hearing from patients, from pharmaceutical 
manufacturers, from pharmacies and others about ideas they 
have. And we are hopeful that some of those ideas can come to 
fruition. I don't know that the silver bullet has been 
discovered yet, but I think there is a conversation going on 
that could produce something that we could all support and 
achieve that balance that we are looking for between 
affordability, but still have access to these life-changing 
drugs.
    Ms. Schakowsky. Well, I know that members want to be part 
of that conversation, so I appreciate that. I know you 
recognize the problem and I yield back.
    Mr. Pitts. The Chair thanks the gentlelady and now 
recognizes the gentleman from Kentucky, Mr. Whitfield, for 5 
minutes for questions.
    Mr. Whitfield. Thank you, Mr. Chairman, and I thank both of 
you for being with us today. We all recognize the important 
responsibility that you have, both of you.
    I am going to touch on something a little bit different. 
Certainly, it is my understanding that biosimilars are many 
times more complicated to consistently produce than generic 
drugs, but a couple of days ago I was reading an article and 
there have been many articles about drug shortages. And the 
American Society of Health System Pharmacists currently lists 
inadequate supplies of more than 150 drugs and therapeutics for 
reasons ranging from manufacturing problems to Federal safety 
crackdowns, to drug makers abandoning low profit products. As a 
result of that, doctors and hospitals are doing rationing and 
sometimes they make decisions about who gets a drug based on 
weight, sometimes on the age of the patient. And in this same 
article, it talks about that in a survey of cancer doctors, 83 
percent of them said over the last 6 months that they had had 
to--they were unable to provide the preferred chemotherapy 
agent at least once during the last 6 months and that a third 
of them said they had to delay treatment and make the difficult 
choice of which patient they are going to give it to, so 
rationing these shortages,
    So both of you are well respected in your field. Would you 
just make a brief comment about this shortage problem and 
whether or not you all are working with manufacturers because 
biosimilars is even more complicated than generics?
    Dr. Woodcock. Clearly, this situation is unacceptable, that 
people with cancer or others would not be able to access life-
saving treatment. We have had a very robust shortage program 
for many years where we try to anticipate and respond. I think 
the fundamental problem is the number of drugs that have a 
single source or perhaps maybe only one competitor.
    If you look at this chart, this shows all the drugs, and I 
can put this in the record, Mr. Chairman.
    Mr. Pitts. Without objection.
    Dr. Woodcock. And you can see that, for the 99 drugs that 
we have, there is only one generic competitor. All right? So 
there are only two on the market.
    And then we have another chart here that shows for 125 
innovator drugs, they have no patent or exclusivity protection, 
there are no generics. And this isn't a result of FDA's backlog 
or anything. Nobody sent in any applications.
    So there is a problem in the market that other entrants 
don't come in and sometimes we get generic entrants and they 
don't market the drug. And so then if the single manufacturer 
has a problem or they decide to raise the price greatly, there 
is no competition there.
    Now our generic user fee program is accelerating the 
approval of generics overall to a 10-month clock for review. So 
that will help somewhat with new entrants, but in the meantime 
it may be that no one is interested in entering that market 
even though it is a critical shortage of a life-saving drug. 
And I can't tell you why that is. I don't understand those 
factors, but that is the reality that we are facing.
    Mr. Cavanaugh. I would concur with everything that Dr. 
Woodcock said and just add that if folks believe that there are 
CMS policies that are contributing to shortages, I would like 
to know and I would like to think about what we could do to be 
part of the solution. The reason many of us came to work at CMS 
is to help our beneficiaries. And if they are being denied 
because of market failure, because of policies, we would like 
to be part of that solution. So I appreciate you raising the 
issue. It is of concern to me.
    Mr. Whitfield. Thank you. I yield back my time.
    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
the gentleman, Mr. Butterfield, for 5 minutes for questions.
    Mr. Butterfield. Thank you so much, Mr. Chairman. Mr. 
Chairman, let me first talk about my district and then build 
out from there. The health disparities that face African-
American communities in my district in eastern North Carolina 
and across the country are absolutely alarming. The FDA knows 
that. Anyone who watches this, knows it for sure. We could just 
talk endlessly about the chilling statistics that show black 
Americans are more susceptible to serious illnesses than 
another demographic. Serious diseases such as HIV, diabetes, 
and cancer more frequently occur in African-American 
communities. Rare diseases like sickle cell anemia occur more 
often in African Americans. The sooner that affordable, safe, 
and reliable treatments are discovered, the better we are all 
going to be.
    Like most, I see the potential that biosimilars can have in 
combatting health disparities. The Affordable Care Act is 
helping to make that possibility a reality. And so the 
Biologics Price Competition and Innovation Act which is part of 
the ACA has helped set up a framework to enable the development 
of new biosimilar drugs. Since 2010, the FDA has worked 
diligently to implement the program. Biosimilars are complex 
and we have heard that testimony today. And I agree with Dr. 
Woodcock that their regulation must be bullet proof. It is 
critical, therefore, that the public can depend on approved 
biosimilars and that we encourage the development of new 
treatments. And so it is my hope that the creation of new 
biosimilars can make safe treatments more affordable for those 
in need.
    I thank both of the witnesses for their testimony today.
    Dr. Woodcock, it is my understanding that current FDA 
guidance allows biosimilar applicants to extrapolate efficacy 
information based on the reference product. I don't fully 
understand that, but I am sure that you do. If you would expand 
on that, please.
    Dr. Woodcock. Well, basically, the biosimilar pathway 
itself is an extrapolation, all right? What is done is, it is 
an abbreviated pathway. So if you can show your product is 
biosimilar through various means that we have established to 
the reference product, then you may be able to, depending on 
what you have shown, have a label that looks exactly like the 
innovator label. Or you may only have some of the indications, 
depending on what you have shown.
    So there are two kinds of extrapolations people are talking 
about. One is the basic abbreviated pathway which means we find 
the evidence that is submitted by the biosimilar and we say 
yes, this means that you have the same properties as an 
innovator drug. And then many of the brand drugs have multiple 
indications. For example, next week it would be ulcerative 
colitis, Crohn's Disease and rheumatoid arthritis, all right? 
Those are different diseases. And so what many people are 
talking about is extrapolation across from one disease to 
another.
    What amount of data that we need to grant all those 
indications is a scientific matter and may be of some dispute, 
obviously, because there is a lot at stake there. But I will 
tell you, we are not going to approve biosimilar drugs that we 
don't think have the same performance as the innovator. That is 
what we are going to do. If a patient is started on a 
biosimilar, they should expect the same results as if they had 
started on a brand drug.
    Mr. Butterfield. Now there are a lot of stakeholders and a 
lot of people have an interest in this subject. I am beginning 
to appreciate that and I see the room full today and I am sure 
there are a lot of people here who are listening very 
carefully.
    Are there concerns that stakeholder groups have? And are 
there any concerns that have been shared about extrapolating 
clinical safety and efficacy data for biosimilars which treat 
special populations including children or certain fields 
including rheumatology?
    Dr. Woodcock. Certainly. People have concerns still about 
generics and there are certain groups such as the neurology 
community still isn't convinced they should do generic 
substitution. Recently, we have sponsored studies to show that 
there is no outcome difference between a generic and an 
innovator drug for seizures. So there is going to be concern 
and there is going to be ongoing concern regardless of what we 
do. But right now we do extrapolate often for regular drugs, 
for the brand drug. We may extrapolate to children based on 
dosing information if the disease is similar enough, rather 
than subjecting children to randomized clinical trials. If we 
have enough scientific data, we will extrapolate after finding 
out what the right dose with the equivalent doses are in 
children of different ages.
    Mr. Butterfield. Thank you. I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
the gentleman from Illinois, Mr. Shimkus, for 5 minutes for 
questioning.
    Mr. Shimkus. Thank you, Mr. Chairman. I know we are getting 
close to calling of votes, but I want to first of all address 
Mr. Cavanaugh.
    I appreciate your answers, but I don't think they are 
totally accurate because I think under the law and especially 
the report language of the bill passed, the report language and 
the congressional intent was that there would be separate 
billing codes for reimbursement at the ASP of biosimilars. So I 
mean your comment saying I can't do this because of statutory 
intent we feel is inaccurate. So I am going to move most of my 
comments to there and I hope you would take that back because 
we think you do have the authority to do that.
    And the other thing just as a comment, listening to 
testimony, biosimilars, the efficacy and the ability, the cost 
benefit, the return on investment, Dr. Woodcock, as you 
mentioned earlier as a rheumatologist and wellness versus 
treatment, there is a great return on that investment that 
somehow has to be put into this pricing decision, right?
    But I want to get to a couple of questions in this whole 
process.
    Let me start, Dr. Woodcock. I understand the FDA has not 
provided details on specifics of interchangeable products. Is 
it possible that FDA might approve an interchangeable product 
without first issuing guidance or interchangeability?
    Dr. Woodcock. Yes, it is. As an interchange with Mr. 
Barton, the statute allows us to execute the statute without 
guidance, is my understanding.
    Mr. Shimkus. Under current law, a new biologic product can 
be brought to market either by being approved as a new drug or 
being licensed a biological product. How, if at all, does a 
manufacturer's decision to use one pathway or another affect 
pre-market review of a product?
    Dr. Woodcock. The body of evidence that is submitted for a 
biological license application, a standalone, right, is 
different than the body of evidence that is submitted for a 
biosimilar.
    Mr. Shimkus. So how?
    Dr. Woodcock. OK, a biological----
    Mr. Shimkus. So what is the answer?
    Dr. Woodcock. I am sorry. A biological product, stand-
alone, must demonstrate free-standing safety and efficacy of 
that product. A biosimilar must demonstrate biosimilarity to a 
reference listed, already approved biological product. Those 
are conceptually, fundamentally, two different things.
    Mr. Shimkus. So really the question is if they choose one 
pathway or the other--I mean right now, how are they making the 
decision which pathway to choose or how can they?
    Dr. Woodcock. We have around----
    Mr. Shimkus. Let me just go to the next question because 
they are all kind of in line. What about the post-market 
obligations if they choose one pathway or another?
    Dr. Woodcock. It is unlikely a biosimilar product would not 
have additional questions that would be post-market 
commitments, but they have the same safety surveillance 
requirements as other marketed products.
    Mr. Shimkus. Let me just go to another one then and I will 
tell you why I am asking these specific questions. Does the FDA 
consider the Purple Book to be part of a biological product's 
labeling?
    Dr. Woodcock. Does it consider what?
    Mr. Shimkus. Do you consider the Purple Book to be a part 
of the biological products labeling?
    Dr. Woodcock. No.
    Mr. Shimkus. OK, so these are all questions asked by U.S. 
Senators in your testimony in November which they still have as 
they have asked me to restate these questions. Do you know why? 
Because you all haven't responded to their questions in 
writing.
    Dr. Woodcock. Well, OK. Well, we will certainly do that.
    Mr. Shimkus. And the point being is there is great 
confusion out there in the healthcare sector on how we are 
going to move forward. And this hearing is going to have 
follow-up questions and they just need to be answered. And so 
again, all these are follow-up, and there was a lot more. I 
have got four or five pages of them from bipartisan questions 
that need to be addressed so we can help--that is actually the 
same questions that you are being asked by the stakeholders. 
And so I would ask you to respond timely to the questions posed 
by my colleagues. And I yield back my time, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. I now recognize 
the gentleman, Mr. Cardenas, for 5 minutes for questions.
    Mr. Cardenas. Thank you very much, Mr. Chairman. Thank you, 
Dr. Woodcock and Deputy Administrator Cavanaugh, for joining us 
today.
    Dr. Woodcock, under BPCIA, interchangeable biologic 
products must demonstrate that they can be expected to produce 
the same clinical result as the reference product in any given 
patient. A biosimilar determined to be interchangeable can be 
substituted. So therefore my question is will you discuss 
generally the types of questions the Agency is thinking through 
as they are considering guidance to industry in this space?
    Dr. Woodcock. Certainly. This issue was before us even 
before the statute was passed, which is one of the differences 
between biologics and most generics, is something called 
immunogenicity. In other words, the ability to stimulate an 
immune response in a patient, a reaction. And this can be 
insignificant or it can cause serious problems. And one of the 
concerns is under a scenario of interchangeability, what we see 
in the generics world people get all different kind of 
products, generics, they switch at the pharmacy based on their 
plan. And the concern is if you are switching back and forth 
could you set up an immune response that would be negative to 
the person? And how you have to address that concern for 
interchangeability is contingent on a number of factors. A 
number of these drugs are not--biologic drugs--are not that 
immunogenic. And some of them they are, but the consequences 
have not been severe. Others, the consequences could be 
catastrophic. So we take all those factors in in talking to 
companies about how much evidence they have to show that 
switching back, people back and forth, wouldn't cause terrible 
harm.
    And the problem we have is the science isn't far enough 
advanced for us to predict this from, say, test tube 
experiments. We have to look in people because we don't 
understand the immune system well enough. So there has to be 
some human testing of switching ordinarily to give confidence 
that, in fact, if you switch the people back and forth, they 
are not going to have some unprecedented problem.
    Mr. Cardenas. Thank you. This question is to Deputy 
Administrator Cavanaugh. I would like to reiterate the concerns 
voiced by my colleagues on both sides of the aisle and the 
final rule for the physician fee schedule, which places 
biosimilars that reference the same biologic into a single 
HCPCS code. Biosimilars are not generic drugs because they are 
not the same copies of one another, and I appreciate how hard 
you and your colleagues at CMS are working to create a robust 
biosimilars market.
    However, because biosimilars are so complex, I fear that 
this may discourage manufacturers from entering the biosimilars 
market. How do you feel about those dynamics?
    Mr. Cavanaugh. So thank you for the question. I think it is 
important to recognize a couple of things. As I said, the 
important therapeutic differences which the FDA has educated us 
about and we recognize them, but there are also regulatory and 
marketplace similarities. And in fact, the congressional 
history here shows that the approval processes were mirrored or 
paralleled off of generic approval processes. We expect them to 
work in the marketplace much like generics in that there will 
be a low-cost alternative to a higher cost innovative product. 
And for that reason and also for statutory reasons, the statute 
said that for products where there are multiple products under 
the same billing code, they should have the ASP average.
    I want to emphasize why we think this is a successful 
policy. One, to Congress' credit from the physician perspective 
when they are ordering the drug, Congress created a payment 
where they are still getting the 6 percent markup from the 
innovative product. So the physician is not invested in a 
higher cost product. They are made whole either way, and I 
think that was a terrific policy that Congress made.
    But secondly, they are going to choose the therapeutically 
successful product at a fair price and we will have these 
biosimilar products competing on price with each other. So the 
last thing I would say is even though they are using a 
methodology similar to generics, that doesn't mean the 
resulting price will be similar to generics. The biosimilar 
companies set their own average sales price. So they can set it 
at a market-bearing price that results their costs whether it 
is research or other input costs. So I don't think the fact 
that they are the same methodology means you will end up with 
the same price.
    Mr. Cardenas. Thank you. With my 5 seconds I just want to 
remind the American public that what we are talking about here 
cannot be put in one page, so I want to thank my colleagues and 
also the process for understanding that laws aren't necessarily 
one or two paragraphs. These are very important issues, and 
protection of the public is very important to our country.
    Thank you so much, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. We are voting on 
the floor, so we will continue as long as we can. The Chair 
recognizes Mr. Collins for 5 minutes for questions.
    Mr. Collins. I want to thank the chairman and I know we are 
now trying to hold the votes down so thank you for letting us 
cut into this just a bit. I thank both the witnesses, Dr. 
Woodcock, Mr. Cavanaugh, for coming.
    I think what I have heard is some 30,000 foot Cliff Notes 
discussions on biosimilars, generics, biologics, etcetera.
    And Dr. Woodcock, as you are sitting there, I know you must 
have some level of frustration because we are under time 
constraints to get the point out. And so in my time, I think we 
have pretty much established that generic is for all practical 
purposes, 99.999 percent the same as the brand name. It is a 
compound. It is usually a pill. It is the same and therefore 
doctors prescribe that.
    But Dr. Woodcock, in what testimony you have given, in 
thinking about the differences in a biologics and a small-
molecule which are two different worlds and a biosimilar which 
will never, ever, ever be the same, and while you have 
explained and I think it is true, the FDA's emphasis is safety 
and efficacy and I guess you would say safety, safety, safety, 
safety, safety. And we have got to know it works as well. But 
safety is always first.
    In 2 or 3 minutes, for the purpose of this committee 
educationally, what would you like to add as far as how the FDA 
is looking at and even maybe explain to the committee the basic 
difference in why a biosimilar will never be a generic and even 
the manufacturing process of a biologic, the sterility process 
or give us 2 or 3 minutes of education which I think would be 
helpful to this committee having heard already some of the 
questions.
    Dr. Woodcock. Well, the biologics are very large molecules. 
In other words, it would be like maybe a little house compared 
to the Empire State Building as far as the comparative size of 
a regular drug to a biologic. And if you just think about the 
brand biologics, most of them are not exactly the same from 
batch to batch. I know that is very disappointing, but they are 
made by cells, usually.
    Mr. Collins. The manufacturing process is unique.
    Dr. Woodcock. Yes, they are biosynthesized by cells and 
those cells are subject to conditions we don't understand very 
well fully or can't fully control. And so they are slightly 
different from batch to batch to batch. Our job in regulating 
them is to make sure that those variabilities in the brand 
product, I am still talking about, don't affect safety, safety, 
safety or effectiveness, OK? So that they stay in a band where 
from the clinic, if you are a doctor treating patients, it 
doesn't make any difference. But it isn't like the small 
molecule where, every tablet, we know exactly what is in there.
    Mr. Collins. And to interrupt, isn't it also true that in 
the intellectual property protection, etcetera, a manufacturer 
is not required to tell the world exactly how they are making 
it?
    Dr. Woodcock. Never, and that is true with the generics as 
well.
    Mr. Collins. And that is what I think some people miss. You 
have to put enough information in your intellectual property to 
say I can replicate it, but you don't--a manufacturer is going 
to protect his price point.
    Dr. Woodcock. Well, it is considered trade secret.
    Mr. Collins. Right, and it will always be trade secret. So 
when a generic or a biosimilar comes out, they don't know the 
16 steps that the brand name is doing to make that product.
    Dr. Woodcock. Right.
    Mr. Collins. And hence, in the case of a biosimilar, it can 
never be the same.
    Dr. Woodcock. What they do and what we found, OK, is for 
the generics does this too. They have to buy the reference 
product on the market and reverse engineer it and then develop 
a process of their own that will replicate that avoiding any 
patents that might be preexisting that may be on process and so 
forth.
    Mr. Collins. And it is just like reverse engineering 
anything. You don't know and don't have the prints of the 
original company to know the tolerances of every item and how 
they interact.
    Dr. Woodcock. That is correct.
    Mr. Collins. So I think in defense of the FDA and what they 
are doing in the safety, safety, safety, but also looking at 
efficacy, the folks making a biosimilar don't have the prints. 
They don't have the process.
    Dr. Woodcock. That is correct.
    Mr. Collins. They are trying to reverse engineer it and yet 
the FDA has to make sure in reverse engineering it safety is 
not compromised, efficacy is there. And that is why it is--you 
have got a very, very, very difficult job in bringing 
biosimilars to market knowing that the person making it doesn't 
have the benefit of the drawings, the process. They are 
guessing. They are reverse engineering. They are hoping they 
get it right and you have to make sure at the end of the day it 
is safe and the efficacy is there.
    Dr. Woodcock. And also what we found to your point, it is a 
very good point, what we found as we work with these companies 
they are going to have to get more lots of the reference drug 
because generics usually----
    Mr. Collins. The variation.
    Dr. Woodcock. Because they have to be within the variation. 
If you just pick a small sample, it might be outliers.
    Mr. Collins. My time is up. I thank you for that. I think 
the education piece is very valuable.
    Mr. Pitts. Thank you. I am sorry to rush you. We have 8 
minutes left. So we are going to have to try to hurry as much 
as possible. Dr. Bucshon, you are recognized for 5 minutes.
    Mr. Bucshon. Yes, Mr. Chairman, I will be brief and just 
make a comment and maybe a brief question. I am glad that you 
are both here. Thank you very much for your work.
    That said, Mr. Cavanaugh, this is kind of directed at CMS. 
It appears to me, as a physician--and I was a practicing 
cardiovascular surgeon--that CMS has become the rate-limiting 
step in getting innovative products to the marketplace and to 
patients. A brief example, a treatment for glioblastoma for 
brain tumors, for example; a bionic prosthetic to benefit 
veterans and others. And it also seems to me that frequently on 
reimbursement decisions that comments and recommendations of 
experts outside of CMS have been ignored. And unfortunately in 
my view, decisions are being based on financial reasons, not 
based on medical benefit of the products.
    I am talking about products that have been approved by the 
FDA and other organizations around the world and subsequently 
are also reimbursed frequently by the private sector insurers 
and then are not reimbursed by CMS or it has been dragged out 
so long that some of the innovative companies have almost gone 
bankrupt because CMS hasn't approved their payment.
    So the question I have is is it the role of CMS or the FDA 
to determine the safety and efficacy of medical products 
including biosimilars?
    Mr. Cavanaugh. To me, sir?
    Mr. Bucshon. Yes.
    Mr. Cavanaugh. No. It is the role of the FDA to determine 
that.
    Mr. Bucshon. OK, so once these are proven to be safe and 
show efficacy for patients, why is frequently CMS dragging its 
feet on reimbursing it? What is the reason?
    Mr. Cavanaugh. Is the question specific to biosimilars or 
broadly?
    Mr. Bucshon. Broadly.
    Mr. Cavanaugh. First of all, as I said, on the first 
biosimilar, we acted very quickly and in fact, we had a billing 
code and coverage guidance before it was actually even 
marketed. You have raised other examples though that are 
broader than biosimilars.
    Mr. Bucshon. I was just throwing those out there. Let me 
just tell you as a physician, many, many people talk to me 
about medical issues, right, because I was a practicing 
physician. And it is not just--I mean I have literally heard 
from hundreds of people frustrated with CMS because there have 
been--and these are coming from patients, from physicians, from 
companies, everywhere, telling me that these products are 
approved by the FDA. They are frequently reimbursed by the 
private sector and that CMS has either decided to not reimburse 
them or dragged their feet or put up a price that is not 
competitive for the production and maintenance of a company or 
the product to be actually on the market place at all. And it 
is very frustrating for me as a physician to know that there 
are products out there to benefit patients.
    And I know you have a tough job. I am just on my soap box a 
little bit here. But I just don't get it because if things are 
approved by the FDA, they are frequently approved by the same 
organizations in the European Union and around the world, and 
these patients are not available to people in the United States 
because not that they are not proven to be effective and safe, 
but Medicare hasn't decided how they are going to pay for it.
    And so if you are not making decision on safety and 
efficacy, how can you decide not to pay for it?
    Mr. Cavanaugh. Sure. I think it is a terrific question and 
allows me to talk about the Medicare process. FDA approves 
safety and efficacy. When it comes to Medicare, there are two 
standards they need to meet, any product or service. One is, it 
has to meet one of the statutorily defined benefit categories. 
So the statute has to say this falls into a category that 
applies to Medicare coverage.
    Mr. Bucshon. I am going to briefly interrupt you. That has 
already been determined by the FDA. There has been clinical 
studies that they have gotten that have shown efficacy, that 
have shown benefit to patients. So that seems like reinventing 
the wheel to me.
    Mr. Cavanaugh. With all due respect, the benefit category 
is not about safety and efficacy. The Medicare statute 
specifies the covered services and benefits. And what I am 
saying is, no matter how safe and effective FDA finds it, it 
can only come into Medicare if it meets the statutory 
definition of something that Medicare covers. And after it 
makes it past that criterion, the secondary criterion is, is it 
reasonable and necessary for----
    Mr. Bucshon. Understood. Since I only have 10 seconds, I 
just want to say that, in my view, every product that is 
approved by the FDA should be available to America's seniors 
and the limiting factor should not be the ability of CMS to 
stonewall and not pay for it. And I am just telling you it is a 
very frustrating situation. I yield back.
    Mr. Pitts. The Chair thanks the gentleman. There are 3 
minutes left on the floor clock. The Chair recognizes Ms. 
Ellmers for questioning.
    Ms. Ellmers. Thank you, Mr. Chairman, and I will be very 
brief. I want to thank the panel. Thank you, Dr. Woodcock, for 
being here again, and Mr. Cavanaugh.
    I actually just have two letters that I would like to 
submit and ask unanimous consent to do so.
    Mr. Pitts. Without objection, so ordered.
    Ms. Ellmers. One is actually from our Doctors Caucus. 
Twelve members of the Doctors Caucus submitted a letter on 
December 21st to the acting Secretary, excuse me, Commissioner 
Ostroff. And we have not yet received a response to those 
questions.
    And so Dr. Woodcock, we will be submitting questions for 
you, and I know that this is an interim, but we would look 
forward to some of the answers. You both have answered many of 
the questions that we have already had.
    Now, the other letter that we have that I would like to 
submit under unanimous consent is from the Coalition of State 
Rheumatology Organizations. This is a letter that I would like 
to submit.
    Mr. Pitts. Without objection, so ordered.
    [The letters appear at the conclusion of the hearing.]
    Ms. Ellmers. Thank you very much. And again, thank you to 
our panel. This is a very, very important issue to all of us, 
and I know that we all agree that we need to get to the bottom 
of this so that we can help those folks out there that need the 
help. Thank you.
    Mr. Pitts. The Chair thanks the gentlelady. That concludes 
the questions that we have here. We have follow-up questions. 
We will submit those to you in writing. We ask that you please 
respond promptly. Members have 10 business days to submit 
questions for the record, so members should submit their 
questions by the close of business on Thursday, February 18th.
    A very important hearing, thank you very much for your 
testimony today. Without objection, the subcommittee is 
adjourned.
    [Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    [[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Dr. Woodcock's response has been retained in committee 
files and also is available at  http://docs.house.gov/meetings/
IF/IF14/20160204/104408/HHRG-114-IF14-Wstate-WoodcockJ-
20160204-SD005.pdf.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 


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