[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]









 EXAMINING THE IMPACT OF VOLUNTARY RESTRICTED DISTRIBUTION SYSTEMS IN 
                    THE PHARMACEUTICAL SUPPLY CHAIN

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

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON HEALTHCARE,
                   BENEFITS, AND ADMINISTRATIVE RULES

                                 OF THE

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 22, 2017

                               __________

                           Serial No. 115-33

                               __________

Printed for the use of the Committee on Oversight and Government Reform





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








         Available via the World Wide Web: http://www.fdsys.gov
                       http://oversight.house.gov
                       
                                  ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

27-116 PDF                     WASHINGTON : 2017 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
              Committee on Oversight and Government Reform

                     Jason Chaffetz, Utah, Chairman
John J. Duncan, Jr., Tennessee       Elijah E. Cummings, Maryland, 
Darrell E. Issa, California              Ranking Minority Member
Jim Jordan, Ohio                     Carolyn B. Maloney, New York
Mark Sanford, South Carolina         Eleanor Holmes Norton, District of 
Justin Amash, Michigan                   Columbia
Paul A. Gosar, Arizona               Wm. Lacy Clay, Missouri
Scott DesJarlais, Tennessee          Stephen F. Lynch, Massachusetts
Trey Gowdy, South Carolina           Jim Cooper, Tennessee
Blake Farenthold, Texas              Gerald E. Connolly, Virginia
Virginia Foxx, North Carolina        Robin L. Kelly, Illinois
Thomas Massie, Kentucky              Brenda L. Lawrence, Michigan
Mark Meadows, North Carolina         Bonnie Watson Coleman, New Jersey
Ron DeSantis, Florida                Stacey E. Plaskett, Virgin Islands
Dennis A. Ross, Florida              Val Butler Demings, Florida
Mark Walker, North Carolina          Raja Krishnamoorthi, Illinois
Rod Blum, Iowa                       Jamie Raskin, Maryland
Jody B. Hice, Georgia                Peter Welch, Vermont
Steve Russell, Oklahoma              Matt Cartwright, Pennsylvania
Glenn Grothman, Wisconsin            Mark DeSaulnier, California
Will Hurd, Texas                     John Sarbanes, Maryland
Gary J. Palmer, Alabama
James Comer, Kentucky
Paul Mitchell, Michigan

                   Jonathan Skladany, Staff Director
                  Rebecca Edgar, Deputy Staff Director
                    William McKenna, General Counsel
                        Natalie Turner, Counsel
                         Kiley Bidelman, Clerk
                 David Rapallo, Minority Staff Director
                                 ------                                

     Subcommittee on HealthCare, Benefits, and Administrative Rules

                       Jim Jordan, Ohio, Chairman
Mark Walker, North Carolina, Vice    Raja Krishnamoorthi, Illinois, 
    Chair                                Ranking Minority Member
Darrell E. Issa, California          Jim Cooper, Tennessee
Mark Sanford, South Carolina         Eleanor Holmes Norton, District of 
Scott DesJarlais, Tennessee              Columbia
Mark Meadows, North Carolina         Robin L. Kelly, Illinois
Glenn Grothman, Wisconsin            Bonnie Watson Coleman, New Jersey
Paul Mitchell, Michigan              Stacey E. Plaskett, Virgin Islands























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 22, 2017...................................     1

                               WITNESSES

Janet Woodcock, M.D., Director, Center for Drug Evaluation and 
  Research, U.S. Food and Drug Administration
    Oral Statement...............................................     5
    Written Statement............................................     7
Mr. Bruce Leicher, Senior Vice President and General Counsel, 
  Momenta Pharmaceuticals, Testifying on Behalf of the 
  Association for Accessible Medicines
    Oral Statement...............................................    12
    Written Statement............................................    14
Gerard Anderson, Ph.D., Director, Center for Hospital Finance and 
  Management, and Professor, Johns Hopkins Bloomberg School of 
  Public Health
    Oral Statement...............................................    25
    Written Statement............................................    27
Mr. David Mitchell, President and Founder, Patients for 
  Affordable Drugs
    Oral Statement...............................................    33
    Written Statement............................................    35

                                APPENDIX

Questions for the Record for Dr. Janet Woodcock, submitted by Ms. 
  Plaskett and Mr. Welch.........................................    52

 
 EXAMINING THE IMPACT OF VOLUNTARY RESTRICTED DISTRIBUTION SYSTEMS IN 
                    THE PHARMACEUTICAL SUPPLY CHAIN

                              ----------                              


                       Wednesday, March 22, 2017

                  House of Representatives,
        Subcommittee on Health Care, Benefits, and 
                               Administrative Rules
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:00 p.m., in 
Room 2154, Rayburn House Office Building, Hon. Jim Jordan 
[chairman of the subcommittee] presiding.
    Present: Representatives Jordan, Walker, Grothman, 
Mitchell, Krishnamoorthi, Kelly, Watson Coleman, and Plaskett.
    Also Present: Representatives Cummings and Welch.
    Mr. Jordan. The Subcommittee on Health Care, Benefits, and 
Administrative Rules will come to order.
    And without objection, the chair is authorized to declare 
recess at any time.
    And I ask unanimous consent that all members of the 
Committee on Oversight and Government Reform be allowed to 
participate in today's hearing.
    Without objection, so ordered.
    I want to do a brief opening statement and then our ranking 
member will do his opening comments as well, and then we'll get 
right to it.
    I do want to thank our witnesses for being here, especially 
the FDA. I know you've testified a number of times in a very 
short period of time. So we do appreciate, Doctor, you being 
with us, and all of our witnesses being with us today.
    The nature of this week is kind of hectic around here, so 
we will try to get your testimony and maybe a few questions. 
But it's an important subject and I don't want to shortchange 
it, but I just want to kind of give you some context as you all 
know what's going on here on Capitol Hill this week.
    The subject of today's hearing affects Americans across the 
country: The rising costs of all patent drugs that lack generic 
competition. To facilitate competition in the pharmaceutical 
market, the Hatch-Waxman Act created an accelerated pathway for 
approving generics, while maintaining incentives for companies 
to invest in developing new innovative products. Hatch-Waxman 
continues to promote the development of low-cost generics.
    According to a recent report, generics are only 27 percent 
of the total drug costs in the United States, yet fill 89 
percent of prescriptions. Last year, however, we saw that there 
are some medicines with increasing prices, and even though 
those medicines are not protected by remaining patent life or 
regulatory exclusivity, they lack lower-cost generic 
equivalents. The big one, of course, was Turing 
Pharmaceuticals.
    Turing acquired the drug Daraprim and quickly increased the 
price about 5,000 percent from $13 a pill to over $750. Even 
though the FDA approved Daraprim in 1953, over 60 years ago, 
there remains no cheap generics for competition of this 
particular pharmaceutical. What is not as well known as the 
exorbitant price is the manipulation of the regulatory 
framework. Not only did Turing increase the price of Daraprim, 
but the company also adopted a strategy to block generic 
competition, thereby frustrating the intent of the law.
    Strategy is simple. Generic manufacturers are generally not 
required to submit full clinical trial data to establish safety 
and efficacy, they instead rely on FDA's previous finding of 
safety and effectiveness for the approved medicine.
    For the generic applications, generic manufacturers obtains 
samples of the approved medicine and demonstrates their product 
as bioequivalent to that approved product. Simple enough. But 
then enter bad actors. Turing thwarted the generic competition 
by blocking generic companies access to samples of Turing's 
pricey product, inhibiting generic manufacturers from 
conducting the bioequivalence testing for the generic 
application. Indeed, Turing testified--Turing testified 
admitting to this blocking strategy to try and block the 
generic competitor for at least 3 years.
    Companies should not be able to use the system to block 
generic competition. Such abuse is leading to debilitating drug 
costs. At the same time, however, distribution restrictions 
oftentimes serve important purposes, such as ensuring the safe 
use and distribution of medicines with heightened safety 
concerns.
    In 2007, Congress gave the FDA authority to order risk 
evaluation and mitigation strategies, programs for medicines 
with heightened safety concerns. REMS, this REMS program 
ensured that the benefits of medicine with a known or potential 
safety concern outweigh the risk of the medicine. FDA can 
mandate that certain distribution restrictions are part of the 
REMS program.
    This hearing will distinguish between the good actors and 
those companies like Turing that self-imposed restricted 
distributions for medicines with no apparent reason other than 
to block the competition.
    The panelists today will help us examine the scope of the 
misuse of this restricted distribution system to block generic 
competition and help to identify solutions. This Congress needs 
to find a way to help the FDA spur the interest of generic 
competition into the market. This hearing is designed to help 
us move towards that goal.
    Finally, I'd like to thank our ranking member for his 
interest in this issue. There's a good chance that we aren't 
going to agree always on what may be the solution, but I am 
pleased that our staffs have been able to work together on this 
issue so well.
    And with that, I would like to recognize Mr. Krishnamoorthi 
for his opening statements.
    Mr. Krishnamoorthi. Thank you, Mr. Chairman, for holding 
this very important hearing today. And thank you to our 
witnesses for taking time out of your precious schedules to be 
here as well.
    The topic of today's hearing is restricted distribution 
systems in the prescription drug market. This is a very 
important issue. When drug companies use restricted 
distribution systems and other anticompetitive practices to 
prevent potential generic competitors from coming onto the 
market, they drive up prices and impose added costs on our 
healthcare system.
    Even more importantly, these anticompetitive practices harm 
patients. One such patient is here to testify today. David 
Mitchell has multiple myeloma, an incurable blood cancer. For 
over 5 years, Mr. Mitchell took the drug Revlimid, which is 
made by Celgene. Celgene has come under fire for using a 
restricted distribution system to prevent generic competitors 
from getting access to the drug samples they would need to 
bring a generic version of Revlimid to market.
    As Mr. Mitchell will testify, over the 5 years he took 
Revlimid, his copays increased by 500 percent. During this 
period, Celgene's revenues from Revlimid also steadily 
increased, without facing any competition from generics, from 
$2.5 billion in 2010 to almost $6 billion in 2015. This was an 
increase of 132 percent.
    Given these figures, it's no wonder that some drug 
companies take extraordinary steps to prevent potential generic 
competition. But it is important to acknowledge that the 
challenges we face in the prescription drug market go beyond 
just restricted distribution systems. For instance, we are 
seeing incredible price increases for decade's old drugs. Most 
recently, Kaleo pharmaceuticals increased the price of its 
autoinjector version of naloxone, a lifesaving drug first 
approved in 1971 to reverse opioid overdoses, from $690 in 2014 
to $4,500.
    The opioid epidemic is ravaging my home State of Illinois, 
as it is many parts of the country. It is wrong for a drug 
company to raise the price of a lifesaving overdose antidote by 
more than 500 percent in a span of just 2 years. That's 500 
percent in the span of 2 years. And although we absolutely rely 
on new breakthrough therapies to treat the most challenging 
diseases, new drugs are being introduced at higher and higher 
prices that our healthcare system simply cannot support. Some 
of these drugs are true clinical breakthroughs, but others add 
little clinical value over drugs that are already on the 
market.
    Lifesaving treatments only save lives when people can 
afford them. According to a 2014 survey, one in five Americans 
did not fill a prescription because they could not afford it. 
Prescription drug prices affect all of our constituents. This 
is an issue they desperately want us to address. And I am so 
thankful that Mr. Jordan, Congressman Jordan, has agreed to do 
this bipartisan hearing on prescription drug pricing.
    In fact, a recent Kaiser Family Foundation poll found that 
60 percent of Americans, including a majority of Republicans, 
think lowering prescription drug prices should be a top 
priority for President Trump and for Congress. And I'm glad 
President Trump has actually made this a priority for his 
administration. According to this poll, more Americans want us 
to deal with rising prescription drug prices than repeal the 
ACA.
    Of course, we do not want to stifle innovation. We want 
drug companies to be able to earn a fair profit that allows 
them to recoup their research and development costs and invest 
in the next cure. But no company should be able to misuse 
public safety regulations to stifle competition and secure a 
monopoly advantage.
    I hope today's hearing will allow us to begin a 
constructive conversation about what we can do legislatively, 
in a bipartisan way, to a handle on runaway prescription drug 
prices. Discovering a lifesaving drug is complicated, but 
lowering prescription drug prices is not. We know what the 
tools are. Among them are promoting generic competition in the 
market, increasing transparency in the pharmaceutical chain, 
and letting Medicare negotiate for a better deal on drugs. 
Congress has only to remove the legal hurdles to lower prices.
    I look forward to today's discussion. I hope, with my 
colleagues on both sides of the aisle, to address this issue on 
behalf of our constituents.
    Mr. Chairman, I just want to do one last thing, which is I 
would like to allow Mr. Welch on my side 1 minute to talk about 
a bipartisan bill that is directly relevant to today's hearing.
    Mr. Jordan. Only for the gentleman from Vermont would we 
make such--no, we're glad to do that. We're glad to do that.
    Mr. Krishnamoorthi. Okay. Thank you, Mr. Chairman.
    Mr. Welch. Well, thank you very much. And I really want to 
associate myself with your statement. And, Mr. Jordan, it's 
great you're doing this hearing.
    If we can bring down the cost of prescription drugs, we've 
got to do it. I've got a REMS bill with Steve Stivers, and I 
think that's going to help in one of the areas that would allow 
us to make certain that we're not abusing a review process for 
the advantage of higher prices at the expense of consumers.
    I also had a chance to meet with President Trump with 
Elijah Cummings. And it was very clear to me that he gets it 
that Americans are paying more than we should be paying. And 
it's not about getting in the way of research and development. 
You know, drug companies do good things. They create life-
extending and pain-relieving drugs. That is a good, good thing, 
but they can't kill us with the cost.
    And there are a lot of market failures, I think we get 
specific on this REMS being one of them, and work together to 
get the benefit of fair and accessible drug prices for all of 
our constituents. That's the goal.
    So thank you both for allowing me to wave on to this 
hearing, and I look forward to working with you to get some 
things done.
    Mr. Jordan. Without objection, we'll let Mr. Welch be a 
part of the hearing. And I want to thank the ranking member and 
Mr. Welch for their statements.
    Let's get right to our witnesses. The committee will hold 
open the record for 5 legislative days for any other members 
who would like to submit a written statement.
    We want to recognize our witnesses. First, we have Dr. 
Janet Woodcock from the FDA. We appreciate you being here. As I 
said, I know you've testified several times in the last few 
days.
    Mr. Bruce Leicher.
    Mr. Leicher. Leicher.
    Mr. Jordan. I appreciate you being here. Senior vice 
president and general counsel for Momenta Pharmaceuticals, 
testifying on behalf of the Association for Accessible 
Medicines.
    And we have Dr. Anderson, director of the Center for 
Hospital and Finance and Management, as well as professor at 
Johns Hopkins Bloomberg School of Public Health. And Mr. David 
Mitchell, president and founder of Patients for Affordable 
Drugs.
    Welcome again to you all. And pursuant to committee rules, 
we actually swear you in. So if you stand up and raise your 
right hand.
    Do you solemnly swear or affirm that the testimony you're 
about to give will be the truth, the whole truth, and nothing 
but the truth, so help you God?
    All right. Let the record show that everyone answered in 
the affirmative.
    And we will start with the gentlelady on my left. Dr. 
Woodcock, you're recognized.

                       WITNESS STATEMENTS

               STATEMENT OF JANET WOODCOCK, M.D.

    Dr. Woodcock. Thank you very much, Mr. Chairman and 
members. I'm really pleased to testify at this hearing on a 
very important issue.
    But first, I'd like to note for the record that appearing 
on this panel does not waive the Administration's policy of not 
appearing concurrent with nongovernment witness, nor the 
Administration's policy of not appearing with less than 2 
week's prior notice. I am appearing in the spirit of 
accommodation and comity.
    Mr. Jordan. Thank you.
    Ms. Woodcock. Yes. So to move to the topic at hand, the 
generic drug program that we operate at FDA has been highly 
successful. Its estimated savings to consumers has been about 
$1.5 trillion in a decade. And as you said, about 90 percent of 
prescriptions in the United States now are generic, at much 
lower cost obviously than the innovators. However, sometimes 
the benefits to patients are delayed beyond the legal 
constraints of patent or exclusivity.
    Innovators may use various routes or maneuvers to delay 
availability of a competitor generic. And among these, although 
there are many others, but among these is the use of REMS or a 
voluntary restricted program that is set up by the 
manufacturer, not required by FDA, to keep competitors from 
getting access to the drug.
    Specifically, most generic applicants need a relatively 
small quantity of brand drug to use as a comparator when they 
do what's called bioequivalence testing to make sure the 
generic is absorbed into the body the same way that the brand 
drug is. And, of course, anyone who gets filled a generic 
instead of the brand they prescribed, we're guaranteeing to 
them it's going to have the same effects. So we want them 
tested to make sure they're absorbed correctly. And some 
innovators have been refusing to provide drug for this 
bioequivalence testing.
    For REMS, which certain restricted distribution 
requirements set up by the FDA for safety reasons, what FDA has 
done to try and mitigate this is have procedures to review the 
generic drug bioequivalence protocol and notify the innovator 
drug in writing that we believe it is adequate and that the 
REMS restriction does not apply. So to remove that barrier and 
get us out of the way. Of course, that doesn't really occur for 
the voluntary restricted programs because there is no barrier 
to simply providing that in the open market. In that case, no 
letter is needed.
    Nevertheless, sponsors do continue to withhold products. 
We've had around 150 inquiries from generic firms about 
difficulties that they have had obtaining product for 
bioequivalence testing. And I really would be happy to answer 
any questions you might have about this.
    [Prepared statement of Dr. Woodcock follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
      
    Mr. Jordan. Thank you, Dr. Woodcock.
    We go now to Mr. Leicher.

                   STATEMENT OF BRUCE LEICHER

    Mr. Leicher. Good afternoon, Chairman Jordan and Ranking 
Member Krishnamoorthi. Thank you for the opportunity to 
participate in this important hearing. I'm Bruce Leicher, 
senior vice president and general counsel of Momenta 
Pharmaceuticals, and chair of the board of the Biosimilars 
Council, a division of the Association for Accessible 
Medicines. We commend you for holding today's hearing.
    Increasingly, patient access to affordable medicines is 
prevented by certain brand drug manufacturers' use of 
restricted distribution programs, including FDA-mandated risk 
evaluation mitigation strategies, REMS, to limit generic and 
biosimilar development. Having worked in the biotechnology 
industry for over 25 years and the biosimilars industry since 
its inception, I'm concerned. These anticompetitive practices 
are contrary to the careful balance of the Hatch-Waxman and 
biosimilar laws and threaten generic competition from the 
emerging biosimilars market.
    For over 30 years, generic companies have safely purchased 
branded drugs on the free market to conduct testing necessary 
for FDA approval. But in recent years, certain brands have used 
restricted distribution schemes, including REMS, to block such 
purchase and testing. If brand products cannot be purchased, 
then affordable generic drugs and biosimilars cannot be 
developed.
    Momenta and the generic and biosimilar industry are 
committed to ensuring that Americans have access to safe, 
effective, and affordable medicine. We do not support policies 
that would endanger patients. We comply with the same rules 
administered by the FDA.
    Generic medicines are almost 90 percent of prescriptions 
dispensed in this country, yet account for less than 30 percent 
of drug spending. Generic drugs save hundreds of billions of 
dollars annually, $1.46 trillion in the last decade alone. And 
biosimilars present the same opportunity.
    Consider that branded specialty medicines are only 1 
percent of all prescriptions, but more than 30 percent of total 
pharmaceutical spending. Their utilization is only expected to 
increase, making the competition promised by biosimilars even 
more important to patients and to taxpayers. The high price of 
many new biologics will only incentivize further abuse of these 
arrangements, if they continue, and create excessive spending 
for the healthcare system.
    The FDA recently reported that over 64 biosimilar programs 
are under review for over 23 different brand biologics. Momenta 
alone has seven biosimilar development programs, and that's 
required us to more than double the size of our workforce. 
Various studies estimate savings for American taxpayers and 
patients between $42 billion to as much as $250 billion over 
the first 10 years following biosimilar market formation. But 
if we're not able to access the product for development, this 
can't happen.
    These brand restrictions take the form of self-imposed 
restricted distribution schemes with wholesalers or specialty 
pharmacies that mimic FDA REMS programs, hiding behind the 
veneer of patient safety. For instance, when we've sought to 
purchase brand products from customary wholesalers in the 
supply chain, we're now asked if we're conducting generic or 
biosimilar studies. On multiple occasions, they inform us that 
their contract prohibits them from selling the brand product to 
us for that purpose. Ironically, when we attempt to purchase 
the same product for use in a comparative novel drug 
development program, where far less is known about product 
safety, we don't encounter these refusals.
    It's clear that this has nothing to do with safety, but 
everything to do with preventing competition. As a result, in 
our company's development decision-making process, we're now 
forced to consider how difficult it will be to obtain the brand 
product. In cases where access is restricted, we have not 
initiated some programs.
    Uncertain litigation is often the only remedy available, 
and some large companies with the necessary resources have been 
suing over access for years. However, litigation is too costly 
and time consuming for companies like Momenta.
    The bottom line is simple: A generic or biosimilar 
manufacturer is prevented from obtaining the brand drug, is 
unable to perform the required FDA testing, and patients will 
miss out on generic and biosimilars savings and access. These 
barriers to competition need to be removed and customary access 
restored.
    Mr. Chairman, the House is currently considering 
legislation that would study these abuses further, but I 
believe there's no need for further study. My written statement 
mentions law firms promoting the use of these programs as a 
tool for profitability. Almost 5 years ago, the Senate passed 
legislation that included language, at FDA's request, to 
address REMS abuse and it was removed in conference. The House 
has considered similar legislation, Mr. Welch's legislation, in 
the 113th and 114th Congress; will again this year.
    The FDA has testified about the problem repeatedly, most 
recently just yesterday before the Senate Health Committee, and 
Dr. Woodcock is here today, I can say now. Committees in both 
the House and Senate have discussed these abuses on numerous 
occasions. Some may tell you that this is too small of a 
problem to address legislatively, but the numbers and this 
hearing say otherwise.
    The Congressional Budget Office has estimated various 
reform proposals for saving billions of dollars for taxpayers. 
Experts and patient advocates have called for fixes to these 
abuses. A study will only further delay competition. It's time 
to act on legislation.
    And I would be pleased to answer any questions after the 
statements. Thank you.
    [Prepared statement of Mr. Leicher follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
  
    Mr. Walker. [presiding.] Thank you, Mr. Leicher.
    Dr. Anderson.

                  STATEMENT OF GERARD ANDERSON

    Mr. Anderson. Thank you. Members of the committee, thank 
you for inviting me today. Today I'm presenting, and it's not 
as a member of the Johns Hopkins University, but as a faculty 
member of Johns Hopkins. So I'm not the corporate 
representative for Johns Hopkins.
    I'm working on the issue of drug pricing with a team of 
faculty at Johns Hopkins with funding from the Arnold 
Foundation from The Commonwealth Fund, and a variety of other 
entities. I don't receive any funding from the pharmaceutical 
industry, wholesalers, insurance companies, or any other 
entities involved in the pharmaceutical supply chain.
    Last December, I had the opportunity to testify at the 
Senate Aging Committee about the rapid increases in off-patent 
drugs. Your committee had similar hearings with Martin Shkreli 
and others. I made a number of very specific suggestions on how 
to deal with the issue of rapid increases and the prices of 
off-patent drugs. These ideas are in my written testimony, but 
they are basically expedited FDA reviews on allowing 
compounding importation in very, very restricted circumstances.
    At the time of our testimony, we really didn't understand 
exactly how Martin Shkreli and others were able to use limited 
distribution chains to stifle competition. It was only after 
the investigations of several congressional committees that we 
learned all the details of what they were able to do.
    Now, just a little bit of background. What happens in most 
cases is that the wholesaler takes the drugs from the 
manufacturer and brings them to the pharmacy or the hospital 
and they're given to patients. The wholesalers compete against 
each other, and as a result, the cost of distributing drugs is 
very low.
    As Dr. Woodcock said, the FDA created the REMS programs, 
which required pharmacies, wholesalers to take special 
precautions in--for very specific drugs. Now, this is totally 
appropriate and very good medical practice. Drugs are put into 
these limited distribution networks for safety reasons. In 
contrast, what we're hearing about today is companies that have 
put these drugs in limited distribution networks to stifle 
competition and raise drug prices. Safety is not their concern; 
it's profits.
    As we've already noted, a problem is that they prevent 
generic drug companies from creating the bioequivalents. 
Without access to the drugs, a competing drug company just 
cannot submit an application to the FDA to manufacture the 
drug. There are other concerns as well. The fact is that 
putting it into a limited distribution chain allows the drug 
company to find out very detailed information about who's 
taking that specific drug. Because there's only one 
distributor, it's possible to track every single patient using 
that drug. So patient confidentiality is very much compromised.
    There's other problems as well. Working at a hospital, what 
I know is for most drugs you can get the drugs 24/7. All the 
wholesalers make them available. But when there's a limited 
distribution chain, that may not be true because they may not 
be working 24/7.
    There is the lack of Federal guidance on when drugs can be 
put into one of these limited networks, if the decision is left 
to the pharmaceutical company, if it's not part of REMS. And 
they're doing it for financial, not safety reasons as in most 
cases.
    We at Johns Hopkins are assembling an inventory of drugs 
that are being dispensed in these limited distribution chains 
and the characteristics of them. We're looking at whether or 
not the price increases when they're put into a limited 
distribution network. And hopefully, in a couple of weeks, 
we'll be able to provide the committee some more information.
    So we have three policy recommendations for the committee 
to consider: The first one is what Congressman Welch 
essentially has proposed, which is to limit the drugs placed in 
limited distribution networks to only the REMS drugs. If the 
Congress doesn't think that this is appropriate, a second 
alternative is to require drug companies to sell their products 
to all competitors. And the third one is to have it announced 
when they're putting it into a REM--into a limited distribution 
network when they put an application into the FDA.
    For me, the main problem, besides the issue of access, is 
the issue of confidentiality.
    We're also looking at another alternative, and that's 
creating a nonprofit drug company to compete against these 
activities. So they would only focus on drugs where there are 
no competition, and they would only focus on where there's been 
very rapid price increases. The hospitals, everybody's getting 
clobbered by this, and we need an alternative.
    I'm happy to answer any questions.
    [Prepared statement of Mr. Anderson follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        
    Mr. Walker. Thank you, Dr. Anderson.
    Mr. Mitchell, we recognize you now for 5 minutes.

                  STATEMENT OF DAVID MITCHELL

    Mr. Mitchell. Mr. Chairman, members of the committee, thank 
you very much for inviting me here today. I'm David Mitchell. 
I'm founder of Patients for Affordable Drugs. We're a national 
organization focused exclusively on policies to lower 
prescription drug prices. To maintain our independence, we 
don't accept funding from any organizations that profit from 
the development and distribution of prescription drugs. We're 
about patients first, last, and always.
    More importantly, for the committee, I'm a relapsed cancer 
patient with multiple myeloma. It's an incurable blood disease. 
Drugs are keeping me alive, and because my cancer finds its way 
around drugs, I'm going to need new ones. So the importance of 
innovative, affordable drugs is not theoretical for me; it's 
literally life and death.
    I hope to watch my youngest son graduate from high school 
in 3 years, and to have one of my older kids give me a 
grandchild one day. I'm very grateful for the drugs produced by 
the science and research sector in our country. But lifesaving 
drugs have to come at prices that'll bankrupt patients and ruin 
the lives of people who are struggling to maintain their 
health.
    Yesterday, I sat in an infusion room for almost 5 hours and 
I received a two-drug combination that costs more than $26,000 
a month. Prior to this drug regime, I took Revlimid, made by 
Celgene, for 5-1/5 years, and I participated in a risk 
evaluation and mitigation program.
    I obtain my drugs only from specific specialty pharmacies. 
And each month, I received counseling on the dangers of this 
drug and I participated in a survey designed to remind me of 
those dangers. The counseling consisted of a nurse reading a 
list of cautions to me. The survey was an automated phone call, 
press 1 for yes, 2 for no, and the whole process took 5 to 10 
minutes. It could easily have been duplicated by any generic 
manufacturer. It wasn't rocket science.
    Of course, during the same period, Celgene was doing its 
best to delay generic versions of the drug by hiding behind its 
restricted distribution system and REMS, refusing to give 
samples to generic drugmakers. Here's what that meant for me: 
My out-of-pocket cost for Revlimid went from $42 a month in 
2011 to $250 a month by the time I had to stop taking it last 
year because of side effects. As you can see from this invoice, 
the retail price for one 4-week cycle of Revlimid is $10,691, 
more than $500 per capsule. Now, I'm lucky. At the time, I had 
good employer-provided insurance. I'm on Medicare now. But 
Medicare beneficiaries aren't always so fortunate. They're 
paying thousands of dollars out of pocket every year. It is the 
most expensive out-of-pocket Medicare drug.
    Members of the committee, that's the impact of REMS abuse 
for real people, and it's a part of the problem with drug 
prices in America. Patients are foregoing their medications, 
they're spending their retirement funds and their kid's college 
savings when a generic competitor sits right around the corner.
    In 2016, Revlimid accounted for 62 percent of Celgene's 
revenue. Revlimid is key to propping up its stock price. It's 
clear to me that Celgene is gaming our system, or as the 
chairman said in his opening remarks, manipulating the 
regulatory framework. It's using bogus pretext of risk 
evaluation mitigation to unlawfully deny samples to generic 
manufacturers in order to prevent them from developing a 
cheaper alternative. It's blocking market competition. We need 
to reform the law and stop these abuses.
    But speeding generics to market will only address a 
fraction of the problem of high drug prices. The problem is 
that instead of a competitive free market for prescription 
drugs, we have a system of monopoly pricing by the drug 
companies through government policy. We have pharmacy benefit 
manager middlemen who process billions in drugs each year but 
who keep all their deals secret.
    As President Trump has said, and 82 percent of Americans 
agree, it's time to allow Medicare to negotiate prices for 
drugs on an open market instead of allowing drug companies to 
act as monopolies. I also believe that requiring transparency 
into PBMs and into prices set when a drug is invented using 
taxpayer funding would go a long way to making drugs more 
affordable. And we should set prices based on the value they 
deliver to patients.
    I'm extremely encouraged that members on both sides of the 
aisle are focusing on drug prices. In my experience, the most 
enduring legislative successes in our country have come with 
bipartisan action.
    Thank you for your attention.
    [Prepared statement of Mr. Mitchell follows:]
   
   
   
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   
   
    
    Mr. Walker. Thank you, Mr. Mitchell.
    Thank you all on the panel for being here today.
    I will at this time recognize myself for 5 minutes. I'd 
like to start with Mr.--is it Leicher? Is it the long A?
    Mr. Leicher. It's Leicher.
    Mr. Walker. Leicher. Okay. All right. I missed it in two 
areas then.
    Mr. Leicher, in 2014, the trade association representing 
generic manufacturers commissioned a study showing that the 
annual cost of misuse of restricted distribution systems to 
delay generic market entry was about $5.4 billion annually. The 
estimated cost to the Federal Government was $1.8 billion.
    In the past few years, has Momenta Pharmaceuticals 
encountered more difficulty accessing samples or have they 
encountered less difficulty? Could you answer that, please?
    Mr. Leicher. So we've encountered more difficulty accessing 
samples, because what I think has happened is companies have 
found that the law is not being enforced that exists today, and 
that the litigation that's been brought against them for 
engaging in these activities has been able to delay access.
    Mr. Walker. In your testimony, you said that at times when 
you have tried to purchase samples from wholesalers, they ask 
you if you are conducting generic or biosimilar studies. And 
when you respond yes, they tell you their contract prohibits 
them from selling samples to you. Do you then go to the 
manufacturer or try to obtain samples? And if so, how do they 
respond? Would you break that down, first?
    Mr. Leicher. Yes, I'd be happy to. So we would go to a 
wholesaler typically to buy the product. And for many products, 
we're able to buy the product, because there's just certain 
companies that are engaging in these practices. We have chosen 
to go and develop other products in cases where we haven't been 
able to purchase from the wholesaler, just because we had other 
options for development available given our size.
    It would be--we don't believe that we would have--we 
believe we would have ended up in protracted negotiations if we 
had gone to the manufacturer, based on our experience with 
talking to other companies.
    Mr. Walker. Just a couple more questions. Are these 
expensive products that have been off patent for a while?
    Mr. Leicher. These are all products that we designed in the 
development program to launch when the patents expire. That's 
the intent of the biosimilar law in Hatch-Waxman. You access 
the product near the end of the patent life to do the 
development, and then you prepare to launch at the time the 
patents are over.
    Mr. Walker. Okay. Well, I think it's pretty clear. I 
appreciate your articulation. I guess my last question would be 
how do we fix the problem?
    Mr. Leicher. Well, we think the best way to fix the problem 
is to--and there are proposals in terms of the FAST Generics 
Act and the CREATES Act in the Senate--is to recognize more 
explicitly that a condition of an FDA approval is a recognition 
that products will be sold on commercially reasonable terms to 
generic and biosimilar companies so that we can fulfill the 
promise of Hatch-Waxman and the promise of the biosimilar law.
    Mr. Walker. Thank you, Mr. Leicher.
    At this time, I'm going to yield 5 minutes to Mr. 
Krishnamoorthi. Are we getting closer? I know we're still 
working on that.
    Mr. Krishnamoorthi. Pretty close.
    Mr. Walker. Okay.
    Mr. Krishnamoorthi. Call me Raja.
    Mr. Mitchell, thank you again for appearing before the 
subcommittee and sharing your very personal experience with us. 
As we heard in your testimony, you've experienced rising 
prescription drug prices in a deeply personal way through your 
battle with cancer. You described your experience with one drug 
in particular, Revlimid, which is made by the drug company 
Celgene. Celgene has been accused of improperly using its 
restricted distribution systems to prevent would-be generic 
competitors from getting access to samples of Revlimid which 
they need to eventually get FDA approval.
    In fact, the FTC warned, in a 2014 amicus brief filed in a 
lawsuit against Celgene, quote, ``If a brand firm can 
effectively block generic firms from accessing brand product 
for bioequivalence testing, it may be able to continue to 
prevent generic competition, even after its patents on these 
products expire.''
    So we're really talking about a time period after the 
patents expire. The FTC also warned that this practice could, 
quote, ``undermine the core principle of the patent system that 
patents have a limited duration.''
    Mr. Mitchell, what does the prospect of generic competition 
mean to you as a patient?
    Mr. Mitchell. It means lower prices for drugs that will 
work just as well as the brand name drugs that are being given 
to me and other patients.
    Sticking with Revlimid, the Kaiser Family Foundation 
reports that the median out-of-pocket cost for a Medicare part 
D beneficiary on Revlimid is $11,500 a year. This is from a 
company that runs profits in the high 20s and paid its CEO 
almost $100 million over the last 3 years. So there's room 
there to lower the price and continue investment in R&D, 
produce a good return for investors, but lower the cost for 
patients for a drug that will work equally well.
    Mr. Krishnamoorthi. Well, the interesting thing about what 
you said is that your out-of-pocket expenses are almost $12,000 
a year. Think of what it's costing Medicare to provide these 
drugs to yourself. I mean, this is why Medicare is going to go 
bankrupt if we don't get control of these prescription drug 
prices.
    Mr. Mitchell. Well, and it's not only Medicare; it's 
employers----
    Mr. Krishnamoorthi. Right.
    Mr. Mitchell. --who are trying to provide good health 
benefits to their employees. When they're confronted with 
rising costs like this, it becomes increasingly difficult to 
provide the benefits that people need at prices that they can 
afford.
    Mr. Krishnamoorthi. Absolutely, you're right. It's going to 
bankrupt, you know, our healthcare system, these prescription 
drug prices rising as fast as they are.
    Dr. Anderson, I know you researched restricted distribution 
systems in-depth. In addition to blocking generic competition, 
how are these restricted distribution systems harmful to the 
drug market as a whole?
    Mr. Anderson. Well, essentially what they do for a patient 
perspective is that they gather all sorts of information about 
you when it's on one of these restricted--so they know exactly 
what Mr. Mitchell's circumstances are. So they have all the 
information they want to know about him. And you might think 
that is fine; I am actually very concerned about the privacy 
type of issues that are involved with this.
    And as a hospital, it's very difficult sometimes to access 
these drugs. Most drugs are available very easily when you need 
them. And, you know, Cardinal is coming to Johns Hopkins, one 
of the big wholesalers, every day with truckloads of drugs. But 
when you're on a limited distribution chain, you might not get 
it for several days. And if you need that drug on a Saturday, 
you might not get it. So there are patient safety issues in 
these concerns as well.
    Mr. Krishnamoorthi. Dr. Anderson, can you estimate or do 
you have an idea, a ballpark estimate, of how many drugs are, 
you know, in this kind of bucket of drugs that are basically 
being--flowed through the restricted distribution systems in 
this kind of what I believe to be an anticompetitive fashion?
    Mr. Anderson. We don't know an exact number, but we think 
it's somewhere in the 150 to 250 range. And what we know is 
that the investment bankers know exactly who it is, and that's 
where the Martin Shkrelis and other people are looking for 
these kinds of things where there are no, in fact, competitors 
and they're going out and buying those particular activities. 
So it's a market opportunity for the investment banking 
community.
    Mr. Krishnamoorthi. Thank you, sir. Thank you very much.
    Mr. Chairman, I yield back.
    Mr. Walker. Thank you very much.
    We usually would rotate back to the gentleman from 
Wisconsin. Mr. Grothman, would you be okay if I yielded time to 
our overall ranking member on the committee? We'll come back to 
you after that and put you back into sequence.
    Mr. Grothman. Well, it depends who the overall ranking 
member is.
    Mr. Walker. It would be Mr. Elijah Cummings.
    Mr. Grothman. Well, sure.
    Mr. Walker. Mr. Cummings, you're recognized for 5 minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Chairman, the issue--and I want to thank the ranking 
member and you, Mr. Chairman, for this hearing.
    The issue of drug prices has been one of my top priorities 
for the past several years. As a matter of fact, just last 
week, Congressman Welch and I, along with the president of 
Johns Hopkins Hospital met with President Trump on this issue. 
And I appreciate that Chairman Chaffetz has worked with me in a 
bipartisan manner at the full committee level to address this 
issue, which affects all of our constituents.
    We all agree that innovation is key, especially when it 
comes to prescription drugs that save lives. We rely on drugs 
to help us fight disease, and we want pharmaceutical companies 
to develop the next cure. We also want them to make a 
reasonable profit. We also expect drug companies to make a 
profit. In fact, the pharmaceutical industry has been one of 
the most profitable industries in America.
    Mr. Mitchell, I thank you for your testimony. And I'm going 
to make sure that President Trump hears your testimony, because 
you're right. I mean, he gets it, he really does. And I think 
your testimony is jarring, because there are a lot of people 
that are going through what you're going through. And I thank 
God that you take your pain, turned it into a passion to do 
your purpose. To do your purpose. And I appreciate it. And I 
really mean that.
    But what have we seen year after year, investigation after 
investigation? Are drug companies exploiting the system and 
taking advantage of consumers like Mr. Mitchell, while making 
obscene profits at their expense? We've seen drug companies 
swoop into the market to buy old drugs and then jack up the 
price.
    Mr. Mitchell, Shkreli sat where you sat, where you're 
sitting right now, and he basically called us imbeciles because 
we wanted to make sure that the American people could afford 
drugs that would keep them alive, keep them healthy. And then 
he took the Fifth and then, you know, sashayed out of here.
    So going back, no R&D, no commitment to patients, just a 
cold, pricing strategy, designed to take advantage of a 
temporary monopoly. But one of the things that, I guess, 
bothers me with all of this, and when I look at you Mr. 
Mitchell, I--it bothers me that our country and certain 
industries, certain folks in the pharmaceutical industry don't 
mind something called collateral damage. In other words, people 
are unable to afford the drugs that they need. Why? Because of, 
in many instances, greed.
    Shkreli is a perfect example. I know everybody is not like 
Shkreli. I know that. But there are a lot of Mr. Mitchells. 
There are a lot of you. As a mater of fact, I just met some 
ladies getting off the elevator who had been in my office who 
told me that for a certain disease, they were here lobbying, 
they said for a certain disease, I can't remember which one, 
she said 3 years ago it cost $8,000 a year, now it's $85,000 a 
year. Come on now. We are a country that is better than that.
    And so we've obtained internal documents that exposes 
business strategy, and we have called drug company CEOs to come 
before the committee to justify their actions. But they never--
this is the thing that gets me, Mr. Mitchell. You know what? 
They come, they do a song and a dance, they do the rope-a-dope, 
they talk about all these drug programs that they have for 
discounts, they sashay their way out of here, get on their 
planes, and they never lower the prices. Collateral damage. 
People left to get sicker. People left to die.
    So we've seen this time and time again. And then they get 
upset when the stock prices go down. Oh, the stock prices--they 
make millions, while people are sitting right now, watching us, 
with chemo dripping through their veins, trying to figure out 
how they're going to survive--not only how they're going to 
survive, but how are they going to do their daily chores. So, 
again, I hope that we don't just come, have a hearing, and then 
move on, because there's too much at stake.
    With that, Mr. Chairman, I thank you for your indulgence, 
and I yield back.
    Mr. Walker. Thank you to the ranking member, Mr. Cummings.
    With that, we'll yield 5 minutes to the gentleman from 
Wisconsin, Mr. Glenn Grothman.
    Mr. Grothman. Thank you.
    I'm not sure which one I'll lead with. Maybe Mr. Leicher. I 
don't know if I got that right. Just in general, you know, 
there's a general perception out there, and I'm sure the 
government wouldn't do a very good job if they had to come up 
with these new drugs, but a general perception that, to me, 
both sometimes drugs are overprescribed and sometimes you 
wonder about the price.
    I don't think you guys have looked at financial statements, 
but, obviously, a drug company, like any company, has expenses. 
Some of those expenses are the literal production of the drug. 
Some of those expenses are the research and approval of the 
drug. Some of those expenses are sales and promotion of the 
drug.
    If somebody spends 10 bucks on a drug, do one of you folks 
give us a ballpark as to how much of that 10 bucks went into 
research, how much went into sales and marketing, how much went 
into administration, that sort of thing?
    Mr. Anderson. So if you were talking about a brand company, 
not a generic company, then it's about 17--$1.70 for what goes 
into R&D and about $2.50 that would go into marketing, about 
$2.50 would be profit. Very little would actually be 
manufacturing, and the rest would be a variety of other things.
    Mr. Grothman. You still have 33 percent to go. Do you want 
to take a crack at the other 33 percent?
    Mr. Anderson. Essentially--I'd have to come back to you on 
that.
    Mr. Grothman. Okay. Anybody else have a crack?
    Mr. Leicher. I'm not sure I can give better numbers than 
that. But what I would add to that is that from a generic and 
biosimilars business perspective where marketing is not a 
significant factor, and all the activities associated with 
commercialization are not a factor, that's what provides the 
opportunity for, in the generics business, up to an 80 percent 
reduction in price when there's multiple competitors entering 
the market when patents expire and, you know, estimates of, you 
know, initially, a 30 percent and perhaps more reduction of 
price for biosimilars.
    Mr. Grothman. And maybe you guys don't know. You say 25 
percent is marketing. Do you know what that is compared to, 
say, the cell phone industry or the automotive industry? It 
doesn't have to be this high, but is it high?
    Mr. Anderson. It is higher than most other industries, but 
I couldn't give you an exact number for all of those.
    Mr. Grothman. Okay. We'll fire away with some of the other 
more expected questions.
    Dr. Anderson, what lessons have you learned from examining 
drug shortages that could be used to help address egregious 
situations like Turing?
    Mr. Anderson. So, essentially, what you see is generally a 
two-pronged approach. One is a shortage occurs and it's very 
hard to get access to a drug. And then following that, what you 
see is a fairly steep price increase. So they take advantage of 
when there's a shortage. Often, it is when there are two 
companies that are manufacturing a drug and one of them stops 
manufacturing that drug, either because it's not profitable for 
them to do so anymore or they run into some production problem, 
and therefore they can't manufacture it. And what we're seeing 
is a lot of mergers in the generic space. And those things are 
cutting down the amount of competition. And so you're seeing 
that as a third problem.
    Mr. Grothman. Okay. What can we do to encourage more 
competition among generics?
    Mr. Anderson. Well, essentially, what you need to do is to 
try to get them to--you've got to stop the mergers, is the 
first thing. And the second thing is to make it easier for them 
to--when there is no competition, to enter the market. And so 
that's why I proposed the expedited review by the FDA, which 
the FDA is starting to do now. So make it easier for a 
competitor to enter the market.
    Mr. Grothman. You said stop the mergers.
    Mr. Anderson. Yep.
    Mr. Grothman. It does--in all industries, compared to when 
I was a child, it seems like everything is mergered into a few 
industries, but how many major drug manufacturers are operating 
now in the United States? Like if there should be a market for 
a new pharmaceutical, how many drug companies are out there who 
have the ability to develop the generic and market it?
    Mr. Anderson. There are still a number, but what we saw 
last year is the number one generic firm acquired the number 
three generic firm in the United States. So we're seeing some 
mergers of very large generic companies occurring.
    Mr. Grothman. And when number one swallows number three, or 
vice versa, do you notice an increase in price?
    Mr. Anderson. Well, you don't notice an increase in where 
there are not competitive drugs.
    Mr. Grothman. I mean, what I'm saying is I assume sometimes 
if one swallows three, that there now is no competition. I 
guess that's what I'm trying to get at.
    Mr. Anderson. That's what I'm saying. You know, the generic 
industry works incredibly well when there are three, four 
competitors in the market. It looks less well when there are 
two, and it doesn't work at all when there's none.
    Mr. Grothman. Okay. I guess I'm well past my time. So thank 
you for the indulgence, Mr. Chairman.
    Mr. Walker. Thank you, Mr. Grothman.
    At this time the chair yields 5 minutes to Ms. Kelly.
    Ms. Kelly. Thank you, Mr. Chair and ranking member.
    Mr. Mitchell, thank you so much for joining us today and 
for your testimony. You represent the voice of many of our 
constituents on both sides of the aisle, that they are the 
financial burden that is the consequence of companies' 
anticompetitive behavior. And in your testimony, you stated 
that your prescription went up nearly 600 percent, in essence, 
doubled since 2011 when you stopped taking it due to side 
effects. And the company that manufactures Revlimid, Celgene, 
reported $1.6 billion in 2015, which accounted for 62 percent 
of that revenue Revlimid did.
    Mr., and I'm going to say, is it Leicher?
    Mr. Leicher. Leicher.
    Ms. Kelly. Leicher. Okay. Are you aware of any companies 
that have benefited in such a great manner from anticompetitive 
behavior, and how common is the practice?
    Mr. Leicher. I'm not sure we're experts on how common that 
practice is because it's not something we seek to engage in, 
certainly at my company. But we're aware of the scenarios that 
you've described, the Daraprim scenario, and the fact that they 
were using restricted access programs as a way to prevent 
competition. Those are largely what was just described, efforts 
by companies to purchase what may even be an old generic drug 
in a shortage situation rebranded and launched it as a branded 
product with a very high price often when the patents have 
expired.
    And what we see as the real solution here is to reduce the 
barriers to entry. And one of the big barriers to entry is what 
this hearing is all about, is if we can't obtain reference 
product from a brand company to test and develop a generic, we 
won't have generic or biosimilars to compete and actually use 
the most effective tool available, which is competitive 
competition to bring the prices down.
    Ms. Kelly. It's just amazing to me. Do they think that, you 
know, people aren't going to notice or not say anything? I know 
you're not a psychiatrist, I don't think you are, but I don't 
get it.
    Mr. Leicher. You know, it's amazing to me too, because what 
they're doing is they're waiting to see if they're going to 
lose the litigation. The larger companies--you know, that's 
what I mean by a barrier entry. We can't afford to litigate for 
3 years to purchase some samples at a fair market value from a 
company and then start development 3 years from now. So they're 
using that delay of litigation to prevent us from entering that 
business.
    And, you know, it answers the question that was asked 
earlier, you know, what about all the mergers? Well, Momenta is 
an example. We're not the only one. We're an example of a 
company that's a new entrant into this business in the last 10 
years. We're providing very significant competition. We 
developed generic enoxaparin, which was a very significant cost 
reduction in the country. We developed a generic version of 
Copaxone. We're working on seven biosimilar programs. But if we 
can't access the referenced product, none of that can happen.
    Ms. Kelly. So you see that as the main----
    Mr. Leicher. We see that as--I've put that as number one on 
our list of barriers.
    Ms. Kelly. And what's two and three? And if anybody wants 
to join in.
    Mr. Leicher. Two and three?
    Ms. Kelly. If you have a two and three.
    Mr. Mitchell. Barriers to generic drugs or barriers to 
lowering prices?
    Ms. Kelly. Well, barriers to assess, and what are the 
barriers to lowering the prices? What can we do? What are best 
practices we can implement? What can we do to change this?
    Mr. Anderson. So, I mean, I guess we need a little more 
help from you in terms of we can do it in brand space, we can 
do it in the generic space. Those are very different spaces 
so----
    Ms. Kelly. Well, I guess what can Congress do to help you?
    Mr. Anderson. Right. So one of the things about Revlimid 
and others is the whole issue of negotiation. What you heard 
was $11,000 in out-of-pocket expenditures for a Medicare 
beneficiary. If you're making $22,000 on Social Security, 
$11,000 is just prohibitive.
    What you've got to recognize is who's paying most of that 
cost. Eighty percent of the cost is paid for by the Medicare 
program. Medicare cannot negotiate those prices one little bit 
when it's paying 80 percent of the cost in the Medicare 
catastrophic amount.
    I helped design the Medicare Catastrophic bill. We did not 
anticipate drugs that cost $75,000 on it. It was designed to 
help the person who had multiple chronic conditions that was 
taking a lot of very inexpensive drugs, but a lot of them, and 
they would enter the catastrophic amount. The drug companies 
looked at this and said, oh, if I charge $80,000 for a drug 
that a Medicare beneficiary might take, Medicare is going to 
pay $64,000 of that. And the beneficiary will end up paying a 
fair amount too, and the PDP, the Medicare drug plan only pays 
15 percent.
    So it wasn't designed for what's happening today. And this 
is something, you know, now 14 years later, we need to revise.
    Ms. Kelly. Thank you. I know my time has run out.
    Mr. Walker. Thank you, Ms. Kelly.
    At this time, we'll recognize Mr. Mitchell for 5 minutes.
    Mr. Mitchell of Michigan. Thank you, Mr. Chair.
    Dr. Woodcock, can you please help me understand a few 
things here. Can you explain the role that the FDA currently 
plays in ensuring timely and full access to generic 
medications?
    Dr. Woodcock. FDA--what FDA does is approve--try to approve 
those generics at the time all patents expire and exclusivity 
expires. So as is already explained, the way the system is set 
up, people can file before that----
    Mr. Mitchell of Michigan. Right.
    Dr. Woodcock. --or do their development--not file an 
application, but do their development process, and then they 
can file and then they can get approved right at the time or 
even tentatively approved prior to, a little bit prior to, so 
they know they have a path to market.
    Mr. Mitchell of Michigan. In the last year or two, can you 
share with the committee how many complaints you've received 
from generic manufacturers that they aren't able to access 
approved medications in order to proceed with research and 
production?
    Dr. Woodcock. Well, overall, we've received over 150 
inquiries. And we don't--about their inability to access the 
reference listed drug, and that's in the generic space. We have 
not--we don't have it nailed down in the biosimilar space, 
which is a new program where----
    Mr. Mitchell of Michigan. What's your distinction between 
an inquiry and a complaint?
    Dr. Woodcock. Oh, okay.
    Mr. Mitchell of Michigan. I come from a very simple world 
here.
    Dr. Woodcock. Well, we wouldn't call--we hear about them, 
all right. And obviously, they're complaining. They inquire if 
we can get the drug somehow or something like that, and I've 
explained what we do. If there is a real FDA-imposed REMS 
program that actually restricts the drug, we have a way we go. 
We send a letter--after reviewing the protocol, we send a 
letter to the reference listed drug holder saying that it's 
safe to provide that drug and that the REMS doesn't apply. But 
that doesn't mean they're going to go and give the drug.
    Mr. Mitchell of Michigan. Why does it not mean they're 
going to give the drug?
    Dr. Woodcock. Because we don't have the authority to order 
them to do that. We simply are telling them that the REMS 
restrictions, which means they can't just give the drug out to 
anyone because of safety----
    Mr. Mitchell of Michigan. I understood that.
    Dr. Woodcock. --doesn't apply in this situation, and that 
we have actually reviewed the generic protocol to make sure 
that it doesn't make any safety risks.
    Mr. Mitchell of Michigan. So the FDA's position currently 
is, well, we'll waive REMS or--but if you--if the manufacturer 
of the brand name drug doesn't want to provide access, they're 
left to litigate. Is that the best answer that they have?
    Dr. Woodcock. We also have referred all these circumstances 
to the FTC.
    Mr. Mitchell of Michigan. And what's happened at the FTC, 
for entertainment purposes?
    Dr. Woodcock. I do not know the answer to that. We can get 
back to you.
    Mr. Mitchell of Michigan. I think the committee would be 
interested in that.
    Mr. Chair, can we request that information? Is that 
feasible?
    Anybody else want to weigh in on this question? It seems to 
me that we send them a letter, say, gee, it would be nice if 
you sent the medication. If they choose not to, you can, you 
know, gain yourself--bring on some attorneys and sue.
    Mr. Mitchell. I do know from preparing for the hearing, Mr. 
Mitchell, that the FTC has filed amicus briefs in cases, 
including the case involving Celgene and Revlimid, saying that 
Revlimid--Celgene's behavior is anticompetitive and arguing 
that the REMS' excuse is just that, a pretext.
    Mr. Mitchell of Michigan. And how long has that--as an 
example, how long has that case been going on?
    Mr. Mitchell. I believe that case has been going on since 
2014.
    Mr. Mitchell of Michigan. Any solutions side on that that 
you've seen, or we're still in appeals process?
    Mr. Mitchell. No, sir. I'm not a lawyer.
    Mr. Mitchell of Michigan. Well, neither am I, sir.
    Mr. Leicher. What I could add to that is the FDA has done 
an effective job in documenting that generic and biosimilar 
companies have the safety capability to handle these products 
when asked. But the FDA does not have authority to regulate 
competition among competitors, and that's really where the 
issue is.
    And that's where some of the statutes, you know, Mr. 
Welch's bill is directed, which is--goes to the core of what 
Hatch-Waxman said and what the biosimilars law said, which was 
that you need to have access to the reference product 
commercially. They don't give us samples. It's described as 
samples. We purchase them at full price.
    Mr. Mitchell of Michigan. Well, see, I don't see it as 
regulating the competitions. It's, in effect, allowing the sale 
of the drug that they would to any other party.
    Mr. Leicher. Exactly.
    Mr. Mitchell of Michigan. It's not like they're trying to 
just provide the drug at the same retail price anybody else 
pays.
    Mr. Leicher. I stated it backwards. It's regulating the 
anticompetitive prevention.
    Mr. Mitchell of Michigan. Okay. Maybe that--okay.
    I'll yield back. Thank you very much, Mr. Chair.
    Mr. Walker. Thank you, Mr. Mitchell.
    Mr. Welch, looks like they have called votes, but I believe 
we have time, not normally on the subcommittee, but we yield 
you 5 minutes for your questions. Thank you.
    Mr. Welch. Thank you very much.
    First of all, I want to thank Mr. Mitchell for his 
questions, because I think they really do go to the heart of 
the issue. It's not a safety issue; it's an anticompetitive 
issue. And ideally, we would have the drug made available for 
research and then the patent holder of the drug has the full 
benefit of that legal patent for the period of time of 
protection.
    So the patent holder here--and tell me if you disagree--is 
basically trying to extend the life of the patent, i.e., the 
monopoly beyond the legally protected timeframe. Is that 
correct?
    Mr. Mitchell. Yes.
    Mr. Anderson. Yes.
    Mr. Leicher. Yes.
    Mr. Welch. Well, that doesn't sound right. So, I mean, this 
is where there's some, I think, reason why there's some 
bipartisan support here, because I think most of us up here 
support competition, and we also oppose gaming the system. I 
mean, it's a very significant legal benefit to an owner of 
intellectual property, whether it's a patent--whether it's a 
pharmaceutical drug or something else, to get something that 
can only be given by law, and that is a period of exclusivity 
where, essentially, they have market dominance and are able to 
then profit on that company. And none of us here in this 
legislation are suggesting an attack on that scheme. But I 
think all of us in support of this legislation are opposed to 
gaming that.
    Mr. Mitchell, I want to just say, I agree with Elijah 
Cummings. And I want to say to all the witnesses, you don't 
know what a breath of fresh air it is to have folks coming in 
here that aren't asking for some special advantage and are 
trying to help us on a bipartisan basis understand what we can 
do public policywise to help a lot of Americans who just want 
to live their lives, but do need medication along the way. So 
this is like unusual for us, okay. And thank you.
    Dr. Anderson, could you just go through just the specifics 
again, because I think it's helpful for all of us to hear about 
it, about how the obstacles are put in the way of the generic 
companies to get the sample that they need in order to do the 
research required to then have Momenta put a generic drug on 
the market.
    Mr. Anderson. So it's pretty simple. You basically create, 
and most of these companies are creating their own specially 
distribution networks or they're working with some existing 
thing to do it, and then they're very much restricting access 
to these drugs.
    It's true both in the brand side, which Mr. Leicher has 
been talking about mostly, but it also turns in the off-patent 
activities as well, where this drug has been around for 50 
years. But only in the case of Turing Pharmaceuticals, there's 
only about 5,000 of those drugs that are being distributed 
every year.
    So the company knows exactly who's buying it and can say, 
you know, Mr. Welch, you don't have that disease, you're not 
entitled to that drug, because then you can't give it to Mr. 
Leicher for him to make it. So, essentially, what they're doing 
is keeping that access to that drug and then they can't apply 
to Janet Woodcock.
    Mr. Welch. Okay. You mentioned the legislation. I'm a 
cosponsor with Mr. Stivers on the Republican side. Would that 
address, in your view, the issue that you're speaking about?
    Mr. Anderson. No, I think it very much would. I mean, it's 
a great piece of legislation, and I totally--I can't endorse it 
as a faculty member, but I think it makes complete sense.
    Mr. Welch. And I'll just ask you this: Congressman Cummings 
was talking to his new best friend, President Trump--I can't 
say that. But I was sitting there when President Trump was very 
enthusiastic about price negotiation. And the concern that I've 
heard from some opponents of negotiation authority for Medicare 
is that that would be the equivalent of price setting. And can 
you give me your reaction to that.
    Mr. Anderson. Well, essentially what you have, and 
especially in the Medicare program for these very expensive 
drugs, is Medicare is a silent partner paying 80 percent of the 
cost. So that makes absolutely no sense to me.
    So if I were to start in the price negotiation activity, it 
would be where Medicare is paying 80 percent of the cost and 
has no negotiating ability at all. You know, I think you could 
do broader than that, but I think if I had to start somewhere 
where I think there should be some level of bipartisan 
agreement on it, it should be where Medicare is paying 80 
percent of the cost.
    Mr. Welch. Okay. I thank you, all.
    And I yield back.
    Mr. Walker. Thank you very much.
    With that, I'd like to thank certainly the FDA for showing 
up today, some last minute things, but we're grateful. In fact, 
Dr. Woodcock, Mr. Leicher, Dr. Anderson, especially you, Mr. 
Mitchell, for having the courage today to come and share your 
story. That's an honor for us to be part of listening to you 
and hearing you out, really the importance of why this is so 
much--important, really for all of us. So thank you all.
    I would ask unanimous consent that members have 5 
legislative days to submit questions for the record.
    Without objection, so ordered.
    If there is no further business, without objection, the 
subcommittee stands adjourned.
    [Whereupon, at 3:13 p.m., the subcommittee was adjourned.]


                               APPENDIX

                              ----------                              


               Material Submitted for the Hearing Record


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                 [all]