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

    PRICED OUT OF A LIFESAVING DRUG: GETTING ANSWERS ON THE RISING COST OF
                                    INSULIN

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

                                    HEARING

                                   BEFORE THE

                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 10, 2019

                                   __________

                               Serial No. 116-25

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                       govinfo.gov/committee/house-energy
                            energycommerce.house.gov

                                   __________

                       U.S. GOVERNMENT PUBLISHING OFFICE

    39-747 PDF                WASHINGTON : 2020

                     COMMITTEE ON ENERGY AND COMMERCE

                         FRANK PALLONE, Jr., New Jersey
                                     Chairman
    BOBBY L. RUSH, Illinois              GREG WALDEN, Oregon
    ANNA G. ESHOO, California              Ranking Member
    ELIOT L. ENGEL, New York             FRED UPTON, Michigan
    DIANA DeGETTE, Colorado              JOHN SHIMKUS, Illinois
    MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
    JAN SCHAKOWSKY, Illinois             STEVE SCALISE, Louisiana
    G. K. BUTTERFIELD, North Carolina    ROBERT E. LATTA, Ohio
    DORIS O. MATSUI, California          CATHY McMORRIS RODGERS, Washington
    KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
    JOHN P. SARBANES, Maryland           PETE OLSON, Texas
    JERRY McNERNEY, California           DAVID B. McKINLEY, West Virginia
    PETER WELCH, Vermont                 ADAM KINZINGER, Illinois
    BEN RAY LUJAN, New Mexico            H. MORGAN GRIFFITH, Virginia
    PAUL TONKO, New York                 GUS M. BILIRAKIS, Florida
    YVETTE D. CLARKE, New York, Vice     BILL JOHNSON, Ohio
        Chair                            BILLY LONG, Missouri
    DAVID LOEBSACK, Iowa                 LARRY BUCSHON, Indiana
    KURT SCHRADER, Oregon                BILL FLORES, Texas
    JOSEPH P. KENNEDY III,               SUSAN W. BROOKS, Indiana
        Massachusetts                    MARKWAYNE MULLIN, Oklahoma
    TONY CARDENAS, California            RICHARD HUDSON, North Carolina
    RAUL RUIZ, California                TIM WALBERG, Michigan
    SCOTT H. PETERS, California          EARL L. ``BUDDY'' CARTER, Georgia
    DEBBIE DINGELL, Michigan             JEFF DUNCAN, South Carolina
    MARC A. VEASEY, Texas                GREG GIANFORTE, Montana
    ANN M. KUSTER, New Hampshire
    ROBIN L. KELLY, Illinois
    NANETTE DIAZ BARRAGAN, California
    A. DONALD McEACHIN, Virginia
    LISA BLUNT ROCHESTER, Delaware
    DARREN SOTO, Florida
    TOM O'HALLERAN, Arizona
                                     ------

                               Professional Staff

                       JEFFREY C. CARROLL, Staff Director
                    TIFFANY GUARASCIO, Deputy Staff Director
                    MIKE BLOOMQUIST, Minority Staff Director

                  Subcommittee on Oversight and Investigations

                            DIANA DeGETTE, Colorado
                                      Chair
    JAN SCHAKOWSKY, Illinois             BRETT GUTHRIE, Kentucky
    JOSEPH P. KENNEDY III,                 Ranking Member
        Massachusetts, Vice Chair        MICHAEL C. BURGESS, Texas
    RAUL RUIZ, California                DAVID B. McKINLEY, West Virginia
    ANN M. KUSTER, New Hampshire         H. MORGAN GRIFFITH, Virginia
    KATHY CASTOR, Florida                SUSAN W. BROOKS, Indiana
    JOHN P. SARBANES, Maryland           MARKWAYNE MULLIN, Oklahoma
    PAUL TONKO, New York                 JEFF DUNCAN, South Carolina
    YVETTE D. CLARKE, New York           GREG WALDEN, Oregon (ex officio)
    SCOTT H. PETERS, California
    FRANK PALLONE, Jr., New Jersey (ex
        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Diana DeGette, a Representative in Congress from the State
      of Colorado, opening statement.................................     2
        Prepared statement...........................................     3
    Hon. Brett Guthrie, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     4
        Prepared statement...........................................     6
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, opening statement......................................     7
        Prepared statement...........................................     8
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     9
        Prepared statement...........................................    11

                                   Witnesses

    Michael B. Mason, Senior Vice President, Lilly Connected Care and
      Insulins Global Business Unit, Eli Lilly and Company...........    12
        Prepared statement...........................................    15
        Answers to submitted questions...............................   129
    Douglas J. Langa, Executive Vice President, North America
      Operations, and President of Novo Nordisk Inc..................    31
        Prepared statement...........................................    33
        Answers to submitted questions...............................   147
    Kathleen W. Tregoning, Executive Vice President for External
      Affairs, Sanofi................................................    43
        Prepared statement...........................................    45
        Answers to submitted questions...............................   158
    Thomas M. Moriarty, Executive Vice President, Chief Policy and
      External Affairs Officer and General Counsel, CVS Health.......    58
        Prepared statement...........................................    60
        Answers to submitted questions...............................   181
    Amy Bicker, R.Ph., Senior Vice President, Supply Chain, Express
      Scripts........................................................    62
        Prepared statement...........................................    64
        Answers to submitted questions...............................   191
    Sumit Dutta, M.D., Senior Vice President and Chief Medical
      Officer, Optumrx...............................................    78
        Prepared statement...........................................    80
        Answers to submitted questions...............................   202

                               Submitted Material

    Article of November 16, 2018, ``Protesters at Sanofi in Cambridge
      decry high price of insulin,'' The Boston Globe, by Allison
      Hagan, submitted by Mr. Kennedy................................   126

    PRICED OUT OF A LIFESAVING DRUG: GETTING ANSWERS ON THE RISING COST OF
                                    INSULIN

                                  ----------

                           WEDNESDAY, APRIL 10, 2019

                      House of Representatives,
          Subcommittee on Oversight and Investigations,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 11:49 a.m., in
    room 2322 Rayburn House Office Building, Hon. Diana DeGette
    (chair of the subcommittee) presiding.
        Members present: Representatives DeGette, Schakowsky,
    Kennedy, Ruiz, Kuster, Castor, Sarbanes, Tonko, Clarke, Peters,
    Pallone (ex officio), Guthrie (subcommittee ranking member),
    Burgess, McKinley, Griffith, Brooks, Mullin, and Walden (ex
    officio).
        Also present: Representatives Barragan, Soto, Carter, and
    Bucshon.
        Staff present: Kevin Barstow, Chief Oversight Counsel;
    Jesseca Boyer, Professional Staff Member; Jeffrey C. Carroll,
    Staff Director; Waverly Gordon, Deputy Chief Counsel; Tiffany
    Guarascio, Deputy Staff Director; Judy Harvey, Counsel; Chris
    Knauer, Oversight Staff Director; Jourdan Lewis, Policy
    Analyst; Kevin McAloon, Professional Staff Member; C. J. Young,
    Press Secretary; Jennifer Barblan, Minority Chief Counsel,
    Oversight and Investigations; Mike Bloomquist, Minority Staff
    Director; Margaret Tucker Fogarty, Minority Staff Assistant;
    Theresa Gambo, Minority Human Resources/Office Administrator;
    Brittany Havens, Minority Professional Staff, Oversight and
    Investigations; Ryan Long, Minority Deputy Staff Director; and
    Natalie Sohn, Minority Counsel, Oversight and Investigations.
        Ms. DeGette. The Subcommittee on Oversight and
    Investigations hearing will now come to order. Today, the
    Subcommittee on Oversight and Investigations is holding a
    hearing entitled, ``Priced out of a Lifesaving Drug: Getting
    Answers on the Rising Cost of Insulin.'' This is the second
    part of a hearing examining insulin affordability and ensuing
    financial and health challenges, and effects on patient lives.
    The Chair now recognizes herself for the purposes of an opening
    statement.

     OPENING STATEMENT OF HON. DIANA DeGETTE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF COLORADO

        With seven and a half million Americans relying on insulin,
    this problem that we are addressing today has affected
    countless lives. That is why this committee is determined to
    find answers and to find solutions. As the committee is well
    aware, despite the fact that insulin has been around now for
    almost 100 years, it has become outrageously expensive. For
    instance, the price of insulin has doubled since 2012, after
    nearly tripling in the past 10 years.
        We have all heard stories of what happens when patients
    can't afford their insulin. People have to forego paying their
    bills, or ration their doses, or skip doses altogether. I had a
    listening session in my district a couple of weeks ago and
    there was a woman who came named Sierra. Sierra has been
    struggling for over a year and a half to pay for her insulin.
    Even after rationing her insulin, she is still paying over $700
    a month. It is simply unacceptable that anyone in this country
    cannot access the very drug that their lives depend on all
    because of the price of insulin has gotten out of control.
        As the cochair of the Congressional Diabetes Caucus, this
    issue is personal with me. Along with cochair, Congressman Tom
    Reed, we examined these issues last year and we issued a report
    exposing some of the underlying problems in the insulin market.
    We put that report into the record at last week's hearing. What
    we found during our investigation was a system with perverse
    payment incentives and a complete lack of transparency in
    pricing.
        Then last week as I said, the subcommittee held its first
    hearing on this issue in the new Congress. We heard testimony
    from expert witnesses and patients in the diabetes space, and
    their message was clear. Insulin is unequivocally a lifesaving
    drug, but because of a convoluted system it has become more and
    more expensive to the point where far too many can no longer
    afford it, even though their very lives depend on it.
        We heard from Gail DeVore, who is a native of my hometown
    of Denver, Colorado, who lives with type 1 diabetes. Ms. DeVore
    described to the committee how the price of her insulin has
    shot up, and she has to ration her doses against the advice of
    her doctor. We also heard from Dr. Alvin Powers on behalf of
    the Endocrine Society who testified, ``It is difficult to
    understand how a drug that has remained unchanged for almost
    two decades continues to skyrocket in price.''
        The subcommittee also received testimony last week from Dr.
    William Cefalu on behalf of the American Diabetes Association.
    Dr. Cefalu spoke about the national survey the ADA conducted
    which found that over a quarter of the people they contacted
    had to make changes to their purchase of insulin due to cost;
    and those people had higher rates of adverse health effects.
    The witnesses last week had many different stories about the
    effects of rising insulin prices, but one consistent theme that
    emerged was the system is convoluted, opaque, and no longer
    serves the patients' best interest.
        The witnesses were some of the leading experts on diabetes
    care, and yet they couldn't point to a reasonable explanation
    for why these prices have gotten so high and that is what leads
    us here today. We have representatives from the three drug
    companies that manufacture insulin, as well as three of the
    largest pharmacy benefit managers or PBMs. Together, these
    companies are the ones that produce this drug, negotiate its
    price, and make decisions that have consequences for the
    availability and affordability of insulin for millions of
    Americans.
        I want to thank all of the representatives for coming
    today. I know for some of you, you had to change schedules, you
    had to make some adjustments and I appreciate it, because all
    of your companies play a large role in the supply chain of
    critical drugs, and all the companies have as you know received
    a lot of criticism.
        But we are not interested in just finger pointing or
    passing the buck. We are interested in finding a solution to
    this problem, and that is why we put everybody here together on
    one panel so you can help us identify what the problem is and
    how we can fix it, and again, it is not my intention, and I
    think Mr. Guthrie agrees, it is not our intention to unjustly
    assign blame to any one player. Instead, what I think is that
    many entities share the blame for a system that has grown up
    and we need a frank discussion about what is causing the
    increases and what we can do to bring them under control.
        As Ms. DeVore testified last week, ``The relief we need is
    right now, not next week, not next year. We need answers today
    because the price of insulin has risen too far, and too many
    people are suffering and even risking death.''
        [The prepared statement of Ms. DeGette follows:]

                    Prepared Statement of Hon. Diana DeGette

        Today, the Subcommittee holds its second hearing on the
    rising price of insulin. With seven and a half million
    Americans relying on insulin, this problem has affected
    countless lives. That is why this Committee is determined to
    find answers and find solutions.
        As this Committee is well aware, despite the fact that
    insulin has been around for decades, it recently has become
    outrageously expensive. For instance, the price of insulin has
    doubled since 2012, after nearly tripling in the previous 10
    years.
        We have all heard the stories of what happens when patients
    cannot afford their insulin. People have to forego paying their
    bills, or ration their doses, or skip doses altogether.
        I heard from a woman in my district, Sierra, who has been
    struggling over the past year and a half to pay for her
    insulin. Even after rationing her insulin, she's still paying
    over $700 a month.
        It is simply unacceptable that anyone in this country
    cannot access the drug their very lives depend on. All because
    the price of this drug--a drug that is nearly 100 years old--
    has gotten out of control.
        As the Cochair of the Diabetes Caucus, this issue is
    personal for me. Along with my Cochair Congressman Tom Reed, we
    looked into these issues last year, and issued a report
    exposing some of the underlying problems in the insulin market.
    What we found was a system with perverse payment incentives,
    and a lack of transparency in pricing.
        Then last week, the Subcommittee held its first hearing on
    this issue in the new Congress. We heard testimony from expert
    witnesses and patient advocates in the diabetes space, and
    their message was clear: insulin is unequivocally a lifesaving
    drug, but because of a convoluted system, it has become more
    and more expensive--to the point where far too many can no
    longer afford it.
        We heard from Gail DeVore, a native of Denver, Colorado,
    who is living with diabetes. Ms. DeVore described to the
    Committee how the price of her insulin has shot up, and she has
    to ration her doses, against the advice of her doctor.
        We also heard from Dr. Alvin Powers, on behalf of the
    Endocrine Society, who testified quote, ``It is difficult to
    understand how a drug that has remained unchanged for almost
    two decades continues to skyrocket in price.''
        The Subcommittee also received testimony last week from Dr.
    William Cefalu on behalf of the American Diabetes Association.
    Dr. Cefalu spoke about the national survey the ADA conducted,
    which found that over a quarter of those who responded had to
    make changes to their purchase of insulin due to cost--and
    those people had higher rates of adverse health effects.
        The witnesses last week had many different stories about
    the effects of rising insulin prices. But one consistent theme
    that emerged from them was that the system is convoluted,
    opaque, and no longer serves the patient's best interests.
    These witnesses were some of the nation's leading experts on
    diabetes care, and yet they could not point to a reasonable
    explanation for why these prices have gotten so high.
        And that is what leads us here today. We have
    representatives from the three drug companies that manufacture
    insulin, as well as three of the largest Pharmacy Benefit
    Managers ("PBMs"). Together, these companies are the ones that
    produce this drug, negotiate its price, and make decisions that
    have consequences for the availability and affordability of
    insulin for millions of Americans.
        These companies play a large role in the supply chain of
    these critical drugs, and as such, they have received a lot of
    criticism in recent years for these price hikes. We will have
    questions for the witnesses today about these increases, and
    what could possibly justify such dramatic spikes. Today is an
    opportunity for them to shed light on the true causes of these
    price increases.
        Now, this Committee is not interested in mere finger-
    pointing and passing the buck. Each of these companies before
    us today has a role in this problem, and that means they must
    also have a role in identifying solutions.
        Likewise, our intention here today is not to unjustly
    assign blame to any one player--because it is clear that many
    entities share in the responsibility.
        We need a frank discussion today about what is causing
    these increases, and what these companies can do to bring them
    under control. As Ms. DeVore testified last week, quote, ``The
    relief we need is right now. Not next week. Or next year." We
    need answers today--because the price of insulin has risen far
    enough, and too many people are suffering.
        I thank the witnesses for appearing before us today, and I
    urge them all to be candid and forthcoming in their discussion
    of this very important topic.

        Ms. DeGette. Thank you all again for being here today. I
    urge you to be candid and forthcoming, and I am now very
    pleased to recognize the Ranking Member Mr. Guthrie, for 5
    minutes for purposes of an opening statement.

     OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEATH OF KENTUCKY

        Mr. Guthrie. Thank you, Chair DeGette, for bringing this
    hearing together, and thank you all for being here. I do echo
    the remarks that you just made.
        Last week, we held a hearing on the rising cost of insulin
    and heard from patients, doctors, and patient groups of how the
    rising cost of insulin has affected Americans with diabetes.
    More than 30 million individuals--and I have two nieces--9.4
    percent of the population in the United States have diabetes.
    In 2016, about 6.7 million Americans age 18 and older used
    insulin.
        The insulin prescribed today is different than the insulin
    discovered over 100 years ago and the life expectancy of
    diabetics has improved dramatically. These innovations should
    not be underestimated and a lot of exciting research is on the
    horizon. Someday soon, I hope we will have a cure for diabetes.
    As we discussed last week, however, the average list price of
    insulin nearly tripled between 2002 and 2013, making this vital
    drug unaffordable for too many Americans.
        Many argue that while list prices have been increasing, net
    prices have stayed relatively the same or have even gone down.
    This sounds great, because in theory no one is supposed to pay
    the list price for insulin. However, if a patient is uninsured
    or underinsured, they may end up paying the list price or close
    to it. We have also heard that more Americans are paying the
    list price at the pharmacy counter for part of the year because
    the enrollment in high-deductible health plans has increased.
    We have struggled to fully understand--and I will emphasize
    this--fully understand while list prices for medicine such as
    insulin have continued to rise, the prescription drug supply
    chain is complex and lacks transparency.
        We have had a lot of conversations with participants in the
    drug supply chain over the last two years to better understand
    how the pricing and rebating system works. We have been told
    that manufacturers set the list price and therefore lowering
    the cost of prescription drugs is as simple as manufacturers
    lowering their list prices. On the other hand, we have heard
    that manufacturers can't simply lower their list price because
    the pharmacy benefit managers or PBMs demand larger rebates,
    and if the manufacturers do not provide them with these rebates
    the PBMs won't put their drugs on their formularies for health
    insurance plans.
        Although they are not on the panel today, we have also
    heard concerns about other entities in supply chains such as
    health insurance companies. As Chair DeGette said and I will
    emphasize, we are not here to point fingers at that, that is
    what we have heard. We want to try to get to a solution. While
    some may think that one party in the supply chain is solely
    responsible for the rising price of drugs, there are incentives
    to increase list prices throughout the drug supply chain.
    Beyond the potential for manufacturers to make more money by
    raising prices, a higher list price allows manufacturers to
    provide larger rebates to PBMs, most of whom have contracts
    that allow them to keep a percentage of the list price, or
    receive fees based on the list price. Additionally, the health
    insurance companies decide whether to pass the rebate along to
    the patient at the point of sale or keep the rebate to lower
    premiums across the board for all beneficiaries.
        The current system contains many incentives for list prices
    to increase rather than decrease. Unfortunately, while we keep
    hearing assurances that net prices are staying flat or
    decreasing and that almost all rebates are passed on to the
    health plans; we know that many patients are being
    disadvantaged by this system and are paying more for their
    insulin at the pharmacy counter. Your companies have taken
    steps to try to reduce out-of-pocket expenses for insulin to
    the patients who need them and that is a good thing. I worry,
    however, that these are only short-term solutions. It is
    important that we collectively find a permanent solution that
    improves access to and affordability of medicine such as
    insulin.
        I thank our witnesses for being here today and I will yield
    the remainder of my time to my friend from Indiana, Mrs.
    Brooks.
        Mrs. Brooks. Thank you, Ranking Member Guthrie and thank
    you to the subcommittee chairwoman for hosting this hearing,
    for holding this hearing. It is continuing the important work
    that was started last Congress in examining the impact that
    rising costs of insulin has on patients struggling to afford
    this lifesaving drug. Nearly 700,000 Hoosiers have diabetes or
    pre-diabetes, which is why I serve as the vice chair of the
    Congressional Diabetes Caucus founded by Diana DeGette and Tom
    Reed. We have always worked in a bipartisan manner in that
    caucus and I hope that we continue in that same spirit today to
    find solutions.
        One of the companies here today, Eli Lilly, has been
    headquartered in Indianapolis for more than 100 years. They
    employ thousands of hardworking Hoosiers, many of whom are my
    constituents. While I know that Lilly has put in place programs
    to subsidize the cost of insulin for some--and I have read all
    of your written testimony and everyone has ideas, and everyone
    has recommendations and that is what we need to get to today.
        I look forward to hearing from our witnesses on their
    recommendations for change, so that no American has to do
    without insulin or take less insulin than what they must have
    to stay alive and remain healthy. I thank you all for being
    here and I yield back.
        Mr. Guthrie. I yield back.

        [The prepared statement of Mr. Guthrie follows:]

                    Prepared Statement of Hon. Brett Guthrie

        Thank you, Chair DeGette, for holding this important
    hearing.
        Last week we held a hearing on the rising cost of insulin
    and heard from patients, doctors, and patient groups about how
    the rising cost of insulin has affected Americans with
    diabetes. More than 30 million individuals--or 9.4 percent of
    the population--in the United States have diabetes and, in
    2016, about 6.7 million Americans aged 18 and older used
    insulin.
        The insulin prescribed today is different than the insulin
    discovered over 100 years ago and the life expectancy of
    diabetics has improved dramatically. These innovations should
    not be underestimated, and a lot of exciting research is on the
    horizon. Someday soon, I hope we have a cure for diabetes.
        As we discussed last week, however, the average list price
    of insulin nearly tripled between 2002 and 2013, making this
    vital drug unaffordable for too many Americans. Many argue that
    while list prices have been increasing, net prices have stayed
    relatively the same or have even gone down. This sounds great
    because in theory no one is supposed to pay the list price for
    insulin. However, if a patient is uninsured or underinsured
    they may end up paying the list price, or close to it. We've
    also heard that more Americans are paying the list price at the
    pharmacy counter for part of the year because enrollment in
    high deductible health plans has increased.
        We have struggled to fully understand why list prices for
    medicines such as insulin have continued to rise. The
    prescription drug supply chain is complex and lacks
    transparency. We have had a lot of conversations with
    participants in the drug supply chain over the last two years
    to better understand how the pricing and rebating system works.
    We've been told that manufacturers set the list price and
    therefore lowering the cost of prescription drugs is as simple
    as the manufacturers lowering their list prices. On the other
    hand, we've heard that manufacturers can't simply lower their
    list price because the pharmacy benefit managers or PBMs demand
    large rebates and if the manufacturers do not provide them with
    these rebates, the PBMs won't put their drugs on formularies
    for health insurance plans. Although they're not on the panel
    today, we've also heard concerns about other entities in the
    supply chain such as health insurance companies.
        While some may think that one party in the supply chain is
    solely responsible for the rising price of drugs, there are
    incentives to increase list prices throughout the drug supply
    chain beyond the potential for manufacturers to make more money
    by raising prices. A higher list price allows manufacturers to
    provide a larger rebate to PBMs, most of whom have contracts
    that allow them to keep a percentage of the list price or
    receive fees based on the list price. Additionally, the health
    insurance companies decide whether to pass the rebate along to
    the patient at the point-of-sale or keep the rebate to help
    lower premiums across the board for all beneficiaries. The
    current system contains many incentives for list prices to
    increase, rather than decrease.
        Unfortunately, while we keep hearing assurances that net
    prices are staying flat or decreasing and that almost all
    rebates are passed on to the health plans, we know that many
    patients are being disadvantaged by this system and are paying
    more for their insulin at the pharmacy counter.
        Your companies have each taken steps to try to reduce out-
    of-pocket expenses for insulin to the patients who need them,
    and that is a good thing. I worry, however, that these are only
    short-term solutions. It is important that we collectively find
    a permanent solution that improves access to and affordability
    of medicines, such as insulin.
        I thank our witnesses for being here today. I yield back.
        Ms. DeGette. We are just waiting for the Chair of the full
    committee and the ranking member for their opening statements.
    We will just wait one moment.
        As soon as he is ready, the Chair will recognize the
    ranking member of the full committee for purposes of an opening
    statement, 5 minutes.

      OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF OREGON

        Mr. Walden. Thank you, Madam Chair. I appreciate your
    indulgence. I know we are all coming back from votes and a few
    things, so I am glad you are having this important hearing
    today. It is really important.
        Last week, we heard a lot of different opinions on why the
    list price of insulin has increased significantly over the last
    decade. One of the doctors on that panel commented she believed
    that high list prices primarily benefit pharmaceutical
    companies. Now another doctor argued the current rebating
    system encourages high list prices, and as the list prices
    increase intermediaries in the supply chain benefit. He argued
    the solution is not as easy as manufacturers simply lowering
    their list price, it requires a broader reform across the
    entire supply chain.
        Now all of the witnesses last week agreed that the current
    pricing system for insulin is actually harming many patients as
    they make healthcare decisions. We heard stories of individuals
    rationing their insulin and foregoing other necessities to make
    ends meet and how this can lead to serious short- and long-term
    health problems and hospitalization, which I am sure you all
    understand. It is critical we work toward ensuring that all
    diabetics have access to insulin. To do so, we need to identify
    and break through barriers that make it challenging to bringing
    down the cost of insulin for patients.
        For more than two years, we have been examining the various
    drivers of increased healthcare costs, so I am glad that effort
    is continuing today. Earlier this year, as part of this work,
    myself, and Republican leaders Guthrie and Burgess, sent a
    letter to each of you that asked specific questions about the
    cost of insulin and the barriers to competition in the insulin
    market. We wanted to learn more about what is really going on,
    so I want to thank each of you for your thorough responses to
    our questions. They are most helpful as we work on this issue.
        While the discussion today is centered around the cost and
    the barriers that exist to reducing costs, it is important we
    do not forget the critical role that both of you, the drug
    manufacturers and the pharmacy benefit managers, PBMs, have in
    making sure patients have access to lifesaving medicines such
    as insulin. Now the insulin that is available today for
    diabetics would not exist without significant investments that
    Eli Lilly, Novo Nordisk, and Sanofi have made to develop and
    improve these medicines. These investments have saved the lives
    of many diabetics. Insulin manufacturers have also created
    Patient Assistance Programs to help patients get access to
    affordable insulin.
        While there will be questions today about whether the
    changes in insulin over the past few decades justify how much
    the list price for insulin has increased over the same period,
    we know that manufacturers rarely receive the list price for
    their medicine. Likewise, PBMs provide many important services
    to patients and use different tools to help control costs while
    promotinghealthcare. For example, in addition to numerous other
    programs, CVS Health created a Transform Diabetes Care Program
    that uses several cost containment and clinical strategies to
    help produce savings. OptumRx created a tool to improve
    provider visibility to lower costs, clinically equivalent
    alternative medicines at the point of prescribing. Just last
    week, Express Scripts announced a new patient assurance program
    that will ensure eligible people with diabetes participating in
    Express Scripts plans pay no more than $25 for a 30-day supply
    of insulin.
        Now while these programs for manufacturers and PBMs are
    important and useful in the short-term, they are only a band-
    aid, so we have to work on the long-term and comprehensive
    solutions. Many of the concerns we heard at last week's hearing
    on insulin are very similar to the issues that were discussed
    at our hearing examining the prescription drug supply chain
    over a year ago, so I appreciate hearing directly from the
    manufacturers and the PBMs today about your perspectives on why
    insulin costs are rising.
        But just like we heard at the hearing on drug pricing in
    2017, to fully understand why the cost of insulin is increasing
    for many patients, we will need to hear from the other
    participants in the supply chain including: the distributors,
    health insurance plans, and pharmacists. But at the end of the
    day, we have to put the patient, the consumer, first in
    everything that we do.
        I want to thank our witnesses for responding to our
    questions and I want to thank you for being here today. You
    will contribute to our work and that is most valuable, and
    unless somebody else wants the remainder of my time, Madam
    Chair, I would yield back.

        [The prepared statement of Mr. Walden follows:]

                     Prepared Statement of Hon. Greg Walden

        I am glad we are having this important hearing today. Thank
    you, Chair DeGette, for holding it.
        Last week, we heard a lot of different opinions on why the
    list price of insulin has increased significantly over the past
    decade. One of the doctors on the panel commented that she
    believed that high list prices primarily benefit the
    pharmaceutical companies. Another doctor argued that the
    current rebating system encourages high list prices and, as the
    list prices increase, intermediaries in the supply chain
    benefit. He argued that the solution is not as easy as
    manufacturers simply lowering their list price and requires a
    broader reform across the entire supply chain.
        All of the witnesses last week agreed that the current
    pricing system for insulin is harming many patients as they
    makehealthcare decisions. We heard stories of individuals
    rationing their insulin and forgoing other necessities to make
    ends meet--and how this can lead to serious short- and long-
    term health problems and hospitalizations.
        It is critical that we work towards ensuring all diabetics
    have access to insulin. To do so, we need to identify and break
    through barriers that make it challenging to bring down the
    cost of insulin for patients.
        For more than two years, we have been examining the various
    drivers of increasing healthcare costs. Earlier this year, as
    part of this work, myself and Republican Leaders Guthrie and
    Burgess sent a letter to each of you asking specific questions
    about the cost of insulin and the barriers to competition in
    the insulin market. I want to thank each of you for your
    thorough responses to our questions.
        While the discussion today is centered around cost and the
    barriers that exist to reducing cost, it is important we don't
    forget the critical role that both of you--the drug
    manufacturers and pharmacy benefit managers (PBMs)--have in
    making sure patients have access to life-saving medicines such
    as insulin.
        The insulin available today for diabetics would not exist
    without the significant investments that Eli Lilly, Novo
    Nordisk, and Sanofi have made to develop and improve the
    medicine. These investments have saved the lives of many
    diabetics. Insulin manufacturers have also have created patient
    assistance programs to help patients get access to affordable
    insulin. While there will be questions today about whether the
    changes in insulin over the past few decades justify how much
    the list price for insulin has increased over the same period,
    we know that manufacturers rarely receive the list price of
    their medicine.
        Likewise, PBMs provide many important services to patients
    and use different tools to help control costs while promoting
    better health. For example, in addition to numerous other
    programs, CVS Health created a Transform Diabetes Care Program
    that uses several cost containment and clinical strategies to
    help produce savings. OptumRx created a tool to improve
    provider visibility to lower-cost, clinically-equivalent
    alternative medicines at the point of prescribing. Just last
    week, Express Scripts announced a new patient assurance program
    that will ensure eligible people with diabetes participating in
    Express Scripts plans pay no more than $25 for a 30-day supply
    of insulin.
        While these programs from manufacturers and PBMs are
    important and useful in the short-term, they are only a band-
    aid. We must work on a long-term, comprehensive solution.
        Many of the concerns we heard at last week's hearing on
    insulin are very similar to the issues that were discussed at
    our hearing examining the prescription drug supply chain over a
    year ago. I appreciate hearing directly from the manufacturers
    and PBMs today about their perspectives on rising insulin
    costs. But just like we heard at the hearing on drug pricing in
    2017, to fully understand why the cost of insulin is increasing
    for many patients, we will need to hear from the other
    participants in the supply chain, including the distributors,
    health insurance plans, and pharmacists. But at the end of the
    day, we must put the patient first.
        I thank the witnesses for being here and I look forward to
    today's important discussion.

        Ms. DeGette. I thank the gentleman. The Chair now
    recognizes the chairman of the full committee, Mr. Pallone, for
    5 minutes for purposes of an opening statement.

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

        Mr. Pallone. Thank you, Madam Chair.
        Today, the committee is holding the second of a two-part
    hearing on the increasing price for insulin. Millions of
    Americans rely on this lifesaving drug and they are directly
    affected by the ever-increasing prices. People are having to
    make sacrifices to be able to pay for their insulin and some
    are even forced to go without it, sometimes with tragic
    consequences.
        Last week, the subcommittee heard from expert witnesses in
    diabetes care. They provided testimony about the rising price
    of various insulin medications and the effects it is having on
    patients living with diabetes. We heard from an endocrinologist
    who described a complicated system that makes it difficult if
    not impossible for him to determine how much his patients will
    have to pay for their insulin. We heard from patient advocates
    who described the hardship patients endure when they can no
    longer afford their medication or are forced to switch.
        These witnesses described a broken system where there is
    not enough transparency surrounding prices and not enough
    incentives to keep prices down. Today we have before us the
    companies that make these drugs, negotiate their prices, and
    make them available through health plans. Their actions and
    decisions have a profound impact on the lives of everyday
    Americans, and we need to hear these companies' response to the
    criticism we heard last week, and their actions, and what their
    actions are doing to contribute to rising prices or hopefully
    reduced prices.
        We know that companies need to make money in order to
    succeed and in a normal market price would reflect what the
    market can bear. The problem is, the market for insulin is made
    up of people who can't survive without the product. I am
    concerned that the market is simply broken down, as I said. It
    appears there is a limited competition and little incentive to
    keep prices at a level the patients can afford and perhaps
    there are incentives in place to keep raising prices.
        As a result, we are left with a drug that has been
    available for nearly 100 years and yet the price tripled and
    then doubled in just the last couple decades. Clearly,
    something is not right here. Three companies currently
    manufacture insulin and they are all represented at the hearing
    today. They not only make the drug, but they also set the list
    price. While most people do not end up paying this list price,
    uninsured patients often do, and even insured patients can be
    affected when the list price rises, and that is exactly what
    has been happening as the list price has skyrocketed in recent
    years and it ripples through the entire system.
        We also have the pharmacy benefit managers or PBMs here
    whose role it is to negotiate lower drug prices on behalf of
    the insurance plans. But there is not much transparency in
    these negotiations and there are questions as to whether
    discounts are being passed down to the patient. When the
    manufacturers have been criticized for raising their prices,
    they have often pointed their finger at the PBMs. When the PBMs
    have been questioned about their practices, they often point
    their finger back at the manufacturer and so we are left with
    no accountability.
        For the millions of people who are suffering in the system,
    these back-and-forth arguments are frustrating and frankly
    unacceptable. Everyone seems to be coming out ahead here except
    the patient, and no one really should suffer because the high
    price of insulin puts it out of reach. I hope that we can all
    learn today about why the costs of insulin are skyrocketing,
    and the role of manufacturers, and PBMs have played, and then
    figure out how to deal with it so we can make insulin more
    affordable.
        So unless somebody else wants my time, Madam Chair, I will
    yield back.
        [The prepared statement of Mr. Pallone follows:]

                 Prepared Statement of Hon. Frank Pallone, Jr.

        Today the Committee is holding the second of a two-part
    hearing on the increasing price for insulin. Millions of
    Americans rely on this lifesaving drug, and they are directly
    affected by the ever-increasing prices.
        People are having to make sacrifices to be able to pay for
    their insulin, and some are even forced to go without it--
    sometimes with tragic consequences.
        Last week, this Subcommittee heard from expert witnesses in
    diabetes care. They provided testimony about the rising price
    of various insulin medications, and the effects it is having on
    patients living with diabetes.
        We heard from an endocrinologist who described a
    complicated system that makes it difficult--if not impossible--
    for him to determine how much his patients will have to pay for
    their insulin.
        We heard from patient advocates who described the hardship
    patients endure when they can no longer afford their medication
    or are forced to switch.
        These witnesses described a broken system, where there is
    not enough transparency surrounding prices, and not enough
    incentives to keep prices down.
        Today, we have before us the companies that make these
    drugs, negotiate their prices, and make them available through
    health plans. Their actions and decisions have a profound
    impact on the lives of everyday Americans, and we need to hear
    these companies' response to the criticism we heard last week,
    that their actions are contributing to these rising prices.
        We know that companies need to make money in order to
    succeed, and in a normal market, prices would reflect what the
    market can bear. The problem is, the market for insulin is made
    up of people who cannot survive without this product.
        I'm concerned that the market has simply broken down. It
    appears that there is limited competition and little incentive
    to keep prices at a level that patients can afford, and perhaps
    there are incentives in place to keep raising prices.
        As a result, we are left with a drug that has been
    available for nearly 100 years, and yet the price tripled and
    then doubled in just the last couple decades. Clearly,
    something is not right here.
        Three companies currently manufacture insulin, and they are
    all represented at this hearing today.They not only make the
    drug, but they also set the ``list price." While most people do
    not end up paying this list price, uninsured patients often
    do--and even insured patients can be affected when the list
    price rises.
        That is exactly what has been happening, as the list price
    for insulin has skyrocketed in recent years it ripples through
    the entire system.
        We also have the Pharmacy Benefit Managers or "PBMs," here,
    whose role it is to negotiate lower drug prices on behalf of
    the insurance plans. But there is not much transparency in
    these negotiations, and there are questions as to whether
    discounts are being passed down to the patient.
        When the manufacturers have been criticized for raising
    their prices, they have often pointed their finger at the PBMs,
    and when the PBMs have been questioned about their practices,
    they often point their finger back at the manufacturer.
        And so, we are left with no accountability. For the
    millions of people who are suffering in the system, these back-
    and-forth arguments are frustrating and unacceptable. Everyone
    seems to be coming out ahead here--except the patient.
        No one should suffer because the high price of insulin puts
    it out of reach.
        I hope that we will learn today about why the costs of
    insulin are skyrocketing, and the role manufacturers and PBMs
    have played.
        Thank you, I yield back.
        Ms. DeGette. I thank the gentleman.The Chair asks unanimous
    consent that the Members' written opening statements be made
    part of the record. Without objection, so ordered.
        I would now like to introduce our first panel of witnesses
    for today's hearing. Mr. Mike Mason, who is the Senior Vice
    President, Lilly Connected Care and Insulins Global Business
    Unit, welcome; Mr. Doug Langa, Executive Vice President, North
    America Operations, and President of Novo Nordisk, Inc.,
    welcome; Ms. Kathleen Tregoning, who is Executive Vice
    President for External Affairs, Sanofi; Mr. Thomas Moriarty,
    Executive Vice President, Chief Policy and External Affairs
    Officer and General Counsel, CVS Health; Ms. Amy Bricker,
    Senior Vice President, Supply Chain of Express Scripts; and Dr.
    Sumit Dutta, Senior Vice President and Chief Medical Officer,
    OptumRx. Welcome to all of you.
        I know you are all aware that the subcommittee is holding
    an investigative hearing and when doing so has the practice of
    taking testimony under oath. Do any of you have objections to
    testifying under oath today?
        Let the record reflect that the witnesses have responded
    no.
        The Chair then advises you that under the rules of the
    House and the rules of the committee, you are entitled to be
    accompanied by counsel. Do any of you desire to be accompanied
    by counsel during your testimony today?
        Let the record reflect that the witnesses have responded
    no.
        If you would, please rise and raise your right hand so you
    may be sworn in.
        [Witnesses sworn.]
        Ms. DeGette. You may be seated. Let the record reflect that
    the witnesses have responded affirmatively. You are now under
    oath and subject to the penalties set forth in Title 18 Section
    1001 of the United States Code.
        And now the Chair will recognize our witnesses for a 5-
    minute summary of their written statements. In front of each of
    you is a microphone and a series of lights. The light will turn
    yellow when you have a minute left, and red to indicate your
    time has come to an end. I would appreciate it if you would try
    to keep your opening statements within the time frame because
    we want to make sure that all of the members have the
    opportunity to ask their questions today.
        We will start with you, Mr. Mason. You are recognized for 5
    minutes for purposes of an opening statement. Thank you.

     STATEMENTS OF MICHAEL B. MASON, SENIOR VICE PRESIDENT, LILLY
    CONNECTED CARE AND INSULINS GLOBAL BUSINESS UNIT, ELI LILLY AND
      COMPANY; DOUGLAS J. LANGA, EXECUTIVE VICE PRESIDENT, NORTH
     AMERICA OPERATIONS, AND PRESIDENT OF NOVO NORDISK INC., NOVO
     NORDISK; KATHLEEN W. TREGONING, EXECUTIVE VICE PRESIDENT FOR
     EXTERNAL AFFAIRS, SANOFI; THOMAS M. MORIARTY, EXECUTIVE VICE
       PRESIDENT, CHIEF POLICY AND EXTERNAL AFFAIRS OFFICER AND
         GENERAL COUNSEL, CVS HEALTH; AMY BRICKER, SENIOR VICE
      PRESIDENT, SUPPLY CHAIN, EXPRESS SCRIPTS; AND, SUMIT DUTTA,
     M.D., SENIOR VICE PRESIDENT AND CHIEF MEDICAL OFFICER, OPTUMRx

                     STATEMENT OF MICHAEL B. MASON

        Mr. Mason. Thank you. Chairwoman DeGette, Ranking Member
    Guthrie, Chairman Pallone, Ranking Member Walden, and other
    distinguished members, my name is Mike Mason. I am the Senior
    Vice President for Connected Care and Insulins at Eli Lilly and
    Company. Thank you for the opportunity to participate in
    today's hearing. Thanks as well to your staff who met with us.
    I'm pleased to be here today to continue that conversation.
        Eli Lilly was founded in 1876, and today employs over
    16,000 people in the United States. We are headquartered in
    Indianapolis. Lilly is proud to have introduced the first
    commercially available insulin product in 1923. For nearly a
    century, we have committed to helping people with diabetes live
    better and longer lives. We've invested billions in the
    discovery of new treatments including biotech insulins Humulin,
    Humalog, and Basaglar. In 2018, we announced our commitment to
    a research and development partnership that could eliminate the
    need for insulin. Lilly is also actively developing connected
    insulin devices that we hope will help people improve outcomes
    and adherence.
        Now, like many people who work at Lilly, I have a personal
    connection to the issues we discuss today. Four of my immediate
    family members live with diabetes. I've seen them cope with the
    daily burdens of the disease including injections before each
    meal. I've seen the devastating complications of diabetes in
    their lives and I know firsthand that they benefit from new,
    innovative treatments.
        Often our phone calls and visits turn to their diabetes.
    Over the years, we focused on these conversations on how they
    were managing their diabetes, but within the last two or three
    years, the conversations have changed. We now spend more and
    more time talking about how much they pay out-of-pocket for
    insulin. As a leader at Lilly, it's difficult for me to hear
    anyone in the diabetes community worry about the cost of
    insulin. Too many people today don't have affordable access to
    chronic medications.
        My colleagues and I have reflected on how we got here and
    what we can do to solve this problem in the short-term and
    long-term. For starters, we have not increased the list price
    for insulin since 2017, but we recognize that the issue is more
    complex than list price and it's important to focus on what
    people actually pay out-of-pocket for insulin. Most people who
    need insulins have either private or government insurance that
    requires them to pay a low, affordable copay. But some people
    don't benefit from these low copays because their out-of-pocket
    costs are based on so-called retail or list prices, not
    negotiated prices or fixed copays.
        The people most exposed in our current system are those in
    the deductible phase of high-deductible health plans, those in
    the Medicare Part D coverage gap phase, and individuals without
    insurance. We know long-term solutions are necessary, but we
    are not waiting to address the gaps in the short-term. The
    Lilly Diabetes Solution Center connects individuals to a suite
    of affordability solutions including immediate access to
    savings offers for the uninsured and privately insured, with no
    paperwork or applications.
        We provide automatic discounts at the pharmacy counter that
    cap the cost of prescription for Lilly insulin at $95 for those
    in the deductible phase of high-deductible plans. We recently
    announced the upcoming launch of a half-price version of
    Humalog called insulin lispro. With these and other meaningful
    solutions, we've tried to build a safety net preventing anyone
    from having to pay retail price for Lilly insulins.
        Our solutions are working to reduce out-of-pocket costs.
    Today, 95 percent of monthly Humalog prescriptions are less
    than $95 at the pharmacy, 90 percent are less than $50 a month,
    and 43 percent are zero. As insulin lispro launches and is
    added to formularies, even more people will pay less. Now while
    these actions ease the burdens for most people in these
    coverage gap areas, they are still stop-gap measures. Long-
    term, systematic solutions are still needed.
        A good place to start is to consider the policy ideas
    suggested by CVS in their written testimony to foster the
    widespread adoption of zero-dollar copays on preventive
    medications like insulin. We agree that this solution would
    save lives and money while cutting straight to the heart of the
    affordability issue. Also, we thank this committee for its
    bipartisan action last week on legislation including the
    CREATES Act and a bill eliminating pay-for-delay tactics.
    Systematic change in our healthcare system will require action
    by all relevant stakeholders. We are ready to play our role and
    we are confident that a solution is possible.
        [The prepared statement of Mr. Mason follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. DeGette. Thank you.
        Mr. Langa, you are recognized for 5 minutes.

                     STATEMENT OF DOUGLAS J. LANGA

        Mr. Langa. Thank you, Chair DeGette, Ranking Member
    Guthrie, and members of the subcommittee. My name is Doug
    Langa. I am the Executive Vice President, North America, and I
    am the President of Novo Nordisk Incorporated.
        For over 90 years, Novo Nordisk has been dedicated to
    improving the lives of people with diabetes. We care deeply
    about the people who need our medicines and we're troubled
    knowing that for some our products are unaffordable. For a
    company committed to helping people with diabetes, patients
    rationing insulin is just simply unacceptable. Even one patient
    rationing insulin is one too many. We need to do more. We all
    need to do more. This is why I appreciate the opportunity to
    take part in a dialogue here today.
        On the issue of affordability, we all hear a lot about list
    price, and I will tell you that at Novo Nordisk we are
    accountable for the list prices of our medicines. We also know
    that list price matters to many, particularly those in a high-
    deductible health plan and those that are uninsured. Why can't
    we just lower the list price and be done? In the current
    system, lowering list price won't bring meaningful relief to
    all patients, and it may jeopardize access to the majority of
    patients who have insurance and are able to get our medicines
    through affordable copays. That's because list price is only
    part of the story. Once we set the list price, the current
    system demands that we negotiate with PBMs and insurance plans
    to secure a place on their formularies. Formulary access is
    critical because it allows many patients to get our medicines
    through copays at reasonable costs. The demand for rebates has
    increased each and every year. In 2018, rebates, discounts, and
    other fees accounted for 68 cents of every dollar of Novo
    Nordisk gross sales in the U.S. As a result, net prices of our
    insulin products have declined year over year since 2015.
    Despite the investment that we make in rebates, some patients
    including those with insurance end up paying list price or
    close to it at the pharmacy counter. As a manufacturer, Novo
    Nordisk has no control over what insured patients pay at the
    pharmacy counter. This is dictated by benefit design.
        In the last few years, we've seen more patients with
    benefit designs that require them to pay high out-of-pocket
    costs, so despite these ever-increasing rebates that we pay to
    get on formularies, patients don't get the full benefit of
    those rebates at the pharmacy counter. This needs to change.
    It's time for people with diabetes to benefit directly from the
    rebates that we pay. I take the mission of this company to help
    people with diabetes very seriously and personally. I lost my
    own father-in-law to this disease, so I do know firsthand what
    it does and how it affects patients and their families.
        When the healthcare market began to shift toward high-
    deductible health plans and we saw that more people were
    struggling to afford their medications, we took action. Back in
    2016, we pledged to limit list price increases to single-digit
    percentages annually. We were one of the first companies to
    make that commitment and we have honored it ever since. Our
    pricing pledge complemented other programs that we've had in
    place for years with the goal of reducing patients' out-of-
    pocket costs.
        Through our nearly two decades old partnership with
    Walmart, Novo Nordisk's high-quality human insulin is available
    at Walmart pharmacies for less than $25 a vial. In 2017, we
    partnered with CVS Health and Express Scripts to expand the $25
    human insulin offerings to tens of thousands of pharmacies
    nationwide. Our human insulin is an FDA-approved, safe and
    effective treatment for both type 1 and type 2 diabetes and
    it's used by about 775,000 patients today.
        Since 2003, we have also provided free insulin to eligible
    individuals through our Patient Assistance Program. Nearly
    50,000 Americans received free insulin through the effort in
    2018 alone. Today, a family of four making up to $103,000 a
    year could qualify for a Patient Assistance Program. We also
    offer copay assistance on a wide variety of our insulin
    medicines which last year helped hundreds of thousands of
    patients lower what they pay at the pharmacy counter.
        Although these valuable programs help many people today, we
    can't stop there. Patients are telling us that we need to do
    more, and we hear them. The challenge is that the current
    system is broken. Bringing relief to patients is going to
    require bigger, more comprehensive solutions built on
    cooperation between all stakeholders in the insulin supply
    chain. We want to be a part of those solutions, and we look
    forward to working with all stakeholders to ensure that this
    lifesaving medicine remains available to everyone who needs it.
        Thank you and I do look forward to answering the questions
    today.
        [The prepared statement of Mr. Langa follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. DeGette. Thank you.
        Ms. Tregoning, now you are recognized for 5 minutes.

                   STATEMENT OF KATHLEEN W. TREGONING

        Ms. Tregoning. Chair DeGette, Ranking Member Guthrie, and
    members of the subcommittee, thank you for the opportunity to
    appear before you today to discuss issues related to pricing,
    affordability, and patient access to insulins in the United
    States. I am Kathleen Tregoning, Executive Vice President
    External Affairs at Sanofi. My goal today is to have an open,
    transparent discussion about how the system works, Sanofi's
    role in it, and how it can be improved.
        Patients are rightfully angry about rising out-of-pocket
    costs for many medicines and we all have a responsibility to
    address a system that is clearly failing too many people. As a
    mom, I was heartbroken at hearing the testimony before this
    subcommittee of other parents who have not only endured the
    terrible challenge of facing illness, but have also struggled
    to afford the medications that they or their children
    desperately need.
        My own family is the beneficiary of a breakthrough in
    medicine. My husband, John, has FH, a genetic disorder that
    makes the body unable to remove LDL or bad cholesterol from the
    blood. He inherited this condition from his father who passed
    away from a heart attack at 40 years of age when John was just
    12 years old. Despite taking statins, watching his diet, and
    exercising regularly, John, himself, had a double bypass at the
    age of 36 and still couldn't get his cholesterol under control.
    Then came a class of drugs called PCSK9 inhibitors, an
    innovative treatment that helps people like my husband lower
    their bad cholesterol.
        I cannot overstate what this breakthrough means for him,
    our family, and our future, including for our 7-year-old son,
    Jack, who has inherited the same condition as his father and
    grandfather. I fully appreciate how important it is for science
    to continue to solve the medical challenges that impact so many
    families, and I recognize that those breakthroughs are
    meaningless if patients are not able to access or afford them.
        Over the last 20 years, Sanofi has been a leader in the
    advancement of new treatments to help people manage their
    diabetes. At the same time, we recognize the need to address
    the very real challenges of affordability. Two years ago,
    Sanofi announced our progressive and industry-leading pricing
    principles. We made a pledge to keep list price increases at or
    below the U.S. National Health Expenditure Projected Growth
    Rate and we stand by this commitment. In 2018, our average
    aggregate list price increase in the United States was 4.6
    percent, while the average aggregate net price, that is the
    actual price paid to Sanofi, declined by 8 percent, the 3rd
    consecutive year in which the amount we receive across all of
    our medicines went down.
        Insulin is a clear example of the growing gap between list
    and net prices. Take Lantus, for example, our most prescribed
    insulin. The net price has fallen by over 30 percent since
    2012, and today it is lower than it was in 2006. Yet, since
    2012, average out-of-pocket costs for Lantus have risen
    approximately 60 percent for patients with commercial insurance
    and Medicare.
        Every actor in the system has a role to play and Sanofi
    takes our responsibility very seriously. In addition to our
    pricing policy, we have developed assistance programs to help
    patients afford their Sanofi insulin, including copay
    assistance for commercially insured patients, including those
    in high-deductible health plans, and free insulin for uninsured
    low-income patients. Sanofi's commitment to patient
    affordability means that today approximately 75 percent of all
    patients taking Sanofi insulin pay less than $50 a month.
        But we recognized that more needed to be done. Last year,
    Sanofi launched a unique program that allowed individuals
    exposed to high retail prices to access Sanofi insulins for $99
    per vial, the lowest available cash price in the United States.
    Based on feedback from patients, providers, and the advocacy
    community, today we announced that we are expanding this
    program. Beginning in June, uninsured patients regardless of
    income level will be able to access any combination of the
    Sanofi insulin they need for $99 per month at the pharmacy
    counter.
        This transformative and first-of-its-kind program is the
    latest in a series of progressive and important steps Sanofi
    has taken to help patients afford the insulin they need. This
    action does not eliminate the need for broader system reform. I
    agree with the witnesses from last week's subcommittee hearing
    that holistic reforms to the system are not only needed but
    overdue. Sanofi also supports a number of recommendations
    outlined in my written testimony including many of the policies
    included in Chair DeGette's Congressional Diabetes Caucus
    report.
        Thank you for the invitation and I look forward to
    answering your questions.
        [The prepared statement of Ms. Tregoning follows:]

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        Ms. DeGette. Thank you so much.
        The Chair now recognizes Mr. Moriarty for 5 minutes, thank
    you.

                    STATEMENT OF THOMAS M. MORIARTY

        Mr. Moriarty. Thank you, Chairwoman DeGette, Ranking Member
    Guthrie, and members of the subcommittee. My name is Thomas
    Moriarty and I serve as the Chief Policy, and External Affairs
    Officer, and General Counsel for CVS Health. Thank you for the
    opportunity to discuss ways to make healthcare more affordable,
    particularly for the millions of Americans with diabetes and
    those who are pre-diabetic.
        A real barrier in our country to achieving good health is
    cost, including the price of insulin products which are too
    expensive for too many Americans. Over the last several years,
    list prices for insulin have increased nearly 50 percent. Over
    the last 10 years, list price of one product, Lantus, rose by
    184 percent. The primary challenge we face is that unlike most
    other drug classes there have been no generic alternatives
    available even though insulin has been on the market for more
    than 30 years.
        Despite this, CVS Health has taken a number of steps to
    address the impact of insulin price increases. We negotiate the
    best possible discounts off the manufacturers' price on behalf
    of the employers, unions, Government programs, and
    beneficiaries that we serve. Our latest 2018 data indicates
    that we have been able to reduce the total cost of diabetes
    drugs including insulin by 1.7 percent, despite brand inflation
    in that year of 5.6 percent.
        Importantly, patient adherence has also increased.
    Specifically, we have replaced two very high cost insulins,
    Lantus and Toujeo, with an effective lower-cost, follow-on
    biologic called Basaglar. By making Basaglar preferred, member
    out-of-pocket costs declined by over 9 percent. Among patients
    who switched to Basaglar, their A1C or blood sugar levels were
    improved by 0.43. To put this in perspective, every one-point
    improvement in A1C among patients with uncontrolled diabetes is
    correlated with approximately $1,400 savings per year in
    medical cost for each patient. This is a real-life example of
    how competition works.
        Despite these efforts, we know this is not enough. Let me
    share a story about a company and their experience with
    diabetes. This company saw the human toll on their colleagues
    and continued to see escalating costs. In response, the company
    began offering employees and their families zero-dollar copays
    for insulin, providing coverage for diabetes medications even
    before the deductibles were met. That means there are no out-
    of-pocket costs, so employees are more likely to take their
    medications, improve their health, and achieve lower costs.
    That company is CVS Health, and when something works for us, we
    offer these solutions to our clients.
        We also offer a number of tools for patients to help reduce
    their out-of-pocket costs and provide transparency at the
    doctor's office, at the pharmacy counter, and directly to the
    patient. For Caremark members, when they are in the doctor's
    office getting a prescription, we provide their doctors with
    real-time information about what is covered under their
    insurance and if there are effective, lower cost, therapeutic
    alternatives available. We also provide this information
    directly to patients online or on their phone. For CVS Pharmacy
    customers, regardless of their PBM or health plan, the Rx
    Savings Finder tool enables our pharmacists to work with
    patients to find the most affordable medications that they
    need.
        Beyond these tools, a coordinated care approach to diabetes
    is essential. We've taken the lead with a program we call
    ``Transform Diabetes Car'' which furthers our focus on
    providing patient care that eases the complexity of self-
    management, improves health, and reduces overall costs. Using
    connected glucometers, a high-touch engagement model, and local
    points of care, clinicians are better able to support specific
    member needs as their care requirements evolve.
        Finally, Madam Chairwoman, despite what we've accomplished
    we know that more needs to be done. Let's bring more effective,
    lower cost alternatives to market faster by ending pay-for-
    delay schemes. Let's foster the widespread adoption of zero-
    dollar copays on preventive medications like insulin,
    recognizing that if we treat these diseases effectively, we can
    save lives and save money, and let's pass your proposal to
    reform Medicare to provide additional support services for
    patients with diabetes to manage their own care.
        We look forward to working with you and the committee to
    help accomplish our shared goals. Thank you, and I'll answer
    any questions that you may have.
        [The prepared statement of Mr. Moriarty follows:]

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        Ms. DeGette. Thank you so much, Mr. Moriarty.
        Now, Ms. Bricker, you are recognized for 5 minutes.

                        STATEMENT OF AMY BRICKER

        Ms. Bricker. Chair DeGette, Ranking Member Guthrie, and
    members of the subcommittee, thank you for inviting me to
    testify at this hearing. My name is Amy Bricker, Senior Vice
    President of Supply Chain for Express Scripts. As a registered
    pharmacist, I began my career in the community pharmacy
    setting. As Senior Vice President of Supply Chain, I am now
    responsible for key relationships and strategic initiatives
    across the pharmaceutical supply chain working directly with
    drug manufacturers and retail pharmacies with the objective of
    keeping medicine within reach for patients including those with
    diabetes.
        Diabetes is of particular interest to me as I have
    witnessed the impacts of this disease personally. My younger
    brother, Jeff, was diagnosed with type 1 diabetes as a child.
    Diabetes is a life-changing diagnosis and can have devastating
    effects if not managed appropriately. I am passionate about
    ensuring patients have access to the medications they need.
    Today I will provide an overview of Express Scripts innovative
    approach to reduce the cost and raise the quality of care for
    people with diabetes and the more than 80 million Americans we
    serve.
        At Express Scripts we negotiate lower drug prices with drug
    companies on behalf of our clients, generating savings that are
    returned to patients in the form of lower premiums and reduced
    out-of-pocket costs. Additional savings are provided through
    our clinical support services which enable individuals to lead
    healthier, more productive lives. When it comes to prescription
    drugs, our goal is the best clinical outcome at the lowest
    possible cost.
        We offer innovative programs to help us achieve that goal
    including several programs that address the cost of insulin for
    patients. One example, our Diabetes Care Value Program closely
    manages the disease State through a holistic approach that
    combines the highest level of clinical care, advanced
    analytics, and patient engagement supported by technology. The
    program offers remote monitoring so that our specialist team
    can intervene when patient blood sugars are dangerously high or
    low. This program resulted in a 19 percent reduction in drug
    spending for diabetes.
        We launched Inside Rx, a cash discount program for patients
    that are either uninsured or faced with high co-insurance,
    partnering with drug manufacturers to provide the negotiated
    rebate at the point of sale resulting in average discounts of
    47 percent per brand drugs including an average of $150 in
    savings per insulin prescription. Our National Preferred Flex
    Formulary provides employers and health plans the flexibility
    to immediately add drugs to their formulary if a drug
    manufacturer chooses to offer a lower priced version of a drug.
        Recently, Eli Lilly announced it is reducing the list price
    of its Humalog insulin by 50 percent. We are excited about
    their decision to lower the list price on this medication and
    encourage other manufacturers to do the same. Most recently,
    Express Scripts announced the Patient Assurance Program which
    caps the out-of-pocket costs at $25 for 30-day supplies of
    insulin. We did this in collaboration with the manufacturers
    represented here today.
        Express Scripts remains committed to delivering
    personalized care to patients with diabetes and creating
    affordable access to their medication. As expressed in several
    public statements, Express Scripts welcomes lower list prices.
    However, list prices are exclusively controlled by
    manufacturers. In the absence of lower list prices, the role of
    negotiated rebates has become increasingly important as a drug
    pricing strategy.
        In today's system, rebates are used to reduce healthcare
    costs for consumers. Employers use the value of these discounts
    to keep benefit premiums affordable, and offer workplace
    wellness programs among other employee, and member-focused
    health initiatives. Half of Express Scripts clients receive 100
    percent of rebates negotiated on their behalf. In total, 95
    percent of rebates, discounts, and price reductions received by
    Express Scripts are returned to employers, plan sponsors, and
    consumers.
        Our 2018 Drug Trend Report showed a 4.3 percent decrease in
    spending for diabetes medications for plans enrolled in our
    clinical solutions. For insulin, the same plans saw a 1.5
    percent decline in unit cost. Express Scripts achieved this
    result by driving competition among manufacturers while also
    leveraging pharmacy discounts to drive savings. Looking to the
    future, we continue to support efforts by Congress and the
    administration to use market-based solutions that put downward
    pressure on prescription drug prices through competition,
    consumer choice, and open and responsible drug pricing.
        In closing, we are proud of what we have done to date, and
    we look forward to working with the committee to improve the
    affordability of insulin products. Thank you for your
    consideration of this testimony.
        [The prepared statement of Ms. Bricker follows:]

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        Ms. DeGette. Thank you.
        Dr. Dutta, you are now recognized for 5 minutes.

                        STATEMENT OF SUMIT DUTTA

        Dr. Dutta. Chair DeGette, Ranking Member Guthrie, Chairman
    Pallone, Ranking Member Walden, and members of the
    subcommittee, good morning. I am Dr. Sumit Dutta, Chief Medical
    Officer of OptumRx, a pharmacy care services company whose
    dedicated employees ensure the people we serve have affordable
    access to the drugs they need. I'm honored to be here to
    discuss steps we can all take to reduce the cost of insulin.
        The OptumRx team includes 5,000 pharmacists and pharmacy
    technicians who help patients learn how to take their
    medications, avoid harmful drug interactions, manage their
    chronic conditions. Our nurses infuse lifesaving drugs in
    patients' homes, our efforts have helped lower overprescribing
    in opioids. Our diabetes management program offers personalized
    patient-driven services to high-risk members to help them
    manage their diabetes.
        OptumRx's negotiated network discounts and clinical tools
    are reducing annual drug costs on average by $1,600 per person
    for our customers. Our efforts start with a clinical assessment
    by our pharmacy and therapeutics committee comprised of
    independent physicians and pharmacists. They evaluate our
    formularies based on scientific evidence, not cost. These
    meetings are open and transparent to our customers. Cost only
    becomes a factor after this independent committee has
    identified clinically-effective drugs in a therapeutic class.
        Because OptumRx promotes the use of true generics to drive
    costs lower through competition, about 90 percent of the
    prescription claims we administer are for generics.
    Unfortunately, in the case of insulin there are no true generic
    alternatives. Because many branded insulin products are
    therapeutically equivalent, we negotiate with brand
    manufacturers to obtain significant discounts off list prices
    on behalf of our customers.
        Already, 76 percent of the people we serve who need insulin
    pay either nothing at the pharmacy or have a fixed copay, most
    commonly $35. For insulin users on high-deductible or
    coinsurance plans, we have taken action to help them directly
    benefit from the savings we're negotiating with manufacturers.
    Last year, we dramatically increased the discounts at the
    pharmacy counter for millions of eligible consumers who are now
    seeing an average savings of $130 per eligible prescription and
    the savings are even higher on insulin.
        Last month, we announced the decision to expand this point-
    of-sale discount solution to all new employer-sponsored plans
    beginning January 2020. Nevertheless, the price of insulin
    remains too high. A lack of meaningful competition allows
    manufacturers to set high list prices and continually increase
    them which is odd for a drug that is nearly 100 years old and
    which has seen no significant innovation in decades. These
    price increases have a real impact on consumers in the form of
    higher out-of-pocket costs.
        The most impactful way to reduce insulin prices is by
    opening the market to true generics and biosimilars. This is
    why we support efforts to reform the patent system and promote
    true generic competition. For years, insulin manufacturers have
    used loopholes in the patent system to stifle competition. One
    manufacturer has filed 74 patents on one brand to prevent
    competition. Others have engaged in multiyear patent disputes
    to delay the introduction of lower cost products.
        Congress can increase competition and lower prices by
    passing the CREATES Act, prohibiting pay-for-delay deals and
    evergreening of patents, accelerating biosimilar options, and
    reducing the exclusivity period for drugs. We are committed to
    doing our part to make insulin more affordable. I would be
    pleased to answer any questions you have.
        [The prepared statement of Mr. Dutta follows:]

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        Ms. DeGette. Thank you, Dr. Dutta.
        It is now time for the Members to ask questions and the
    Chair recognizes herself for 5 minutes.
        I appreciate all of your testimony. What strikes all of us
    on this panel, which we have heard from all of the actors in
    the system, is how the list price is really high, but then
    there are all these workarounds that some people can get to get
    a lower price of insulin, and let me just give you an example.
    Eli Lilly increased the price of Humalog from $35 in 2001 to
    $275 today. Novo Nordisk increased the list of NovoLog by over
    350 percent since 2001. And on January 8th of this year, the
    insulin products of Novo Nordisk went up by 5 percent. Sanofi
    increased the price of Apidra from $86 in 2009 to $270 last
    year. And so, since January 1st, the three main brands were 4.4
    to 5.2 percent gone up this year.
        And most everybody here now knows my daughter Francesca,
    who is 25, she is a type 1 diabetic. I am not going to put
    anybody on the spot, but she is on a newer kind of insulin and
    she has insurance. She is still on my insurance for eight more
    months--who is counting--and she renewed her prescription at
    the beginning of the year. And for this insulin it says on the
    receipt the retail price, $1,739.79, ``Your insurance saved you
    1,399.79.'' But for her type of insulin she is on, the list
    price is $347.80 per bottle. Now she didn't pay that because
    she is on insurance, but she still paid quite a bit because I
    have a pretty high deductible.
        So here is the thing everybody is saying, ``Well, sure the
    list price is high, but there are all these workarounds.'' But
    not everybody gets the workarounds, and the question is why is
    the list price so high? So, I am going to ask each one of you,
    and I have really limited time.
        Mr. Mason, I am wondering if you can tell me in 30 seconds,
    how does Eli Lilly justify these huge increases in list prices
    in the past 10 or so years?
        Mr. Mason. Thank you for the question. I hope your daughter
    is doing well.
        Ms. DeGette. Yes, forget about that. Just, please.
        Mr. Mason. Seventy-five percent of our list price is paid
    for rebates and discounts to secure access, so people have
    affordable access----
        Ms. DeGette. That is what is making the price go up and up?
        Mr. Mason. Two hundred and ten dollars of a vial of Humalog
    is paid for discounts and rebates.
        Ms. DeGette. OK, Mr. Langa, same question.
        Mr. Langa. So as you heard last week from Dr. Cefalu from
    the ADA, there is this perverse incentive and misaligned
    incentives and this encouragement to keep list prices high, and
    we've been participating in that system because the higher the
    list price, the higher the rebate.
        Ms. DeGette. So, you also think it is because the rebates
    that the prices have gone up so much in the last 10 years?
        Mr. Langa. There's a significant demand for rebates. We
    spend almost $18 billion.
        Ms. DeGette. OK, I am sorry.
        Ms. Tregoning. Yes, as part of how we set list prices, we
    have to look at the dynamics of the supply chain including the
    rebates. We have at Sanofi limited ourselves to list price
    increases no greater than national health expenditures across
    every one of our products.
        Ms. DeGette. OK.
        OK, now, Mr. Moriarty, I bet you have a different
    perspective on why the list price of insulin is so high.
        Mr. Moriarty. Chairwoman, rebates are discounts. And as
    we've disclosed, more than 98 percent of those discounts go
    back to our clients.
        Ms. DeGette. I understand, but why do you think the list
    prices are so high?
        Mr. Moriarty. I can't answer that. That is the
    pharmaceutical manufacturers' purview.
        Ms. DeGette. But you don't think it is because of
    discounts?
        Mr. Moriarty. I do not, no.
        Ms. DeGette. Ms. Bricker?
        Ms. Bricker. I concur. I have no idea why list prices are
    high and it's not a result of rebate.
        Ms. DeGette. Dr. Dutta?
        Dr. Dutta. We see list prices rising double digits in non-
    rebated drugs, in generics where monopolies lost, or where
    manufacturers buy up and create monopoly, so we can't see a
    correlation just when rebates raise list prices.
        Ms. DeGette. OK, so of course my time is almost up, but I
    think this is a good example of the problem that the Members of
    Congress are dealing with in trying to figure out how to solve
    this problem. Because it seems to me what is happening is that
    every component of the drug system is contributing to an upward
    pressure on the list price.
        I know the members are going to have a lot of questions
    around that and we will do some follow-up at the end, so I
    would like to recognize the ranking member for his input, for 5
    minutes.
        Mr. Guthrie. Thank you very much. Thanks for being here. I
    am going to use a quick example just because I am trying to
    make it simple. I have been wrestling with this for about a
    month in trying to figure out what is happening.
        If Chair DeGette was making this phone and I want to buy it
    and she said she is willing to take $100 for it, but she says,
    ``I will sell it to you for 300,'' and give me 200 back, and
    that doesn't make sense. Or Chair DeGette is willing to take
    $100 and I say to her, ``Hey, I am willing to pay 100, but
    charge me 300 and I will give you 200 back.'' The whole idea is
    that Brittany is the purchaser at the end and I am passing, I
    am giving that to her for $100 because she is the plan, she is
    saving the money and passing it on to her consumers, and what
    we are trying to figure out is where that delta is going. It is
    just hard to figure out and I have been spending a lot of time
    on it.
        On February 6th, so the three manufacturers, I want to try
    to, because I have a few questions so try to go fast, you said
    that your list price has gone up, but your net price has gone
    down. What would happen if you just said, ``Hey, I want to make
    my list price my net price, and put it out on the
    marketplace?''
        So I'll let you three.
        Mr. Mason. First of all, we are dropping our list price of
    Humalog by 50 percent with our launch of lispro insulin. For us
    there are many people who have access. The majority of people
    have access for insulin at affordable cost through their plans.
    That's not tied to list price, so we don't want to disrupt
    those by lowering list price. We think the best way is to
    provide in the short-term is to keep our list price at the way
    it is; so we don't disrupt those individuals, we don't harm the
    access that they have.
        Mr. Guthrie. But if you are willing to take, I think you
    said you had, I don't know, whatever the net price is, I know
    net prices are different with different plans. There is not one
    net price, I get it. But if you are willing to take a net price
    for your product and three of you here, why wouldn't that be
    something out there for everyone to pay? I mean that is what
    you are willing to charge, right?
        Mr. Mason. It's just more difficult to do that to disrupt
    that for a product that's on the marketplace today, because
    people have affordable access.
        Mr. Guthrie. But you have had your net price and according
    to your testimony go up 207 percent while your list price
    dropped by 3 percent, according to the letter on February 6th
    on Humalog.
        I think you all are similar too. I don't want to just do
    Lilly, all of you guys as well. I mean that is kind of, so we
    see the net price going--I understand what you are saying, but
    we see the net price rising. We want to know why it is doing
    it? Maybe there is a market reason for that and it is
    benefiting consumers, but we want to know.
        Mr. Langa. In the current system today, the most important
    thing for us is for the most number of patients to get our
    brands at the most affordable prices, and in the system today
    that is the current formulary positions. Just the three PBMs
    here today represent over 220 million covered lives.
        Mr. Guthrie. OK, you said they were perverse. OK, I am
    running out of time.
        Mr. Langa. So that is 80 percent of the lives, so for us to
    lose one of those positions that would be a dramatic impact to
    patients in terms of the medicine that they are on, physicians
    in terms of their choice.
        Mr. Guthrie. Your argument is----
        Mr. Langa. And there would be----
        Mr. Guthrie [continuing]. You would lose your position on
    the formulary if you lowered your price?
        Mr. Langa. In the current system if we eliminated all the
    rebates, yes.
        Mr. Guthrie. You are shaking your head, the same way?
        Mr. Langa. We believe that we would be in jeopardy of
    losing those positions.
        Mr. Guthrie. You said there were perverse incentives. What
    are the perverse incentives?
        Mr. Langa. Well, we're spending almost $18 billion a year
    in rebates, discount, and fees, and we have people with
    insurance with diabetes that don't get the benefit of that.
        Mr. Guthrie. What are the perverse incentives for that 18
    billion in rebates? You said they are perverse----
        Mr. Langa. They're going into the system and they're
    misaligned, right, so that's, we believe that they should go
    back to the diabetic patient.
        Ms. Tregoning. The issue here, Congressman, is not one of
    negotiation. The PBMs are very effective negotiators. It's what
    happens with the results of that negotiation. Those rebates are
    not necessarily going all the way through to patients. They're
    being used for other parts of the system, and we don't have
    visibility to how those rebates get used. Those rebates are
    part of how we secure formulary placement and cost sharing for
    the patients that are covered by those plans.
        Mr. Guthrie. So you say, ``I am willing to take X for a
    product, but for me to get on their formulary, I know I am
    going to have to raise my list price because they then want
    rebates,'' is that what you are arguing?
        Ms. Tregoning. The rebates are how the system has evolved.
    The rebates are part of the negotiation to secure formulary
    placement and associated----
        Mr. Guthrie. I went too long on that side because I am not
    giving you--you already talked to that, I guess. I had other
    questions, but I would rather hear your responses to that.
        Ms. Bricker. So as mentioned previously by my colleague to
    my left, of course we're looking at the clinical attributes of
    a product and I know you want to get to the economics. The way
    we make formulary decisions is based on net price. If every one
    of the manufacturers to my right wanted to reduce their list
    price, there would be no implication to the rebate status so
    long as the net price remained the same.
        Mr. Guthrie. So on my example, if she is willing to sell
    for me a hundred and I sell to Brittany for a hundred, and you
    are saying rebates keep the price down, but in the end because
    you are selling to her at the net price, so why wouldn't the
    net price be--what we are trying to figure out is it seems like
    there is a price that is marked through the system that seems
    to be based on something, but there seems to be an inflation
    and another higher price that just seems to be caught up in the
    system.
        But what really affects people as we have talked about,
    when they are going to the point of sale when they haven't hit
    their deductible. I know you have these plans in place and
    those are great, but we need to figure out the economics behind
    it; so if we need to do something here to help people out, we
    need to understand that.
        I wish we had more than 5 minutes. I yield back.
        Ms. DeGette. The Chair recognizes Mr. Kennedy for 5
    minutes.
        Mr. Kennedy. Thank you. I want to thank the witnesses here
    and I want to thank the Chair and ranking member for holding
    this hearing.
        I am going to follow up on some of the questions that have
    already been asked. I want to submit for the record though a
    Boston Globe piece from last November. I have done this before
    in other hearings about individuals, two mothers that brought
    ashes of their children in front of Sanofi in Boston, in
    Cambridge, back in November trying to protest these prices.
        You all have, you know why we are here, and you know what
    the challenges are. I can tell you even from being here for a
    couple minutes how frustrating it is to be on this side of the
    dais, and watch everyone do this. So I also, I hope, and I
    expect that you will also understand that if that is the result
    of this hearing that we are not, you are hearing bipartisan
    frustration on this. You are not going to--the status quo is
    not going to continue, it can't.
        We heard testimony last week from patients that were
    literally rationing, putting their lives on hold, or taking
    serious risks for themselves and their children, to be able to
    get access to medicine that was patented and sold for a dollar.
        And, sir, Mr. Mason, you began by saying about the 75
    percent of that increase over the course of the past several
    years increase in list price goes to PBMs. The data that I have
    indicates that over the past--since 2002 to 2013, Endocrine
    today estimated the average price went from $231 in 2002 to
    $736 in 2013, inflation adjusted. Seventy-five percent of that
    is roughly $375. That means 127--50 percent of that baseline
    price is not PBMs.
        Where is the other 50 percent? What justifies the other
    $127 increase?
        Mr. Mason. You know, our net prices have gone down since
    2019, so the--or since 2009. We haven't taken a price increase
    until since 2017.
        Mr. Kennedy. Sir, have you ever lowered a price off of your
    formulary?
        Mr. Mason. We are launching a lower priced Humalog that's
    50 percent off.
        Mr. Kennedy. It took 15 years and global outcry on this to
    do it? What factors go into--have you ever lowered the price
    off of a formulary?
        Mr. Mason. We have lowered our net price over the last 10
    years.
        Mr. Kennedy. What factor goes into lowering that price?
    What evaluation do you take to lower that price?
        Mr. Mason. What evaluation, you know, a decade ago we were
    on formularies, all formularies, now we're on formularies
    about, you know, half, about half of formularies, patients in
    America have our insulins because we're moving to strictly
    formularies. We have to provide rebates in order to provide and
    compete for that so people can use our insulin.
        Mr. Kennedy. Mr. Langa, have you ever lowered a list price?
        Mr. Langa. We have not.
        Mr. Kennedy. Why not?
        Mr. Langa. For two reasons, as I said the biggest vehicle
    today for the most majority of patients in this country----
        [Simultaneous speaking.]
        Mr. Langa. No, it's formulary position. So that's the best
    way for us today to reach the most amount of patients in an
    affordable way and anything that risks that is something that
    we have to strongly consider. Everything's on the table right
    now for Novo Nordisk. We want to be part of the solution.
        Mr. Kennedy. If it takes us hauling you in after people are
    telling us that they are rationing the lives of their children,
    how does this work? I understand that part of this comes back
    on us. You guys are responding to incentives that Congress sets
    and a lack of regulation, a lack of oversight to allow this to
    happen. But from my position at the moment, trying to figure
    out what levers to push and pull, we are asking what goes into
    the factors to set that list price, we don't get an answer. To
    lower risk price, it either hasn't happened or we don't know.
    You place the blame on the major of the hike of it to going on
    the PBMs and the PBMs are putting it back at you.
        If you were in my position, what do we do to try to make
    sure that patients in this country get access to lifesaving
    medication, that was initially discovered for a buck and sold
    to a university, to ensure that every person could get access
    to it? What do you suggest?
        Mr. Langa. I suggest that we all come together to come up
    with solutions, get together with Congress to make sure that
    rationing never happens again. As I mentioned in my opening
    statement, one patient is too many. And as an organization
    that's for 90 years been committed to patients with diabetes,
    it's tragic and it should never happen.
        Mr. Kennedy. Ms. Tregoning?
        Ms. Tregoning. Congressman, no one should be rationing
    insulin. No one----
        Mr. Kennedy. And they do every day.
        Ms. Tregoning. We need to make those patients more aware of
    the programs that are available.
        Mr. Kennedy. What do you do--the programs, ma'am, there
    were people here last week that said those programs take weeks
    to get into that there are not transparency on it. They can't
    wait six weeks to get an insulin shot.
        Ms. Tregoning. Congressman, our copay assistance programs
    can be accessed in a matter of minutes online, and so, people
    with high-deductible health plans----
        Mr. Kennedy. Do you have any patients that don't have
    access to internet?
        Ms. Tregoning. We also have phone numbers where patients
    can call.
        Mr. Kennedy. How long does it take for them to be able to
    access those programs? What percentage of folks do you deny?
        Ms. Tregoning. For copay assistance and for--we have, it's
    literally a matter of moments for the VALyou Savings Program
    that we accessed, that we announced today, the expansion----
        Mr. Kennedy. That you announced today when you are in front
    of Congress?
        Ms. Tregoning. It's an expansion of a program that we
    started last year, $99 for the insulin that they need in any
    combination at the pharmacy counter; people can get access to
    that. It's for uninsured patients. For those with high-
    deductible health plans, they can access copay assistance
    that's no more than a $10 copay.
        Mr. Kennedy. I am way over time.
        But for the folks that are uninsured that are paying your
    full list price----
        Ms. Tregoning. For the folks that are uninsured paying full
    list price----
        Mr. Kennedy. I yield back.
        Ms. Tregoning [continuing]. They now have access as of
    June, $99 at the pharmacy counter for the insulin that they
    need per month.
        Ms. DeGette. The Chair recognizes the ranking member of the
    full committee, Mr. Walden, for 5 minutes.
        Mr. Walden. Thanks again, Madam Chair, for having this
    hearing. Thanks again to our witnesses for being here.
        Ms. Tregoning, in 2018, Sanofi launched Admelog. Now I
    understand that is a follow-on biologic to Eli Lilly's Humalog.
    Now according to press articles, Sanofi launched Admelog at a
    list price that is about 15 percent less than the list price
    for Humalog. Is that pretty close?
        Ms. Tregoning. Yes. It's the lowest rapid-acting list
    priced insulin.
        Mr. Walden. OK. Typically, when a generic medicine enters
    the market, we expect for the price of the generic to be less
    than the branded; and many patients to switch from the brand
    medicine to the generic medicine. You have told us, however,
    that Admelog is not on the formulary for any commercial plans.
    I believe that is correct?
        Ms. Tregoning. No. Yes, correct. It's only available
    through Managed Medicaid.
        Mr. Walden. Given that Admelog was launched at a lower list
    price than Humalog, what barriers are preventing patients from
    this alternative and are there issues gaining formulary access
    for Admelog?
        Ms. Tregoning. Congressman, we were unable to secure
    formulary access through rebating with Admelog. As to exactly
    why those decisions were made, I'd have to defer to my
    colleagues on the other side of the panel.
        Mr. Walden. Has Sanofi faced these barriers for launching
    any other products?
        Ms. Tregoning. Yes, Sanofi has brought a number of products
    to patients at lower prices including Kevzara, which is a lower
    list price of a rheumatoid arthritis medicine, and we similarly
    face challenges.
        Mr. Walden. Given Sanofi's experience with Admelog, do you
    think more follow-on biologics and biosimilars of insulin will
    help reduce the list price of insulin, or does the biologic
    market function differently than introduction of a generic of a
    small molecule drug?
        Ms. Tregoning. There is already competition in the insulin
    market as I believe one of the colleagues referenced. Eli Lilly
    introduced a follow-on biologic version of Lantus several years
    ago and so there is competition. CVS in its testimony spoke to
    the fact that they were able to leverage greater rebates and
    negotiate through that.
        Mr. Walden. Now, I want to switch to Mr. Mason and thanks
    again for being here. We have heard that sometimes a branded
    biologic manufacturer may tell pharmacy benefit managers, PBMs,
    and health insurance plans that they will no longer provide
    rebates for their branded product, if the PBM or health
    insurance plan puts a follow-on biologic or biosimilar on the
    formulary. Has Eli Lilly told any PBMs or health insurance
    plans that it will no longer provide rebates for Humalog if the
    PBM or health insurance plan puts Admelog on its formulary?
        Mr. Mason. No, we haven't.
        Mr. Walden. All right.
        Ms. Tregoning, similarly did Sanofi tell any PBMs or health
    insurance plans that it would stop providing rebates for Lantus
    if the PBM or health insurance plan put Basaglar on their
    formulary?
        Ms. Tregoning. No, nothing.
        Mr. Walden. Mr. Moriarty, has a manufacturer ever said they
    would stop providing you rebates for a product if you put a
    competing product on your formulary?
        Mr. Moriarty. Not that I'm aware of, sir.
        Mr. Walden. OK, so that has never happened.
        Mr. Moriarty, Ms. Bricker, and Mr. Dutta, why isn't Admelog
    included on your formulary?
        Ms. Bricker. The challenge that we have with Admelog
    specifically is one of net cost. And so through the mechanisms
    that we use today, which are rebates or discounts, it was more
    expensive than competing product. Manufacturers do give higher
    discounts for exclusive position, so I think that was your
    question to my counterpart here on the right.
        Mr. Walden. Yes, if each of you could answer that.
        Ms. Bricker. Yes, so to the extent that we have recognized
    one product as exclusive, other manufacturers will--that
    exclusive product will receive less discount if additional
    products are added.
        Mr. Walden. Why not include both?
        Ms. Bricker. We'll receive less discount in the event that
    we do that.
        Mr. Walden. What?
        What about the others on the panel, Mr. Dutta and Mr.
    Moriarty, can you speak to this?
        Dr. Dutta. The lowest cost product gets preferential
    position on our formulary. So, for example, generics which are
    very low cost have preferential position.
        Mr. Walden. OK.
        Mr. Moriarty?
        Mr. Moriarty. Similarly, we drive to lowest available cost,
    lowest cost product. And with the example of Basaglar we were
    able to move that follow-on biologic to preferred status and
    actually have most, if not all, patients now on that one.
        Mr. Walden. We keep hearing the manufacturers should just
    lower their list prices, but a lower list price doesn't
    necessarily guarantee that a manufacturer will have access to
    patients, or that that patient will pay a lower price at the
    pharmacy counter. Do you take the list price of a medicine into
    consideration when making formulary decisions?
        Mr. Moriarty. We do not. We focus on the lowest available
    cost, the lowest net cost.
        Mr. Walden. All right.
        Ms. Bricker?
        Ms. Bricker. The same, yes, lowest net cost.
        Mr. Walden. Mr. Dutta?
        Dr. Dutta. Lowest net cost, and for the member we consider
    their cost by using point-of-sale discounts and in order to
    lower their cost out-of-pocket.
        Ms. DeGette. I just want to follow up on the ranking
    member's questions for Mr. Moriarty and Dr. Dutta. Why then if
    you look at generics and the lowest cost, why aren't either of
    your PBMs putting Admelog on these plans?
        Mr. Moriarty. Madam Chair, we have gone with Basaglar as
    the follow-on biologic alternative and the preferred status for
    that category.
        Ms. DeGette. OK.
        Dr. Dutta?
        Dr. Dutta. It would cost the payer more money to do that.
        Ms. DeGette. Why?
        Dr. Dutta. Because the list price is not what the payer is
    paying. They're paying the net price.
        Ms. DeGette. The Chair now recognizes Dr. Ruiz.
        Mr. Ruiz. Thank you, Chairwoman.
        The rising cost of drugs is such a big problem that it has
    reached kitchen table, family conversations across America.
    Those families are struggling, worried about having to decide
    between paying for insulin or paying their bills. There has
    been a lot of rhetoric today, and finger pointing in the drug
    pricing debate; and oftentimes the conversation is based on
    theoretical arguments about what will work for manufacturers,
    or PBMs, or insurance companies, with little regard to what
    works for patients.
        As a doctor, I put my patients' needs above all else and
    our solutions should do the same and reduce out-of-pocket costs
    for patients. In my district, according to the Health
    Assessment & Research for Communities 2016 survey, one out of
    four adults diagnosed with diabetes in the Coachella Valley are
    living below the Federal poverty line; and over 10 percent of
    adults diagnosed with diabetes do not have health insurance
    that covers some or all of the cost of their prescription
    drugs. This is not just a problem for the uninsured or
    underinsured either.
        Just this week I heard from Tamara Smith and David Richard,
    two constituents who had to go on a specialized form of insulin
    that isn't covered by their insurance. That means hundreds of
    dollars more out-of-pocket every month. So reducing the list
    prices of drugs or increasing the number of generics does not
    solve the problem, if these savings are not lowering out-of-
    pocket costs for people like Tamara and David. The CEO of
    Diabetes Patient Advocacy Coalition drove home this point in
    her testimony last week in stating, ``Somebody's making a
    profit and it's not the patients.''
        So, Mr. Mason from Eli Lilly, who is making a profit from
    these increases in insulin prices?
        Mr. Mason. You know, I think, first of all, we don't want
    anyone not to be able to afford their insulin.
        Mr. Ruiz. Who is making a profit with these increases in
    insulin prices that patients have to pay for?
        Mr. Mason. Our net price is the price that we receive are
    going down.
        Mr. Ruiz. Are you?
        Mr. Mason. No.
        Mr. Ruiz. Are you making a profit? Are the CEOs of your
    companies making these profits?
        Mr. Mason. Our net prices, the price that we receive has
    gone down since 2009.
        Mr. Ruiz. Well, somebody is making a profit. Somebody is
    getting richer on the backs of our patients.
        Mr. Langa from Novo Nordisk, what entity in the supply
    chain is prioritizing affordability and access of insulin for
    patients?
        Mr. Langa. Well, we'd like to think we are. I mean we
    participate in as many formularies as we can. As I've mentioned
    that is critically most important. We have Patient Assistance
    Programs as well as copay assistance programs.
        Mr. Ruiz. Who is making a profit then?
        Mr. Langa. Well, our nets are going down as well, but there
    is a small profit that----
        Mr. Ruiz. Your nets, but your overall profits for the
    company and CEOs have been going up, haven't they?
        Mr. Langa. No. Our profit has been----
        Mr. Ruiz. Take-home pay from CEOs?
        Mr. Langa. Our profits have been relatively stable.
        Mr. Ruiz. From CEO pay hasn't gone up in the past several
    years?
        Mr. Langa. His pay has increased, yes.
        Mr. Ruiz. OK.
        So last week, Dr. Cefalu from the American Diabetes
    Association noted that PBMs' primary customers are the health
    plans and insurers not the patients. He testified, ``We don't
    know whether those transactions are actually benefiting the
    patient at the point of sale.''
        Ms. Bricker from Express Scripts, does Express Scripts pass
    any savings on to beneficiaries; and how do we know what the
    difference is if there is not that transparency?
        Ms. Bricker. So yes, thank you for the question. For over
    20 years, Express Scripts has supported point-of-sale rebates.
    We do have clients and plan sponsors that are----
        Mr. Ruiz. How do we know what the percentage of that cost
    savings to patients, is if we don't have transparency of what
    the savings are? Are they going to your clients' profit or are
    they going to reducing out-of-pocket costs? How do we know?
        Ms. Bricker. So we support transparency for our plan
    sponsors, those that hire us. They absolutely have the ability
    to look at all of our rebate negotiated contracts as well as
    our retail contracts. We believe in transparency for patients.
        Mr. Ruiz. So we need to look into what you say, and what is
    actually being done with implementation and that is what the
    purpose of this is for.
        Mr. Moriarty from CVS Health, are these barriers to passing
    discounts on to patients at the point of sale and, if so, what
    are they?
        Mr. Moriarty. Sir, we have over ten million lives covered
    in a point-of-sale rebate program today. We also, as you heard
    in my written testimony and oral testimony, we really advocate
    a zero copay for insulin and other preventive medications. The
    cost savings associated with adherence is significant.
        Mr. Ruiz. OK, I got 20 seconds so let me ask this question
    directly. What are each one of you willing to give up to make
    sure that every patient who needs insulin will get insulin? Mr.
    Mason?
        Mr. Mason. We are willing to provide solutions, and we are
    providing solutions that close the gap to anyone paying out-of-
    pocket----
        Mr. Ruiz. What are you willing to give up?
        Mr. Mason. We're willing to give up--we gave up $108
    million last year.
        Mr. Ruiz. Mr. Langa, what are you willing to give up?
        Mr. Langa. Last year we invested almost $18 billion in
    rebates, discounts, and fees; and we also spent 200----
        Mr. Ruiz. But yet the prices are still going up, so the
    status quo isn't working.
        Ms. Tregoning, what are you willing to give up?
        Ms. Tregoning. We are willing to contribute to solutions to
    allow patients to access, and that's why the program that we
    have allows $99 at the pharmacy for the insulin----
        Mr. Ruiz. Those solutions aren't working if we are seeing
    doubling, tripling, cost of insulin and our patients are having
    to ration and not afford their insulin.
        Ms. Tregoning [continuing]. And that costs are going down.
        Ms. DeGette. The gentleman's time has expired.
        The Chair now recognizes the gentleman from Virginia, Mr.
    Griffith, for 5 minutes.
        Mr. Griffith. Thank you, Madam Chair.
        Mr. Mason, Ms. Tregoning, and Mr. Langa, we have heard that
    there are numerous fees and discounts in the prescription drug
    supply chain that are calculated based on insulin prices.
    According to what I have read, you all have fees with your
    supply chain partners that are based on a percentage of the
    list price of insulin. Why are they structured this way?
        You are up first, Mr. Mason, let's go. Time is running.
        Mr. Mason. We don't--the PBMs kind of own the paper of the
    contracts and that's what we have to work with.
        Mr. Griffith. All right.
        Mr. Langa?
        Mr. Langa. It's the current system.
        Ms. Tregoning. Agreed, it's the current system.
        Mr. Griffith. All right. Have any of your companies tried
    to negotiate flat fees with your supply chain partners?
        Mr. Mason. Yes, we have.
        Mr. Langa. We have tried a variety of different avenues
    with contracting.
        Mr. Griffith. But you have not been successful, why?
        Mr. Mason. No, our efforts were pushed away.
        Mr. Langa. I think it's because it's the current system and
    again in this demand for rebates today.
        Mr. Griffith. Ms. Tregoning?
        Ms. Tregoning. Yes, again it's the system under which we
    operate.
        Mr. Griffith. So other than just it's the system, what
    reasons did the other participants in the supply chain provide
    to justify a fee based on the list price of the medicine rather
    than a flat fee?
        Mr. Mason. It's the current system.
        Mr. Griffith. Just the current system, everybody agree with
    that? All right, because I will move on.
        Mr. Moriarty, in the February 6th letter that we sent to
    CVS Health, we specifically asked CVS Health to list all the
    contractual terms in your existing contracts that are impacted
    by the list price of a medicine. CVS Health did not directly
    answer whether there were any fees charged by CVS that are
    calculated as a percentage of a list price.
        While reviewing the standard contract template commonly
    utilized between CVS Caremark and a health plan client for
    several lines of business that the committee received in
    response to a letter that we sent to CVS Health last August, we
    saw that there was a section in the template on disclosure of
    manufacturer fees, that are disclosed that Caremark Part D
    services may also receive administrative fees from
    pharmaceutical companies that are based on a percentage of the
    list price of the medicine. It therefore appears as though CVS
    Health may use administrative fees that are based on a
    percentage of the list price of a medicine. This is correct,
    isn't it?
        Mr. Moriarty. Congressman, over 98 percent of all the fees,
    rebates that we obtain across our services and 100 percent in
    Medicare go back to the plan sponsors.
        Mr. Griffith. That is not what your contract says. Your
    contract says you all can charge a one percent fee, an
    administrative fee based on the price of the medicine. The
    question that I have is, it doesn't cost your company any more
    to process a $4 drug than it does a $40,000 drug; isn't that
    correct?
        Mr. Moriarty. It represents the costs associated with that
    processing, sir.
        Mr. Griffith. Well, wouldn't it make more sense from a
    consumer's standpoint that you came out and be more
    transparent, but that you came out with a flat fee and worked
    with these folks over here to come up with a flat fee? Because
    I understand in Part D on Medicare you are just charging the
    one percent, but across the board according to your information
    you sent us you are charging two percent. As a part of the
    rebate you are getting two percent of that, and I don't know
    whether you are charging those folks an administrative fee or
    not, but wouldn't it make more sense just to have a flat fee
    for doing what you all do?
        Mr. Moriarty. If the flat fee represents what the current
    net pricing, the lowest pricing it is in the market, yes, we
    will do that.
        Mr. Griffith. You are willing to do a net, even if it costs
    your company some profit you are willing to do a flat fee?
        Mr. Moriarty. Here's the issue. I think what's been
    proposed before actually results in not lower costs, actually
    higher costs. If it results in lower costs, we will implement
    that.
        Mr. Griffith. I mean because one of the problems we have is
    if you are not in one of the magic companies you are paying the
    list price and you are not able to afford it, or you are paying
    the high deductible in order to get there because you haven't
    reached your deductible yet. And lots of people have opted for
    these plans, and so the consumer is having to pay that higher
    list price, they aren't getting all those rebates all the time,
    and as a result of that their net price has gone up
    substantially. That is what we're hearing from our constituents
    who are having to pay that. It just seems to me that it ought
    to be something that we all can look at, the whole system needs
    to be more transparent; and that you all ought to be paid for
    processing that prescription whether it is a $4 drug or a
    $40,000 drug, you ought to be charged a set standard fee that
    doesn't have the drug companies coming in here saying, ``We are
    raising our list price,'' so they can get more.
        By the way, how many billions of dollars, or at least
    hundreds of millions of dollars is represented by that one or
    two percent?
        Mr. Moriarty. We pass back as I said over 98 percent, and
    we had disclosed publicly what the retained number is.
        Mr. Griffith. What is the dollar number?
        Mr. Moriarty. The total number across is $300 million.
        Mr. Griffith. I yield back.
        Ms. DeGette. Thank you.
        Mr. Kennedy offered an article for the record and, without
    objection, it shall be entered.
        [The article appears at the conclusion of the hearing.]
        Ms. DeGette. The Chair now recognizes the chairman of the
    full committee, Mr. Pallone, for 5 minutes.
        Mr. Pallone. Thank you, Madam Chair. I missed a lot of the
    hearing because we had other hearings, and we were on the floor
    today with net neutrality. But I just want to say this. All I
    hear from my constituents, they are just totally disgusted,
    right. They figure particularly for insulin it has been around
    a long time, you know, they don't even believe in a market-
    based system anymore.
        I mean, frankly, I believe in a market-based competitive
    system. I think that, you know, that is what the country is all
    about. But what they tell me is, just set the price. They will
    literally say to me, ``You in Congress or some Government
    agency should just set the price and that is it.'' They just
    don't believe in a competitive model anymore. So, you know, you
    keep saying the system, the system, the system doesn't work,
    well, I guess part of what I would like to know is why this
    marketplace competitive model doesn't work anymore. What has
    happened?
         So, you know, last week the committee heard from Dr.
    Lipska, who is a clinician and researcher, and she said, and I
    quote, ``Drug makers make excuses for why prices have gone up.
    They say it's the fault of PBMs, or wholesalers, or the high
    deductible insurance plans, but the bottom line is that drug
    prices are set by drug makers. The list price for insulin has
    gone up dramatically and that's the price that many patients
    pay. That is what needs to come down. It's as simple as that.''
    Now, many of my constituents say, very simple, set the price.
    Have the Government set the price and not have the company set
    the price. But I mean that is not the competitive model
    obviously. So let me just start.
        Mr. Mason, you set the list price for your insulins, not
    the PBMs or anyone else in the supply chain. Why are we talking
    about high drug prices when it is within your power to bring
    the list prices down? Why don't you just bring the list price
    down, or do you want us to set it? Because that is what my
    constituents say. Don't have Mr. Mason set it, you set it. Let
    the government set it. Why not, if you are not going to do
    anything?
        Mr. Mason. OK, so we--well, we actually buy down everyone
    in a high-deductible plan down to $95, so we're doing that
    today. Everyone who has, on a Lilly insulin at the pharmacy we
    buy every prescription down to $95, so we are reducing the list
    price. We're paying rebates in order to get access and----
        Mr. Pallone. Are you willing to reduce it more?
        Mr. Mason. We right now reduce, you know, no matter how
    much their--you mean, they can use multiple vials, multiple pen
    packs. We've brought it down to----
        Mr. Pallone. All right. What would be the problem if the
    Government lists the price and just brings it down and says
    that is what you have to charge?
        Mr. Mason. I mean right now we have--the competition is
    fierce. I mean our net prices are lower today than----
        Mr. Pallone. So you think competition is working; the
    marketplace is working.
        Mr. Mason. I think it's working, yes. Yes.
        Mr. Pallone. I don't hear that from my constituents.
        Mr. Langa, it is unconscionable that these essential drugs
    have seen dramatic price increases. Why isn't Novo Nordisk
    reducing its list price? Again, my constituents say force them
    do it.
        Mr. Langa. Well, we do believe in a market-based system. I
    would also say if we reduced our list price, we would put all
    of our formulary positions in jeopardy. Just here at the table,
    these three PBMs represent 220 million covered lives, and for
    us the risk that----
        Mr. Pallone. So you are going to blame the PBMs again.
        Mr. Langa. It's not the blame. We don't want to put those
    lives at risk, but we are willing to----
        Mr. Pallone. All right, so then let's get rid of the PBMs
    and we will just set the price, the Government will set the
    price and you don't have to worry about the PBMs. What do you
    think?
        Mr. Langa. It's not what we believe in. We take a market-
    based approach and it is competitive.
        Mr. Pallone. I agree with you, but nobody thinks it is
    competitive anymore.
        Mr. Langa. So if you look at our rebates, the average
    rebate for Novo Nordisk in 2014 was 48 percent. The average
    rebate just 4 years later in 2018 was 68 percent. That's a 40
    percent increase. We spent up to $18 billion last year in
    rebates, discounts, and fees to provide formulary access, so.
        Mr. Pallone. All right, let me--I think you are just
    passing it on to the PBMs.
        Ms. Tregoning, same question is people being forced to
    ration their insulin because they can't afford it. What is
    stopping Sanofi from lowering its list price? Why don't we just
    set the price ourselves?
        Ms. Tregoning. Congressman, unfortunately, under the
    current system simply lowering list price as I believe some of
    the witnesses last week attested to might not help patients and
    actually could cause some patients, who are on their
    formularies where we've secured position with rebates, to lose
    access. If we could get----
        Mr. Pallone. But if we set the price there would be no PBMs
    anymore.
        Ms. Tregoning. Congressman, I believe that the market-based
    system is very important for continued innovations. We don't--
    --
        Mr. Pallone. I agree, but you guys have got to convince us
    that it is working and that the, you know, the problem that we
    have is we always end up having to interfere with the market
    when it becomes monopolistic, when it is not working, and my
    constituents say it is not working. ``What are you doing,
    Pallone? It is not working.''
        Ms. Tregoning. Congressman, competition is working. The net
    prices are coming down. The issue we have is that the results
    of that negotiation are not finding their way to patients, and
    that's the issue at hand. We at Sanofi are working, where
    patients are exposed to those high list costs, we are
    effectively de facto having a lower list price and covering
    through copay assistance or VALyou Savings Programs. But we
    don't control the out-of-pocket costs.
        Mr. Pallone. I mean the problem is, Madam Chair, I know my
    time is up, but everybody just blames, you know, the PBMs blame
    the companies, the companies blame the PBMs, and our
    constituents say they are all no good, just get rid of the
    system. I am reluctant to do that because I believe in a
    market-based system. But this is, you know, this is what I
    hear. Thank you.
        Ms. DeGette. Thank you, Mr. Chairman.
         The Chair now recognizes Mrs. Brooks from Indiana, for 5
    minutes.
        Mrs. Brooks. Thank you, Madam Chairwoman.
        I think everyone is focused and the answers all seem to be
    focused on the system which I think we all are acknowledging
    and are very frustrated. It seems to be very broken. In the
    February 6th letter that we sent to the manufacturers we heard
    it is becoming increasingly common for insurers and PBMs to
    only offer one insulin manufacturers' line on their
    formularies.
        I want to ask some questions about formularies and because
    it sounds like everyone in this finger pointing is having to do
    with formularies. And so, I am curious, why are, and not, you
    know, being involved in, but we are all learning a lot more
    about this system, why is it that you might have one insulin on
    a formulary? Why wouldn't you want all of them to be on your
    formularies?
        I also have a question because if you are, say, an
    employee's daughter or son and you are used to one insulin then
    the company switches their insurance program and then that
    child has to go to different insulin, why would we not offer as
    many options as possible?
        I will start with you, Dr. Dutta. If you could, you know,
    why do we make this change and then the rebates get in the
    middle of it and the discounts, and can you just help us? The
    system seems really broken and it sounds like that is part of
    it.
        Dr. Dutta. Thank you for the question. The first assessment
    is purely clinical. It is about whether a product is unique or
    if there are therapeutic alternatives. So when you have a
    unique product, price is high. It's put on our formulary, there
    is no competition. Then as manufacturers produce more products
    that are therapeutically equivalent, in the case of insulins
    rapid-acting insulins, long-acting insulins, in a category then
    there's an opportunity when they're equivalent to negotiate
    price down off of list price. However, to your specific
    question, if there's a patient that requires a medication that
    is not our preferred product or not formulary, we offer a
    process for the patient and their doctor to request and provide
    rationale for their product. If there's a good reason like an
    allergy or something like that, then they would be allowed to
    have that product.
         Mrs. Brooks. Thank you.
        Ms. Bricker, what would happen in the market for you to
    stop, for you, not just your company, but all of the PBMs here,
    what would happen if you stopped excluding certain insulin
    products from the formularies, if you allowed all of them in
    the different categories of insulins as I understand, if you
    allowed all of them to compete and be on each of your
    formularies?
        Ms. Bricker. Yes, thank you for the question. We don't have
    one formulary. We have many, many, many formularies. The
    formulary that provides the greatest savings for our clients
    actually limits through exclusivity or exclusive placement
    insulin options. We do that because we're able to secure the
    deepest discount from the manufacturer once we award that
    placement. And so, they're offering discount in exchange for
    market share and in exchange for access.
        But to your point, we have other options and we believe
    that choice to our plans is critical and they absolutely can
    select formularies that have all insulin on the formulary.
        Mrs. Brooks. What if we removed exclusivity from
    formularies?
        Ms. Bricker. Prices would go up.
        Mrs. Brooks. Why do you believe prices would go up? Mr.
    Moriarty, why would prices go up if all of the companies were
    able to be a part of your formulary? Mr. Moriarty?
        Mr. Moriarty. Because the drug companies would not offer
    the discounts that currently exist in the system.
        Mrs. Brooks. And so, if we were to remove all exclusivity
    from formularies, Mr. Mason?
        Mr. Mason. You know, our rebates went up during the period
    were removed from kind of dual access to exclusive formularies.
    That's what caused the list prices to go up.
        Mrs. Brooks. Mr. Langa?
        Mr. Langa. Our rebates have been competitive for years.
    Year over, year over year they're competitive. We believe in
    choice, choice for the physician, and choice for the patient.
    Someone that--a physician should be able to use their clinical
    experience to make decisions, not a formulary.
        Mrs. Brooks. What if we got rid of rebates and discounts,
    Ms. Tregoning?
        Ms. Tregoning. We would support moving to a system in which
    you had fixed fees for PBMs and that we removed rebates. As
    long as patient access and affordability could be guaranteed,
    we would be more than happy to move to that system.
        Mrs. Brooks. Do you think if we had systems like that you
    all would lower your insulin prices that would be offered?
        Ms. Tregoning. If we could be assured that patient access
    and affordability would be maintained, we would certainly be
    willing to lower our list prices, if we moved away from a
    rebate system.
        Mrs. Brooks. Mr. Langa?
        Mr. Langa. Yes, we support the rebate rule and we also
    support that if as long as there's access and affordability we
    are open to that option.
        Mrs. Brooks. Mr. Mason?
        Mr. Mason. Same answer.
        Mrs. Brooks. Thank you. I yield back.
        Ms. DeGette. The Chair now recognizes the gentlelady from
    New Hampshire, Ms. Kuster, for 5 minutes.
        Ms. Kuster. Thank you.
        Thank you very much for your testimony today and as we
    unravel this whole process of rebates and volume discounts the
    high cost that patients and families are facing for insulin. In
    New Hampshire we have 121,000 Granite Staters, just give or
    take ten percent of our population, actually, have either type
    1 or type 2 diabetes. These are the people that I have in mind,
    the families that we have been hearing from.
        But I want to understand, the frustration that the diabetic
    Americans come not just from the dramatic increases in the out-
    of-pocket costs, but the mind-numbing complexity of how the
    drugs are priced and a belief that insulin manufacturers and
    pharmacy benefit managers may have lost focus on who they are
    truly meant to be working for, the patient. So that is really
    where we are coming from is to try to understand as we unravel
    this.
        You have heard some of the ideas here, which I would
    imagine would be a dramatic change in the way you do business
    on certainly from the conversations I have had with the PBMs,
    but also from the manufacturers' point of view. I mean, I don't
    think anyone really comes to this with totally clean hands
    because you are chasing the profits of the quarterly earnings
    as well as anyone else.
        I think part of what is difficult for us to understand is
    these are medicines that have been around for a long, long,
    long time without a great deal of innovation, without a change
    in the chemistry and the medication itself. Maybe there has
    been a change I understand in the delivery mechanism, you know,
    maybe there is a medical device change in having a longer
    lasting impact on patients, and certainly for patient
    convenience and patient health that is important.
        But we are trying to get to the bottom of why this has gone
    up so much. It is one thing for us to consider that in a field
    of medicine that has dramatic new innovations and the R&D
    costs, but it is all the more complex for us to sort that out
    with something like insulin.
        I want to get at two areas, if I could. Just, Mr. Mason,
    what efforts would you recommend to Congress to improve price
    transparency for patients? You obviously have taken a stand on
    getting rid of rebates or those types of things, but what is it
    that should be happening in terms of the patient understanding
    the pricing?
        Mr. Mason. We're open for transparency to help patients. We
    think the biggest issue that we're hearing right now--we want
    the same thing. We're not defending the system, we're just
    explaining the system up here. We want reform. We want, you
    know, anything that provides better access to patients. The
    heart of what we're hearing from patients is those with high-
    deductible plans, about half of those high-deductible plans
    will take the rebates that are given to them and they use those
    to afford chronic, or affordable care for those with chronic
    disease. About half of them decide to actually put that back
    and actually lower premiums for the general population.
        So what we hear and what you're probably hearing is for
    those individuals who are in those high-deductible plans where
    that employer has decided to say, ``I'm going to pick the plan
    design that gives me lower premiums,'' because they're
    prioritizing that. They're making that conscious plan decision
    and that leaves individuals with chronic medication paying this
    price. That is a gap in the system right now that is leading to
    what we're hearing the most from diabetes patients.
        Now we're providing now a stop-gap measure to buy all those
    people down to $95, but that's a short-term fix. Long-term
    fixes should really be focused on what can we do with these
    high-deductible plans so that they have affordable coverage
    from day one and that decision is universal.
        Ms. Kuster. So you would agree that there is a discount for
    volume purchasing, and are you saying they fall outside--and I
    can ask Ms. Bricker to explain this.
        But--well, let me go to you, Ms. Bricker. What he is
    saying, how do we get to transparency for the patient, and how
    do we get all the patients to benefit from a mechanism that
    makes sense to me that you have described which is a volume
    discount, essentially? That is what the rebates are.
        Ms. Bricker. A couple of things, if I may, so believe
    strongly in having real-time benefit check at the time of
    prescribing that the physician has at his or her fingertips,
    what product is covered under the formulary, and what it will
    cost the patient, absolutely critical to ensuring that there
    isn't friction at the counter. Transparency, also, to plan
    sponsors so that they fully understand the value that we've
    negotiated for them by way of rebates and discounts.
        And so of course we've got to continue to do more. We've,
    as mentioned previously, announced a program for $25 insulin
    for all of our commercial patients. But clearly where we're
    still faced with challenges in the Part D benefit and we are
    absolutely in support of continuing to modernize that benefit
    such that patients, you know, have caps and don't have, aren't
    exposed to these high list prices, essentially.
        Ms. Kuster. My time is up, but thank you.
        Ms. DeGette. Thank you. The gentleman from West Virginia is
    now recognized for 5 minutes.
        Mr. McKinley. Thank you, Madam Chairman. I apologize. I
    have been back at two other committee meetings going on, so I
    have missed some of your--but I heard enough of it.
        Mr. Langa, I probably would focus most of my remarks
    towards you on this. I was here, so just begin, for my records
    the only thing that we have some information that we were--a
    vial of insulin in '67 cost a dollar. If just the CPI went up
    $17, but yet your NovoLog is now with a list price of 237, not
    $17.
        So many times, when we have our meetings back in the
    district in our roundtable discussions they talk about how
    people in West Virginia, probably no different than around the
    country, having three and four hundred dollars a month. I just
    talked with that fellow this morning, he said he just wrote a
    check for a thousand dollars for his insulin in excess of his
    insurance.
        What I was hearing not only similar dollar increases like
    this, but I was hearing all of you say it was caused by
    innovation, in part by innovation. I am curious what kind of
    innovation have we implemented over the last few years that
    would cause such a drastic increase in the price of insulin,
    the innovation part of it? Because let me just, I am a strong,
    strong supporter of innovation, so help me out a little bit.
    Why is innovation causing the increase in price?
        Mr. Langa. Sure, so innovation is very important to us as
    an organization, we're an innovator company. I would tell you
    that what's most important, and I think it was mentioned
    earlier, is that we keep the patient in mind. Because even that
    word ``incremental,'' it's not incremental to patients.
        So when you think about going from 4 to 6 injections a day
    to one, if you think about being able to take a mealtime
    insulin at or right after you eat versus an hour to an hour and
    a half before, if you think about basal insulin or long-acting
    products today that give you the support of hypoglycemia, maybe
    the best way I could describe it is: we have patients that want
    to work for Novo Nordisk because of the mission that we're on
    to defeat diabetes, and we have these patients sometimes speak
    at our company meetings.
        Mr. McKinley. I am just trying to understand the innovation
    part of it.
        Mr. Langa. But I am going to, I think, get to it.
        Mr. McKinley. Please get to it because we have run out of--
    I don't need someone to filibuster here on me.
        Mr. Langa. It's not filibustering, it's this individual
    talk about what he lives with; night terror. Night terror is
    something called low hypoglycemia at night and actually makes
    him do things that are out of what he normally does. And
    because he got on a product called Tresiba that reduces
    hypoglycemia 40 percent----
        Mr. McKinley. You are saying, you are saying the innovation
    that----
        Mr. Langa [continuing]. He has not had a night tremor
    since.
        Mr. McKinley. I am saying if--were prior to having the
    innovation that prices were lower, now they are skyrocketing up
    to 237. Can we just stop the innovation? If it worked before,
    why in the last five years through innovation we have gone from
    17 or $20 up? I don't want to go there, because as an engineer
    I believe very much in research and to do that, but if we are
    driving the price up--innovation is supposed to drive the price
    down, not up.
        I am really troubled with it. But I think it is----
        Mr. Langa. Innovation is for today, and tomorrow I think
    it's important because we're innovating for the future and the
    future of people living with diabetes. So it's a partnership
    with MIT. It's our partnerships with the University of
    California San Francisco.
        Mr. McKinley. I want to respond back to why that in the
    past, until the last few years that I am sure you were
    innovating back in the '70s and '80s, the innovation and it
    wasn't skyrocketing like it is right now. So it is just
    counterintuitive that why innovation is driving the price up
    now in the last few years.
        Let me go back to the list prices because I am not going
    to--we are going to run out of time. But I don't understand
    that--I come from the construction industry, but also in life I
    need to see some examples of why we have these list prices set
    up for discounts I have heard you talk about. If we don't have
    rising list prices for cars and appliances and construction
    material, why is it that pharmaceuticals are jazzing up the
    list price so they can offer discounts? Why is that unique to
    the pharmaceutical field?
        Mr. Langa. Again, I know you've heard a lot about this
    today, but it is about these misaligned incentives in the
    system. The higher the rebate--excuse me. The higher the list
    price, the higher the rebate.
        Mr. McKinley. Yes.
        Mr. Langa. The rebates are used within the system. And that
    is--and again, and those rebates don't get passed through to
    the people living with diabetes and that is there that lies the
    challenge.
        Mr. McKinley. Should we eliminate or discourage the
    rebates?
        Mr. Langa. Well, certainly we're supportive of the rebate
    rule, and we're supportive of the pass-through of those rebates
    to benefit patients, and we think that would be something that
    would be healthy for patients.
        Mr. McKinley. OK, I have run out of time. I am sorry. I
    yield back.
        Ms. DeGette. The Chair now recognizes the gentlelady from
    Florida for 5 minutes.
        Ms. Castor. Well, thank you, Chair DeGette for holding this
    hearing to tackle the skyrocketing insulin prices.
        I recently met with a family from back home in Tampa. Nine-
    year-old Brooke and her father Todd explained to me how she was
    diagnosed when she was three days old in the hospital and how
    they have struggled with her diabetes since then. But it is not
    just--the big struggle hasn't really been on the health side.
    It has been with affording insulin and drugs. They have had to
    change their lifestyle a little bit and Todd told me at one
    point they had run out of insulin two weeks before the end of
    the month and had to borrow a vial from an adult friend of ours
    who was using Humalog and had numerous vials stockpiled.
        That is how, he said, ``That is how we do it now. We tell
    our endocrinologist that we use more insulin than we need in a
    month, so she writes prescriptions for slightly more than we
    use. Since the vials are good for two years, we have extra in
    case anything happens. At the end of the day, we count
    ourselves blessed that both my wife and I work, and our
    insurance sufficiently helps pay for all of Brooke's type 1
    diabetes supplies, but the beginning of the year is still very
    difficult until we pay our deductibles. We choose to pay more
    for our insurance out-of-pocket to make those deductibles.''
    But he says, ``I cannot fathom how a family can choose to limit
    or ration insulin for their children. The system needs to be
    fixed.''
        Then I asked Brooke, I said, ``What would you as a 9-year-
    old having to deal with this, what would you want me to ask?''
    She says, ``Why do we have laws that protect kids' safety like
    bike helmets, seatbelts, and indoor smoking bans, but not laws
    that would allow them to get the medicines they need to stay
    alive?''
        So this, things have got to change. So let's start with
    manufacturers' list prices and how we get them under control.
    It seems to be that just about everyone in the supply chain
    except the patient is benefiting from increasing list prices.
        Mr. Mason, if rebates and fees tied to list price were to
    be restricted or eliminated, do we have any guarantee from Eli
    Lilly that prices would go down and patients would pay less?
        Mr. Mason. We would definitely consider it.
        Ms. Castor. Mr. Langa?
        Mr. Langa. Yes. We would consider that, yes.
        Ms. Castor. Is there a guarantee?
        Mr. Langa. Well, what's important to us again is that the
    majority of patients can have access at affordable pricing and
    as long as there was that in place then, yes, we would consider
    that.
        Ms. Castor. Ms. Tregoning?
        Ms. Tregoning. Yes, as long as we can ensure patient access
    and affordability in formularies then we would certainly lower
    list price with the elimination of rebates.
         Ms. Castor. OK. There is another hitch in the system here
    and that is kind of the gaming of charitable contributions. It
    has been reported that some manufacturers use the Patient
    Assistance Programs to reduce their own tax burden. That by
    donating drugs to these Patient Assistance Programs, the
    company is able to deduct the value of the donated drugs from
    its taxes.
        In 2015, I understand Lilly donated 408 million worth of
    drugs to the Lilly Cares Foundation. Mr. Mason, should
    manufacturers be able to benefit financially from the Patient
    Assistance Programs?
        Mr. Mason. We do it only to help patients. We don't want
    anyone not to afford----
        Ms. Castor. But boy, that is a big--408 million, then I
    would think we would see some commensurate reduction of the
    list price that would be tied to that.
        Mr. Mason. Our net prices are going down, and then what
    you're not seeing is we spent $108 million last year on savings
    offers that helped 525,000 people. Those aren't a tax write-
    off. Those are----
        Ms. Castor. I think there is an issue here though with
    these kinds of charitable contributions. You seem to be
    benefiting on both sides and patients aren't.
        So turning to the PBMs, Ms. Bricker, if fees paid to PBMs
    and wholesalers are standardized and entirely delinked from the
    list price, what impact would it have on what the patient
    ultimately pays?
        Ms. Bricker. Over 50 percent of our clients receive all
    fees that are collected from manufacturers and 95 percent of
    all fees and discounts and rebates are passed on to our plan
    sponsors. And so, ultimately when you delink the fee from the
    list price, there really is nothing that prevents the
    manufacturer from continuing to increase the price.
        Ms. Castor. So, Mr. Dutta, the mission of PBMs is to get
    the lowest price possible for drugs for their clients, but that
    clearly isn't happening. How can we change the system to better
    align out-of-pocket patient cost to negotiate a net cost
    instead of the list prices?
        Dr. Dutta. Well, 76 percent of our members today either pay
    zero-dollar copay or most commonly a flat copay of $35. And for
    that other percentage that you're asking about that are on a
    coinsurance or a high-deductible plan we advocate for point-of-
    sale rebates as well as preventive drug lists such that
    insulins would not apply to the deductible.
        Ms. Castor. I yield back my time, thank you.
        Ms. DeGette. Thank you. The Chair now recognizes Mr. Mullin
    for 5 minutes.
        Mr. Mullin. Thank you, Madam Chair, and thanks for holding
    this meeting. It is not too often we get together and actually
    agree on issues, but we are all talking about the same thing;
    and we are all scratching our head trying to figure out how we
    got to this point.
        Real quickly, I want to go back to what was just asked
    about YOUR tax advantage for taking the rebates. Is there a tax
    advantage for YOUR companies for those rebates, yes or no?
        Mr. Mason. No.
        Mr. Mullin. No.
        Mr. Langa. No.
        Ms. Tregoning. No.
        Mr. Mullin. Well, what about the charitable contributions?
    Is that not a tax advantage?
        Mr. Mason. We only give insulin and what people use.
        Mr. Mullin. Well, because if it is at $300, and I am just
    using generic numbers, if the list price is 300, you put your
    rebates in and you get it all the way down to 100, who absorbs
    those rebates?
        Mr. Mason. That's not why we're doing it. We're doing it
    for----
        Mr. Mullin. No, who absorbs those rebates?
        Mr. Mason. Those----
        Mr. Mullin. Who absorbs those rebates? Do you guys absorb
    those rebates? If you are giving the rebates and the list price
    is at $300, you are getting it to $100, who absorbs those
    rebates?
        Ms. Tregoning. The rebates go to the PBMs with whom----
        Mr. Mullin. It doesn't go to the patient though, right?
        Ms. Tregoning. That's based on the--that's the concern that
    we have.
        Mr. Mullin. Do you write that off as a charitable
    contribution?
        Ms. Tregoning. That's different than a charitable
    contribution. The free drug program which are run through
    Patient Assistance Programs----
        Mr. Mullin. OK.
        Ms. Tregoning [continuing]. That's different. That's
    providing free drug to patients below a certain income
    threshold. That's separate from rebate----
        Mr. Mullin. You know what Mr. Griffith asked back here in
    the back, the innovation--no, I am sorry--McKinley asked about
    the innovation. When you are talking about the innovation side
    of things, are you using insulin today to help pay for future
    drugs? Is that the innovation that you guys are using for
    research? Does the price of insulin help offset the cost of
    research for future drugs?
        Ms. Tregoning. Revenues from all of our business, in part,
    go back to fund research and development across all areas. For
    diabetes in the United States, I would point out our revenues
    have gone down.
        Mr. Mullin. But I can understand price. A lot of you guys
    come in and you talk to me in my office and you say, ``Look,
    the price of the drug is so we can recoup our cost to develop
    it. That was the cost so that is why it is set at where it is
    because we are trying to recoup the cost of it.'' I totally get
    that. You have got to recoup the cost especially when you start
    having patents that are going to run out and you need to recoup
    your costs in time.
        But the cost is already recouped in this, so you are using
    insulin today, the cost of insulin today to pay for future
    drugs that are outside of insulin; is that correct?
        Ms. Tregoning. We continue to invest in research----
        Mr. Mullin. That is why you are seeing it go up so much?
        Ms. Tregoning. No, because our revenues from diabetes are
    going down. The net prices are going down. Our revenues from--
    --
        Mr. Mullin. But you don't have any costs associated with it
    because it has already been developed. It has already been paid
    for.
        Ms. Tregoning. But again, the revenues for Sanofi's
    diabetes business in the U.S.----
        Mr. Mullin. OK.
        Ms. Tregoning [continuing]. Have gone down by half over the
    last four years because net prices have gone down so
    dramatically.
        Mr. Mullin. I have some quick questions I need to get to.
    If a patient qualifies for YOUR programs, how much does it
    cost? How much does their insulin cost at that point?
        Mr. Langa. Patient assistance is free.
        Ms. Tregoning. For copay assistance they'll pay no more
    than a $10 copay.
        Mr. Mullin. OK.
        Ms. Tregoning. But if they qualify for the charitable then
    it is free drug.
        Mr. Mullin. OK.
        Mr. Mason. Patient assistance is free.
        Mr. Mullin. Is free.
        Ms. Bricker, with the Express Scripts you guys came up with
    no more than a $25 charge to customers. You just rolled that
    out recently, right? How long did it take you to develop that?
        Ms. Bricker. We've been working on it for a few months.
        Mr. Mullin. For a few months. Have the companies here on
    the panel, have they agreed to participate in that with you?
        Ms. Bricker. Yes, they have.
        Mr. Mullin. It took you two months to come up with that.
    How are you guys able to offer that?
        Ms. Bricker. In collaboration with the manufacturers as
    well as in collaboration with the plan sponsors.
        Mr. Mullin. When a patient qualifies for YOUR programs, how
    long do they typically stay on those Patient Assistance
    Programs? Either one.
        Mr. Langa. It varies. It varies, really, by patient
    program. So they have renewal periods, but it could be 1 year,
    3 years.
        Mr. Mullin. Do you know what average the patient stays on
    the program?
        Mr. Langa. I'd have to get back to you on the average. I
    don't know what that is.
        Ms. Tregoning. I don't have that information.
        Mr. Mullin. Mason?
        Mr. Mason. Our separate foundation does that, so we don't
    have that data.
        Mr. Mullin. OK, I will yield back.
        Thank you so much for your time.
        Ms. DeGette. Thank you. The Chair now recognizes the
    gentleman from New York, Congressman Tonko, 5 minutes.
        Mr. Tonko. Thank you, Madam Chairwoman.
        I would like to begin by asking our panel a number of
    simple yes or no questions. During our hearing last week,
    patient advocate Gail DeVore testified that against her
    doctor's orders she had rationed and diluted a bottle of
    insulin because she couldn't afford to pay the $346.99 it cost
    her per month. Are you aware of stories like Gail's, and we
    will start with you, Mr. Mason, and go across, but yes or no,
    are you aware?
        Mr. Mason. Yes.
        Mr. Langa. Yes, we are.
        Ms. Tregoning. Yes, we're aware.
        Mr. Moriarty. Yes.
        Ms. Bricker. Yes.
        Dr. Dutta. Yes.
        Mr. Tonko. Have any of you personally ever had to ration a
    vial of insulin?
        Mr. Mason. I have not.
        Mr. Langa. I have not personally.
        Ms. Tregoning. No, I have not.
        Mr. Moriarty. I have not.
        Ms. Bricker. I have not.
        Dr. Dutta. No, and no one should.
        Mr. Tonko. Similarly, I hear stories from my constituents
    frequently about the struggle to afford lifesaving medications
    including having to make tough choices about putting food on
    the table or simply buying medication. Have any of you ever
    personally had to choose between feeding your family or buying
    a life-sustaining medication?
        Why don't we start with you, Dr. Dutta, and go the opposite
    way?
        Dr. Dutta. No, and no American should.
        Ms. Bricker. No, I have not.
        Mr. Moriarty. I have not.
        Ms. Tregoning. No, I have not, and agree no one should.
        Mr. Langa. I have not and no one should.
        Mr. Mason. I have not and no one should.
        Mr. Tonko. In a broader sense, have any of you ever
    struggled to afford a medication that was recommended to you by
    your doctor?
        Mr. Mason. I have not.
        Mr. Langa. There once was a time when one of my children
    had to be on a growth hormone product and we were not able to
    get reimbursement. At that time, it was going to be several
    thousand dollars and that was going to be a challenge for us.
    So yes, there was a time in my life.
        Mr. Tonko. Thank you.
        Ms. Tregoning. I'm fortunate not to have faced that
    situation.
        Mr. Moriarty. I have not.
        Ms. Bricker. I have not personally, but yes, my family
    members have struggled.
        Dr. Dutta. No, I have not and no one should.
        Mr. Tonko. Well, I thank you for your candor. I want to be
    clear that I am not asking these questions as a gotcha moment,
    but as a reminder that we need to approach this issue with
    empathy and compassion. We never know what the person next to
    us might be going through. These stories we have all heard and
    are sharing today are from real people.
        Modern medicines like insulin save lives, but when we
    dangle these life-sustaining medications just out of reach from
    those who need them, we are engaging in a most cruel form of
    torture. According to Dr. Lipska's testimony last week, one in
    four individuals reported using less insulin than prescribed
    over the past year specifically because of cost. Let's put
    ourselves in their shoes for the day.
        We can get bogged down here in Washington with the blame
    game and talk about esoteric issues like rebates and list
    prices and Patient Assistance Programs, but the reality is that
    when I go this weekend back to my hometown to Amsterdam, New
    York, there will be people in my community that are in the
    hospital putting their lives at risk, because they are so
    desperate for this medication that they are priced out of that
    they deliberately let their blood sugar crash just so they can
    get free samples of insulin on their way out of the door.
    Regardless of where you pin the blame, the system as it exists
    now is horrendously broken; and the companies represented at
    the witness table are benefiting while patients across the
    country are losing. That is unacceptable and we need answers.
        Last week, in testimony before the committee we heard from
    the Endocrine Society that in 2017 expenditures for insulin in
    the United States reached some $15 billion. They also told us
    that three of the top ten medication costs were for a type of
    insulin. Where is all this money going?
        Let's start with you, Mr. Mason.
        Mr. Mason. Our net prices are going down. Why we hear so
    much of why people can't afford their insulin today, it's those
    individuals in about half the high-deductible plans that don't
    benefit from the rebates and have high out-of-pocket costs
    because the rebates are being used to buy down the premiums.
        Mr. Tonko. Do those net prices need to go down further?
        Mr. Mason. Our net prices are going down.
        Mr. Tonko. No, you said they are, but do they need to go
    down further? In order for people to--we hear about CEOs
    getting an increase in their salary and we--tell us, well, the
    response is our net prices are going down. Do they need to go
    down further or do we need to take from the CEO?
        Mr. Mason. All I'm saying is our net prices are going down.
    The price that plans pay, payers pay to get insulin is going
    down, but those costs are not being used to help people who
    have diabetes in about half of the high-deductible plans. Those
    rebates are used in order to buy down premiums for the general
    population leaving those with chronic medications like insulin
    exposed to a deductible. That's what we're hearing. That's the
    point that we need to focus on solutions. That's the gap in the
    current system. The current system's not working. We agree a
    hundred percent. That is the heart of the issue.
        Mr. Tonko. Well, I see my time is up, I will yield back.
    But again a crisis that we need to resolve as soon as possible,
    quickly here. Thank you and I yield back.
        Ms. DeGette. The Chair now recognizes the gentlelady from
    New York, Ms. Clarke, for 5 minutes.
        Ms. Clarke. Thank you very much, Madam Chair, and I thank
    our ranking member. This is a very important hearing today and
    I wanted to ask a couple of questions.
        We have heard a number of examples of the dramatic rise of
    insulin prices this afternoon and I am still not clear on the
    flow chart. You know, we have heard a whole lot of different
    things about net pricing, list pricing, and that net pricing is
    going down.
        Is that what you are saying, Mr. Mason? OK, now is that
    subject to ebbs and flows? In other words, if you are saying
    that price is going down as we sit here, is there a point where
    that price gets settled at a lower price or is there the
    possibility that it rises again? Is it like oil?
        Mr. Mason. No, it's not like oil. I mean this has been
    pretty flat over the last 10 years. We can provide the, I think
    we provided the data as part of our written testimony.
        Ms. Clarke. Well, how is it then if they are going down
    over the past 10 years that it is still unaffordable? That is
    the flow chart that I am talking about. If you are going down--
    first of all, it spiked for some strange reason, I guess the
    change in the system or the, you know, modernization of the
    system that included this rebate, you know, shenanigan, because
    that is what it is at the end of the day, if you have a 100-
    year-old product that increased in value because all of these
    other dynamics got involved and, you know, it is the same
    product.
        Can you give me a sense of what happens when you produce
    this product, what the cost is, and then how it gets to the
    point where the average American can't afford, who needs it,
    can't afford to access it? That is the crux of this for, I
    think, the listening public. Because we have talked about a lot
    of terms of art here, but Americans need to know how you got to
    where you are given what we know. Can you explain? Can you
    explain, or is there anyone on the panel that can explain it in
    layperson's terms?
        Ms. Tregoning. Congresswoman, first, the insulins of today
    are very different than the insulins of the past, so I think
    that's also very important to keep in mind. That the insulins
    today----
        Ms. Clarke. We understand that.
        Ms. Tregoning. In terms of the list versus net prices, the
    net prices have been going down steadily. We talked about our
    insulins. Our list price has gone down 25 percent over the last
    five years, or since 2012, and that is expected to continue.
    The issue here is that the savings----
        Ms. Clarke. What precipitated that?
        Ms. Tregoning. It's additional competition and rebating----
        Ms. Clarke. Are you sure it wasn't the outcry of the public
    that could no longer afford it that are watering down their
    insulin?
        Ms. Tregoning. Unfortunately, Congresswoman, the lower net
    prices are not finding their way to patients, exactly to your
    point. That the rebates that exist in the system that gap
    between the list and the net prices is being used to subsidize
    other parts of the system and so, unfortunately, patients----
        Ms. Clarke. So the system became far more complex over
    time. Is that what you are----
        Ms. Tregoning. I think the system became complex and
    rebates generated through negotiations with PBMs are being used
    to finance other parts of the healthcare system and not to
    lower prices to the patient.
        Ms. Clarke. If we extract rebates from the system, what
    happens?
        Ms. Tregoning. If we moved to a system of fixed fee, we
    support the rebate rule then we would be able to lower our list
    prices, but we would need to ensure that the formulary
    position----
        Ms. Clarke. No. I just want to know if we removed the
    rebates.
        Ms. Bricker, I think you had----
        Ms. Bricker. If you remove the rebates, the discounts,
    there is no one that's advocating then for the patient and the
    plan sponsor to drive discounts and affordability. The rebates
    are discounts. They sound mysterious. It's just a discount and
    it's a volume discount.
        Ms. Clarke. Right.
        Ms. Bricker. And so PBMs serve a critical function in
    ensuring affordability. Are there people that slip through the
    cracks? Absolutely, and we're absolutely committed to figuring
    out how to serve each and every patient. But I would caution,
    doing away with rebates will only increase costs.
        Ms. Clarke. OK.
        Ms. Tregoning. We support having rebates pass through to
    patients, pass through to the patients who use the drugs upon
    which the rebates have been negotiated. That's----
        Ms. Clarke. This is a circular issue, because you want that
    passed on to the patient.
        Mr. Langa. Yes.
        Ms. Clarke. So that you can continue to push up the price.
        Ms. Tregoning. We don't receive list price. We receive the
    net price. We don't receive the list price.
        Ms. Clarke. You don't receive the list price.
        Ms. Tregoning. No. The price that is paid to manufacturers
    is ultimately the net price.
        Ms. Clarke. Right.
        Ms. Tregoning. So the rebates now are being used to offset
    other costs in the system. What Sanofi would advocate for is
    ensuring that those rebates are provided to patients who are
    using the drugs; upon which those rebates are negotiated to
    lower their out-of-pocket costs.
        Ms. Clarke. Are you saying that the PBMs' demand for
    increased rebates is the reason you are forced to keep raising
    your list prices?
        Ms. Tregoning. It is one component of how we consider and
    at Sanofi we have limited our list price increases. But one
    component of that decisionmaking is the dynamics of the supply
    chain.
        Ms. Clarke. What are the other components?
        Ms. Tregoning. The other components include the need to
    continue to invest in R&D and the competitive environment.
        Ms. Clarke. I yield back. I think it is more P&G. That is
    profit and greed. I yield back, Madam Chair.
        Ms. DeGette. The Chair now recognizes the gentleman from
    Maryland, Mr. Sarbanes, for 5 minutes.
        Mr. Sarbanes. Thank you.
        Is the rebate, Ms. Bricker, is the rebate system
    transparent right now would you say?
        Ms. Bricker. The rebate system is 100 percent transparent
    to the plan sponsors and the customers that we service. To the
    people that hire us, employers of America, the Government,
    health plans, what we negotiate for them is transparent to
    them.
        Mr. Sarbanes. So we can track the list price, then we can
    see the rebate, then we can see the net price, then we can see
    the savings that you pass along to the consumer; that is all
    completely transparent to the public?
        Ms. Bricker. It's not transparent to the public unless they
    are our patient.
        Mr. Sarbanes. Should it be?
        Ms. Bricker. We don't believe so.
        Mr. Sarbanes. Should it be a trade secret, is that the
    problem, like proprietary----
        Ms. Bricker. The reason I'm able to get the discounts that
    I can from the manufacturer is because it's confidential.
        Mr. Sarbanes. It is a secret.
        Ms. Bricker. Because it's confidential.
        Mr. Sarbanes. Yes, because it is a secret. What about if we
    made it completely transparent? Who would be for that?
        Ms. Tregoning. We would support transparency along the
    entire chain. That's the important thing is if we have
    transparency all along from the list price all the way through
    to patients.
        Mr. Sarbanes. Do you all support that?
        Ms. Bricker. Absolutely not, but----
        Mr. Sarbanes. No, you can't, because then it will end up
    hurting the consumer.
        Ms. Bricker. It will hurt the consumer.
        Mr. Sarbanes. Yes, it will hurt the consumer to have
    transparency, you know?
        Ms. Bricker. It will hurt the consumer, Congressman,
    because----
        Mr. Sarbanes. I don't buy it.
        Ms. Bricker [continuing]. Prices will be held high.
        Mr. Sarbanes. I am not buying it. I think a system has been
    built that allows for gaming to go on and you have all got your
    talking points.
        Ms. Tregoning, you have said you want to guarantee patient
    access and affordability at least ten times, which is great,
    but there is a collaboration going on here. I know there is
    this going on too, but the system is working for both of you at
    the expense of the patient.
        Now I reserve most of my frustration for the moment in this
    setting for the PBMs, because I think the lack of transparency
    is allowing for a lot of manipulation. I think the rebate
    system is totally screwed up, that without transparency there
    is opportunity for a lot of hocus-pocus to go on with the
    rebates. Because the list price ends up being unreal in certain
    ways except to the extent that it leaves certain patients
    holding the bag, then the rebate is negotiated, but we don't
    know exactly what happens when the rebate is exchanged in terms
    of who ultimately benefits from that.
        I think we need more transparency and I do not buy the
    argument that the patient is going to be worse off, the
    consumer is going to be worse off if we have absolute
    transparency. I think just to get the lobbyists in the room to
    shudder a little bit, I think the PBMs should be utilities or
    converted to nonprofits or something. I know when you started
    out, I understand what the mission was originally with the
    PBMs. It is a complicated industry. You need an intermediary to
    assemble all the information on both sides, to weigh in, to
    assemble the bargaining position so that you can get the best
    price, and in the early days that was a good argument.
        But now things have gotten out of control. You are too big,
    and the lack of transparency allows you to manipulate the
    system at the expense of the patient. I don't buy the argument
    that the patient and consumer is going to get hurt if we have
    absolute transparency. If we can't get it from a for-profit
    entity like the PBM, then we ought to look at other ways of
    doing it, including having the Government get into this space
    and compete in providing that important function. With that I
    will yield back my time.
        Ms. DeGette. The Chair now recognizes the gentlelady from
    Illinois, Ms. Schakowsky, for 5 minutes.
        Ms. Schakowsky. Thank you, Madam Chair, for holding this
    hearing.
        I don't know if I have any questions at all, but I want to
    tell you something. In the 2018 election, the number one
    concern of Americans, the high cost of prescription drugs. We
    have the names of people who have died because they couldn't
    get their insulin. A young man who was trying to control it
    himself after going off his parents' policy, dead. We know that
    a huge number of people are not taking the insulin that they
    need because they can't afford it. So then they get sick, they
    get sicker, and maybe they die because of it. I don't know how
    you people sleep at night.
        Between 1996 and now, when you have Eli Lilly from $21 a
    vial to $275, you heard Mr. McKinley--am I saying that right--
    who went through all that, interesting by the way. So for Eli
    Lilly it is now $275. For Sanofi it is $270. For Novo Nordisk
    it is $280. Curiously close in price and way too high. I want
    to tell you something. That will not stand in this Congress. I
    heard Ms. Brooks say the system is broken and I think on both
    sides of the aisle there is a commitment. We have even heard
    the President of the United States talk about price gouging.
    Yes, we need transparency. I have a strong transparency bill
    that is going to hold you guys accountable and make you notify
    how you justify raising those prices. You talked about
    another--Mr. Langa, you talked about another drug that you are
    developing and that somehow that is an excuse because it helps
    diabetics and that is the research and development that you do.
    You are in trouble. And the lobbyists out here, or maybe that
    is you, need to understand that this is a commitment on the
    part of the Congress to get drug prices, particularly
    lifesaving, life necessities, to get those prices under
    control. If you think you can, you know, just out-talk us
    without any transparency, without any accountability, I just
    want you to know your days are numbered.
        You know, when Mr. Azar became the Secretary of Health and
    Human Services, I wanted to remind him that he came from Eli
    Lilly at the very time that those insulin prices went through
    the roof, and we are seeing that on drugs that have been like
    yours on the market for decades. If you want to try and
    explain--I totally agree, isn't that a good thing that now
    people may be able to take one vial and not have to shoot up
    all the time because, you know, and the delivery system. But we
    had no clue if that means that you can raise those prices a
    thousand percent.
        And you think you can get away with that kind of secrecy or
    just blaming the PBMs. I am not holding them unaccountable
    here, we need to do that. But don't excuse yourselves from this
    and don't tell us about the wonderful charity prices that you
    give and then you do get tax breaks, I am assuming--contradict
    me if I am wrong--when you give charity care to people. I
    believe that that is a tax-deductible kind of item for you, I
    am not hearing anybody contradict that. I resent that very
    much, because then everybody else is still paying those very,
    very high prices. So just know something is going to happen
    here if you don't decide in your own interests to lower those
    prices so people don't have to die. I yield back.
        Ms. DeGette. The gentlelady yields back. The gentleman from
    California, Mr. Peters, is recognized for 5 minutes.
        Mr. Peters. Thanks. I have heard a lot of this discussion
    and it has been very edifying for me. Actually, I don't want to
    blame you for a system that we have set up here that encourages
    these bizarre incentives. The fact is that it is a system that
    incentivizes people to charge higher list prices so they can
    give rebates that give them access to customers.
        I am pretty much a believer in markets. Someone called this
    a free market. This is really not. I don't think that we should
    suggest that this is the kind of competition that is going to
    take care of our problems. What we have here is what economists
    call a ``market failure'' at best. That is when it is
    appropriate for government to take action in a capitalist
    system. I think most people agree with that, and I think that
    is what we are going to see.
        We are going to have to take out the incentive, this crazy
    incentive to charge higher prices so that you can get the
    customers and no one knows what the real prices are. I mean it
    is impossible for us to understand, you know, we have access to
    all this information, this is a really, really opaque system
    and so we are going to have to change that.
        I appreciate the input. I don't ever suggest that companies
    aren't going to make money when they are allowed to do it. I
    just think that this is a perverse system that has to be
    changed so that if we want competition, we get real
    competition. But this system of rebates is really encouraging
    an anti-competitive behavior.
        Also, I know that--I will just express a concern and this
    is in the courts. But, you know, now we have companies owning
    PBMs and plans without any assurance of the relationship
    between the sister companies, the PBMs and the plans. Again, I
    think there is a real risk of anti-competitive behavior.
        I mean, I think you have come here and done the best job
    you can answering these questions. It is a system that no one
    should have to apologize for, but it is a system that we are
    going to have to change here in Congress; and I think that is
    what you will see going forward. I yield back.
        Ms. DeGette. The gentleman yields back.
        We now have several members who are not on this
    subcommittee but who have been gracious enough to be here for
    most of all of the hearing, and I appreciate their attendance
    and input. I would like to first recognize Congressman Bucshon
    for 5 minutes.
        Mr. Bucshon. Thank you, Madam Chairwoman.
        I was a physician before I was in Congress, so these types
    of issues are extremely important to me. For me it is all about
    people and taking care of people, making sure especially when
    it is a life-sustaining drug. I appreciate all of your input.
    It is a system that needs changed.
        We did a hearing last Congress and we had eight
    stakeholders in the entire supply chain and we pretty much got
    this, you know, the whole time, and I get that. I am not
    blaming anybody. I am just saying I think it is just, we have
    developed a system over time that is going to need changed. I
    am going to have questions for both the PBMs and the companies.
        Dr., is it Dutta, yes, I understand that representatives
    from your company testified in front of the Senate Finance
    Committee yesterday. My understanding is that your company was
    asked questions about contracting practices and relationships
    with manufacturers. I would like to just follow up on those and
    then Ms. Bricker and Mr. Moriarty can comment also.
        Can you talk about the following: Has your company ever
    proposed in contract or otherwise demanded that manufacturers
    give advance notice of list price decrease? I remind you,
    everybody, we are all under oath here, so, and we have access
    to information potentially that could counteract a questioned
    answer that isn't accurate.
        Dr. Dutta. Yes.
        Mr. Bucshon. OK. And then the manufacturers pay a higher
    fee, a rebate, if list prices do not increase above a certain
    percentage in that contract year? So, for example, if they
    don't increase their list price above a certain percent that
    they may have to pay a higher fee or rebate for that drug?
        Dr. Dutta. I'm not aware of that.
        Mr. Bucshon. OK. And that manufacturers pay a certain
    rebate amount even if they decrease their list price?
        Dr. Dutta. I'm not----
        Mr. Bucshon. My point is if you have a list price here and
    the company says, ``We are going to go down to here,'' and the
    rebate was based on the higher list price, does that amount
    stay the same?
        Dr. Dutta. I'm not aware of that.
        Mr. Bucshon. OK.
        Same questions, Ms. Bricker, is do you have contractual or
    otherwise demanded that manufacturers give advance notice of
    list price decrease?
        Ms. Bricker. No, we welcome lower list prices.
        Mr. Bucshon. OK, great. And that manufacturers pay a higher
    fee or rebate if list prices do not increase above a certain
    percentage in that contract year?
        Ms. Bricker. No.
        Mr. Bucshon. OK. The manufacturers pay a certain rebate
    even if they decrease their list?
        Ms. Bricker. No.
        Mr. Bucshon. OK. We hear that they do.
        But, Mr. Moriarty, same thing, I mean do you have
    contractual relationships that otherwise demand that the
    manufacturers give you advance notice of decrease in the list?
        Mr. Moriarty. No.
        Mr. Bucshon. OK, great. The manufacturers pay a higher fee
    or rebate if list prices do not increase above a certain
    percentage in a contract year?
        Mr. Moriarty. No.
        Mr. Bucshon. OK, great. The manufacturers pay a certain
    rebate amount even if they decrease the list?
        Mr. Moriarty. No.
        Mr. Bucshon. OK.
        Mr. Moriarty. We are all about net price.
        Mr. Bucshon. Understood.
        I am going to focus on the 340B program real quickly. I
    have been an advocate for reforming that program. Information
    that Novo Nordisk provided to the committee indicated that many
    of Novo Nordisk's insulin products are at penny pricing in the
    340B program. Moreover, information Novo Nordisk provided the
    committee showed that for one of these insulin products at
    penny pricing the number of packages provided to 340B entities
    increased from just over 270,000 packages in 2014 to over
    735,000 packages in 2018. That is more than 172 percent
    increase in the number of packages supplied to 340B entities,
    and many of the Novo Nordisk other insulin products also saw a
    significant increase in the number of packages sold in the 340B
    program during this period.
        Can you explain the impact that the 340B program has had on
    Novo Nordisk's pricing in the private and commercial markets?
        Mr. Langa. We have over 18,000 facilities, I believe, at
    this point roughly and it is at penny pricing. So it's
    literally 99.9 percent, and the packaging is, I believe as you
    reference it so; and has been going up. Is the question its
    influence on the commercial market?
        Mr. Bucshon. Yes, I mean because of that, because of its
    penny pricing and the volume has gone up dramatically, has that
    had an effect on the overall pricing structure in the rest of
    the marketplace, essentially?
        Mr. Langa. I think the challenge has been the 340B entities
    and who actually gets the designation and not. I think that's
    been more of the complexity and the challenge than it has been
    the spillover.
        Mr. Bucshon. OK.
        Mr. Mason, same thing. I mean 340B has dramatically
    expanded as we all know, right?
        Mr. Mason. A similar question, I mean obviously it does
    take away our net sales. If those are legitimately helping, you
    know, individuals that need that help we're fine that our
    product is going----
        Mr. Bucshon. I understand that. I mean, but, and quickly. I
    am out of time.
        Ms. Tregoning. Yes. I think the issue is the heavily
    discounted products that go into the 340B system. But are those
    heavily discounted prices making their way to patients.
        Mr. Bucshon. Yes. I am going to just quickly say, with your
    indulgence, Madam Chairwoman, that in the 340B program I firmly
    believe based on this subcommittee's report that was released
    last Congress that we need to seriously look at and reform the
    340B program; so that it continues to exist for the hospitals
    and patients that need it, but add a degree of transparency
    because it is spiraling.
        Thank you, I yield back.
        Ms. DeGette. I thank the gentleman. The Chair now
    recognizes the very, very patient woman from California, Ms.
    Barragan, for 5 minutes.
        Ms. Barragan. Thank you very much.
        You know, I am sitting here, and I have been hearing this
    back-and-forth for the last couple of hours, and the way I
    think I would summarize this is it sounds like we are playing a
    middleman. It just sounds like we are playing a middleman for
    prescription drugs to be on a preferred list. That is not just
    to put all the blame here, but then these list prices have just
    been skyrocketing and then when we ask about pricing. What we
    are hearing back from the drug companies is, well, the net
    price is actually declining. Last time I checked I think Lilly
    was doing pretty good. Wouldn't you say so, Mr. Mason? Why
    don't you tell me what the revenue was for this coming year?
    What is Lilly's revenue this coming year?
        Mr. Mason. $21 billion.
        Ms. Barragan. OK, I saw $25.3 billion for the coming year.
    Your CEO in 2014 was making 14.5 million in a pay package. That
    was in 2014. The new CEO, 2018, is making $17.2 million in a
    pay package. You guys are doing okay. I would think so. The
    American people sees that, and they say, ``Why can't we just
    get pricing for insulin, a lifesaving drug that we need? Not
    that we want, but that we need.'' And they say Congress has to
    do something.
        When you see what, when you hear what is happening here
    today that is exactly what is going to have to happen. I don't
    see anything happening here. I mean, look, I represent a
    congressional district that is a majority minority. People of
    color are disproportionately impacted by diabetes, Latinos and
    African Americans. I happen to represent a district that
    includes Compton and Watts, very low-income, working class
    families who are struggling. My report says there is over
    80,000 uninsured there, a lot of people who probably can't
    afford to pay for their insulin.
        Do you all recognize that YOUR pricing policies and this
    system is causing people to die every day? Do you all recognize
    that? Mr. Mason, do you recognize that? Let me just go down the
    list here, yes or no, do you all recognize this?
        Mr. Mason. We don't want anyone not to be able to provide
    their insulin. We----
        Ms. Barragan. I understand that. But do you recognize that
    this pricing system and model is causing people to die?
        Mr. Mason. We need to do something about it collectively.
        Ms. Barragan. OK, that is a yes.
        Mr. Langa?
        Mr. Langa. We recognize the model is certainly a challenge,
    yes.
        Ms. Barragan. You are playing a role in that model. Let's
    not mince any words here, is these companies and the PBMs are
    playing a role in this model and that is why we are having this
    hearing is because we are trying to get to the bottom of it.
        Ms. Barragan. Ms. Tregoning.
        Ms. Tregoning. Yes, we recognize that's happening and
    that's why we put in place the programs, to address the
    inadequacies of the current system so that that doesn't happen,
    so people aren't forced into rationing their insulin. We don't
    want to see that.
        Ms. Barragan. Mr. Moriarty?
        Mr. Moriarty. There's no question there's a portion of the
    population where this needs to be addressed very directly, no
    question.
        Ms. Barragan. Ms. Bricker?
        Ms. Bricker. Absolutely there are patients falling through
    the cracks. We exist only to make medication more affordable
    and----
        Ms. Barragan. OK. I am not obviously going to get you to
    tell me that you are a part, because I mean, and the reality is
    what we heard today that that is what is happening here. You
    know, I wish that you all would just come together and
    collaborate.
        A moment ago, Ms. Bricker, I believe you are the one who
    said that the way you were able to get the $25 plan and the
    deal that you were able to get for the insulin, the new program
    that you just rolled out, was that you collaborated together,
    that you worked together. So if you could do it there, how come
    you all can't do it for others, right? And so, this is where
    Congress has to step in and do something. It is because of
    profits. It is because of greed. The American people are tired.
    And when people die, when people die and that is what is
    happening, make no mistake about it, we hear about it. The
    country hears about it and it is outrageous. It is completely
    outrageous.
        I want to end quickly on the Medicare Part D. You know, in
    2018, more than 43 million seniors enrolled in Part D plans.
    Currently, the Government is prohibited from negotiating
    directly with the drug manufacturers on behalf of Medicare Part
    D enrollees. If this prohibition were lifted the Government
    would be able to provide the leverage needed to bring down
    prescription drug pricing.
        On a yes or no real quick because I only have 10 seconds,
    starting on the end, yes or no, do you support Medicare being
    able to negotiate drug prices under Part D?
        Mr. Mason. Prices are getting better in Part D----
        Ms. Barragan. Yes or no, would you support negotiating drug
    prices under Medicare Part D?
        Mr. Mason. Just don't think they're needed.
        Ms. Barragan. OK.
        Mr. Langa. I think everything we would consider, if it
    helped the patient.
        Ms. Barragan. So that is a yes?
        Mr. Langa. I think we'd consider everything. I think the
    fair market, the free market that's playing right now is
    working because we have some of the heaviest discounts in Part
    D.
        Ms. Barragan. It is not working because people are dying,
    and they can't afford it.
        But next?
        Ms. Tregoning. The PBMs are very effective negotiators. The
    question: is what do we do with the results of those
    negotiations?
        Ms. Barragan. You don't have an answer on whether you
    support Medicare being able to negotiate drug prices under Part
    D?
        Ms. Tregoning. Don't support direct negotiation because the
    PBMs are effective negotiators.
        Ms. Barragan. You do not. OK.
        Mr. Moriarty. We do not. We drive very effective
    discounting.
        Ms. Barragan. OK.
        OK, Ms. Bricker?
        Ms. Bricker. Similarly, yes. The Government----
        Ms. Barragan. You do not?
        Ms. Bricker. Do not support.
        Ms. Barragan. OK.
        Mr. Dutta?
        Dr. Dutta. We do not.
        Ms. Barragan. OK. I can understand why that might be the
    case. It is unfortunate, but my time is up. I yield back.
        Ms. DeGette. Thank you. I thank the gentlelady.
        I am now pleased to recognize the gentleman from Georgia,
    Mr. Carter, for 5 minutes.
        Mr. Carter. Thank you, Madam Chair, and thank you for
    allowing me to participate in this.
        Ladies and gentlemen, thank you for being here today. Just
    a full disclosure, currently I am the only pharmacist serving
    in Congress. I practiced pharmacy, community pharmacy,
    independent community pharmacy for over 30 years. You know, I
    remember and just FYI, I started when I was ten. But I can
    remember that--I can remember when PBMs evolved. I can remember
    when PSC was nothing more than a processor. That is all they
    did was process claims before PBMs got involved in setting up
    formularies. I can remember ordering directly from drug
    companies and not going through a wholesaler or anyone, just
    getting a shipment every week, a delivery every week from Eli
    Lilly or any other of the companies, Upjohn, or any of the
    number of companies that we ordered from.
        You know, my colleague, Mr. Tonko, mentioned earlier about
    patients having to make choices between eating and between
    paying for their medications. I have seen it firsthand. I have
    witnessed it firsthand.
        Ms. Bricker, you said you were a pharmacist and practiced
    in community forums. I don't know what your experiences were.
    You are obviously a lot younger than me, but at the same time I
    can tell you I have seen it. I have seen patients at the
    counter having to make a decision between buying medicine and
    between buying groceries. I have seen mothers in tears because
    they couldn't afford their medications. I have witnessed it
    firsthand. I was the boots on the ground there. That is why I
    am so passionate about that.
        I wanted to start with you Mr. Langa. During a briefing
    with committee staff, I don't know if it was you or a member,
    or a representative of your company; but they said that list
    prices started to increase more rapidly around the same time
    that there started to be more consolidation throughout the drug
    pricing supply chain, and that there have been increasing
    demands on rebates. Has consolidation impacted the list price
    of medications?
        Mr. Langa. I think it was a factor. I think that as the
    PBMs today, as I mentioned the three here today represent
    almost 220 million covered lives or 80 percent of the lives,
    so.
        Mr. Carter. And that is probably, the three here today I
    believe represent over between 70 and 80 percent of all the
    PBMs in America.
        Mr. Langa. Correct. I think that as the consolidation that
    purchasing power got bigger, the rebate challenges got heavier.
        Mr. Carter. Absolutely.
        Mr. Mason, would you agree with that? And in fact, I
    believe that you responded to a letter and said the same thing.
        Mr. Mason. Yes.
        Mr. Carter. OK.
        I would like to ask you, Mr. Moriarty, you are with CVS
    Health. CVS is a drugstore, right?
        Mr. Moriarty. That's correct.
        Mr. Carter. Caremark is the PBM.
        Mr. Moriarty. That's correct.
        Mr. Carter. And that is owned by CVS, the same company?
        Mr. Moriarty. That's correct.
        Mr. Carter. Aetna Insurance is the same company?
        Mr. Moriarty. That's correct.
        Mr. Carter. OK, so we got Aetna the insurance company, we
    got Caremark the PBM, and we got CVS the drugstore, all the
    same company, right?
        Mr. Moriarty. That's correct.
        Mr. Carter. OK.
        Ms. Bricker, I believe that Express Scripts, you are here
    today representing the PBM?
        Ms. Bricker. Yes, I am.
        Mr. Carter. You are also--you just bought out CIGNA
    Insurance. That is right?
        Ms. Bricker. CIGNA acquired Express Scripts.
        Mr. Carter. CIGNA acquired Express Scripts, and you also
    have your own mail-order pharmacy; is that correct?
        Ms. Bricker. We do have a mail-order pharmacy.
        Mr. Carter. OK.
        Dr. Dutta, same thing with you. Optum is the PBM, United
    Healthcare is the insurance company, and you also have your own
    mail-order pharmacy; is that correct?
        Dr. Dutta. Optum and United Healthcare are sister
    companies, yes.
        Mr. Carter. You do have a mail-order pharmacy that you own
    as well?
        Dr. Dutta. OptumRx has a mail-order pharmacy.
        Mr. Carter. Yes. okay, that is a long yes answer.
    Nevertheless, when you have been saying during these hearings
    that you are returning money to the plan sponsors, can you
    define plan sponsors for me? Is that the insurance companies?
        Mr. Moriarty?
        Mr. Moriarty. It is the employers, State and Federal----
        Mr. Carter. The insurance, are you sending the money back
    to the insurance company?
        Mr. Moriarty. As well as health plans, but it's much more
    than just health plans. Yes, sir.
        Mr. Carter. You are sending it back to--and, Ms. Bricker,
    you are sending it back to the insurance companies?
        Ms. Bricker. So we send back to the clients that hire us.
    Those are employers----
        Mr. Carter. At the end do you send it back to the
    insurance--please remember you are under oath here. Let's get
    on. Do you send it back to the insurance companies?
        Ms. Bricker. In the event that the plan sponsor is an
    insurance company, yes.
        Mr. Carter. Right.
        Ms. Bricker. But that's not the only----
        Mr. Carter. OK.
        Dr. Dutta, same thing with you?
        Dr. Dutta. In the event that the plan sponsor is the
    insurance----
        Mr. Carter. OK, same thing. So essentially you are the PBM
    managing money and you are sending the money back to another
    company that you own. In some cases that could be the case;
    isn't that right, Dr. Dutta?
        Dr. Dutta. So we have many health plans that----
        Mr. Carter. I understand that. But it is possible you could
    be sending it back to the--owned by the same company. So this
    vertical integration that we are talking about here that I have
    been on the FTC and the Department of Justice about, that is
    something that certainly we need to be aware of.
        Boy, 5 minutes flies, let me tell you. But before I
    relinquish my time, I want to congratulate all of you because
    you have done something here today that we have been trying to
    do in Congress ever since the 4 years and 3 months that I have
    been here and that is to create bipartisanship, because what
    you have witnessed here today is bipartisanship.
        This is going to end. I have witnessed it. I have seen what
    you have done with the PBMs. I have seen what you have done
    with DIR fees. I see what you are trying to do now with GER
    fees and BER fees. Let me tell you, what the CMS is proposing
    in the way of doing away with DIR fees and the way of having
    discounts at the point of sale, that is going to happen. We are
    going to make sure that happens and that is going to bring more
    transparency to the system, and we are not going to stop there.
        Thank you, Madam Chair, and I yield back.
        Ms. DeGette. Thank you, Mr. Carter. I was just saying I
    never thought I would see the day when Buddy Carter was
    channeling Jan Schakowsky. Congratulations.
        I now want to recognize Mr. Guthrie for closing questions
    and a statement.
        Mr. Guthrie. I just want to close and when the Chair and I
    were discussing having the hearing we thought insulin was a
    proper one to have. One, I know it is different than 100 years
    ago today. But we had a lady before, a doctor, physician from
    Yale that said that there was--held up an insulin and said this
    is the same insulin from the 1990s as it is today and the price
    has moved forward.
        We wanted to--because we wanted to look at the entire
    system, but we thought if we looked at one drug that affects
    almost--like I said, I have two nieces with diabetes--it
    affects almost every family, that we could look at what is
    going on and then we could extrapolate to bigger.
        I will tell you, and you were talking about Ms. Schakowsky,
    my friend Ms. Schakowsky from Illinois, she also talked about
    President Trump in saying that this is important to him. My
    experience with him in meeting with him is that drug pricing is
    important to him, so it is everybody. It is uniting everyone.
        I am going to be quick. I know 5 minutes went fast before,
    I didn't get all my questions. I am not going to ask a question
    because that is not what I have been recognized for. But
    innovation is important. I saw a film yesterday of a father
    talking about his daughter, I don't know if ``cured'' is the
    right word, but not having any symptoms from sickle cell. I
    mean it is just--Hepatitis C, you can take with, and you talk
    about medical devices. You can do the artificial pancreases
    here.
        So innovation and having a market-based system and a free
    enterprise system is absolutely important and--but what we are
    trying to get at with this is, and hopefully you can see our
    frustration, is that we see the pharmaceutical companies say,
    ``Our net price is going down.'' We see the list price going
    up. I have friends here from Bardstown that are in the Buddy
    Carter situation, are community pharmacists, and they see, have
    described to me situations that he just described and they have
    to pay the list price to sell to somebody who is not through
    the--when they sell, so it is a cash flow to those kind of
    businesses.
        What we are trying to figure out is if the net price is the
    net price, then why isn't that what is paid to the--if the idea
    is we are going to get the lowest price for our insurance
    companies, then why isn't selling something for $135 that is
    costing them $135 better than selling something 300 or $400 and
    getting 300 or $400 back, other than saying I saved you that
    money? Just trying to figure out where the money is going and
    so this has been informative.
        I think one question I wanted to ask that I am going to do
    for the record is, so what you put on the formulary, is it
    better for a high list price with a lower net or that is better
    for the insurance company, but it is not as good for a--if it
    is just a lower net price or just lower list price, it is
    actually lower for the consumer going to the counter at the
    pharmacy?
        This is just hopefully the beginning of a series of
    hearings and it has been informative. We do appreciate you
    willing to come here and your testimony and trying to inform us
    because we do have to make some decisions. We don't want
    unintended consequences because you could get into--if you get
    into price controls you get into rationing and you get into
    shortages and that is not where we want to--that is not where I
    want to go. We want people to have a fair price that they can
    pay and if they can't pay to have the assistance to have that
    because it is lifesaving.
        Thank you for your indulgence and I yield back.
        Ms. DeGette. I thank the ranking member, and I do want to
    thank the witnesses. I know people asked you hard questions. It
    was important to us to get everybody in here, and I think we
    can all agree that the system is broken, and it has grown up in
    a way over time that people didn't anticipate. But here is the
    thing. The people who are suffering are the patients. In the
    case of insulin, the people who are suffering are people who
    need insulin every second of every minute of every day or they
    will die, and that is the issue that we have here.
        I now, having done this investigation last year with my
    colleague from New York, Tom Reed, and now doing this
    investigation, I think I have a pretty good grip, and I think
    the members of this committee are getting a better and better
    grip of what is going on. And what is going on is the system
    has grown up in this country where we are continually--it is a
    smoke-and-mirror system where we are continually increasing the
    list price of insulin in order to try to do negotiations to
    somehow get the price of insulin down.
        But let's look at the reality of the situation. The members
    of this panel kept saying over and over again net prices of
    insulin have gone down and one person even said that nobody
    pays list price, they all pay net price. But that is not
    exactly true.
        So I just want to give you the example of Humalog, because
    Humalog is one of those insulins, it is not 100 years old, but
    it is over 20 years old and in 2001, Humalog cost $35 a vial.
    Today, no change to Humalog--it is not Tresiba, which by the
    way Tresiba is not an insulin, it is another drug to help
    absorption of insulin that is given to type 2 diabetics--so
    Humalog, it is still the same formulary. It is $275 today for a
    bottle of the same insulin that I bought for Francesca when she
    was six years old, and the generic Humalog that Lilly has come
    up with, good news, it is only $137 a bottle. So it is still
    way beyond where it was in 2001.
        Well, now Sanofi has a new generic alternative, Admelog. I
    just sat here and looked and Admelog, it might not cost as much
    as Humalog, but it costs over $200 a bottle. So let's not kid
    ourselves that the generic equivalent of this is really any
    cheaper for that young woman in my district who doesn't have
    insurance who is desperately trying to find two bottles of
    insulin every month. That is $400 for her even if she bought
    that.
        When you say nobody is paying list price, there are people
    paying list price. The people who are paying list price are the
    people who have high-deductible plans who have to pay for the
    list price when they go in to the pharmacy and they are on
    their deductible, the people who are in the doughnut hole of
    Medicare Part D, and the people who are uninsured.
        I know all of the, everybody here, the PBMs and the
    pharmaceutical companies all have these efforts to give cheaper
    insulin to people like this, but I am going to tell you, the
    lady I talked to in Denver, she didn't know how to get that
    insulin. She had no idea how to get it, and our witnesses last
    week said many people in that situation don't. It is not a
    solution to the problem, it is just a temporary Band-aid and it
    is one that we have to stop with a wholesale innovation.
        Let me just say, finally, this. It is not like the
    pharmaceutical companies or anybody else in the system is doing
    this for a public interest reason. The pharmaceutical companies
    had $323 billion in profits last year. The PBMs had $23 billion
    in profits last year. And so everybody is making a profit and
    the people who are really suffering here are the people who
    either have to pay list price or even after their deductible
    have to pay an unacceptable price and nobody here in this room
    wants that.
        What we are going to do, we are going to get together in a
    bipartisan way and we are going to work with all of you, plus
    everybody else in the distribution center, to figure out how we
    can provide insulin to diabetics at a cost that they can afford
    and we are going to do that as quickly as we can. So as you
    heard we are having an ongoing investigation here. We are
    prepared to talk to you now and we are prepared to bring you
    all back in July or in September to talk about the progress
    that we have made, because this is not optional and it is going
    to happen. I want to thank you all again for coming today and
    we are not going to have any more testimony, but I really want
    to thank you for coming and I want to thank you for being part
    of the solution and not a continuing part of the problem.
        In closing, I will remind members that pursuant to
    committee rules they have 10 business days to submit additional
    questions for the record to be answered by witnesses who have
    appeared before the subcommittee. I ask that the witnesses
    agree to respond promptly to any such question should you
    receive any, and with that the subcommittee is adjourned.
        [Whereupon, at 2:37 p.m., the subcommittee was adjourned.]
        [The article appears at the conclusion of the hearing.]

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