[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE DRUG SUPPLY CHAIN
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
----------
DECEMBER 13, 2017
----------
Serial No. 115-88
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
GREG WALDEN, Oregon
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
FRED UPTON, Michigan BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee GENE GREEN, Texas
STEVE SCALISE, Louisiana DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida PAUL TONKO, New York
BILL JOHNSON, Ohio YVETTE D. CLARKE, New York
BILLY LONG, Missouri DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana KURT SCHRADER, Oregon
BILL FLORES, Texas JOSEPH P. KENNEDY, III,
SUSAN W. BROOKS, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California
RICHARD HUDSON, North Carolina RAUL RUIZ, California
CHRIS COLLINS, New York SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina
Subcommittee on Health
MICHAEL C. BURGESS, Texas
Chairman
BRETT GUTHRIE, Kentucky GENE GREEN, Texas
Vice Chairman Ranking Member
JOE BARTON, Texas ELIOT L. ENGEL, New York
FRED UPTON, Michigan JANICE D. SCHAKOWSKY, Illinois
JOHN SHIMKUS, Illinois G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee DORIS O. MATSUI, California
ROBERT E. LATTA, Ohio KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia KURT SCHRADER, Oregon
GUS M. BILIRAKIS, Florida JOSEPH P. KENNEDY, III,
BILLY LONG, Missouri Massachusetts
LARRY BUCSHON, Indiana TONY CARDENAS, California
SUSAN W. BROOKS, Indiana ANNA G. ESHOO, California
MARKWAYNE MULLIN, Oklahoma DIANA DeGETTE, Colorado
RICHARD HUDSON, North Carolina FRANK PALLONE, Jr., New Jersey (ex
CHRIS COLLINS, New York officio)
EARL L. ``BUDDY'' CARTER, Georgia
GREG WALDEN, Oregon (ex officio)
C O N T E N T S
----------
Page
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 1
Prepared statement........................................... 3
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 7
Prepared statement........................................... 6
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 7
Prepared statement........................................... 8
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 9
Prepared statement........................................... 10
Witnesses
Lori Reilly, Executive Vice President for Policy, Research, and
Membership, Pharmaceutical Research and Manufacturers of
America........................................................ 12
Prepared statement........................................... 14
Answers to submitted questions............................... 246
Tom DiLenge, President, Advocacy, Law, and Public Policy,
Biotechnology Innovation Organization.......................... 33
Prepared statement........................................... 35
Answers to submitted questions............................... 254
Chip Davis, President and CEO, Association for Accessible
Medicines...................................................... 49
Prepared statement........................................... 51
Answers to submitted questions............................... 262
Elizabeth Gallenagh, Senior Vice President, Governmental Affairs
and General Counsel, Healthcare Distribution Alliance.......... 66
Prepared statement........................................... 68
Answers to submitted questions............................... 271
Mark Merritt, President and CEO, Pharmaceutical Care Management
Association.................................................... 74
Prepared statement........................................... 76
Answers to submitted questions............................... 275
Matt Eyles, Senior Executive Vice President and Chief Operating
Officer for Policy and Regulatory Affairs, America's Health
Insurance Plans................................................ 92
Prepared statement........................................... 94
Answers to submitted questions............................... 282
Tom Nickels, Executive Vice President for Government Relations
and Public Policy, American Hospital Association............... 108
Prepared statement........................................... 110
Answers to submitted questions............................... 298
Gerald Harmon, M.D., Chair, Board of Trustees, American Medical
Association.................................................... 119
Prepared statement........................................... 121
Answers to submitted questions............................... 301
B. Douglas Hoey, CEO, National Community Pharmacists Association. 129
Prepared statement........................................... 131
Answers to submitted questions............................... 307
David Mitchell, Founder and President, Patients for Affordable
Drugs.......................................................... 140
Prepared statement........................................... 142
Answers to submitted questions............................... 317
Submitted Material
Statement of the AARP, submitted by Mr. Green.................... 194
Statement of Express Scripts, submitted by Mr. Burgess........... 197
Statement of the American Pharmacists Association, submitted by
Mr. Burgess.................................................... 200
Statement of the Senior Care Pharmacy Coalition, submitted by Mr.
Burgess........................................................ 203
Statement of the Coalition for Affordable Prescription Drugs,
submitted by Mr. Burgess....................................... 217
Statement of the National Multiple Sclerosis Society, submitted
by Mr. Burgess................................................. 220
Alliance for Transparent & Affordable Prescriptions, submitted by
Mr. Burgess.................................................... 239
EXAMINING THE DRUG SUPPLY CHAIN
----------
WEDNESDAY, DECEMBER 13, 2017
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
room 2123 Rayburn House Office Building, Hon. Michael Burgess
(chairman of the subcommittee) presiding.
Members present: Representatives Burgess, Guthrie, Barton,
Shimkus, Blackburn, Latta, Lance, Griffith, Bilirakis, Long,
Bucshon, Brooks, Mullin, Hudson, Collins, Carter, Walden (ex
officio), Green, Schakowsky, Matsui, Castor, Sarbanes, Lujan,
Schrader, Cardenas, Eshoo, DeGette, Welch, and Pallone (ex
officio).
Staff present: Ray Baum, Staff Director; Mike Bloomquist,
Deputy Staff Director; Adam Buckalew, Professional Staff
Member, Health; Kelly Collins, Staff Assistant; Zack Dareshori,
Legislative Clerk, Health; Jordan Davis, Director of Policy and
External Affairs; Paul Edattel, Chief Counsel, Health; Adam
Fromm, Director of Outreach and Coalitions; Ali Fulling,
Legislative Clerk, Oversight & Investigations, Digital Commerce
and Consumer Protection; Jay Gulshen, Legislative Associate,
Health; James Paluskiewicz, Professional Staff, Health;
Jennifer Sherman, Press Secretary; Danielle Steele, Counsel,
Health; Hamlin Wade, Special Advisor, External Affairs; Jeff
Carroll, Minority Staff Director; Tiffany Guarascio, Minority
Deputy Staff Director and Chief Health Advisor; Una Lee,
Minority Senior Health Counsel; Rachel Pryor, Minority Senior
Health Policy Advisor; Samantha Satchell, Minority Policy
Analyst; Andrew Souvall, Minority Director of Communications,
Outreach and Member Services; Kimberlee Trzeciak, Minority
Senior Health Policy Advisor; and C.J. Young, Minority Press
Secretary.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. The subcommittee will come to order. I will
recognize myself for 5 minutes for an opening statement.
I want to thank everyone for being here today. We are going
to talk about the U.S. drug supply and the complex way it is
interwoven with multiple stakeholders involved in each step of
the process. Improving access to lifesaving treatments for
consumers and patients should be a nonpartisan priority for
every person in the room. Two weeks ago, the Health
Subcommittee held a hearing on the implementation of the 21st
Century Cures Act. We heard testimonies from officials at the
helm of the National Institute of Health and the Food and Drug
Administration about the law's transformative impact on
maintaining our nation's global leadership in biomedical
innovation. Built into that very concept is the expectation
that innovative and breakthrough treatments will get developed,
approved, and introduced into the therapeutic market to cure
diseases or effectively manage chronic conditions so people
lead healthier, fuller lives.
Today's hearing will serve as an important educational
opportunity to better understand the intricacies of our
nation's drug supply chain. To help us work toward that goal,
we will hear from a diverse group of representatives--ten to be
exact--that represent many facets of the supply chain process,
and I do want to welcome each of you to the subcommittee this
morning. It is my hope that our discussion today is substantive
and will be focused on the patients who are prescribed these
medications because, at the end of the day, it is the patients
who matter most in our conversation.
Practicing medicine, I cared most about prescribing for my
patients a drug that was efficacious and safe, and really not
wanting to think too much whether or not they would be able to
fill their prescription at the pharmacy. But now, the
conversation has shifted to a complicated back and forth
between doctors, patients, insurance companies, pharmacies
about drug co-pays, prior authorizations, drug formularies,
step therapies, amongst other things. Over the last few years,
we have also learned about acquisitions and mergers within the
various drug supply chain as companies seek out increased
integration of their operations with an eye towards more
efficiencies.
Prescription drugs continue to play a vital role in the
United States health care system. From significantly improving
patients' lives to producing health care savings through fewer
hospitalizations and medical procedures. A patient's access to
prescription drugs is a key health care issue for Americans and
within that context now the debate is over affordability.
I will be frank with you. I expect disagreement this
morning. But while there are legitimate differences of opinion,
I recognize that every participant here this morning does
aspire to the common goal of saving lives and alleviating human
suffering. And so out of these areas of disagreement, I hope to
begin to identify areas of consensus so that we can begin
delivering solutions to the problems that we do identify this
morning.
These stakeholders here include pharmaceutical
manufacturers that primarily research, develop, and produce
brand name and generic drugs, biologic, and biosimilars. These
medicines treat a spectrum of diseases and conditions from
allergies, infections, hypertension to cancer, diabetes, and
rheumatoid arthritis.
Next, the pharmaceutical wholesalers purchase these drugs
and store them in regional distribution centers for delivery
points that include our pharmacies, our supermarket retailers,
hospitals, physician groups, and other health care providers.
Wholesalers also provide other ancillary services such as
repackaging, consulting, inventory management, and patient
discount programs.
Overall, pharmacy benefit managers manage prescription drug
benefits on behalf of employer-sponsored health plans, health
maintenance organizations, state and federal health programs
including Medicare Part D, and Medicaid-managed care plans.
These managers impact the lives of 226 million insured
Americans with most of them enrolled in private health plans.
So they have a special role in the drug supply chain that
includes determining payments and pricing for drugs, processing
pharmacy drug claims, negotiating rebates and discounts from
drug manufacturers, designing drug plan formularies, and
operating mail order businesses.
Retail pharmacies have a large neighborhood presence
representing large drug store chains, pharmacy departments in
local supermarkets and big box retailers, and independent
community pharmacies that occupy a unique and essential role
within the drug supply chain. Many drug stores contract with
payors and pharmacy benefit managers to join health plan
pharmacy networks. Some larger pharmacy chains have also
entered into joint ventures with PBMs and insurers.
Finally, private health insurance plans are likely
recognized by most Americans to have a direct impact on their
ability to access prescription drugs, largely due to the
dictates of federal laws such as the Affordable Care Act on
benefit requirements and out-of-pocket spending limits. They
employ utilization controls to manage cost such as multi-tier
drug formularies, step therapies, prior authorizations for
certain high-cost brand name medicines.
Again, I want to welcome all of our witnesses here today.
As you see, we have the entire panoply of the supply chain here
before us.
I look forward to your testimony and we will recognize Mr.
Green of Texas, the ranking member of the subcommittee, 5
minutes for an opening statement.
[The prepared statement of Mr. Burgess follows:
Prepared statement of Hon. Michael C. Burgess
The Subcommittee will come to order.
The Chair will recognize himself for an opening statement.
The multifaceted nature of the current U.S. drug supply
chain system is complex and interwoven with multiple
stakeholders involved in each step of the process. Improving
access to life-saving treatments for consumers should be a non-
partisan priority for all of us. Two weeks ago, the Health
Subcommittee held a hearing on the implementation of the 21st
Century Cures Act and heard testimonies from officials at the
helm of the National Institutes of Health and the Food and Drug
Administration about the law's transformative impact on
maintaining our nation's global leadership in biomedical
innovation. Built into that very concept is the expectation
that innovative and breakthrough treatments will get developed,
approved, and introduced into the therapeutic market to cure
diseases or effectively manage chronic conditions, so people
can lead healthier, fuller lives.
Today's hearing will serve as an important educational
opportunity to better understand the intricacies of our
nation's drug supply chain. To help us work toward that goal,
we will hear from a diverse group of representatives--ten to be
exact--that represent the many facets of the supply chain
process. I want to welcome each of you to the subcommittee this
morning. It is my hope our discussion today is substantive and
largely focused on the patients who are prescribed these
medications because, at the end of the day, they are who matter
most in this conversation.
Practicing medicine, I cared most about prescribing my
patients a drug that was efficacious and safe without thinking
too much about whether they would be able to fill their
prescription at the pharmacy. Now, the conversation has shifted
to a complicated back-and-forth between doctors, patients,
insurance companies, and pharmacies about drug copays, prior
authorizations, and drug formularies, among other things. Over
the last few years, we have also learned about acquisitions and
mergers within and amongst the various drug supply chain as
companies seek out increased integration of their operations
with an eye towards more efficiencies over the larger continuum
of the system.
Prescription drugs continue to play a vital role in the
United States health care system, from significantly improving
patients' lives to producing health care savings through fewer
hospitalizations and medical procedures. A patient's access to
prescription drugs is a key healthcare issue for Americans, and
within that context is the debate over affordability.
Now, I also expect disagreement. But, while there are
legitimate differences of opinion, I recognize that every
participant here this morning does aspire to the common goal of
saving lives and alleviating human suffering. And so out of
these areas of disagreement--I hope to begin to identify areas
of consensus so that we can begin delivering solutions to the
problems identified this morning.
These stakeholders include pharmaceutical manufacturers
that primarily research, develop, and produce brand-name and
generic drugs, biologics, and biosimilars. These medicines
treat a spectrum of diseases and conditions, such as allergies,
infections, and hypertension to cancer, diabetes, and
rheumatoid arthritis.
Next, pharmaceutical wholesalers purchase these drugs and
store them in regional distribution centers for delivery points
that include pharmacies, supermarket retailers, hospitals,
physician groups, and other healthcare providers. Wholesalers
also provide other ancillary services such as repackaging,
consulting, inventory management, and patient discount
programs.
Overall, pharmacy benefit managers (PBMs) manage
prescription drug benefits on behalf of employer-sponsored
health plans, health maintenance organizations, state and
federal health programs, including Medicare Part D and Medicaid
managed care plans. PBMs impact the lives of 266 million
insured Americans, with most them enrolled in private health
plans. They have a special role in the drug supply chain that
include determining payments and pricing for drugs, processing
pharmacy drug claims, negotiating rebate and discounts from
drug manufacturers, designing drug plan formularies, and
operating mail-order and specialty pharmacies.
Retail pharmacies have a large neighborhood presence,
representing large drug store chains, pharmacy departments in
local supermarkets and big-box retailers, and independent
(community) pharmacies that occupy a unique and essential role
within the drug supply chain. Many drug stores contract with
payers and PBMs to join health plan pharmacy networks; some
larger pharmacy chains have also entered into joint ventures
with PBMs and insurers.
Finally, private health insurance plans are likely
recognized by most Americans to have a direct impact on their
ability to access prescription drugs, largely due to the
dictates of federal laws, such as the Affordable Care Act, on
benefit requirements and out-of-pocket spending limits. They
employ utilization controls to manage costs, such as multi-
tiered drug formularies, step therapies, and prior
authorizations for certain high-cost brand-name medicines.
I again want to welcome our witnesses and thank you for
being here. I look forward to your testimony.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, and thank you to our
witnesses for being here this morning.
Too many Americans face real barriers in accessing the
medications they need. Annual drug spending in the U.S. is
expected to reach more than $500 billion by 2018.
In 2015, the rise in prescription drug spending outpaced
all other health care services, surpassing hospital care as
well as physician and clinical services.
While new life changing and lifesaving therapies continue
to enter the market each year, patients must be able to afford
these treatments in order to benefit from these breakthroughs.
The issue of high drug costs is not a simple challenge with
a simple solution. Instances of bad actors buying up off-patent
generic drugs with only one manufacturer astronomically jacking
up the price has posed one type of challenge while breakthrough
treatments capable of curing previously incurable disease but
will have staggering price tags poses a different one.
These challenges are magnified by the proliferation of the
high deductible plans which expose more and more consumers to
the full list of their medications.
We have a responsibility to explore the full spectrum of
the supply chain to protect patients which are distinct for
generic and brand name drugs and frustratingly complex.
The United States leads the world in biomedical
development, but having 21st Century Cures means much less if
people cannot access because of the high prices.
It's important to also recognize that pharmaceutical
companies sponsor the research that leads to these advances. We
must find a workable solution that incentivizes competition in
the pharmaceutical marketplace, reward value, and encourage the
development of these affordable and high quality drugs.
We must also monitor steep prescription drug price
increases when they rise, particularly when no additional
research or development has occurred.
There are a number of policy proposals that are represented
to address the issue of high prescription drug costs.
Transparency and value-based approaches are some of the keys to
market-based reforms that will lead to better prices, continued
investment in research and development, and ensure that
taxpayers receive a real return on their investment.
I want to note that in pursuit of the lower drug prices,
Congress must be careful to avoid the policies that will
diminish patient safety.
Filling out an application to the FDA is one step in what
can be a decades-long process to get from the lab table to the
bedside.
Proposals that would lower FDA safety and effective
standards effectively outsource FDA oversight to other
countries, push the stage of three trials into the post-
approval space are unlikely to translate into meaningful
savings for customers and are likely to put patients at risk.
Making the FDA approval process as sophisticated and
efficient as it can be is one thing, but rolling back patient
protections in the name of lower drug prices is not an
acceptable path.
We should be looking on how we pay for drugs and reward
real value in the order of safety and meaningful, address the
rising costs of prescription drugs.
Following our bipartisan work on the 21st Century Cures
Act, our recent work to reauthorize the FDA user fee programs,
it is my hope that we can advance bipartisan policies to
address rising drug costs.
This problem demands a bipartisan and thoughtful process
that includes a full spectrum of stakeholders. The American
people expect us to work together to find answers and I believe
we can do so.
I want to thank you for being here today and look forward
to the day's discussion. And Mr. Chairman, I have one more
minute. I'd like--anybody would like to have a minute? No? OK.
I'd like to ask unanimous consent to place into the record,
Mr. Chairman, a letter from AARP.
Mr. Burgess. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Burgess. I believe the chair actually already used your
minute.
Does the gentleman yield back?
Mr. Green. I yield back.
Mr. Burgess. The chair thanks the gentleman.
Mr. Green. You owe me a minute sometime.
Mr. Burgess. Oh, next week.
The chair now recognizes the gentleman from Oregon, the
chairman of the full committee, Mr. Walden, 5 minutes, please.
[The prepared statement of Mr. Green follows:]
Prepared statement of Hon. Gene Green
Thank you Mr. Chairman, and thank you to our witnesses for
being here this morning.
Too many Americans face real barriers to accessing the
medications they need.
Annual drug spending in the U.S. is expected to reach more
than $500 billion by 2018.
In 2015, the rise prescription drug spending outpaced all
other health care services, surpassing hospital care as well as
physician and clinical services.
While new life-changing and life-saving therapies continue
to enter the market each year, patients must be able to afford
these treatments in order to benefit from these breakthroughs.
The issue of high drug costs is not a simple challenge with
a simple solution.
Instances of bad actors buying up off-patent generic drugs
only made by one manufacturer and astronomically jacking up the
price poses one type of challenge, while breakthrough
treatments capable of curing previously un-curable disease but
have a staggering price tag poses a different one.
These challenges are magnified by the proliferation of
high-deductible plans, which expose more and more consumers to
the full list price of their medications.
We have a responsibility to explore the full spectrum of
the supply chain to protect patients, which are distinct for
generic and brand-name drugs, and frustratingly complex.
The United States leads the world in biomedical
development, but having 21st century cures means much less if
people cannot access them because of high prices.
It is important to also recognize that pharmaceutical
companies sponsor the research that leads to these advances.
We must find workable solutions that incentivize
competition in the pharmaceutical marketplace, reward value,
and encourage the development of affordable and high quality
drugs.
We must also monitor steep prescription drug price
increases when they arise, particularly when no additional
research and development has occurred.
There are a number of policy proposals that have been
presented to address the issue of high prescription drug costs.
Transparency and value-based approaches are some of the
keys to market-based reforms that will lead to better prices,
continued investment in research and development, and ensure
that taxpayers receive a real return on their investment.
I want to note that in the pursuit of lower drug prices,
Congress must be careful to avoid policies that will diminish
patient safety.
Filing an application with the FDA is the last step in what
can be a decade's long process to get from the lab table to the
bedside.
Proposals that would lower FDA safety and effective
standards, effectively outsource FDA oversight to other
countries, or push stagethree trials into the post-approval
space are unlikely to translate into meaning savings for
consumers and are likely put patients at risk.
Making the FDA approval process as sophisticated and
efficient as it can be is one thing, but rolling back patient
protections in the name of lower drug prices is not an
acceptable path.
We should be looking at how we pay for drugs, and reward
real value in order to safely and meaningfully address the
rising costs of prescription drugs.
Following our bipartisan work on the 21st Century Cures Act
and our recent work to reauthorize the FDA user fee programs,
it is my hope that we can advance bipartisan policies to
address rising drug costs.
This problem demands a bipartisan, thoughtful process that
includes the full spectrum of stakeholders.
The American people expect us to work together to find
answers and I believe we can do so.
Thank you all for being here today, and I look forward to
today's discussion.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Dr. Burgess, thank you for holding this
important discussion. I appreciate your comments and those of
Mr. Green's about the full set of issues before us and the
overwhelming desire by our constituents that we dive deep into
the whole drug chain and figure out how we can put consumers
first not only in developing new medicines and new innovation
and better pricing as well.
As Mr. Green mentioned, this community unanimously
reauthorized and the president signed into law the FDA
Modernization Act. This committee last Congress championed the
21st Century Cures Act with Congresswoman DeGette and
Congressman Upton at the helm of that, celebrating its one-year
anniversary.
But, clearly, there is more to be done, and as chairman of
the committee, I felt it was really important that we hear from
the entire sector from the development of new drugs to the
final end place where we buy them, we consume them, we use
them.
For more than 4 years, members of this committee have
listened to patients. We have listened to providers. We have
listened to payors. The Federal Government is one of the
biggest payors in this effort and we are all about accelerating
the discovery, development, and delivery of innovative drugs
and medical devices. That was a lot of what was behind passage
and implementation of 21st Century Cures.
We have heard from Dr. Gottlieb and we have heard from the
head of NIH about the progress they are making already with the
legislation we have enacted.
Today, though, we want to get a more full appreciation for
the drug supply chain, and I think you all would have to
acknowledge its complexity, and we want to ask questions
instead of jumping to conclusions.
I encourage members on both sides of the aisle to dismiss,
to a certain extent, any of your preconceived notions and let's
focus on how each stage of the drug supply chain impacts
access, delivery, and delivery of drugs and, of course, costs.
We need to listen to the complex journey from molecular
discoveries to patient deliveries that one dose of medicine
takes along the way and we all need to learn about the impact
each participant in the supply chain has in the ultimate cost
to patients.
And we have no shortage of witnesses today to help us gain
a better understanding, and we appreciate you all being here.
We have representatives from the manufacturers, the
distributors, the payers, the pharmacists, the providers, and
the patients.
And I promise today's hearing will be an informative
discussion and, I dare say, not the last as we move forward to
better educate ourselves and then look at the public policy
changes that need to be made to move America forward in these
areas.
So I thank you all for your participation. I think you'll
find the committee is very interested in every step of this
process and with that, Mr. Chairman, I would yield the balance
of my time to the chairwoman of the Telecommunications
Subcommittee, the gentlelady from Tennessee, Mrs. Blackburn.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
Thank you, Dr. Burgess, for holding this important
discussion.
As we all know, no one is immune to sickness and disease.
This is, in part, why our committee--under the bipartisan
leadership of former Chairman Fred Upton and Congresswoman
Diana DeGette--championed the 21st Century Cures initiative.
For more than 4 years, members of this committee listened
to patients, providers, and payors. Accelerating the discovery,
development, and delivery of innovative drugs became a
nationwide mantra for the passage of Cures. And I'm proud to
say that today--thanks to the tireless advocacy of patients
across the country and the endurance of members of this
committee--we celebrate the one-year anniversary of this
landmark bill being signed into law.
But our work isn't done. As Dr. Burgess has said, ``As we
continue to build on the success of the transformative 21st
Century Cures act, our committee must fully comprehend how each
step of the drug supply chain process impacts consumers.''
He's right. And it is why we are here today--to learn from
patient and industry experts and improve our understanding of
the drug supply chain.
In order to fully appreciate the drug supply chain you have
to acknowledge its complexity and ask questions instead of
jumping to conclusions. I encourage members on both sides of
the aisle to dismiss any preconceived notions and focus on how
each stage of the drug supply chain impacts access and delivery
of drugs. Listen to the complex journey--from molecular
discoveries to patient deliveries--that one dose of medicine
takes.
Now, I'll be up front: For me, this isn't a drug pricing
hearing. There's enough rhetoric about the cost of drugs. But
having said that I know that I have more to learn about the
impact each participant in the supply chain has in the ultimate
cost to patients. And we have no shortage of witnesses to
question As you can see, we have invited witnesses from each
step of the process: manufacturers, distributers, payors,
pharmacists, providers, and patients. I promise today's hearing
will be an informative discussion.
On that note, I'd like to welcome to each of our expert
panelists. I appreciate your generosity and willingness to
participate today. And I yield to Mrs. Blackburn of Tennessee,
who would like to offer a few opening remarks.
Mrs. Blackburn. Thank you, Mr. Chairman, and I thank
Chairman Burgess for the hearing and to each of you. We know it
is the busy time of year. We are appreciative that you are here
before us and, as Chairman Burgess said, we have the entire
panoply of the system.
And most of my constituents will tell you they understand
how their doctor, their insurance plan, and the pharmacy play
into the prescriptions they receive. They do not have the
understanding, as Chairman Walden said, of the complex system
that goes from research to the time they pick up that
prescription, and we are so interested in looking at this
access, delivery, and cost issue within this entire spectrum.
It does affect health care delivery, and being from middle
Tennessee, we have a lot of health care in my congressional
district and this entire supply chain is an issue that we
discuss often.
And we are excited about some of the new innovations that
are coming your way with technology. So that will enter into
our discussion today. Thank you for your presence and, Mr.
Chairman, I will yield back to you the balance of the time and
if there is another member who would like to claim that time.
Yield back.
Mr. Burgess. Seeing none, the gentlelady yields back. The
chair thanks the gentlelady.
The chair recognizes the gentleman from New Jersey, the
ranking member of the full committee, Mr. Pallone, 5 minutes
for an opening statement, please.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman.
This committee has spent considerable time examining the
drug supply chain both through the Drug Quality Security Act
and, more recently, through the 21st Century Cures, and today
is actually the 1-year anniversary of when President Obama
signed 21st Century Cures. Both of these legislative efforts
were the result of considerable oversight and discussion as to
how the drug supply chain worked, how it could be better
secured and how we could encourage efficiencies to improve drug
development. And these bipartisan efforts have helped to
address the post-market security of products and the regulatory
review process. But neither effort focused on how prescription
drugs move through the supply chain through the financial lens.
Prescription drug prices are higher than ever, and while
the dramatic rise in prescription spending has come down a
little, we know addressing drug costs continues to be a top
priority for many American families. The costs of prescriptions
have forced so many American families to make tough choices.
For some, it is a choice of filling their prescriptions or
filling their tank of gas to get to work. For others, they are
leaving prescriptions unfulfilled, skipping doses, or cutting
pill in half so they don't have to purchase their prescriptions
that often, and none of these choices is acceptable.
Today, prescription drug spending represents about 14
percent of overall health care spending. It is no wonder that
six in 10 Americans have said that lowering prescription drug
costs should be a top priority for Congress and this
administration and I am pleased that there has been such
bipartisan interest in this topic both during consideration of
the FDA Reauthorization Act and at recent member briefings, and
I do believe that making prescription drugs more affordable for
the average consumer is an issue that we all care about and can
support.
And that is why today's hearing is so important. This
morning, we have the opportunity to better understand the drug
supply chain and the often-complicated ways that drugs move
through the supply chain to the patient. As my colleagues have
pointed out, we will hear from each of our witnesses about the
role they play regarding drug delivery, the impact they have on
the cost of drugs, and the value they bring to patients and
consumers, and I hope and expect that today's hearing will
serve as a foundation for future hearings on policy solutions
that may help reduce prescription drug costs in our health care
system.
While understanding how the supply chain works is
critically important to this committee, I also would urge
Chairman Walden to schedule a legislative hearing in the early
part of next year to examine specific proposals to address the
high prices of prescription drugs.
Our constituents want and expect us to take concrete action
to address this growing problem. And the problems we are seeing
in the supply chain cannot be addressed through one policy
solution and all of our witnesses have a role to play in these
solutions.
It is long past time for Congress to take a serious look at
all solutions that will help American families to afford the
medications they depend on and I look forward to further
bipartisan discussion on what that broad range of policy
solutions may look like.
And I want to thank each of our witnesses for being here
and look forward to learning more about your role in the drug
supply chain and how we can improve access to drugs for
patients in the future, and I would like to yield the remainder
of my time to Congressman Lujan from New Mexico.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
This Committee has spent considerable time examining the
drug supply chain both through the Drug Quality Security Act,
and more recently through 21st Century Cures. Both of these
legislative efforts were the result of considerable oversight
and discussion as to how the drug supply chain worked, how it
could be better secured, and how we could encourage
efficiencies to improve drug development. These bipartisan
efforts have helped address the post market security of
products and the regulatory review process, but neither effort
focused on how prescription drugs move through the supply chain
through the financial lens.
Prescription drug prices are higher than ever, and while
the dramatic rise in prescription spending has come down some,
we know addressing drug costs continues to be a top priority
for many American families. The costs of prescriptions have
forced so many American families to make tough choices. For
some, it's a choice of filling their prescription or filling
their tank of gas to get to work. For others, they are leaving
prescriptions unfilled, skipping doses, or cutting pills in
half so that they don't have to purchase their prescriptions as
often. None of these choices are acceptable.
Today, prescription drug spending represents about 14
percent of overall healthcare spending. It's no wonder that six
in ten Americans have said that lowering prescription drug
costs should be a top priority for Congress and this
Administration. I am pleased that there has been such
bipartisan interest in this topic--both during consideration of
the Food and Drug Administration Reauthorization Act and at
recent Member briefings. I do believe that making prescription
drugs more affordable for the average consumer is an issue that
we all care about and can support.
That is why today's hearing is so important. This morning
we have the opportunity to better understand the drug supply
chain and the often complicated ways that drugs move through
the supply chain to the patient. As my colleagues have pointed
out, we will hear from each of our witnesses about the role
they play regarding drug delivery, the impact they have on the
cost of a drug, and the value that they bring to patients and
consumers.
I hope and expect that today's hearing will serve as a
foundation for future hearings on policy solutions that may
help reduce prescription drug costs in our healthcare system.
While understanding how the supply chain works is critically
important to this Committee, I urge Chairman Walden to schedule
a legislative hearing in the early part of next year to examine
specific proposals to address the high prices of prescription
drugs. Our constituents want and expect us to take concrete
action to address this growing problem.
The problems we are seeing in the supply chain cannot be
addressed through one policy solution and all of our witnesses
have a role to play in these solutions. It is long past time
for Congress to take a serious look at all solutions that will
help American families to afford the medications they depend
on. I look forward to further bipartisan discussion on what
that broad range of policy solutions may look like.
I want to thank each of our witnesses for being here. I
look forward to learning more about your role in the drug
supply chain and how we can improve access to drugs for
patients in the future.
Thank you.
Mr. Lujan. Thank you, Mr. Pallone, and Mr. Chairman, thank
you for this important hearing.
There is so much going on in the health care arena right
now--CHIP, community health centers, National Health Services
Corps, special diabetes program, Medicare extenders, Puerto
Rico's Medicaid program--items that all need attention and need
it now.
With all these priorities competing for attention, it would
be easy to lose sight of which should be our guiding star--
finding ways to balance innovation and affordability.
We depend on different approaches to give us more time with
the ones we love, whether it is a brother who lives with
diabetes or a mother with a new cancer diagnosis. Our lives
have been improved by many tools including pharmaceutical
therapies. To realize the promise of these innovations, we must
ensure patients can access the cures that manufacturers spend
so much energy and effort developing. It doesn't help to hold
out hope for a cure if there is no hope that regular people can
afford it.
It is unrealistic to think the answer to making
prescription drugs affordable for everyone is ending the 340B
program or allowing for off-label communication.
We must all look holistically at what affordable accessible
health care means. I am also real interested, Mr. Chairman--on
a bit of a sidebar here--because we have everyone in the room
to work with you and make sure that we are pushing pain
management treatments that are nonaddictive.
This is critically important. We have a huge problem facing
our country and we need to work together to get that done. We
also need serious treatments from everyone here to make sure
that we are addressing the cravings that come from opioids and
alcohol.
Simply having medications that make someone sick if they
use is not going to stop the craving and not going to stop use.
I am hopeful this is the first of many hearings examining
how we ensure affordable accessible prescription drugs and I
look forward to working with everyone here on real solutions.
Thank you, Mr. Chairman.
Mr. Burgess. Chair thanks the gentleman. Gentleman yields
back.
This will conclude member opening statements and the chair
would remind members that pursuant to committee rules, all
members' opening statements will be made part of the record.
And once again, we do want to thank our witnesses for being
here today, taking time to testify before the subcommittee.
Each witness is going to have an opportunity to give a three-
minute opening statement and that will be followed by questions
from members.
So today, in order, we are going to hear from Lori Reilly,
the Executive Vice President for Policy, Research, and
Membership at the Pharmaceutical Research and Manufacturers
Association of America; Tom DiLenge, President, Advocacy, Law,
and Public Policy, Biotechnology Innovation Organization; Chip
Davis, President and CEO for the Association for Accessible
Medicines; Elizabeth Gallenagh, Senior Vice President,
Government Affairs and General Counsel, Health Care
Distribution Alliance; Mark Merritt, President and CEO for the
Pharmaceutical Care Management Association; Matt Eyles, the
Senior Executive Vice President and Chief Operating Officer for
Policy and Regulatory Affairs at America's Health Insurance
Plans; Tom Nickels, the Executive Vice President for Government
Relations and Public Policy for the American Hospital
Association; Gerald Harmon, M.D., Chairman of the Board of
Trustees of the American Medical Association; Douglas Hoey, the
CEO of the National Community Pharmacists Association; and
David Mitchell, the Founder and President of Patients for
Affordable Drugs.
We do appreciate you all being here this morning. Ms.
Reilly, you are now recognized for 3 minutes to give a summary
of your opening statement.
STATEMENTS OF LORI REILLY, EXECUTIVE VICE PRESIDENT FOR POLICY,
RESEARCH, AND MEMBERSHIP, PHARMACEUTICAL RESEARCH AND
MANUFACTURERS OF AMERICA; TOM DILENGE, PRESIDENT, ADVOCACY,
LAW, AND PUBLIC POLICY, BIOTECHNOLOGY INNOVATION ORGANIZATION;
CHIP DAVIS, PRESIDENT AND CEO, ASSOCIATION FOR ACCESSIBLE
MEDICINES; ELIZABETH GALLENAGH, SENIOR VICE PRESIDENT,
GOVERNMENTAL AFFAIRS AND GENERAL COUNSEL, HEALTHCARE
DISTRIBUTION ALLIANCE; MARK MERRITT, PRESIDENT AND CEO,
PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION; MATT EYLES, SENIOR
EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER FOR POLICY
AND REGULATORY AFFAIRS, AMERICA'S HEALTH INSURANCE PLANS; TOM
NICKELS, EXECUTIVE VICE PRESIDENT FOR GOVERNMENT RELATIONS AND
PUBLIC POLICY, AMERICAN HOSPITAL ASSOCIATION; GERALD HARMON,
M.D., CHAIR, BOARD OF TRUSTEES, AMERICAN MEDICAL ASSOCIATION;
B. DOUGLAS HOEY, CEO, NATIONAL COMMUNITY PHARMACISTS
ASSOCIATION; DAVID MITCHELL, FOUNDER AND PRESIDENT, PATIENTS
FOR AFFORDABLE DRUGS
STATEMENT OF LORI REILLY
Ms. Reilly. Thank you, Chairman Burgess, Chairman Walden,
and Ranking Members Green and Pallone.
My name is Lori Reilly and I am the Executive Vice
President for Policy and Research at PhRMA and it is my
pleasure to be here today.
Over the past 20 years, more than 500 new medicines have
been approved to come to market to treat some our nation's most
challenging and costly conditions. In the midst of this
progress, prescription drug medicine growth is growing slowly.
Just last week, CMS released new data to show that prescription
drug spending in 2016 grew at 1.3 percent. That was lower than
any other category of spending. To put that into context,
hospital spending growth grew at three and a half times that
amount. In the last 7 out of 10 years, prescription drug
spending growth has been below national spending growth.
Today, medicines consume about 14 percent of the health
care dollar, and many assume, when they see that number, that
all, or substantially all, of that flows back to the brand name
manufacturers. However, less than half of that, or 47 percent,
is attributable to brand name drug spending. The remainder, 23
percent, goes to generic firms and 31 percent goes to the
supply chain.
Going forward over the next decade, medicines are projected
to remain 14 percent of the health care dollar, and many
question how is that possible knowing all of the new
innovations that are coming to market in the coming years. And
there are a few reasons for that, the first being that over
$100 billion worth of medicines will be going off-patent over
the next five years and that will put cost pressure as new
generics and biosimilars enter the marketplace. The second is
the fact that there is significant cost constraint in the
prescription drug market as three large pharmacy benefit
managers buy on behalf of over 70 percent of all prescriptions
in this country.
These PBMs exert significant cost pressure to keep prices
and spending in check. One of the ways they do that is by
extracting significant discounts and rebates from
pharmaceutical manufacturers. In fact, discounters and rebates
increased 40 percent over the last 4 years and now total over
$100 billion a year. Unfortunately, oftentimes those discounts
and rebates are captured by intermediaries and don't make their
way back to patients. This problem has become more acute over
time as we've seen a dramatic increase in the number of
patients that today have a deductible for their medicine.
So take, for example, a patient who takes an insulin
product with a list price of $400 and that medicine carries a
discount of about 65 percent. A patient with a deductible today
goes to the pharmacy counter and will be asked to pay $400 for
that medicine despite the fact that the insurance company is
paying nothing while earning $239 on every sale. Given the
rapid rise in deductibles, this must change. Insurance
companies and PBMs must be pushing these discounts and rebates
back to patients to lower their out-of-pocket spending.
With that, my time is up and I look forward to questions
today. Thank you.
[The prepared statement of Ms. Reilly follows:]
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Mr. Burgess. Chair thanks the gentlelady.
The chair recognizes Mr. DiLenge for 3 minutes for your
opening statement, please.
STATEMENT OF TOM DILENGE
Mr. DiLenge. Thank you, Mr. Chairman, Ranking Member Green,
Mr. Walden, Ranking Member Pallone. Thank you for the
opportunity to testify today about how to sustain the
biomedical innovation that is bringing home and cures to the
patients who need them the most.
I am Tom DiLenge. I am Vice President for Advocacy, Law,
and Public Policy. While BIO represents the entire biomedical
ecosystem--universities, startups, investors, large drug
companies--the vast majority of our members--about 80 percent--
are small companies with no marketed products and no profits.
They rely heavily on outside investors and partners to fund the
cutting-edge research that they do, and it is these small
companies that are leading 70 percent of the nearly 6,000
clinical trials that are underway today.
Another key fact--almost 60 percent of all new medicines
are innovated right here in America, more than the rest of the
world combined. We lead because America has a public policy
environment that incentivizes the investment and innovation and
this committee, on a bipartisan basis, has led the way on that
for decades. This is critical because, while NIH funds really
important research, it is the private sector that spends $150
billion every year in applied R&D to bring products from
research to the marketplace.
This investment provides more than 1.7 million American
jobs and we are growing jobs at twice the rate of the national
average. More importantly, we are having an awe-inspiring
record of public health accomplishment, transforming HIV/AIDS
from a death sentence to a manageable condition, increasing
cancer survival in children to 83 percent today, and hundreds
of other new medicines for once-debilitating diseases.
We are saving millions of lives. We are saving trillions of
dollars in the process. We are making discoveries that were
once unimaginable--immuno-oncology, in which we activate the
body's own immune system to attack cancer--gene therapy, which
we can repair defective genes or use the patient's own cells to
make a medicine tailored for that patient.
Precision and personalized medicine is here. Thus, to
understand the pricing dynamics of our market, it is important
to consider a couple of facts. Ninety percent of clinical
programs fail. Ninety-two percent of our companies are
unprofitable. Ten to 15 years and $2.6 billion, the average
time and cost to bring a medicine through approval, that number
has doubled since 2003, and nearly 90 percent of prescriptions
today in America are for cheap generic copies of once-branded
drugs. Thus, it is the revenues from the 10 percent of
successful clinical programs that have to be sufficient to
incentivize this entire wonderful innovation ecosystem.
We have repeatedly seen biotech investment jeopardized by
the spectre of government price setting. The small companies
are the proverbial canaries in the coal mine when it comes to
that.
We also recognize that patients, even those with insurance,
cannot afford many of these lifesaving miracles. We share this
commitment to solving the problem. BIO has joined the coalition
with a lot of people at the table and others--insurers, PBMs,
patient groups--to come up with market-based ways to lower drug
costs. We'd love to work with this committee on doing that.
Reward volume, reward value, not volume, inject more
competition, empower patients. So with Congress' continued
support, we are going to put more Americans to work, we are
going to lower health care costs, and we are going to heal the
world in the process.
Thank you, and I am happy to answer any questions you have.
[The prepared statement of Mr. DiLenge follows:]
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Mr. Burgess. The chair thanks the gentleman.
Mr. Davis, you're recognized for 3 minutes for an opening
statement, please. And your microphone.
STATEMENT OF CHIP DAVIS
Mr. Davis. Sorry about that.
Good morning, Chairman Burgess, Ranking Member Green,
Chairman Walden, and Ranking Member Pallone, members of the
subcommittee. Thank you for the invitation and opportunity to
testify today.
As stated, my name is Chip Davis. I am the President and
CEO of the Association for Accessible Medicines. We are the
leading trade association for manufacturers of FDA-approved
generic and biosimilar medicines. Our members manufacture more
than 61 billion doses of medication at over 150 facilities here
in the United States on an annual basis.
As you know, Americans across the political spectrum are
calling for action to lower the cost of prescription drugs,
making it a foremost health priority, which is why we are all
here today. Despite a lot of well-intentioned rhetoric, over
the last year the problem of high drug prices by and large
continues unabated.
Last month, the nominee for secretary of health and human
services, Alex Azar, said that drug prices are too high and
must be lowered. FDA Commissioner Scott Gottlieb recently
characterized drug costs as a public health concern.
Congress now has the opportunity to take meaningful action
to lower the cost of prescription drugs. Over 30 years ago,
through Hatch-Waxman, Congress sought to strike a careful
balance between encouraging innovation in drug development,
which we all support, and accelerating access to lower cost
generic alternatives for patients.
Unfortunately, the patient access side of Hatch-Waxman is
absolutely unequivocally in jeopardy as we speak. This is due
to a combination of factors, including a failure of policy to
keep pace with a changing pharmaceutical market, a growing
market and balance between generic buyers and sellers, and an
increase in anti-competitive business practices deployed by
certain brand companies who have been increasing these
activities so much in recent years that recently Commissioner
Gottlieb counseled the industry last month, and I am quoting,
``to end the shenanigans,'' during his formal remarks at an FTC
hearing.
The generic industry operates in a rapidly changing often-
commoditized marketplace with significant and unique pressures
that distinguish it from the monopolized brands sector. As a
result, generics continue to experience accelerated price
deflation. In fact, it is ironic in many ways that at a time
when the overall costs of prescription drugs is such a high
profile issue that generic medicines are currently experiencing
an unprecedented degree of price deflation, which impacts the
national health estimate figures that were mentioned
previously. In fact, according to IQVIA, which is formerly
Quintiles IMS, for 16 consecutive months generic drugs prices
have declined.
Our members operate in a consolidated market where three
large buying consortiums of wholesalers and retail pharmacies
now control 90 percent of the retail generic market. Portfolio
decisions related to what medicines they will continue to
manufacture, announcing pending closures of manufacturing
facilities, and significant anticipated job layoffs in the
generic sector are all things that we are currently
experiencing.
Should the market not evolve itself and should Congress
fail to take action, these trends will continue, threatening
uninterrupted patient access to the needed generic medicines.
When generics and biosimilars are available, competition
increases and patients benefit from access to safe and
affordable treatment options.
We have provided this committee with recommendations that
Congress could take today to increase competition and increase
patient access.
I thank you again for the opportunity to testify and look
forward to your questions today.
Thank you.
[The prepared statement of Mr. Davis follows:]
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Mr. Burgess. The chair thanks the gentleman.
Ms. Gallenagh, you're recognized for 3 minutes, please, to
summarize your opening statement.
STATEMENT OF ELIZABETH GALLENAGH
Ms. Gallenagh. Good morning, Chairman Burgess, Ranking
Member Green, Chairman Walden, and Ranking Member Pallone and
members of the subcommittee.
Thank you for the chance to participate in today's hearing.
Health Care Distribution Alliance represents 35 primary
pharmaceutical distributors, the vital link between the
nation's pharmaceutical manufacturers and more than 200,000
pharmacies, hospitals, and other providers nationwide. Their
expertise streamlines the supply chain to ensure safety and
efficiency while achieving cost savings for our nation's health
care system.
Without HDA members, pharmacies and providers would have to
carry weeks of inventory and undertake the time consuming
process of placing daily individual orders with every
manufacturer. By working with full line distributors,
pharmacies can maintain just-in-time inventories, saving them
the expense and staff necessary to carry extensive inventories
or manage large storage facilities.
While our members are logistics experts, pharmaceutical
distribution has evolved over the last decade. This is no
longer an industry focused solely on moving products from point
A to point B. In exchange for a variety of distribution and
logistics services that primary distributors provide to
manufacturers, they charge bona fide service fees. These fees,
which are not passed on to the customer, represent a fair
market value for itemized services actually performed on behalf
of the manufacturer that the manufacturer would have to perform
otherwise for themselves.
Our industry is a very high volume yet low profit margin
industry with the industry margin just over 1 percent on
average in 2016. Moreover, in a recent 2017 study, the Berkeley
Research Group concluded the pharmaceutical wholesale
distributor profit on overall branded drug costs was just under
1 percent.
Traditional pharmaceutical wholesale distributors purchase
pharmaceuticals from manufacturers based on the wholesale
acquisition cost, or WAC--a publicly available figure reported
for each product by the manufacturer. WAC represents the
manufacturer's list price and does not include rebates, prompt
payment, or other adjustments in price resulting from
downstream or proprietary negotiation. Manufacturers set the
WAC prices for their products and distributors are not privy to
how that pricing decisions are made.
Primary distributors typically sell branded drugs to
downstream customers based on those WACs established solely by
those manufacturers. Distributors might also sell generic drugs
to downstream customers based on WACs or they may be based in
part on response to the market, which includes competing
generic drugs. In other words, wholesale distributors do not
control the price of pharmaceuticals, but rather the price of
pharmaceuticals is dictated by list prices determined by their
manufacturers and other market forces including the WACs of
generic drugs that compete with given generic drug products.
HDA distributor members add value within the supply chain
and have minimal impact on the overall cost of drugs.
Ultimately, the services provided by our members result in
benefits to patients and consumers and have made the U.S.
pharmaceutical supply chain one of the safest and most
efficient in the world.
Thank you. I would be happy to answer any question.
[The prepared statement of Ms. Gallenagh follows:]
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Mr. Burgess. The chair thanks the gentlelady.
The chair recognizes Mr. Merritt for 3 minutes. Summarize
your opening statement, please.
STATEMENT OF MARK MERRITT
Mr. Merritt. Thank you, Mr. Chairman, and members of the
committee.
Pharmacy benefit managers are the industry that employers
and others hire to negotiate discounts and reduce prescription
drug costs.
We see too many reasons why drug pricing has become a focal
point in recent years. First, as drug makers shift from making
blockbuster drugs like Lipitor, which cost maybe $3 a day, to
making much more expensive products like Sovaldi--a great
product, but it costs $1,000 a day. Second, in the face of
rising medical costs, more health plans are raising deductibles
in order to keep premiums as low as possible. This means for
the first time some patients who had grown accustomed to paying
$2,500 for a $500 drug are now seeing how expensive some of
these drugs really are.
It's important to note that while the subject of today's
hearing--the drug supply chain--is important and worthy to be
discussed, it has nothing to do with why drug companies raise
prices. As always, pricing power and pricing decisions in any
industry are driven by supply and demand and competition, not
supply chains.
Prices are set exclusively by drug companies with zero
input from anybody else in the supply chain including PBMs.
Further, supply chains are a routine part of how consumers
access products in the marketplace today. Every industry uses
them. They are not unique to health care or prescription drugs.
In the simplest terms, the prescription drug marketplace is
like any other--a market of sellers and buyers. Drug makers are
the sellers and, like all sellers, set prices according to
whatever they think the market will bear. Likewise, buyers, who
we represent, want to pay as little as possible. These are the
employers, unions, health plans, and government programs that
hire PBMs to negotiate rebates, discounts, and other price
concessions from drug makers and drug stores. These savings are
used to reduce premiums, cost sharing, and other expenses. And
some drug makers have tried to blame their own pricing
decisions on the supply chain but this makes little sense. For
example, Mylan used this excuse when they raised EpiPen prices
400 percent at a time when supply chain costs were relatively
flat. Sovaldi had a launch price of $84,000 even though it
involved no rebates at all.
Some of the highest prices are in Medicare Part B, as in
boy, where payments are set by the Federal Government without
negotiations from PBMs or rebates. In any case, almost half of
the RFPs large employers use when hiring PBMs now require PBMs
to pass through 100 percent of the rebates and about 90 percent
of rebates are passed through overall in the marketplace.
While PBMs are proud that, according to CMS, drug trend
only grew 1 percent last year despite rising list prices, we
welcome manufacturers to offer alternatives to rebates as a way
to get discounts. Payers--our clients--just want the lowest net
cost wherever they can get them.
Thank you for having me here today and I look forward to
answering any questions you may have.
[The prepared statement of Mr. Merritt follows:]
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Mr. Burgess. The chair thanks the gentleman.
Mr. Eyles, you are recognized for 3 minutes to summarize
your opening statement, please.
STATEMENT OF MATT EYLES
Mr. Eyles. Good morning, Mr. Chairman, members of the
subcommittee. I am Matt Eyles, Chief Operating Officer of
America's Health Insurance Plans, the national association
whose members provide coverage for health care.
I appreciate the opportunity to testify on behalf of our
members this morning and my testimony focuses really on three
topics. First, the consequences of out of control drug prices,
both excessive launch prices and supersized price increases,
and the impact they have on consumers and the factors pointing
to a broken pharmaceutical market. Second, any discussion of
drug prices and the supply chain must begin with the list
price, set solely by drugs companies, and which act as the
starting point for plans and PBMs to negotiate lower prices for
consumers. Third, AHIP's policy solutions to promote more
affordable drug prices.
Out of control prices are the result of drug companies
taking advantage of a market skewed in their favor. Too often,
this skewed market has granted economic power to drug companies
through price-dictating monopolies. For example, with no
generic competitors, the list price of popular insulin
increased almost 300 percent since 2007, while the CPI rose
only about 15 percent.
If you remember one message this morning, it is that the
entire pricing process is driven off the list price of a
branded drug, solely determined by the drug company, not anyone
else, and the end result is everyone pays more.
AHIP's members negotiate with providers and drug
manufacturers to cover high-quality treatments and services at
the most affordable prices. Looking at the drug supply chain,
we must keep two points in mind. First, health insurers offer
comprehensive coverage under the pharmacy benefit for
prescriptions delivered through retail pharmacies. This
represents about 70 percent of drug spending. Second, plans
provide coverage under the medical benefit for physician-
administered drugs delivered in outpatient and inpatient
settings. This covers about 30 percent of spending.
Our discussion today focuses largely on that first bucket
covered under the pharmacy benefit but plans provide coverage
for both types and therefore have a unique perspective into the
broader drug market. A 2017 AHIP analysis found that 22 cents
of every dollar spent on insurance premiums goes toward
prescription drugs. This is a conservative estimate by
excluding hospital spending on drugs.
But here's the bottom line.: The 22 percent outpaces
spending on physicians, inpatient hospital, and outpatient
hospital services. So when drug prices go up, insurance
premiums go up, and that's an economic reality.
For the committee's consideration, we included
recommendations in our written statement with three categories
of policy solutions--first, delivering real competition through
generics and biosimilars; second, ensuring open and honest
pricing with greater transparency into how drug prices are set
and when prices increase excessively; and third, delivering
value to patients by expanding efforts to link drug prices to
clinical value and outcomes.
Thank you for the opportunity this morning. We look forward
to working with the committee to find solutions to affordable
medications.
[The prepared statement of Mr. Eyles follows:]
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Mr. Burgess. Thank you, Mr. Eyles.
Mr. Nickels, you're recognized for 3 minutes, please, to
summarize your opening statement.
STATEMENT OF TOM NICKELS
Mr. Nickels. Mr. Chairman, my name is Tom Nickels. I am
Executive Vice President of the American Hospitals Association.
I appreciate the opportunity to be here today on behalf of
the----
Mr. Walden. Your mic's not on.
Mr. Nickels. Thank you very much--our 5,000 hospital and
health system members. I would like to briefly address three
issues: the drug supply chain, drug pricing, and the 340B
program.
America's hospitals rely on innovative drug therapies to
save lives every day. Modern pharmaceuticals play a critical
role in getting patients healthy and helping them maintain that
health.
The drug supply chain is, as Chairman Walden said, complex,
with the number of steps between the development and delivery
of a drug. Hospitals primarily intersect with the drug supply
chain in their role as purchasers and dispensers of
pharmaceuticals. At the beginning of the chain, our academic
medical center members play a leading role in both the
development and testing of new drug therapies. Studies show
that these efforts discover drugs that have a
disproportionately important clinical effect in therapies that
can be used for widespread public health concerns. Further down
the supply chain all hospitals are major purchasers of drugs
used in clinical settings.
Hospitals work with manufacturers and group purchasing
organizations to negotiate the best prices for the drugs they
use and reduce administrative expenses. Most hospitals do
retain some direct contracting with drug manufacturers
primarily for branded therapies for which there is no
competition. Once a hospital acquires a drug, it manages its
supply in hospital-based pharmacies who work with prescribing
clinicians to develop and manage the formulary, following
standards that take into account evidence-based clinical,
ethical, legal, and other factors.
Pharmacists also manage the dispensing of medications to
the appropriate clinical staff who then deliver the drug to the
patient. In terms of pricing, spending on pharmaceuticals, as
has been noted, has increased dramatically over the last
several years and the primary driver is higher prices. We see
both higher launch prices for new drugs and increases in prices
for existing drugs. Limited competition and drug shortages have
also facilitated this growth.
Whether GPO or a hospital is negotiating, the starting
price, as has been pointed out, is the price set by the
manufacturer. The ability of the GPO or hospital to obtain a
discount off the price largely has to do with volume and
whether and how much competition exists. In instances where no
competition exists such as for many of the new high-cost
specialty drugs, large discounts are not available.
The burden of these high prices falls on all purchasers
including patients and the providers who treat them. For
example, hospitals frequently see patients show up in the
emergency department or return for follow-up care sicker than
when they left because they were unable to afford their drugs.
Hospitals as drug purchasers also face significant resource
constraints as spending on drugs increase. Hospitals must make
tradeoffs between investments in staff, technology, and
facilities upgrade and paying more for drugs.
Lastly, I want to mention the 340B program which permits
safety net hospitals to care for communities with a high number
of low-income and uninsured to stretch scarce federal resources
as far as possible, reaching more eligible patients and
providing more comprehensive services.
The 340B program enables these hospitals to serve their
communities by reinvesting savings from reduced drug prices
into programs that benefit vulnerable patients at no additional
cost.
Thank you very much for the opportunity to testify.
[The prepared statement of Mr. Nickels follows:]
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Mr. Burgess. Thank you, Mr. Nickels.
Dr. Harmon, you're recognized for 3 minutes to summarize
your opening statement, please.
STATEMENT OF GERALD HARMON
Dr. Harmon. Thank you, Chairman Burgess, Ranking Member
Green, distinguished members of the subcommittee.
I am Gerry Harmon. I am a practising family physician from
Parleys Island, South Carolina, and Chairman of the AMA Board
of Trustees.
I think we can all agree that our goal is to ensure
patients have access to the right medication at the right time.
I want to speak to the physician's role of prescribing the most
appropriate treatment and the challenges my patients and I
face.
Affordability in price can indeed be a major barrier, but
so are the various administrative hoops that we have to jump
through when prescribing medications. Such hoops includes
things such as prior authorizations, frequently changing drug
formularies, step therapy, nonstandardized forms, all put in
place by insurance companies in an attempt to manage costs.
These barriers usually delay treatment for my patients and,
clearly, take time away from patient care. As an example, in
the few days I've been away from my practice on a trip such as
today, I received an email from a long-time patient who has
recently changed his insurance coverage. His blood pressure
medicine that he's been stable on for years now is not on the
new formulary under his new plan and he's down to his last 30
days of therapy. I am going to have to call his pharmacy
benefit managers--PBM, request a form and a fax number, fill
out the form with some data points and fax it back.
Eventually, I hope to get some ideas from the insurance
company and/or the PBM about what types of different
medications I might consider or steps I might follow in order
to prescribe my patient's medicine. I cannot do this in a
standard form or electronically via email. My patient,
meanwhile, is at risk for running out of medications or
changing to a less effective therapy. Clearly, that's going to
endanger his health. He could end up going to the emergency
room or having a serious illness such as a heart attack or a
stroke, which adds enormous cost to the entire health care
system.
Such efforts to maintain cost and value in such an
otherwise stable patient are, clearly, misdirected. In another
venue, doctors who administer biologic medications to treat
certain cancer, rheumatoid arthritis patients face even more
costs and challenges than a primary care doctor like myself.
Small community practices in particular are at a
disadvantage relative to hospitals and large practices when it
comes to requiring biological medications for special patients.
Patients usually have to pay a high co-pay for medicine. We've
alluded to that in other testimony. It could cost tens of
thousands of dollars and the co-pay can be as high as 20 or 30
percent, and that's a bunch of money to my patient population.
When the patients cannot afford the co-pay, the physicians,
who must pay for the medicines up front, cannot manage the
debt, and the patients are referred to treated in the hospitals
or outpatient settings that are much more expensive. And these
are just some of the challenges doctors face when helping
patients navigate medicines.
What could help physicians like myself? We've offered some
opportunities for improvement in our written testimony. There
are so many opportunities. We can discuss them almost ad
infinitum.
In closing, I would like to thank you. AMA looks forward to
working with you on this issue.
Thank you.
[The prepared statement of Dr. Harmon follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. Thank you, Dr. Harmon.
Mr. Hoey, you're recognized for 3 minutes, please, to
summarize your opening statement.
STATEMENT OF B. DOUGLAS HOEY
Mr. Hoey. Thank you, Chairman Burgess, and Ranking Member
Green and members of the subcommittee for conducting this
hearing and for the invitation to testify.
I am Douglas Hoey, CEO of the National Community
Pharmacists Association. NCPA represents America's community
pharmacists including the owners of 22,000 independent
community pharmacies.
More than any industry segment, independent pharmacists are
in underserved rural and urban areas. Local pharmacists are the
medication experts on the health care team and, importantly, to
consumers nationwide. These health care professionals are
easily accessible.
Pharmacists increase health care quality and decrease its
costs by optimizing safe and effective medication use. Over the
past few years, CMS has been testing new payment and care
models across hundreds of community pharmacists and to date,
nearly 300,000 patients have been enrolled. Early findings
suggest high patient satisfaction, improved outcomes, and
reduced overall health care spending with reductions of greater
than $1000 a year for those patients who received high clinical
intervention. To achieve that future promise, however, systemic
barriers must be overcome. We believe intermediary parties,
pharmacy benefit manager middlemen, are increasing pricing
complexity and contributing to higher prescription drug costs.
Since their inception, PBMs have morphed from claims
adjudicators into little known and largely unregulated
corporations, and despite their immense market influence, PBMs
are not subject to industry-wide regulation nor do they have an
obligation to always put their clients' interests above their
own. Opaque PBM practices that require increased transparency
including PBM-retained rebates and spread pricing, generic drug
reimbursement schemes and pharmacy direct and indirect
remuneration, or DIR, fees.
And I will expand on our members' current number-one
concern, which are DIR fees. Now, these fees are assessed on
pharmacies months after a prescription is filled. CMS has
identified concerns from the rapid growth in DIR fees including
higher beneficiary costs, accelerating patients into the donut
hole, and the shifting of liability for Part B costs from plan
sponsors to CMS.
In the recently released Medicare proposed rule, CMS
explicitly states they are considering requiring all price
concessions from pharmacies to be reflected at the point of
sale.
NCPA strongly supports this approach. CMS estimates this
would result in significant patient savings at the pharmacy
counter, as well as overall savings over a 10-year period.
In conclusion, it makes financial sense for Congress to
demand increased true transparency into the prescription drug
marketplace for all taxpayer-funded prescription drugs, and to
fully utilize the expertise of the community pharmacist to
identify potential savings.
Thank you.
[The prepared statement of Mr. Hoey follows:]
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Mr. Guthrie [presiding]. Thank you. The gentleman's time
has expired and I recognize Mr. Mitchell for 3 minutes for your
opening statement.
STATEMENT OF DAVID MITCHELL
Mr. Mitchell. Thank you.
Chairman Burgess, Ranking Member Green, Chairman Walden,
members of the committee, I am honored to be here today.
I am David Mitchell and I am founder of Patients for
Affordable Drugs. We are bipartisan. We focus on policies to
lower prescription drug prices. We don't accept funding from
any organizations that profit from the development or
distribution of prescription drugs.
More importantly for today, I have an incurable blood
cancer called multiple myeloma and prescription drugs are
keeping me alive, literally. Right now, my treatment is 5 hours
of infusions, carry a price tag of $450,000 this year. I am
very grateful to the science and research communities for these
drugs, and because my disease is incurable, it finds its way
around drugs. It mutates. I need innovation of new drugs if I
am going to stay alive. This is not theoretical for me. It's
literally life and death.
But my experience has taught me one irrefutable fact, and
that is that drugs don't work if people can't afford them.
Since our launch in February, we've built a community of almost
20,000 Americans from every state. Patients tell us terrible
stories of skipping doses, cutting pills in half, even
declaring bankruptcy, because of the price of their drugs.
They're scared, they're angry, and they need help.
I am going to highlight a few policy solutions for the drug
supply chain. First, however, it is critical to note that
prices set by drug corporations with government-granted
monopolies are at the headwaters of the pricing problem.
When retail prices set by drug corporations go up, all the
players in the system make more money--drug manufacturer, PBMs,
doctors, hospitals. The people hurt are patients, consumers,
taxpayers, and employers who foot the bill.
But the drug supply chain downstream is also a big part of
the problem. Here's a patient perspective on some elements.
One, we should allow Medicare to directly negotiate lower
prices for patients. Every other developed country in the world
does this. We should, too.
We need increased transparency throughout the supply chain.
Three pharmacy benefit managers control almost 80 percent of
the market and negotiate in secret, leaving consumers,
taxpayers, and policymakers in the dark.
Co-pay coupons and patient assistant programs are phony
charities. They are designed to do one thing. That is keep
prices high. They are not charity. They are marketing.
According to City Research, for every $1 million spent on
charitable donations, drug corporations reap as much as $21
million in return. We should lower drug prices and make co-pay
coupons unnecessary.
Finally, we have to ensure that patients pay based on
rebated, not list, prices and that patients with insurance
don't pay more than they would if they paid cash.
Gag clauses should be outlawed. I am extremely encouraged
that members on both sides of the aisle are here today focusing
on drug pricing because, in my experience, the most enduring
legislative solutions have come with bipartisan action.
Thank you.
[The prepared statement of Mr. Mitchell follows:]
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Mr. Burgess. Thank you, Mr. Mitchell, and I want to thank
the entire panel for their testimony and we will move into the
question/answer portion of the hearing.
We'd like to recognize the gentleman from Oregon, Mr.
Walden, chairman of the full committee, 5 minutes for
questions, please.
Mr. Walden. I want to thank the chairman very much and,
again, I want to thank all the witnesses today. You have helped
us scratch the surface, get a better understanding from the
start to the finish--from the molecular development to the
patient who's on a lifesaving drug.
And, obviously, you have also outlined for us differences
of opinion about how we achieve more affordable health care and
not just--we are looking at this, by the way, not just at the
drug chain but across the entire industry of health care. And
it is a big one, it is an expensive one, and I know when I go
home to Oregon it is on top of everybody's minds. They may
complain about their insurance premium or this, that, or the
other thing.
But at the end of the day, they all want to know why--you
name it in health care--why it costs what it does or they want
to know what it costs, because of lack of transparency. You
don't even know. There are all these schemes and things and I
think we are all trying to get to the bottom of it and my goal
is to have an informed process, beginning today, that lets you
all make your case.
And I would just be curious, as you all have heard each
other talk, and we finished with Mr. Mitchell, who I've met
with before in my office, and sorry for what you're going
through, obviously, but you make a very compelling case.
You make some pretty strong statements about what needs to
be changed and I would like to go to the other end because some
of those are targeted at the pharmaceutical companies and see
if we can get a response from Ms. Reilly on what Mr. Mitchell
said and how we should be guided in this, and if others want to
weigh in along the way that would be good as well.
Ms. Reilly. Well, thank you for the question, and I think a
lot of what I heard out of David's mouth are things that we do
agree with.
For example, today, as I talked about and others talked
about, our companies do provide robust discounts and rebates to
pharmacy benefit managers and insurers, and unlike almost any
other part of the health care system, those rebates and
discounts aren't passed back to the patients.
If a patient with a deductible today ends up in the
hospital before they reach their deductible, the price they pay
is a negotiated price that that insurance company has
negotiated on their behalf. It seems strange that if a patient
instead needs a pharmaceutical before they reach their
deductible, that they're asked to pay a full unnegotiated price
for the medicine and don't get the benefit of that discount and
actually earn money on every transaction. That doesn't seem
right to me and I think that does need to change.
CMS just, earlier this year, posted their new Part D rule.
In it, they put a request for information out about the
potential for passing through discounts and rebates in the
Medicare Part D program. We actually think that's a good first
step. Today, the evidence suggests by CMS that PBMs prefer
medicines with high list prices and high rebates because for
those products they can use those rebate dollars to keep their
premiums low and they also put people into catastrophic quicker
and passing through----
Mr. Walden. Right. So I want to give them a chance to
respond to that because I assume they will want to.
So let's go to the insurance plans. You have heard what Ms.
Reilly said about consumers paying the full freight here and
not being covered by insurance and no negotiation. Is that
accurate? Is there something we should do about that?
Mr. Eyles. So thank you, Chairman Walden, for the
opportunity. What I would say is health plans negotiate on
behalf of their members and consumers every single day across
all parts of the supply chain, whether it be providers or drug
manufacturers.
To put this into context, I think you probably heard some
of the statistics thrown around that 90 percent of the
prescriptions are generic that are filled in this country. So
that means about 10 percent are filled through retail--that are
brands. Not all of those brands offer rebates. There's a large
number of brands that don't offer rebates. So really we are
trying to focus on a much smaller problem when the bigger
problem really comes back to the price.
Using Ms. Reilly's example earlier of insulin of $400 a
vial, a decade ago that vial was only about $90. Right now, if
prices of insulin increased only by the consumer price index
rather than much, much higher rates, we'd only be paying about
$100 per vial, all right, if you're just following inflation.
We wouldn't be having this discussion about rebates----
Mr. Walden. So----
Mr. Eyles [continuing]. If it didn't start with the price.
Mr. Walden. So who can tell me why that insulin is the
price it is today?
Ms. Reilly. I would say, Chairman Walden, the net price of
insulins have not changed all that significantly. What has
changed is the levels of discounts and rebates that are being
demanded in part because it is an extremely competitive market.
As I mentioned before, insurance companies, PBMs, in the
Part D program, for example, they like high list prices that
come with high rebates because they can then use those rebates
to keep their premiums low, attract patients to their health
care plan. Unfortunately, what the problem is is they're not
sharing those rebates and discounts back with patients as they
do if a patient ends up in the hospital or uses a physician and
that's what needs to change.
Mr. Walden. All right. My time has expired. We didn't get
to the PBM's view of this. I hope we do, coming forward,
because this is the debate. Because at home the constituents
say why is insulin $400 when it used to be a hundred dollars or
whatever the number is, And that's repeated time again, whether
it is EpiPen or whatever. We can't answer that either because I
am not sure there is a good answer.
So with that, Mr. Chairman, I've exhausted my time and I,
again, appreciate your willingness to have this hearing and
yield back.
Mr. Burgess. Chair thanks the gentleman. Gentleman does
yield back.
The chair recognizes the gentleman from Texas, Mr. Green, 5
minutes for questions, please.
Mr. Green. Thank you, Mr. Chairman.
A Harvard study found that there are more than three-
quarters of the public believe that name brand prescription
drugs are too high and an issue primarily driven by price
increases in the absence of additional competition. Biologics
represent the majority of these high-priced drugs representing
7 out of the 10 highest grossing pharmaceutical products in
2015.
A landmark 2014 Rand study also estimated that biosimilars
could save as much as $40 billion through 2024 in the United
States alone, and we have another study from IMS Health opening
markets to biosimilar competition health care systems could
realize savings of more than 10 billion euros in the E.U. alone
between 2016 and 2020. The cumulative savings over the next 5
years in the E.U. and the United States would be 49 billion in
euros.
Mr. Davis, Mr. Merritt, do you agree that we should support
policies to encourage a workable pathway for biosimilars as we
in Congress do encourage bringing these product online and
encouraging uptake by physicians and plans for their patients?
Mr. Davis first.
Mr. Davis. Congressman, thank you for your question.
The short answer is yes, we represent biosimilar
manufacturers today in addition to generic manufacturers, and
as you stated, biosimilars hold the potential for so much
promise in terms of increasing access and realizing savings
because they will provide competition to the increasingly
costly degree of specialized medicine and personalized medicine
moving forward.
There's a couple challenges with respect to making sure
that we realize the full potential of biosimilars here in the
U.S. market. One is getting them to market, which is why we
need to create some Fast Generics Act pass so that our members
can actually gain access to the samples to do the
pharmacovigilance to apply to the FDA to get biosimilars to the
market. And then the second thing we have to look at, and we
have to be candid about this, is right now there are eight
biosimilars that have been approved by the FDA. There are only
three on the market. The other five are tied up in endless
litigation.
So if we ultimately want to--we have a lot of catching up
to do in terms of you mentioned the E.U. They are light years
ahead of us in terms of utilization, access, and savings on
biosimilars.
We have the opportunity from a policy perspective to catch
up. The Federal Government started scoring savings for
biosimilars in 2014 fiscal year. The first one wasn't on the
market until September of 2015. So we have more work to do
there.
Mr. Green. Mr. Merritt.
Mr. Merritt. And I would agree with what Chip said.
Biologics are the future. Specialty products are the future and
they're very expensive. They're very great products, as David
Mitchell mentioned.
But right now, they're often unaffordable and the key is
competition. Biologics already have 12 years of exclusivity.
We'd like that to be down to seven so we can get competition
started faster.
We'd like these drugs to have the same name the way
generics do with brand drugs on the regular market and a host
of other things because without competition, you're not going
to have savings and if you have more and more brand protection
for every little minute change you make and if litigation ties
these up for years and years, for a month, a couple of months,
a year of being tied up in litigation can cost consumers
billions of dollars. And so we are very aligned with the
generics on this.
Mr. Green. Mr. Chairman, I believe that our government's
approach to approving and integrating biosimilars in our health
system would impact overall potential for competition and
access to more affordable life changing drugs for patients.
Let's hope we can continue to support this developing market so
that patients can realize the value and benefit of such
treatments.
Mr. Eyles, the complexity of the drug supply chain is hard
to overstate as evidenced by all 10 of our witnesses this
morning. They've been in the growing chorus calling for greater
transparency in the drug supply chain.
Some states have already taken action. California recently
enacted legislation that would require reporting of certain
price hikes and legislation that would be introduced in both
the House and the Senate--that has been introduced would create
a similar federal requirement.
What we've already seen is some good actors taking
meaningful steps to increase transparency. For example, Sanofi
and Janssen have agreed to disclose their drug price increases
each year. Sanofi also announced it would put limits on how
much it will increase drug prices. But as you note in your
testimony that more could be done to encourage open and
straightforward price setting and highlight the need for
disclosure of intended launch price.
Could you discuss further why the disclosure of intended
launch price would be helpful to insurers and how you believe
such a disclosure be operationalized?
Mr. Eyles. Thank you, Ranking Member Green.
Yes, we've been very supportive of greater transparency
into really both when it comes to launch prices and price
increases.
While we are not supportive of controlling prices, we think
it is important to have more information out there in the
public domain about exactly how prices are set. Right now,
pharmaceutical prices are set in the black box.
When a new product gets launched with a price of $475,000
no one really understands how that got set.
Mr. Green. Well----
Mr. Eyles. We think ahead of time, having additional
visibility into how prices get determined by the manufacturer
and then price increases over time, particularly those on
higher cost drugs and those that exceed certain thresholds,
it'll be important to understand other parts of the health care
system have oversight and controls on them.
For example, insurers have to report all of the inputs into
their rates before they get approved. We are not looking to
have specific approval of drug prices but we do think it is
important to have greater transparency and greater dialogue
around how are prices being set up front.
Mr. Green. Well, Mr. Chairman, thank you. I know I am over
time.
But transparency always works and, like you said, it works
in other parts of the health care delivery system. So thank you
for the time.
Mr. Burgess. Gentleman yields back. Chair thanks the
gentleman. The chair recognizes the gentleman from Kentucky,
Mr. Guthrie, vice chairman of the Health Subcommittee. 5
minutes for your questions, please.
Mr. Guthrie. Thank you very much. Thanks for everybody
being here today, and it is really a great day to start this
process. I was invited not long ago to the White House with the
majority leader and we met with the President. I want to tell
you, we walked away with the President wanting action on this
issue. He's very focused on it. I think this is the beginning
of a process that I hope will lead to an action as we move
forward.
I have some prepared questions but I will get back to what
the chairman said. I don't think we ever got a really good
answer.
If insulin is a competitive product and it was $90 10 years
ago and it should be $100 if you just went through the standard
inflation, why is it $400? It's got to be somewhere between
here and here it has increased in price and maybe, Mr. Merritt,
you'd like to address that.
Mr. Merritt. Yes. And this happens with a lot of drugs, but
you see it a lot in insulin is there are insulin products but
they have new methods of administration--actually some better
methods of administration and that creates a whole new patent
protection for these products.
And so that is how the prices go up and, again, on a very
basic point, drug makers can charge whatever they want for a
product. That's not saying a price is right or wrong but it has
nothing to do with anybody at this table except for the drug
manufacturers.
All that we can do is get the biggest rebates possible, the
biggest discounts possible, pass it on to the plans and
employers and have them use it to reduce premiums, cost
sharing, or whatever each plan wants to do.
But just the fact that we don't control the prices, that
they have patent protection with minor changes in the products,
again, making the products better, that's what gives them that
pricing power.
Mr. Guthrie. So the insulin--so Ms. Reilly, that would--so
innovation has come from PhRMA. Therefore, you have invested
the research dollars so you're recapturing those resources
dollars, therefore it is four times what it was?
Ms. Reilly. Well, Mark is correct that there have been
significant advancements in insulin. We now have long-acting
insulins. We have an insulin that's injectable with pens and
other things.
But, again, I would say the list price of the medicine is
not what the manufacturer retains, and in the case of the
insulin marketplace, there are multiple competing products.
What manufacturers have retained over the last 5 years has
been stable or declining and part of the reason for that is we
do have PBMs that are buying these medicines that, again, CMS,
MedPAC, and others have demonstrated that what they prefer is a
high list price and a high rebate.
That lowers the net price considerably. The rebates on
average in the insulin market space are 65 percent.
Mr. Guthrie. Well, who sets the list price then? For what
the PBMs have to charge, who sets the list price?
Ms. Reilly. Well, and I want to respond to something that
both Mark and Matt said with regard to the list price. The list
price is not set in a vacuum.
Our companies have to engage with PBMs and insurance
companies every day in determining the list price and their
preferences, quite honestly, matter significantly. And they
matter to the extent that if they want a high list price with a
high rebate and they're telling a company when they control a
hundred million lives, an individual one, that is their
preference if that product is to get on formulary.
Commonly, PBMs pick and choose amongst insulins and they
say to a company, if you don't give me the price I want, you're
off my formulary. And if you are buying on behalf of a hundred
million Americans, more than countries like France and Germany,
the leverage they exert is significant.
Mr. Guthrie. So would you argue your market price is the
list price less rebate? You know that going in----
Ms. Reilly. Yes. Yes.
Mr. Guthrie [continuing]. Therefore, you have to set a
higher list price to get the market price that you think you
need to cover your--same way with biologics?
Ms. Reilly. Just to stay flat. Yes.
Mr. Guthrie. To stay flat.
Mr. Merritt. If I could just jump in for a second, it would
be an anti-trust violation for those discussions to ever
happen. Those discussions don't happen. Manufacturers set the
price according to however they want to move their products,
whatever they think they need to do. PBMs have zero input into
that. Health plans have zero input into that.
Of course, we get the biggest rebates that we can, but
remember, this is a chicken and egg thing. If the price goes
up, we are going to get a bigger rebate because our clients,
Matt's companies and others are going to demand us to get
bigger and bigger discounts. But the----
Ms. Reilly. I would argue----
Mr. Merritt. No, I am not done yet. But the list prices are
the list prices, and that is a drug maker thing. It has nothing
to do with----
Mr. Guthrie. Well, let me----
Mr. Bucshon. Mr. Chairman, I--Mr. Chairman----
Mr. Guthrie. Not--let me----
Mr. Bucshon. He interrupted her testimony.
Mr. Guthrie. I am going to let you finish your thought.
Then----
Mr. Merritt. Yes. That's what I am saying. It's just a
basic thing. I think sometimes you can try to over complicate
the whole issue of supply chain.
Supply chain is just how you distribute products. Every
industry uses them. They're not exotic. They all use rebates.
Mr. Guthrie. I got about 40 seconds. Yes, let me go back
to----
Ms. Reilly. I would say you have to ask the question that
if our revenue is flat or declining in the space of insulin and
the list price is increasing? It's benefiting everyone that's
paid off of the list price including the PBMs and the health
plans.
Mr. Guthrie. So the argument the rebate doesn't go to the
consumer?
Ms. Reilly. No, it does not get passed----
Mr. Guthrie. Do you have an answer for that, Mr. Merritt?
Mr. Merritt. It does. It goes to the client who may use it
to reduce the cost of that particular drug--the cost sharing,
or more commonly it is used to reduce overall.
Mr. Guthrie. I guess I will have Administrator Eyles and
AHIP. So the rebate does go to the consumer?
Mr. Eyles. They go to people who purchase health insurance
coverage. Yes, they go to everyone. That's right. So when you
look at filings that insurance companies have to file with
every state department of insurance, there are specific lines
dedicated to pharmaceutical rebates and when rates get approved
those rebates are taken into account. There are different----
Ms. Reilly. I would argue that's a perversity of insurance.
Mr. Guthrie. Time is expired. I wish I had more time with
that but----
Ms. Reilly. Right. The purpose of insurance is for healthy
to subsidize the sick. We are evolving to a system where the
sick are subsidizing the healthy through rebates.
Mr. Burgess. Gentleman yields back his time. Chair thanks
the gentleman.
The chair recognizes the gentleman from New Jersey 5
minutes for questions, please.
Mr. Pallone. Thank you, Mr. Chairman.
I have long believed that one critical component of the
successful drug supply chain is a robust generic manufacturing
presence and market.
Generics can continue to play a role in fostering increased
competition and affordable access to medications, which is why
I've continuously worked to provide generics with a level
playing field and supported increased assistance and incentives
including most recently through the FDA Reauthorization Act as
a way to encourage a strong generic presence in our
pharmaceutical market.
So I wanted to ask Mr. Davis a couple questions. In your
testimony you noted that generics operate under a very
different business model than brand drug manufacturers.
Can you further discuss how the business model for generic
drugs is different than brand drugs and the different
considerations generic drug manufacturers take into account
when making product development decisions?
Mr. Davis. Thank you, Ranking Member Pallone, and thank you
for your leadership on ensuring a level playing field. I am
happy to address that.
The debate that you just heard between the branded industry
and the PBMs and the insurers on rebates as a percentage of
list price and discounts are for 11 percent of all
prescriptions in the United States.
It is not the generic business model. So if there is one
thing I leave this committee with today it is to think of
generics differently than the way you think about policy that
impacts the branded industry.
We are a commoditized, not monopolized industry. As a
result of that, the way the supply chain actually leverages
driving prices down to where we are in 16 consecutive months of
price deflation is by combining their resources and leveraging
their purchasing ability where there are now three wholesaler
retail pharmacy consortiums that are controlling 90 percent of
the generic supply chain.
So you have three suppliers who are driving the prices down
lower than they have ever been before in the generic
marketplace and as a result of that they are moving
increasingly toward what are called single-sourcing contracts
meaning they want to partner or contract with one generic
company to fill a majority of their portfolio of purchasing
needs.
As a result of that, what we have seen is, quite frankly,
an unsustainable supply chain for generics moving forward, if
in fact we can ensure that there is robust competition on the
buyer side in addition to the seller side.
In 2000, there were approximately 200 wholesalers on the
market. Today, there are three that control 90 percent of the
supply chain. The buyer side is three.
We are still 20 to 30 competitive generic manufacturers all
competing for that business, and economics will dictate over
time that you will see more consolidation on our side in an
effort to level out that negotiating table.
Mr. Pallone. All right. I want to ask two more questions.
You talked about how generic manufacturers operated in this
commodity style market as a result of the multiple
manufacturers marketing the same product.
But do you want to explain a little better the role that
plays in bringing the generic drug to market?
Mr. Davis. Happy to do so. You have----
Mr. Pallone. And then I've got one more question.
Mr. Davis. Sure. You have a situation, Congressman, where
the ability for a generic manufacturer, when you actually get
to what's called commoditized pricing in the generic
marketplace, a decade ago it took eight, nine, or ten generic
competitors to get to 80 to 85 percent off the reference for
the originator price.
You get there now as soon as three, four, or five generic
entrants, which is why the FDA commissioner has prioritized not
just the first generic application at FDA but the first,
second, and third.
Our companies have to make decisions in a commoditized
market that has varying price fluctuation upward and downward
about what the sustainability is of the competitive market in
any therapeutic area. So that's a significant factor in
determining if they go to market once they get approved and if
they stay on the market once they are approved.
Mr. Pallone. All right. Then lastly, let me just ask
briefly about the rebates. We've heard quite a bit of debate
about the appropriateness or value of rebates in the drug
supply chain.
So what role, if any, do rebates play in the negotiations a
generic drug manufacturer undertakes with payers and how does
reimbursement traditionally work for generic drugs?
Mr. Davis. Thank you for that. It's an important
distinction. As I said, for 89 percent of the prescriptions in
the U.S. that are generic, the traditional rebate model by and
large does not apply.
Generic companies are reimbursed in many ways based upon
two things: their ability to meet that wholesaler demand with
the three who control 90 percent of the market.
By saying can you meet our volume requests and are you
willing to meet the price that we are actually going to tell
you we are going to pay for that product--let's take generic
Crestor, for example, rosuvastatin--and if you don't--and if
you're not willing to offer it at 10 cents a capsule, one of
your 19, 20, or 21 other competitors that are also marketing
that will, and we will cut you out.
So it is really about volume and ability to keep your price
as low as possible. So it is an example of the market actually
working.
Mr. Pallone. All right. Thanks a lot, Mr. Davis.
Mr. Burgess. Gentleman yields back. The chair thanks the
gentleman.
The chair recognizes the gentlelady from Tennessee, Mrs.
Blackburn, 5 minutes for questions, please.
Mrs. Blackburn. Thank you, Mr. Chairman.
I appreciate that, and I appreciate the discussion that we
are having here this morning on this issue. I will say I am a
little surprised. There's a lot of finger pointing that is
going around.
But I will tell you all, I think there is more than enough
blame to go around for what we see transpiring in the
marketplace and with the high cost.
And listening to you all, I will tell you there is
absolutely--it confirms to me why so many of my patients--my
constituents will say as a patient who takes something
regularly, they have tried to find other options in the
marketplace--programs like GoodRX or I know there are several
others--because they are very frustrated.
And Mr. Mitchell, I appreciate the concerns that you bring
to bear as a patient and someone who is using something. This
is an issue that we need to address, and we need your best
efforts in solving this.
So I am going to focus on not things in the past, but as we
move forward. And let's put our attention there. And for each
of you on the panel--and we are going to start with Ms. Reilly
and work all the way down--what change would you like to see in
the marketplace or what change in law should we make to make
certain that, as Chairman Walden said, we are focused on
access, delivery, and the cost of these pharmaceuticals to
patients.
Now, you are only going to have about 30 seconds. So Mr.
Merritt, listen--make that good and concise for me. OK. Ms.
Reilly, you are on. Let's go right down the panel.
Ms. Reilly. Great. I would say two things. The first, as I
mentioned before, passing through those robust discounts and
rebates that totalled over $100 billion last year back to
patients. That would lower patient drug costs immediately.
The second, which is more of a mid- to longer-term option,
is moving our system towards one where-which moves towards a
value-based system away from volume. Let's reward companies
that deliver medicines that are delivering the outcomes that
patients and payers want.
Mrs. Blackburn. Thank you.
Mr. DiLenge. Thank you.
I mentioned at the outset that we are part of a coalition
with insurers, PBMs, and others, and one of the ideas is in
fact exactly what you were talking about in terms of patient
information.
We need to empower patients. Right now, they do not have
good information about their choices. They don't know about
their formularies. Their formularies are constantly changing
throughout the year.
Their prices are changing, their co-pays, their co-shares.
If they had more access to good information they'd be able to
find cheaper medicine.
Mrs. Blackburn. OK. Time's up.
Mr. Davis. Congresswoman, thank you.
There are three things that we would recommend. The first
is to repeal the misguided Medicaid penalty on generic drugs.
It was passed in the fall of 2015 as part of the balanced
budget agreement.
It actually punishes generic manufacturers in the
circumstances where they don't take a price increase, and
serves as a disincentive.
Pass the CREATES Act, as I mentioned earlier, and include
biosimilars in the coverage gap for Part D to ensure a robust
biosimilars market, moving forward.
Ms. Gallenagh. Thank you.
As wholesalers, we don't actually take positions on
transparency or on pricing issues. But I would say that our
members would support anything that examines greater
competition in the marketplace and better access for patients.
Mrs. Blackburn. OK.
Mr. Merritt. I agree with a couple things that were said
before. Value-based contracting would be great. The patent
reforms that Chip and the generics industry have talked about,
and also something that we haven't talked about and may not
come up today but electronic prescribing.
We'd like doctors to be able to look at the formularies
before they prescribe the drugs so patients aren't surprised at
the pharmacy as they can choose the least expensive option
available.
Mr. Eyles. Solutions that bring more competition through
generics and biosimilars. That's the first thing. That's very
important.
The second is greater price transparency, both about how
prices get set and how prices are increased, and we'd agree
that it's important to also move towards value-based pricing
and outcomes-based pricing.
Mr. Nickels. I would agree with a number of the things that
have been said already--greater competition, greater
transparency. I would agree on the CREATES Act as a piece of
legislation that should move forward and, of course, as I
mentioned in my statement, protecting the 340B program.
Dr. Harmon. I would tell you that not only is Mr. Mitchell
the formal patient representative. All of us in the room are
either patients or caregivers for patients. So we all wear that
same appellation.
As a provider, as a physician, what I would like to see is
transparency. It's been alluded to. That's not just a buzzword.
It needs to be a reality and I need to eliminate these
administrative hassles that interfere with delivering care for
my patients. Thanks.
Mr. Hoey. I have three suggestions. One would be the
transparency with spread pricing. That's what the pharmacy has
paid and what the employer is charged, which are two different
things. The employers charged more. The second would be
pharmacy DIRs at the point of sale or prohibiting pharmacy DIRs
altogether, and then the third would be eliminating the
conflicts of interest that exist between a price giver and a
price taker.
So they're giving prices but they're also taking a price,
and there is an immense conflict of interest. Thank you.
Mr. Mitchell. I would focus on promoting competition and
making Hatch-Waxman work as intended. That means no more pay-
for-delay. There's a bipartisan bill to do that now.
The CREATES Act is an incredibly important bipartisan bill.
It would save more than $3 billion. That is important. But all
elements of patent abuse that extend patents beyond what you
intend with our laws should be addressed to promote competition
because competition lowers prices.
Mrs. Blackburn. You all did a great job staying under the
time limit. I thank you all.
And as I yield back, I will just say listen to what you
said. Transparency, competition--basically, focusing on the
patient and those are worthy goals.
I thank you for the hearing and I yield back.
Mr. Burgess. Gentlelady yields back. Chair thanks the
gentlelady. Chair yields to the gentlelady, Ms. Matsui from
California, 5 minutes for questions, please.
Ms. Matsui. Thank you, Mr. Chairman.
High drug prices are really at the top of the mind of our
constituents and we've seen recent examples of extreme bad
actors raising prices purely for profit motives.
Congress does need to review and better understand drug
pricing to ensure that we are incentivizing research and
innovation and development of new drug treatments and cures
without creating loopholes that can be taken advantage of.
Drug pricing is particularly complicated because it is not
transparent to the public and because drug companies often end
up with monopolies, which we all know can drive up costs. We
need an approach that focuses on the patient and the cost to
the health care system, which will be tethered by ensuring that
there is sufficient competition in the market place.
Where there is more than one option for a drug or
treatment, costs tend to be driven down. As we move toward
precision medicine, we move away from multiple treatment
options per person.
So this is something we will only have to grapple with more
and more. I know we talked about this. Let me follow up here.
Ms. Reilly, when drug companies set the initial list price
for the drug from which all of the components of the price
follow, do manufacturers also publish or make available how
they determine the list price?
Ms. Reilly. Well, companies--and to be honest, as PhRMA we
don't engage with our companies in terms of how they price
their products. We can't for anti-trust reasons.
However, many companies have talked about their
philosophies with regards to how they price their product and
they look at a number of factors.
They look at the prevalence of the disease. They look at
existing treatments that are already in the market.
Ms. Matsui. How about the research and development costs
that the company has done?
Ms. Reilly. Research and development is a cost of doing
business that, obviously, has to be recouped. But companies
really are focusing on the value that a given medicine is
bringing to market and the list price that we come up with is
very much negotiated with the purchasers of the product.
A PBM or insurance company does not have to cover our
product. In fact, some proudly talk about the fact that they
exclude certain products from formularies if they don't get the
price that they want. So they're not done in a vacuum.
Ms. Matsui. All right. Let me switch here.
Dr. Harmon, when a doctor prescribes a drug, how often do
they know how much it will cost a patient?
Dr. Harmon. Representative Matsui, they really only know if
they do it a lot, because if I de novo prescribe a drug I have
no idea. You heard it from some of the other panelists.
Increase transparency on drug pricing and availability and
formulary would greatly enhance my ability to adequately and
accurately prescribe the right treatment for the right patient
at the right time.
Ms. Matsui. So when doctors are familiar with certain drugs
that they prescribe, they know to recommend to their patient if
they have two generics that do the same job as a named drug.
Do you tend to use this price information in a systemic way
or anecdotally from what they hear from the patients?
Dr. Harmon. Systemically. I try to be an evidence-based
prescriber. So I deal with my medical literature and up-to-date
treatments that are made available to me. I make that decision,
Congresswoman Matsui. But also 99 percent of the time I write
on my prescription blank or I sent the electronic prescription
substitution authorized.
Ms. Matsui. OK.
Dr. Harmon. Generics are available. Rarely do I prescribe
the brand name. The only exception is if I know that their
insurance plan ahead of time will authorize the brand and
actually have a better affordability to the patient than a
similarly priced generic.
Ms. Matsui. OK. Thank you.
I want to ensure that we continue to encourage innovation
and development of new cures and the ability to profit as part
of that when you are in such a risky business.
But I think the profit has gotten way out of control in
many cases. I want to make sure the potential for profit is
truly incentivizing innovation, not just lining investors'
pockets.
Mr. DiLenge. What are examples of biologic companies that
are innovating but also keeping prices low?
Mr. DiLenge. I think the vast majority are, and so we've
seen, particularly over the last couple years but we've seen
incredible market competition in biologics, not necessarily by
biosimilars.
I agree with Chip on some of his comments there. But among
branded biologics there is intense competition. In fact, the
time to entry for the second biologic in a class has dropped
dramatically.
And so what you are seeing is a lot of great competition
and the second and third products are coming in usually cheaper
than the first.
Ms. Matsui. OK.
Mr. DiLenge. So we are seeing a lot of good competitive
market dynamics in biologics.
Ms. Matsui. Well, I would say so, but I think when you
increase more competition and eliminate the monopolies, because
there are still some loopholes and ways for players along the
chain to take advantage of this system with our without
competition.
So do you see--I guess Mr. Mitchell--do you see policy
solutions that encourage innovation but close loopholes?
Mr. Mitchell. Can you pose that question again, ma'am? I
didn't hear it.
Ms. Matsui. OK. Do you see policy solutions that encourage
innovations but close loopholes?
Mr. Mitchell. I think, most importantly, that we want to
incentivize companies to invent new drugs and not invest time
and money to milk money out of old drugs, and that's why I
place the emphasis in what I said to the lady from Tennessee on
closing patent loopholes----
Ms. Matsui. Right.
Mr. Mitchell [continuing]. That allow them to get more time
beyond that which you intend under Hatch-Waxman instead of
focusing their attention on developing new drugs, making more
innovation.
Ms. Matsui. All right. Thank you very much.
Mr. DiLenge. Ms. Matsui, if I just may respond real quick,
I think it's important to emphasize that the time to market for
generics has stayed the same for two decades.
So the idea that there is all this patent evergreening and
that innovators are getting all these new patents and pushing
out the time for generics the data just doesn't support that.
Thank you.
Ms. Matsui. OK. Thank you. I yield back.
Mr. Burgess. Gentlelady yields back. Chair thanks the
gentlelady.
The chair recognizes the gentleman from Texas, Mr. Barton,
5 minutes for questions, please.
Mr. Barton. Thank you, Mr. Chairman and Ranking Member
Green, for holding this hearing. We have established the number
of witnesses we can have on one panel because there is no more
room.
[Laughter.]
So we know that the number now is 10. This committee has
jurisdiction over quite a bit of the U.S. economy.
The three most complicated issues we deal with in terms of
pricing are the price of gasoline--when it's up everybody's mad
at us, the price of prescription drugs, which we are talking
about today, and the price of cable TV. And I may be using a
misnomer for cable TV. It may not be cable TV anymore.
But of those three, the one that is most complicated and
the most byzantine pricing mechanism is drugs. I take six
prescription drugs every day.
I had a heart attack 6 years ago and I have high blood
pressure and so I take six drugs. I couldn't tell you what
those drugs cost. My insurance company pays it. I pay a little
bit of a deductible so I know what my deductible is when I get
them filled every three months. I get a 90-day supply.
Some of them are Plavix or Plavix, Lisinopril, Lipitor.
Those are some of the name brands, and I think everything I am
taking now is a generic. I don't believe I use any of the name
brands.
So it's good to have this hearing. I hope we learn
something from it. It would be nice if we could come up with a
simplified system for drug pricing and perhaps this hearing
will begin that.
My specific questions are going to deal with the pricing of
biosimilars. Now, Congresswoman Eshoo and I worked together
several years ago to get a biosimilar title in what's now
called the Affordable Care Act and there is just--it's been one
rocky ride trying to get biosimilars to the marketplace.
And recently Congresswoman Eshoo and I led a letter that 48
other members signed asking them to have a separate code at CMS
for biosimilars.
Mr. Davis, you represent both the generic drug companies
and the biosimilar drug companies. You mentioned in your
written testimony that biosimilars are more complicated,
difficult to develop than traditional drugs. Could you expand
on that briefly, please?
Mr. Davis. Sure, Congressman. Thank you for the question.
Biosimilars are a subset of biologics. So the reverse
engineering process associated with biosimilars is heavily
science weighted and much more expensive over time.
So development programs for biosimilars can cost $150
million to $400 million in advance of filing the application.
So what we need to recognize is that there are similarities in
terms of the value that competition from biosimilars will
present to traditional biologics in the market once they get
there that is akin to the traditional small molecule versus
generic competition that we've seen for years in the branded
side.
At the same time, we do need to recognize that they are a
different class of drug and as a result of that, through the
leadership of you, Congresswoman Eshoo, and others, be able to
have a pathway established here in the U.S. as part of the
Affordable Care Act through BPCIA.
That pathway, as was suggested earlier, has not gone as
smoothly as possible and there are several policy reasons why
we are where we are, not the least of which was the potential
to have different J codes for the originator product and all of
the competitors in a separate one at CMS.
Because of the leadership of this committee, CMS has
announced a plan change to that as of January 1. So thank you
for that as well.
Another solution that would increase the uptick in interest
on the part of our members to make the investments they need to
bring biosimilars to market will be making sure that
biosimilars are treated like biologics in the Part D coverage
gap.
So it's actually our members asking to be held to the 50
percent discount to make sure that the value that biosimilars
from a pricing perspective doesn't get lost as people go
through the Part D program.
Mr. Barton. Mr. DiLenge, as Mr. Davis just said, CMS has
announced that they're going to reverse their earlier policy
and assign a separate HCPCS code for each biosimilar rather
than have a single payment rate.
Do you believe that this promotes a more vibrant and
sustainable market for biosimilars and hopefully over time
reduces prices?
Mr. DiLenge. Absolutely. We need to be able to incentivize
for the reasons that Mr. Davis said. You need to really
incentivize the biosimilar marketplace differently than you
would a traditional generic marketplace.
And so while you have all the generics in the same code and
that works for that marketplace, it does not work for
biosimilars. It won't spur the investment.
I talked earlier today about the investment that's required
for all types of innovation but biological innovation in
particular is very, very expensive and you need to have the
right incentives, and the Federal Government, the way they
code--it sounds really arcane, coding, but it actually does
impact what investors think about going into markets.
Mr. Barton. OK. Thank you, Mr. Chairman.
Mr. Burgess. Gentleman yields back. Chair thanks the
gentleman.
Chair recognizes the gentleman from Oregon, Dr. Schrader, 5
minutes for your questions, please.
Mr. Schrader. Thank you, Mr. Chairman. Very good hearing.
Probably should have a follow-up, given the breadth of the
group in front of us here.
At the outset, I am not someone that blames the
pharmaceutical industry or the supply chain for the problems we
are seeing. This is just an outgrowth of industry developments
and the innovation that's out there, as pointed out, a lot of
the starts on these innovative drugs fail--90 percent failure
rate.
That's not generally a good business model. But these guys
do it because they care about the marketplace and there,
hopefully, is a profit to be made at some point in time. I
would remind everybody that pharmaceuticals are not the highest
cost in our health care system. But at the same time, they are
one of the fastest rising costs and my guess is they will
continue to increase in cost because of the tremendous
excitement and innovation in precision medicine. It's
wonderful.
As a little old country veterinarian that I had to do and I
now look at as almost a barbaric kind of way are going to be so
refined that people will not have some of the great side
effects that we see today in the marketplace.
But having said that, we are also stewards of the taxpayer
dollar and as things get expensive and we have this wonderful
opportunity in this country and hearing everybody talk about
innovation that's now occurring in particular in this country
that's great.
But we have to be able to afford things, and therefore we
have to ask some tough questions and hopefully work on how do
we all together make this medication at least slightly more
affordable to the taxpayer and, frankly, to folks in the
individual marketplace also.
So having said that, Mr. Davis, can you talk to me a little
bit about the REMS issue and restrictive access abuse--that
sort of thing. Why, in particular, do we need an effective
enforcement mechanism to address that?
Mr. Davis. Congressman, thank you for the question and I
would be remiss if I didn't start by thanking you for your
leadership on this issue as well as Congressman Welch.
It's important because--let me start with--REMS was created
in 2007 as part of the reauthorization for the prescription
drug user fee program then, and REMS, in terms of ensuring
patient safety is a very important program.
The original statute--the authorizing statute--also said
that REM should not be used for the unintended consequences of
delaying competition from generics.
The challenge we have is that's exactly what, in many
instances, it is being used for and the reason that there is no
remedy for it is because there is no sufficient enforcement
mechanism in the authorizing legislation from 10 years ago, and
there have been constant efforts on the part of generic
manufacturers in 2012 as part of the first generic user fee
agreement that coincided with the reauthorization of the PDUFA.
They came very close. There was a provision in the Senate
version that actually would have remedied this issue. It's 5
years later and it still exists. And if you want a robust
biosimilars market and you want to make sure that competition
gets to market sooner rather than later, claiming patient
safety issues that have never been documented after the FDA
certifies generic manufacturers will appropriately handle the
samples they need to do the pharmacovigilance is just an excuse
to prolong monopolies beyond their intended effect.
Mr. Schrader. All right.
Mr. Merritt, talking about PBMs, I remember a day 20 years
ago when they were the godsend, if you will, to reducing drug
prices and having someone knowledgeable deal with the panoply
of drugs that are out there and getting it.
I would like to think that still exists, obviously, or
people wouldn't be using you. There is a supply and demand. The
reason they use PBMs is because they think they're getting
value.
Some insurers had moved away from that a little bit here
very recently and everyone talks nowadays about this black box,
and given the fact that you guys have to talk about some of the
rebates when you are reporting to Part D and CMS.
Is there a way to inject some transparency in what you do
without giving away proprietary information in the private
insurance market?
Mr. Merritt. Yes. That's a great question.
Yes, Medicare Part D is a great example because consumers
have transparency. They choose their plans. They can see what
the premiums are, what the cost sharing is, what the drug
selection is of every plan, which is why you have 90 percent
satisfaction with Medicare Part D.
I agree with something Dr. Harmon said. It would be nice if
there was that transparency in the doctor's office so people
weren't surprised--the physician, the pharmacist, and the
patient--as to what a drug actually costs a patient because
Lori is correct, the cost sharing is different for different
plans because different plans have different goals and
different populations.
So if there was electronic prescribing and doctors and
patients seeing what the actual out-of-pocket costs were in the
doctor's office I think that would really help.
Mr. Schrader. Very good. Well, I've got a ton of questions
probably like everybody else here and I appreciate all the
participants on the panel.
I guess, Mr. Chairman, it'd be nice maybe to have a work
group at some point in time, work with all our participants,
the patient groups also, about what are some of the best
solutions because I don't think there is a silver bullet here
that's going to require everyone to get in the boat together
and figure out how do we make sure we still have the most
vibrant innovative pharmaceutical market in the world that is
increasingly doing amazing things, from my perspective.
Thank you, Mr. Chairman. Yield back.
Mr. Burgess. Chair thanks the gentleman. Gentleman yields
back.
Chair recognizes the gentleman from Illinois, Mr. Shimkus,
5 minutes for questions, please.
Mr. Shimkus. Thank you, Mr. Chairman.
This is a great panel. Appreciate you all being here. I
would recommend that we break it down. There's too many--
because I think all of us want to talk to each one of you.
I know you can all come and visit with us but to have that
interaction. Some of you are going to get lost in the shuffle
and we apologize for that.
I've spent a lot of time in this health care arena on
orphan drugs, on antibiotic resistance. So and I, like some of
my colleagues, understand the 90 percent failure rate,
understand the R&D.
We want to make sure there is a return. We are the
innovators in the world but we just have to be careful.
And then we've got these--how do you provide lifesaving
drugs to a small population that you can't get a return just
from selling that drug to that individual. So that's all part
of this debate.
The antibiotic thing, which Gene Green and I have worked
on, we are floating tradeable vouchers somehow, having the
company get some way to get a return on that so that they can
have a ready-made supply of something which you, hopefully,
don't have to use. Can you imagine asking a company to have
something on the shelf that you hope you don't use?
So that's why you all are there for the right reason,
trying to make the system work. I really do appreciate it.
This transparency debate is also key. It gets us frustrated
and you just talk about drug prices in a hospital setting, but
the hospital has a federal mandate called EMTALA--emergency
room. Anybody can go.
High cost--how do they balance that versus an outpatient
clinic that doesn't have that mandate of that service? I think
you always win with being transparent and then you help educate
the consumer, and then the consumers say, well, that's why I
have to pay a little bit more because, shoot, the hospital's
paying for this emergency room access, which they have to do.
So health care is a most challenging and frustrating
payment process that we have and many years I tried to stay off
this committee because I didn't want to deal with it. They kept
throwing me back on so I am stuck with it.
[Laughter.]
But I really want to talk to one provision too that I hear.
I want to go to the local pharmacist. I think one provision
that just really gripes me is this clawback issue.
So here's what happens. Doctor gives a prescription to a
patient. A patient goes to a pharmacist. They pay the
transaction or the insurance, and then months later tell me
what happens. It's hard to believe.
Mr. Hoey. You're leading right up to it, Congressman,
exactly to the punch line. So months later, the money that the
pharmacy collected from the consumer is taken back by the
insurance plan, or the PBM.
So for----
Mr. Shimkus. And the drug probably has already been
consumed.
Mr. Hoey. Hopefully it's worked and that patient is doing
fantastic on it. But the payment is still in play.
So the pharmacy basically is forced to act like a mule to
take the money from the patient and then that money is clawed
back from the pharmacy to the health plan or the PBM.
Mr. Shimkus. Can someone tell me why? Can someone defend
that practice? Do you really want to try?
Mr. Merritt. No. No, we don't defend the practice. It's an
outlier behavior. It's something that is outlier behavior in
the industry and we understand frustrations on that. And to the
degree it exists, it exists rarely and hopefully more rarely in
the future.
Mr. Shimkus. Well, when our local pharmacists come to see
us, especially the community-owned small ones, they show us.
They show us the bill.
They show us the receipt, so I hope that people are
listening to the hearing and saying, we got to fix this.
Because it's just not right to offer a service, pay the cost
and then for someone else later on to say, oh, you got to give
us money back because whatever parameter. It's not truth in
advertising.
It's not truth in billing, and I am tired of it. I really
am--and I hope it gets fixed.
With that, Mr. Chairman, I am going to yield back before I
get more angry.
[Laughter.]
Mr. Burgess. The chair thanks the gentleman. The chair
would remind the gentleman that he was the ranking member of
this subcommittee when we were in the minority and I was down
on the first row. So he's got a lot of time in service here.
[Laughter.]
Chair recognizes the gentlelady from Colorado, Ms. DeGette,
5 minutes for questions, please.
Ms. DeGette. Thank you, Mr. Chairman.
Over the last 6 months, as many of the these panelists
know, I've been working with Congressman Tom Reed, who is my
co-chair of the Diabetes Caucus on what's going on with insulin
prices around drug pricing.
And what we've learned across the whole drug chain is that
there is a lack of transparency, which we've been talking about
a lot in the hearing today, and we've also learned that there
is a lot of finger pointing, which we've also seen in this
panel today.
It's kind of good. It's frustrating to have 11 witnesses
but you hear all of that. And so I want to kind of focus on
this issue of the complex web of financial and contractual
relationships between the players here with the idea that maybe
we can get to some more transparency and the ultimate goal
being to help the patients.
Ms. Reilly, I heard you talking about your view of how the
market is working in your opening statement and I agreed with
almost everything you were saying but you left one thing out
and the thing you left out is why the price of insulin is $400
to begin with.
Now, I know there are a lot of different delivery systems.
There's a lot of different kinds of insulin. We've moved away
from the animal insulin. We don't have a generic yet, although
that's coming soon, et cetera, et cetera. But some would say
it's not just the other players. PhRMA has a role in this, too.
So I want to ask you and two other witnesses a very simple
question as we go forward, and that is this. Will PhRMA, AHIP,
and PCMA each agree to work with your member companies to share
information with us about your contract with other supply chain
players including sharing specific examples of contract terms?
Obviously, I don't want to undermine confidentiality. But
until we know what the contract terms are it's really hard for
us to get that transparency.
Yes or no, Ms. Reilly.
Ms. Reilly. Well, we as----
Ms. DeGette. Yes or no would work.
Ms. Reilly. I don't have access to those contracts,
Congresswoman.
Ms. DeGette. Can you work with your members to try to get
us that information?
Ms. Reilly. You could probably work independently with
them. As a trade association, we cannot be privy to
confidential information.
Ms. DeGette. You're not going to help.
OK. Mr. Merritt, can you help us with that?
Ms. Reilly. It's a violation of anti-trust.
Mr. Merritt. Yes. Yes.
Ms. DeGette. OK. And Mr. Eyles, can you help us with that?
Mr. Eyles. Yes.
Ms. DeGette. OK.
Now, I was listening with great interest to Mr. Guthrie's
questions about the PBMs and I want to ask you a couple of
questions, Mr. Merritt, about this because I heard you say that
the rebates always go back to the consumers.
But I know from my investigation they don't always go back
to the consumers in the form of lower drug prices. Isn't that
correct? Yes or no.
Mr. Merritt. Well, yes in the sense that----
Ms. DeGette. Thank you.
Mr. Merritt. No, but we give the rebates to the plans and
then they sometimes----
Ms. DeGette. Right. But they don't always go back in the
form of lower drug prices.
And so I want to ask you sometimes the PBMs actually make
money off of the rebates paid by the pharmaceutical companies.
Is that correct?
Mr. Merritt. That totally depends on the client. The
client----
Ms. DeGette. But it could happen, right?
Mr. Merritt. If the client wants that to be that way.
Ms. DeGette. Yes. That answer is yes.
Now, my understanding is that some of your member clients
pass some but not always all of the rebates onto their
insurance or employer clients. Is that correct?
Mr. Merritt. It's determined by the insurer but----
Ms. DeGette. Right. That's correct. Some do, some don't.
Mr. Merritt. A hundred percent of the big employers
requires 100 percent pass-through of those rebates.
Ms. DeGette. But not everybody, right? Not everybody?
Mr. Merritt. Probably because they don't want to.
Ms. DeGette. Right. Yes. OK.
Is it true that PBMs sometimes make money off
administration fees paid by pharmaceutical companies that are
separate from rebates?
Mr. Merritt. There are different fee agreements and there
are different ways that we have to work----
Ms. DeGette. And so the answer to that is yes, too, isn't
it? I am sorry?
Mr. Merritt. Yes.
Ms. DeGette. Thank you.
Now, do your member companies sometimes include price
protection clauses intended to insulate PBMs from drug price
increases in your contracts with pharmaceutical companies?
Mr. Merritt. They're intended to insulate our clients from
price increases.
Ms. DeGette. And so that answer is yes, right?
Mr. Merritt. Well, our clients. So I guess it would be that
was there to insulate our clients from price increases. They
want those there.
Ms. DeGette. OK. Member companies sometimes include price
protection clauses intended to insulate PBMs from price
increases in contracts in pharmaceutical companies--yes or no?
Mr. Merritt. I guess it would be no.
Ms. DeGette. OK. Do these price protection clauses
sometimes allow your member companies to make additional money
through clawbacks when a drug's price increases?
Mr. Merritt. I am not aware of that in the clawbacks.
Ms. DeGette. Yes. So if a drug price increases they can get
clawbacks. Ms. Reilly, you were nodding.
Mr. Merritt. Oh, I see.
Ms. Reilly. Well, I was--yes, I actually have a document
right here and it states Express Scripts has more than 90
percent of brand manufacturer contracts include price
protections.
Ms. DeGette. Can I get a copy of that?
Ms. Reilly. Absolutely.
Ms. DeGette. And Mr. Chairman, I would like to put that
into the record.
Mr. Burgess. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Ms. DeGette. OK. Mr. Chairman, as you can imagine I have
many more questions and I apologize for making you answer yes
or no. We have 5 minutes.
I am going to submit these to the witnesses and I thought
the idea that Mr. Schrader had to have a task force is an
excellent idea.
Thank you. I yield back.
Mr. Burgess. Chair thanks the gentlelady. The gentlelady
yields back.
The chair recognizes the gentleman from Ohio, Mr. Latta, 5
minutes for questions, please.
Mr. Latta. Well, thank you very much, Mr. Chairman, and to
our panel, thanks very much for being here today. It's been a
very, very interesting discussion we've been having this
morning.
Several years ago, I sponsored the legislation on track-
and-trace, from making sure that we don't have adulterated
counterfeit drugs entering the market. So this has been a
really fascinating hearing that we've been having today.
And I am also working on legislation right now to modernize
and reform the FDA's OTC monograph system. I would like to talk
a little bit more about that to see how we examine ways to
modernize the regulatory infrastructure of prescription drugs.
As members, I believe we should always be looking for
avenues to reduce burdensome regulation, foster innovation,
spur competition, and provide certainty for consumers and
businesses.
And as we go forward, how can Congress help modernize the
regulatory infrastructure at the FDA in order to bring these
new medicines to market in a quicker manner? Because we had the
hearing earlier this fall that was really fascinating to see
how long it's been going back to 1972 when you are looking at
45 years.
So Ms. Reilly, if I could ask you, what can we do as
members as we look at legislation to help modernize this
infrastructure at the FDA?
Ms. Reilly. That's a great question, and I would
congratulate this committee on recent passage of the
Prescription Drug User Fee Act, PDUFA and GDUFA as well,
because that's a significant step forward in terms of
modernizing the agency. I also think Commissioner Gottlieb has
done a number of things on his initiative to move this in the
right direction.
There are a handful of areas that I think still need
further work. Combination products--EpiPen has come up on a
number of comments here before and I think more needs to be
done to ensure that when we have combination products, be it
auto injector products like EpiPen that you have got two
different parts of the agency that need to work more closely
together so that we can spur competition, get those products to
market sooner.
I think innovative clinical trial design is another area.
As was mentioned before, the medicines that are coming to
market are very different than the medicines that came 20 years
ago. And so we need to modernize clinical trial design and the
regulatory tools that are used to review those products as
well.
And then I would say we need to continue to advance
prescription-focused drug development. Having the patient at
the center through the process of the Food and Drug
Administration is vitally important but ensuring that patients
I also heard as reimbursement decisions and coverage decisions
are equally as important.
Mr. Latta. Thank you.
Mr. DiLenge or--and Mr. Davis, would either of you like to
comment on ways in which the FDA modernization or increased
generics on the market would also help benefit our consumers
and the patients out there?
Mr. Davis. Congressman, thank you for the question.
Yes, and then first I would second the recommendations that
Ms. Reilly made. I think relative to the generic market, again,
the leadership of this committee to pass the user fee agreement
for the generics, we are only in. really, at the beginning of
our sixth year of the user fee program with the FDA. The brands
had a 20-year head start in many ways.
So that system is much more refined. I think there is a
shared both commitment and responsibility between our sector
and the agency to make sure that we are driving as much
effectiveness and efficiency through the generic and biosimilar
approval processes.
A simple example is first cycle approvals for generic
applications historically have been very, very low--abysmally
low. Under the leadership of Dr. Gottlieb, that has already
begun to change.
Mr. Latta. Let me ask you this. Why has this been so, you
know, dismal in the past? What has caused that?
Mr. Davis. Quite frankly, I think if you look back I would
certainly say on behalf of our members through the first GDUFA
implementation the first 5 years engagement between the FDA and
the industry in the first couple of years as the Office of
Generic Drugs probably could have been more robust and mutually
productive.
By the time the FDA started having goals--associated
timeline goals associated with approving ANDAs, they were well
on their way to have already built OGD.
The aggressive timelines in GDUFA II--8 months for a
priority review, 10 months for a standard ANDA--will go a long
way towards enhancing competition, getting ANDAs approved and
then getting that competition out to the market.
Mr. Latta. Mr. DiLenge, would you like to comment?
Mr. DiLenge. I would just completely agree with that. You
know, we've learned a lot on the innovator side about how you
improve first cycle approvals by the FDA. That is critical to
getting even more brand-to-brand competition in the
marketplace.
We are doing that now on the innovator side. The generic
industry, I think, can learn a lot from what we went through
over the last 20-plus years of GDUFA and really learn with the
new GDUFA how they can interact with the agency in a better way
to get more generic drugs through the process quicker on the
first tray.
Mr. Latta. Thank you very much, Mr. Chairman. My time is
about to expire and I yield back.
Mr. Walden. Would the gentleman yield?
Mr. Davis. If I could just add one follow-on comment?
Mr. Latta. Go ahead.
Mr. Davis. It's critically important for us to get more
ANDAs approved earlier. Then we also need to make sure that
there is a market where those holding those licenses will go to
the market and not be tied up in endless delay through patent
filings, extensions, evergreenings, and product topping as
well.
Where Tom and I would disagree is that is increasingly a
significant issue that's keeping generics and biosimilars from
the market.
Mr. DiLenge. And we do respectfully disagree with that.
There is really no data to show that.
Mr. Latta. Thank you. And now, Mr. Chairman, my time has
expired and I do yield back.
Mr. Burgess. Your time expired a long time ago. But I do
need to recognize the chairman for an informational message.
The chairman is recognized.
Mr. Walden. Thank you, and with the indulgence the
committee, I know a couple of members have asked about we need
to have a work group. We need to have some sort of rump group
to address this issue.
Consider yourself on it if you are on the Health
Subcommittee. That is the job of this committee. That is the
job of other subcommittees that are looking at other things.
The O&I Subcommittee is looking at 340B issues, about to issue
a report.
But this is where we are going to do regular order right
here on the Health Subcommittee to look at the issues that you
all are helping us get a better handle on, and I think there
may be an opportunity to come back after the 1st of the year
and continue this discussion.
It, I am sure, isn't the most fun thing for all of you to
be at the same table together but it sure helps us, have you
each go back and forth and tell us your points of view.
And so I appreciate the committee's indulgence. But the
notion we are going to have a splinter group go off and do
something, put a nail in that one because this is the splinter
group.
This is the Health Subcommittee. This is the Energy and
Commerce Committee and we are going to go through regular order
to get the answers that will work for consumers.
With that, I yield back, Mr. Chairman.
Mr. Burgess. I thank the chairman for the observation. This
is indeed the smoke-filled room.
The chair recognizes the gentlelady from California, Ms.
Eshoo, 5 minutes for questions, please.
Ms. Eshoo. Thank you, Mr. Chairman, and I want to thank
Chairman Walden for the comments that he just made because it's
important that the work not only begin here but that the
Members are responsible for shaping a policy around what we are
discussing, which is so important.
I want to thank all the witnesses, all ten of you. Because
I've listened to most--just about every--well, everything since
we began, it's a good exercise to just sit still and to listen
to the questions that are asked and the answers that are given.
Here are my observations. Number one, and I am proud of
this--the United States of America and its genius has produced
lifesaving drugs not only for people in the United States but
for people around the world.
So the research, the development that comes out of both the
biotechnology industry, the pharmaceutical industry are really
very, very important and I am proud of the work that I've done
over the years to help advance that.
I am a firm believer in it. The other observation I have is
if we were starting from scratch and you all designed the
system that you are here to talk about today, it really sounds
like a Rube Goldberg plan, I have to tell you.
And I don't blame any one of you. You have told your story.
You're sticking to your story. But the fact of the matter is is
that it's not working well at all and it's not healthy to have
the antipathy in the country against you.
It's a very unhealthy thing. It really is, because on the
one hand, people need the drugs. We had members speak to their
own conditions and what they need to take.
So this is crying out for reform. This is crying out for
reform. And I think what I would just put you all on notice
on--about is that we are going to reform. We need to reform. We
have to answer to our constituents.
We have to answer for what the costs are in the system that
we oversee. The Federal Government is the major player and
payer in the United States of America when it comes to health
care.
So there is going to have to be some give and take on these
issues. Mr. Davis, I just want to say something about REMS.
Yes, it put into place in 2007 and it was put into place to
protect patients. You know that.
Now, the FDA is the one that identifies the issues that
need to be identified relative to safety and it's why we have
REMS. One of the drugs that comes to mind is sodium oxybate,
commonly called the rape drug.
So you said some things about REMS that I don't think are
really accurate because the safety relative to these drugs that
are very, very dangerous if they get into the wrong hands--that
we all need to gather around that. That's a must.
That's not a Republican issue, a Democratic issue. It's
there for a very good reason because those drugs, as I said, if
they fall into the wrong hands it's dangerous.
I want to thank pharmacists. I have to tell you, in my
community in California and Silicon Valley it's very difficult
to find a small druggist anymore. They're gone. They're gone.
They're gone. It's all the big guys now.
And I am not saying that they may not be doing a good job
for people to get their prescription drugs. But I can't name
one small druggist anymore, including a cousin of mine that was
in the business his entire adult life.
So that says something about money because money is part of
the business, and I think that that's a real loss in my
communities and I guess communities in different parts of the
country.
And to our friend at the end of the table, I think that you
are a walking advertisement for the good things we did in the
ACA because you would not be covered for anything in terms of
what you are going through were it not for the reforms of the
insurance industry that we took on in order for you to be
covered and at least have peace of mind that you have coverage
and that the lifetime limit caps were lifted as well because of
the horrendous costs that pile up very quickly when you are
dealing with what you are dealing with and I wish you well.
I really wish you well, and thank you for bringing together
people on a bipartisan basis. We need you to work with us and
congratulations on not being dependent on the money of anyone
that's involved in the industry because it then actually, I
think, diminishes or brings questions to the effort.
So thank you to all of you and those are my observations.
But I think that they more than hint at the work that we need
to do because this is--if there were a chart that was brought
into the hearing room today, starting with the top--research,
development, and then where it goes and who's involved at every
level--it would outdo Johnny Carson's roadmap that he used to
point to.
So thank you, Mr. Chairman, and I look forward to being a
part of the solution at this committee relative to the cost of
drugs in our country.
Mr. Burgess. Gentlelady yields back. Chair thanks the
gentlelady.
The chair recognizes the gentleman from New Jersey, Mr.
Lance, 5 minutes for your questions, please.
Mr. Lance. Thank you very much, Mr. Chairman, and my
thanks to the panel.
Ms. Reilly, CMS recently announced in a proposed Part D
rule that it wants to require Part D sponsors to pass through a
portion of manufacturer rebates and pharmacy price concessions
at the point of sale.
What is the ideal way in which you think this should
function?
Ms. Reilly. Well, thank you for the question and I think it
is important and this is an important step I think that CMS is
asking for information on this very issue.
I think when Part D was originally designed the notion was
just that, that the discounts and rebates that are negotiated--
and they are significant in Part D--they're larger than in the
commercial marketplace--find their way back to patients at the
point of sale.
Today, those dollars are used by health plans and not
disagreeing with keeping premiums low as an important goal. We
believe, however, in work that we've done that not only could
discounts and rebates get passed back to patients, that we
could do it in a way that actually saves the government money--
upwards of $20 billion over 10 years if we are able to pass
those discounts back to patients because it will delay the time
in which a patient enters the catastrophic phase of the benefit
where the government picks up a large share of the cost and it
will also lower the amount that the government is paying for
low-income subsidies.
I think the proposal that was put forth in the CMS request
needs some fine tuning. They talk about pass-through of
discounts through a class of medicines.
We think it actually would work better if it was done on an
individual product basis because, quite honestly, companies are
not all that interested in providing greater rebates if they're
going to be enhancing their competitors.
Confidentiality is important, I think, to make this work.
But I would argue this is a good step forward and could be
transformational into changing some of the misaligned
incentives that exist in the system today that, again, as CMS
has previously noted, encourages insurers to pick drugs with
high list prices and high rebates.
We want them competing on delivering drugs that provide the
best value at the lowest net price and this is a good step in
that direction.
Mr. Lance. Would anyone else on the panel like to comment?
Yes, sir.
Mr. Merritt. You do see some point of sale rebates
happening in the commercial market where you have the whole
health plan want to say, hey, look, we will raise premiums
slightly in order to do that.
We are seeing that happen there. In Medicare it's difficult
because CMS has noted this would raise cost to taxpayers by
about $80 billion and would increase premiums for patients. And
the reason that happens is because Part D reimburses plans
based on the premiums, and if the premiums go up so does the
cost to the government.
And so I think when you think about point-of-sale costs you
shouldn't think about it in terms of reducing costs overall. It
doesn't reduce costs overall.
It just shifts costs to taxpayers if it's done wrong in
Medicare and from healthy people to sicker people who need the
medications and that's a policy decision as to how CMS wants to
approve it--look at it.
One thing CMS said is if they do approach this, they want
to do it in a cost-neutral way. I think that's the thing that
we are working on right now is trying to figure out how that
would even happen.
Mr. Lance. Thank you.
Yes, sir.
Mr. Hoey. Congressman, we would say that the rebates allow
for shell games to be played and because of the rebates those
are often an unreliable--we do support pass through to the
point of sale.
However, we believe that it enables shell games if it's not
properly monitored and already we are starting to see rebates
being relabeled.
So what was a rebate yesterday is no longer a rebate. It's
an administrative fee. It's some different category so it
doesn't fall into that rebate bucket.
So there is a lot of shapeshifting going on that further
complicates the pricing of the product.
Mr. Lance. And whose responsibility should it be to make
sure that that does not continue to occur? Does that require a
statutory change or purely a change from the executive branch,
in your judgment?
Mr. Hoey. I think it would require a statutory change for
that to happen. I do not think that the--that CMS--I can't
speak for them, of course, but I don't know that they would say
they have the regulatory authority to really police that.
Mr. Lance. Mr. Mitchell, you wanted to comment?
Mr. Mitchell. Yes, Congressman, if I may, please.
I just want to bring it back to the patient impact of those
out-of-pockets paid on retail rather than rebate. The 12
highest out-of-pocket costs for drugs on Medicare Part D
annually range from $4,400 a year to almost $12,000 a year.
This really hurts people whose median income is around
$26,000 a year. We need to fix something in the system and the
proposal from the Trump administration to allow the point-of-
sale price paid by patients to be based on rebate if not retail
is a good step in the right direction.
It will move some money around unless you change benefit
design. But we think the tradeoff is great to help people who
are bearing the greatest burden and spread it a little more,
even though it may have a slight premium impact.
Mr. Lance. Well, thank you. I got through one of five
questions and I am already over time.
I yield back. Thank you.
Mr. Burgess. Chair thanks the gentleman.
The chair recognizes the gentlelady from Illinois, Ms.
Schakowsky, for 5 minutes for questions, please.
Ms. Schakowsky. Thank you for holding this hearing today,
Mr. Chairman.
I think it's long overdue that this subcommittee and
committee work on skyrocketing drug prices.
AARP reported that in 2015 the average drug price was
$13,000 per drug for a year's supply and that's almost a
quarter of the median U.S. household and four-fifths of the
average Social Security benefit.
Now, of course, not all of that money is out-of-pocket
costs. But somebody ends up paying.
Mr. Eyles, I want to ask you a question. Does the insurance
industry have meaningful input into the list price?
Mr. Eyles. No. We don't have any input into the list price.
Ms. Schakowsky. And does the insurance industry have any
information about what the various factors that go into it
including how much spending goes to research and development?
Mr. Eyles. No, that's not reported.
Ms. Schakowsky. So let's take Sovaldi for a minute. Gilead
bought Sovaldi for about $11 billion, investing zero dollars in
R&D, and made about $11 billion in year one by jacking up the
list price to $84,000 per treatment--per cure, really.
We learned this from Dr. Gerry Anderson, professor of
public health at Johns Hopkins University. Dr. Burgess hosted
him at a round table. And according to a Senate investigation,
we found out that Sovaldi's business model was to reach about
20 percent of the people with Hep C. There's one out of five
people who might be able to afford it, and that includes people
on Medicare. If their co-payment would be $5,000 they probably
couldn't afford it. And the rest of the people, well, too bad.
We talked a bit about insulin. Mr. Eyles mentioned the
decade increase. What I had was about 300 percent including the
percent--including the period, by the way, that Alex Azar, who
is now nominated to head HHS, was at Eli Lilly. And we know the
names of people who died because they could not afford to get
the insulin they needed.
So this business model, this idea that we can just jack up
prices past what people can afford, I wondered if our consumer
could speak to that for just a minute.
Mr. Mitchell. Well, it's not just insulin. Insulin prices
have gone up 300 percent over the past 10 years and it's
because we have an oligopoly that controls the price of
insulin. They move their prices in lockstep and they increase
prices because they can.
But you should also look at other drugs like multiple
sclerosis drugs.
They have increased 500 percent in price from 2004 to 2017,
and when PhRMA says actually, our treatments are lowering cost
of care, in 2004 the drugs accounted for 50 percent of
treatment costs for multiple sclerosis but in 2017 they account
for 75 percent of treatment costs.
The drug I was on for 5 years called Revlimid, made by a
company called Celgene, increased its price this year by 20
percent. This is a drug that was invented in the 1950s and
which is being kept off of generic is preventing a generic.
Ms. Schakowsky. Excuse me, so is your point that there was
no additional research and development. The price just went up?
Mr. Mitchell. The price just went up. That's all.
Thank you, Congresswoman.
Ms. Schakowsky. Thank you. I appreciate that.
I want to get to the issue of rebates. Pharmaceutical
companies talk on TV during these ads that are ubiquitous--if
you can't afford your drug come to us and maybe we can help you
and my office, we take advantage of that.
But I wanted to ask, really, yes or no, Ms. Reilly, do drug
companies get a tax break for those rebates?
Ms. Reilly. For the donations, yes.
Ms. Schakowsky. For the donations. So if you set a list
price that is up here and then you have a rebate to make it
cheaper for some, is it the difference between the list price
and the rebate that is considered a donation?
Ms. Reilly. I would have to get back to you on that. I am
not sure how that----
Ms. Schakowsky. But it could be as much as $100 billion
because that's what you were saying was about the donation. You
said $100 billion.
Ms. Reilly. No, no, no.
Those aren't donations. A hundred billion dollars are the
rebates that our companies provide in terms of discounts for
insured patients, right. That's totally separate from patient
assistance programs that help patients that lack insurance.
That's a totally different issue.
Ms. Schakowsky. How much is that money and--well, I am over
time. I would like to know how much goes into those programs
and----
Ms. Reilly. I would be happy to----
Ms. Schakowsky [continuing]. How much of a tax break
companies get for lowering the price.
I yield back.
Mr. Burgess. Gentlelady yields back. Chair thanks the
gentlelady.
Chair recognizes the gentleman from Virginia, Mr. Griffith,
5 minutes for your questions, please.
Mr. Griffith. Thank you all for being here. I have to tell
you, though, you all have raised my blood pressure today.
Everybody is saying that this is the problem and that's the
problem and the bottom line is we have our working group, as
the chairman said, which is going to be this subcommittee.
I believe you all need a working group. Because if you all
don't solve this we are going to come in and come up with an
answer and it may not be an answer that you end up liking.
Now, one of the things I've heard today that I do like is
transparency, and I understand Mr. Mitchell needs the
manufacturers of the drugs, biologicals, whatever--needs a
consumer patient advocate, needs the insurance companies out
there--we all need that.
We need our doctors. We appreciate that. Love my
pharmacists. As you all know, I really think they're front line
folks for health care and most people, at least in districts
like mine that are mostly rural, they've known their pharmacist
for years. They trust their pharmacist. They want their
pharmacist's input, and we appreciate that.
But here's the question. Without transparency, Mr. Merritt,
I can't figure out for the life of me why the insurance
companies can't deal directly with the manufacturers and the
pharmacists and what value is it that you are adding?
Because what we've got is a big black box, and we dump the
drugs in and we got people pointing fingers. And I am not going
to ask you because that's a question we are going to have to
answer another day. I only have 3 and a half minutes left.
That'll take hours.
But what I am seeing and what the public sees is we've got
this big black box called a PBM. They're saying they have to
raise their prices so they can then give you a bigger discount
and sometimes Mr. Eyles and the insurance companies like that
and sometimes you like it and sometimes you get rebates back
and sometimes you take money from the pharmacists back after
they've already filled the prescription, or the insurance
company does.
But it all comes back. For the life of me, if we don't get
some transparency in there--and there must be something you are
adding to the system and I look forward to you telling me after
the meeting in a written form what that is.
But I think we have to have some transparency so the
average citizen in the United States understands why it is that
you all are up here pointing fingers at one another and it
comes back in big part to what's going on inside that big black
box called the PBMs.
Now, that being said, on the clawback, as I call it, or DIR
fees, as you know, Mr. Hoey, I have a bill in along with my
friend, Mr. Congressman Welch, and we've introduced a
bipartisan bill that would put an end to this retroactive
collection fees from pharmacies.
And it's interesting because we heard Mr. Merritt earlier
say that's an outlier. But when I hear from pharmacists in
Pennington Gap and in Pulaski and in Salem and in all the small
towns in my rural district with 29 jurisdictions that they're
having a problem with this, I think it must be the big boys and
all of my small pharmacies are the outliers who are getting hit
by this. Has that been your experience?
Mr. Hoey. DIR fees are prevalent across every pharmacy that
we know of that does business with Medicare Part D, which is
every pharmacy. So DIR----
Mr. Griffith. So it's not an outlier, from your
perspective?
Mr. Hoey. No. The consumer co-pay clawbacks, I would not
call them an outlier. Those are really one PBM that's doing the
most damage there.
But DIRs is across the board. It's suffocating independent
pharmacies and it leads to some of the consequences that the
congresswoman from California alluded to.
Mr. Griffith. And it's interesting because they apparently
do this analysis on Part D. I've been reading through the CMS
rule analysis and at one point they say, our analysis of Part D
plan payment and cost data indicates that in recent years,, DIR
amounts Part D sponsors--that would be the insurance
companies--and their PBMs actually received have consistently
exceeded bid projected amounts and in another part of that
analysis it says that that means it goes to their profit line.
Mr. Mitchell and the consumers out there aren't seeing all
that in those savings. That's going to profit. Does that happen
a lot, Mr. Hoey?
Mr. Hoey. Oh, absolutely. So the DIR fees--I think the CMS
analysis from January show that DIR--over $80 billion have been
paid in DIR fees over the last 6 years. And so where those DIR
fees are going, some of them may be going to lower premiums.
Maybe----
Mr. Griffith. And I suspect some of them are going to lower
premiums.
Mr. Hoey. But some of it may not be going to that.
Mr. Griffith. But here's the problem that the American
public sees and if I've heard about it I know others have and
those may ask questions about it as well and that is I've heard
stories--and they're anecdotal and people don't want me to use
their names and so forth--where they've gone to their
pharmacist.
The pharmacist has told them this is how much it's going to
cost and as I think it was Mr. Mitchell testified people are
cutting their drugs in half or not taking all their doses
they're supposed to, and the pharmacist will say, well, if you
pay cash and don't use your insurance you can actually get it
cheaper.
Because of all the finger-pointing going on down on this
end of the table as to who's made the prices go up, you are
actually better off to deal outside the system and just buy it
for cash. Have you found that to be true?
Mr. Hoey. That is correct in some cases, and the pharmacies
that do that are taking their business life in their own hands.
Mr. Griffith. I understand that. That's why I can't talk
about it.
Mr. Hoey. Yes, sir.
Mr. Griffith. Can't talk about it much. So here's the
bottom line, folks. If that doesn't say that there is something
stinking in Denmark, nothing else does.
We are going to have to work on it and that's why you see
Democrats and Republicans upset today.
I yield back.
Mr. Guthrie [presiding]. Gentleman yields back.
The chair recognizes Mr. Sarbanes from Maryland for 5
minutes for questions.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank the panel.
I want to thank in particular Mr. Hoey for your testimony
and for the work of the association. I agree with just about
everything that my colleague just finished saying and I hope,
as many members have emphasized today, that the message is
getting through that on a bipartisan basis we are kind of
reaching the end of our tether.
And a lot of it just has to do with trying to catch smoke
when it comes to how this pricing works. We have the whole
chain represented here, I gather, and I listened to all your
testimony as I was navigating the traffic coming in from
Baltimore this morning.
So I did listen carefully, and I guess, Mr. Hoey, I would
be interested--anybody else who wants to volunteer--but
transparency is a word we hear over and over and over again.
What are the two or three things--not to set you up in
direct opposition with Mr. Merritt but what are the two or
three things in terms of more transparency on the part of the
PBMs that you would predict the PBMs would scream the most
about if those provisions were put in place?
Mr. Hoey. We've talked about some of them as far as the
rebates. That would certainly----
Mr. Sarbanes. Yes.
Mr. Hoey [continuing]. Cause, I think, a great deal of
consternation. I think also there--on the generic side--and
Chip mentioned earlier that 90 percent of the prescriptions are
generic and there are very few rebates for those 90 percent.
However, they're sort of a de facto rebate that the PBM
industry has created.
One of those is through the consumer co-pay clawbacks that
we talked about. As we indicated, it's not every PBM that does
that but it's about a third of the market. The second is on the
MAC prices. So a MAC price is on the generic side and what the
PBM does is they set a ceiling for that generic price. That
ceiling can vary from pharmacy to pharmacy, from day to day,
from hour to hour. So the pharmacy actually has no idea what
it's going to be paid for a generic product at any time.
In fact, when the consumer walks in for a prescription, the
consumer often doesn't know what they're going to pay for that
generic price, for that generic prescription, the pharmacist
has no idea, and really, the only entity with the perfect
information is in the middle and that's the PBM.
And until the PBM tells the pharmacy what to charge the
consumer, the pharmacy has no idea what they're going to be
paid and then what to charge the consumer. And furthermore,
with DIR prices now, not only does the pharmacy not know until
it processes that prescription, but it still doesn't know until
months later when more money is clawed back from it.
So those practices make it almost impossible to run a small
business and to predict cash flow, to invest in capital, and to
hire employees.
Mr. Sarbanes. I appreciate it. I can't help but see an
analogy when we talk about how the prices can change from hour
to hour and, frankly, as the PBMs would say that their role is
critical and satisfying on demand need for drugs and the more I
listen to it the more it sounds much like the discussion we
have of the purchase and pricing of electricity.
We've been doing a lot of hearings in this committee on
electricity--modernizing the grid, how purchasing of
electricity has these middle operators that have to assemble
the resource and then sell it up the line and so forth.
So that, to me, is a powerful analogy and, frankly, where
it gets my head, just to send a shudder through the panel here
today, is to the idea of regulation approaching a kind of
utility regulation when you come--when it comes to drugs, which
are needed by just about every American at some point in their
life. This is something that traffics in the public space when
you look at it that way.
So this is where I come from, and somebody on the
Republican side said that if the drug supply chain can't be
improved then we may start out in a place that you don't like.
But that's where my head is, and with that I yield back.
Mr. Burgess [presiding]. Gentleman yields back. The chair
thanks the gentleman.
Chair recognizes the gentleman from Florida, Mr. Bilirakis,
5 minutes for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Thanks for holding this hearing and I thank the panel as well.
Quite a few of my constituents bring this up to me when I
am home on the weekends--what about the importation of drugs
from Canada? Are they safe? Is it an idea that has merit?
Why don't we start with Ms. Reilly, please.
Ms. Reilly. I think there is, unfortunately, a misnomer
that importing drugs from places like Canada--our belief is
that oftentimes, particularly when people go on the internet
and they think they're buying a drug from Canada it often is
not coming from Canada.
In fact, in the past when the FDA did its investigation and
ordered drugs from so-called Canadian internet pharmacies found
that over 80 percent of them were coming from countries all
over the world and many of those were not the medicines that
they purported to be.
Is it fair to say that if I walked into a Canadian drug
store today to purchase a medicine would it be safe? Yes, it
would.
But the Canadian market is 10 percent of the U.S. market
and has repeatedly said that they don't intend nor will be
responsible for supplying the U.S. drug market.
The idea of importation raises significant concerns from a
safety perspective. We've heard from every FDA commissioner,
both administrations going back for over 20 years.
Trying to guarantee the safety of medicines that are coming
in from all over the world is near impossible and would
jeopardize a supply system today that has been remarkably safe
for Americans.
Mr. Bilirakis. How about Mr. DiLenge? Do you want to
comment on that?
Mr. DiLenge. Yes. First of all, I agree, obviously, with
everything that Lori said but let me add another dimension to
this, which is by importing what are you importing? You're
importing basically price controls on American intellectual
property that other governments have imposed through their
negotiations of drug prices.
They don't negotiate the foreign governments. They impose
prices because they're single purchasers, and what they are
doing is, because I talked about it earlier, that vast majority
of innovation is occurring in the United States.
They are basically imposing price controls on American
intellectual property. It should be investigated as an unfair
trading practice--and we encourage that the Trump
administration is trying to look at this, finally, as a trading
practice problem.
Mr. Bilirakis. Anyone want to weigh in? Maybe there is an
opposing view.
Mr. Davis. Congressman, I would just add from the generic
perspective, and I respect and agree with the safety concerns
that both Republican and Democratic administrations have found
through the FDA commissioners, there is a practical effect with
respect to generics.
Because we have a more robust market-based competitive
environment for generics here in the U.S., generics cost less
in the U.S. than they do in Canada as a market basket. So it
begs the question why would you be importing something that's
more expensive there?
Mr. Bilirakis. OK. Thank you. I will move on to the next
question.
Mr. Merritt and Mr. Hoey, CMS recently published their 700-
page proposed rule for Medicare Part D for calendar year 2019.
One component was their proposed implementation of the drug
management program for at-risk beneficiaries from the
Comprehensive Addiction Recovery Act of 2016--and that was my
provision.
This drug management program, or lock-in, as we call it, is
used in Medicare--of course, Medicaid programs and private
insurance currently.
Have you had a chance to review the regulations and what
are your thoughts on CMS's proposed implementation? We'll start
off with Mr. Hoey.
Mr. Hoey. Yes, Congressman, we have had a chance to take a
look at that and overall we support the way the Part D lock-in
program is structured.
We would contrast that on the Medicaid program the
prescriber and the pharmacy that the patient is locked into is
chosen by the beneficiary and that's not the situation with
Medicare. In the Medicare plan it would be assigned by the
plan. So we are concerned about that freedom of choice from the
consumer.
Also, with the Medicaid plan it's administered by the
state, and the Medicare program it would be administered,
again, by the plan. So we are concerned about that.
And lastly, we would be concerned by--since the Medicare
plan is administering it, any situation where the patient would
be locked into a plan that also owns pharmacies or they're
locked into their own mail order pharmacies.
Mr. Bilirakis. OK. Fair enough.
Mr. Merritt.
Mr. Merritt. Sure. The key with protecting at-risk patients
is to make sure that they're going to one doctor and one
pharmacy and those two medical professionals are communicating.
The challenge in the past has been doctor shopping and
other addiction-related behaviors in which people are dying.
It's a real epidemic.
The challenge we see at our first look at this is there are
too many processes where you can't simply work with a
particular pharmacy in a local area to a beneficiary and that
they have 6 months essentially to work the system and not be at
any particular pharmacy and we think for the at-risk patients--
not for all patients, not for all drugs--but for at-risk
patients on things like opioids, that's a recipe for disaster.
In 6 months people can literally lose their lives, and the
whole goal of this program, I think, is patient safety and I
think that's what the president has been talking about, too. We
do appreciate your leadership on this, though.
Mr. Bilirakis. Sure. Absolutely. Thank you. I look forward
to working with you in the future and get it right because if
we are not safe nothing else matters as far as that is
concerned.
Well, I don't have any more time, unfortunately.
Mr. Burgess. Gentleman's time has expired.
Mr. Bilirakis. Does anyone want to add something----
Mr. Burgess. No. The gentleman's time has expired.
Mr. Bilirakis. All right. All right. All right.
[Laughter.]
Mr. Burgess. The chair recognizes the gentleman from
Missouri, Mr. Long, 5 minutes for questions, please.
Mr. Long. Ahead of Peter? OK. I didn't realize that.
Thank you all for being----
Mr. Burgess. I thank the gentleman for pointing that out.
But Mr. Welch is not on the subcommittee. Do I have that
correct? And as a consequence, we will hear from subcommittee
members first.
So you are recognized for 5 minutes.
Mr. Long. I appreciate it. Thank you. Now that I have one
minute left----
[Laughter.]
In 1966 there was a movie, ``Ten Little Indians'' and when
I look at our ten witnesses here today, all these folks were
invited to a luxury mountaintop resort where they started
getting knocked off one by one from an unseen source. Nobody
knew if it was one of them or who did it.
So I am thinking that if we had you all go off for the
weekend and come back, whichever one of you comes back next
week you'd have the perfect response to all of this and we
could get this deal settled.
But it's like Morgan said, everybody's blood pressure gets
raised on this. But if you think that we are the ones to come
up with a solution, I hope that we can figure out something
between then and now.
Let's see. Mr. Merritt, I am given to understand that
Express Scripts--one of your members or your members is the
only or one of the only PBMs that have implemented a
comprehensive opioid solution.
I myself have three friends that I grew up with that have
all lost children within the last few years to this opioid
crisis and to combat the devastating impact of opioid abuse,
which includes, according to this, a 7-day fill, enhanced
fraud, waste, and abuse prevention with providers and
pharmacies as well as disposal bags for medication waste.
Can you tell us a little bit more about this program and
when your other member companies will be initiating similar
programs?
Mr. Merritt. Well, let me talk about it as an industry as a
whole, and I do really appreciate those moves by Express
Scripts.
I think what we see is that we are able to identify or the
PBMs are able to identify people who are at risk. You can look
at people who try to get the same scripts filled at multiple
pharmacies, have gone to the same doctor to try to get multiple
prescriptions.
You can track drug stores that have unusual dispensing
patterns or--which aren't many but they do exist--and then
providers or physicians who have unusual practices of
prescribing and with that information you can identify at-risk
people.
It really is important to do the most important thing with
any addiction is to limit the supply and have monitoring, as we
were just talking about with Congressman Bilirakis, of medical
professionals.
And, again, this is not for regular people who don't have a
problem. This is for at-risk people on particular drugs.
Express Scripts has done a lot on that regard. We do see that
happening in the industry more.
We are supporting electronic prescribing legislation right
now, which would require these drugs to be electronically
prescribed by physicians to a certain pharmacy so that safety
could be improved. But, you know, we do see our industry taking
a lot of good strides in this.
Mr. Long. In my state of Missouri we don't have a drug
registry. We are, I think, the only state that doesn't have it.
Our governor has tried to implement that but it hasn't really
gotten off the ground.
We are down in the southwest--at least my district,
southwest corner of the state joining Arkansas, Oklahoma, and
Kansas, and the doctors that work the late shift on Friday
night and Saturday night in these ERs, folks will come up from
Arkansas, Kansas, over from Oklahoma--we are very close to all
those states--and their Dr. White is always retired. Dr. White
retired in Arkansas and I really need my opioids.
So they'll come in and they'll want to get their
prescription filled. Well, guess what? That doctor has got two
choices. He can fill that prescription or, according to
Obamacare where you have to rate your physicians, the doctor
can say, I am not going to fill this prescription for this guy.
I know that he's addicted to it and he needs help but he
doesn't need me to prescribe this. So he doesn't fill it then
the guy rates him down on his rating and then he's no longer
able to--so it's a huge problem.
So anything that you can share that you can help us with in
that regard. Like I said, being the only state that doesn't
have the registry it's--and being right down in the corner
where you get three other states that all do and all the folks
come in on the weekends, Friday, Saturday night, fill up the ER
begging these doctors for their opioids.
Ms. Reilly, real quickly, some call for government
negotiation in Part D, framing the issue as if there is no
competition in the marketplace or negotiation happening now
when nothing could be further from the truth.
Can you tell us about the current role in negotiating the
Part D program and how that's been responsible for bringing
down prescription drug costs?
Ms. Reilly. Absolutely. I think Part D has been the model
of success with regards to competition. Today, as I mentioned
before, those three large pharmacy benefit managers, they buy
on behalf of 70 percent of all prescriptions in this country
and they move their market leverage whether they're buying on
behalf of Medicare beneficiaries are those in the commercial
market to put additional cost pressure. They've done it in such
a way where we've had high beneficiary satisfaction. Costs of
the program are half of what they were expected to be when
Medicare Part D passed and premiums have been low. In fact,
there was an amendment offered in this very committee to try
and set premiums at a price of around $50. That's never even
gone into effect. We've never had an average premium that high.
I think that speaks to the testament of the private market
where there is a significant amount of competition.
We talked earlier today--I think the evolution of the Part
D program is to ensure that that robust competition and those
rebates that are collected get passed back to the beneficiary
to lower patient out-of-pocket costs.
Mr. Long. OK. Thank you.
And Mr. Chairman, I don't have any time but if I did I
would yield it back.
Mr. Burgess. Chair thanks the gentleman. Gentleman yields
back.
We have been in this hearing a long time and my goal is to
proceed without taking a break because then we will have votes
on the floor in a little while and they'll want to have to then
delay things.
But if anyone does need to take a quick break if you will
just do so quietly and then join us back and I think the
committee would understand.
So with that, I will recognize Mr. Bucshon of Indiana 5
minutes for questions, please.
Mr. Bucshon. Thank you, Mr. Chairman.
Mr. Nickels, you seem kind of lonely there. No one has
asked you any questions so I figure I might as well do that.
[Laughter.]
Mr. Nickels. Thank you.
Mr. Bucshon. Yes. You mentioned 340B. It's a program that I
support. I have a lot of rural hospitals that really depend on
it.
But I am concerned about the dramatic expansion of the
program since the Affordable Care Act, and I want to make sure
that the program is being used for its original intent.
And in that vein, I want to first remind everyone what the
definition of a grantee is so that we know what the question
is. Grantee eligible for 340B include black lung clinics,
comprehensive hemophilia diagnostic treatment centers,
federally qualified health centers, Native Hawaiian health
centers, Ryan White HIV/AIDS program grantees, et cetera. You
understand what grantees means.
So what I would say is in the interest of making sure that
the program is being used for its original intent, would you be
supportive of reporting requirements for hospitals similar to
what 340B grantees are required to support, such as providing
the number and percentage of individuals who are dispensed or
administered 340B drugs disaggregated by insurance status, and
the aggregate amount of reimbursement received for drugs
purchased under 340B and/or provide contracts that would verify
that a hospital meets the legal criteria for 340B eligibility?
Mr. Nickels. Thank you very much for the question, and to
your point, 340B is a very important program to your hospitals,
to rural hospitals throughout the country.
It's worth noting that the expansion of the 340B program,
which occurred in 2010, did expand largely to rural hospitals,
to children's hospitals, and to cancer hospitals. So the
dramatic increase has been because of the additional----
Mr. Bucshon. Fair enough. Approximately half the hospitals
in America are participating at this point, right?
Mr. Nickels. Right. Right. Right. Many of which----
Mr. Bucshon. Which means half the hospitals in America must
be in rural areas.
Mr. Nickels. Well, actually almost half are in rural areas.
That's correct.
Mr. Bucshon. Yes. OK.
Mr. Nickels. But also remember that cancer hospitals,
children's hospitals, and then DSH hospitals also qualify for
the program. So it's more than just rural.
Mr. Bucshon. So the question is, it seems to me if
grantees, the ones I described, have--and it's complicated, I
understand that--have requirements to justify their
participation in 340B that it would only seem fair that pretty
much every participant in the program should be able to show
that they're benefiting low-income citizens, hospitals that
can't buy expensive cancer medicine.
And so the question stands. Do you all support that type of
a change? Because right now, as you probably know, in the law
it doesn't really prescribe that you have to justify where the
money that you save is going and the reality is, in order to
make sure, from our standpoint, that the program is being
utilized properly we need that information.
Mr. Nickels. Right. So you are correct. The eligibility for
the program is in statute and not based on anything else. So
there is subsets of my membership those are the ones who
qualify.
Having said that, we think they should all continue to
qualify, but I do agree that further transparency in terms of
where the dollars go is something we are certainly willing to
discuss with the committee. We've been discussing it with HRSA
for many years.
Mr. Bucshon. Right. That's the point--you are discussing it
for many years but we are not getting to an end point. So the
question is it's yes or no. You support transparency and this
type of thing or you don't.
I understand the strategy if you don't support it is to
draw this out for--until we give up and decide not to try to
change the law. It's an up or down question to me.
I am all about transparency. I was a heart surgeon before.
I asked my hospital that I worked at once, hey, what's the
actual cost to do--a patient comes in, goes to the cath lab,
gets a cath, goes to the OR, I do a three-vessel bypass
surgery, what's the cost, and they said, well, we can't tell
you that. And, honestly, they probably couldn't, necessarily.
So I am all about transparency. If the consumer knows, if
the public knows, what's wrong with that?
Mr. Nickels. Right. No, I would say we are certainly in
favor of increased transparency, but not in favor of changing
the statutory qualifications for the program that would result
in rural hospitals being thrown off the program.
Mr. Bucshon. Well, that's not what we are trying to
accomplish.
Mr. Nickels. But if you want to talk about transparency----
Mr. Bucshon. It's the hospitals in rich suburban areas that
are participating, that are buying up medical practices outside
of their urban area and then adding all of those practices of
the 340B program that I am concerned about.
Mr. Nickels. Right. And, again, those hospitals though
still do have to qualify for the program based on the
definition.
Mr. Bucshon. OK. Fair enough.
Mr. Nickels. But I do want to answer your question, which
is yes, we are willing to discuss transparency and try to work
on that with you.
Mr. Bucshon. All right. Fair enough.
I yield back.
Mr. Nickels. Thank you.
Mr. Burgess. Chair thanks the gentleman. Gentleman yields
back.
Chair recognizes the gentleman from North Carolina, Mr.
Hudson, 5 minutes for questions, please.
Mr. Hudson. Thank you, Chairman Burgess and Ranking Member
Green, for holding this important hearing today. Thank you for
all the witnesses. I know we've been here a long time. I've
gone to the bathroom four times. I haven't seen you all get up.
So congratulations on your fortitude.
[Laughter.]
But I do really appreciate this discussion. I had hoped
that today we could start peeling back the onion a little bit
on this complex issue of the drug supply chain and really start
the process of finding solutions and I think we've really taken
a really good step in the right direction. I think there has
been some great discussion back and forth. I know it is a
challenge to have ten folks at one table.
But I think the ability to have this exchange has been
really helpful, certainly for me, and I am excited to continue
to work on this, Mr. Chairman.
I would pose this first question maybe to the whole panel
and whoever is interested in jumping in. But as more and more
patients gravitate toward this issue that's been discussed
several times today about people moving toward low-premium
high-deductible plans, due to the high cost of insurance plans
available today. Patients need to be educated on how to best
utilize these plans.
Numerous studies have come out recently that show patients
are not engaged in normal shopping behaviors such as discussing
cost of service, comparing cost and quality services, or
negotiating the price of services. Because patients are
responsible for the full cost of their health care before they
meet their deductible, expensive treatments during the
deductible period can result in patients not adhering to their
treatments, resulting in worse outcomes.
My question to whoever would like to answer this is what
are you doing to educate patients on the tools available to
them to lower their out-of-pocket costs specifically as it
relates to drug treatments before they meet their deductible.
So, I don't know--Mr. Eyles, I am sure you want to----
Mr. Eyles. Sure, Congressman. Thanks for the question
because it's a really important one, particularly how we engage
patients and then consumers so that they have the information
that they need.
And our members are committed to developing the tools. Most
of them have very robust web-based tools so that people can go
on, understand whether their physician is in network or not,
what the differences are between formularies, co-payments, what
qualifies for being covered before the deductible.
So at least for most individuals preventive services are
covered before the deductible with no cost sharing so that
people can go and get their annual physicals and understand
what's available to them.
One of the challenges that we have, for example, with high
deductible plans that are paired with a health savings
account--and, again, our members are very supportive of that--
are some limitations on the ability to cover services that
would be defined as preventive ahead of time. So we think there
are some important modifications that we could make to HSAs to
improve them, make them better.
But our members are committed to having very robust tools
so that people understand cost, quality, and the status of
their providers.
Ms. Reilly. I would just also add, and I would agree with
Matt's comment about the need for a clarification in the IRS
guidance to ensure that to the extent employers and others what
to be able to offer a high-deductible plan with a health
savings account that they can offer preventative services,
things like diabetes medicines before the deductible.
I think the other important piece is we know from all of
the literature that patients pick a plan based on premium
price, and the lower the premium the higher the likelihood they
gravitate towards those plans.
What they don't often realize is by signing up for a low-
premium plan they're signing up for a plan with a deductible
that may be as high as $5,000 and that they will be responsible
for all of the costs until they hit that point.
One of the things that we pushed the previous
administration on is to develop an out-of-pocket calculator
similar to what exists in Medicare Part D where an individual
can enter the information what drugs am I on, what physician do
I use, so that they can get a real-life calculation in terms of
what their costs are going to be depending on the plan that
they pick.
We don't really have that yet today for the exchange plans
and I do fear that oftentimes people end up buying plans which
are not in their best interest, that aren't going to cover the
medicines they need, where their doctor is not in-network, and
that's a problem and needs to be improved, and transparency
that allows patients to make better choices should absolutely
be paramount.
Mr. Hudson. Mr. Hoey, did you want to jump in or anybody
else?
Mr. Mitchell. I would just add those are both good ideas. I
had a patient contact me over the weekend who's taking an
expensive subcutaneous drug for her cancer. The price went up
$1,400.
She said, I can't get anyone to explain to me why. I don't
know who raised my price--my doctor, my insurer, the drug
company. All of what Ms. Reilly just said needs to be done but
there needs to be a way for patients to get their questions
answered.
It could be online. It could be on the phone. But the
system is impenetrable for us and somehow something that
approximates what happens in other industries where customer
service is important needs to manifest itself on drug pricing.
Mr. Hudson. Anybody else want to jump in?
Mr. Hoey. As far as at the counter that's one area where
pharmacists--we are sort of a rare breed in that we know the
cost of the drug in some cases. We don't know when we are going
to get paid but we know the cost of the drug and we know the
therapeutic effectiveness of it.
So we can often help the patient, kind of guide them
through, especially when they're hitting prior authorizations
that Dr. Harmon mentioned or some of the other hurdles that
they hit at the counter. We can sometimes help them with that,
especially in those high-deductible plans.
Mr. Burgess. The gentleman's time has expired.
Mr. Hudson. Guess I should have paid better attention, Mr.
Chairman. I apologize.
Thank you for the answers.
Mr. Burgess. Well, the only reason I interrupt is the
gentleman from Georgia, who has been very, very patient, and
the gentleman from Georgia is recognized for 5 minutes for
questions.
Mr. Carter. Thank you, Mr. Chairman, and thank all of you
for being here today.
Mr. Merritt, I will start with you. Quite often,
pharmacists are complaining about the fact that they're being
threatened for mailing or delivering drugs by the PBMs because
the PBMs own their own mail order pharmacies.
As you well know, pharmacies get contracts from PBMs unless
it's a closed network and they can either accept that contract
and the terms of that contract or they can't.
If they accept it, then they can service the patient. If
they don't, then they can't service the patient and that's what
they're left with.
Just a yes a no answer, if you will, Mr. Merritt--do you
agree that pharmacists should be able to tell patients that if
they pay cash for a medication they can get it cheaper? Yes or
no.
Mr. Merritt. Yes.
Mr. Carter. You do agree with that? Then why is it that
these contracts that I referred to earlier have gag clauses in
it where it says that if the pharmacist indeed lets the patient
know that if they pay cash it'll be cheaper, that they could be
kicked out of this contract and that contract can be
terminated?
Why is that? Can you explain that to me? If indeed, as you
have said earlier, you are in favor of transparency, why are
the gag clauses in there? Can you explain that to me?
Mr. Merritt. I don't know, and we as an industry don't
defend that practice at all. So, we want people to pay the
lesser of and in fact almost all the plans work together. The
PBMs work together with what's called lesser of logic so that
automatically the person will pay the less.
Mr. Carter. Then why are the gag clauses in there? Why are
they in there if you truly want to take care of the patient, if
you truly want them to get their medication why is the
pharmacist running the risk of being kicked out of the plan if
they offer this information to the patient?
Mr. Hoey, do you ever get any of your members complaining
of this?
Mr. Hoey. All the time. Our members are intimidated and
most of the time will refuse to go on the record because of
basically a business death penalty if they're caught talking to
media, talking too much.
Mr. Carter. Mr. Merritt, during the years 2010 through 2015
CMS has said that DIR growth and rebate growth has grown 22
percent per year whereas the Part D gross drug costs have only
increased 12 percent.
Can you explain why that difference is there? Why the DIR
has grown 22 percent but the Part D drug costs have only grown
12 percent? Is there a reason for that?
Mr. Merritt. Well, DIR--direct and indirect remuneration--
is an important discounting tool in Medicare Part D. The
federal----
Mr. Carter. Can you explain why that difference exists? If
the Part D costs have only increased 12 percent, why have the
DIR fees increased 22 percent?
Mr. Merritt. Remember that--sure, and I understand. The
PBMs--we get the discounts where we can. We pass them back to
the plans and the plans use them as they see fit.
Sometimes usually they want to reduce premiums. They want
to reduce overall cost sharing. It depends on their individual
strategy.
Mr. Carter. And how far do these clawbacks of these DIR
fees go? Are you aware? How far back do they go? Because I can
tell you that my wife's pharmacy in March got a bill for
$10,337 that went back not 5 months but 5 years.
Now, let me ask you about that. Those DIR fees, did you
credit the government or the consumer with that? Did you go
back those 5 years and credit the government? Because what
happens is this.
We got a Part D program that has, as you well know and
everyone on this panel well knows, has a doughnut hole in it.
Mr. Mitchell, I am sure you are in this. I am sure you have
Medicare. You pay so much until you get in that doughnut hole,
then you have to start paying for it. That means that everyone
out here who buys drugs has to start paying for it if you are
on Medicare. And when you charge those higher prices--the list
prices we've been referring to it as--that pushes people into
the doughnut hole even more.
Now, listen. It gets even better, folks. What happens next
is that when you get pushed out of the doughnut hole, guess who
starts paying for it then? The taxpayer. All of us. We get to
share in it.
My question to you, Mr. Merritt, are you sharing that? Are
you sharing that with CMS to let them know, hey, you need to
credit them back with this? Are you?
Mr. Merritt. Yes. CMS is aware of the DIR. They see all
this information and they've been very clear----
Mr. Carter. So when my wife's pharmacy got hit for the
$10,337, this PBM went back and credited CMS with that and went
back to the patient and said, oh, you shouldn't have been in
the doughnut hole that quickly--we are going to go back and
reimburse you that? So I just want to know because she's going
to ask me tonight about that $10,337.
I mentioned it was $10,337 because that's how much it was,
and Mr. Hoey, have you had any other of your members who have
experienced these type of things?
Mr. Hoey. Both on the retroactive. We had a call this week
from a member in the Midwest who went back 5 years, six figures
on DIRs. Had another one just this year, also in the Midwest,
one pharmacy taken back over $100,000 in DIRs from, really,
three different plans.
Mr. Carter. OK. The last thing I will say is this. All of
you said we need more transparency and I will tell you, Mr.
Merritt, I pulled out your mission statement earlier today and
it says pharmacy benefit managers reduce prescription drug
costs and improve convenience and safety for consumers. Reduce
prescription drug costs.
Mr. Merritt. Right.
Mr. Carter. How is that working out for everybody? If it
were working out we wouldn't be here now. If it were working
out then we wouldn't have had a 1,553 percent increase in
prescription drug costs since PBMs started--1,553 percent
increase.
Mr. Merritt. CMS said the growth was 1 percent last year.
Mr. Carter. Mr. Merritt, transparency is the key. The most
immediate, the most significant impact that we can have on drug
prices is to have transparency.
Thank you, Mr. Chairman, and I yield back.
Mr. Burgess. Chair thanks the gentleman.
Chair recognizes the gentleman from Vermont. Not on this
subcommittee but we welcome you today and you are recognized
for 5 minutes for questions.
Mr. Welch. Thank you very much and thank you for having
this hearing. I thank the panel. It's very helpful.
First of all, this hearing is not about the value of the
pharmaceutical industry. They create life-saving and pain-
relieving drugs. It is not about trying to stifle innovation.
Everyone on this panel wants to support that.
It is about the lack of restraint and the pricing power
that the pharma industry has that is resulting in immense
heartache for families, and you can create a life-extending
pain-relieving drug. But if you kill taxpayers with the price
then it's not accessible.
So I want to talk a bit about that. First of all, my
colleagues have talked about transparency. That's essential.
The opaqueness of the market works for the benefit of the folks
pricing it.
Ms. Gallenagh, you said at the very beginning that the
whole chain down the line starts with the list price, correct?
And I think a number of people on the panel agreed with that.
The pharma companies establish the list price, correct?
Ms. Gallenagh. Yes.
Mr. Welch. They have no restraints on what they can do?
Ms. Gallenagh. I would say that the constraint is only our
negotiation which, again, our net price is not what we earn,
right, the list price.
Mr. Welch. Let me ask you this. Just get some things
established here.
When a company creates a product it gets a patent, correct?
Ms. Gallenagh. Correct.
Mr. Welch. And it gets a period of exclusivity.
Ms. Gallenagh. Correct.
Mr. Welch. It has a monopoly over that product for a period
of time?
Ms. Gallenagh. It can sell that particular product. It
doesn't prohibit competing products that have the same effect,
for example.
Mr. Welch. That particular product----
Ms. Gallenagh. But we see significant competition well
before patent----
Mr. Welch. Do you have a problem answering the question?
Ms. Gallenagh. No, I am just trying to clarify.
Mr. Welch. That product for which you got a patent is
something over which you control the price, correct?
Ms. Gallenagh. We control the price in negotiation with the
purchaser of the product. Correct.
Mr. Welch. And the price that you set is based upon meeting
obligations to shareholders in a return on profit, correct?
Ms. Gallenagh. It is based on a number of factors--the
value the medicine provides and the like, yes.
Mr. Welch. Is it the case that at the end of that patent
period that it is something given by public policy as incentive
for doing the research any of your member companies have used
legal maneuvers to extend that period of original exclusivity
in the patent?
Ms. Gallenagh. It's impossible to extend the length of a
particular patent. The current system works this way as a
result of Hatch-Waxman.
Mr. Welch. Hold on a second. Have you ever heard the term
evergreening?
Ms. Gallenagh. I have heard the term evergreening. Of
course.
Mr. Welch. And evergreening is extending the life of the
control. Is that correct?
Ms. Gallenagh. No. Evergreening the----
Mr. Welch. Has a company in your organizational group, ever
paid another company in return for not bringing their competing
product to the market?
Ms. Gallenagh. Companies have entered into what's known as
a patent settlement wherein a generic company is trying to
enter the market before the expiry of a patent.
Mr. Welch. According to you?
Ms. Gallenagh. Excuse me?
Mr. Welch. According to your company. If you pay somebody
off not to bring their competing product to market, then you
enjoy----
Ms. Gallenagh. The generic company----
Mr. Welch. --the pricing power of that exclusivity perk.
Ms. Gallenagh. The generic company is trying to bring a
product to market prior to the patent expiring. There is----
Mr. Welch. Isn't there an argument over whether the patent
period is a set period in time.
Ms. Gallenagh. Absolutely.
Mr. Welch. Exactly. So----
Ms. Gallenagh. And it cannot be extended beyond that.
Mr. Welch. It doesn't take a genius to figure out when that
period is up. It's called looking at a calendar, right?
Ms. Gallenagh. Correct. But drug----
Mr. Welch. OK. So are you familiar with a recent effort by
Allergan where they took their products and paid the Mohawk
Indian tribe to take, ``ownership,'' as I understand it, as a
way of having better defenses against competition?
Ms. Gallenagh. Yes, I am familiar with that and they used
that through a process called inter partes review.
Mr. Welch. Can you give me any other example in the entire
economy of the United States where the owner of a valuable
intellectual property would pay someone else to take ownership
of that product?
Ms. Gallenagh. That has been used in other--universities
have used that, yes. It has happened.
Mr. Welch. And give me a specific example.
Ms. Gallenagh. I can get back to you on it. But I know
there are universities that have----
Mr. Welch. You don't have a specific example now?
Ms. Gallenagh. I will get back to you. I know it exists.
Mr. Welch. Is there anyone here who can justify a practice
where a seller of a product, like a pharmacy, after selling it,
5 months, 6 months, or a year later has to rebate under a DIR?
Can anyone justify that? Anyone--business model would it work
with that situation?
Ms. Gallenagh. If I understand your question, if you are
asking whether discounts and rebates are common in industries
then I would say absolutely. It is very common for industries
to discount and rebate their products. That's not uncommon.
Mr. Welch. All right. So the situation that you've been
describing your company could work with if that happened to the
pharmacy or if that happened to pharma?
Ms. Gallenagh. Different issue than what's happening in the
pharmacy. Absolutely.
Mr. Welch. So you justify what's happening to pharmacists?
Ms. Gallenagh. No, I don't justify what's happening in the
pharmacy. Absolutely not.
Mr. Welch. All right. Sir, please.
Mr. Davis. Congressman, I just wanted to add for a
clarifying point around the patents, you are right, and to the
point that was made, a finite period of time as to when an
individual patent is supposed to end.
There is no such limitation on the number of patents filed
on a product to extend its monopoly beyond the main ingredient
patent that was originally filed and the best example of that
is Humira, which generates the most revenue of any product in
the U.S. and in the world at $16 billion per year.
In the 3 years leading up to the main ingredient expiry on
that drug, that manufacture filed 50 new patents on that
product. So even if they were ultimately struck down, that
company continues to enjoy a monopoly while litigation ensues
and that is why it is so important to maintain the IPR process
in addition to the court process that we have in federal court.
Mr. Welch. Yield back. Thank you.
Mr. Burgess. Gentleman's time has expired. Chair thanks the
gentleman.
And I think we've been through the entire subcommittee with
the exception of your chairman so I am going to recognize
myself 5 minutes for questions, and I may not take all 5
minutes because most of the information has been put out in
front of the public today.
I want to underscore what Mr. Griffith's line of
questioning started with and the recent publication from the
National Academy of Sciences on ``Making Medicines Affordable:
A National Imperative,'' in the preface of that report, which
is lengthy, but in the preface they make the statement that
public concern has reached a tipping point, and they go on to
cite several examples that may have caused that tipping point
to have been reached.
But going further, they say those examples have had a
sufficient impact on the health of citizens such as to attract
sustained public attention and concern.
A September 2017 survey of adult American priorities for
Congress through the end of the current year found lowering
prescription drug prices to be the highest ranked above minimum
wage, reducing the deficit, rebuilding the nation's
infrastructure, reducing taxes, or any other of the six items
considered.
So Mr. Griffith's point well taken and this has been a very
informative panel. I want to thank all of you and I know there
have been some differences of opinion. We expected that. In
fact, we welcome that.
Mr. Griffith's admonitions that there may be solutions that
you--you are smarter about this stuff than we are by a lot and
you may have solutions that you can arrive at, not necessarily
individually but in collaboration.
And I would just submit to you that those solutions may
well be better than anything we or a federal agency can impose.
But I guess the other side of that is if we are not moving
towards some solutions to this problem then there likely will
be some type of action, perhaps not by this subcommittee this
year, perhaps not by this subcommittee next year, but there
will be action taken--whether it be by agency or legislatively.
Now, Mr. DiLenge, I am going to switch gears a little bit.
I do want to ask you because some of your written testimony is
actually fascinating--Mr. Nickels, in his testimony, gave us a
list of several medications that were very high in price and
one of them was Keytruda and a drug that was developed for
malignant melanoma, and the United States president who was
president when I was in medical school--Jimmy Carter--publicly
disclosed in July of 2015 that he had metastatic melanoma to
his liver and his brain. And, of course, I thought the next
story in that sequence was a state funeral.
However, a year later, he's speaking at the Democratic
Convention. A year ago or a little bit less than a year ago he
was at President Trump's inauguration. It is a fantastic
story--that when Jimmy Carter was elected president I was in
medical school. That story would not have happened.
Can you speak to that?
Mr. DiLenge. Yes. It's just one example of so many
incredible miracles. There's no other word for what happened
with Jimmy Carter.
Mr. Burgess. It's a gift. It's a gift.
Mr. DiLenge. It's a miracle, and that is what the hard men
and women who worked in our companies, and again, let me remind
you all these are mostly start-up companies.
They are trying to raise capital every day. I will give you
one quick story of one of our companies right on the cusp of
success--started in 2002, has raised $4 billion in public and
private investment and partnerships with larger companies.
It spent about $2.5 billion so far in R&D. It is hoping to
get its first approval of a dramatically important drug next
year from the FDA, and that's after 15 years, OK, of every day
working. They've had setbacks. They've had to reduce their
staffs because it's been hard to raise capital throughout that
whole time period.
This is the reality of what this body does. When it makes
public policy it is directly impacting the investment decisions
that are being made in companies like this one every day--can
we afford to get that capital, to advance that R&D, to get to
the next Keytruda. That's exactly what is at stake here.
Mr. Burgess. And I don't want people to become discouraged
from hearing this from the information that we've gotten in
this hearing. I am optimistic.
There have been people in my office just very recently, one
with a potential gene therapy for a specific type of blindness
and one with a therapy for hemophilia. Hemophilia, for crying
out loud.
This was never something that I thought when I was in
training that day we would ever see and it will have a profound
impact on Mr. Eyles' business because of the ramifications. And
these individuals also were talking about how do we prepare
the--whether it's CMS or private insurance--how do we prepare
the payers for what is in development because, again, I
consider it a gift to humanity that they are providing.
Yes, there is going to be cost associated with that, with
one of these therapies that we're talking about it was a one-
time therapy so a lot of research and development costs will
have to be recouped on that one injection or one treatment--
whatever it is.
Mr. DiLenge. And I can I just add that, our industry has
been criticized over the years for basically wanting people to
be addicted to drugs, right, that we just want chronic
conditions and we don't ever want to cure people, we just want
to keep them on drugs for the rest of their life.
These new biotech miracles are actually going to cure
people and a lot of them is maybe one-time injections of gene
therapy. And that is why when you look at the pricing of those
it's going to be shocking. Let's be honest about that. But the
value that they deliver is far beyond those prices.
Mr. Burgess. And some of us have urged to allow the things
that are in development--to allow discussions with CMS and
payers before the FDA approval just because of the----
Mr. DiLenge. Thank you for your work on that, sir.
Mr. Burgess. Because it is so important.
And Mr. Merritt, you mentioned something in your response
to a question. I found it intriguing. I've been a big advocate
of physician drug monitoring programs or prescription drug
monitoring programs, I guess I should say, the PDMPs. I know
it's another layer we put on your life, Dr. Harmon. Apologize
about that.
But it is useful to know if someone is getting multiple
prescriptions. But then you alluded to that with the data that
you have available you can know who is at risk even before they
might be identified as a risk to themselves or family or their
physician.
So that's pretty powerful information, and I don't know if
there is a way for you to share with the person who is
providing the care.
But I hope we can find a way that your claims data or
whatever we would call it can actually have a profound
beneficial impact on what has become a national crisis.
So, perhaps we will enter into more discussions about that.
But that was an intriguing thought that you gave us today and I
appreciate that.
So once again, thanks everyone, for being here.
Mr. Green, did you have any concluding thoughts?
Mr. Green. No, Mr. Chairman.
Mr. Burgess. Anything else to add for the record?
I want to thank all of you for your testimony and remind
members that there are--oh, wait.
I need to submit statements for the following for the
record: the American Pharmacists Association, Senior Care
Pharmacy Coalition, Coalition for Affordable Prescription
Drugs, National Multiple Sclerosis Society, Express Scripts,
Alliance for Transplants and Affordable Prescriptions.
[The information fappears at the conclusion of the
hearing.]
Mr. Burgess. Pursuant to committee rules, I remind members
they have 10 business days to submit additional questions for
the record. I ask the witnesses to submit those responses
within 10 business days of the receipt of those questions.
Without objection, the subcommittee is adjourned.
[Whereupon, at 1:15 p.m., the committee was adjourned.]
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