    [House Hearing, 116 Congress]
    [From the U.S. Government Publishing Office]

                      MAKING HEALTH CARE MORE AFFORDABLE:
                            LOWERING DRUG PRICES AND
                            INCREASING TRANSPARENCY

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

                                    HEARING

                                  BEFORE THE

            SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                             COMMITTEE ON EDUCATION
                                   AND LABOR
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

               HEARING HELD IN WASHINGTON, DC, SEPTEMBER 26, 2019

                                   __________

                               Serial No. 116-42

                                   __________

          Printed for the use of the Committee on Education and Labor

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

               Available via the World Wide Web: www.govinfo.gov
                                       or
                  Committee address: https://edlabor.house.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    37-859                      WASHINGTON : 2021

    --------------------------------------------------------------------------------------

                        COMMITTEE ON EDUCATION AND LABOR

                 ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

    Susan A. Davis, California           Virginia Foxx, North Carolina,
    Raul M. Grijalva, Arizona            Ranking Member
    Joe Courtney, Connecticut            David P. Roe, Tennessee
    Marcia L. Fudge, Ohio                Glenn Thompson, Pennsylvania
    Gregorio Kilili Camacho Sablan,      Tim Walberg, Michigan
      Northern Mariana Islands           Brett Guthrie, Kentucky
    Frederica S. Wilson, Florida         Bradley Byrne, Alabama
    Suzanne Bonamici, Oregon             Glenn Grothman, Wisconsin
    Mark Takano, California              Elise M. Stefanik, New York
    Alma S. Adams, North Carolina        Rick W. Allen, Georgia
    Mark DeSaulnier, California          Lloyd Smucker, Pennsylvania
    Donald Norcross, New Jersey          Jim Banks, Indiana
    Pramila Jayapal, Washington          Mark Walker, North Carolina
    Joseph D. Morelle, New York          James Comer, Kentucky
    Susan Wild, Pennsylvania             Ben Cline, Virginia
    Josh Harder, California              Russ Fulcher, Idaho
    Lucy McBath, Georgia                 Van Taylor, Texas
    Kim Schrier, Washington              Steve Watkins, Kansas
    Lauren Underwood, Illinois           Ron Wright, Texas
    Jahana Hayes, Connecticut            Daniel Meuser, Pennsylvania
    Donna E. Shalala, Florida            William R. Timmons, IV, South
    Andy Levin, Michigan*                    Carolina
    Ilhan Omar, Minnesota                Dusty Johnson, South Dakota
    David J. Trone, Maryland             Fred Keller, Pennsylvania
    Haley M. Stevens, Michigan
    Susie Lee, Nevada
    Lori Trahan, Massachusetts
    Joaquin Castro, Texas
    * Vice-Chair

                       Veronique Pluviose, Staff Director
                     Brandon Renz, Minority Staff Director
                                     ------

            SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                    FREDERICA S. WILSON, Florida, Chairwoman

    Donald Norcross, New Jersey          Tim Walberg, Michigan
    Joseph D. Morelle, New York            Ranking Member
    Susan Wild, Pennsylvania             David P. Roe, Tennessee
    Lucy McBath, Georgia                 Rick W. Allen, Georgia
    Lauren Underwood, Illinois           Jim Banks, Indiana
    Haley M. Stevens, Michigan           Russ Fulcher, Idaho
    Joe Courtney, Connecticut            Van Taylor, Texas
    Marcia L. Fudge, Ohio                Steve C. Watkins, Jr., Kansas
    Josh Harder, California              Ron Wright, Texas
    Donna E. Shalala, Florida            Dan Meuser, Pennsylvania
    Andy Levin, Michigan                 Dusty Johnson, South Dakota
    Lori Trahan, Massachusetts           Fred Keller, Pennsylvania
    (VACANT)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing held on September 26, 2019...............................     1

    Statement of Members:
        Walberg, Hon. Tim, Ranking Member, Subcommittee on Health,
          Employment, Labor, and Pensions............................     4
            Prepared statement of....................................     5
        Wilson, Hon. Frederica S., Chairwoman, Subcommittee on
          Health, Employment, Labor, and Pensions....................     1
            Prepared statement of....................................     3

    Statement of Witnesses:
        Garthwaite, Mr. Craig, Ph.D, Associate Professor of Strategy
          Northwestern University Kellogg School of Management.......    62
            Prepared statement of....................................    64
        Holt, Mr. Christopher, Director of Health Care Policy
          American Action Forum......................................    51
            Prepared statement of....................................    53
        Isasi, Mr. Frederick, J.D., MPH Executive Director Families
          USA........................................................     7
            Prepared statement of....................................     9
        Mitchell, Mr. David, Founder, Patients for Affordable Drugs..    91
            Prepared statement of....................................    93
        Socal, Dr. Mariana P., MD, MS, MPP, Ph.D, Assistant
          Scientist, Johns Hopkins Bloomberg School of Public Health,
          Department of Health Policy and Management.................    28
            Prepared statement of....................................    30
        Talente, Ms. Bari, J.D., Executive Vice President, Advocacy,
          National Multiple Sclerosis Society........................    17
            Prepared statement of....................................    19

    Additional Submissions:
        Levin, Hon. Andy, a Representative in Congress from the State
          of Michigan:
            Letter dated September 25, 2019 from the International
              Union, United Automobile, Aerospace and Agricultural
              Implement Workers of America (UAW).....................   135
        Ms. Wilson:
            Letter dated September 19, 2019 from AARP................   137
            Prepared statement from the Alliance for Retired
              Americans..............................................   140
            Prepared statement from the California Medical
              Association............................................   141
            Letter dated September 24, 2019 from the American Medical
              Association (AMA)......................................   142
            Letter dated September 26, 2019 from the American
              Federation of Teachers (AFT)...........................   143
            Press Release: Lower Drug Costs Now Act Promises to Bring
              Down Prescription Drug Prices..........................   145
            Press Release: Working People Deserve Affordable
              Prescription Medicines.................................   149
        Questions submitted for the record by:
            Mr. Levin................................................   153
            Schrier, Hon. Kim, a Representative in Congress from the
              State of Washington....................................   155
            Stevens, Hon. Haley M., a Representative in Congress from
              the State of Michigan

            Underwood, Hon. Lauren, a Representative in Congress from
              the State of Illinois

            Levin, Hon. Andy, a Representative in Congress from the
              State of Michigan......................................   153
        Responses to questions submitted for the record by:
            Mr. Isasi................................................   161
            Mr. Mitchell.............................................   165
            Dr. Socal................................................   168
            Ms. Talente..............................................   170

            MAKING HEALTH CARE MORE AFFORDABLE: LOWERING DRUG PRICES
                          AND INCREASING TRANSPARENCY

                                  ----------

                          Thursday, September 26, 2019

                           House of Representatives,

             Subcommittee on Health, Education, Labor, and Pensions

                        Committee on Education and Labor

                                Washington, D.C.

                                  ----------

        The subcommittee met, pursuant to call, at 2:01 p.m., in
    Room 2175, Rayburn House Office Building. Hon. Frederica S.
    Wilson [chairwoman of the subcommittee] presiding.
        Present: Representatives Wilson, Norcross, Morelle, Wild,
    McBath, Underwood, Stevens, Courtney, Fudge, Harder, Shalala,
    Levin, Trahan, Scott, Walberg, Roe, Allen, Banks, Taylor,
    Watkins, Wright, Meuser, Johnson, and Keller.
        Also Present: Representatives, Davis and Foxx.
        Staff Present: Ilana Brunner, General Counsel; Emma Eatman,
    Press Assistant; Daniel Foster, Health and Labor Counsel;
    Carrie Hughes, Director of Health and Human Services; Ariel
    Jona, Staff Assistant; Stephanie Lalle, Deputy Communications
    Director; Jaria Martin, Clerk/Assistant to the Staff Director;
    Max Moore, Office Aide; Merrick Nelson, Digital Manager;
    Veronique Pluviose, Staff Director; Banyon Vassar, Deputy
    Director of Information Technology; Joshua Weisz,
    Communications Director; Cyrus Artz, Minority Parliamentarian;
    Courtney Butcher, Minority Director of Member Services and
    Coalitions; Cate Dillon, Minority Staff Assistant; Rob Green,
    Minority Director of Workforce Policy; Jeanne Kuehl, Minority
    Legislative Assistant; John Martin, Minority Workforce Policy
    Counsel; Hannah Matesic, Minority Director of Operations;
    Alexis Murray, Minority Professional Staff Member.
        Chairwoman WILSON. I note that a quorum is present. The
    subcommittee on Health Employment Labor and Pensions will now
    come to order. Welcome to everyone.
        I note that the subcommittee--for the subcommittee: Mr.
    Grijalva, Ms. Davis of California, Mr. Castro of Texas, and Ms.
    Jayapal of Washington and Ms. Schrier of Washington are
    permitted to participate in today's hearing with the
    understanding that their questions will come only after all
    members of the subcommittee on Health, Employment, Labor, and
    Pensions, on both sides of the aisle who are present and have
    had an opportunity to question the witnesses.
        The subcommittee is meeting today in a hearing to receive
    testimony on making health care more affordable, lowering drug
    prices and increasing transparency.
        Pursuant to rule 7(c), opening statements are limited to
    the Chair and the Ranking Member. This allows us to hear from
    our witnesses sooner and provides all members with adequate
    time to ask questions.
        I recognize myself now for the purpose of making an opening
    statement.
        Today, we are gathered to discuss policy solutions to
    reduce prescription drug prices for consumers, businesses and
    taxpayers. Prescription drug prices are out of control. More
    than $450 billion or about $1,100 per person is spent across
    the healthcare system every single year.
        Pharmaceutical companies are charging American prices that
    are three, four, or in some cases, dozens of times higher than
    what they charge for the exact same drugs they sell in other
    countries.
        As a result, Americans across the nation are struggling to
    afford the medication they need to maintain their health. In
    fact, in the past three years, in ten adults decided--in the
    past year, three in ten adults decided to forego taking their
    prescribed medications because of the cost.
        We must act on behalf of people like Azima, a social worker
    in my home state of Florida who struggles to make monthly co-
    payments for her prescription drugs which cost more than her
    rent, electricity, cell phone bill and car payment combined,
    and Jesimya David Scherer-Radcliff who tragically died from
    rationing the lifesaving insulin he needed to treat his
    diabetes.
        As our witnesses will share, exorbitant drug prices place a
    significant burden on workers and their families. Employer
    health plans spend nearly $84 billion annually on drugs alone.
    As drug companies continue to raise prices with no end in
    sight, seniors, taxpayers, workers and our economy are all
    footing the bill. That is why we must take bold action by
    passing the Lowering Drug Cost Now Act, an ambitious plan to
    lower drug prices and increase transparency in five key ways.
    First, the bill ends the ban on Medicare negotiating directly
    with drug companies to get a fair deal for American consumers.
    Second, the bill makes the lower drug prices negotiated by
    Medicare available to all Americans, which will cut costs for
    both employers that provide their workers healthcare and
    workers covered by employer provided healthcare. Third, the
    legislation caps negotiated drug prices at prices charged in
    similar countries so that drug companies stop ripping off
    Americans while charging other countries less for the same
    drugs. Fourth, the bill creates a new out-of-pocket limit, on
    drugs for Medicare beneficiaries and ends unfair annual price
    hikes by prescription drug companies for 8,000 drugs.
        Finally, the Lowering Drug Cost Now Act reinvests the
    savings from negotiated drug prices in research and innovation
    to make new medical breakthroughs.
        My Republican colleagues have responded to this proposal
    with the same tired rhetoric, labeling it a socialist takeover
    of our healthcare system but the central provisions in this
    proposal have been endorsed by President Trump himself.
        We even put together a few video clips of the President
    promising to negotiate prices and align the prices Americans
    pay with what consumers in other countries pay. Play the video.
        [Video plays]
        Chairwoman WILSON. On the day the Lowering Drug Cost Now
    Act was introduced, the President tweeted: ``It is great to see
    Speaker Pelosi's bill today.'' My Republican colleagues claim
    cutting the cost of drugs will stifle research and innovation,
    but nine out of ten big pharmaceutical companies spend more on
    marketing, sales, and overhead than on research.
        Each of us has a responsibility to serve our constituents
    and address the unsustainable cost of prescription drugs.
        Today's hearing is an important step towards that goal, and
    I want to thank each of our witnesses for being with us to
    discuss this comprehensive solution to one of our nation's most
    pressing crises.
        I now recognize the distinguished Ranking Member for the
    purpose of making an opening statement. Mr. Walberg.
        [The statement of Ms. Wilson follows:]

          Prepared Statement of Hon. Frederica S. Wilson, Chairwoman,
            Subcommittee on Health, Employment, Labor, and Pensions

        Today we are gathered to discuss policy solutions to reduce
    prescription drug prices for consumers, businesses, and taxpayers.
        Prescription drug prices are out of control. More than $450 billion
    across the health care system or about $1,100 per person is spent every
    year.
        Pharmaceutical companies are charging Americans prices that are
    three, four, or in some cases dozens of times higher than what they
    charge for the exact same drugs they sell in other countries.
        As a result, Americans across the nation are struggling to afford
    the medication they need to maintain their health. In fact, three in
    ten adults decided to forgo taking their prescribed medications in the
    past year because of the cost.
        We must act on behalf of people like Azima, a social worker in my
    home state of Florida who struggles to make monthly copayments for her
    prescription drugs, which cost more than her rent, electricity, cell
    phone bill, and car payment combined.
        And Jesimya David Scherer-Radcliff, who tragically died from
    rationing the life-saving insulin he needed to treat his diabetes.
        As our witnesses will share, exorbitant drug prices place a
    significant burden on workers and their families. Employer health plans
    spend nearly $84 billion annually on drugs, alone.
        As drug companies continue to raise prices with no end in sight,
    seniors, taxpayers, workers, and our economy are all footing the bill.
        That is why we must take bold action by passing the Lower Drug
    Costs Now Act, an ambitious plan to lower drug prices and increase
    transparency in five keyways.
        First, the bill ends the ban on Medicare negotiating directly with
    drug companies to get a fair deal for American consumers.
        Second, the bill makes the lower drug prices negotiated by Medicare
    available to all Americans, which will cut costs for both employers
    that provide their workers health care and workers covered by employer-
    provided health care.
        Third, the legislation caps negotiated drug prices with prices
    charged in similar countries so that drug companies stop ripping off
    Americans while charging other countries less for the same drugs.
        Fourth, the bill creates a new out-of-pocket limit on drugs costs
    for Medicare beneficiaries and ends unfair annual prices hikes by
    prescription drug companies for 8,000 drugs.
        Finally, the Lower Drug Costs Now Act reinvests the savings from
    negotiated drug prices in research and innovation to find new medical
    breakthroughs.
        My Republican colleagues have responded to this proposal with the
    same tired rhetoric, labeling it a socialist takeover of our health
    care system. But the central provisions in this proposal have been
    endorsed by President Trump himself.
        We even put together a few video clips of the President promising
    to negotiate prices and align the prices Americans pay to what
    consumers in other countries pay. On the day Lower Drug Costs Now Act
    was introduced, the president tweeted, `` . . . it's great to see
    Speaker Pelosi's bill today.''
        My Republican colleagues claim cutting the cost of drugs will
    stifle research and innovation, but nine out of ten big pharmaceutical
    companies spend more on marketing, sales, and overhead than on
    research.
        Each of us has a responsibility to serve our constituents and
    address the unsustainable cost of prescription drugs. Today's hearing
    is an important step toward that goal.
        I want to thank each of our witnesses for being with us to discuss
    this comprehensive solution to one of our nation's most pressing
    crises. I now recognize Ranking Member Walberg, for an opening
    statement.
                                     ______

        Mr. WALBERG. I thank you, Chairwoman and I appreciate the
    opportunity today to have a hearing on this bill. Also to make
    it very clear that the President hasn't yet called upon us to
    support it and his statements were that he was glad to see a
    bill talking about doing things we all want to do. He did not
    say that he supports this bill as written and I would think
    that he, as he said, in one of the videos up there, together we
    will stop it. Together--there has been no togetherness in
    putting this bill together, even from my Democrat colleagues in
    working with the speaker who put it together. I just wanted to
    make that notation as well. There is no question that
    healthcare costs are at the top of the minds for many
    Americans--most Americans and the cost of prescription drugs
    are a concern for workers and families.
        According to a recent report on medicine use and spending
    in the U.S., patients paid 61 billion dollars in out of pocket
    drug costs in 2018. So it is not surprising that a recent poll
    found 1 in 4 Americans worry about affording their medication.
    Sadly, individuals and families are being let down by Democrat
    leadership. Instead of working on this serious issue in a
    bipartisan manner, Speaker Pelosi's radical, partisan bill was
    drafted in secret, I think for a purpose, without member input
    or the regular committee process.
        The public leader McCarthy accurately described H.R. 3 as a
    ``Step towards nationalizing the drug industry and opening the
    door to a one size fits all government-controlled rationing of
    prescription drugs.''
        This bill is a political ploy that will not be considered
    in the Senate or become law. When asked about the bill, Senate
    Majority Leader Mitch McConnell said, and I quote: ``Socialist
    price controls will do a lot of left-wing damage to the
    healthcare system and of course we are not going to be calling
    up a bill like that.''
        We shouldn't be surprised that once again, Democrat
    leadership is pushing far left politics over policy. From
    taking over all student lending to mandating wage hikes,
    Democrats are pushing an agenda that strips hardworking
    taxpayers of their rights. H.R. 3 is just the latest in this
    string of aggressive socialist policies introduced by
    Congressional Democrat leadership. Over half of the Democrat
    Conference supports Medicare for all. A government-run single
    payer healthcare system that would eliminate private health
    insurance, including employer sponsored coverage, something
    that is admired by most everyone who has that opportunity and
    ought to be expanded. This is a jurisdiction of our committee.
    Congressional efforts to bring down drug prices for American
    people have been and should continue to be a collaborative and
    bipartisan effort.
        In 2016, a Republican Congress passed the 21st Century
    Cures Act. Bipartisan legislation, I might add, that was signed
    into law by President Obama, which accelerated discovery and
    development of new cures and treatments. Additionally, we
    reauthorized a generic drug user fee program and last year, the
    FDA approved a record number of generic drugs, driving up
    competition and giving consumers more affordable choices. And
    this year, and I know this for a fact as I sit on the House
    Energy and Commerce Committee. This year's House and Senate
    Committees have worked together on bipartisan bills to address
    the cost and transparency of prescription drugs.
        Two of these bills, bipartisan bills have become law and
    others are awaiting further action in both chambers. There is a
    common thread there in bipartisan efforts.
        Governments don't negotiate, they dictate. The radical
    approach taken by H.R. 3 includes troubling and unprecedented
    government interference in private market negotiations which
    will eliminate choice and competition and jeopardize innovation
    investment and access to future cures. Countries that have
    adopted drug pricing systems like those included in H.R. 3 face
    decreased access to innovative new medicines, increased wait
    times for treatment and supply shortage for in demand drugs.
    H.R. 3 will negatively impact investment and research and
    development of future treatments putting breakthrough cures for
    diseases like Alzheimer's, cancer, sickle cell anemia, and
    others at risk.
        Instead of holding a hearing on this socialistic agenda
    drug pricing scheme that will hurt the development of money
    saving treatments and more importantly, people's lives. The
    committee's time would be better spent finding bipartisan
    solutions to our Nation's problems.
        Republicans stand ready to work with Democrats to push for
    legislation that promotes competition, lowers out of pocket
    cost for consumers, and establishes transparency and
    accountability in drug pricing and might I add, that has a
    chance for a two-chamber solution that would get to the
    President's desk. With that, I yield back.
        [The statement of Mr. Walberg follows:]

    Prepared Statement of Hon. Tim Walberg, Ranking Member, Subcommittee on
                    Health, Employment, Labor, and Pensions

        ``There's no question that health care costs are at the top of the
    minds for many Americans, and the cost of prescription drugs are a
    concern for workers and families. According to a recent report on
    medicine use and spending in the U.S., patients paid $61 billion in
    out-of-pocket drug costs in 2018. So, it's not surprising that a recent
    poll found one in four Americans worry about affording their
    medication.
        Sadly, individuals and families are being let down by Democrats.
    Instead of working on this serious issue in a bipartisan manner,
    Speaker Pelosi's radical, partisan bill was drafted in secret, without
    Member input or the regular Committee process. Republican Leader
    McCarthy accurately described H.R. 3 as `a step toward nationalizing
    the drug industry and opening the door to a one-size- fits-all,
    government-controlled rationing of prescription drugs.'
        This bill is a political ploy that will not be considered in the
    Senate or become law. When asked about the bill, Senate Majority Leader
    Mitch McConnell said, `Socialist price controls will do a lot of left-
    wing damage to the healthcare system. And of course, we're not going to
    be calling up a bill like that.'
        We shouldn't be surprised that once again Democrats are pushing
    far-left politics over policy. From taking over all student lending to
    mandating wage hikes, Democrats are pushing an agenda that strips
    hardworking taxpayers of their rights. H.R. 3 is just the latest in
    this string of aggressive socialist policies introduced by
    Congressional Democrats. Over half of the Democrat Conference supports
    Medicare-for-All, a government-run, single-payer health care system
    that would eliminate private insurance, including employer-sponsored
    coverage, which is in the jurisdiction of this Committee.
        Congressional efforts to bring down drug prices for the American
    people have been, and should continue to be, a collaborative and
    bipartisan effort.
        In 2016, a Republican Congress passed the 21st Century Cures Act,
    bipartisan legislation signed into law by President Obama which
    accelerated discovery and development of new cures and treatments.
    Additionally, we reauthorized the generic drug user fee program - and
    last year the FDA approved a record number of generic drugs, driving up
    competition and giving consumers more affordable choices.
        And this year, House and Senate Committees have worked together on
    bipartisan bills to address the cost and transparency of prescription
    drugs. Two of these bills have become law, and others are awaiting
    further action in both chambers.
        Governments don't negotiate, they dictate. The radical approach
    taken by H.R. 3 includes troubling and unprecedented government
    interference in private, market negotiations, which will eliminate
    choice and competition, and jeopardize innovation, investment, and
    access to future cures.
        Countries that have adopted drug-pricing systems like those
    included in H.R. 3 face decreased access to innovative new medicines,
    increased wait times for treatment, and supply shortages for in-demand
    drugs.
        H.R. 3 will negatively impact investment in research and
    development of future treatments, putting breakthrough cures for
    diseases like Alzheimer's, cancer, sickle cell disease, and others at
    risk.
        Instead of holding a hearing on this socialist agenda drug-pricing
    scheme that will hurt the development of money-saving treatments and--
    more importantly----people's lives, the Committee's time would be
    better spent finding bipartisan solutions to our nation's problems.
    Republicans stand ready to work with Democrats to push for legislation
    that promotes competition, lowers out-of- pocket costs for consumers,
    and establishes transparency and accountability in drug pricing.''
                                     ______

        Chairwoman WILSON. Without objection all other members who
    wish to insert written statements into the record may do so by
    submitting them electronically to the committee clerk in
    Microsoft Word format by 5:00 pm on Wednesday, October 9th,
    2019. I will now introduce our witnesses: Frederick Isasi is
    Executive Director of Families USA. Welcome. Bari Talente is
    Executive Vice President of the National MS Society. Welcome.
    Dr. Mariana Socal is Assistant Scientist at Johns Hopkins
    University, Bloomberg School of Public Health. Welcome. Dr.
    Craig Garthwaite is Associate Professor of Strategy at
    Northwestern University's Kellogg School of Management.
    Welcome. Christopher Holt is Director of Health Care Policy at
    the American Action Forum. Welcome, Mr. Holt. David Mitchell is
    Founder and President of Patients for Affordable Drugs.
    Welcome.
        We appreciate all of you coming today and look forward to
    your testimony. Let me remind you that the witnesses--let me
    remind the witnesses that we have read your written statements
    and they will appear in full in the hearing record, pursuant to
    Committee Rule 17 and committee practice, each of you is asked
    to limit your oral presentation to a five minute summary of
    your written statement.
        Let me remind the witnesses that pursuant to Title 18 of
    the U.S. Code, section 1001, it is illegal to knowingly and
    willfully falsify any statement, representation, writing,
    document or material fact presented to Congress or otherwise
    conceal or cover up a material fact.
        Before you begin your testimony, please remember to press
    the button on the microphone in front of you so that it will
    turn on and the members can hear you. As you begin to speak,
    the light in front of you will turn green. After four minutes,
    the light will turn yellow to signal that you have one minute
    remaining. When the light turns red, your five minutes have
    expired, and we ask that you please wrap it up or I will have
    to wrap it up for you.
        We will let the entire panel make their presentations
    before we move to member questions. When answering a question,
    please remember to once again turn on your microphone. I will
    first recognize Mr. Isasi.

    TESTIMONY OF FREDERICK ISASI, J.D., EXECUTIVE DIRECTOR FAMILIES
                                  USA

        Mr. ISASI. Chairwoman Wilson, Congressman Walberg, Members
    of the subcommittee, thank you for the opportunity to testify
    today. I am Frederick Isasi, the Executive Director of Families
    USA, a non-partisan, non-profit that for nearly 40 years has
    served as one of the leading national voices for the health
    care movement in Washington D.C. and on the state level. Thank
    you very much for holding this hearing on lowering drug costs.
    We are meeting at an extraordinary time for our Nation's
    family.
        Do you realize that about 1/3rd of Americans report not
    taking their prescription drugs because they are too expensive?
    Of these, more than 2/3rds are engaging in the terrible gamble
    of either skipping doses or cutting their pills in half.
        Think of the life these Americans are living. In last
    fall's Congressional elections, the American people sent a
    strong signal to all of you. An astounding 82 percent of
    Republicans and 90 percent of Democrats said taking action to
    lower the price of prescription drugs should be a top priority
    for this Congress.
        Despite all the conflicts, legal and economic discussions
    and the alarmist and false arguments of the drug industry, at
    its core, the problem of out of control drug costs is very
    simple. Congress created a system that provides a government-
    granted monopoly to drug makers, and many within the industry
    are abusing Federal law.
        Let me explain what I mean. Over time, so much of the
    industry's focus has shifted from creating innovative drugs
    that can save lives to doubling down on high-powered lawyers to
    help find loopholes, sue competitors and generally abuse the
    spirit in which Federal prescription drug laws were created. It
    is time for Congress to reexamine and rewrite patent
    exclusivity laws to stamp out these abuses and actually
    incentivize innovation.
        In the absence of this wholesale reform, we at Families USA
    are strongly supportive of the committee acting to mark up and
    move forward H.R. 3 the Lowering Drug Cost Now Act. It
    represents bold Congressional action that would require the
    government to defend our families and negotiate directly with
    drug manufacturers to curb abusive practices and price
    increases. These are policies supported by more than 2/3rds of
    Americans. The bill uses savings and reduced drug costs to
    invest in research and development for new cures as well as
    capping out of pockets costs for Medicare beneficiaries. It
    also could support much needed improvements in Medicare, such
    as dental, hearing and vision benefits and support for low-
    income Medicare beneficiaries.
        We also recommended several critical improvements to
    strengthen the bill, such as expanding the selection of drugs
    that are subject to negotiations, expanding mandatory price
    hike protections to private payers and allowing uninsured
    patients to get negotiated prices. So what will the fate of
    this legislation be? You are all up against one of the most
    profitable industries in the world with revenues in access of
    $1 trillion and half of its profits are generated in the U.S.
    and Canada alone.
        And industry spending, at least $133 million to lobby
    Congress, all of you, with over 800 lobbyists in D.C. Members
    of the committee, I ask you, does our democracy work? Will this
    committee, will Congress, will the President act to support our
    Nation's families or will the drug companies win yet again?
        Let me tell you about one person, perhaps, who can steady
    your resolve to get this legislation enacted. Her name is
    Katherine from Wheeling, Illinois. Her story tells her own
    struggle but also the struggle of millions of other Americans.
    Katherine worked very hard. She had a career as a secretary and
    then in her late 50s, she developed a cough. It wasn't going
    away. Within three months of going to the doctor for a cough,
    however, she was told she had a rare lung disorder and that
    without a lung transplant, she wouldn't live to see the end of
    the year and then her condition worsened.
        Her doctors prepared her to die and Katherine prepared
    herself to die, and then she got the call. A new lung had been
    found and she was going to live. This all happened about five
    years ago. This incredible gift and a new chance at life, but
    unfortunately her experience has turned into something else.
        Katherine takes 36 pills every day, including anti-
    rejection and pain medications. Each year, the cost of her
    medication overwhelms her. Katherine has to ration her
    medications to make them last. She spends an astounding $1,000
    each month on her medications, despite being a Medicare
    beneficiary, which is exactly half of her monthly income. Think
    about what this means.
        Katherine, after living through the experience of almost
    dying, receiving a lung transplant, fighting for her life is
    left to spend half of her income to pay for medications. You
    won't be surprised to know that Katherine sold her home, moved
    in with her parents, her mom is 86 and her dad died this year
    at 89.
        She lives an extremely frugal life but as her drug costs
    escalate year over year, she moves closer and closer to
    financial ruin and deep poverty. At the end of each year, she
    finds herself thousands of dollars short. She lives each day
    with the anxiety of wondering how will she find the money to
    pay for her drugs.
        Despite being one of the wealthiest nations in the world,
    despite spending two or three times more than the rest of the
    world, this is the life we give to Americans. Thank you for
    holding this hearing, thank you for considering this
    legislation.
        [The statement of Mr. Isasi follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman WILSON. And thank you. We will now recognize Ms.
    Talente.

      TESTIMONY OF BARI TALENTE, J.D., EXECUTIVE VICE PRESIDENT,
             ADVOCACY, NATIONAL MULTIPLE SCLEROSIS SOCIETY

        Ms. TALENTE. Thank you. Good afternoon, Chairwoman Wilson
    and Ranking Member Walberg. Thank you for the opportunity to
    participate in this hearing on lowering drug prices and
    increasing transparency. My name is Bari Talente and I am the
    Executive Vice President of advocacy with the National Multiple
    Sclerosis Society. The Society works to ensure that the nearly
    1 million people with MS in the United States have what they
    need to live their best lives.
        People with MS are typically diagnosed between the ages of
    20 and 50, making MS a disease that hits people during their
    prime employment years. In fact, nearly 60 percent of people
    living with MS have employer-sponsored health insurance. We
    hear from people with MS who are reluctant to disclose their
    diagnosis publicly because they feel their job may be in
    jeopardy or they don't want to be that person with their
    coworkers, the one who is responsible for driving up health
    insurance costs.
        There are now more than 15 FDA-approved disease modifying
    treatments, referred to as DMTs, that help manage disease
    progression for relapsing forms of MS. No single DMT is best
    for all people living with MS so these treatments are not
    interchangeable.
        The first--unfortunately, the price of these DMTs has
    dramatically increased since the first treatment was approved
    in 1993. That DMT came to the market at approximately $11,500
    and now has a list price of more than $98,000. Imagine how this
    has felt for someone who has been on this treatment since it
    first came out.
        In 2013, the annual median price for the MS DMTs was less
    than $60,000 dollars. Today, in 2019, that median price for
    brand MS DMTs is over $88,000 dollars.
        We have seen escalating prices for products already on the
    market, some for a considerable amount of time.
        In fact, a recent study by Health Affairs shows that price
    increases of brand name drugs are largely driven by year over
    year price increases of drugs already on the market and not by
    new products.
        We have recently asked people with MS about the impact of
    the cost of these DMTs on them. 40 percent of those who took
    our survey shared that they have altered their use of their DMT
    because of costs. They are stopping treatment, skipping or
    delaying filling a prescription or not taking the medication as
    prescribed to try and make it last longer.
        Due to the price, people with MS often face prior
    authorization and step therapy in their health insurance, which
    can delay care. Each time a person with MS experiences a gap in
    care or fails on a medication, they are at risk for a relapse,
    disease progression, and worsening of symptoms from which they
    may not fully recover.
        Here are just two of the direct experiences people with MS
    have shared with us. Jenna from Massachusetts is worried about
    affording her DMT. Her husband's insurance currently covers it,
    but not all insurances will. Jenna says, ``we are terrified for
    him to change jobs because we cannot afford my medication if it
    is not covered. He has had to turn down a better paying job
    with better hours in order to keep our insurance.''
        Over the last decade, Keysha from Pennsylvania has tried
    many DMTs. She has commercial insurance through her employer
    and receives financial assistance through a manufacturer
    sponsored program, but she notes ``If I am on super-expensive
    meds, I am hurting my company's bottom line in the end. I would
    choose a different medicine if there was one that was
    significantly lower in price.''
        Medications cannot change lives if people cannot access
    them. We must look at solutions across the entire prescription
    drug supply chain. Additional information about legislation we
    support is in our written testimony. We do support the goals
    and many provisions of the Lowering Drug Cost Now Act of 2019
    and applaud this effort to lower drug costs. We appreciate this
    legislation does not establish a formulary and includes an out-
    of-pocket cap in Medicare part D.
        We believe the bill could be strengthened by beginning the
    out-of-pocket cap earlier and expanding competition to be more
    than one single generic. I would like to conclude with a
    message from Keysha to all of you and your colleagues: ``Do
    something to help with the cost. It is not a selfish thing to
    want to be well. To want to contribute. All people deserve a
    chance to be contributing members of society.'' Thank you, and
    I look forward to your questions.
        [The statement of Ms. Talente follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman WILSON. Thank you, Ms. Talente. We will now
    recognize Dr. Socal.

     TESTIMONY OF MARIANA P. SOCAL, MD, MS, MPP, PH.D., ASSISTANT
      SCIENTIST, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC HEALTH,
               DEPARTMENT OF HEALTH POLICY AND MANAGEMENT

        Dr. SOCAL. Good afternoon. Thank you, Chairwoman Wilson,
    Ranking Member Walberg and Members of the Committee. It is a
    great honor and It is a great pleasure to be talking to you
    today.
        For over a year, I have been researching America's largest
    employers and trying to help them improve the drug benefit that
    they offer to their workers. In one of these initiatives and
    partnering with the Pacific Business Group on Health, a
    coalition of more than 50 large public and private employers to
    identify and remove wasteful spending from their drug
    formularies.
        I am also leading a research project in which I partnered
    with ERIC, the ERISA committee. This committee represents
    nationwide self-insured companies with more than 10,000
    employees. In this project, I am examining the prices that some
    of the largest U.S. corporations are paying for their drugs.
        The first thing I learned in my research is that employers
    want to provide their workers with the best benefits that they
    can. Companies want to attract and retain the best workers in
    offering good benefits is key for that.
        The second thing that I have learned is that companies are
    spending a lot of money hiring specialists to help them manage
    their drug benefit, but they are not always getting the best
    deals that they can. Typically, employers hire pharmaceutical
    benefit managers, a PBM, to negotiate drug prices on their
    behalf. The PBM also designs the drug formulary that goes to
    the employer's plan.
        So here is how the negotiation works. The PBM offers to
    cover a drug on the formulary in exchange for lower prices.
    When the PBM has a choice and can pick between a few drugs,
    which one will go into the formulary, then the market can work.
    The problem occurs when a drug has no competition. If the PBM
    cannot say no to a certain drug and then choose a different
    one, then the PBM cannot negotiate a lower price, and there is
    no incentive for manufacturers to lower the price.
        As a result, for certain drugs without competition, the
    U.S. pays three to four times more higher prices than in other
    countries.
        For these cases, a different type of negotiation is needed.
    In the absence of product to product competition in the U.S.
    market, the price comparison between the U.S. and other
    countries can offer an alternative pathway for this
    negotiation. My colleagues and I examined the 79 top spending
    drugs in the Medicare part D program, and we found that if the
    U.S. paid the average price of the countries that we studied,
    Medicare part D alone could have saved $73 billion in 2018.
        If employers adopted the same approach, the savings would
    be similar. H.R. 3's proposal of having the secretary negotiate
    on behalf of all Medicare beneficiaries and those covered by
    private insurance is likely to succeed in lowering drug prices
    because of two main reasons: first, because it includes
    everyone in the negotiation. The more people included in the
    negotiation, the greater the negotiating power and the greater
    ability to lower prices.
        Second, because it incorporates a transparent benchmark
    into the negotiation, the prices paid in other countries. U.S.
    companies, especially the very large employers, they like to
    think that they are getting the best possible deals in drug
    pricing, but we found that sometimes, the employers don't even
    have the information that they need to understand if they are
    getting the good deal or not.
        It is very hard, for example, for an employer to know how
    much they are paying for a drug. The net price, after the
    rebates and discounts can be only known sometimes weeks or
    months after the drug bill was paid and there is very little
    transparency in this process.
        The negotiation proposed in H.R. 3 would benefit employers
    by providing them with a transparent maximum price. It will
    also allow employers to opt out of the price so that they can
    choose what's the best deal for them. For patients, lower and
    transparent prices will help reduce cost-sharing. Patient's
    cost-sharing is typically calculated over a drug's list price.
    Having a transparent and lower drug price available to all
    patients will allow them to benefit directly from the
    negotiations. This is also very important for the 30 percent of
    American workers who are currently enrolled in high-deductible
    health plans. These patients pay the drug's full cost. Today,
    over half of all Americans obtain health coverage through their
    employer, most of them through self-insured employers which the
    employer will pay the drug's bill.
        In response to rising drug costs, many companies are
    pushing more of the cost of prescription drugs onto the
    employees, either in the form of high deductibles or by
    charging a percentage cost-share, especially for high-cost
    drugs. This is one of the reasons why many Americans are not
    able to afford the drugs they need, even if they have health
    insurance.
        Thank you so much for your time, and I look forward to your
    questions.
        [The statement of Dr. Socal follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman WILSON. Thank you, Dr. Socal. And we will now
    recognize Mr. Holt.

     TESTIMONY OF CHRISTOPHER HOLT, DIRECTOR OF HEALTH CARE POLICY
                         AMERICAN ACTION FORUM

        Mr. HOLT. Thank you, Chairwoman Wilson, thank you Ranking
    Member Walberg, Members of the Committee. I very much
    appreciate the opportunity to speak with you about this issue
    of complex drug prices. The legislation before you, H.R. 3 aims
    to bring down drug costs across the U.S. Healthcare system
    without harming innovation or creating barriers to access for
    patients. These goals are laudable. I do not believe however,
    that the policies in H.R. 3 can achieve the lower drug costs
    sought without negatively impacting the development of future
    cures, as well as patient access to existing medications. In
    the face of rising demand and increasing prices for drugs, the
    way to reduce prices without harming innovation and access is
    to increase supply and heighten competition.
        Unfortunately, the policies proposed in H.R. 3 are likely
    to have the opposite effect. Title I of H.R. 3 proposes to
    create a process whereby the Secretary of Health and Human
    Services will negotiate directly with drug manufacturers over
    the price of specific pharmaceuticals and then make that price
    available to all third-party payers in the United States.
        This in and of itself is an extraordinary market
    intervention by the Federal government. The proposal of direct
    government negotiation is predicated on the notion that the
    prices that the Federal government currently pays for
    medications are completely at the whim of manufacturers and
    that market forces or negotiation have no impact. In reality,
    however, prices for the drugs and the Medicare part D program
    right now are already determined through a vigorous negotiation
    process that involves plans, sponsors, PBMs and manufacturers.
    In the Medicare part B program, which covers physician
    administered drugs, we do not have the same benefit from the
    competitive nature and structure of part D but even here,
    market forces do play a role.
        While the formula for determining what Medicare pays for
    part B drugs can and I think should be reformed, it does
    include most if not all privately negotiated rebates and price
    concessions in the group market. In other words, private
    competition and negotiation are driving down the government's
    price in part B as well.
        Still, there are increasing calls for the Secretary to
    negotiate drug prices directly. The process that H.R. 3 would
    establish, however, cannot accurately be described as a
    negotiation. Instead, this bill would import foreign
    governments price controls through an average international
    market price based on the average volume weighted sales of the
    price of the drug in six foreign markets. This price, which
    U.S. policy makers would have no role in determining beyond
    selecting the countries to be referenced would serve as a
    target price in the negotiations and would be used to set both
    the maximum price that could be charged and a de facto floor as
    well.
        The negotiation would be limited to a range of not more
    than 120 percent of the average international market price and
    in effect, not less than 99 percent as the Secretary would be
    required to accept any offer below the average international
    market price.
        Within that limited range, the manufacturer would have no
    leverage in the negotiation process. The secretary would have
    carte blanche to require any proprietary data, details of the
    company's business practices with civil monetary penalties for
    non-compliance.
        Most important, the manufacturer would be required to reach
    an agreement and if they do not, would face a tax on the gross
    receipts of their drug of up to 95 percent.
        There is no requirement on the secretary to reach an
    agreement. Offering the choice between a lower price or an
    excessive tax cannot be described as a negotiation. Rather, it
    is government dictated price controls; but because of the
    centrality of the average international market price to the
    process, the resulting price will not consider the full
    therapeutic needs of U.S. patients or their views on value.
        Policymakers in the U.S. will ultimately have little
    control over the prices of drugs or the determination of value.
    The bill includes these heavy-handed provisions because the
    government has very limited leverage in a true negotiation. As
    detailed in my written testimony, the Congressional budget
    office has consistently found that the Secretary could not
    obtain lower prices in part D through negotiation without
    eliminating planned choice for beneficiaries or impeding their
    access. The process outlined appears likely to eventually
    encompass nearly all branded drugs and biologics sold in the
    U.S. and will certainly restrict the flow of capital to
    pharmaceutical companies leading to a decreased capacity for
    future research and development.
        I appreciate this opportunity and I look forward to your
    questions.
        [The statement of Mr. Holt follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        WILSON. Thank you. We will now recognize Dr. Garthwaite.

    TESTIMONY OF CRAIG GARTHWAITE, ASSOCIATE PROFESSOR OF STRATEGY
          NORTHWESTERN UNIVERSITY KELLOGG SCHOOL OF MANAGEMENT

        Mr. GARTHWAITE. Thank you, Chairwoman Wilson and Ranking
    Member Walberg and Members of the Committee for inviting me to
    testify today about H.R. 3, the Lower Drug Cost Now Act. While
    this bill has a number of features, in my testimony today, I
    will primarily address the proposed pharmaceutical price
    controls in the legislation. While supporters of legislation
    hope to characterize it as introducing Medicare drug price
    negotiations, that is not accurate.
        Instead, the bill gives the HHS Secretary unprecedented
    power to set market prices for the entire healthcare economy.
    Under the bill, the prices for the most expensive drugs that
    lack competition would be limited to 1.2 times the price in a
    set of six developed markets.
        Firms that don't comply will be fined up to 95 percent of
    the drug's revenue. Economics is a simple term for this
    proposal. It is a price control. This is particularly true in
    the case where the mandated price will then be passed along to
    the commercial market, which already has a robust system of
    negotiations.
        While I understand that calling these price controls a
    negotiation might be more politically palatable, that doesn't
    make it accurate. Now those in favor of price controls argue
    they're necessary because the higher prices decrease access to
    potentially lifesaving products. They often characterize those
    high prices as serving no other purpose than satisfying the
    greed and unending pharmaceutical profits.
        The reality is far more complicated than this simple
    caricature. High prices are part of a necessary tradeoff to
    provide the incentives for firms to invest the capital required
    to develop lifesaving drugs in the first place. At its heart,
    drug development involves a difficult tradeoff of reduced
    access today for increased innovation tomorrow.
        I don't say this lightly. I understand that high prices can
    decrease access to potentially lifesaving medications but
    frankly, there are no easy answers here.
        The economic evidence is clear, if we institute price
    controls of the nature discussed in this bill, we will see
    fewer investments in the development of new drugs for
    conditions that don't currently have treatments.
        Such decreases in innovation create their own access
    problems. While It is clear that patients today paying high
    prices can suffer decreased access for medication, and this is
    not an optimal outcome, those patients have a significant
    benefit that shouldn't be overlooked. They, through their PBMs
    have the luxury of negotiating the price of their drug.
        If you are sick with a condition today for which there are
    no treatments, a drug is not available at any price. This is
    the access problem that is so often missed in these
    discussions. Those who claim innovation won't be affected by
    price controls, simply misunderstand or deliberately ignore the
    economic evidence. In a modern market, a large share of biotech
    products result from venture capital firms, making substantial
    and risky investments to commercialize basic science into
    products that improve people's lives. The incentive for those
    investments come from the high prices and profits earned by
    today's successful firms. The venture capital firms at the
    heart of this process are not beholden to the pharmaceutical
    industry. They can invest in any sector of the economy. If you
    lower returns, capital will follow out of this sector into
    other more profitable sector, therefore it doesn't matter how
    much pharmaceutical firms spend on marketing, and it doesn't
    matter if someone believes a pharmaceutical company earns too
    much money and therefore can withstand the lost profits.
        While people like to mention these facts, the claim that
    innovation won't be affected, the basic economics and a number
    of empirical studies demonstrate that firms invest in products
    based on the expected return. The question then becomes how
    much do we value the innovation that would disappear because of
    these price controls?
        After all, an optimal innovation policy is one where the
    benefits of innovation outweigh the costs of reduced access
    today. It is possible we are currently getting this balance
    wrong. It might be that we provided too strong of an incentive
    in favor of new products at the cost of people not being able
    to access products today.
        We must remember that everything about the existing
    parameters of our tradeoff is ultimately a policy decision.
    There is nothing magical about a 20-year patent life. The very
    fact that it is constant, across both products and markets
    suggests that It is not the result of some finely-tuned
    calibration that weighs these costs and benefits. That said,
    while there is nothing magical about this parameter in our
    current policy, it is clear that moving away from this existing
    policy will decrease investments and innovation and the
    important thing to realize is that might be okay. The extra
    innovation we are getting may not be worth it, but that is the
    debate that Congress should be having. Instead, legislation
    such as H.R. 3 and the Trump administration's international
    pricing index effectively outsource this debate to foreign
    governments. This is not a profile encouraged by our
    policymakers. Why should access to new innovation for Americans
    be determined by policy decisions in London, Paris and Berlin?
    Simply because It is too hard for us to have the conversation
    about what products we want to say no to today in order to have
    a true price negotiation? In contrast to other developed
    economies who may have lower prices for the same drug, the
    United States relies far more heavily on markets because we are
    a large and diverse economy and market forces are better for
    allocating goods and services than central planning but we must
    recognize that markets can fail and when they fail, there is a
    role for the government to step in. There are many features of
    H.R. 3 that do that.
        [The statement of Mr. Garthwaite follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman WILSON. Thank you. Thank you, Mr. Garthwaite. I
    will now recognize Mr. Mitchell.

     TESTIMONY OF DAVID MITCHELL, FOUNDER, PATIENTS FOR AFFORDABLE
                                 DRUGS

        Mr. MITCHELL. Chairwoman Wilson, Ranking Member Walberg,
    Members of the Committee, I am honored to be here. I am David
    Mitchell, I am founder of Patients for Affordable Drugs. More
    importantly, I have an incurable blood cancer and prescription
    drugs are keeping me alive. Every two weeks I spend half a day
    at a clinic getting infused drugs, which unfortunately are
    slowly failing, so last week, my doctors added an oral chemo
    drug. I am now taking four drugs. Now that my drugs carry an
    annual list price of $875,000, I have relapsed twice.
    Eventually I am going to run out of options so the importance
    of innovation is not theoretical for me; it is literally life
    and death. But my experience as a patient taught me one
    irrefutable fact and that is drugs don't work if people can't
    afford them.
        To address out of control prices, however, we really must
    come to grips with some larger facts. Despite what drug
    companies tell us, and the general point that was made just now
    by Professor Garthwaite, sky high prices are not all about
    innovation. Multiple studies show there is no correlation
    between the cost of R&D and the price that is assigned to a
    drug.
        Taxpayers front a huge portion of the bill for the basic
    science that leads to new drugs. Every single drug approved by
    the FDA from 2010 to 2016 was based on funding from taxpayers,
    science brought forward through the NIH. Meanwhile, independent
    analyses show that 9 of 10 drug companies spend more on
    advertising and marketing than on R&D. Why do drug companies
    charge so much? Because they can. Yes, drug companies should
    make a profit when they develop innovative drugs, but our
    current system is broken. And it is costing us all and our
    family finances, our health outcomes and lives.
        H.R. 3 would ensure drug companies charge a fair price to
    patients while protecting access to lifesaving drugs and
    innovation.
        I want to run through some highlights of H.R. 3 that I
    believe enjoy bipartisan support. First, it brings our prices
    more in line with what other wealthy nations pay using an
    international price index, very much like the Trump
    administration proposal. Second, it stops drug companies from
    increasing prices faster than the rate of inflation, just like
    the bipartisan Grassley-Wyden bill. Finally, it caps seniors'
    out of pocket costs for prescription drugs at $2,000 a year.
    Grassley-Wyden has a slightly higher cap.
        Now I want to mention three other provisions important to
    patients. H.R. 3 ensures that Americans with public and private
    insurance have access to lower price drugs.
        As an employer myself for 30 years, it is important that
    this bill gives 150 million Americans and their employers
    access to lower drug prices. Second, savings can go to new drug
    research and innovation at NIH.
        Finally, it protects access to all drugs unlike in the
    private sector, H.R. 3 does not rely on a formulary and drugs
    are covered by Medicare just as they are today.
        Now we all know the bill is under attack. Here is what
    people are saying. I heard some of it today. It is socialism.
    Well, competition and negotiation are cornerstones of
    capitalism. The truth is taxpayers negotiate on everything from
    aircraft carriers to printer paper. The only reason we don't
    negotiate for drugs today is because pharma inserted the
    prohibition into law in 2003, otherwise we'd be negotiating.
    It'll kill innovation; Dr. Garthwaite just made that point.
    Well, nobody cares more about innovation than me. As a patient,
    however, I find this to be a scare tactic and I find it
    offensive. HHS Secretary Azar refutes it best. He says: ``It is
    a tired talking point. The idea that if one penny disappears
    from pharma profit margins, American innovation is going to
    grind to a halt.''
        And finally, it is going to lead to rationing. Well, my
    Lord, we already have drug rationing in this country. People
    are skipping doses, cutting pills in half, choosing between
    food and paying for their drugs. People are dying because they
    can't afford their insulin. H.R. 3 will stop rationing by
    lowering drug prices. Now right now, there's a fundamental
    question drug companies want us to ask about drug prices: what
    are we willing to pay to save a life? And I can tell you, that
    is easy. When It is your child's ability to breathe, when It is
    your cancer, the answer is anything, but that is the wrong
    question.
        We should be asking what is the right amount of money the
    drug companies should make on these drugs? With hundreds of
    clinical trials underway right now for new gene therapies that
    are currently priced at a half a million dollars or more, we
    cannot pay just any price the drug companies demand. Neither
    American families, nor our system can afford that. I feel
    incredibly grateful to be here today speaking on behalf of
    patients. I do believe the moment is at hand to address this
    problem, and with bipartisan support, we will. Thank you.
        [The statement of Mr. Mitchell follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman WILSON. Thank you, Mr. Mitchell. Under Committee
    Rule 8(a), we will now question witnesses under the five-minute
    rule. I will now yield myself five minutes.
        I want to thank all of you for your testimonies, thank you
    so much. Mr. Mitchell, you mentioned that you started a new
    oral chemotherapy drug last week. Can you repeat the list price
    for that drug and tell us what your out-of-pocket expenses are?
    Because we have five Members of Congress that I know of that
    take oral chemotherapy today.
        Mr. MITCHELL. So, this is the drug I started taking last
    Wednesday night. It is called Pomalist. It is 21 capsules. It
    carries a list price of $17,200. I have to take it this way
    every four weeks. The first fill was $2,758. My out of pocket,
    under part D, and I will be paying $850 dollars every four
    weeks out of pocket for this drug.
        Chairwoman WILSON. Ms. Talente, in your testimony, you
    share the stories of several of the patients whom you worked
    with at the National MS Society. You point out that the
    patients always struggle with the fear that they are
    contributing to overall health care in their workplace, health
    plans, and they don't want to be perceived as that person who
    is responsible for making everyone else pay. This is very
    troubling to me. Can you talk a bit more about the stigma that
    MS patients face and how does it present barriers to
    employment, to access, and to care?
        Ms. TALENTE. That is probably more than we have time for
    today, but I will touch on some of it. Health care cost is
    certainly a big part of that. So, the MS disease modifying
    treatments are about 75 percent of the cost of treating someone
    with MS.
        And as I highlighted, the median price of those brand
    treatments is more than $88,000 today, and so that is
    definitely a drain on employers' health care cost and health
    care burdens, and I have talked with people with MS who are the
    employee. I have talked with people with MS whose spouses are
    the employee and many of them are guilt-ridden about the cost
    that they are bringing to bear on their employer and their
    coworkers, and many of them are afraid and when people do lose
    their job for whatever reason, many of them, rightly or
    wrongly, attribute that loss of employment to being that health
    care burden.
        Chairwoman WILSON. Thank you. Many on the other side of the
    aisle and in the insurance industry often say that patients
    need to have more skin in the game to keep costs under control.
    To me this seems like an excuse for plans to raise deductibles
    and increase cost-sharing for patients. And we are talking
    about medications, this notion of skin in the game can have
    troubling consequences for patients.
        Mr. Isasi, what effect does requiring patients to pay more
    out-of-pocket have on their ability to access care, including
    prescription drugs?
        Mr. ISASI. Well what we know right now is a third of
    Americans who are trying to access prescription drugs to stay
    healthy or to get healthy are not taking that medication as
    directed because they can't afford it. And some of those
    people, the majority of them are actually cutting their pills
    in half, or skipping doses, some are just not taking them at
    all. We hear stories all the time about patients who end up
    becoming seriously ill or dying because they can't take the
    prescription so as we heard earlier, these very high costs
    don't actually allow people access to the innovation that the
    pharmaceutical company is promising. It is actually rationing.
        Chairwoman WILSON. Okay. Now we expect this bill to have--
    to greatly reduce cost for patients and tax payers and I
    believe it is important that we use savings to improve crucial
    health programs for American people, so I am going to ask the
    witnesses. Perhaps Mr. Isasi and Ms. Talente. Are there any
    programs such as the NIH or Medicare in which you believe
    Congress should invest these savings? We will start with you,
    Mr. Isasi.
        Mr. ISASI. Absolutely, I think that what we know for sure
    is right now it is seniors and Medicare beneficiaries across
    the country have spoken--they are desperately in need of an
    oral health care benefit. In Medicare there is none. They are
    desperately in need of a hearing benefit in Medicare. There is
    none. They are desperately in need of a vision benefit. There
    is none. So there is a lot of need right now to make the
    Medicare benefit comprehensive so that we are giving folks who
    are receiving it the best chance at living their best self-
    actualized life and in addition, we also know that all of these
    innovations that the drug industry is profiting from, almost
    all of them--all of the ones that are currently being approved
    in the last five years started with NIH research, so let's
    invest in the place where the innovation actually occurs which
    is our public and private institutions that receive NIH
    funding.
        Chairwoman WILSON. Thank you. Ms. Talente, you have a
    couple of seconds.
        Ms. TALENTE. We know that for every MS treatment on the
    market today, you can tie back some critical understanding of
    the biological function of the mechanism of action of the
    understanding of MS back to research that was done at the
    National Institutes of Health so investments there, at NIH is
    probably one of the best ways to spur the future innovation and
    bring cures in the future.
        Chairwoman WILSON. Thank you so much. I remind my
    colleagues that pursuant to committee practice, materials for
    submission for the hearing record must be submitted to the
    committee clerk within 14 days and now we will have questions
    from Mr. Walberg, Ranking Member.
        Mr. WALBERG. Thank you, Madam Chairwoman and thanks to the
    panel for being here. Mr. Holt, when Medicare's prescription
    drug program was implemented, it included a non-interference
    clause that prohibited the Secretary of HHS from intervening in
    negotiations between private firms or private plans.
        Has this model been successful in driving down costs and
    increasing competition with Medicare beneficiaries and second,
    would the direct negotiation provision in H.R. 3 destabilize
    these efforts?
        Mr. HOLT. Yeah, so when part D was first developed, the
    idea was to get as many plans competing as possible but there
    was concern that the negotiation wouldn't work so there was a
    Federal fallback plan that would have had a premium of, I
    think, 35 dollars at the time. Today it would be at about 44
    dollars. In reality, the negotiations between the manufacturers
    and the plans and PBMs have led to a situation where the
    premium, I think next year is expected to be about 30 dollars
    on average per beneficiary, so we've definitely seen that the
    negotiation in part D has been very effective. That is not to
    say that there aren't reforms that could be made to part D and
    I think this bill at least starts to address some of that but
    yeah, we've seen very effective negotiation in part D.
        Mr. WALBERG. Would we see destabilization of these efforts
    by direct negotiation as proposed in H.R. 3?
        Mr. HOLT. Yeah, and particularly early on where some drugs
    would be having their price set by the Secretary and the others
    would still be part of this negotiation would be really
    difficult to predict how that would affect the overall benefit.
        Mr. WALBERG. Mr. Holt, when talking about the high cost of
    prescription drugs, Sivaldi, the cure for Hepatitis C is the
    poster child. Although the drug cost 84,000 dollars for a full
    course of treatment at the time of its launch, within two
    years, competitors introduced rival treatments and the price
    came down by 46 percent, which I hasten to say is still too
    high for many people. In your opinion, was this an example of
    market failure?
        Mr. HOLT. No, I mean this is an example of how markets
    should work. Competitors come in and we see concessions as a
    result.
        Mr. WALBERG. Would it be considered a market failure under
    H.R. 3?
        Mr. HOLT. Under H.R. 3, Sivaldi would be considered to be a
    drug that does not have competition.
        Mr. WALBERG. Thank you. Mr. Garthwaite, Dr. Garthwaite, you
    explained in your written testimony that development of
    pharmaceuticals is a long and risky process and that firms rely
    on some degree of regulatory and market predictability when
    deciding to invest. How would H.R. 3 undermine the
    predictability and the willingness of firms to take chances for
    the sake of innovation?
        Mr. GARTHWAITE. On the predictability side, you'd be a bit
    at the whim of the Secretary of HHS as to whether you're going
    to be one of the drugs that is picked to have your price
    negotiated.
        In addition, we would be targeting our negotiation on those
    drugs that generate the most unique value in the market, those
    that don't have competition and therefore are the only choice.
    Now that might seem positive to some people but I would note
    that is the very nature of drugs that we would want to see
    people invest in so we would be sending a signal to the private
    market that drugs that meet unmet demand, that provide truly
    new treatment options are going to have their price severely
    capped and while Mr. Mitchell mentioned the Secretary Azar's
    comment about one penny of profit, that is not what we are
    talking about here. We are not talking about marginal changes
    to profitability and I am sorry that Mr. Mitchell thinks it is
    a tired talking point but the trouble with the truth is it
    doesn't change.
        The truth is if you decrease the return to innovation, you
    will get less innovation and I am happy to have a debate about
    whether we want less innovation. I am not happy to sit here and
    say that won't be the response. It is personal to me as well. I
    have lost very close family members to cancer because they
    didn't have the drugs that you have the ability to pay for.
    That is an access problem that we have to take very seriously.
        There are a lot of conditions for which we don't have
    access today because there is no drug and we have to keep those
    people in the debate as well because sadly they can't be
    sitting at the table testifying because they are no longer
    here.
        Mr. WALBERG. Thank you. Let's go to some case history, Dr.
    Garthwaite in countries that have enacted price control similar
    to the ones included in H.R. 3. Do their patients have the same
    access to new therapies as patients in the United States, and
    second, do patients in those countries face increased wait
    times, drug shortages or denial of coverage for lifesaving
    drugs?
        Mr. GARTHWAITE. This varies a bit by countries. We often
    talk about the idea of European healthcare or developed country
    healthcare. There is no one system that we want to talk about
    or that we can point to and say they are all the same.
        In the UK, for example, where NICE is the committee that
    negotiates this. Yeah, patients have reduced access to drugs.
    Patients with cystic fibrosis don't get access to Vertex'
    products there and that is a choice that they've made. In
    Germany, they pay higher prices, they get more access, but they
    don't get access to some drugs that we get here because they
    deem that they are not worth the money that is being paid and
    that is all fine. There is no secret to how Europeans get lower
    prices. They are not better negotiators than us. They'll just
    walk away. They are willing to walk away from drugs. We don't
    want to do that here. We don't want to face the hard choice in
    that H.R. 3 so what do we say? You're going to give us the
    price we want, or we are going to take all of your money as a
    drug company. That is not a negotiation.
        Chairwoman WILSON. Thank you.
        Mr. WALBERG. Thank you, I yield back.
        Chairwoman WILSON. Mr. Norcross of New Jersey.
        Mr. NORCROSS. Thank you, Madam Chairwoman for having this
    hearing and it certainly is long overdue to have some real
    conversations that lead to both the continuation of innovation
    but at a reasonable price. I can tell you the folks in my
    district, nothing twerks them up more as to find out their
    great country spent somewhere close to $40 billion a year in
    NIH funding which means we had skin in the game. That money
    does not magically appear from somewhere. It is those taxpayers
    we represent and yet the stories that I hear from a young man
    who goes for his insulin and what he pays a year and if they
    can go right across the border into Canada, 1/10th the price.
        So, Ms. Talente, I'd like to ask you a couple of questions.
    When we talk about negotiations going beyond where we have
    historically been to where this bill puts us, we spent $40
    billion on NIH and it is not all for one particular area.
    There's a lot of research there and you say they bring this
    great intervention. Do you see that America gets a discount on
    some of the pricing from those innovative drugs that come from
    NIH? Are we getting that special break?
        Ms. TALENTE. No, not that I have seen.
        Mr. NORCROSS. So, we pay for it and under many cases we pay
    substantially more than other countries?
        Ms. TALENTE. Yes, that is true.
        Mr. NORCROSS. This is the thank you we get for putting that
    research. I really appreciate that. But can you walk me through
    the negotiations that Medicare has? Can you directly say
    because we pay this much more for our pharmaceuticals in this
    country, that we are getting more breakthroughs across the
    board but particularly in MS?
        Ms. TALENTE. Generally, what we see is that the
    breakthroughs in innovation hop in and then those products go
    through the drug approval process in other countries as well,
    so they are not just coming to the U.S., they are going to
    other countries around the world.
        Mr. NORCROSS. You find it somewhat distressing that we make
    the greatest investment and pay the greatest prices?
        Ms. TALENTE. I find it disturbing that people are going
    without their medication because they can't afford it.
        Mr. NORCROSS. Thank you. I want to talk about some of the
    issues with the PBMs. Having spent the better part of my
    private career dealing with health plans, pharma plans, the
    PBMs that came into existence some time ago were the greatest
    thing since sliced bread. They were out there fighting for us,
    but now they are part of the problem. So when we see
    negotiations, we the end users, even though we buy a large
    plan, don't see the direct negotiations that take place. In
    other words they are being done behind closed doors.
        So, Dr. Socal, how can we ensure those PBMs are pricing,
    those price savings are passed on to the end consumers?
        Dr. SOCAL. There are two ways that we could do it. We could
    try to capture every single change in the negotiation process
    and make that known, which I don't think is feasible and I
    don't think it helps to the negotiation process or we can have
    a benchmark and we can show this is the benchmark that other
    countries are paying and you as an insurance plan, you have
    something that you can compare your price to. So you don't
    really know all the working mechanisms that are happening
    behind the curtain but you have a very clear benchmark that you
    can take a look at to know if you are getting a good deal or
    not.
        Mr. NORCROSS. The rebates, that is part of the area that we
    don't see anymore, and you might get the savings but you might
    not. What do you think the most effective way, other than to
    open up that process, and to some degree I agree with you that
    it is very difficult to follow everything, that is why they are
    doing so well. The confusion that the average person doesn't
    have the time to go but rebates see to be a real issue that
    they are not making to the end user.
        Dr. SOCAL. And I would add it is not only the fact that
    there is a rebate, it is the fact that the rebate is
    intertwined with the revenue source for the PBM. So, if PBMs
    were to pass on fully all rebates, all fees, everything to the
    payers, that possibly would generate less distortions to the
    market. But PBMs' revenue depends by in large on rebates and
    that generates a series of distortions and oftentimes higher
    prices for the payers as well.
        Mr. NORCROSS. I am out of time. Thank you, I yield back.
        Chairwoman WILSON. Thank you, Mr. Norcross. Dr. Foxx?
        Mrs. FOXX. Thank you, Madam Chairwoman. I want to thank our
    witnesses for being here today. Mr. Holt, what current
    regulatory guardrails exist in the pharmaceutical industry to
    give incentives to companies to undertake financial risk
    associated with developing new drugs? Would H.R. 3 impact the
    current patent system and exclusivity periods that attract
    investment?
        Mr. HOLT. I don't know that H.R. 3 would directly impact
    the patent system. I think clearly H.R. 3 has serious
    implications for capital to continue coming to drug
    development.
        Mrs. FOXX. Mr. Holt, H.R. 3 would allow the Secretary of
    HHS to negotiate the prices for up to 250 drugs per year. In
    your opinion, does HHS have the necessary access to data and
    regulatory review capacity to undertake this process and what
    are the consequences of granting HHS this information?
        Mr. HOLT. So currently no. the legislation does grant HHS
    really unlimited power to demand any and all information from
    manufacturers in order to in theory facilitate the negotiation
    although it is not clear to me that HHS needs any of that
    information since the Secretary can basically just wait out the
    manufacturer during the discussion; but I have real concerns
    about the proprietary data being handed over to the government.
        Mrs. FOXX. Thank you. Dr. Garthwaite, you note in your
    testimony the important role of the National Institutes of
    Health and other government entities in funding scientific
    research that contributes to product development. You explain
    further, however, that NIH is focused on basic scientific
    research and not the start to finish pipeline of pharmaceutical
    trials and production. What role does private investment play
    in bringing innovations to the market and how would H.R. 3
    undermine this process?
        Mr. GARTHWAITE. So private market basically commercializes
    the basic science that the NIH does and so it helps to think a
    bit why we have the NIH in the first place. The NIH solves what
    economists call is a public goods problems. So you generate a
    bunch of basic science, anyone can use it. You can't protect
    it, and because you can't protect it, you can't appropriate the
    value. No private firm is going to ever do that research
    because they can't get their money back, so that is where the
    very valuable role of the NIH comes in. In fact, as tax payers,
    we should be happy that the NIH is being used in all drugs
    because we are getting the most bang for our buck on the share
    of the 30 billion dollars that goes to drug development.
        So if you want to use savings from this bill to then get
    new drugs to market, you are going to have to really change the
    function of the NIH in some way to really start to focus more
    on commercialization, which is not something they've done
    before, and it is not clear it is going to be something that
    they are very good at.
        I would note that this is in many ways a centralization of
    the research process with NIH, but they are going to act like
    they are their own little venture capital company. At the same
    that the private market is choosing to decentralize research to
    a large number of small biotech companies and so you would
    really have to change the nature of what the NIH is to get that
    to work and it is going to be sort of a competition between
    taking away the incentive for the private market to invest
    commercialization dollars, how much innovation will you lose
    there compared to how much you think you could get by having
    the NIH serve this new and untested role. That is the--you have
    to think about that. I don't know if we have a good answer as
    to which of those would dominate.
        Mrs. FOXX. Thank you. Dr. Garthwaite, proponents of H.R. 3
    argue that implementing an ``international price index'' would
    force foreign countries to pay their fair share of the
    pharmaceutical research and development cost that are largely
    borne by the United States. Would this proposal result in other
    countries paying more for research and development or everyone
    paying for less research and development?
        Mr. GARTHWAITE. The answer is kind of both, I guess.
    Foreign countries are going to pay a little bit more. We are
    going to pay a lot less, a net will meet somewhere in the
    middle from that so we will get a little bit more money out of
    the foreign countries and I share Mr. Norcross' frustration. I
    would like it if the other countries paid more of this than we
    currently do. That would be the first best, right? Every
    country sort of pays its fair share. Unfortunately, what's
    probably going to happen is they'll pay a little bit more, we
    will pay a lot less and we will get less innovation and that is
    unfortunately where we are going to be.
        Mrs. FOXX. Well we've always been the leaders in many,
    many, many things and to me this is a small price to pay for
    the access that our citizens have to the drugs that are
    developed. Thank you very much. I yield back.
        Chairwoman WILSON. Now, Mr. Morelle, New York.
        Mr. MORELLE. Thank you, Madam Chair for holding this
    important hearing today. I will start out by saying I am a
    capitalist. I believe in investment and innovation, new
    products, new development cycle. I think it has benefitted
    Americans tremendously over the years but I am struck by the
    issue of innovation in pharmaceuticals because I have met with
    pharmaceutical companies, I know the talking points, but I find
    it interesting and I will just use an example which is probably
    not entirely analogous but if you think about what's happened
    in the development of personal computing over the last 30 or 40
    years, there's been massive innovation, massive investment, and
    yet the price of these devices has continued to drop despite
    the fact that there is more and more investment in innovation.
    I think back to my old social studies books about Henry Ford
    who priced the Model Ts when they were coming off the assembly
    line so that individual workers could afford them so he would
    help build a market.
        The difference in pharmaceuticals, I understand is you
    didn't have to buy a car if you didn't want to. You could find
    other ways to exist. Mr. Mitchell and people like him don't
    really have an option of not buying the car in the analogy.
    They have to buy the drug because it is lifesaving, so I
    struggle to understand exactly why the innovation cycle works
    in just about every other industry, but it doesn't seem to work
    very well in the pharmaceutical industry.
        Particularly in the advent of supercomputers, mapping of
    the genome and more and more information available to
    pharmaceutical companies but let me--so I will just use that as
    sort of a sense of where I come from on this and I am happy to
    talk to others and by the way, Dr. Garthwaite, I thought you
    said at one point, and I don't have time unfortunately but I'd
    like to get into it with you, perhaps offline. You mentioned
    something about the advertising costs and salaries don't affect
    return on investment for investors but actually all costs go
    into it unless I misunderstood--did I misunderstand you? Okay,
    I apologize. I only have three more minutes but I will look at
    the testimony, but I do apologize if I mischaracterized that so
    thank you for clearing it up.
        I did want to talk about insulin. In my district, insulin
    prices have skyrocketed as I assume it is everywhere else but
    in Rochester alone, where I represent, the 50 most popular
    diabetes medications cost the Medicare program and
    beneficiaries approximately $24.7 million in 2016 dollars. The
    monthly cost of a widely used insulin would be 74 percent lower
    Australian prices, 70 percent lower UK prices and 52 percent
    lower Canadian prices. We talked about cost setting in those
    countries as a reason for that, but it is important to know.
        Studies show manufacturers could charge as little as $7 to
    $11 per month for insulin and still make a profit. The average
    monthly--I'm sorry yearly price--annual price of insulin
    nationwide is $450 which is a considerable multiple of that
    number so Dr. Socal, if you might, in your testimony you talked
    about the role competition plays in controlling health care
    costs and when there is no competition, prices tend to rise and
    I would just be curious about what barriers there are. Insulin,
    in particular does not have--first of all it has been on the
    market for a long time so could you talk to me about how--is
    there innovation? Is that what is driving the price of insulin
    because it doesn't seem for something that is been around so
    long that is the issue.
        Dr. SOCAL. Well it is a combination of multiple factors but
    I would first start by highlighting yes, it is an older drug,
    it has incurred changes and innovation over time, especially in
    the sense of new application mechanisms, new tweaks to the
    length of the effect, faster effect, longer effect and things
    like that but most importantly, the prices for insulin, it is a
    quite good example of what I mentioned before.
        PBMs cannot say no to insulin. You cannot say no. It is a
    drug that you really need, and you need right now. It is
    similar to a situation where you have a very serious infection
    and you need an antibiotic. You cannot wait a week or a month
    to get your antibiotic. It is the same way with insulin, but
    people with diabetes, they need the same urgency of access
    every single day, every single time.
        Mr. MORELLE. And is the innovation that you talked about,
    is that what is driving the price of insulin?
        Dr. SOCAL. No, that is not driving the price of insulin. It
    is really distorting a little bit the competition between the
    insulins that do exist in the market so before when it was
    brought up, the fact that well there are some therapeutic
    classes where you do see branded drugs available in the market
    and they compete against each other, yes but we have to think
    about the clinical aspects of that and I am a physician, I am
    very familiar with what patients feel and they feel I am used
    to my insulin, to my application mechanisms. If I was going to
    change, it is not going to control my disease as effectively so
    those clinical aspects also play a lot in terms of being able
    to say no and negotiate effectively for that.
        Mr. MORELLE. Thank you so much. Thank you, Madam Chair.
        Chairwoman WILSON. Thank you. Thank you so much. Dr. Roe?
        Dr. ROE. Thank you, Madam Chair for having this and I hope
    we will continue to have these hearings. I am going to go on a
    little history tour.
        I graduated from medical school this December 49 years ago
    and I graduated from medical school there was one cephalous
    borne antibiotic and now there are--I call them self-
    acknowledging. There are so many of them. There were five anti-
    hypertensive. Three of them made you sicker than the
    hypertension did, and we didn't use them much. Now there are 50
    at least.
        My first pediatric rotation in medical school was at St.
    Jude's children's hospital. I can still remember seeing some of
    those kids. 20 percent of them lived, 20. Now It is 83 percent
    I believe is the last number I saw from St. Jude's and Mr.
    Mitchell, you are getting the benefit of some incredible
    research that is been going on and I hope it continues to go
    on. I have struggled with this for 40 years, seeing patients as
    a private practice doctor and a teacher in medical school. The
    innovation that we have, these new medications and then
    patients being able to afford them. If you can't take it, as
    Mr. Mitchell said, it doesn't do you any good and Mr. Morelle,
    I could not agree with you more, insulin was discovered in 1921
    by Benning and Best in Toronto, Canada. There is no reason for
    it to be 10 times as high in Canada as it is here in this
    country and you look at these countries that--that this
    international pricing is going to be and of the 270 new global
    medicines lost in the United States since 2011 to 2018, 100
    percent of them are available in the United States. 41 percent
    of them are available in Australia, so one of the ways you do
    is no question, the CBO is correct. You limit--when you limit
    how much somebody would pay, you are going to limit what's
    available for people to take and that is the dilemma I have and
    I think Ms. Talente, I think one of the things that we can do
    and Mr. Mitchell, there is no question that there are diseases
    out there and new innovations that are going to come along that
    are going to be expensive and I think we have to take those
    patients that are in these very high risk situations and put
    them in a high risk pool where their costs are no greater than
    anybody else and we are going to continue to find cures. I will
    run through very quickly. Dr. Lemial Diggs was my hematology
    professor in medical school. He lived his entire life trying to
    cure sickle cell disease for African Americans. His entire
    life.
        I can remember sitting by bedsides of pregnant women and
    taking out the sickle blood and transfusing normal hemoglobin
    into that woman for 35 weeks so she could get through her
    pregnancy and we could deliver her baby safely. Now, at NIH,
    some of the basic science research. It looks like we are going
    to be able to take an intenuated HIV virus, put the right
    genetic code and cure sickle cell disease. That is remarkable,
    but it is not going to be inexpensive and we as a society have
    to decide are we going to have the innovation and we're going
    to help the people that have MS--numbers of patients, a million
    patients in the United States have MS and these treatments are
    incredibly expensive, so what we have to do is I want the
    innovation but I don't want, as a doctor, 41 percent of the new
    drugs that I have access to and especially, I have said this
    all along. I don't care if your case is one in a million. If it
    occurs in you, it is 100 percent. Just like Mr. Mitchell's is
    100 percent for him, in that patient, so I am going to ask Dr.
    Garthwaite just a couple of questions.
        In 2018, the FDA approved 58 novel drugs. In 2017, the
    pharmaceutical industry spent 97 billion on research,
    development and so forth and a typical R&D, we know It is
    somewhere between 800 million and 2.7 billion to bring molecule
    to market so that I can write a prescription for it. Do you
    think that the elimination, effectively the elimination of the
    private industry and R&D by 2023 under this bill will adversely
    impact patients 10 years from now and do you think the NIH will
    be able to offset that loss through their budget, even though
    It is only a third of private spending?
        Mr. GARTHWAITE. So I have doubts on whether the NIH will be
    able to offset it, even if we gave them a lot more money. As I
    said, it is not just about giving the NIH more money, It is
    about them doing an entirely different set of activities than
    they currently do and we know that private firms partner with
    the NIH based on their ability to get returns. We know that in
    1995, we used to say that the NIH would have a fair pricing
    clause attached to their partnership with private firms. We
    took that away. We said there are no more pricing constraints
    on the partnerships, the number of these partnerships
    skyrocketed in the years after that, so we need to have a
    respect for the fact that the private market are the people who
    commercialize drugs. We could try to make the NIH that entity,
    but it would be vastly different than they currently do.
        Dr. ROE. That is not what's going on in Switzerland or
    other places--or France. They have a robust market. The private
    companies do that research there and It is not done by the
    government of France or the government of Switzerland.
        Mr. GARTHWAITE. But they do it to sell it to the United
    States. Global firms do research and sell to us.
        Dr. ROE. Well I do want to continue. Madam Chair, I really
    do appreciate this hearing and I hope we continue this
    discussion.
        Chairwoman WILSON. We will.
        Dr. ROE. We don't have enough time.
        Chairwoman WILSON. Thank you, Dr. Roe. Mr. Courtney of
    Connecticut.
        Mr. COURTNEY. Thank you, madam chairwoman and thank you for
    hosting this hearing. Last November, this country experienced a
    historic moment. It was the largest voter turnout in a midterm
    election since 1914. We elected a new majority with a plurality
    of 10 million votes which shattered all records in history of
    this country and if you looked at the exit poling, health care
    cost was the number one concern of voters and more particularly
    the cost of prescription drugs so holding this hearing on this
    bill is in my opinion keeping faith with the loud strong
    message that came out less than a year ago through our
    democracy.
        Yesterday, we got more validation about this issue. Kaiser
    Family Foundation released its annual health benefits survey of
    employer-sponsored health insurance. The study found that the
    average premium for family plans has increased 22 percent since
    2014 which has been a very low inflation environment and last
    year to this year, it was a 5 percent increase, again, far
    surpassing the rate of inflation. According to the Americas
    Health Insurance Plans, 23 percent of private health insurance
    premiums go towards prescription drugs. The largest share of
    healthcare costs, larger than doctor services, office visits
    and hospital stays. In addition, we have seen the trend toward
    high deductible coverage as a way, a desperate way of trying to
    moderate the increase of a premiums so again, there's an
    additional layer of cost which patients and workers have been
    experiencing.
        So Dr. Socal, when we talk about the brave new world of
    high-deductible health insurance, lowering the list price of
    drugs, which as you pointed out in your testimony is really
    where the rebates are worked off, but they are not shared with
    workers so could you kind of talk a little bit more about the
    way that all transpires.
        Dr. SOCAL. Absolutely. First of all, let me just mention
    that from an employer perspective, you want to offer the best
    benefit you can to your workers so an employer, if possible,
    they would choose to offer the best plan they can and the
    offering of these high-deductible health plans, more and more--
    the more frequent offering for those plans, it already reflects
    how companies are struggling to pay for their bills and they
    are sharing these agreements with patients. The real problem is
    that once you are enrolled in a high-deductible health plan,
    automatically, there is some sort of parallel mechanism to save
    money like a savings account, for example.
        Patients believe they are going to be protected like an
    insurance agreement, however the price that they are going to
    be faced with is going to be the list price so you cannot save
    your way to pay for the list prices that the insurers are
    negotiating down.
        Mr. COURTNEY. That was on page 7 of your testimony, which
    again, basically says list prices before rebates determine
    America's cost-sharing amounts so again, the patient and the
    worker again is really sort of excluded from all the--
        Dr. SOCAL. Absolutely, they are always faced during the
    initial deductible, even for somebody who is fully insured,
    doing the cost-share and cost-sharing--percentage cost sharing
    is more frequent for the highest cost drugs, so patients are
    always paying over the list price, never over the negotiated
    price.
        Mr. COURTNEY. Thank you. And Mr. Isasi, again, AHIP, which,
    you know, maybe hasn't always been aligned with your
    organization in the past but I mean do you see any--do you
    disagree at all with their analysis that prescription drugs now
    are sort of consuming the highest percentage of premium
    dollars?
        Mr. ISASI. Prescription drugs are 25 percent of premium
    dollars at this point. They have gone up exponentially which
    means if any of us aren't on prescription drugs, we are still
    paying for them.
        Mr. COURTNEY. So again, if we are looking at a strategy
    both public sector and private in terms of just how we moderate
    and hopefully reduce premiums. I mean that sort of trend just
    sort of screams out for Congress to act, is that right?
        Mr. ISASI. That is exactly right and just on this
    innovation question that keeps coming up. A couple of points:
    Sovaldi, which was raised before. Gilead bought the drug from
    the researcher at the VA and then their analyst said enter the
    market at this price and we will make a ton of money and then
    they quadrupled it. And then the patients in the VA couldn't
    afford to get the drug. That is innovation. MS, we have talked
    a lot about MS. In the last five years, the drug went from
    $60,000 to $90,000. In five years, same drug, that is not
    innovation. That is not about innovation. In fact, what we know
    right now is 75 percent of the drugs that are coming to market
    are coming to market because they are especially drugs that can
    get the Medicare beneficiaries in a catastrophic coverage where
    they only pay 5 percent. The government pays 80 percent, the
    plan pays 15 percent. Think about what it would mean if we had
    iPhones where 80 percent of the cost was government subsidized,
    15 percent was paid by the iPhone retailer and then 5 percent
    was paid by us. That is what we are living with right now. That
    is not innovation; that is why we don't have low cost drugs.
        Mr. COURTNEY. And that is why we need to move on H.R. 3--
        Mr. ISASI. Absolutely.
        Chairwoman WILSON. Thank you. Mr. Johnson from South
    Dakota.
        Mr. JOHNSON. Thank you, Madam Chair, I appreciate it. So
    Mr. Garthwaite, I understood your comments. They made sense to
    me that venture capitalists and for that matter other capital
    contributors, they could invest in any industry and so that
    doesn't offend me that the pharmaceutical companies would need
    to have a certain return on investment that need to earn that
    return on investment to attract that capital.
        It seems like from the data we have looked at and from the
    testimony we've heard today, the pharmaceutical companies are
    not earning anywhere close to that necessary return on
    investment and the European markets, so where do the
    pharmaceutical companies make up that shortfall and the target
    return on investment?
        Mr. GARTHWAITE. The United States.
        Mr. JOHNSON. I mean obviously that is the answer. I mean I
    do find myself more and more affiliating myself with the
    comments of the President that in that environment it looks
    like Europeans are really taking advantage of us. That may not
    be their intention but that is certainly the effect.
        Dr. Foxx, I thought had some good questions about and also
    kind of where do we go from here.
        Your response that yeah maybe we would come down a bunch
    and they might come up a little bit but that means that yes, we
    are paying less but we are getting a lot less innovation. I get
    that is logical; it seems fatalistic, it seems like we are
    putting ourselves and the rest of the world in a box. Is there
    any other way? Is there any way to better balance this European
    versus American contribution to the return on investment?
        Mr. GARTHWAITE. I think if you are looking for optimism,
    you shouldn't have invited an economist here to testify. That
    is not really what we do. I mean listen, It is unfair. What's
    happening is that the Europeans are free riding off of American
    dollars and I think that is bad. I think the only thing worse
    is that no one is providing this innovative money. I mean
    sometimes if we want to get so caught up in the idea of
    fairness, we are going to cut our nose to spite our face.
        We are going to stick it to the Europeans, right? They are
    going to have to spend more and we are going to win in that
    sense, but what are we going to win? We are going to win lower
    prices, okay? And fewer drugs in the future. This is all
    dictated by returns and while I understand Mr. Isasi's example
    that Gilead didn't make the drug itself, a company named
    Pharmasset made Sivaldi. Why did they do it? So they could sell
    it to Gilead. In the end, the venture capitalists are looking
    for an attractive exit from their innovation and Pharmasset.
    They sold it and then Gilead priced it and took it to market
    and that is what people are looking for in this. The return is
    what dictates this.
        Mr. JOHNSON. So I do understand the value of paying more
    for a drug so that a country, like America, can get a preferred
    access to that drug but I found myself being struck by Ms.
    Talente's comment, her testimony that in most years, most of
    the increase in drugs, the price that Americans pay for drugs
    come from year over year increases of drugs that are already on
    the market rather than new market entrance. Does that comport
    with the knowledge you have got about what drives
    pharmaceutical inflation?
        Mr. GARTHWAITE. Unfortunately, I am well aware of the
    health--the article she is citing. It is a tragically flawed
    article. It uses bad data. It doesn't understand how drugs are
    priced. It uses non-rebate data, and older drugs have bigger
    rebates, so by construction, if you don't take rebates into
    account, it will look like the price increases are coming from
    older drugs, not newer drugs, and so I mean I don't know what
    else to say other than the article is wrong.
        Mr. JOHNSON. So what suggestions, Mr. Garthwaite, if H.R. 3
    is not the right approach, because I do find myself believing
    wholeheartedly that the system--that this balance that you very
    articulately and logically laid out for us--I believe in that
    balance. Cost and innovation, there's a tension between those
    two.
        I do get the sense that maybe we haven't balanced that
    properly so if H.R. 3 isn't the right solution, give us some
    thoughts about where we should go from here.
        Mr. GARTHWAITE. Absolutely. First, let's do things that
    make the market work. Some of the reasons it doesn't work is
    because of decisions that Congress has made. We have the
    catastrophic program that Mr. Isasi is talking about where the
    government pays 80 percent of the cost of high-priced drugs.
    That is ludicrous. That doesn't provide insurers the strong
    incentive to negotiate, so let's flip that, let's put 80
    percent on the back of the insurer. All of a sudden, they are
    going to get a lot more interested in negotiating the high
    price of the drug.
        We have protected classes that say you have to cover every
    drug in the category. You don't have to come to Kellog and take
    our wonderful negotiations classes to know that if they have to
    pay your price, you can just sit there and wait. We have
    generics that have very small markets and therefore can't
    attract multiple competitors. There, we've already paid for the
    innovation. We might want to think about regulation for those
    products, things like the Daraprim product that Martin Shkreli
    raised the price on that sort of got everyone upset. Maybe that
    is where we need regulation. It is not that I am opposed to
    regulation in any setting, I want to be clear. We want
    regulations when markets failed but a high price is not a
    market failure if that price is generating the incentive for
    the innovation we want and so targeting the places where the
    market isn't working, provide insurers with the incentive to
    negotiate and vigilantly monitor the competition. Don't allow
    people to gain patents, don't allow people to exclude their
    competitors. Have robust anti-trust authority for people who
    are breaking the rules and then if all that happens and we are
    still at this position, then let's talk about a failed market
    but we haven't even given the chance for the market to work
    yet.
        Mr. JOHNSON. Thank you very much. Madam Chair.
        Chairwoman WILSON. Thank you. Ms. Shalala of Florida.
        Ms. SHALALA. Thank you very much. I am interested--
    obviously you have described the cost-shifting that is going on
    from the Europeans to us. It is been going on for a long time
    and it is not so easy to get at that and during the time that I
    was the HHS Secretary, I begged for an opportunity to negotiate
    because I was opposed to the importation, which I thought was
    unsafe and I still believe it is unsafe. But explain to me and
    all of you can comment on this, how the Europeans can negotiate
    directly, have a more limited list of drugs and get better
    outcomes than we get in whatever you want to describe the
    market for because I don't see analysis that tells me that
    large numbers of Europeans are dying from certain diseases
    because their health administrators are negotiating are tough
    negotiators on the price of drugs.
        Mr. GARTHWAITE. So I mean what we can do is we can do what
    the Europeans do and start saying no to some drugs on our own.
    So we talked about insulin. Why is one reason insulin is
    expensive? Yes, it is an old drug but it has evolved a lot over
    time and there are two categories you might want to think
    about. We have human and analog insulin, analog insulin being a
    newer insulin. Caramore, which is a Medicare Advantage provider
    in California, they put a bunch of their type II diabetics, a
    large fraction on them on human insulin, the older kind and
    then they monitored for any adverse events. They had no
    increase in hypoglycemic events and they had a big decrease in
    savings.
        Ms. SHALALA. So basically what you're saying to us is that
    where there are more than one drug that will treat the patient,
    we have not seen different outcomes necessarily for most
    patients but we are not prepared to do that?
        Mr. GARTHWAITE. The gentleman left, Mr. Morelle but in tech
    what happens is we take slightly worse products that have
    meaningfully lower costs. In the U.S., healthcare we are
    unwilling to do that. Right?
        We want--we will never take a slightly worse product, even
    if It is thousands of dollars less. We will, however, take a
    slightly better product and pay thousands of dollars more and
    until we are willing to say we won't do that, that you have got
    to give us the return for our money, we are not going to get
    any savings.
        Ms. SHALALA. Madam Chair, this is a very important point
    because what we are describing is--we have not focused on
    outcomes. I am interested in outcomes. I am interested in
    whether we can make Americans healthier, and if we can use a
    negotiated process to do that, are there any circumstances or
    will any of you--would you propose any different ways of
    organizing the negotiation other than using an international
    price index?
        For example, the VA negotiates now, the prices are online.
    You can actually see the contracts online. I mean we do have
    American government officials that now have experience in
    negotiating prices, whether it is on Medicaid or whether it is
    VA or whether it is for Tricare, we have had a lot of
    experience.
        Mr. ISASI. Well I was going to say absolutely and we know
    that, for example, what Mr. Garthwaite is talking about in so
    much of his testimony is this hypothetical world in which if
    only we could do this and if only we could do that but the
    truth is we live in a world where there is a Medicare benefit,
    cash off of coverage that pharmaceutical companies are pricing
    to that coverage, there has been a 96 percent increase in price
    only in that coverage. They are playing a game with us, but he
    is in this hypothetical world. To your point, in particular
    with launch prices, we should be able to understand what is the
    real value of this drug? Does it really provide a benefit? How
    does it compare to what is on the market currently? We are not
    doing that as a country. You are describing that occurring in
    other countries, Mr. Garthwaite is as well.
        We are not doing that as a country so we just put it on the
    market, they market it to doctors, doctors bring it to their
    patients and now we are spending $6,000 for something that
    should probably cost 5 cents.
        Ms. SHALALA. The head of Eli Lilly came in to see me before
    they dropped their price for insulin and they actually had the
    nerve to say to me he could have dropped the price lower. I
    mean--
        Mr. ISASI. They tripled--insulin tripled between 2003 and
    2012 and it went up 10 times faster than all the drugs since
    then. Ten times faster, meanwhile they are suing other
    competitors to make sure they can't come to market with a
    biologic similar.
        Ms. SHALALA. Mr. Holt, just one small point. I am an
    academic and normally when we testify or publish articles, we
    identify if our organization takes money from--in your case
    from pharma. I didn't see that acknowledgement on your
    testimony. I would hope that you would disclose whether your
    organization does take any money from pharma or has in the past
    taken money from pharma. I yield back.
        Chairwoman WILSON. Mr. Holt?
        Mr. HOLT. Our organization is a 501C3 and we don't disclose
    our donors. I am not allowed contractually to do that, and I
    also don't have anywhere near the knowledge of our donor
    situation to do so.
        Ms. SHALALA. It is actually online, the IRS reports.
        Mr. HOLT. Not ours. Maybe people who give money to us but
    ours are not.
        Chairwoman WILSON. Thank you. Mr. Allen of Georgia.
        Mr. ALLEN. Thank you, Madam Chairwoman and thank you for
    this expert testimony today. Obviously, I think every district
    in the country, when we go home, healthcare is number one. No
    question about it.
        What I have been able to observe is nobody in healthcare is
    happy. Patients, Mr. Mitchell, are not happy, providers aren't
    happy, and the government has thrown trillions of dollars at
    this. The cost is skyrocketing and yes, we've got--we are
    developing great drugs. We are--I think, again, in a free
    market environment. There is no question that free markets
    drive innovation. The government doesn't innovate anything.
    Yes, we can do studies, we can pay people to do studies but
    still to be able to raise the capital to invest, to be able to
    come up with these things that save lives is critical to this
    whole process so here is the question. And again, we do believe
    that this thing needs to be fair throughout the world. In other
    words, we should be able to sell your technology.
        I mean we have this problem in China. Why is the President
    negotiating with China? Because they are stealing all our
    intellectual capital and then turning around and competing
    against us and dumping those products in here. In fact, how
    much of our drugs today are made in China? Because they have
    stolen our capital and they are selling the elements to develop
    these drugs back to us.
        Mr. GARTHWAITE. A lot are made in China. I don't want to
    sign on to the second part that they are made in China because
    they are stealing our intellectual property. They are made
    there because we outsource manufacturing to China and India for
    lots of products so--
        Mr. ALLEN. They aren't proprietary.
        Mr. GARTHWAITE. We outsource to them to make the drug. It
    is a contractual arrangement between us and them. It is a
    perfectly legal arrangement.
        Mr. ALLEN. I see. And they are using our technology to do
    that?
        Mr. GARTHWAITE. Our technology on how to manufacture drugs?
        Mr. ALLEN. Yeah.
        Mr. GARTHWAITE. That is--India has been the drug store to
    the world for decades.
        Mr. ALLEN. Okay.
        Mr. GARTHWAITE. It is not--that technology on how to make a
    small molecule product isn't proprietary technology unless
    you--you have a lot more access to information than I do so you
    might know something about them taking technology, but I am not
    sure what you are getting at.
        Mr. ALLEN. Well, I just--again, this is a worldwide
    problem, I guess what I am trying to say as far as whether it
    is Europe or anybody else and the fact that in Canada you can
    buy insulin for much less than you can buy it here in this
    country, we've got to fix that, and in other words, we've got
    to fix it to the extent that whatever we are able to develop
    here and sell here, if somebody else is going to use the same--
    use our intellectual capital, they need to pay for that and
    again, I still don't understand why is it that they can sell
    their insulin for less than we can do it. I mean--
        Mr. ISASI. Because their government negotiates price. That
    is why. That is literally the reason.
        Mr. GARTHWAITE. It is also--I'm sorry. It is because they
    are willing to walk away. I know you want to talk about me
    living in a fantasy world, but it is not hard. They are willing
    to walk away, and we are unwilling to tell our seniors, in
    particular, that lower prices might mean less access to drugs.
        Mr. ISASI. And that is why H.R. 3 is so brilliant because
    it actually doesn't walk away; it forces a manufacturer to
    either give it a reasonable price or they end up paying an
    excise tax.
        Mr. ALLEN. I'd like to reclaim my time.
        Mr. ISASI. So, they don't walk away. They make sure the
    drug is available. That is what we care about.
        Mr. ALLEN. I'd like to reclaim a little bit of my time,
    Madam Chair. Well listen, I got a little something going here,
    right?
        Now, so the last questions. So if a--the drug Mr. Mitchell
    is taking and I don't know how that is being paid for but say
    it is Medicare, okay?
        Mr. GARTHWAITE. I mean I guess, yeah.
        Mr. ALLEN. And so Medicare is going to negotiate the price
    of this drug and they are saying we are going to pay this much
    for this drug for Mr. Mitchell and that is all we are going to
    pay. The company says we are not going to sell it to you for
    that and they walk away from the deal, what do we do then?
        Mr. GARTHWAITE. So the hard part is that we have required--
    so that is an oral chemotherapy drug so I believe it is in the
    Medicare part D. we've required that the oncology products in
    Medicare part D, the insurer must cover every single one so it
    is the decision--that is a government decision because we
    didn't want seniors to not have access to every oral oncology
    product and that is a decision that we've made and that is
    why--It is not about the government negotiating it. The
    government negotiating it under those rules, it is the same
    thing that is going to happen and so--
        Mr. ISASI. That isn't what would happen under the bill.
        Mr. ALLEN. I am not addressing you, sir.
        Chairwoman WILSON. Great discussion.
        Mr. ALLEN. Can he finish his answer?
        Chairwoman WILSON. Finish your answer if it is a minute.
        Mr. GARTHWAITE. A whole minute? We have to decide whether
    we are willing to walk away. There is no secret to the drug
    pricing. It is not about the government negotiating, it is
    about the government saying they'll walk away. Creating that
    outside option. What we are going to do under the H.R. 3 is
    just under H.R. 3, you will still get access to the drug
    because we have said we will take all the company's money away
    if they don't give it to us so where is the access problem
    going to come? It is not going to come today. It is going to
    come in 10 years. There are no easy answers here.
        Chairwoman WILSON. Okay, thank you so much. And now our
    esteemed Chair, Mr. Scott.
        Mr. SCOTT. Thank you. Mr. Mitchell, you know what portion
    of R&D is done by the private sector and what portion is done
    by the Federal government?
        Mr. MITCHELL. The budget for NIH this year is $39 billion.
    Pharma claims to be spending about $90 billion, but a
    tremendous amount of the spending by taxpayers through the NIH
    is on early high-risk, basic science that is the platform that
    leads to these new drugs. In addition, increasingly, NIH is
    doing drug development right now, is running clinical trials on
    the sickle cell drug inside its walls and in fact the NIH paid
    for most of the clinical trials for this expensive CAR-T drug
    which was brought to market by Novartis, so NIH is doing a
    tremendous amount of research not just basic science but
    increasingly drug development.
        Mr. SCOTT. And is there any potential in revisiting the
    decision that was made in 1995 to limit the prices for drugs
    that are partially developed with Federal spending?
        Mr. MITCHELL. Yeah and with all due respect to Dr.
    Garthwaite and he can look at this document too, the fact is
    that the number of cooperative research and development
    agreements did not skyrocket in the wake of the elimination of
    the reasonable pricing clause in 1995.
        NIH had a standard CRADA and then it created something
    called materials CRADAs which did not exist in 1995. Subsequent
    to 1995 and the elimination of the reasonable pricing clause,
    the increase in the number of comparables, standard CRADAs was
    14 percent over the ensuing 15 years and today the number of
    cooperative research and development agreements has gone up by
    only 45 percent, while the budget of NIH has gone up 400
    percent so you need to understand what actually happened in
    1995 when they created a different category of CRADA and you
    have to compare the original CRADA and see what happened in
    those ensuing years. Those are the numbers.
        Mr. GARTHWAITE. What is NIH's position on doing this?
        Mr. MITCHELL. The NIH made their decision back in 1995 when
    drug companies used to have much bigger R&D departments and
    today, the drug companies are increasingly reliant on the NIH
    for the basic science that leads to these incredible
    breakthrough drugs, kind of like the ones that I am taking.
        Mr. GARTHWAITE. But the NIH has said they don't want to do
    any pricing clauses.
        Mr. MITCHELL. The NIH are scientists and they want to pay
    attention to science. We need to look after taxpayers. So, I am
    with them on that.
        Mr. SCOTT. Mr. Mitchell, the question was should we revisit
    that proposal?
        Mr. MITCHELL. Absolutely.
        Mr. SCOTT. Dr. Socal, is there any evidence that if we
    reduced our prices to what other countries are paying, that
    prices would go up in those other countries?
        Dr. SOCAL. Not necessarily, no. So the big difference is
    that our country, with our market-based system, we are paying
    the price especially for drugs that have been in the market for
    a long period of time. These prices are going up where
    everywhere else they are going down and they go down everywhere
    else because of two reasons, one is because the research and
    development costs, they are sunk costs, they are not involved
    in the cost of producing every new pill. It is minimal change
    for every new production cost so other countries, they have
    recognized and they have mechanisms, after the drug is on the
    market to control and prevent these cost increases over time so
    it is unlikely that costs would increase everywhere else just
    because we changed the price here.
        Mr. SCOTT. Okay, Mr. Isasi, did you want to say something
    about the last discussion?
        Mr. ISASI. Absolutely. Thank you. Really quickly just to
    say that what was being described as what the legislation does
    is incorrect. The legislation would not have the government
    walk away from drugs that our seniors need. We at Families
    would not support that; that is not what the bill does. What
    the bill says is let's negotiate. Let's negotiate and come with
    a fair price and if we can't reach agreement, the upper limit
    is 120 percent of what the rest of the world is paying so we
    are still going to pay more and if we still can't agree, then
    you go sell your drug and we are going to take the money back
    from you because you are trying to rip off America's families
    and American taxpayers. That is what the bill does, it does not
    do what he says it does which is walk away from the drug and
    take the drug away from seniors. That is not what the bill
    does. It protects access and also protects the taxpayer from
    this extortion that is happening from drug companies.
        Mr. MITCHELL. And Mr. Chairman, could I just add that one
    of the key reasons that drugs are available first here in the
    U.S. is because we are the largest market and we pay the
    highest prices and at 120 percent of those referenced
    countries, we will still be the largest market paying the
    highest prices. It is very difficult to see how a CEO is going
    to walk into his ward, as Secretary Azar said to me, and tell
    his board I am walking away from the biggest market with the
    highest prices in the world.
        Chairwoman WILSON. Thank you.
        Mr. SCOTT. Thank you, Madam Chair.
        Chairwoman WILSON. Mr. Taylor of Texas.
        Mr. TAYLOR. Thank you, Madam Chair. If I remember my
    economics correctly, if you want to lower prices, you increase
    supply. I mean dirt cheap is cheap because there's a lot of
    dirt, right? So if you make more of something, prices will go
    down.
        Government price controls, tempting as they may be to try
    to deal with the problem, I generally haven't seen that work
    out very well. Generally. they have to be undone at some point
    because they just didn't pan out but just going to this
    particular government price fixing system, do you have any
    comments with regard to how this particular government pricing
    system works in your mind or how it wouldn't work in your mind.
    Where would it ultimately end up being a problem? I think you
    have alluded to this a bit in terms of research.
        Mr. GARTHWAITE. Yeah, I mean I was pretty clear before, I
    thought, that this is not about the government walking away
    from drugs despite being mischaracterized by another witness.
    The government isn't going to walk away from the drugs today
    because the government could just effectively take the drugs
    today, it doesn't have to. Where it is going to show up is an
    investment to innovation for new drugs 5, 10, 15 years for now
    which responds to the return on it. And again, as I have tried
    to be very clear, we might as a society want to have fewer
    drugs in the future in order to get more access today.
        There is no purely economic sort of platonic idea about
    what that is. That is a decision we should be debating. Do we
    want to slow the pace of innovation in order to get lower
    prices today?
        And let's have that conversation. Let's not let the
    officials in London and Berlin and Paris and Sydney have that
    conversation.
        Mr. TAYLOR. Sure. And I think what I will say is a common
    bind here--what binds us together is a common point as I think
    everybody in this room wants to see lower drug prices, right?
    That is something we can all agree on. I hope we can agree that
    the best way to go do that is again to increase supply through
    a series of bills that came out of energy and commerce
    committee unanimously that were then amended in such a way that
    made it unacceptable to Republicans that basically were sent to
    the senate to go die so those are not affected bills. I would
    hope that we would revitalize those bills, take them up as
    separate bills, send them back over to the Senate so that they
    can actually pass them and actually help our constituents lower
    drug prices so there are opportunities in front of us.
        They are here in this chamber, in the House of
    Representatives. We know what to do, we know some of the
    actions we need to take. We just need to be legislatively inept
    at getting them through in such a way that is actually go on to
    the President's desk.
        Just speaking about research and development, which we have
    talked about a little bit. I see there's an estimate that R&D
    will be cut by 200 billion dollars over the next 10 years if we
    were to go into this government price fixing mechanism that is
    in H.R. 3. Does that strike you as broadly correct, is that--
    can you speak to that estimate?
        Mr. GARTHWAITE. I'd say It is the first one. I don't think
    our goal should be about lowering prices. Our goal should be
    about increasing welfare or making people better off now and in
    the future, and figuring out what the price of an access
    tradeoff is there.
        If our goal is simply to lower prices, we can do that. That
    is actually not hard. The government is a very powerful force.
    It can come in and say let's not make it 120 percent. Let's
    make it 80 percent of the foreign price so we are trying to
    improve welfare. Where that welfare comes in is this effect on
    research and development, how much would it be.
        I haven't run the number of whether it is 200 billion that
    would go down, partly because it is a pretty complicated
    question because it is about how is the venture capital company
    going to respond and so I don't--is that in order of magnitude
    correct? Maybe?
        Mr. TAYLOR. So then also going staying on this topic of
    research and how important it is for the future of creating the
    next innovation, I think you correctly pointed out that it is
    not about the present prices where your real worry is. Your
    real worry is about future innovations including the United
    States which has been a tremendous leader on that. It comes at
    a price. So we are--NIH is conducting research and you are
    looking at the private industries estimating they are doing 97
    billion dollars of R&D every year, which is a tremendous sum of
    money to find the next generation of drugs. If we were to go on
    a price fixing scheme, it seems to me that you're saying that
    97 billion would go down.
        Mr. GARTHWAITE. I mean economic logic would dictate that if
    you are going to earn less money from your investment, you'll
    find the next best use for that dollar, particularly true for
    venture capital companies where literally that is what they are
    supposed to do. They are supposed to get a return for their
    investors.
        Mr. TAYLOR. Well I appreciate what you are saying here
    today. I will just say that I am certainly here to try to lower
    drug costs. As I go across my district, one of the top 3
    complaints I hear is the cost of healthcare and we know that
    drug cost is a natural component of the cost of healthcare. And
    again, I am focused on trying to increase the supply. To me,
    price fixing is a lazy legislator's answer to fixing a
    particular economic problem and I would challenge anybody here
    to tell me hey, price fixing worked great here. This is the
    best because I think when they are borne out over several
    decades, they generally just fall apart completely and are
    completely undone. I don't know that this Congress has done
    price fixing in the past, but it has not panned out. With that,
    Madam Chair, I yield back.
        Chairwoman WILSON. Okay. Ms. Wild of Pennsylvania, welcome
    back.
        Ms. WILD. Thank you, Madam Chair. I apologize for stepping
    out. I had to attend an Ethics Committee meeting, which is an
    internal committee governing ethics, but I think It is an
    appropriate subject to sort of lead off this discussion because
    to me, this is an ethical issue. This is a problem that our
    country is having. We have people dying because they cannot
    afford their prescription drug prices and that to me is
    unethical for the richest country in the world.
        It seems to me that we are just consistently putting
    profits over people and Mr. Taylor, I have the utmost respect
    for my colleague across the aisle. He and I have worked on a
    bipartisan basis on other matters, but I will tell you, I don't
    think we are legislatively inept as I think you have termed it.
    We are, as a body, the government is far too influenced by the
    pharmaceutical lobby. That is at the heart of this problem. So
    with that said, let me just say that Dr. Garthwaite, you said a
    couple of minutes ago, venture capitalists' job is to make
    money for their investors. Well we know that in 2016, Turing
    Pharmaceuticals CEO raised the price of a newly acquired drug
    from $13.50 to $750.
        In response to this, J. Michael Pearson, the CEO of Valeant
    said his company's responsibility was to its shareholders, not
    the customers who rely on the drugs to live. In fact, we know
    that shareholders can bring suit for an officer's breach of
    fiduciary obligation owed to shareholders through shareholder
    derivative lawsuits so Mr. Pearson, the CEO, was right. His
    first duty is and was to make as much money as he can for his
    company.
        I would respectfully submit to you that should not be our
    priority in saving lives, in making people healthy again. We
    cannot continue to have profits over people as the most
    important thing governing this discussion. So, I know that you,
    Mr. Holt and Dr. Garthwaite--first of all, do either one of you
    have any formal medical background or training? Formal.
        Mr. HOLT. I don't.
        Mr. GARTHWAITE. No, as my wife says, I am not that kind of
    doctor.
        Ms. WILD. I didn't think so. I know you both have serious
    reservations about government negotiation of drug prices or
    tying drug prices to those of other countries, but I want to
    talk about something else. I want to talk about something that
    matters to my constituents that I hear about almost every
    single day. I want to talk about diabetes and the price of
    insulin, and you said, Dr. Garthwaite, market competition will
    drive down costs.
        Well guess what, we have a whole lot of competition for
    insulin. We have a whole lot of demand for it. It is been
    around forever. There have been no new formularies in decades
    and yet the price of insulin continues to go up, so there's no
    market force that is influencing that other than the fact that
    a whole lot of people need insulin and the manufacturers know
    that and so what they do is they keep raising the price on it.
    It is unconscionable and I can't believe we're even sitting
    here having this discussion. I have constituents who are dying
    because they don't take their insulin, or they can't afford to
    get it, or they are rationing it.
        I don't even--I can't even believe we are having this
    conversation. Do either one of you, just the two of you that I
    am talking to know what happens physically within a diabetic
    patient's body when she doesn't have access to insulin or has
    to ration her insulin? Do you know what ketoacidosis is? Do you
    know what the symptoms are? I will tell you: confusion,
    excessive vomiting, dehydration, shortness of breath, loss of
    consciousness, organ failure and death and I have constituents
    who themselves are rationing their insulin, whose family
    members have died because they rationed or didn't have their
    insulin available to them because of the price and I am not
    about to go back to them and say let's leave it up to the
    market to determine what the price of your insulin should be
    because you know what, the market has completely failed them
    and that is why we are here now. That is why this bill is
    coming before the House because we, as a country, and
    pharmaceuticals as an industry have completely failed the
    American people and we can't let it continue. I yield back.
        Chairwoman WILSON. Thank you very much, Ms. Wild. And now,
    Mr. Watkins of Kansas.
        Mr. WATKINS. Thank you, Madam Chair. Dr. Garthwaite, we
    hear heartbreaking stories of patients in other countries who
    are denied access to new treatments that could improve their
    lives. Earlier this month, news outlets cover the story of two
    sisters battling cystic fibrosis in Scotland. A breakthrough
    drug that treats the disease isn't currently covered by the
    United Nations' National Health Service because the government
    determined that the drug is too expensive. While one of the
    sisters was able to receive treatment for free from the
    manufacturer's compassionate care program, the other was told
    that she was not sick enough to qualify.
        Under H.R. 3 with access to these potentially lifesaving
    drugs be threatened for America patients?
        Mr. GARTHWAITE. I think It is unlikely that access to
    existing drugs would be threatened for Americans because as Dr.
    Socol said, the cost is sunk, so there is profit to be made
    selling it. Where the access restriction is going to come and
    we can't avoid an access restriction, it is going to come on
    drugs in the future. That is where It is going to come, less
    innovation so while Ms. Wild is right, not having access to
    diabetes drugs today causes that to happen, causes
    ketoacidosis, I would submit to ask her, do you know what
    happens to a cancer patient who doesn't have access to oncology
    that treats their cancer. You sit next to their bed and you
    watch them die like it happened to my family members. So that
    access mode happens no matter what. It is a question of whether
    we are going to pay attention to it, or we are going to pretend
    it doesn't exist.
        Mr. WATKINS. Mr. Holt, your testimony denotes that ``the
    cost of successfully bringing a drug to market has been
    estimated at approximately 2.87 billion dollars.'' And that
    establishing an international price index similar to the one
    included in H.R. 3 would lead to 9 billion dollars in lost
    revenue for drug manufacturers per year.
        If this index is expanded to the entire United States
    market, how many fewer drugs could we see approved by the FDA
    per year?
        Mr. HOLT. So the 9 billion figure was looking at the
    President's IPI proposal specifically limited to part B. Part B
    is about 10 percent of the U.S. market so you would see that
    increase by that--so roughly about 30 drugs per year, the
    amount that it cost to produce roughly 30 drugs per year would
    be lost.
        Mr. WATKINS. How does this impact the pipeline and the
    development of new medicines?
        Mr. HOLT. So on average, FDA approves about 33 new drugs a
    year so that is a big chunk of the pipeline.
        Mr. WATKINS. Thank you. Madam Chair, I yield the balance of
    my time.
        Chairwoman WILSON. Thank you very much. And now--oh, Mr.
    Keller, Pennsylvania.
        Mr. KELLER. Thank you, Madam Chair and I'd like to thank
    all the members of the panel for being here today. Prescription
    drug pricing is an issue. We've been hearing it from everybody.
    I have been in my district and there are a lot of things I
    think go into it and a question, I guess I just want to have
    for Dr. Garthwaite, I know you talked a lot about the return on
    investment and all those kinds of things and when we look at
    who this impacts and who the pharmaceutical companies are, they
    are basically owned by shareholders, is that correct?
        Mr. GARTHWAITE. It is a variety of organizational
    structures.
        Mr. KELLER. And it would be public pensions and all that
    kind of stuff.
        Mr. GARTHWAITE. Probably yes.
        Mr. KELLER. So a lot of the times, the motivation is to
    make sure they get a return on investment and then we as public
    sector employers invest in those drug companies too so if we
    want to point the finger at people making money, I think we
    need to look at all of us and I think we need to look at all
    things that we can do to help this and instead of pointing the
    finger at one person or another, look for actual solutions
    which I think would be in some kind of patent reform, things
    that would make drugs accessible rather than trying to point
    the finger of blame. I guess the one thing I'd like to ask you
    about and I know you mentioned it, you talked about drugs or
    people walking away--or making certain drugs because of the
    innovation and so forth, that would be that the company would
    just stop manufacturing or might not invest money in the
    future. In other words, if we weren't going to let them develop
    drugs, somebody said the government would walk away. It
    wouldn't necessarily be the government, it would be that the
    companies wouldn't invest in R&D?
        Mr. GARTHWAITE. Yeah, I mean we talk about the innovation
    tradeoff, it is not getting new drugs in the future. Drugs that
    have already developed, that we have already developed, people
    will make and sell at that price.
        Mr. KELLER. Right, but that might not get innovation for
    future drugs and treatments.
        Mr. GARTHWAITE. You would see a--it is not that you would
    get none--
        Mr. KELLER. You wouldn't get as much because when you look
    at some of the other countries where that is happened, there's
    not as much R&D in Germany or other countries as there are in
    the United States, would that be--
        Mr. GARTHWAITE. No, I wouldn't think of it that way. It
    doesn't matter where the R&D happens. We get lots of good drugs
    from Germany, we get drugs from Israel, we get an emergent
    Chinese biotech market. It is about where the profits can be
    earned, that is what dictates the investment.
        Mr. KELLER. Okay. Another question I guess I would have.
    Part of the consideration, would that also be any kind of tort
    reform? Would that be helpful in this discussion?
        Mr. GARTHWAITE. I mean if I started making a list, I am not
    sure that would get to the top 10.
        Mr. KELLER. Not the top 10 but probably a portion of it. I
    mean--
        Mr. GARTHWAITE. Honestly, I have never thought about tort
    reform in this context right now. There certainly are liability
    issues.
        Mr. KELLER. There was a Columbia science and technology
    article in the law review between December of 2009 and June of
    2010, just one company paid 3.36 billion in claims for cases,
    class action suits so I think there's some room--I guess my
    point is if you could make a list of things to do, it is just
    more than one thing other than just having the government
    negotiate prices.
        Mr. GARTHWAITE. I would just say that if a company does
    something wrong, they might have to--I don't know the case of
    the 3.6 billion but just because it is a big fine, doesn't mean
    that it is a wrong fine.
        Mr. KELLER. Right. I get that.
        Mr. GARTHWAITE. Yeah, I mean we want a tort system.
        Mr. KELLER. Right, I get that, but again, some kind of
    reform might be helpful in order to keep things in check.
        Mr. GARTHWAITE. You have to point to me where the tort
    system is failing, I guess. I can understand the medical
    malpractice side--
        Mr. KELLER. I get that too. I get that too.
        Mr. GARTHWAITE. I just don't know what the reform you are
    looking for is, I guess.
        Mr. KELLER. I guess we need to just look at all avenues I
    guess is my point. We shouldn't look at just one thing.
        Mr. GARTHWAITE. I would agree that we should be
    comprehensive at everything we do.
        Mr. KELLER. Yes, absolutely. I guess that is my point. I
    just don't know that this bill gets us there. This is just one
    of negotiating government prices rather than looking at all the
    solutions.
        Mr. GARTHWAITE. Yeah, but we should be clear. This bill has
    a lot of good parts. The stuff they want to do for Medicare at
    part D, the stuff that the other witnesses talked about. I mean
    that is good. Creating an out of pocket cap, if we expanded it
    to think about getting rid of coinsurance, which doesn't really
    make a ton of sense, fixing the catastrophic but let's focus on
    the things that we can do that are going to make the market
    work more efficiently. I'd love to be comprehensive in that,
    but I wouldn't say that this bill is not just about the price
    control. There are a lot of things in there that are analogous
    to what Republicans in the finance community are talking about
    as well.
        Mr. KELLER. And again, I think those are things to look at
    but having the government just be the sole negotiator of price
    I think is--in this bill, one person, the Secretary would be
    the person that would select the drugs that we are going to
    talk about and look at negotiating the prices on that group of
    drugs, which I think is controlled by one person.
        Mr. GARTHWAITE. That feature of the bill causes me pause,
    yes.
        Mr. KELLER. There are some things that I think would be
    pretty dangerous and limit choices and so forth for people that
    need to help. Thank you, I yield back.
        Mr. GARTHWAITE. Thank you, Ms. Davis?
        Ms. DAVIS. Thank you, Madam Chair, thank you to all of you
    for being here. We have just very few minutes, but I wanted to
    give Mr. Holt, Mr. Garthwaite that chance, if you'd like to
    respond to my colleague because we are very passionate about
    this, and I have to tell you that this is not a partisan issue.
    Everybody is passionate and I will have a question for Mr.
    Mitchell as well so if you could just quickly respond if you'd
    like.
        Mr. GARTHWAITE. I would say, Ms. Wild, I understand you're
    passionate. You brought up Turing Pharmaceuticals and Valiant.
    I was pretty specific in my testimony about those two
    companies, that those are examples of behavior that I believe
    there's a role for the government to regulate their prices. In
    fact, a big chunk of my testimony refers specifically to that
    instance and why I think for small market generics, that is
    something that we should regulate. We've already paid the
    innovation tradeoff. This idea about profits versus life. I
    mean there are economic realities in life.
        Ms. DAVIS. Thank you I am going to--is that enough of a
    response? I am sorry. We are just in such a hurry. Mr. Holt?
        Mr. HOLT. I also referenced the Turing Pharmaceuticals
    situation in my testimony. I do think that is an egregious
    breach and I think the single search generics are a real
    problem. I also am concerned about patients. My mother has
    diabetes. I have seen her off her insulin, so I am very
    sensitive to that.
        I think the reality is that we see the pipeline that is
    coming. We are seeing biologics, gene therapy, we can negotiate
    90 percent discounts and individuals aren't going to be able to
    pay for these so what we have to talk about is how the system
    is going to pay for drugs so that patients do have access.
        Ms. DAVIS. Right, and that issue of access--and so I wanted
    to turn to Mr. Mitchell and Mr. Mitchell, I wanted to thank you
    for being here. I am very familiar with multiple-myeloma, it is
    very personal to me and I understand what you are going through
    so one of the questions that I have often have, I come from San
    Diego and so we work with pharmaceutical companies all the time
    but for a long period of time, patients weren't really spoken
    to, frankly. They weren't engaged, they weren't at the table.
    They weren't really encouraged to participate and provide the
    kind of input that I think is important to our researchers, to
    the companies as a whole. Mr. Mitchell, do you feel that
    situation has changed? Do you feel that people feel as if there
    is something that they are being able to offer in this
    discussion?
        Mr. MITCHELL. I think there is not enough of an opportunity
    for policymakers to hear from independent patient groups. Most
    of them are funded by the drug companies and that is okay. They
    use that money for good purpose, patient education, patient
    support but on drug prices they are constrained. I do want to
    make a couple of quick points. I agree with Professor
    Garthwaite that we should be maximizing welfare and the way to
    do that is we are going to have to lower drug prices so people
    can get access to the drugs they need. There is enough spending
    in the system to reduce crises and not impact R&D, in fact the
    money U.S. based drug companies made in 2015 by charging
    American side prices was nearly double what was needed to fund
    their total global R&D and so if we are going to be making
    decisions about where to invest based on returns for venture
    capitalists, instead of the needs of people like me and
    everybody along this table who knows someone they love, then we
    are making a big mistake because we are not putting the public
    welfare first. We are saying we are going to provide for the
    needs of VCs in order that we get the investment we need and
    the final thing is, when drug companies say we are not going
    to--what they are saying to me is we want to be able to set any
    price we demand and you pay it or you won't get the drugs you
    need. We can't do that. We do have to strike the balance that
    folks are talking about here.
        Ms. DAVIS. Yeah, well thank you. I appreciate your
    comments. I mean one of the areas in H.R. 3 that we haven't
    focused too much on is how we get to that. If there is a sweet
    spot, I am not sure we'd call it that in negotiating with drug
    companies and we talked about the average international market
    price but in that, and I don't want to go into more detail of
    it, there also is this question, this concern about access.
    Access in other countries. Again, whether people feel like they
    are able to get multi-myeloma drugs elsewhere, obviously have--
    it doesn't mean that we have more patients of any one cancer
    here in the United States than anywhere else in the world so
    obviously they are getting some of that, I think. The other
    issue is patents and we haven't talked a lot about them, but
    you focused a lot on the fact that we should have more
    competition, yes, but you can't have competition if you have
    one company that has the monopoly on multiple, multiple drugs
    in any one country.
        Mr. ISASI. That is the exact point that has not been said
    in this entire discussion about competition and worrying about
    squelching innovation. These companies are operating with a
    government-granted monopoly. This isn't a free market, it is
    non-efficient, it is distorted, and they are abusing the
    government-granted monopoly and what we should do is negotiate
    price in that environment.
        Ms. DAVIS. Thank you very much. I know my time is up. I
    hope that at some point we are going to be tasking drug
    companies to find the cures that we need upfront.
        Chairwoman WILSON. Thank you very much, Ms. Davis. I remind
    my colleagues that pursuant to committee practice, materials
    for submission for the hearing record must be submitted to the
    committee clerk within 14 days following the last day of the
    hearing, preferably in Microsoft Word format. The materials
    submitted must address the subject matter of the hearing.
        Only a member of the committee or an invited witness may
    submit materials for inclusion in the hearing record. Documents
    are limited to 50 pages each. A document longer than 50 pages
    will be incorporated into the record by way of internet link
    that you must provide to the committee clerk within the
    required timeframe but please recognize that years from now,
    that link may no longer work.
        Again, I want to thank the witnesses for their
    participation today. What we have heard is very valuable.
    Members of the Committee may have some additional questions for
    you, and we ask the witnesses to please respond to those
    questions in writing.
        The hearing record will be held open for 14 days in order
    to receive those responses. I remind my colleagues that
    pursuant to committee practice, witness questions for the
    hearing record must be submitted to the majority committee
    staff or committee clerk within 7 days.
        The questions submitted must address the subject matter of
    the hearing. Before recognizing the Ranking Member for his
    closing statement, I ask unanimous consent to enter the
    following materials into the record.
        These are letters in support of prescription drug pricing
    legislation from AARP, Alliance for Retired Americans, AFSCME,
    AFL-CIO, American Federation of Teachers, American Medical
    Association, and the California Medical Association. I now
    recognize the distinguished Ranking Member for his closing
    statement, Mr. Walberg.
        Mr. WALBERG. I thank you, Madam Chairwoman and appreciate
    the hearing today. Thank you to each of the panelists for being
    here. Dr. Garthwaite, I'd be wrong to forget the fact that I
    have my oldest grandson turn 13 last week. He was born at 24
    weeks at Northwestern Hospital. The result of all sorts of
    wonderful, wonderful care in that neonatal ICU unit as well as
    medications, et cetera. He's 13 strong, healthy and smarter
    than me. At least he would believe that so thank you,
    Northwestern.
        Madam Chairwoman, this was a good discussion. I think in my
    opening comments, I tried to make it clear that this is a type
    of discussion that we should have. We don't disagree about
    everything in this legislation but there are some major glaring
    problems in this legislation that had we had discussions like
    this as opposed to a very closed, closed operation of the
    speaker of putting together a piece of legislation without
    consultation with appropriate committees, ours included, I
    think we might have had the opportunity for a better outcome.
    As I have said, I have seen that take place in Energy and
    Commerce Committee.
        I have seen it take place in some major piece of
    legislation. I think we could do it. Instead of holding a
    hearing on this socialized drug pricing scheme, the committee's
    time would be better spent on finding bipartisan solutions to
    our nation's problems.
        Governments don't negotiate, they dictate. We want
    negotiation. How is that done? I think there are means to do
    that and I would hope that this committee's leadership, as well
    as other committees that are involved with this would put a
    slowdown on it to bring together something that indeed can pass
    out of this House and chart the course even for the Senate for
    something they could vote on and pass as well and the President
    could sign, so again, thank you for the time and with that, I
    yield back.
        Chairwoman WILSON. Thank you to our witnesses for joining
    us today and today we heard compelling testimony on the urgent
    need for the Federal government to reduce the cost of
    prescription drugs for consumers, businesses, and taxpayers.
        Americans across this country are struggling to access the
    prescription drugs they need to be healthy. They are forced to
    pay inflated prices that are far higher than those charged for
    the same drugs sold by the same pharmaceutical companies in
    other countries and they are hit with annual price hikes that
    far exceed the rate of inflation. But our witnesses shared
    prescription drug companies are not charging these exorbitantly
    high prices because of natural market forces, and the evidence
    is clear that they are not inflating prices because they are
    investing in research and development as some of my Republican
    colleagues may argue. By contrast, prescription drug companies
    are artificially inflating prices so that they can pay for
    marketing and sales, executive bonuses and stock buybacks. We
    cannot allow this to happen in the pharmaceutical industry. We
    cannot allow them to get richer while Americans across this
    country risk their health under the weight of unaffordable drug
    prices.
        They are truly drug dealers, and this is criminal. Simply
    put, medicines are of no use if those who need them cannot
    afford them. That is why it is imperative that we pass the
    Lower Drug Cost Now Act. As our witnesses made clear, this
    legislation would lower drug prices, increase transparency at
    pharmaceutical companies, and align our drug pricing system
    with the rest of the developed world.
        By adopting the Lower Drug Cost Now Act, Congress can take
    a long overdue step toward empowering all Americans, whether
    you get your healthcare through Medicare or your employer, to
    access fairly-negotiated drug prices. I look forward to working
    with each of my colleagues to pass this legislation and improve
    the health and lives of Americans for generations to come. If
    there is no further business, without objection, the committee
    stands adjourned and thank you.
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        [Whereupon, at 4:21 p.m., the subcommittee was adjourned.]

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