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





 
           PRESCRIPTION DRUG COVERAGE IN THE MEDICARE PROGRAM

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 30, 2019

                               __________

                           Serial No. 116-27
                           
                           
                           
 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 
39-904 PDF           WASHINGTON : 2022                       
                        

                    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 Health

                       ANNA G. ESHOO, California
                                Chairwoman
ELIOT L. ENGEL, New York             MICHAEL C. BURGESS, Texas
G. K. BUTTERFIELD, North Carolina,     Ranking Member
    Vice Chair                       FRED UPTON, Michigan
DORIS O. MATSUI, California          JOHN SHIMKUS, Illinois
KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland           H. MORGAN GRIFFITH, Virginia
BEN RAY LUJAN, New Mexico            GUS M. BILIRAKIS, Florida
KURT SCHRADER, Oregon                BILLY LONG, Missouri
JOSEPH P. KENNEDY III,               LARRY BUCSHON, Indiana
    Massachusetts                    SUSAN W. BROOKS, Indiana
TONY CARDENAS, California            MARKWAYNE MULLIN, Oklahoma
PETER WELCH, Vermont                 RICHARD HUDSON, North Carolina
RAUL RUIZ, California                EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan             GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire         GREG WALDEN, Oregon (ex officio)
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
LISA BLUNT ROCHESTER, Delaware
BOBBY L. RUSH, Illinois
FRANK PALLONE, Jr., New Jersey (ex 
    officio)
    
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     2
Hon. Larry Bucshon, a Representative in Congress from the State 
  of Indiana, opening statement..................................     3
    Prepared statement...........................................     4
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     5
    Prepared statement...........................................     7
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     8
    Prepared statement...........................................     9
Hon. Eliot L. Engel, a Representative in Congress from the State 
  of New York, prepared statement................................    66

                               Witnesses

James E. Matthews, Ph.D., Executive Director, Medicare Payment 
  Advisory Commission............................................    10
    Prepared statement...........................................    12
    Answers to submitted questions...............................    67


           PRESCRIPTION DRUG COVERAGE IN THE MEDICARE PROGRAM

                              ----------                              


                        TUESDAY, APRIL 30, 2019

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:30 a.m., in 
room 2322 Rayburn House Office Building, Hon. Anna G. Eshoo 
(chairwoman of the subcommittee) presiding.
    Members present: Representatives Eshoo, Engel, Butterfield, 
Matsui, Castor, Sarbanes, Lujan, Schrader, Kennedy, Cardenas, 
Welch, Ruiz, Dingell, Kuster, Kelly, Barragan, Blunt Rochester, 
Rush, Pallone (ex officio), Burgess (subcommittee ranking 
member), Upton, Shimkus, Guthrie, Griffith, Bilirakis, Long, 
Bucshon, Brooks, Mullin, Hudson, Carter, Gianforte, and Walden 
(ex officio).
    Staff present: Jacquelyn Bolen, Counsel; Waverly Gordon, 
Deputy Chief Counsel; Tiffany Guarascio, Deputy Staff Director; 
Josh Krantz, Policy Analyst; Una Lee, Chief Health Counsel; 
Aisling McDonough, Policy Coordinator; Joe Orlando, Staff 
Assistant; Kaitlyn Peel, Digital Director; Samantha Satchell, 
Professional Staff Member; C. J. Young, Press Secretary; Mike 
Bloomquist, Minority Staff Director; Jordan Davis, Minority 
senior Advisor; Caleb Graff, Minority Professional Staff 
Member, Health; Peter Kielty, Minority General Counsel; Ryan 
Long, Minority Deputy Staff Director; Brannon Rains, Minority 
Staff Assistant.
    Ms. Eshoo. The Subcommittee on Health will now come to 
order.
    Good morning, everyone. I am going to recognize myself for 
five minutes for an opening statement.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Our subcommittee continues its work to lower drug prices 
for seniors and for families across our country. Last month the 
members of the subcommittee passed six bipartisan bills to make 
prescription drugs more affordable by increasing market 
competition. Today, we are going to take a close look at the 
Medicare program to understand what is leading to high 
prescription drug costs for the 60 million Americans who get 
their drugs through Medicare.
    To inform our work, we have present at hand, Dr. Matthews, 
the Executive Director of MedPAC, the Medicare Payment Advisory 
Commission. MedPAC provides valuable nonpartisan advice to 
Congress on the Medicare program.
    We need expert advice. Drug prices are skyrocketing and 
Congress must act, and wants to act. Before we do, we have to, 
I believe, do as best we can to do a deep dive to understand 
the Medicare program and its challenges.
    Medicare accounts for one out of every three dollars spent 
on prescription drugs, and drug spending is growing rapidly 
each year. Whether a patient gets their drugs at the hospital 
under the Part B program, or the pharmacy counter through the 
Part D program, costs are rising.
    In the Part B program, Medicare drug spending doubled from 
2009 to 2017. We spent $32 billion, that's with a B, on Part B 
drugs in 2017. Part D drug spending has also nearly doubled 
over the past ten years. We spent $80 billion in the Part D 
program in 2017.
    These rising costs are putting, I believe, unsustainable 
pressure on the Medicare program and on America's families. In 
a recent Kaiser Family Foundation poll, 23 percent of seniors 
say it is difficult to afford their medications. I know it is 
true for my constituents, and for all of my colleagues 
constituents as well.
    We hear from people on a consistent basis. They are worried 
that when they leave their doctors' office appointments with a 
new prescription written out for them, they are not sure 
whether they can pay for it, afford it or not.
    America leads the world in innovative healthcare, but soon, 
few people will be able to afford this cutting-edge care. This 
committee, through our work on the 21st Century Cures Act, 
promoted development of novel, breakthrough treatments. But, 
with the development of these treatments has come increased 
spending.
    Spending on drugs in specialty tiers has grown nearly 1,000 
percent over ten years, from $3.4 billion in 2007 to $37.1 
billion in 2017.
    Because Medicare has no limit on out-of-pocket spending, 
people who rely on specialty drugs are hit especially hard. One 
study found needing a single specialty drug could cause people 
on Medicare to spend anywhere from $2,000 to $16,000 out-of-
pocket annually.
    Every senior deserves high-value, innovative medicine to 
improve their lives, but rapidly increasing costs affect their 
ability to get the drugs they need. We need solutions.
    Today's hearing is yet another step closer to our, well, I 
would say it is a very important step towards our bringing 
forward solutions to what I just described.
    Welcome to Dr. Matthews. I look forward to your expert 
advice on improving the Medicare Part D program.
    [The prepared statement of Ms. Eshoo follows:]

                Prepared Statement of Hon. Anna G. Eshoo

    Today, this Subcommittee continues its work to lower drug 
prices for seniors and families.
    Last month, the members of this Subcommittee passed six 
bipartisan bills to make prescription drugs more affordable by 
increasing market competition.
    Today, we are taking a close look at the Medicare program 
to understand what is leading to high prescription drug costs 
for the 60 million Americans who get their drugs through 
Medicare.
    To inform our work, we have Dr. Mathews, the executive 
director of MedPAC, the Medicare Payment Advisory Commission. 
MedPAC provides valuable nonpartisan advice to Congress on the 
Medicare program.
    We need expert advice--drug prices are skyrocketing, and 
Congress must act.
    Before we do, we must understand the Medicare program and 
its challenges.
    Medicare accounts for one out of every three dollars spent 
on prescription drugs, and drug spending is growing rapidly 
each year.
    Whether a patient gets their drugs at the hospital under 
the Part B program or the pharmacy counter through the Part D 
program, costs are rising.
    In the Part B program, Medicare drug spending doubled from 
2009 to 2017. We spent $32 billion on Part B drugs in 2017. 
Part D drug spending has also nearly doubled over the past ten 
years. We spent $80 billion in the Part D program in 2017.
    These rising costs are putting unsustainable pressure on 
the Medicare program and American families. In a recent Kaiser 
Family Foundation poll, 23 percent of seniors say it is 
difficult to afford their medications.
    I know it's true for my constituents. I've heard from 
people that are worried when they leave their doctors 
appointment with a new prescription and no way to pay for it.
    America leads the world in innovative healthcare, but soon, 
few people will be able to afford cutting-edge care.
    This Committee, through our work on the 21st Century Cures 
Act, promoted the development of novel, breakthrough 
treatments. But, with the development of these treatments has 
come increased spending.
    Spending on drugs in specialty tiers has grown nearly 1,000 
percent over ten years--from $3.4 billion in 2007 to $37.1 
billion in 2017.
    Because Medicare has no limit on out-of-pocket spending, 
people who rely on specialty drugs are hit especially hard.
    One study found needing a single specialty drug could cause 
people on Medicare to spend anywhere from $2,000 to $16,000 
out-of-pocket annually.
    Every senior deserves high-value, innovative medicine to 
improve their lives, but rapidly increasing costs affect their 
ability to get the drugs they need.
    We need solutions. Today's hearing will get us another step 
closer.
    Welcome to Dr. Mathews and I look forward to your expert 
advice on improving the Medicare Part B and D programs.

    Ms. Eshoo And with that, I will now recognize Mr. Bucshon, 
who will--is taking the place of Mr. Burgess this morning, who 
has to be at the Rules Committee.
    Ms. Eshoo Welcome. It is nice to sit next to you.
    Mr. Bucshon. Thank you. It is nice to sit next to you, 
also.

 OPENING STATEMENT OF HON. LARRY BUCSHON, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF INDIANA

    Madam Chairwoman, thank you for holding this important 
hearing today. I appreciate this opportunity to members to take 
a deeper look at the drug coverage offered to seniors under 
Medicare Part B and Part D. These programs provide critical 
healthcare coverage for American seniors. And getting a better 
understanding of where these programs are today will help 
ensure that we can--they can meet the needs of seniors 
tomorrow.
    As we have been exploring drug pricing in this subcommittee 
and in the committee, this is an important opportunity to hear 
from the Medicare Payment Advisory Commission, a nonpartisan 
organization that is tasked with providing technical advice to 
Congress. MedPAC is an important resource for Congress as we 
look to address challenging issues, such as Medicare's ability 
to provide adequate and affordable drug coverage to seniors, 
and the impacts any programmatic changes may have on 
beneficiaries, providers, and taxpayers.
    Medicare Part B covers drugs that are administered by a 
physician through infusion or injection in an office or 
outpatient setting. These drugs include many high-cost 
chemotherapy agents, and other critical lifesaving medications.
    Medicare Part D provides a prescription drug benefit to 
beneficiaries, and participation is voluntary. The Part D 
program has been a success. According to a recent MedPAC 
report, it has improved beneficiaries' access to prescription 
drugs.
    Generic drugs now account for nearly 90 percent of the 
prescriptions filled. Enrollees' average premiums for basic 
benefits have remained around $30 per month for many years. 
More than 8 in 10 Part D enrollees reported they are satisfied 
with the program. Furthermore, because of the deliberate 
structure of Part D, which incentivizes private health insurers 
to compete against one another, the program has been wildly 
successful in holding down costs to taxpayers.
    In 2016, Part D expenditures were approximately $100 
billion, which was less than half of the $205.5 billion 
projected by the CBO in 2006. In fact, over the first ten years 
that Part D was in operation, CBO data shows that the program 
cost taxpayers $555.8 billion less than originally projected.
    While Part B and Part D operate differently and cover 
different medications, they both provide seniors with access to 
necessary treatments and lifesaving drugs. It is important that 
any suggested changes to these program be well understood, and 
the impacts on patients, providers, and taxpayers be carefully 
considered.
    The Trump administration has made a vow to lower costs of 
drugs, and has proposed changes to both Medicare Part B and D, 
to address the rising list prices, out-of-pocket costs for 
patients, and costs to the Federal Government. These proposed 
changes to how Medicare operates and provides drugs under Part 
B and D should be carefully analyzed to understand their full 
impact.
    It is important that members of Congress on both sides of 
the aisle work together and, with the Administration, find 
solutions to lower list prices and out-of-pocket costs while 
maintaining robust access to seniors, without penalizing 
physicians, taxpayers, or stifling innovation.
    As the Energy and Commerce Committee considers legislative 
proposals to address the high cost of drugs, I appreciate the 
important resource that MedPAC provides Congress. I want to 
thank our witness Dr. Matthews for being here today and I look 
forward to your testimony.
    I yield back.
    [The prepared statement of Mr. Bucshon follows:]

                Prepared Statement of Hon. Larry Bucshon

    Madame Chairwoman, Thank you for holding this important 
hearing today.
    I appreciate this opportunity for members to take a deeper 
look at the drug coverage offered to seniors under Medicare 
Part B and D. These programs provide critical healthcare 
coverage for American seniors and getting a better 
understanding of where these programs are today will help 
ensure that that can meet the needs of seniors tomorrow.
    As we have been exploring drug pricing in this committee, 
this is an important opportunity to hear from the Medicare 
Payment Advisory Commission, a nonpartisan organization that is 
tasked with providing technical advice to Congress. MedPac is 
an important resource for Congress as we look to address 
challenging issues, such as Medicare's ability to provide 
adequate and affordable drug coverage to seniors, and the 
impacts any programmatic changes may have on beneficiaries, 
providers, and taxpayers.
    Medicare Part B covers drugs that are administered by a 
physician through infusion or injection in an office or 
outpatient setting. These drugs include many high cost 
chemotherapy agents, and other critical life-saving 
medications.
    Medicare Part D provides a prescription drug benefit to 
beneficiaries, and participation is voluntary. The Part D 
program has been a success, according to a recent MedPac 
report,``It has improved beneficiaries' access to prescription 
drugs. Generic drugs now account for nearly 90 percent of the 
prescriptions filled. Enrollees' average premiums for basic 
benefits have remained around $30 per month for many years. 
More than 8 in 10 Part D enrollees report they are satisfied 
with the program." Furthermore, because of the deliberate 
structure of Part D--which incentivizes private health insurers 
to compete against one another--the program has been wildly 
successfully in holding down costs to taxpayers. In 2016, Part 
D expenditures were approximately $100 billion--which was less 
than half the $205.5 billion projected by CBO in 2006. In fact, 
over the first ten years that Part D was in operation, CBO data 
shows that the program cost taxpayers $555.8 billion less than 
originally projected. \1\
---------------------------------------------------------------------------
    \1\ https://www.americanactionforum.org/research/medicare-part-d-
advancing-patient-health-private-sectorinnovation/
---------------------------------------------------------------------------
    While Part B and Part D operate differently and cover 
different medications, they both provide seniors with access to 
necessary treatments and life-saving drugs. It is important 
that any suggested changes to these programs be well 
understood, and the impacts on patients, providers, and 
taxpayers be carefully considered.
    The Trump Administration has made a vow to lower the cost 
of drugs and has proposed changes to both Medicare Part B and D 
to address the rising list prices, out-of-pocket costs for 
patients, and cost to the Federal Government. These proposed 
changes to how Medicare operates and provides drugs under Part 
B and D should be carefully analyzed to understand their full 
impact. It is important that Members of Congress on both sides 
of the aisle work together, and with the Administration to find 
solutions to lower list prices and out-of-pocket costs while 
maintaining robust access for seniors without penalizing 
physicians and taxpayers, or stifling innovation.
    As the Energy and Commerce Committee considers legislative 
proposals to address the high cost of drugs, I appreciate the 
important resource that MedPac provides to Congress.
    I thank our witness, Mr. Matthews for being here today, and 
I look forward to your testimony. I yield back.

    Ms. Eshoo. I thank the gentleman for his statement, and now 
I recognize Mr. Pallone, chairman of the full committee, for 
five minutes for his 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 we are continuing this committee's important work in 
providing Americans relief when it comes to the skyrocketing 
price of prescription drugs. We have already passed several 
bills that will remove barriers that delay cheaper generic 
drugs from coming to market. Today we are focusing on the 
rising costs of prescription drugs in the Medicare program so 
we can begin to think about solutions to drive down costs for 
America's seniors and for the Federal Government.
    We have all heard the stories about Americans who cannot 
afford their medications, who are rationing their life-saving 
therapies, or choosing not to fill their prescriptions because 
they instead need to put food on the table. At the same time, 
we have watched as prescription drug spending continues to cost 
the Federal Government more and more each year. And we simply 
can't afford to wait any longer to fix this broken system.
    The way drug prices are set, and the opaque drug supply 
chain, has fostered a system that can be gamed for profit at 
the expense of seniors who need access to affordable medicines.
    I want to thank James Matthews, the Executive Director of 
MedPAC, for testifying. MedPAC is a critical resource to 
Congress and provides invaluable nonpartisan policy 
recommendations on how to improve the Medicare program for 
beneficiaries. MedPAC has conducted significant work on 
prescription drug pricing in the Medicare program. I look 
forward to hearing from Dr. Matthews on how we pay for drugs 
under Parts B and D, and how we can lower drug costs.
    But this is particularly concerning in the Part D program, 
where high cost specialty drugs represent a large and growing 
share of Part D spending. According to MedPAC, spending for 
specialty drugs has grown more than ten times since the 
beginning of the Part D program. That growth resulted in 
specialty drug claims making up nearly a quarter of all gross 
Part D spending in 2017. It is now estimated that between 2019 
and 2023, nearly two-thirds of newly-launched drugs will be 
considered specialty drugs.
    These high cost specialty drugs are partly responsible for 
the fact that each year more beneficiaries are reaching the 
catastrophic phase of the Part D benefit. In 2016, over 360,000 
Medicare beneficiaries reached the catastrophic limit of $4,850 
out-of-pocket, that threshold, in just one visit to the 
pharmacy. That's a significant jump from only 33,000 
beneficiaries in 2010, and this leaves beneficiaries, 
particularly those with serious, chronic, or life-threatening 
diseases at risk for substantial out-of-pocket costs.
    I look forward to hearing from Dr. Matthews about MedPAC's 
proposal to add an out-of-pocket limit to the Part D program. I 
hope we can work together on a bipartisan basisto implement 
some of these ideas in order to provide seniors with peace of 
mind that they will be protected if they need these high-cost 
therapies.
    MedPAC has also noted that the current structure of the 
Part D program may be eroding incentives for Prescription Drug 
Plans to control costs. Currently, the Federal Government pays 
80 percent of the costs for Part D benefits in the catastrophic 
phase of coverage. This means that payors may not be 
incentivized to effectively manage costs for their most 
expensive enrollees since the Government is footing most of the 
bill.
    We will also discuss Part B drug spending, which has 
increased at an average rate of almost 10 percent annually for 
the past decade. These increases are primarily driven by rising 
drug prices, which have a direct impact on out-of-pocket costs 
for beneficiaries, because most beneficiaries are responsible 
for paying a 20 percent coinsurance on their Part D drug--Part 
B drugs. I look forward to examining proposals to slow rapid 
price growth and increase competition in the Part B drug 
program as well.
    While most groundbreaking drugs are coming to market, they 
really are saving lives, increasing quality of life, and 
helping seniors to better manage diseases; but these therapies 
often come with price tags that are unaffordable for the 
average American. And these prices represent a significant 
long-term financial challenge to the Federal Government and to 
the Medicare program. We have to find solutions that promote 
greater affordability and access. I look forward to that 
discussion today.
    I don't think anybody else wants my time, Madam Chair, I 
yield back. Thank you.
    [The prepared statement of Mr. Pallone follows:]

             Prepared Statement of Hon. Frank Pallone, Jr.

    Today we are continuing this Committee's important work in 
providing Americans relief when it comes to the skyrocketing 
price of prescription drugs. We have already passed several 
bills that will remove barriers that delay cheaper, generic 
drugs from coming to market. And today we're focusing on the 
rising costs of prescription drugs in the Medicare program, so 
we can begin to think about solutions to drive down costs for 
America's seniors and for the Federal Government.
    We have all heard the stories about Americans who cannot 
afford their medications, who are rationing their life-saving 
therapies, or choosing not to fill their prescriptions because 
they instead need to put food on the table. At the same time, 
we have watched as prescription drug spending continues to cost 
the Federal Government more and more each year. We cannot 
afford to wait any longer to fix this broken system.
    The way drug prices are set, and the opaque drug supply 
chain, has fostered a system that can be gamed for profit at 
the expense of seniors who need access to affordable medicines.
    I'd like to thank James Mathews, the Executive Director of 
the Medicare Payment Advisory Commission, for testifying today 
on this important issue. MedPAC is a critical resource to 
Congress and provides invaluable nonpartisan policy 
recommendations onhow to improve the Medicare program for 
beneficiaries. MedPAC has conductedsignificant work on 
prescription drug pricing in the Medicare program, and I look 
forward to hearing from Dr. Mathews on how we pay for drugs 
under Parts B and D and how we can lower drug costs.
    This is particularly concerning in the Part D program, 
where high cost specialty drugs represent a large and growing 
share of Part D spending. According to MedPAC, spending for 
specialty drugs has grown more than ten times since the 
beginning of the Part D program. That growth resulted in 
specialty drug claims making up nearly a quarter of all gross 
Part D spending in 2017. It is now estimated that between 2019 
and 2023, nearly two-thirds of newly launched drugs will be 
considered specialty drugs.
    These high cost specialty drugs are partly responsible for 
the fact that each year more beneficiaries are reaching the 
catastrophic phase of the Part D benefit. In 2016, over 360,000 
Medicare beneficiaries reached the catastrophic limit of $4,850 
out-of-pocket threshold in just one visit to the pharmacy. 
That's a significant jump from only 33,000 beneficiaries in 
2010. This leaves beneficiaries, particularly those with 
serious, chronic, or life-threatening diseases at risk for 
substantial out-of-pocket costs.
    I look forward to hearing from Dr. Mathews about MedPAC's 
proposal to add an out-of-pocket limit to the Part D program. I 
hope we can work together on a bipartisan basisto implement 
some of these ideas in order to provide seniors with peace of 
mind that they will be protected if they need these high cost 
therapies.
    MedPAC has also noted that the current structure of the 
Medicare Part D program may be eroding incentives for 
Prescription Drug Plans (PDPs) to control costs. Currently, the 
Federal Government pays 80 percent of the costs for Part D 
benefits in the catastrophic phase of coverage. This means that 
payors may not be incentivized to effectively manage costs for 
their most expensive enrollees since the Government is footing 
most of the bill.
    We'll also discuss Part B drug spending, which has 
increased at an average rate of almost 10 percent annually for 
the past decade. These increases are primarily driven by rising 
drug prices, which have a direct impact on out-of-pocket costs 
for beneficiaries because most beneficiaries are responsible 
for paying a 20 percent coinsurance on their Part B drugs. I 
look forward to examining proposals to slow rapid price growth 
and increase competition in the Part B drug program.
    While more groundbreaking drugs are coming to market that 
are saving lives, increasing quality of life, and helping 
seniors to better manage diseases, these therapies often come 
with price tags that are unaffordable for the average American. 
These prices also represent a significant, long-term financial 
challenge to the Federal Government and to the Medicare 
Program. We must find solutions that promote greater 
affordability and access, and I look forward to the discussion 
today.

    Ms. Eshoo. The gentleman yield back, and now I'm pleased to 
recognize Mr. Walden, the ranking member of the full committee, 
for five minutes for his opening statement.

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

    Mr. Walden. Thank you, Madam Chairman. Thank you for 
holding this hearing.
    This hearing continues this committee's important work on 
bringing down the costs of prescription drugs for seniors, 
frankly for all Americans, and patients across thecountry, but 
especially seniors in the Medicare program.
    I want to thank our witness. Doctor, we are delighted to 
have you here as Executive Director of Medicare's Payment 
Advisory Commission, more commonly known as MedPAC. The work 
you do there, and your team, is really important. MedPAC 
provides a really valuable service to lawmakers. As an 
independent nonpartisan commission, provides data analysis and 
policy recommendations to improve the Medicare system, which we 
all care deeply about.
    We value this input and we really appreciate the work of 
the Commission.
    Today, we call on MedPAC's expertise with respect to rising 
prescription drug costs in the Medicare system. This committee 
has a long history on this issue, including the creation of 
Part D, which some of us were on the committee then and did the 
full overnight mark-up, and 60 amendments, and a lot of back 
and forth, but we got it done. That was back in 2003.
    Nearly 44 million Medicare beneficiaries use Medicare Part 
D today. I remember there was talk then that nobody would write 
one of those plans, it will never get off the ground, it will 
cost a fortune. And, actually, it has worked pretty well. Now 
there are some tweaks all these years later we need to look at.
    It is important to note the overwhelming majority of 
seniors who have Part D are satisfied with their plan. The 
premiums have remained stable and, frankly, relatively low 
throughout the program's history. The program has largely been 
a good success, and harnessing the power of competition to 
create a working market has given consumers more choices than 
anybody thought possible, and has helped keep prices down.
    Now, there are challenges to Medicare Part D that have 
grown over time and have saddled some beneficiaries with 
significant increases in their out-of-pocket costs. 
Additionally, the share of Medicare Part D spending 
attributable to the catastrophic stage of coverage, has 
increased from 14 percent of the program costs in 2006 to 40, 4 
zero, percent in 2017. We should confront these issues now to 
modernize Part D and keep drugs affordable for seniors and 
address misaligned incentives to drive up costs.
    The same goes for Part B where a small number of drugs 
represent a large percentage of Government and beneficiary 
spending on the program. As others have noted, Part B drug 
spending has increased almost 10 percent per year since 2009. 
While there has been tremendous development, especially drugs, 
that can effectively treatcancer and other diseases in amazing 
ways, these rising costs must also be confronted.
    I look forward to hearing from our witnesses, or our 
witness, on whether the current structure of how Part B drugs 
are reimbursed--can and should be modified to foster 
competition and to lower prices. One consistent concern I hear 
about from my constituents in Oregon, and I have done 20 town 
halls so far this year, is the high cost of prescription drugs. 
I know that my colleagues on both sides of the aisle have heard 
similar concerns in their districts as well.
    We have worked in a bipartisan manner on lowering drug 
costs over the last several years. During my tenure as chairman 
of this committee and during the first few months of this year 
we have continued those efforts. I believe that that should 
continue. This hearing will help us further our bipartisan work 
to lower drug costs for American consumers and seniors who rely 
upon Medicare.
    Thanks again, Doctor, for being here today and the good 
work you do at MedPAC.
    With that, Madam Chair, I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared Statement of Hon. Greg Walden

    Thank you, Chairwoman Eshoo for holding this hearing today. 
This hearing continues this committee's important work on 
bringing down the cost of prescription drugs for patients 
across the country, including seniors in the Medicare program.
    I'd like to thank our witness, Dr. James Matthews, 
Executive Director for theMedicare Payment Advisory Commission, 
more commonly known as MedPAC. MedPAC provides a valuable 
service to lawmakers in Congress, as an independent, 
nonpartisan commission providing data analysis and policy 
recommendations to improve the Medicare system. We value this 
input and appreciate the work of the Commission.
    Today, we call on MedPAC's expertise with respect to rising 
prescription drug costsin the Medicare system. This Committee 
has a long history on the issue, including the creation of the 
Part D benefit back in 2003 that nearly 44 million Medicare 
beneficiariesuse today. It's important to note that the 
overwhelming majority of seniors who have Part D are satisfied 
with their plan, and premiums have remained stable and 
relatively low throughout the program's history. The program 
has largely been a success, harnessing the power of competition 
to create a working market that gives consumers choice and 
keeps prices down.
    There are challenges in Part D, however, that have grown 
over time and have saddled some beneficiaries with significant 
increases in their out-of-pocket costs. Additionally, the share 
of Part D spending attributable to the catastrophic stage of 
coverage has increased from 14% of program costs in 2006 to 40% 
in 2017. We should confront these issues now to modernize the 
Part D benefit, keep drugs affordable for seniors and address 
misaligned incentives that drive up costs.
    The same goes for Part B, where a small number of drugs 
represent a large percentage of Government and beneficiary 
spending on the program. As others have noted, Part B drug 
spending has increased almost 10% per year since 2009. While 
there has been tremendous development of specialty drugs that 
can effectively treat cancer and other diseases in amazing 
ways, these rising costs must also be confronted. I look 
forward to hearing from our witness on whether the current 
structure of how Part B drugs are reimbursed can be modified to 
foster competition and lower prices.
    One consistent concern I hear about from my constituents in 
Oregon as I hold town halls and other meetings is the high cost 
of prescription drugs. I know that my colleagues on both sides 
of the aisle have heard similar concerns in their districts as 
well.
    We have worked in a bipartisan manner on lowering drug 
costs over the past several years, during my tenure as Chairman 
and during the first few months of this year. I believe that 
should continue, and this hearing will help us further our 
bipartisan work to lower drug costs for American consumers and 
seniors who rely on Medicare.
    Thank you again to our witness for being here today, and I 
look forward to a productive hearing.

    Ms. Eshoo. The gentleman yield back.
    Now I would like to remind Members that, pursuant to 
committee rules, all Members' written opening statements shall 
be made part of the record. So, get them in.
    I would now like to introduce our witness for today's 
hearing, Dr. Jim Matthews. He serves as the Executive Director 
of the Medicare Payment Advisory Committee, and a very 
important position, a very important commission. And once 
again, thank you for being here today to be instructive to us. 
And we certainly look forward to your testimony.
    You have testified many times in Congress, so I don't think 
I need to explain the lighting system to you. The most 
important one is when it turns red, because that is when your 
five minutes are up.
    So, Dr. Matthews, thank you again. You are now recognized 
for five minutes of testimony.

  STATEMENT OF JAMES E. MATTHEWS, PH.D., EXECUTIVE DIRECTOR, 
              MEDICARE PAYMENT ADVISORY COMMISSION

    Mr. Matthews. Thank you. Good morning, Chairwoman Eshoo, 
Dr. Bucshon, and distinguished committee members. On behalf of 
MedPAC, a nonpartisan, independent congressional advisory 
agency, I am here to convey information on Medicare's payments 
for prescription drugs.
    First, I will describe how Medicare pays for drugs under 
Part B and discuss recent trends in spending and utilization.
    Second, I will do the same with Part D.
    Lastly, I will touch briefly on commission recommendations 
that address these trends.
    I will start with Part B. Part B covers drugs that are 
typically administered by a provider, such as infused 
chemotherapy drugs. Medicare pays for Part B drugs based on the 
average sales price that manufacturers report for a drug, net 
of most rebates and discounts. Medicare pays providers the 
actual sales price, plus a six percent add-on, regardless of 
how much the individual provider has spent to purchase the 
drug. Medicare makes a separate payment to the provider for 
administering the drug.
    Part B spending has grown roughly 10 percent a year since 
2009, reaching $32 billion in 2017. Growth in Medicare spending 
for drugs under Part B is driven largely by rising prices, 
which account for two-thirds of overall spending growth, and 
which reflect manufacturers' significant pricing leverage. 
Under the current payment system, as drug prices rise, 
Medicare's payments will follow. And Medicare has few tools to 
affect prices under Part B.
    Part D uses private plans to deliver Medicare's outpatient 
prescription drug benefit. Part D plans negotiate with 
pharmacies over payment rates for filling prescriptions, and 
with drug manufacturers for post-sale rebates. Medicare is 
prohibited from interfering in these negotiations.
    There are two components of Medicare's payments to plans 
for Part D basic benefits.
    First, there is a per-enrollee payment based on plans' 
bids, which reflects their expected costs for the Part D 
benefit for an average enrollee.
    The second is individual reinsurance, which are cost-based 
payments to plans for which Medicare covers 80 percent of the 
costs in the catastrophic phase of the benefit.
    Part B--Part D spending grew at about 7 percent annually 
between 2010 and 2017, reaching $80 billion. But Medicare's 
reinsurance payments for Part D enrollees who had drug spending 
high enough to reach the catastrophic phase grew almost 20 
percent annually over the same period. Again, high cost 
therapies drive these trends. Part D spending for high-priced 
specialty tier drugs grew tenfold between 2007 and 2017. And, 
again, this growth is driven by price.
    In 2017, 370,000 beneficiaries filled a single prescription 
that was so expensive it would push them into the catastrophic 
phase of the benefit, up from just 33,000 such beneficiaries in 
2010.
    When plans have financial responsibility for insurance 
risk, they face greater incentives to manage costs. However, 
growth in reinsurance, recent changes to the coverage gap, and 
the growth in high-cost medicines may be eroding plans' 
incentives to and ability to control costs. In fact, Part D's 
benefit structure may give plans a financial incentive to play 
certain high-cost, high-rebate drugs on their formularies, even 
when lower cost alternatives are available.
    Growth in drug prices substantially affects Medicare drug 
spending. This growth reflects both higher prices for existing 
products and the launch of new high-price drugs. Yet, again, 
Medicare has very limited influence over drug prices.
    Recent commission recommendations attempt to address the 
growth in Medicare drug spending. In Part B we would give 
clinicians an alternative to the ``buy and bill'' environment, 
and provide incentives for them to use this approach.
    In Part D we would shift more liability for costs in the 
catastrophic phase of the benefit to plans. In exchange, we 
would give plans more tools and flexibility to manage 
enrollees' utilization. We would also eliminate beneficiary 
cost-sharing in the catastrophic phase.
    In sum, prescription drugs are essential to treating many 
medical conditions, and Medicare must ensure that beneficiaries 
have access to appropriate medication therapies. At the same 
time, high prices for drugs make it difficult to ensure this 
access, while protecting the taxpayers and beneficiaries who 
funds the program. We hope the committee regards the Commission 
as a resource as you develop policies to address these critical 
issues.
    Thank you.
    [The prepared statement of Mr. Matthews follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
        Ms. Eshoo. Thank you, Dr. Matthews.
    We have now concluded the opening statements and we will 
move to member questions. Each Member will have five minutes to 
ask questions of Dr. Matthews. I will start by recognizing 
myself for five minutes.
    Again, thank you, Dr. Matthews. In my opening statement I 
spoke about the increase in spending on specialty drugs. And 
you, you also have spent part of your testimony on specialty 
drugs in the Medicare Part D program, and what that means for 
seniors.
    You point out that plans may not have the incentive or the 
ability to control the costs of specialty drugs. So, what, can 
you restate for us what exactly MedPAC believes what plans can 
do to better manage the costs of the new specialty drugs?
    And, of course it is not just Medicare being hit by the 
trend in high-cost drugs. We have--well, I have some other 
questions, too. Maybe I should just put all my questions out 
and you can answer them.
    Veterans' Affairs, Medicaid, and private plans, how are 
they managing this trend?
    How to other Federal programs like the VA and TRICARE 
leverage their buying power for these products?
    And what is the effect of high-cost drugs--well, we know 
what the effect of high-cost drugs on beneficiaries is. Does 
MedPAC have a recommendation relative to an out-of-pocket cap 
needed for Medicare drug costs?
    I know that you said that Medicare has very little 
authority relative to pricing but, you know, we want to examine 
everything, every angle of this Rubik's Cube. And so, if we 
were to implement such a cap, how would that affect the 
incentive for drug makers in Part D plans that we have 
discussed?
    So, those are my questions. And have at it.
    Mr. Matthews. Sure. So, and again thank you for the 
invitation to testify and to clarify. This is my first 
testimony before Congress.
    Ms. Eshoo. Oh. Well, bravo. It is not so bad, is it?
    Mr. Matthews. Not yet.
    [Laughter.]
    Ms. Eshoo. This is a friendlier hearing room. It is 
smaller, it is more personal. So, share your wisdom and your 
expertise with us.
    Mr. Matthews. Sure. So, your question has multiple 
components and I am going to try and get to all of them.
    First, as you know, Medicare has made a recommendation in 
2016, and slightly modified that recommendation in 2018, to 
modify the structure of the Part D benefits. And the motivation 
behind this recommendation hinges on the entry of high-cost, 
high-rebate drugs into the Part D program, and the incentives 
that the plans have to place those drugs on their formularies, 
even when lower cost alternatives are available.
    And the incentives are such that the plan can move a 
beneficiary into the catastrophic phase of the benefits where 
the plan only has 15 percent liability for those costs under 
current law. The Medicare program is liable for 80 percent, 
which it makes on a retrospective cost basis. So, it is counter 
to the incentives that the plans have to actually manage the 
benefit above the catastrophic limit.
    Plans are not the only actor that might have a role in 
managing costs at that level. We have started to evaluate 
additional reforms to the structure of the Medicare Part D 
benefit that would contemplate a role for the manufacturer to 
have some financial responsibility above that catastrophic 
phase, in contrast to current law where the manufacturer is 
liable for a 70 percent discount on brand name drugs within the 
coverage gap.
    We are contemplating whether or not the incentives might be 
better for beneficiaries and the program as a whole by shifting 
that liability above the catastrophic threshold.
    Ms. Eshoo. Is there any benefit to the beneficiaries 
relative to rebates in this?
    Mr. Matthews. So, we think that by aligning the incentives 
for the plans and manufacturers to bargain hard for costs and 
to manage utilization that that would probably have a more 
direct and immediate effect on the majority or the totality of 
Part D enrollees relative to rebates that have distorted 
effects with respect to any individual beneficiary's 
utilization and costs.
    Ms. Eshoo. And the other, how the other programs, private 
plans, Medicaid, VA, how are they managing this trend? How do 
they leverage their buying power for these products?
    Mr. Matthews. So, so Medicaid has a couple of tools 
available to the program. And, again, I am not deep on Medicaid 
because my expertise is primarily Title 18, so I don't want to 
stray too far out of what I am able to talk about. But Medicaid 
benefits from a statutory discount and also from a certain 
inflation rebate that governs how much manufacturers can 
increase their prices.
    Veterans' Affairs is able to contract directly with 
manufacturers and suppliers under the Federal Supply Schedule. 
They can do so because they actually take delivery of products 
and can guarantee utilization. But it is my understanding that 
sometimes VA has been criticized in that they have a closed 
formulary that in some cases has precluded access to certain 
innovative medications.
    Ms. Eshoo. Well, my time has certainly expired. So now I 
would like to recognize Mr. Bucshon, who is standing in for the 
subcommittee ranking member, for his five minutes of questions.
    Mr. Bucshon. Thank you, Madam Chairwoman.
    Dr. Matthews, MedPAC in the past has recommended a 
voluntary market-based program for doctors to use third party 
vendors to obtain drugs in Part D. The Administration, in its 
advanced notice of proposed rulemaking, proposes setting up a 
similar system but would make it mandatory for physicians to 
participate.
    I have heard concerns from providers that requiring them to 
switch to vendors could be very disruptive. Can you discuss why 
MedPAC opted for a voluntary program, and what features you 
included to foster competition on drug pricing?
    Mr. Matthews. Sure. One of the main reasons that led us to 
recommend a vendor-based approach to Part D drugs was the 
potential inflationary incentives inherent in Part B. Where the 
higher the cost of the drug, the higher the six percent add-on 
that the provider who administers the drug receives from the 
program.
    And the research is fairly limited as to whether or not 
providers are actively acting on those incentives but, 
nonetheless, the incentives are still there. And we feel that 
getting providers out of the financial incentives related to 
``buy and bill'' would be better served by having them focus 
more on selecting the drugs that are most appropriate to the 
given patient.
    And so, we have recommended a modernization of the prior 
competitive acquisition program that Medicare used several 
years back under which a vendor would be responsible for 
negotiating prices with manufacturers, and the vendor would be 
able to pass on those prices to the individual clinicians or 
providers who prescribe drugs under Part B.
    Mr. Bucshon. Can I ask a question there?
    Mr. Matthews. Sure.
    Mr. Bucshon. Because if you add another middle person, just 
so you are going to--you might, there might be some savings but 
you are going to eat some of that up; right?
    Mr. Matthews. Under our construct there would be a couple 
of parameters that would govern the ability of a provider to 
eat up those savings.
    One, under our construct savings would accrue to the 
vendor, and savings wouldalso accrue to the clinicians who 
voluntarily elected to participate in that vendor's negotiated 
prices.
    The second thing that we would do----
    Mr. Bucshon. So that would be the difference between 
voluntary and mandatory then essentially; right?
    Mr. Matthews. Yes, sir, that's correct.
    Mr. Bucshon. OK.
    Mr. Matthews. The second thing we would do is under our 
recommendation we would have a requirement that the vendor 
negotiate prices no higher than 100 percent of ASP as currently 
pertains to the market. So, there would be a couple of ways to 
govern any potential price increases on the Medicare----
    Mr. Bucshon. Well, couldn't you, couldn't you just do that? 
Couldn't we just do that without a vendor in the middle? We 
could just say we are--I mean, that has been tried, right? 
There was a demonstration project?
    Mr. Matthews. Yes, sir.
    Mr. Bucshon. In a previous administration cutting it down 
to ASP plus I think two point some percent. I can't remember.
    Mr. Matthews. So, the current sequester effectively reduces 
Medicare payments for Part B drugs from the statutory ASP plus 
six to ASP plus 4.3 percent.
    Mr. Bucshon. Yes, yes. OK, the demonstration project, which 
didn't happen----
    Mr. Matthews. Right.
    Mr. Bucshon [continuing]. Was even lower than that.
    Mr. Matthews. Right.
    Mr. Bucshon. I have another question, so I will move on 
from there.
    But first of all, as a physician I think there 
automatically is an assumption that physicians out there will 
choose higher price, a higher priced product to make more 
money. And I will just push back on that and say that I think 
there are maybe people that would do that. But I would argue 
that the vast majority of physicians make decisions on which 
medications to use for patients based on known clinical 
knowledge based on standard of care in their community. I just 
want to say that up front.
    But we do, but there are incentives. Not disagreeing with 
that.
    In MedPAC's recommendation for Part D it suggests that plan 
sponsors be given more financial incentives to manage the 
benefits of high-cost enrollees by shifting more of the plan 
payments from open-ended reinsurance to capitated payments. As 
part of a--part of this suggestion, plan sponsors would be 
given more flexibility to use ``formulary tools.''
    As a physician I have had some problems with those 
``formulary tools'' such as step therapy and prior 
authorization for many years. That could delay patient access 
to timely medications, disrupt treatment regimens for stable 
patients and create unnecessary physician burden.
    Did MedPAC consider these potential impacts to patients and 
physicians before providing this recommendation?
    Mr. Matthews. Yes, sir, we did. And, as always, there is a 
balance or set of tradeoffs involved in these kinds of 
decisions where you want to give the plans the leverage with 
manufacturers to negotiate prices and incentive to manage 
utilization versus any potential speed bumps that those tools 
put in front of providers and patients in terms of timely 
access to the medications.
    So, we have talked with stakeholders in the course of 
developing our recommendations. And we do understand the 
frustration that some of these utilization management tools 
create. But, at the same time it is a question of the tradeoffs 
and the balance that we are trying to achieve for the program 
as a whole.
    Mr. Bucshon. OK, great. Thank you. My time has expired, and 
I yield back.
    Ms. Eshoo. I thank the gentleman and he yield back.
    The Chair now recognizes Mr. Pallone, the full committee 
chairman, for his five minutes of questioning.
    Mr. Pallone. Thank you. Thank you, Madam Chair. And I 
wanted to kind of follow up on some of those things that you 
mentioned, Madam Chair.
    Let me start with Part D. MedPAC has analyzed that between 
2007 and 2017, Part D program spending increased from $46 
billion to about $80 billion, for an average increase of 5.6 
percent per year, which I think is unsustainable. So, Dr. 
Matthews, can you explain why we are seeing these steep 
spending increases in Part D?
    And it is my understanding that a smaller portion of high-
cost beneficiaries are driving the majority of Part D spending; 
and is that correct?
    Mr. Matthews. Yes, sir, that is correct.
    As one of the members said in the opening statements, Part 
D has been successful in shifting a substantial amount of 
utilization among Part D enrollees to generics, which the 
Commission has supported. But at the same time, we are seeing 
the entry of new high-cost specialty drugs into the program. 
And over the last several years it is those drugs that have 
been predominantly driving the increases in spending that we 
have documented.
    Mr. Pallone. Now, I know you talked a little bit about some 
of MedPAC's solutions to control spending in response to 
Chairman Eshoo. But would you, would you develop that a little 
more? What are some of MedPAC's solutions to control spending 
inthe future?
    Mr. Matthews. OK. So, again, under Part D one of the key 
elements that we would do is restructure the benefit to give 
plans more of an incentive to manage utilization above the 
catastrophic limit. We feel that having the program be 
responsible for 80 percent of those costs above the 
catastrophic limit is inconsistent with the notion that Part D 
was founded on, which was that Part D plans would compete with 
manufacturers in order to generate the best possible price for 
the enrollees in order to keep premiums low.
    So, we feel that the incentives currently has negated 
plans' ability to do that somewhat.
    As we have been discussing the growth in Medicare spending 
for drugs under Parts B and D since then, we have become more 
attuned to the influence of these new, high cost therapies. And 
we are starting, as I said earlier, to contemplate whether or 
not manufacturers, who do indeed control the price, should have 
a greater liability for spending in the catastrophic phase of 
the benefit.
    Again, the Commission has not made any formal 
recommendation there yet, but it is something that we are very 
actively engaged in doing.
    Mr. Pallone. Let me get into two more questions. This is 
the last one on Part D, then I want to ask about Part B.
    You talked about generics. You know, we are very proud of 
the fact that on a bipartisan basis we reported out a package 
of generic competition bills that I think are going to go to 
the floor soon. But, of course, if you have these single source 
drug therapies, there is no competition. Right? So, we know 
often that these innovative products can change lives, the 
single source. But without competition how difficult is it to 
control the cost of those therapies in particular?
    Mr. Matthews. We believe it is difficult. And that is one 
factor that has led us to contemplate going further than our 
2016 benefit restructuring recommendation. And again, here the 
recommendation was to have plans liable for 80 percent of those 
costs.
    But, if we are talking about true sole-source products for 
which there are no competitors, the plans are going to have 
fairly limited negotiating leverage with which to negotiate 
hard on price with the manufacturers.
    And that is why we are starting to contemplate whether or 
not the manufacturers should have some liability for costs 
above the catastrophic phase.
    Mr. Pallone. All right. Now let me address Part D.
    I was struck by the rate of rapid annual growth in Part D 
drugs mentioned in your testimony, almost 10 percent spending 
increases annually for the past decade. So, one question.
    Could you provide some examples of the most expensive drugs 
in the Part D program and the conditions they treat? And what 
are some of the annual per-user costs for these drugs? And what 
is the beneficiary's responsibility for these costs?
    Mr. Matthews. Sure. And just to clarify, this is D?
    Mr. Pallone. D now. This is my only question about D, yes.
    Mr. Matthews. Yes, of course.
    So, a lot of the high-cost drugs that we have been seeing 
over the last several years are high-cost specialty drugs, 
predominantly biologics. All of the top ten drugs for Part Din 
terms of spending are biologics. They are used to treat 
conditions such as cancer and its side effects, rheumatoid 
arthritis, and ocular conditions such as macular degeneration.
    Mr. Pallone. All right. Thank you so much.
    Thank you, Madam Chair.
    Ms. Eshoo. I thank the gentleman, and he yield back.
    The Chair now recognizes Mr. Walden, the full committee 
ranking member for his five minutes.
    Mr. Walden. Thank you, Madam Chairwoman.
    And again, Doctor, thank you for the work you do, and your 
team.
    We know that a lot of surveys show seniors like Medicare 
Part D, like a 90 percent approval rating. But we also see some 
disturbing trends. I wanted to ask you about some of that.
    I hear a lot about the rising out-of-pocket costs for 
seniors. And I have some concerns that some of the changes to 
the Part D program provide incentives to use brands over 
generics, and particularly as it relates to true out-of-pocket 
cost, the acronym TrOOP, calculations.
    So, if a senior used only generics they would have to spend 
about $5,100 to reach the catastrophic stage of coverage; 
correct?
    Mr. Matthews. Yes, sir. That sounds about right.
    Mr. Walden. And so, due to the way TrOOP is calculated, I 
am told a senior would have to spend only $2,275 in a year to 
reach catastrophic coverage if they use only brands. Is that?
    Mr. Matthews. Without commenting on the specific dollar 
amounts, I believe the proportions are correct.
    Mr. Walden. OK. And how have these incentives then affected 
Part D formularies and plan design? What is happening in this?
    Mr. Matthews. So, we do see a trend where plans have in 
certain instances included high-cost, high-rebate drugs on 
their formularies even when lower cost alternatives are 
available.
    And the idea here is that the high-cost drug is going to 
get the beneficiary into the coverage gap sooner than a lower 
cost brand name drug, or a lower cost generic. And it is above 
the coverage gap in the current construct where the plan only 
has 15 percent liability for those costs.
    And so, arguably, there are instances where the size of the 
rebate for certain drugs can be so great as to even begin to 
offset their 15 percent liability above that catastrophic 
limit.
    Mr. Walden. So, what is the effect for taxpayers, and what 
is the effect for consumers for that?
    Mr. Matthews. So, for taxpayers then the fastest growing 
component of Medicare spending for Part D is the reinsurance 
payments that the program makes to plans. And these are 
payments that reflect plans' costs for these extremely high-
cost enrollees. But these payments are also funded directly by 
the Medicare program.
    So, the fact that these reinsurance payments have been 
growing for 20 percent year over year for the last ten years is 
detrimental to taxpayers. And to the extent that these costs 
are reflected in the calculation of Part B premiums, it is 
detrimental for the beneficiaries who are paying for these 
premiums.
    Mr. Walden. All right, thank you very much. I will yield 
back, Madam Chair.
    Ms. Eshoo. I thank the gentleman. He yield back.
    The Chair now recognizes the gentlewoman from California, 
my friend Congresswoman Matsui.
    Ms. Matsui. Thank you so much, Madam Chair.
    And thank you, Dr. Matthews for joining us today.
    While it is important to focus on lowering the price of 
prescription drugs to patients and to ensure the sustainability 
of the Medicare program, we can't lose site of the need to 
protect beneficiaries' access to necessary medications. As you 
know, the Administrationlast fall proposed changes to the 
protected class policy that would allow Part D plan sponsors to 
add restrictions or otherwise limit prescription medications in 
the six protected classes.
    The protected class policy is an important safety net for 
patients who absolutely need potentially life-saving 
medications to treat a complex medical condition. I am 
particularly concerned that changing protected class policy 
will jeopardize Medicare beneficiaries' access to the full 
range of medicines for treating mental illness.
    For example, antidepressant medication impacts individuals 
differently and, as such, can take time to find the right 
treatment that works for any given individual. And earlier this 
month I wrote a letter to my colleagues to CMS expressing this 
concern.
    Dr. Matthews, I understand that MedPAC has recently 
considered similar changes to two of the six protected classes, 
including antidepressants. Given my concern around access for 
Medicare's most vulnerable beneficiaries, I am interested in 
your thoughts on how we can continue to ensure the availability 
of needed medications while making changes to protect the 
classes?
    Mr. Matthews. Sure. Yes, ma'am, I'm happy to address that.
    As part of our 2016 recommendations on Part D, we did 
recommend removing two categories of drugs from the protected 
classes, one of which was antidepressants. The second one was 
immunosuppresives used after transplant surgery.
    The rationale here was that there do seem to be enough 
alternatives in those two categories that plans could be able 
to put together a formulary that accommodated the clinical 
needs of most beneficiaries needing those drugs without being 
constrained by having to cover every drug on those protected 
classes.
    The Administration's proposal is a little bit different. I 
don't think they have recommended eliminating any of the 
protected classes, but have proposed giving plans more ability 
to use utilization management within those classes.
    Again, you know, the balance here is beneficiary access 
relative to plans' ability to negotiate with manufacturers for 
price. And if the plan has to cover every single drug in a 
protected class, they have virtually no leverage in order to 
negotiate with a manufacturer. So, it is those tradeoffs that 
led us to the recommendation.
    The last thing I would say is we would, in either instance, 
in our recommendation or with respect to the Administration's 
proposal, we would believe that there is a strong need for a 
well-functioning appeals process that beneficiaries can avail 
themselves of.
    Ms. Matsui. I agree. Yes, that would be good.
    But on the other hand, you know, we have had experience 
with people with mental illness. And in particular, as you 
know, the therapy involved there is very difficult to get the 
right medication. And then to have to go back again to start 
over since there we know that is not going to work anyway. And 
I just really hope that whatever process you decide to 
implement is really going to be very sensitive to that.
    Because we would hate to lose the ability for individuals 
who already found a therapy to be able to continue in some way.
    Mr. Matthews. Yes. We are keenly aware of the unique nature 
of treatments for behavioral disorders.
    Ms. Matsui. OK. I want to talk a little bit about out-of-
pocket spending for beneficiaries in Medicare Part D. And I am 
concerned about patient access issues created by the fact the 
Part D program does not currently have an out-of-pocket limit. 
It means that some seniors who have significant drug spending, 
often those with chronic diseases or those who are severely 
ill, will continue to pay a cost-sharing obligation even in the 
catastrophic phase, and even after spending thousands of 
dollars out-of-pocket.
    I know that MedPAC has recommended reforming the Part D 
benefit to eliminate cost sharing above the out-of-pocket 
threshold. Can you explain MedPAC's recommendations to cap out-
of-pocket expenses for Part D beneficiaries, and how this 
change might impact premiums and other aspects of the benefit 
design?
    And I only have about 15 seconds here.
    Mr. Matthews. Sure. So, we did indeed recommend in 2016 
capping the beneficiary's financial obligation above the 
catastrophic phase. The motivation was that if the beneficiary 
is incurring that kind of cost, coinsurance is not a drag on 
inappropriate utilization but it is potentially punitive at 
that point from the beneficiary's financial perspective.
    Ms. Matsui. OK. I yield back my time. Thank you.
    Ms. Eshoo. I thank the gentlewoman. She yield back.
    I now would like to recognize the gentleman from Illinois, 
Mr. Shimkus, for five minutes of questions.
    Mr. Shimkus. Thank you, Madam Chairman. And I want to thank 
you for having this hearing today.
    Dr. Matthews, welcome. We appreciate your input. And it is 
very helpful. We just need to take action, and that is what 
this hearing is.
    I also appreciate your comments on trying to clarify the 
how is VA different. I know that is kind of out of your window. 
But, that there is a formulary and so the formulary is narrow, 
so even our veterans may not get the full scope of drugs 
available in our country because they are purchasing and making 
contracts. And we always have to try to explain that in this 
process because sometimes it gets lumped together and say, 
well, why can't you do it that way? And I guess if you have 
lower cost, that is good. But if you don't get the drug, the 
blockbuster drug, then it is bad. So, then there is--there is 
that balance.
    I also appreciated, talking just Medicare D, what benefit 
was provided to our seniors for health and prescription drugs 
prior to Medicare D?
    Mr. Matthews. There was no real outpatient prescription 
drug benefit.
    Mr. Shimkus. There was none. So, I mean, again, for, just 
for an instruction purpose, we wrestled with how to get 
Medicare. In fact, a lot of conservative Republicans got beat 
up quite a bit on this because we expanded in essence an 
entitlement and mandatory spending program. But modern medicine 
said prescription drugs has to be part of the fix.
    I know the chairman has left, but we had some great fights, 
and debates, and battles. And Chairman Pallone was most angry 
about the donut hole provisions which we placed in there for 
budgetary--to make the numbers work.
    So, I was surprised when I met with a constituent because I 
don't follow this as closely as you all do, and we have a new 
world of drugs on the market prior to what we did in 2003. They 
are lifesaving drugs, they are biologics, they are especially 
new blockbuster drugs are very, very expensive.
    So, I had a constituent who provided me with this, a 
biologic. It is actually ant--let me look down there. What was 
it? Enzyme. Come on, come up here so you can tell me. All 
right, enzyme deficiency. So, this is at a cost a year of 
$348,000.
    So, then I was kind of going through how Medicare D got 
established. And I drew the donut hole. I said, you pay here, 
you fall into the donut hole, you have to pay it all. And then 
it was our intent that once you came out of the donut hole that 
you would be covered. So, I think some of your proposals are 
trying to address, well, you know, the answers to Doris, 
Congresswoman Matsui's concerns about end of out-of-pocket 
cost.
    And then I was surprised when he provided me information 
that the percentage cost. This is 22,000, 348,000 over a year, 
22,000 a month. They are still on the hook for a percentage of 
that.
    Mr. Matthews. Yes, sir. Correct.
    Mr. Shimkus. So for those who were in that room in 2003 
thought that once they got out of the donut hole they had kind 
of gotten home free. That is not true, is it?
    Mr. Matthews. No, sir, it is not.
    Mr. Shimkus. Yes, and it is not true for my constituent 
either. So, I appreciate him meeting me. We actually met in a 
bar, you know, as I was traveling through my district, which is 
very large. Yes, we did have to have a few drinks after I heard 
that cost of that, they were having the burden.
    So, we need to address this, you know, this major expense. 
And if Medicare D is supposed to be an insurance plan and then 
there is a catastrophic portion, there is eventually a time 
when--and I think that is your reinsurance provision and those 
other proposals, am I correct?
    Mr. Matthews. That's correct. Yes, sir.
    Mr. Shimkus. So, I just thank you for being here. It is my 
understanding that you are an independent agency and you advise 
us. So, I would hope, Madam Chairman, that we would take your 
counsel and try to address especially this end of the process 
because Medicare D does--seniors pay in. I mean, so they are 
part of the solution. They are not just, it is just not all 
Government solution because it is an insurance plan that they 
are partners with and they choose. We need to help them on the 
back end.
    So, with that I appreciate your time. Thank you, Madam 
Chairman. And my time has expired.
    Ms. Eshoo. I thank the gentleman. Excellent questions.
    I now would like to recognize the gentleman from Oregon, 
Mr. Schrader, for five minutes of questions.
    Mr. Schrader. Thank you, Madam Chairwoman, I appreciate it.
    Dr. Matthews, thanks--I need some medication myself--thank 
you for taking time to be here.
    As you may or may not know, my State of Oregon is taking 
steps to increase the number of payments tied to performance in 
Medicaid. Specifically, they are using an 1115 waiver to work 
with our coordinated care organizations and network providers 
to create a plan to have a value-based payment by 2022. Other 
states are also trying to set up these arrangements.
    Has MedPAC evaluated either in specific cases or more 
broadly whether Medicare may benefit from value-based payments 
and tying the reimbursement to actual outcomes? What, if any, 
barriers are in the way for that?
    Mr. Matthews. So, we are aware of the emergence of these 
types of value-based arrangements, both here in the United 
States and in European countries. It is my understanding that 
the evidence on the long-term effectiveness of these 
arrangements simply does not yet exist, that these are new 
enough that a broad base of evidence hasn't been generated to 
ascertain that they have, they can exercise the potential that 
the stakeholders believe is there.
    With respect to Medicare, one potential impediment to the 
broad use of these sorts of value-based arrangements is the 
voluntary nature of Part D. So, a plan may enter into a 
manufact--an agreement with a manufacturer that is contingent 
on certain beneficiary outcomes that may not manifest 
themselves until after the lapse of a period of years. But Part 
D is a voluntary benefit, and a beneficiary can move from one 
plan to the next year after year. And so, a plan may not see 
the benefits of its investment in these arrangements for a 
particular enrollee.
    So that is one potential logistical obstacle in Part D as 
currently designed.
    Mr. Schrader. Good point.
    With regard to the general Medicare population, you spoke 
in your testimony about the long-term beneficiaries 
disproportionally selecting brand drugs sometimes over generic, 
actually oftentimes brand over generic. What remedy for 
increasing utilization of generics by this population would you 
recommend? I know that there are administrations out there 
trying just to lower the cost of the brands or, excuse me, the 
generic to zero to make it appealing. What about increasing the 
cost of the brand? Your thoughts.
    Mr. Matthews. So, we have gone on record as recommending 
that even low income or beneficiaries receiving the low income 
subsidy should be given incentives to use generics when they 
are available and clinically appropriate.
    As you just mentioned, those incentives can take one of two 
forms: one is zero copayments or zero financial liability for 
generics; the second would be some nominal financial liability 
for the use of brand name drugs when generics are available. 
And we think that even low income beneficiaries should have to 
make those kinds of decisions with respect to the therapies 
that they and their clinicians decide on.
    Mr. Schrader. So you don't have an opinion as to whether 
just reducing one or increasing?
    Mr. Matthews. Either would achieve the goal of increasing 
benefit--low income beneficiaries' use of generics.
    Mr. Schrader. All right. Very good, thank you.
    With that, I yield back.
    Ms. Eshoo. I thank the gentleman. He yield back.
    I now would like to recognize the gentleman from Kentucky, 
Mr. Guthrie.
    Mr. Guthrie. Thank you, Madam Chair, for holding this 
meeting.
    And thank you for being here. Doing a good job for your--
good job even though it is your first time. I almost said a 
good job for your first job. But a good job. I appreciate it 
very much.
    And, unfortunately, we should coordinate better with my 
neighbor in the hallway Mr. Schrader because he asked almost 
word for word one of the questions I was going to ask. So, let 
me get to the valued-based. That is interesting to me.
    But so, are you supportive of transparency tools like real-
time prescription benefit check that could help beneficiaries 
understand the cost of their prescribed medications before they 
leave the doctor's office?
    Mr. Matthews. Yes, sir. We have been supportive of 
clinicians' use of electronic tools like real-time benefit 
check.
    Mr. Guthrie. So, what policies do you think we should 
develop to encourage use of these policies, of these tools?
    Mr. Matthews. I would need to think about that, with all 
due respect. It is my understanding that the technology does 
exist with respect to currently available electronic health 
records. But the issue is getting the clinician to actually 
purchase the requisite models or modules to do the real-time 
benefit check and providing incentives for clinicians to use 
those.
    The Commission does not have a specific proposal in order 
to do that.
    Mr. Guthrie. OK. Thank you.
    And changing gears, since Mr. Schrader took my thunder, I 
am told that the physician charge, I am told that a physician 
charges, that a physician charges per administering drugs are 
twice as much in hospitals compared to doctors' office. This 
drives up Medicare costs but also drives up cost-sharing for 
the patients. Can more be done to address this through site 
neutral payment reform?
    Mr. Matthews. Yes, sir. I believe there is more that can be 
done. As you know, the Commission has been concerned about the 
incentives or the undesirable incentives that occur with 
respect to the differential for a clinician's services in the 
physician office versus the hospital outpatient department. And 
we have made recommendations to standardize those payments 
across settings.
    Yet, nevertheless, we think that those incentives still 
exist and that there are potential broader remedies that could 
be contemplated.
    Mr. Guthrie. OK, thank you. And, again, thanks for being 
here today, and holding the hearing. And I yield back.
    Mr. Bucshon. Will the gentleman yield for a few seconds?
    Mr. Guthrie. Yes, I will yield the remainder of my time to 
Mr. Bucshon.
    Mr. Bucshon. Yes, yes.
    Mr. Guthrie. Dr. Bucshon.
    Mr. Bucshon. Yes. I just want to make a brief comment on 
what he was talking about--about the patients knowing up front 
what prices drugs are.
    When I was in practice, if I was going to prescribe 
something, I knew might cost a lot I actually checked myself 
personally before I would prescribe it for the patient, just to 
make sure. But I do think in today's electronic world that we 
should, physicians should be able to determine that up front. 
And sometimes, depending on the patient, that may very well 
make you make different decisions on what the options are 
because if the out-of-pocket is going to be really high to the 
patient there might be therapeutic alternatives.
    So, I do think we can get to a place where electronic 
records can provide that information at a minimum to the 
provider. I think it is when you go to the consumer it is more 
confusing, but for the provider I think that can, that could 
help, so. Yes, it could pop up on the screen for example when 
you go to provide, when you go to send an electronic 
prescription.
    So, I yield.
    Mr. Guthrie. Thanks. I yield back.
    Ms. Eshoo. I thank the gentleman. And he yields.
    I now would like to recognize the gentleman from 
California, Dr. Ruiz, for five minutes of questioning.
    Mr. Ruiz. Thank you.
    Dr. Matthews, I appreciate the position that the Commission 
is in trying to make recommendations that balance the need to 
cut down on healthcare costs while also ensuring that patients 
are getting the care that they need. And I know that patient 
care is important to you.
    In your written testimony you identify one of the 
Commission's goals is ``achieving a Medicare program that 
ensures beneficiary access to high quality, well-coordinated 
care.''
    Last November, CMS proposed a rule that would allow 
Medicare Advantage plans to use step therapy for Medicare Part 
B drugs. And, while I understand that step therapy can play an 
important role in reducing healthcare costs, it often does not 
take into account a patient's medical history, like whether 
they have tried the medication previously and failed under a 
different insurance plan.
    Fred Sangiorgio, one of my constituents from La Quinta, 
California, suffers from psoriasis and psoriatic arthritis and 
is going through step therapy right now. He has been diagnosed 
most of his adult life and has tried several treatments over 
the years. Despite the fact that he already tried one treatment 
that didn't work, he is currently being forced to go through a 
similar treatment that his doctor knows won't be effective.
    Instead of being able to prescribe an alternative treatment 
that she thinks will be more effective, his doctor has to wait 
for this drug to fail, too, despite the fact that both of them 
know that what is going--what is going to happen.
    That is why I have introduced legislation with my friend 
Congressman Wenstrup, a fellow physician, that would help 
protect the doctor/patient relationship and help get patients 
the care that they need. The Safe Step Act creates a list of 
exemptions that will allow patients to bypass step therapy if 
their doctor knows that the treatment will not be successful, 
as is the case with Fred.
    As a physician, I want to ensure that all step therapy 
protocols also include safeguards to help ensure that patients 
aren't forced to have to try a treatment that their provider 
knows is not likely to work for them, or even to take a drug 
that may have already failed for them in the past.
    So, can you outline some safeguards that CMS can put into 
place to protect the patients from unnecessary and potential 
harmful treatments?
    Mr. Matthews. Yes, sir. Again, the Commission has gone on 
record as supporting giving plans more flexibility to 
appropriately use these management tools. We do understand that 
the circumstances of every patient is unique, and that we would 
not support putting a patient through some of these things, 
like step therapy, when the clinician knows that they are not 
going to be effective for a given patient. Therefore, we have 
said that the greater use of these tools has to be accompanied 
by a very robust and effective system of grievances and appeals 
whereby a clinician can request an expedited----
    Mr. Ruiz. What are some of these exceptions that you would 
propose to safeguard patient access?
    Mr. Matthews. So, if the clinician is able to document that 
the patient has previously failed on a therapy that is required 
by a plan's formulary or step therapy or----
    Mr. Ruiz. What does ``failed'' mean to you?
    Mr. Matthews. That the patient's clinical condition has not 
responded to the treatment that is being required by the plan.
    Mr. Ruiz. Does a lack of compliance due to cumbersome 
regiments like a, you know, every 4-hour treatment and, 
therefore, that doesn't fit that person's life or work 
schedule, would that be considered failure to you?
    Mr. Matthews. I do not have the clinical basis to answer 
that question, with all due respect. The Commission hasn't 
opined at that level of detail.
    Mr. Ruiz. Right. In my medical opinion, when it is a 
compliance issue it is usually a failure in the system to 
provide the best treatment and follow-up for that patient. It 
is not the patient's fault per se, which is normally what 
happens in the medical world.
    What other safeguards could we think of that would provide 
these exceptions so that we can preserve the patient's and the 
physician's judgment in getting them the medication that is 
best for that patient; instead of putting them through a 
rigorous bureaucratic step process in order to save the company 
money?
    Mr. Matthews. Again, if I could ask for the dispensation to 
think about that and follow up.
    Mr. Ruiz. OK. What's the MedPAC strategy to both monitor 
beneficiary impact and to ensure CMS institutes appropriate 
safeguards, including those that are lined with number of State 
laws which serve as models for the Safe Step Act?
    Mr. Matthews. So, we believe that the Medicare program is 
currently monitoring beneficiaries' appeals under Part D. There 
are a number of steps that patients and their clinicians can go 
through, and it is my understanding that the majority of those 
appeals are indeed adjudicated in favor of the patients when 
clinically warranted.
    So, the agency is indeed monitoring whether or not 
beneficiaries' access to medications under Part D as being 
unduly compromised.
    Mr. Ruiz. Thank you.
    Ms. Eshoo. The gentleman yield back.
    I now would like to recognize the gentleman from Florida, 
Mr. Bilirakis, for five minutes of questioning.
    Mr. Bilirakis. Thank you, Madam Chair. I appreciate it very 
much. Thanks for holding this very important hearing. I 
appreciate it.
    Dr. Matthews, with Florida's traditionally higher senior 
population, lowering prescription drug prices, as you can 
imagine, and Medicare is very important to me. As noted in 
MedPAC comments on the International Pricing Index, or IPI for 
short, last year the drug value program recommended previously 
by MedPAC would give vendors tools to negotiate lower prices.
    Under the Administration's IPI proposal they don't include 
these tools. So it seems like, instead, the Government is just 
setting the price directly. Am I correct in concluding that 
MedPAC's proposal is more market-based than the 
Administration's?
    Mr. Matthews. I would not want to comment on whether or not 
the competing proposals are more market based, one relative to 
the other. We did identify a number of potential logistical 
issues with respect to the Administration's proposal that we 
believe would make it very difficult to implement. These range 
from things such as the one you just mentioned, that the vendor 
would not have any tools, such as a formulary, or other 
mechanisms by which to negotiate with manufacturers.
    The vendor under the Administration's model would take 
title to the drugs, but perhaps not actual physical possession.
    Then, lastly, the vendor would be paid at a rate determined 
by Medicare based on the international price comparison, 
whether or not they were able to obtain that rate on the market 
or not. We identified a number of issues that would affect the 
ability to even calculate that international sales rate, given 
available data and given the idiosyncratic arrangements between 
manufacturers and, you know, other countries' Governments.
    So, we think there are some substantial implementation 
difficulties with respect to the IPI proposal that do not 
present themselves under our proposal, which would give the 
vendor more ability to negotiate on the basis of being able to 
help drive manufacturers's volume.
    Ms. Eshoo. Excuse me, Doctor. May I please, I just learned 
that your voice is not carrying well on T.V. so, can you bring 
your microphone much closer.
    Mr. Matthews. Sure.
    Ms. Eshoo. And then maybe the staff hearing me will come 
back in and let us know if you can be heard.
    Mr. Matthews. Thank you.
    Ms. Eshoo. Thank you.
    Mr. Matthews. Sure.
    I am sorry, so I was indicating that under our proposal 
that some of the difficulties engendered by the IPI proposal 
would be mitigated. And we believe that it would have greater 
potential to reduce spending for Part B drugs.
    Mr. Bilirakis. Very good.
    I know there are examples in the market where arbitration 
is used, such as baseball. I am a big baseball fan. But 
developing breakthrough medicine is a lot different from 
developing starting pitching. And legislating a Government-
defined arbitration process is a lot different from negotiating 
one through a players' union.
    Mr. Matthews. Yes, sir.
    Mr. Bilirakis. Are there examples of binding arbitration 
between being used in healthcare? Do any of these examples 
involve setting prices at a national level or just resolving 
disputes at an individual level?
    Ms. Eshoo. Move your microphone even closer please. Yes, 
pull it right up.
    Mr. Matthews. This is, yes, this is not a natural thing for 
me to be doing. So I apologize.
    Ms. Eshoo. That is all right. We will guide you. It is just 
a microphone; get it as close as possible so----
    Mr. Matthews. All right.
    Ms. Eshoo [continuing]. Anyone in the country that is 
listening in can actually hear you.
    Mr. Matthews. Yes. That is not helping but I will----
    Ms. Eshoo. OK.
    [Laughter.]
    Mr. Matthews. We will see.
    So, we are unaware of the use of baseball arbitration in 
the way we have proposed it for Part B.
    Mr. Bilirakis. Can you describe how you have proposed it, 
the arbitration?
    Mr. Matthews. Right. So, so as I mentioned both in my 
written testimony and in my oral remarks, one of the 
vulnerabilities of the Medicare program is that it has little, 
if any, ability to influence the price that the manufacturer 
sets for a product and, therefore, the price that Medicare 
pays. We believe that binding arbitration would give the 
program a means of influencing that price by bringing the 
manufacturer to the table with their absolute best offer for a 
new product.
    And then the secretary would be able to make a competing 
offer if he or she did not think that the evidence supported 
that manufacturer's price. And that this would be distinct from 
a scenario where the secretary is negotiating directly with 
manufacturers for price in that only certain drugs that met a 
criteria defined under statute or regulation would trigger this 
binding arbitration process.
    But, currently the Medicare program has virtually no means 
whatsoever to influence price. As I have said in my testimony, 
under both B and D price is one of the major drivers of 
Medicare spending for drugs.
     Mr. Bilirakis. Very good. Thank you.
    I yield back, Madam Chair.
    Ms. Eshoo. The gentleman yield back.
    And I now would like to recognize the gentlewoman from New 
Hampshire, Congresswoman Kuster.
    Ms. Kuster. Thank you very much. I am delighted to be here. 
Thank you for your discussion. It is actually very, very 
helpful on a complicated topic.
    In New Hampshire the nearly 300,000 Medicare beneficiaries, 
and most of them, many of them do have Medicare Part D for 
complete drug coverage. But the prices that Granite Staters are 
facing for prescription drugs are, to say it bluntly, 
unacceptable and, frankly, unsustainable. They are 
unsustainable for aging communities that rely on Medicare to be 
there for them when they turn 65, and for the taxpayers who 
hard-earned dollars go toward the different payment mechanisms 
that you have walked us through today.
    I am going to cut to the chase. I want to understand 
specifically on the ``buy and bill'' program.
    Under the current Part B system, a provider is reimbursed 
at 106 percent of the average sales price, regardless of the 
actual price that they pay for the drug. So my question is some 
providers may be getting the drug at a price below the average, 
and it is possible that some at a price above the average?
    Could you explain the original intent behind the 100 
percent plus six add-on payment? And what information is 
available on the provider's actual acquisition cost, what they 
pay for the drug?
    Mr. Matthews. OK, sure. I will try to answer without 
deigning congressional intent behind the six percent add-on.
    But, the answer to the question, in all candor, is not 
clear. There are a number of competing alternative explanations 
for six percent. One is that the six percent helps compensate 
clinicians and providers for the costs of administering the 
drug. But, as I mentioned earlier, Medicare pays the clinician 
separately for that.
    Ms. Kuster. But they get a separate payment for that?
    Mr. Matthews. That is correct.
    Ms. Kuster. Right.
    Mr. Matthews. So, I don't think that explanation is quite 
right.
    Another explanation is that the six percent compensates for 
the provider's costs related to handling and storing the drug 
or waste that occurs during the administration of the drug. 
But, again, under both the outpatient perspective payment 
system and the physician fee schedule there are components of 
those payments that reflect providers' costs of basically 
running the operation. So I don't think that is----
    Ms. Kuster. The normal overhead.
    Mr. Matthews. That is, that is exactly right.
    Ms. Kuster. Exactly.
    Mr. Matthews. Yes, ma'am.
    And so the most compelling explanation, from my 
perspective, is that as you just pointed out, not every 
purchaser is able to get the drug at the average price. Some 
are paying more, some are paying less. And to the extent that 
volume is driving a provider's ability to obtain a good price, 
some small, independent practitioners, rural physicians,small 
hospitals, may not be getting quite a good a deal as larger 
health systems. And so, the six percent add-on could be 
reflecting the relative purchasing provider base--power based 
on volume.
    Ms. Kuster. I am glad you brought up volume, and my goal is 
to have the lowest price for the senior and the lowest price 
for the taxpayer. I think right now it is safe to say seniors 
are paying too much, taxpayers are paying too much.
    My question is has MedPAC ever examined the impact on the 
cost of medications to beneficiaries in the Medicare program by 
authorizing Health and Human Service secretary to negotiate a 
volume discount on prescription drugs? Have you ever provided 
recommendations? Could you tell us?
    I just don't understand, everywhere else. I have sat for 
six years on the Veterans' Affairs Committee. I know what 
Federal employees. I know what Walgreen's. And my constituents 
don't understand why wouldn't we have a volume discount for the 
purchaseof medication under Medicare?
    Mr. Matthews. The Commission has not taken a position on 
this issue, nor have we made any recommendations.
    Ms. Kuster. So, we don't know, it could bring down the cost 
for both the taxpayers and seniors?
    Mr. Matthews. I don't know that I would opine on that 
myself because the notion of volume discount in some ways 
raises the question of the secretary negotiating with 
manufacturers and basically saying, I, the Medicare program, am 
going to guarantee a certain amount of volume of your drug and, 
therefore, you need to give me this volume discount or this 
lower price.
    And, again, the Commission has not taken a position with 
respect to the secretary's ability to influence price through 
direct negotiation.
    Ms. Kuster. I would simply say, in every other aspect that 
is how we bring down the price is negotiating a volume 
discount.
    I very much appreciate your candor.
    Mr. Matthews. Sure.
    Ms. Kuster. I yield back.
    Ms. Eshoo. The gentlewoman yield back.
    I now would like to recognize the gentleman from Georgia, 
Mr. Carter, for five minutes of questioning.
    Mr. Carter. Thank you very much, Madam Chair. Thank you, 
Dr. Matthews, for being here, and thank you for the work that 
you in leading MedPAC and helping and doing your best to keep 
prices down, as well as providing the best services that we can 
to the recipients of Medicare. It is extremely important.
    Earlier this month in this committee, in a bipartisan 
fashion, I was able to pass legislation that I sponsored, 
bipartisan legislation, along with Representative Gianforte, 
Representative O'Halleran, Representative Welch, called the 
Payment Commission Data Act.
    Mr. Matthews. Yes, sir.
    Mr. Carter. Which is going to allow MedPAC, as you know, to 
be able to get data relating to prescription drug pricing. And 
you in turn will be able to use that data to make 
recommendations to us here in Congress.
    Can you just comment on that firsthand on how that may be 
able to help you?
    Mr. Matthews. Yes, sir. Before I do, I would want to 
express on behalf of the Commission my appreciation to you and 
the other cosponsors of this legislation.
    One of the ways that the Commission has been hamstrung in 
terms of being able to evaluate the effects of the various 
rebate structures on the Medicare program and its beneficiaries 
is we do not have access to that level of granular data with 
respect to rebates on a prescription by prescription or drug by 
drug basis.
    And so, for example, when we commented on the Office of 
Inspector General's recent proposal to eliminate rebates in the 
Medicare program, we were only able to evaluate that proposal 
through its aggregate impacts on the program, on beneficiaries 
and manufacturers. We simply did not have the level of detail 
in order to be able to assess; it would affect this group of 
beneficiaries who are taking this class of medications for this 
variety of conditions. And so, having this more granular data 
on rebates would help us do those kinds of analyses and help 
inform the kinds of deliberations that the committee is having 
on a regular basis.
    Mr. Carter. Right. I certainly think both of us would be 
remiss if we did not mention that that information is only 
going to go to you.
    Mr. Matthews. Yes, sir.
    Mr. Carter. You are the only ones who are going to see it. 
It is not--we get it, it is proprietary information, but it is 
not going to be released to the public, it will only go to the 
Commission.
    Mr. Matthews. That is correct, sir. MedPAC has a sterling 
track record in terms of----
    Mr. Carter. Right.
    Mr. Matthews [continuing]. Handling proprietary and 
sensitive data.
    Mr. Carter. Right.
    I want to ask you about the DIR fees. You are familiar with 
DIR fees and you are familiar with what the Administration, 
what Health and Human Services, CMS specifically, has proposed 
in changing the rules so that--so that DIR fees or discounts 
will go directly at the point of sale, as you mentioned 
earlier. But there were two things that you mentioned in your 
letter to the Administration, or to HHS, about DIR fees, first 
of all, that DIR fees had grown from $229 million in 2013 to $4 
billion in 2017.
    Mr. Matthews. Sure.
    Mr. Carter. $229 million to $4 billion.
    And, of course, for those people who don't know, DIR fees 
are essentially clawback fees that go to the, the PBMs put on, 
placed on the pharmacies.
    You also mentioned that the amount of the DIR fees that the 
plan sponsors were recouping actually exceeded what they had 
proposed and what they really had projected. Can you comment on 
or explain what that disparity might mean for cost sharing?
    Mr. Matthews. Yes. What the short answer is that this means 
beneficiaries at the point of sale are paying a much greater 
amount in cost sharing than they should be relative to the 
effective transaction price between the manufacturer and the 
plan.
    Mr. Carter. Exactly. Exactly. But and I know that MedPAC 
has put out some different solution to the DIR fees, but the 
point is that you agree that DIR fees are a problem?
    Mr. Matthews. Yes, sir, that is correct.
    Mr. Carter. OK, good.
    Very quickly in what little time I have left, of course one 
of the things that we've been talking on this committee and in 
Energy and Commerce, and specifically on the Oversight and 
Investigations committee has been insulin pricing. I just 
wanted you to comment very quickly that I understand there is a 
lot of variability in the different plans on how they cover 
insulin, but can you, can you explain how the Medicare plans 
cover insulin, particularly for those patients who are in the 
donut hole?
    Mr. Matthews. If I could get you to ask the question just 
slightly differently?
    Mr. Carter. Well, in other words, I know the different 
Medicare Part B plans cover it in different ways. But making it 
affordable, making it accessible is something we are very 
concerned with, particularly on this committee. How can we do 
that? How can those plans do that in a better way?
    Mr. Matthews. Again, our recommendation to restructure the 
Part D benefit would mitigate the incentives for plans to use 
these high-cost, high-rebate drugs, and insulin is one example 
of those kinds of things. And by better aligning the plans' 
incentives it would potentially reduce the influence of DIR on 
the cost that the beneficiary faces.
    Mr. Carter. Right. Again I want to thank you for your work 
on transparency and accountability within the system, 
particularly with the third party, the pharmacy benefit 
managers, the middleman, that is what is going to help us. And, 
you know, transparency is the best disinfectant out there, and 
sunlight is, and that is why we need it so bad.
    Thank you for your work on this, and I yield back.
    Ms. Eshoo. The gentleman yield back.
    I now would like to recognize the gentleman from North 
Carolina, George Butterfield, and happy birthday to you again.
    Mr. Butterfield. I have been multitasking today and I don't 
have any questions.
    Ms. Eshoo. You don't?
    Mr. Butterfield. If you can believe that.
    Ms. Eshoo. Isn't that something.
    Mr. Butterfield. Yes.
    Ms. Eshoo. Well, a lot of good ones have been asked, so 
stay tuned.
    All right. Well, with that we will move to the gentlewoman 
from Delaware, Ms. Blunt Rochester, for five minutes of 
questioning.
    Ms. Blunt Rochester. Thank you, Madam Chairwoman. I would 
also like to thank you, Dr. Matthews, I am trying to speak into 
the mike now I am cognizant of it.
    Today's hearing is an opportunity for the subcommittee to 
continue our bipartisan work on lowering prescription drug 
costs by turning our attention to how skyrocketing prices are 
impacting Medicare Part B and D. And it couldn't happen at a 
more important time. Prescription drug spending accounts for 
nearly one dollar out of every five spent on Medicare and, 
according to the Kaiser Family Foundation, was 19 percent of 
overall Medicare spending in 2016.
    The Office of the Actuary at CMS found that the national 
health expenditures will continue to increase by an annual 
average of 5.5 percent until 2027. These spending trends mean 
that it is not just the Federal Government that is paying more 
but Medicare beneficiaries. In my State that means growing 
costs for the almost 200,000 Medicare beneficiaries.
    Dr. Matthews, I would like to discuss Part B's, Medicare 
Part B's low-income subsidy which helps provide beneficiaries 
with limited incomes assistance with their Part D premiums and 
out-of-pocket expenses.
    In 2018, 12.5 million beneficiaries with incomes at or 
below 100 percent of the Federal poverty level received Federal 
assistance. In Delaware, 23 percent of beneficiaries received 
the low-income subsidy. However, MedPAC has found that relative 
to other Part D enrollees, a higher proportion of LIS enrollees 
use brand name drugs.
    Can you explain why this is happening?
    Mr. Matthews. OK. The dominant hypothesis that has guided 
our thinking here is that the low-income beneficiary whose 
costs are heavily subsidized is not as sensitive to cost 
sharing, or the price of the drugs that they take relative to a 
beneficiary who is paying, you know, the full coinsurance and 
their full out-of-pocket liability. And so, given the choice 
between a brand name drug and a generic, many Medicare patients 
who regard generics as not as good, a low-income beneficiary 
who is facing zero or minimal cost sharing is going to opt for 
the brand name when it is available.
    Ms. Blunt Rochester. Right. Opt for the one that they 
rationally think is the better----
    Mr. Matthews. Yes.
    Ms. Blunt Rochester [continuing]. Product.
    Additionally, MedPAC found that in 2016, about 8 percent of 
Part D enrollees reached the out-of-pocket threshold. And of 
that 8 percent of high cost enrollees, over 70 percent were LIS 
beneficiaries. Given that it is the Medicare program that pays 
the largest share of costs out of--above the out-of-pocket 
threshold, I am concerned that plans may be structuring their 
benefits in ways that shift costs to Medicare for these, these 
enrollees in order to shield plans from risk.
    Does MedPAC share these concerns?
    Mr. Matthews. Our concerns are more with, are even larger 
than that, not limited just to the low-income beneficiaries. 
But, again, given the growth in the cost-based reinsurance 
payments for all Part D enrollees, we believe that is an 
extremely pressing problem for the program. While in the 
earlier phases of the Part D benefit LIS enrollees did reach 
the catastrophic phase at faster rates and in greater 
proportions, in recent years it is the non-LIS population who 
is now hitting that cap at much higher rates.
    Ms. Blunt Rochester. I know one of the things that you 
discussed before were the incentives, you know, to incentivize 
beneficiaries to pick a cheaper alternative. Can you talk about 
the options that you gave, are these evidence-based? Where did 
these ideas come from? How do you know they will work? You had, 
you listed, like, zero copayments, you talked about nominal 
financial incentive. Can you talk about where you got that from 
and why you think it will work?
    Mr. Matthews. Yes, with permission, I would like to be able 
to follow up.
    Ms. Blunt Rochester. Great.
    I appreciate MedPAC's thoughtful analysis on this issue and 
so many issues within the Medicare program. Low-income Part D 
beneficiaries on tight incomes, there are many of them, and we 
must be doing all we can to ensure that they also have access 
to the medications that they need, while ensuring that there 
are not perverse incentives that keep drug prices high.
    I thank you and I yield back.
    Mr. Matthews. Thank you.
    Mr. Butterfield [presiding]. Thank you, Ms. Blunt 
Rochester.
    The gentle lady from California, Ms. Barragan, is 
recognized for five minutes.
    Ms. Barragan. Thank you.
    I want to follow up on the questioning from one of my 
colleagues on Medicare Part D negotiating. I know that you 
indicated that MedPAC has not taken a position on that. We had 
a hearing a few weeks ago, we had the drug manufacturers come 
in and PBMs come in. I asked them if they were for or against a 
proposal to have Medicare negotiate. And they were against it. 
Not surprising to many, concerned about profits and so on and 
so forth.
    I am really glad to see in the committee that we are 
working on a bipartisan basis to bring down the price of 
prescription drugs. But I, having heard from my colleagues who 
sit on other committees for the VA, and everything I have read, 
it seems to me that--and certainly hearing from you that you 
have no means to influence price--it seems to me that if that 
were lifted, it would actually provide some leverage for us to 
bring down the cost of prescription drugs to the American 
people.
    Has MedPAC done any type of study on how much money the 
American people would save if Medicare had the ability to 
negotiate drug prices?
    Mr. Matthews. MedPAC has not done its own independent 
assessment of the viability of direct negotiation between the 
secretary and manufacturers.
    When others, such as our colleagues at CBO, have looked at 
this issue they have determined that without the secretary 
having very, very strong leverage, such as Medicare coverage or 
Medicare payment, or other alternatives that have been proposed 
related to things outside of my purview such as patent changes, 
that the secretary is unlikely to achieve substantial savings 
through direct negotiation without being able to use those 
kinds of very strong negotiating tactics.
     Ms. Barragan. Can Medicare, rather can MedPAC do a study 
on this so that Congress has a report to look at-- and to look 
at these factors that you are discussing? Will MedPAC commit to 
doing something like that?
    Mr. Matthews. We could potentially look at some of the 
issues that would pertain to a direct negotiation scenario. So, 
you know, for example would this be across-the-board all drugs, 
all manufacturers? Does the agency have the resources to 
conduct these kinds of evaluations? What the evidence base is 
for the secretary's ability to negotiate a given price? We 
could look at those sorts of issues in a qualitative way.
    I don't know that we would have the capacity to or the 
desire to second guess our colleagues at CBO with respect to 
calculating potential savings.
    Ms. Barragan. OK. Well, anything you could provide to 
Congress could be helpful, especially because this has been a 
bipartisan issue on a bipartisan basis, seems like a way to 
move forward. So, given that you do, you work on a bipartisan 
basis----
    Mr. Matthews. Yes, ma'am.
    Ms. Barragan [continuing]. I think any information will be 
helpful. Thank you for that.
    I want to chat quickly about the issue of minority health 
disparities. Across this country, you know, people based on 
race are treated differently in our healthcare system, we have 
different health impacts and outcomes. For example, HIV 
diagnosis rate among Hispanic men is more than 3 times the HIV 
diagnosis rate among non-Hispanic white men. African Americans 
are also more than twice as likely as whites to be diagnosed 
with and die from blood cancer and multiple melanoma.
    My district is majority minority. It is about 80 percent 
Latino/African American. I have the highest rate of diabetes 
than any other congressional district in the State of 
California. And we touched a little bit upon low-income 
communities and how Medicare actually has low-income subsidies 
for patients. But the annual income is pretty low. I think it 
is about $18,735. In California it is easy to miss that a 
little bit. And they are not qualified.
    And my concern is the connection between costs and the 
continuing impacts and effects on minority health disparities. 
Has MedPAC or CMS done any type of study to determine whether 
minority communities have similar outcomes from the Medicare 
Part D program as non-minority communities?
    Mr. Matthews. Not to the best of my knowledge.
    Ms. Barragan. Is that something you could do? I know you 
mentioned you do a lot of, you look at tradeoff and balances. 
But, you know, when we are talking about communities of color, 
racial health disparities is an issue. There shouldn't be 
really a tradeoff or balance with their health.
    Mr. Matthews. Understood. What is outlined here is a fairly 
broad endeavor though. And with, again with all due respect, if 
you could grant me the leeway to go back and talk to my staff 
about what we can and can do with--or can and can't do with the 
resources that we have available to us we would certainly be 
willing to take a look at this.
    Ms. Barragan. Great. Thank you. I yield back.
    Mr. Butterfield. Thank you. The gentleman from Montana is 
recognized for five minutes.
    Mr. Gianforte. Thank you, Mr. Chairman.
    OK, thank you. Drug prices in the Medicare program keep 
rising and it is making it tougher for seniors in Montana to 
afford their prescriptions. Dr. Matthews, last August several 
members of the committee wrote to MedPAC and asked the 
Commission to examine the trend of hospital consolidation and 
how much consolidation increases the costs to Medicare, the 
Medicare program and beneficiaries, including the costs of 
prescription drugs. So, I want to focus on this issue today.
    Since we are discussing prescription drug prices, can you 
please update us on MedPAC's findings, specifically the impact 
of hospital consolidation and acquisition of physician 
practices on the cost of prescription drugs to the Medicare 
program and seniors' out-of-pocket expenses?
    Mr. Matthews. Yes, sir. So, I don't have any update with 
respect to work we have currently underway in response to the 
most recent request. But as you know, a couple of years back we 
did a chapter in a June report looking at the effects of 
consolidation on Medicare spending, and looked at the impacts 
of both vertical integration where different levels of the 
healthcare system form single entities or horizontal 
integration such as where all cardiologists integrate under a 
single organization.
    And so both of those types of consolidation do have the 
potential to increase spending for the Medicare program.
    Mr. Gianforte. So, that request that was made, the work is 
still ongoing?
    Mr. Matthews. Yes, sir, that is correct.
     Mr. Gianforte. OK.
    Mr. Matthews. And we anticipate starting to roll that out 
in the fall of this year.
    Mr. Gianforte. OK, thank you.
    How do significant payment differences for identical 
medical services performed in Medicare at hospital outpatient 
departments versus independent physician practices impact 
seniors' out-of-pocket costs for Part B drugs?
    Mr. Matthews. It has the potential to substantially impact 
their out-of-pocket costs. But I use the word ``potential'' 
deliberately. And the reason I do that is because most Medicare 
beneficiaries in fee-for-service Medicare do have some 
secondary coverage. They are dual-eligibles, they have 
employer-sponsored wrap-around insurance, or they purchase 
Medigap.
    And so, to some extent they are insulated from the direct 
effects of these payment differentials across settings. But 
nonetheless, all Medicare beneficiaries are experiencing these 
effects through higher Part D premiums. And those beneficiaries 
who elect to purchase Medigap are paying higher Medigap 
premiums as a result.
    Mr. Gianforte. OK. And has MedPAC made any recommendations 
to address this differential?
    Mr. Matthews. We have. It's been several years now where we 
identified a set of services meeting certain criteria: if they 
are majority provided in physicians' offices, they are majority 
not associated with emergency care, and identified services 
that are appropriate candidates for a Medicare site mutual 
payment policy.
    Mr. Gianforte. OK. If Congress required Medicare to pay the 
same amount for services regardless of where they are 
performed, would seniors' out-of-pocket prescription drug costs 
decrease? What effect would it have on Medicare overall costs?
    Mr. Matthews. Off the top of my head I could not venture an 
answer with respect to the effects on their drug costs. It is 
something we could think about.
    Mr. Gianforte. OK. So that is something you could look into 
additionally. Because this is the concern we hear back home 
is----
    Mr. Matthews. Understood.
    Mr. Gianforte [continuing]. The overall cost, and 
prescription drugs area big piece of that. So, we very much 
appreciate your, your help to----
    Mr. Matthews. Yes, sir.
    Mr. Gianforte [continuing]. Chart a path for us.
    Mr. Matthews. Yes, sir.
    Mr. Gianforte. I thank you for your testimony today. With 
that, Mr. Chairman, I yield back.
    Mr. Butterfield. Thank you.
    The gentle lady from Illinois, Ms. Kelly, is recognized for 
five minutes.
    Ms. Kelly. Thank you, Mr. Chair. Dr. Matthews, thank you 
for being here, and thank you for your testimony and sharing 
MedPAC's work on these important issues.
    As you point out in your testimony, there is a handful of 
expensive drugs driving spending in the Part D program, with 
consumers responsible for significant out-of-pocket costs. The 
top ten highest expenditure drugs accounted for about 43 
percent of Part D drug spending in 2017. All of these project--
products, excuse me, are biologics. Some of these drugs have 
competitors and others do not.
    I would like to learn more about the impact a biosimilar 
entry into the market had to date on the price of the 
originator biologics driving costs in Part D. You have shared 
what drugs a program is spending the most money on and the 
conditions these drugs treat. But how many of the top ten 
highest expenditure drugs in Part D face competition from a 
biosimilar?
    Mr. Matthews. As I recall, there are two products out of 
that top ten list that have biosimilar competitors. The 
biosimilars have not had a substantial impact on the price that 
Medicare pays for the originator biologics. In part, this 
probably reflects the way Medicare pays for the biosimilars 
relative to the innovator biologic.
    The innovator biologic gets it own payment code and its own 
six percent add-on. The biosimilar gets its own payment code, 
even if it is at a lower price, but it gets the six percent 
add-on that is associated with the innovator product.
    So, from the prescriber's perspective, the physician who 
administers the drug, it is a neutral decision whether to use 
the innovator product or the biosimilar.
    MedPAC has recommended that instead of those two products 
having unique codes, that you would potentially influence price 
to a much greater extent by combining them and having the 
program pay the average of the sales prices of those two 
products.
    Ms. Kelly. OK. I understand what you are saying that there 
has only been a modest impact on prices----
    Mr. Matthews. That is right.
    Ms. Kelly [continuing]. To date and your recommendations 
for what we can do about it.
    Can you discuss how original biologics and biosimilars are 
currently grouped, and what the Commission has recommended to 
result in price reduction there?
    Mr. Matthews. Yes. Again, under current payment policy the 
innovator biologics and each biosimilar get their own payment 
code. And, again, in an attempt to make the decision 
financially neutral from the prescriber's perspective, the 6 
percent add-on for any of those products if the add-on 
associated with the originator product.
    So, again, our recommendation would be that instead of 
having, let's say, a $1,000 drug that gets a $60 add-on, and 
then a $100 drug or biologic that gets a $60 add-on, that 
instead we would average the $1,000 bio--referenced biologic 
and the $100 biosimilar and have Medicare pay that rate, which 
would give providers a much greater incentive to use the 
biosimilar and potentially start to move the price of the 
referenced biologic down in a way that we have not yet seen.
    Ms. Kelly. Is there, as we have been sitting here, is there 
anything that we haven't asked you that you want to tell us?
    Mr. Matthews. No, ma'am. I do not want to venture any of my 
own questions here, so.
    Ms. Kelly. Well, thank you. A major goal of this committee 
in our drug pricing work to date has been to remove the 
barriers to generic competition and stop anticompetitive 
practices. It is important for us to continue to examine 
policies that would support competition in all markets to lower 
costs facing consumers. Everyone should have access, as you 
know, to the care and medication they need.
    And thank you, and I yield back.
    Ms. Eshoo[presiding]. The gentlewoman yield back.
    And I now would like to recognize the gentleman from 
Vermont, Mr. Welch.
    Mr. Welch. Thank you.
    Ms. Eshoo. Happy birthday to you.
    Mr. Welch. Well, thank you.
    Ms. Eshoo. Thank God you were born.
    Mr. Welch. Some people agree with that. Thank you.
    Dr. Matthews, really good testimony, so thank you very 
much, and really good work.
    It is really frightening, the cost of prescription drugs, 
and it is really frightening how the market power that is out 
there is so aggressively used no matter how much pain is 
inflicted on folks. I was here when Mr. Bucshon was raising 
some questions about a formulary. And a lot of people have that 
question: is that going to impede access. I was talking to 
Senator Grassley. He had that concern.
    One of the approaches that we took in Vermont, because here 
is the dilemma as I understand it, if you have a strict 
formulary you tend to get more savings but less patient choice. 
But if you have a wide-open formulary with patient choice you 
get no savings. So how do you, how do you deal with that?
    What we did in Vermont is we basically made it pretty easy 
for a doctor to override what the formulary was because it 
might be that Mr. Bucshon, or Dr. Bucshon and I have the same 
condition but the medication that works for him is different 
than the one that works for me. I mean, is that a possible way 
to try to thread the needle here where we maintain patient 
choice but get the benefit where in the vast majority of time 
medication A is probably going to be good for Dr. Bucshon as 
well as good for me? Is that a possible path forward on this?
    Mr. Matthews. Potentially, and as I said in my comments 
earlier, we do think that there should be very robust 
exceptions and appeals avenues available for Part D enrollees 
and their physicians. But at the same time, you know, we are 
trying to balance the plan's ability to leverage price from the 
manufacturer. And----
    Mr. Welch. Right. I agree with that. But the fact is that 
there is going to be a lot of resistance if there is an 
apprehension that a patient can't get the medication he or she 
needs. So it has to be simple.
    But the incentives that are built into the system right now 
that you outlined are totally in favor of higher prices. You 
know, if you can get somebody into the specialty drug program, 
then that is a real burden on the taxpayer. The patient has no 
clue really, because we rely on what the doctor tells us.
    I would just urge us to try to look for some way where we 
address this patient choice issue, because I know a lot of my 
colleagues have that concern. I have that concern.
    Mr. Matthews. Sure.
    Mr. Welch. But we've got to get the benefit of that 
formulary.
    Now, the other thing is we are the only Government that I 
am aware of that really doesn't play an active role in trying 
to provide some pricing protection to benefit our taxpayers and 
consumers. And you gave the shocking statistics about the 
specialty drugs and how a while ago what was it, 33,000 people 
went immediately into----
    Mr. Matthews. Yes, sir. That was in 2010. The number in 
2017 is now 370,000.
    Mr. Welch. Yes. So it is one prescription----
    Mr. Matthews. Sure.
    Mr. Welch [continuing]. Gets them into that high pay, high 
taxpayer pay situation.
    Now, would you be supportive of legislation which would 
have price negotiation available as a tool for MedPAC and, in 
the event that failed, have arbitration to come up with a price 
that is ``fair''?
    Mr. Matthews. The Commission has not weighed in on the 
broader question of direct negotiation. Our standing 
recommendation would include binding arbitration as part of our 
DVP proposal, which we recommended in 2017. We are currently 
exploring whether or not binding arbitration could have a 
potentially greater role in the Medicare program. But we have 
not----
    Mr. Welch. You could have the binding arbitration in some 
of the highest cost specialty drugs.
    Mr. Matthews. Yes, sir. That is correct.
    Mr. Welch. And that would have a huge impact on the cost of 
the overall to the taxpayer and to the plans. Correct?
    Mr. Matthews. Yes, sir, that is correct.
    Mr. Welch. Yes, I mean, you know, again I am going to focus 
on Dr. Bucshon here a minute because I know what a dedicated 
physician he has been. We just have this dilemma: you just 
can't have it all. OK. You just can't have it all, and the cost 
side on healthcare is where all the pain is. If we just have 
these costs go out of control, continue to go out of control, 
that cuts off access.
    So there has got to be some tradeoffs is my view here. 
Would you agree with that, Dr. Matthews?
    Mr. Matthews. Yes, sir. It is all about tradeoffs.
    Mr. Welch. There is some argument that is always made by 
the pharma companies that if there is some pushback on their 
pricing power, that somehow means they are not going to 
innovate. I find that to be bogus because they are spending 
more on advertising than they are on research. There is an 
enormous amount of research funded by taxpayers through the 
National Institute of Health. There is an enormous amount of 
research funded by taxpayers through the research and 
development tax credit.
    Do you see that if we have reasonable interaction by the 
Government to negotiate prices or to have an arbitration system 
with neutral parties that that would have--that would impede 
innovation?
    Mr. Matthews. As we have contemplated binding arbitration, 
we do not believe that it would stifle R&D for true innovative 
new products where the manufacturer would have an opportunity 
to come before a neutral arbiter, or arbitror, I never know 
which the right word is, but present evidence in terms of R&D 
costs, in terms of foregone additional spending for the use of 
their product. And----
    Mr. Welch. And you would get some transparency out there?
    Mr. Matthews. Yes.
    Mr. Welch. Again, Madam Chair, I think that is why this 
hearing is so important. I mean, this is not a he said/she said 
deal. We are all losing on this thing.
    I appreciate that testimony and the good work you have done 
over the years. And, hopefully, this committee can start moving 
forward to help bring these prices down.
    I yield back.
    Ms. Eshoo. I thank the gentleman, and he yield back.
    I also want to acknowledge, and I think I was leaving the 
hearing room to run downstairs to the other hearing, and I did 
not get to wish our colleague Congresswoman Robin Kelly a 
happy, blessed, wonderful birthday, because you are all 3.
    With that, I am pleased to recognize the gentleman from 
Florida, Mr. Soto, for five minutes of questioning.
    Mr. Soto. Thank you, Madam Chairwoman.
    We saw in our committee analysis we are paying 104.3 
percent average sales price to providers, down from 1.6 percent 
because of sequester. We all realize this is an incentive to 
purchase drugs at a higher average sales price and receive a 
higher reimbursement.
    We saw CMS roll out a plan recently last year to have 
pharmaceutical vendors purchase and sell directly to patients, 
circumventing this provider cost escalation incentive, 
providing flat fees to providers and time reimbursements to 
international pricing.
    For my constituents at home will this do the job or are 
there other things we should be doing going along with what 
Congressman Ruiz talked about potential arbitration or other 
ideas? What is MedPAC advising?
    Mr. Matthews. OK.
    Mr. Soto. Just broad points.
    Mr. Matthews. Yes, sir. So, I am not familiar with the 
proposal to have manufacturers sell directly to patients, if I 
understood your question correctly. So, again I would ask for 
the dispensation to come back to you on that point.
    With----
    Mr. Soto. So, basically it is saying allow private sector 
pharmaceutical vendors to buy and bill Medicare for drugs and 
supply those drugs to providers, rather than the providers 
doing so directly?
    Mr. Matthews. Yes. So, this is part of the IPI proposal 
that the Administration has put forward. And again, while we do 
support the Administration's desire to reduce the prices that 
Medicare beneficiaries pay for prescription drugs, particularly 
in light of prices that citizens of other countries are paying, 
but at the same time we think there are certain logistical and 
implementation issues with respect to the Administration's 
proposal that would make it less likely to succeed than----
    Mr. Soto. What are those specifically?
    Mr. Matthews. So, again, under the Administration's 
proposal, Medicare would set a price that it will pay the 
vendor based on the international reference price. And it is 
incumbent upon the vendor to try and obtain that price from 
manufacturers.
    But the proposal, if I recall correctly, does not give the 
vendor much by way of negotiating tools in order to extract 
that price.
    Mr. Soto. So, that is where this arbitration idea that is 
being mulled around in this committee----
    Mr. Matthews. Yes, sir.
    Mr. Soto [continuing]. Is so critical because that could 
create a more arms-length transaction to get the most efficient 
price. Is that correct?
    Mr. Matthews. That is correct.
    Mr. Soto. I wanted to move into some other ideas pitched by 
HHS, particularly step therapy and higher authorization. 
Certainly with lesser conditions these can be cost saving. But 
I worry when you apply it to cancer and other potentially fatal 
conditions that this step therapy and prior authorization, 
particularly step therapy, leads to time running out and people 
dying, literally, of cancer because they are given less 
effective drugs earlier on in the step therapy. And that we end 
with a death that could have been prevented.
    Do you think there should be a carve-out for cancer and 
other fatal conditions with regard to step therapy?
    Mr. Matthews. The Commission has not contemplated the need 
for a carve-out or exceptions based on medical condition or a 
patient's diagnosis. But we have recognized, again, the need 
for a very robust and very expeditious exceptions and appeals 
process as part of the use of utilization management tools on 
the part of plans.
    Mr. Soto. And going into another issue that we continue to 
see is in the private market drug prices going 3, 4, 10 times 
the amount of increases. What role should we play in stopping 
this from happening? How does that affect Medicare when we see 
a drug that has been around for 20 years that has a 10--10 to 
20 percent--10 to 20 times increase? What are you advising us 
to do?
    Mr. Matthews. Right. So that is actually an insightful 
distinction that if I could take a minute.
    Mr. Soto. Yes.
    Mr. Matthews. So, one, you know, we have seen the entry of 
truly revolutionary blockbuster products on the market that 
cure things like Hep C. So, the Sovaldis, the Harvonis where 
the benefits of the medication potentially warrant the prices 
that the manufacturer is charging.
    But we also see, and the Commission is extremely concerned 
about instances that you just alluded to where you have 
products that have been on the market for decades where there 
is no real active research and development to increasing the 
efficacy of these products. And yet, the prices continue to 
increase year over year.
    While there may be costs and R&D going on beyond, behind 
the scenes that people like me don't see, we still think that 
those kinds of cost increases are not warranted, given our 
responsibility to a public program like Medicare. And so, we 
have recommended an inflation rebate that would check the 
ability of manufacturers to increase their prices on a year 
over year basis in excess of some defined rate of inflation.
    Mr. Soto. Thank you. I yield back.
    Ms. Eshoo. The gentleman yield back.
    It is a pleasure to recognize the gentleman from Maryland, 
Mr. Sarbanes, for five minutes of questioning.
    Mr. Sarbanes. Thank you.
    Thank you, Dr. Matthews, your testimony today has been 
excellent. You are definitely going to get called back by many, 
many committees in the future.
    Mr. Matthews. I am sorry to hear that.
    Mr. Sarbanes. You did a great job.
    I wanted to pick up actually right where Congressman Soto 
left off because you mentioned this inflation rebate as a way 
of trying to get to some of these significant price----
    Mr. Matthews. Yes, sir.
    Mr. Sarbanes [continuing]. Increases. And it seems to me 
that, arguably, is the other side of a coin where you could 
think about setting, or we could think about setting upper 
limits on the prices of some of these drugs. It is just a 
different way of accomplishing the same thing.
    Would you agree with those as sort of two sides of the same 
coin potentially?
    Mr. Matthews. Potentially, yes.
    Mr. Sarbanes. Yes. I note that there is a number of States 
which have begun to explore regulating prescription drug 
pricing within their own jurisdictions. Maryland recently 
created, the Maryland General Assembly passed legislation.
    I think it is the first State to actually get this passed, 
it is now subject to the Governor's signature, that would 
create a prescription drug affordability board. The board would 
have the authority to review drug cost data that manufacturers 
submitted, and then they could set an upper payment limit on 
those prescription drugs. And I think there are six or seven 
other States that are exploring the same sort of approach.
    We have talked about a number of strategies to address drug 
pricing. We have also talked about how you have made 
recommendations on how Medicare can try to manage the situation 
downstream a little bit, if you view the original pricing that 
the manufacturers are setting as kind of the ultimate upstream 
point in the continuum.
    There are all these efforts downstream, bringing the plans 
in, trying to incentivize them more to manage costs so the 
program isn't taking as big a hit, et cetera. But if we go to 
the source, which is the pricing that the manufacturers are 
setting, there is increasingly I think a sense in this Congress 
on both side of the aisle that we have to take some pretty 
dramatic steps to control the costs and the price setting at 
that end.
    But what is your view of this concept of regulating or 
setting upper limits on the prices of these various categories 
of prescription drugs?
    Mr. Matthews. OK. So, so again, the Commission hasn't taken 
a position with respect to setting a specific cap on a price. 
Although, I do see the analogy between setting a hard cap on a 
price versus setting a cap on the rate that a price can 
increase over time.
    I am also not personally familiar with the details of the 
State efforts that you have just described, but it is something 
we can start to look at and see if there is any model there.
    But, with respect to our inflation rebate, it is guided by 
the notion that for drugs that have been on the market for some 
period of time where they are established therapies whose 
indications are known, and their effects are known, that to 
some extent these are commodities, and the expectation of 
commodity prices is that they should go down over time.
    When you look at things like computers or wide screen 
T.V.'s you are getting better and better technology with each 
passing year at lower prices. The question is why these trends 
work in reverse for prescription drugs, especially these 
therapies that are, again, long-extant on the market?
    And so, we think that at a minimum, setting a limit that 
those prices can increase year over year is a step in 
moderating these effects that we have seen that have very 
detrimental effects on the Medicare program.
    Mr. Sarbanes. Well, I think we need to put every option on 
the table. The rebate is, I would say, a step in the right 
direction, an inflation rebate. But we need to be looking at 
negotiating power on the part of the Medicare program. Many 
have talked to that. The arbitration approach is another. Maybe 
some form of, like, public auction around the pricing of these 
drugs, and even the notion of regulating these, these drugs as 
a utility.
    I mean, if you look at there is a lot of--there is a lot of 
analogies you can draw between the public good aspect of how 
drugs are delivered to pretty much every American and the way 
electricity is delivered, or water is delivered, or, you know, 
healthcare premiums are set. I think there is going to be a lot 
more activism on our part here in Congress with respect to the 
pricing of drugs.
    Thank you for your testimony today. This was extremely 
helpful. I yield back.
    Mr. Matthews. Thank you. Thank you.
    Ms. Eshoo. The gentleman yield back.
    I am going to recognize myself for an additional five 
minutes, and also the ranking member as well for a couple of 
follow-up questions.
    First, Dr. Matthews, again thank you. I think it is very 
clear that the committee on a bipartisan basis clearly has more 
than an interest in addressing drug prices.
    I would encourage MedPAC to go back and continue to make 
recommendations on how to protect patient access. I know that 
in the original legislation that created MedPAC, when Medicare 
Part D was created so was MedPAC. But to leave out patients in 
this, I mean, this is not just a program where numbers are 
shifted around. The numbers apply to people, to human beings, 
and I don't see how that element can be left out of your 
deliberations.
    As we work to reduce costs, that too has an effect on, as 
we have heard from questions and your responses, that too has 
an effect on patients.
    Now, this whole issue of step therapy, I don't see how 
MedPAC can just stick with what seems to me a conversation 
about tools and the kit, et cetera, et cetera, when people have 
actually died because they don't have access to what they need. 
We can't ignore that, nor can MedPAC. So, while this step 
therapy has been created so that, as you describe it more tools 
in the kit to reduce and control pricing and whatever, when 
people are dying because they can't get what they need, and 
they are pushed back to step one.
    Step 1 the doctor knows is not going to work, step 2 the 
doctor knows is not going to work, but you never get to 3 
because you haven't lived long enough, that doesn't make sense. 
It just doesn't. I mean, it is not defensible in my view and I 
think in other members' views as well.
    I don't know who supports this thing. It is from the both 
side of the aisle you have heard about it. We have heard from 
our constituents. They don't identify themselves to us as 
Republicans or Democrats, they are our constituents.
    The issue that you have raised since the program was 
founded, was put together, that there has been a 20 percent 
increase in D, if I heard you correctly, a 20 percent increase 
on an annual basis relative to drug pricing is, to say it is a 
jaw-dropper doesn't begin to describe it.
    I think we have our work cut out for us, but I think you do 
as well. I think that MedPAC needs to step its game up, so to 
speak, in these, in these areas. And that you do it in a timely 
fashion so that you can make recommendations and some of these 
changes be recommended in these key areas.
    With that, I would like to recognize Mr. Bucshon and thank 
him for his support of an additional five minutes for myself 
and for himself as well. Thank you again.
    Mr. Bucshon. Thank you, Madam Chairwoman.
    I will make a few comments about the step therapy and prior 
authorization. I mean, I have been a physician for years, for 
many years, and this has been a concept that has waxed and 
waned for the 30 years or so that I have been in medicine. And, 
you know, it is a concept that waxes and wanes because at the 
end of the day I would argue it ultimately doesn't save anybody 
any money because the delay--it has a potential to delay 
therapy.
    And then as a cardiovascular surgeon I saw people in 
tertiary care situations in their lives, and I just, I have 
always had concerns about that. I don't know if anyone has, has 
looked at the long-term implications of that, and it may not 
be--it is probably out of the scope of what you look at.
    Mr. Matthews. Yes, sir.
    Mr. Bucshon. But looking at delay in therapy, potential 
delay in therapy--and, again, my argument that physicians 
generally will make the decision to treat their patients based 
on what they think is the best individual therapy for that 
patient. And do consider cost. Don't get me wrong. As I 
mentioned, I considered cost if there was equivalent therapy.
    The one thing I--on the prior authorization, a number of 
years ago, maybe 10 or 15 years ago, there was one of the major 
private sector insurance companies that decided to drop their 
prior authorization program. Do you recall that at all?
    Mr. Matthews. I do not. I am sorry.
    Mr. Bucshon. It might have been UnitedHealthcare. I can't 
recall. Don't quote me on that, but I just--and then it has 
been, I think it has been reinstituted. But the reasoning 
behind that, I remember when that happened, was is because they 
found that whoever this was, and I am not saying it was them, 
is that at the end of the day it didn't save them anything 
because they were authorizing about 98 or 99 percent and the 
administrative costs to deny the 1 or 1.5 percent didn't 
outweigh the savings.
    Have you heard of that type of concept?
    Mr. Matthews. I have heard similar anecdotes. Again, I 
can't attribute them to a specific----
    Mr. Bucshon. Right.
    Mr. Matthews [continuing]. Instance, but yes.
    Mr. Bucshon. Yes. I would argue that that is probably the 
case. The administrative costs if you are going to, you know, 
if you are going to deny 10 percent or something I--I get that. 
I would say I would have an ethical problem with that. But if 
you were, then it might save you money. I don't know what the 
finances are on that.
    But there is a perception that it saves money, and I am not 
sure that that is actually true.
    So, I want to comment, that is my comment on those two 
things.
    Do you know if CBO has ever done studies on out-of-pocket 
cost caps? Like, say, if there was a cap set at a certain level 
what the, what the CBO score would be? There will be a score, 
right, because there will be a potential number of people that 
would go over, that would normally be over that level, whatever 
that cap is.
    Mr. Matthews. I believe that is correct, yes.
    Mr. Bucshon. Is that something that you think would be 
interesting to know for your purposes?
    Mr. Matthews. This would be for?
    Mr. Bucshon. For Medicare Part D. Like an out-of-pocket 
cost cap; right?
    Mr. Matthews. Yes. And this is something that MedPAC has 
recommended as part of our package of Part D recommendations.
    Mr. Bucshon. Right. The question would be is what level 
that the out-of-pocket costs are capped at.
    Mr. Matthews. That is correct.
    Mr. Bucshon. So the question would be is a CBO score on 
that at differing levels might be interesting information to 
know. Would you agree or disagree with that, or have they done 
it?
    Mr. Matthews. I am not aware that they have done this. But 
I don't disagree that it would be an interesting thing to know 
the effects at different level.
    Mr. Bucshon. Because if you were going, if Congress was 
going to say, OK, we are going to set an out-of-pocket cost cap 
at X dollars, right? The first thing we would do is get a CBO 
score.
    Mr. Matthews. Right.
    Mr. Bucshon. And see, well, what is that going to--what is 
that going to cost; right? Because there will be a cost if you 
set it, if you set it low enough there would be a cost?
    Mr. Matthews. Right.
    Mr. Bucshon. And so, maybe preemptively having a multitude 
of different cost levels known to Congress before we try to 
make some of these decisions might--could be helpful. Would you 
think that would be the case?
    Mr. Matthews. Without committing my colleagues----
    Mr. Bucshon. I understand. I am not asking----
    Mr. Matthews [continuing]. To doing this work.
    Mr. Bucshon [continuing]. You for any commitment at all. 
Right.
    Mr. Matthews. That is correct, yes.
    Mr. Bucshon. Yes. I think that might very well be helpful.
    With that, Madam Chairwoman, I yield back.
    Ms. Eshoo. The gentleman yield back.
    Again I would like to thank you, Dr. Matthews, for your 
participation. I hope that you didn't need to take any pain 
medication to come here today or anything else due to your 
testimony. But a first time out I think that we would all say 
that you presented your case very well.
    I want to remind Members that pursuant to committee rules 
they have ten business days to submit additional questions for 
the record to be answered by the witness who has appeared. We 
would appreciate your timely response to those, Dr. Matthews.
    As I said, we really appreciate prompt responses to the 
question that you may receive.
    So, at this time, the subcommittee is adjourned.
    [Whereupon, at 12:43 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

               Prepared Statement of Hon. Eliot L. Engel

    Thank you Madame Chairwoman Eshoo for holding today's 
important hearing on Medicare drug pricing. Nearly 130,000 of 
my constituents depend on this vital federal health program for 
drug coverage.
    A growing share of the program's expenditures are going to 
prescription drugs. According to the nonpartisan Kaiser Family 
Foundation, Medicare's share of nationwide prescription drug 
spending jumped from 18 percent in 2005 to 30 percent in 2017.
    While some of this increase was for innovative drugs--which 
save future Medicare dollars--much of the growth stems from 
price spikes.
    I am pleased that this committee has taken steps in the 
past to curb Medicare drug spending. The bipartisan 21st 
Century Cures Act included provisions from my bill toexpand 
access to infusion drugs under the Medicare Part B program. 
These expanded benefits will give beneficiaries the ability to 
receive life-saving therapies in the comfort of their own home 
while avoiding costlier care in institutional settings. These 
past efforts demonstrate that Medicare can be leveraged to 
reduce drug costs.
    My constituents are outraged that the 2003 Prescription 
Drug, Improvement, and Modernization Act, which I voted 
against, contains the so-called ``non-interference clause."
    This horrendous policy prevents Medicare from using its 
clout to negotiate lower prescription drug prices.
    Empowering Medicare to do so would bring immediate relief 
to hard-working American families, who often are being forced 
to choose between filling life-saving prescriptions or 
purchasing groceries.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]