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

      LOWERING PRESCRIPTION DRUG PRICES: DECON-STRUCTING THE DRUG SUPPLY
                                     CHAIN

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 9, 2019

                                   __________

                               Serial No. 116-32

    [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
    40-223PDF           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...........................................     3
    Hon. Michael C. Burgess, a Representative in Congress from the
      State of Texas, opening statement..............................     3
        Prepared statement...........................................     5
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     6
        Prepared statement...........................................     8
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, opening statement......................................     9
        Prepared statement...........................................    10
    Hon. Eliot L. Engel, a Representative in Congress from the State
      of New York, prepared statement................................   223

                                   Witnesses

    Justin McCarthy, Senior Vice President, Patient and Health Impact
      Group, Pfizer..................................................    11
        Prepared statement...........................................    14
        Answers to submitted questions...............................   259
    Kave Niksefat, Vice President, Value and Access, Amgen...........    27
        Prepared statement...........................................    29
        Answers to submitted questions...............................   262
    Jeffrey J. Hessekiel, Executive Vice President and General
      Counsel, Exelixis..............................................    41
        Prepared statement...........................................    43
        Answers to submitted questions...............................   271
    Amy Bricker, R.Ph., Senior Vice President, Supply Chain, Express
      Scripts........................................................    54
        Prepared statement...........................................    56
        Answers to submitted questions...............................   274
    Brent Eberle, R.Ph., Chief Pharmacy Officer, Navitus Health
      Solutions......................................................    68
        Prepared statement...........................................    70
        Answers to submitted questions...............................   278
    Estay Greene, Phar.D., Vice President, Pharmacy Services, Blue
      Cross Blue Shield..............................................   137
        Prepared statement...........................................   140
        Answers to submitted questions...............................   283
    Lynn Eschenbacher, Phar.D., Chief Pharmacy Officer, Vice
      President of Medication Management, Ascension..................   152
        Prepared statement...........................................   154
        Answers to submitted questions...............................   288
    Jack Resneck, M.D., Chair, Board of Trustees, American Medical
      Association....................................................   171
        Prepared statement...........................................   173
        Answers to submitted questions...............................   294
    Richard Ashworth, Phar.D., President of Pharmacy at Walgreens....   180
        Prepared statement...........................................   182
        Answers to submitted questions...............................   301
    Leigh Purvis, Director, Health Services Research, AARP...........   188
        Prepared statement...........................................   190
        Answers to submitted questions...............................   305

                               Submitted Material

    Statement of America's Health Insurance Plans, May 9, 2019,
      submitted by Ms. Eshoo.........................................   224
    Statement of American Society of Health-System Pharmacists, May
      9, 2019, submitted by Ms. Eshoo................................   230
    Statement of National Association of Chain Drug Stores, May 9,
      2019, submitted by Ms. Eshoo...................................   236
    Statement of American Pharmacists Association, May 9, 2019,
      submitted by Ms. Eshoo.........................................   244
    Statement of National Community Pharmacists Association, May 9,
      2019, submitted by Ms. Eshoo...................................   253

    LOWERING PRESCRIPTION DRUG PRICES: DECONSTRUCTING THE DRUG SUPPLY CHAIN

                                  ----------

                             THURSDAY, MAY 9, 2019

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:02 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, Welch,
    Ruiz, Dingell, Kuster, Kelly, Barragan, Blunt Rochester,
    Pallone (ex officio), Burgess (subcommittee ranking member),
    Shimkus, Guthrie, Griffith, Bilirakis, Long, Bucshon, Brooks,
    Mullin, Carter, Gianforte, and Walden (ex officio).
        Staff present: Jacquelyn Bolen, Counsel; Jeffrey C.
    Carroll, Staff Director; Waverly Gordon, Deputy Chief Counsel;
    Tiffany Guarascio, Deputy Staff Director; Josh Krantz, Policy
    Analyst; Aisling McDonough, Policy Coordinator; Joe Orlando,
    Staff Assistant; Alivia Roberts, Press Assistant; Kimberlee
    Trzeciak, Senior Health Policy Advisor; C. J. Young, Press
    Secretary; Jennifer Barblan, Minority Chief Counsel, Oversight
    and Investigations; Mike Bloomquist, Minority Staff Director;
    Margaret Tucker Fogarty, Minority Staff Assistant; Caleb Graff,
    Minority Professional Staff Member, Health; Peter Kielty,
    Minority General Counsel; Ryan Long, Minority Deputy Staff
    Director; James Paluskiewicz, Minority Chief Counsel, Health;
    Brannon Rains, Minority Staff Assistant; Zach Roday, Minority
    Communications Director; Kristen Shatynski, Minority
    Professional Staff Member, Health.
        Ms. Eshoo. The Subcommittee on Health will now come to
    order. Good morning, everyone. The Chair now recognizes herself
    for five minutes for an opening statement.

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

        I want to begin today by acknowledging that Robert Pear,
    the New York Times health reporter, died on Tuesday. For 40
    years--40 years--for four decades, his meticulous
    straightforward reporting helped the American people make sense
    of the Washington healthcare debate. He was a giant in his
    field; and he is going to be missed.
        I want to welcome the witnesses that are here today and I
    want to thank you for being willing to testify. I understand
    that some of the witnesses preferred not to be formally sworn
    in, and I want to reiterate that each witness, so that the
    public knows as they are listening in, that each witness has
    signed a statement certifying that, quote, knowingly providing
    material false information to this subcommittee is ``knowingly
    concealing material information from this subcommittee and is a
    crime.''
        So thank you again to the witnesses. My staff did reach out
    to nearly a dozen drug companies to testify, and there were few
    that were willing to do so. Express Scripts was the only major
    PBM willing to testify. CVS Health and OptumRx both said no.
        So, today's hearing focuses on a health crisis facing
    American families: the soaring costs of prescription drugs. At
    this hearing, we are going to ask each stakeholder in the drug
    supply chain about the role that they play, the impact they
    have, each one has on drug prices, and the value each one
    brings to patients.
        We are going to follow the money. We are examining the
    system from beginning to end because in order to fix it, we
    need to understand it and then be able to act. We have already
    taken some first steps. The House passed two drug bills
    yesterday and we are pleased about that; but we have a lot of
    work ahead of us.
        So instead of a lengthy opening statement, I want to
    summarize my questions from the top for the first panel now.
        First, we have the drug makers. Pfizer has done well,
    earned $53.6 billion in revenue last year and Amgen earned
    $23.7 billion. We will also hear from a small cancer company,
    Exelixis, which has only 2products.
        To the drug makers: How do you price your drugs? We know
    there are costs--research and development, salaries,
    advertising, whatever the investment to bring the drugs to
    market. After the costs are calculated, how do you set the
    price? Who in the drug supply chain do you exchange money with
    and how?
        The next link in the chain are the pharmacy benefit
    managers or the PBMs. They use their buying power to get the
    best deal on drugs for the clients they represent, which are
    commercial health insurers, self-insured employers, Medicare
    Part D Plans. This is a highly profitable business and, in
    2017, Express Scripts, who is here today and we are grateful
    that they are, earned $100 billion in revenue.
        So my question for the PBMs is: What value do you add? You
    don't invent. You don't manufacture. You don't conduct research
    and development. Explain to us how you earn your money, and who
    in the drug supply chain do you exchange money with and how?
        So on this first panel, we can conservatively estimate that
    our witnesses represent nearly $200 billion in revenue. That is
    a very important part of our national economy. And my question
    for each is: Where do those billions come from? Where can we
    cut so that Americans can afford their drugs?
        During the second panel, we will examine the second half of
    the drug supply chain and we will hear from a health insurer, a
    health system, a pharmacy, a physician, and a patient
    representative.
        [The prepared statement of Ms. Eshoo follow:]

                    Prepared Statement of Hon. Anna G. Eshoo

        I want to acknowledge that Robert Pear, the New York Times
    health reporter, died on Tuesday. For 40 years, his meticulous,
    straightforward reporting helped the American people make sense
    of the Washington healthcare debate. He was a giant in his
    field, and will be very missed.
        Some of our witnesses today preferred not to be formally
    sworn in. I want to reiterate that each witness signed a
    statement certifying that, I quote, "Knowingly providing
    material false information to this subcommittee or knowingly
    concealing material information from this subcommittee, is a
    crime."
        Thank you to our witnesses. My staff reached out to nearly
    a dozen drug companies to testify, and you are the few willing
    to do so. Express Scripts was the only major PBM willing to
    testify. CVS Health and OptumRX both said no.
        Today's hearing focuses on a health crisis facing American
    families--the soaring costs of prescription drugs. At this
    hearing, we will ask each stakeholder in the drug supply chain
    about the role they play, the impact they have on drug prices,
    and the value they bring to patients.
        We're going to follow the money. We're examining the system
    from beginning to end because in order to fix it, we must
    understand it, and then, we're going to act.
        We've already taken the first step. The House passed two
    drug bills yesterday, including a bill I sponsored, to increase
    drug market competition.
        We have a long hearing ahead of us. So, instead of a
    lengthy opening statement, I want to summarize my questions for
    the first panel now.
        First, we have the drug makers--Pfizer, which earned $53.6
    billion in revenue last year, and Amgen, which earned $23.7
    billion. We'll also hear from a small cancer drug company,
    Excelixis (Ex-EL-ix-is), which has only two products.
        To the drug makers: How do you price your drugs? We know
    there are costs--research and development, salaries,
    advertising, etc. After the costs are calculated, how do you
    set a price? Who in the drug supply chain do you exchange money
    with and how?
        he next link in the chain--Pharmacy Benefit Managers or
    PBMs. They use their buying power to get the best deal on drugs
    for the clients they represent, which are commercial health
    insurers, self-insured employers, Medicare Part D plans. This
    is a highly profitable business. In 2017, Express Scripts
    earned $100 billion in revenue.
        My question for the PBMs: What value do you add? You don't
    invent. You don't manufacturer. You don't conduct research and
    development. How do you earn your money? Who in the drug supply
    chain do you exchange money with and how?
        On this first panel, we can conservatively estimate that
    our witnesses represent nearly $200 billion in revenue.
        My final question for them: Where do those billions come
    from and where can we cut the fat, so that Americans can afford
    their drugs?
        During the second panel, we'll examine the second half of
    the drug supply chain. We'll hear from a health insurer, a
    health system, a pharmacy, a physician, and a patient
    representative.
        I will continue to follow the money through the drug supply
    chain. Thank you all for your testimony.

        Ms. Eshoo. So, I'm now pleased to recognize Dr. Burgess,
    the ranking member of the subcommittee for five minutes of his
    opening statement.

    OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
                  IN CONGRESS FROM THE STATE OF TEXAS

        Mr. Burgess. Thank you, Madam Chair.
        And too, it is with some sadness that I look over in the
    corner of the room, where the press occupies the press gallery,
    and some great deal of sadness with Robert Pear not being with
    us today. And through many of these arguments, Troubled Asset
    Relief Program, the Stimulus Bill, all of the Affordable Care
    Act debates, Robert was always there, faithfully writing. I
    didn't always like what he wrote but I could always count on
    him to be fair and do a very reasonable job of imparting the
    information to his readers. We will miss Robert Pear.
        So I appreciate this hearing today. And Madam Chair, when
    we sat down at the beginning of this Congress to sort of
    discuss some of the bipartisan goals, we agreed that the Drug
    Supply Chain Hearing that was held in December of 2017 was
    immensely helpful. So today's hearing is a continuation of
    that; this hearing being more company-specific rather than
    industry-wide. Both perspectives are important.
        I am hopeful that the witnesses here today will impart
    their firsthand experience and knowledge of the supply chain so
    that members of the subcommittee can build on the foundation of
    information that we began in the last Congress.
        I can't possibly be out of time. It is going up. Oh, good,
    I have got the rest of the week.
        The nature of the current drug supply chain is complex and
    has multiple stakeholders involved in each step. There are
    actors who are essential to the supply chain but do not affect
    the price of the medication. Bringing all of these stakeholders
    to the table today can give us an opportunity.
        It is my hope our discussion is substantive and focused on
    the patients who are prescribed these medications because, at
    the end of the day, it is the patient who matters most in this
    conversation. They are bearing the cost of these medications.
    They are the ones who stand to benefit from the cures or the
    maintenance of their good health.
        Prescription drugs continue to play a vital role in the
    United States healthcare system, not just improving patients'
    lives but producing healthcare savings through fewer
    hospitalizations and medical procedures. You know, I do just
    have to note Pfizer is here today. Pfizer didn't discover
    penicillin; Sir Alexander Fleming did and we all are familiar
    with the statue that the bullfighters erected to Sir Alexander
    Fleming. But it is Pfizer that democratized penicillin and
    brought it available to the rank and file regular American
    citizen and, most importantly, brought its availability forward
    to be used right before the D-Day invasion in 1944. So in some
    ways, we owe our success in World War II to the United States
    pharmaceutical industry; and I always feel obligated to mention
    that fact because people do forget.
        Improving access to life-saving treatments for consumers is
    a bipartisan priority. I would like to see us continue to build
    upon the successes that we have seen from 21st Century Cures
    and to spur biomedical innovation. That being said, it is
    imperative that we ensure that our system is ready to
    understand and pay for the treatments and cures in today's
    development when they reach the hospitals tomorrow and the
    doctors' offices in the future. It does no good if the patient
    is not able to afford them. And maybe at some point we can talk
    about perhaps, not depending upon last century's model of
    paying for things, but think of this century's model, where the
    cost of some of these novel treatments can be amortized over a
    longer period of time, even though they may be a single
    treatment. With some gene therapies and cell therapies, it will
    be a single episode of treatment but the benefit will accrue
    over a long period of time.
        I hope this hearing will shed some light on the
    interworking's of price negotiations between the stakeholders.
    This subcommittee has done good work on the issue of drug
    pricing this Congress, especially with the Purple Book and the
    Orange Book bills passed yesterday; but we need to find a
    bipartisan way to move forward with additional legislation.
         The hearing in the last Congress involved a fair amount of
    finger pointing among witnesses and that is okay. That is the
    reason it was constructed the way it was. I expect we will see
    some of that today, but I do want to remind our witnesses that
    our goal is to solve the problem, not assign blame. And to that
    end, we have invited you here and, if you will remember my
    admonition at the end of the last supply chain hearing was, you
    all have the knowledge and expertise to solve these problems.
    We lack that knowledge and expertise. But if you don't solve
    it, we will; and you probably won't like the expertise that we
    have in how it is solved.
        So I really call upon you to, not necessarily even during
    this hearing but in the days, and weeks, and months to come,
    please interact with us and share with us your ideas because
    they are critically important. There are legitimate differences
    of opinion. I recognize that every participant here this
    morning does aspire to the common goal of saving lives and
    alleviating human suffering. But out of these areas of
    disagreement, I hope to identify areas of consensus so that we
    can begin delivering solutions to the problems identified this
    morning.
        I know I took some extra time. I would be happy to yield
    back.
        [The prepared statement of Mr. Burgess follows:]

                 Prepared Statement of Hon. Michael C. Burgess

        Thank you, Chairwoman Eshoo. I appreciate your work in
    organizing the hearing we are holding this morning. When the
    two of us sat down at the start of your term as Chair to
    discuss bipartisan goals for this Congress, we agreed that the
    drug supply chain hearing that I chaired in December 2017 was
    immensely helpful. Today's hearing is similar in nature to that
    hearing we held last Congress but provides a more company-
    specific, rather than industry-wide, perspective of each link
    in the drug supply chain.
        I am hopeful that the witnesses here today will impart
    their firsthand experience and knowledge of the supply chain
    onto the Members of this Subcommittee and build upon the
    foundation we laid last Congress.
        The nature of the current U.S. drug supply chain system is
    complex and has multiple stakeholders involved in each step of
    the price negotiation process. There are also actors who are
    essential to the supply chain, but that do not affect the price
    of a medication. Bringing these stakeholders to the table today
    will provide us with an opportunity to learn about each
    player's roll in the drug supply chain as well as their impact,
    if any, on pricing and help to inform our decisions as Congress
    moves forward in its efforts to address drug pricing.
        It is my hope our discussion today is substantive and
    largely focused on the patients who are prescribed these
    medications because, at the end of the day, they are who matter
    most in this conversation. They are bearing the cost of these
    medications.
        Prescription drugs continue to play a vital role in the
    United States healthcare system, from significantly improving
    patients' lives to producing healthcare savings through fewer
    hospitalizations and medical procedures. A patient's access to
    prescription drugs is a key healthcare issue for Americans, and
    within that context is the debate over affordability.
        Improving access to life-saving treatments for consumers is
    a bipartisan priority, and I would like to see us continue to
    build upon the successes that we have seen from 21st Century
    Cures and other pieces of legislation to spur biomedical
    innovation. That being said, it is imperative to ensure that
    our healthcare system is ready to pay for the treatments and
    cures in today's development pipelines when they reach patients
    in tomorrow's hospitals and doctors' offices.
        I hope that this hearing will shed some light on the inner
    workings of price negotiations between the stakeholders. This
    Subcommittee has done good work on the issue of drug pricing
    this Congress, especially with the Purple Book and Orange Book
    bills passing the House yesterday, but I hope that we can find
    a bipartisan way to move forward with additional legislation.
        The hearing last Congress involved a fair amount of finger
    pointing among witnesses, and I expect that we will see a bit
    of that today. I would like to remind our witnesses that our
    goal is to solve the problem, and that we have invited you this
    morning to offer quality input so that your voice can be heard.
        While there are legitimate differences of opinion, I
    recognize that every participant here this morning does aspire
    to the common goal of saving lives and alleviating human
    suffering. Out of these areas of disagreement--I hope to
    identify areas of consensus so that we can begin delivering
    solutions to the problems identified this morning.
        Thank you, Chairwoman Eshoo, I yield back.

        Ms. Eshoo. Thank you, Mr. Burgess. The gentleman yields
    back.
        I'm now pleased to recognize the chairman of the full
    committee, Mr. Pallone, 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 continue to focus our attention on reducing the
    price of prescription drugs by closely evaluating the
    pharmaceutical supply chain. It is critical that we have a full
    understanding of how drugs are developed, priced, delivered,
    purchased, and dispensed so we can consider policies that will
    best improve the system to drive down costs and save consumers
    money.
        Drug prices continue to dramatically increase, while
    consumers pay more and more out-of-pocket for the medications
    they need. In fact, nearly one in four Americans who take
    prescription drugs say it is difficult to afford their
    medications. And I want to stress that this is simply not
    acceptable. I follow-up on what Dr. Burgess said. You know our
    constituents are just tired. They have had enough with the
    pharmaceutical industry. They think that the excuses are lame
    and they just want prices to come down and they want us to do
    something about it.
        Fortunately, this committee is already taking bipartisan
    action to make prescription drugs more affordable. Last month,
    we favorably reported out of committee bills that would help
    bring generic drugs to market faster. Yesterday on the House
    floor, we passed two of those bills that will increase the
    accuracy and transparency of the food and drug administration's
    databases that generic and biosimilar manufacturers depend on
    to bring more affordable prescription drugs to market. And next
    week, the House will consider legislation that has been
    reported out of our committee that will further these goals as
    well, including the CREATES Act and legislation to address pay-
    for-delay agreements.
        Now, I am proud of the bipartisan work but it is critical
    that we recognize that the work cannot and will not stop there.
    Solving this drug-pricing crisis will require a multifaceted
    approach that addresses the misaligned incentives throughout
    the supply chain that often encourage gaming and lead to higher
    costs.
        The pharmaceutical supply chain is an intricate and
    complicated network made up of drug manufacturers, wholesalers,
    providers, insurers, pharmacy benefit managers, pharmacists,
    and patients. It is critical that Congress, as well as the
    American people, have a clear understanding of how these
    entities operate, how they work in relation to one another, and
    what impact they have on the drug prices consumers ultimately
    pay.
        Now we know that innovation has paved the way for a new
    generation of life-saving and life-changing therapies for
    patients who otherwise may have faced more difficult outcomes.
    However, as newer and more specialized medicines come to
    market, these drugs typically have much higher prices that are
    too often just simply unaffordable.
        And I am interested in hearing from our witnesses today how
    much manufacturers set prices for newly launched drugs and why
    some drugs that are already on the market have continually
    increased in price. I also want to know how pharmacy benefit
    managers work with health insurance plans to decide how to
    cover these medications and under what conditions. It is also
    important to discuss how healthcare providers, hospitals, and
    pharmacies deliver medications to patients. But ultimately, I
    am most interested in how these decisions impact consumers, our
    constituents, and what they pay when they reach the pharmacy
    counter or receive a bill for drugs administered in a hospital.
        And it is our hope that the witnesses will discuss specific
    policy solutions that Congress should keep in mind as we move
    forward with legislative proposals to bring down costs. I would
    like to hear our witnesses' thoughts on providing for an out-
    of-pocket cap in Part D, increasing transparency about--around
    drug mechanisms and price increases, and further incentivizing
    competition in the marketplace.
        So today's hearing is an important step in our efforts to
    fulfill the promise we made to the American people to reduce
    their healthcare costs, and I look forward to hearing form our
    witnesses; and I hope that we can continue to work in a
    bipartisan manner to reduce prescription drug prices and
    consider real solutions that will lower costs.
        This is the number one issue that I hear when I go home.
    People want to know what we are going to do to lower prices.
    And you have heard both Democrats and Republicans and,
    certainly, the President of the United States prioritize this.
        And so as Dr. Burgess said--I don't want to put words in
    his mouth, you know you give us some ideas, obviously - ``we
    are going to take action because we have no choice.''
        Lastly, if I could, I did want to say that I wanted to
    mention the passing of New York Times reporter Robert Pear; who
    spent a lot of time in this room and downstairs covering our
    hearings and markups. You knew it was a big health hearing when
    Robert was here. And yesterday, I was really saddened to hear
    about his passing. He was a gentleman in every sense of the
    word, a phenomenal reporter. I am going to miss seeing him here
    at our hearings discussing healthcare policy with him and
    reading his stories. I always would wait to see what he was
    going to write the next day after he was here.
        So it is a huge loss and I know that a lot of people in
    this room today are feeling that loss.
        So, thank you, Madam Chair.
        [The prepared statement of Mr. Pallone follow:]

                 Prepared Statement of Hon. Frank Pallone, Jr.

        Today we continue to focus our attention on reducing the
    price of prescription drugs by closely evaluating the
    pharmaceutical supply chain. It's critical that we have a full
    understanding of how drugs are developed, priced, delivered,
    purchased, and dispensed so we can consider policies that will
    best improve the system to drive down costs and save consumers
    money.
        Drug prices continue to dramatically increase, while
    consumers pay more and more out-of-pocket for the medications
    they need. In fact, nearly one in four Americans who take
    prescription drugs say it is difficult to afford their
    medications. This is simply unacceptable.
        Fortunately, this Committee is already taking bipartisan
    action to make prescription drugs more affordable. Last month,
    we favorably reported out of Committee bills that will help
    bring generic drugs to market faster. Yesterday on the House
    floor we passed two of those bills that will increase the
    accuracy and transparency of the Food and Drug Administration
    databases that generic and biosimilar manufacturers depend on
    to bring more affordable prescription drugs to market. Next
    week, the House will consider legislation that has been
    reported out of our Committee that will further these goals as
    well, including the CREATES Act and legislation to address pay-
    for-delay agreements.
        I am proud of the bipartisan work, but it is critical that
    we recognize that the work cannot and will not stop there.
    Solving this drug-pricing crisis will require a multifaceted
    approach that addresses the misaligned incentives throughout
    the supply chain that often encourage gaming and lead to higher
    costs.
        The pharmaceutical supply chain is an intricate and
    complicated network made up of drug manufacturers, wholesalers,
    providers, insurers, pharmacy benefit managers, pharmacists,
    and patients. It is critical that Congress, as well as the
    American people, have a clear understanding of how these
    entities operate, how they work in relation to one another, and
    what impact they have on the drug prices consumers ultimately
    pay.
        We know that innovation has paved the way for a new
    generation of life-saving and life-changing therapies for
    patients who otherwise may have faced much different outcomes.
    However, as newer and more specialized medicines come to
    market, these drugs typically have much higher prices that are
    too often just simply unaffordable.
        I am interested in hearing from our witnesses today how
    manufacturers set prices for newly launched drugs, and why some
    drugs that are already on the market have continually increased
    in price. I also want to know how pharmacy benefit managers
    work with health insurance plans to decide how to cover these
    medications and under what conditions. It is also important to
    discuss how healthcare providers, hospitals, and pharmacies
    deliver medications to patients.
        But ultimately, I am most interested in how these decisions
    impact consumers--our constituents--and what they pay when they
    reach the pharmacy counter or receive a bill for drugs
    administered in a hospital.
        It is my hope that the witnesses will discuss specific
    policy solutions that Congress should keep in mind as we move
    forward with legislative proposals to bring down costs. I'd
    like to hear our witnesses' thoughts on providing for an out-
    of-pocket cap in Part D, increasing transparency around pricing
    mechanisms and price increases, and further incentivizing
    competition in the marketplace.
        care costs, and I look forward to hearing from our
    witnesses. I hope that we can continue to work in a bipartisan
    manner to reduce prescription drug prices and consider real
    solutions that will lower costs.
        Thank you, I yield back.

        Ms. Eshoo. I thank the chairman. The gentleman yields back.
        I'm now pleased to recognize the ranking member of the full
    committee, Mr. Walden, 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 very much, Madam Chair, and I want to
    join my colleagues in recognizing the loss of Robert Pear and
    expressing our condolences to his family and friends. He was
    fair. He was fierce. And he was factual. And you knew when he
    approached you with questions, he had done his homework and you
    better be ready.
        And he came out to my district in the winter of '17,
    traveled around, went to a Rotary Club meeting, a town hall,
    and a few things. And so he got on the ground, too, and I was
    always impressed with his writing. And sometimes, like Former
    Chairman Burgess said you agreed and sometimes you didn't but
    you knew he had done his homework and he is a real role model
    for journalists.
        So I want to thank you, Madam Chair, for the hearing. As
    you know, last Congress we did a similar hearing when I was
    chairman, and I think really we got a lot of positive feedback
    from members; and so I think this really builds on that to
    educate us about the whole pharmaceutical supply chain, the
    players involved, many of whom will be represented on the two
    panels today. We appreciate your participation because we are
    all trying to figure out how do we make sure the medical
    miracles that are discovered here or elsewhere get to our
    patients, our constituents in a way they can afford to take
    them and save their lives.
        And this is a very difficult issue. I have never seen a
    President more engaged on this issue than President Trump is
    and his Secretary of HHS. They have some innovative and
    creative ideas, some of which may work better than others, but
    there is no doubt this administration is very committed to this
    cause of getting prices down.
        So as we all seek to continue to improve our understanding
    of the drug supply chain and how each step in the process
    impacts consumers, we can further deconstruct how the supply
    chain affects drug prices by hearing from our witnesses from
    each step of this process: manufacturers, payers, pharmacists,
    providers, patients. So I would like to welcome each of you
    here today.
        Our committee has done a lot to help get life-saving
    treatments to patients. This includes championing the landmark
    21st Century Cures bill, which I think everybody on the
    committee participated in but it was led really by then-
    Chairman Fred Upton and Congresswoman Diana DeGette. It sought
    to modernize the nation's biomedical innovation infrastructure,
    streamline the process for how drugs and medical devices are
    approved, and get new treatments to patients faster.
        However, the impact of cutting-edge life-saving cures
    cannot be fully realized if they remain largely unaffordable to
    most patients. So while innovation and market competition are
    the key drivers of priced reduction, we must also acknowledge
    that the complexity of the supply chain does have an impact on
    access. It does have an impact on delivery and on the cost of
    drugs.
        Meanwhile, in the last Congress, in a bipartisan, I think
    unanimous, way we reauthorized the Food and Drug
    Administration. It gave the agency some new tools and resources
    to get generic drugs into the market faster. We have already
    seen the positive effects of that legislation play out. We have
    seen last year the FDA approved a record number of generic
    drugs, driving competition and giving consumers more choices.
    Just last month, this committee unanimously approved a number
    of FDA policies designed to increase transparency in the supply
    chain and bring down prescription drug prices.
        So I hope we can continue to work across the aisle on
    common sense policies to address the rising drug costs and, in
    doing so, we will rely on the testimony and insight of
    witnesses like those before us today.
        And again I would say, having been involved in these
    efforts for years, we need to look from one end to the other of
    everything related to healthcare, Madam Chair, not just drugs,
    not just PBMs, not just insurers but we need to get this right
    for our constituents, for our country. I don't think there is a
    country on the face of the planet that does more in innovation,
    in healthcare than the United States. So that is important; but
    even with all the changes from various players in how insurance
    works and all, again, we are seeing people priced out of
    markets with enormous deductibles, enormous copays, premiums
    going up, drugs that get left on the counter because they can't
    afford them. And so our work must continue.
        So I appreciate your leadership on this and I look forward
    to hearing from our witnesses. I would admit up front we have a
    concurrent hearing on energy with the Secretary downstairs so,
    I will be popping back and forth.
        And with that, Madam Chair, I yield back.
        [The prepared statement of Mr. Walden follow:]

                     Prepared Statement of Hon. Greg Walden

        Thank you, Madam Chair, for revisiting this important
    issue. When I was Chairman last Congress we laid groundwork to
    help educate Members about the pharmaceutical supply chain and
    the players involved, many of whom will be represented on our
    two panels and the role they play in how a product is priced.
    It was one of our most popular hearings and I want to thank you
    for building upon that previous work.
        As we all seek to continue to improve our understanding of
    the drug supply chain and how each step in the process impacts
    consumers, we can further deconstruct how the supply chain
    effects drug prices by hearing from witnesses from each step of
    the process: manufacturers, payors, pharmacists, providers, and
    patients. I'd like to welcome to each of our expert panelists
    that will help us understand the complex journey--from
    molecular discoveries to patient deliveries--a single dose of
    medicine takes.
        Our committee has done much to help get lifesaving
    treatments patients. This includes championing the landmark
    21st Century Cures Act, led by former Chairman Fred Upton and
    Congresswoman Diana DeGette. This important legislation sought
    to modernize the nation's biomedical innovation infrastructure,
    streamline the process for how drugs and medical devices are
    approved to get new treatments to patients faster. However, the
    impact of cutting-edge, lifesaving cures can't be fully
    realized if they remain largely unaffordable to most patients.
    While innovation and market competition are the key drivers of
    price reduction, we must also acknowledge that the complexity
    of the supply chain has an impact on access, delivery, and cost
    of drugs.
        In the last Congress we reauthorized the Food and Drug
    Administration, and gave the agency new tools and resources to
    get generic drugs into the market faster. We've already seen
    this play out--last year FDA approved a record number of
    generic drugs, driving competition and giving consumers more
    choices. Then just last month, this Committee unanimously
    approved a number of FDA policies designed to increase
    transparency in the supply chain and bring down prescription
    drug costs. I hope we can continue to work across the aisle on
    commonsense policies to address rising drug costs--in doing so,
    we will rely on the testimony and insight of our witnesses
    today to help us improve both innovation and affordability.
        I look forward to the testimony of our witnesses and hope
    all Members take advantage of this opportunity to better
    understand this complicated but so very important issue.

        Ms. Eshoo. I thank the gentleman. The gentleman yields
    back. And thank you for your statement.
        I now would like to introduce the first panel of our
    witnesses for today's hearing and thank you again for your
    willingness to be here with us today to testify.
        Mr. Justin McCarthy, Senior Vice President of Patient and
    Health Impact Group at Pfizer, thank you; Mr. Kave Niksefat--am
    I pronouncing your name correctly--he is the Vice President of
    Value and Access at Amgen; Mr. Jeffrey--is it Hessekiel--
    Hessekiel--good. I don't have an easy last name to pronounce so
    I don't like it when it is mispronounced and I don't want to
    mispronounce yours--is the Executive Vice President and General
    Counsel at Exelixis; Amy Bricker, Senior Vice President for
    Supply Chain at Express Scripts; Mr. Brent Eberle, who is the
    Chief Pharmacy Officer at Navitus Health Solutions.
        So thank you again for joining us today and we really look
    forward to your testimony.
        I don't know whether I need to explain the lighting system.
    I think you are all familiar. Probably the most important one
    is red and you need to stop then. All right? And you don't have
    to read your entire statement into the record; that will be
    placed in the record. If you want to summarize that, simplify
    it, however you wish to approach it, I think the simplifying it
    is most welcome by members.
        So we will start with Mr. McCarthy. You are recognized for
    five minutes.

     STATEMENTS OF JUSTIN McCARTHY, SENIOR VICE PRESIDENT, PATIENT
    AND HEALTH IMPACT GROUP, PFIZER; KAVE NIKSEFAT, VICE PRESIDENT,
      VALUE AND ACCESS, AMGEN; JEFFREY HESSEKIEL, EXECUTIVE VICE
     PRESIDENT AND GENERAL COUNSEL, EXELIXIS; AMY BRICKER, R.Ph.,
    SENIOR VICE PRESIDENT, SUPPLY CHAIN, EXPRESS SCRIPTS; AND BRENT
    EBERLE, R.Ph., CHIEF PHARMACY OFFICER, NAVITUS HEALTH SOLUTIONS

                      STATEMENT OF JUSTIN McCARTHY

        Mr. McCarthy. Chairwoman Eshoo, Ranking Member Burgess, and
    members of the subcommittee, thank you for inviting me to
    testify today. It is an honor to be a part of this panel. My
    name is Justin McCarthy and I lead the Pfizer team responsible
    for reimbursement and market access for medicines and vaccines.
        At Pfizer, more than 90,000 colleagues come to work each
    day aligned around a singular purpose--breakthroughs that
    change patients' lives. In 2018, we estimate that more than 784
    million people around the world use the Pfizer medicine or
    vaccine to improve their health, and we want to help even more.
        With approximately 100 programs in our pipeline, we hope to
    bring a wave of innovative new medicines to the market that
    address the most challenging diseases and conditions. Just this
    week we received approval for a breakthrough medicine with the
    potential to change the lives of patients battling
    cardiomyopathy; a rare life-threatening disease for which there
    were no previous options for patients. Unfortunately, these
    scientific innovations will not change patients' lives unless
    patients can get access to them and can afford them.
        Medicine should not be out of reach for patients, but three
    trends have evolved since the Part D benefit was enacted that
    are contributing to the affordability challenge. First, patient
    out-of-pocket costs are rising due to increased coinsurance and
    high deductibles. And while the original intent of out-of-
    pocket costs was to turn patients into smart consumers of
    healthcare, in reality, it is just causing patients to delay or
    defer care.
        Second, the growth in rebates are depriving patients of
    negotiated discounts.
        And third, we have seen tremendous advances in biomedical
    innovation that were not envisioned when the Part D benefit was
    enacted.
        All of us on this panel share a responsibility to help find
    solutions that address the affordability challenges that I know
    this committee cares deeply about.
        I have outlined four solutions in my written testimony that
    address both health system and patient affordability and this
    morning, I would like to focus on two of them: relieving
    patient cost-sharing burden and supporting the uptake of
    biosimilars.
        First, to relieve patient affordability, we should impose a
    cap on out-of-pocket costs and pass-through negotiated
    discounts to the patients. Abandonment of medicines is a
    growing problem. Nearly a third of all Part D prescriptions are
    abandoned at the pharmacy counter if seniors are asked to pay
    $250 or more. This number can approach 75 percent for new
    prescriptions and this trend is made worse because patients pay
    an average of 14 percent in out-of-pocket costs for medicines
    and only two percent for other healthcare costs.
        Abandoning prescriptions is bad for both patients and
    overall health system costs. That is why we are advocating for
    capping seniors' out-of-pocket costs in Part D and offering
    solutions to help fund that cap.
        In addition, the current system of rebates has increasingly
    led to perverse market incentives, where patients do not
    receive the direct benefit of negotiated rebates for the
    medicines they are taking. These patients are paying their
    deductible and coinsurance based off the full list price, not
    the negotiated price. If rebates are passed to Medicare
    beneficiaries at the point-of-sale, we estimate that seniors
    taking Pfizer medicines could save hundreds of dollars per
    year. The resulting improved adherence could also reduce total
    healthcare spending.
        To be clear, the rebate reform is not a windfall to Pfizer
    or the pharmaceutical industry. We are committed to converting
    all our rebates to point-of-sale discounts. We also fully
    expect that enhanced transparency will enable PBMs and plans to
    negotiate even greater discounts.
        Second, incentivizing the use of low-cost biosimilars.
    Medicines are the only segment of the healthcare system with
    built-in cost containment. When a medicine's patent expires
    low-cost generics are made available, often at just five
    percent the cost of original branded products. The system works
    well for generic drugs; however, the system is not yet working
    for biologics, where the adoption of biosimilars is facing
    resistance.
        Biosimilars have the potential to save billions in
    healthcare costs. That is why we must incentivize the use of
    biosimilars which, today, can be as much as 40 percent less
    expensive than the branded biologic.
        In closing, medicines are our best hope for preventing,
    curing, and treating disease. They can also help significantly
    reduce overall healthcare costs by mitigating the need for more
    expensive treatments. We all want America to remain the leader
    in biomedical innovation and to ensure that people have access
    to medicines when they need them most.
        Again, thank you for the opportunity to testify today. I
    look forward to answering your questions.
        [The prepared statement of Mr. McCarthy follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you, Mr. McCarthy. Excellent testimony.
        Next, I would like to call on Mr. Niksefat. You are
    recognized for five minutes.

                       STATEMENT OF KAVE NIKSEFAT

        Mr. Niksefat. Chairwoman Eshoo and Ranking Member Burgess,
    and members of the subcommittee, thank you for inviting me to
    be here today.
        My name is Kave Niksefat and I am Vice President and head
    of U.S. Value and Access at Amgen, one of the world's leading
    biotechnology companies. For nearly 40 years Amgen has been
    providing innovative biologic medicines to patients suffering
    from some of the world's most serious, prevalent, and costly
    diseases including: cancer, osteoporosis, and heart disease. I
    believe we have a helpful perspective on the drug supply chain
    and the important role it plays in determining what patients
    pay for their medicines.
        Amgen is part of the drug supply chain, of course, and we
    understand the role that we play in proactively taking steps to
    ensure that patients have access to the medicines they need.
    Amgen is a leader, for example, in value-based partnerships and
    in developing high-quality biosimilars; and we support policy
    solutions in these two areas and others that will improve
    affordability to patients.
        Perhaps the most significant way Amgen addresses
    affordability issues for patients is through the responsible
    pricing of our medicines, which is also where the complexities
    and inefficiencies of the drug supply chain begin to show
    themselves more clearly.
        Let me start by noting that the overall net selling price
    of Amgen medicines in the U.S. actually declined in 2018 and is
    expected to further decline in 2019. Why then are there so many
    Americans still struggling to afford the medicines they need
    from Amgen and others?
        The examples of one of Amgen is flagship and growing
    medicines, Repatha is illustrative. Repatha is approved by the
    FDA to prevent heart attacks and strokes by substantially
    lowering cholesterol in a wide range of high-risk heart
    patients. Last year, Amgen took the unprecedented step of
    making Repatha available at a 60 percent reduced list price,
    with the hope of improving affordability for patients and
    supporting the growth of this product in a competitive
    marketplace.
        To allow for a smooth transition to the lower list priced
    Repatha by the supply chain, we have temporarily continued to
    offer Repatha at its original list price. In a well-functioning
    system that transition would happen quickly, especially at a
    time when the U.S. spends $600 billion every year on heart
    disease.
        Unfortunately, this transition has been much slower than
    you might expect. Why? We believe it is due to the embedded
    issues in today's rebate-driven supply chain. For example, only
    about half of commercially insured patients currently access
    the lower list price Repatha. While Amgen has offered
    equivalent or lower net prices on the lower list price option
    of Repatha, Amgen pays fewer rebate dollars to achieve the same
    net price. We believe this lower rebate makes the lower list
    price Repatha less attractive to portions of the supply chain,
    especially in a marketplace where the competition can offer a
    higher overall rebate and achieve the same net price.
        Amgen intends to discontinue the original list price option
    of Repatha, once we see sufficient adoption in the market of
    the low list price option, which we hope will occur by the
    beginning of 2020.
        To be clear, I am neither putting all the blame for high
    drug prices on any one actor in the supply chain, nor am I
    calling for the elimination of PBMs, which play an essential
    role in our supply chain. We are supportive, however, of market
    and policy changes to ensure that the more than $150 billion in
    rebates and price concessions that the biopharmaceutical
    industry provides each year to the supply chain actually make
    their way to patients in the form of lower out-of-pocket costs
    at the pharmacy counter. Until these changes are made, we feel
    the rebate dollar will continue to be the single largest
    economic driver in the drug supply chain.
        In closing, all of us on both of these panels have a role
    to play in ensuring that the U.S. drug supply chain works
    better. I commend this committee for seeking bipartisan
    solutions that will benefit patients. Amgen remains committed
    to working with Congress and the administration to advance
    market-based reforms that will promote competition and improve
    access to new therapies without stifling innovation.
        Thank you again.
        [The prepared statement of Mr. Niksefat follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you, Mr. Niksefat. You certainly delivered
    that with great clarity and we appreciate it.
        I now would like to recognize Mr. Hessekiel. You are
    recognized for five minutes for your testimony.

                     STATEMENT OF JEFFREY HESSEKIEL

        Mr. Hessekiel. Chairwoman Eshoo, Ranking Member Burgess,
    and members of the subcommittee, thank you for the opportunity
    to appear here today.
        I am Jeff Hessekiel, Executive Vice President and General
    Counsel at Exelixis, a 500-employee biotech company based in
    Alameda, California. We are on a mission to discover, develop,
    and commercialize new medicines for difficult to treat cancers.
        I am here to give voice to small-and medium-sized
    biopharmaceutical companies whose voices are rarely heard in
    Washington, even though we drive the lion's share of drug
    discovery in the United States. In fact, in 2018, these
    companies patented almost two-thirds of new drugs approved by
    the FDA.
        I am also here to describe the tremendous risks and costs
    that businesses like ours assume. Overall drug pricing is
    certainly a cause for concern in the cancer space, which is my
    employer's focus. The more immediate concern, however, is
    patient access and affordability. To address that problem, we
    ask Congress to let us provide support to Medicare Part D
    patients diagnosed with cancer in the same way that we do for
    commercial patients.
        Exelixis' flagship product is cabozantinib, a Part D drug
    currently approved for forms of liver, kidney, and thyroid
    cancers. For kidney cancer, it has quickly become the number
    one prescribed therapy of its kind.
        At this point, I would like to acknowledge Dena Battle,
    founder of a patient advocacy organization known as KCCure.
    Formerly a congressional aide, Dena is in the room with us
    today. Her late husband, Chris, was diagnosed with stage four
    kidney cancer. After fighting by his side, Dena is now a full-
    time advocate helping to increase kidney cancer research
    funding.
        After he had exhausted all other treatment options, Chris
    was one of the first patients to benefit from cabozantinib when
    it was FDA approved. We are thankful that our medicine gave him
    nine additional months with Dena and their daughters before,
    sadly, he passed away.
        It was Exelixis' great privilege to help Chris Battle, as
    it is our privilege to help every patient that we serve. That
    is why we exist. However, it may come as a surprise to you that
    two years after we were able to help Chris with our FDA-
    approved product, Exelixis almost went out of business. We had
    spent $2.3 billion in research and development and the revenues
    from sales of cabozantinib were meager, due to the very small
    patient population for which the drug was approved at the time.
        Our hopes for long-term financial security rested on four
    pivotal trials. In 2014, when the first two of these trials
    read out negatively, as often happens in cancer research,
    Exelixis went into a tailspin. Our stock plummeted. We had
    dwindling cash reserves, considerable debt, and had to lay off
    nearly 75 percent of our employees.
        Despite these setbacks, Exelixis persevered. Our trials in
    kidney and liver cancer showed strong results and later, FDA
    approvals in these indications offered the opportunity to serve
    larger patient populations. We now offer cabozantinib at the
    price necessary to recoup a portion of our past R&D
    investments, fund our extensive development programs in over 20
    forms of cancer, and undertake new drug discovery efforts. The
    resulting revenues have enabled us to steady our financial
    ship.
        Exelixis' ups and downs illustrate the risks frequently
    faced by emerging biopharma companies and it bears repeating
    that despite such huge challenges that these companies face, we
    are the overwhelming source of medical innovation, especially
    for critical and catastrophic diseases. For this reason, we
    caution Congress not to undermine, disrupt, or even destroy the
    biopharma innovation cycle that drives the discovery of life-
    saving new medicines for Americans.
        Some countries have implemented price controls to keep drug
    prices artificially low. Others have weakened intellectual
    property protection. However, it is the United States that has
    been the driving source of humanity's most critical medicines
    and Americans have benefitted immeasurably from that
    innovation.
        In closing, we believe Congress' foremost healthcare
    concern should be to help facilitate patient access to critical
    medicines. Cancer patients too often face crippling out-of-
    pocket costs and are forced to delay or even abandon their
    therapy. For these patients, we do not accept the policy
    argument that patients must have financial skin in the game in
    order to obtain their therapy.
        At Exelixis, we have a deeply held commitment: no patient
    who requires one of our therapies should go without because of
    an inability to pay, and we do everything that we can under law
    to fulfill that commitment. We strongly urge you to allow
    Exelixis to do more. Let us provide Part D patients the same
    cost-sharing assistance that we provide commercial patients.
        Thank you for the opportunity to appear here today to speak
    for emerging biopharma companies. I look forward to responding
    to your questions.
        [The prepared statement of Mr. Hessekiel follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much for your highly instructive
    testimony.
        I now would like to recognize Ms. Bricker. You are
    recognized for five minutes and thank you, again, for saying
    yes to us.

                        STATEMENT OF AMY BRICKER

        Ms. Bricker. Absolutely.
        Chairwoman Eshoo, Ranking Member Burgess, and members of
    the subcommittee, thank you for inviting me to testify at this
    hearing. My name is Amy Bricker, Senior Vice President of
    Supply Chain for Express Scripts.
        I am a pharmacist by training, and I began my career in the
    community pharmacy setting. In my current role at Express
    Scripts, I oversee key relationships and strategic initiatives
    across the pharmaceutical supply chain. I work directly with
    drug manufacturers and retail pharmacies with the mission of
    helping more than 80 million Americans achieve better health
    with greater choice, affordability, and predictability. I
    appreciate the opportunity to testify on the challenge
    presented by high drug prices.
        Prescription drug affordability affects patient health; and
    I am pleased that the subcommittee is examining the entire
    supply chain. Express Scripts' role in the supply chain serves
    to drive down prices and deliver savings to consumers. We are
    part of the solution but every part of the supply chain needs
    to be part of the solution and this isn't always the case.
        Innovation can yield life-changing new therapies and
    treatments that improve or extend life but the increasingly
    high price tag that accompanies these medications is putting
    them out of reach for patients. At Express Scripts, we are
    focused on solutions that support both innovation and
    affordability so that patients can access the care they need.
        Health plans, unions, government plans, and employers,
    including many pharmaceutical companies, trust us to manage
    pharmacy and medical benefits for millions of Americans. Our
    clients work with us because high drug prices present an
    enormous challenge, and we deliver value and innovation for
    them every single day. The savings are real.
        In 2018 alone, Express Scripts returned $45 billion in
    savings to our clients. Because of our innovative solutions,
    our clients achieve the lowest drug trend in decades; just 0.4
    percent across employer-sponsored plans. Despite rising list
    prices, the average 30-day prescription costs only six cents
    more. In Medicare, we delivered an unprecedented 0.3 percent
    decline in drug spending across the plans we serve. Without the
    work we do, cost to patients and taxpayers would be higher.
        More must be done to lower costs for patients and that
    starts with more competition, consumer choice, and responsible
    drug pricing. Our ability to direct patients towards lower cost
    more effective medications yields most patients from high out-
    of-pocket cost. However, those with high deductible health
    plans, those who pay a portion of the drug's cost based on
    coinsurance, and those that are uninsured are too often subject
    to high prices at the pharmacy counter because they are paying
    based off the list price. Too many drugs, often without
    rebates, are coming to market with little or no regard for
    affordability. Manufacturers continue to bring drugs to market
    with eye-popping list prices that are not rebated. Let's be
    clear. The problem starts with list prices, not rebates, but we
    owe it to our fellow Americans to find solutions.
        Our combination with Cigna will enhance our ability to
    design targeted solutions to address these disparities and
    improve choice, affordability, and predictability for our
    consumers and clients. For example, within the first 100 days
    of our merger, we were able to launch a Patient Assurance
    Program, which will cap insulin costs. While this committee
    knows the price of insulin has more than doubled since 2012,
    the cost for our patients will be limited to just $25 a month.
    This is one early example of the accelerated change our
    combined company is driving.
        Similar to the construct of our Patient Assurance Program,
    we believe there are more direct and effective ways to deliver
    relief to patients through expanded benefit designs; without
    disrupting coverage for millions. Solutions include allowing
    more preventative services to be covered in the deductible
    phase and assuring biosimilars have a clear pathway to the
    market.
        We commend this committee on its recent efforts to approve
    legislation creating more competition in the generic and
    biosimilar markets. We are proud of the role we play to lower
    prescription drug costs and we look forward to working with the
    committee on targeted solutions to improve the affordability of
    prescription drugs for all Americans.
        Thank you.
        [The prepared statement of Ms. Bricker follows:]

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        Ms. Eshoo. Thank you for your testimony.
        I now would like to call on Mr. Eberle. And you are
    recognized for five minutes, and thank you for being here
    today.

                       STATEMENT OF BRENT EBERLE

        Mr. Eberle. Thank you. Chairwoman Eshoo, Ranking Member
    Burgess, and members of this Health Subcommittee, thank you for
    the opportunity to come before you today. My name is Brent
    Eberle and I am the Senior Vice President and Chief Pharmacy
    Officer at Navitus.
        Navitus was formed in 2003 in response to a market need for
    a PBM model with enhanced focus on transparency and aligned
    incentives. Today, we are owned by SSM Health Care, a not-for-
    profit integrated health system headquartered in St. Louis.
    Navitus administers pharmacy benefits for over six million
    members across the country, across multiple lines of business.
        As a full pass-through transparent PBM, Navitus has a
    different business model that remains unique in the industry.
    The term pass-through means that we pass through to our clients
    all of the payments that we receive from drug manufacturers,
    including rebates and any other discounts. We also pass through
    100 percent of the discounts that we receive from pharmacies.
    We simply charge a flat known administrative fee for the
    services we provide. We believe that this approach ensures
    there is no conflict of interest or confusion about who we are
    working for.
        In spite of the negative attention that PBMs have been
    getting recently, PBMs perform several critical functions that
    are necessary for patients to access the medications they need.
    PBMs act as consolidators of market power for those who offer
    pharmacy benefits; acting as a counterbalance to the market
    power of drug manufacturers and large pharmacy chains. By
    representing their clients, PBMs are able to combine buying
    power of many individual plans and negotiate with manufacturers
    and pharmacies to obtain lower prices than any individual plan
    can attain on their own.
        PBMs also perform numerous other important tasks, including
    multiple operational and clinical management functions.
    Operational activities include management of eligibility,
    standardization of claims processing, determining member and
    plan costs, and controls to prevent fraud, waste, and abuse. A
    typical pharmacy claim transacts in less than a second but
    involves hundreds of calculations and hundreds of data elements
    to ensure that claim processes correctly.
        Part of my role at Navitus is to oversee the clinical
    activities of the organization. Since PBMs are in the unique
    position to impact pharmaceutical care at a macro level, our
    teams design products and services that are targeted to improve
    population health in a number of different areas. These areas
    include helping ensure medications are used appropriately and
    according to current practice guidelines, increasing medication
    adherence through patient education and engagement, and
    preventing the overuse or misuse of medications through our
    opioid management efforts.
        Our clinical teams are passionate about improving care. And
    our business model based, in operational and financial
    transparency, helps to ensure the programs we develop provide
    value and optimize the dollars our clients have available for
    pharmacy. We play an active role in being stewards of the
    pharmacy benefit for our clients, who trust us to perform this
    service.
        In 2018, our net drug spend was nearly flat and almost half
    of our clients actually saw their pharmacy spend decrease from
    the previous year. These positive results not only benefited
    our clients but their members as well, who saw a two percent
    decrease in their out-of-pocket pharmacy costs. Our current
    efforts are focused on further extending transparency to
    providers and our members through innovative technology that is
    focused in improving the provider and patient experience. We
    are accomplishing this in numerous ways, including the
    expansion of electronic prior authorization, the use of real-
    time benefit checks, and mobile applications that let members
    see where their lowest cost pharmacy is in their area.
        Additionally, the growth in the internet of things creates
    numerous opportunities for us to develop and collaborate on
    tools and services focused on improving drug treatment
    adherence. We know that adherence is key to ensuring patients
    have the best chance for their treatment plan to be successful.
    Our vision is that these investments will continue to enhance
    patient engagement, resulting in improved health and lower
    overall costs.
        As with all parts of healthcare, transparency and aligned
    incentives can play a significant role in improving quality and
    reducing costs. We believe any effort to reform the PBM
    industry should start with increasing transparency so that
    decision-makers in benefit plans and in governmental entities
    for government-sponsored plans have all of the information that
    they need to make the decisions--the best decisions they can.
        In the current system, too often, decisions are made based
    on partial or incomplete information. By making the necessary
    information available to plan sponsors and by continuing to
    root potential conflicts of interest, the entire system can be
    made more efficient; and better decisions can be made,
    resulting in improved care and lower costs.
        Thank you for the opportunity to share with you an overview
    of our pass-through PBM model and to highlight the vital role
    PBMs play in the drug supply chain. I look forward to your
    questions.
        [The prepared statement of Mr. Eberle follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much.
        We have concluded the opening statements. We are going to
    move to member questions. Each Member concerning the value of
    cabozantinib based on the data from our clinical trials and the
    drug's safety profile. Member will have five minutes to ask
    questions of our witnesses and I will start by recognizing
    myself for five minutes.
        Mr. McCarthy, Mr. Niksefat, and Mr. Hessekiel, you heard my
    questions in my opening statement. Can you briefly instruct the
    committee members? How do you price your drug?
        We know that you have costs. So, we are not talking about
    costs. How do you price your drug?
        Mr. McCarthy. Thank you. I will do my best to answer that
    important question.
        So first of all we start--our starting point is always to
    look at the burden of disease, the burden to patients and the
    burden to the cost to the system. And that is our starting
    point.
        What we then do is look at what is the benefit that our
    medicine brings. Is it safer? Is it more effective? Does it
    avoid other downstream costs and hospitalizations? And that is
    our framework.
        We also then look at the population that we are treating,
    affordability to the system and to patients, and we also look
    at our need to continue to sustain investment and innovation.
        And we take all of those factors and we put it together and
    come up with what we think is the value. What we do next is we
    go out and we talk to providers. We talk to patients. We talk
    to plans. And we test our assumptions, and we get their
    feedback, and then we refine our price.
        That takes us to the next stage, which is where we go out
    and we negotiate with plans and PBMs for coverage. And
    sometimes we get coverage; sometimes we get restricted
    coverage; and sometimes we get excluded. And that is basically
    the process.
        Ms. Eshoo. Mr. Niksefat.
        Mr. Niksefat. Thank you, Madam Chair. A very similar answer
    to the gentleman from Pfizer.
        When we look at setting a list price for a drug, it is not
    done in a vacuum. It is looked through and established at the
    pricing principles that we have that start with what is the
    value of the medicine to physicians, patients, and ultimately
    the healthcare system overall.
        We then look at what is the economic benefit that that drug
    brings, in terms of additional offsets to costs that exist in
    other areas, and look at it as well to see how large is the
    patient population we believe it will impact, and making sure
    that we can sustain continued investment and innovation.
        We also look at how does this drug play within our existing
    pharmaceutical supply chain, especially when competition is
    present.
        Ms. Eshoo. Thank you.
        Mr. Hessekiel.
        Mr. Hessekiel. Sure. To establish the launch price for
    cabozantinib, we conducted extensive market research to
    determine the opinion of potentially prescribing physicians,
    plans, and payors concerning the value of cabozantinib based on
    the data from our clinical trials and the drug's safety
    profile.
        We also considered the market context into which we were
    launching the drug, such as the attributes and prices of
    competitor products.
        Finally, we evaluated our own level of R&D spending which,
    as I had mentioned at the time, was $4.3 billion that we had
    spent to get to that point, and we figured what was necessary
    in order for us to discover and investigate cabozantinib, as
    well as the amount we are currently spending on that
    investigation, and how much more we would need to spend in the
    future.
        Ms. Eshoo. I still don't quite get it but I want to move on
    to my next question.
        To the manufacturers: In your negotiations with the PBMs,
    do you pay them anything?
        Mr. McCarthy. We pay them in two respects. We have the
    rebates, which we have been talking about----
        Ms. Eshoo. Discounts.
        Mr. McCarthy. Discounts, rebates----
        Ms. Eshoo. Yes, let's use discounts because rebate--the
    connotation of a rebate, to me, is I associate that with
    consumers but I don't believe that that ultimately is reaching
    them. Some people think that but I don't.
        So let's use the word discount, all right?
        Mr. McCarthy. OK, we agree. So we pay discounts that we
    agree to----
        Ms. Eshoo. You negotiate discounts.
        Mr. McCarthy. We negotiate discounts.
        Ms. Eshoo. But do you pay any money to them for anything?
        Mr. McCarthy. Well we negotiate discounts and then we also
    pay administrative fees which are not based off the list price
    but are administrative fees for administering the benefit. It
    is a general administration fee.
        Ms. Eshoo. To the PBM?
        Mr. McCarthy. To the PBMs, yes.
        Ms. Eshoo. Why do you pay that?
        Mr. McCarthy. It is an administrative fee for managing the
    formulary and other services.
        Ms. Eshoo. To the manufacturers, again: Are there any other
    fees or monies that are associated with manufacturers and PBMs
    that I have missed?
        You just pay administrative fees and you do the discounts.
        Mr. McCarthy. Yes.
        Ms. Eshoo. To Ms. Bricker and Mr. Navitus, you have
    different business models, obviously. You are a small PBM. You
    are one of the giant of three in our country.
        You are paid by your clients to negotiate with the drug
    manufacturers. Do they pay you money as part--do they pay you
    anything for these negotiations?
        Ms. Bricker. Thank you for the question, Congresswoman.
        Yes, our clients do pay us for the services that we
    provide.
        Ms. Eshoo. And is it a fee-based payment or is it based on
    the discount? What is it based on?
        Ms. Bricker. The arrangements vary by client. They choose
    how they elect to pay us. Some do----
        Ms. Eshoo. They choose; you don't set it.
        Ms. Bricker. Yes, ma'am, they choose.
        Ms. Eshoo. Mr. Eberle?
        Mr. Eberle. Yes, for our clients, we do everything on a
    fee-for-service basis. So it is a flat per member, per month
    administrative fee or a fixed per claim charge. But that is
    what our clients charge us--or what we charge our clients to
    provide that service.
        Ms. Eshoo. So the $64,000 question is: Your business
    model--well, you both view it this way but it seems to me that
    your business model, given what you have testified reaches the
    patient--the savings?
        Mr. Eberle. Yes, all of the savings that we receive from
    manufacturers and pharmacies get passed back to the plan
    sponsors. Those plan sponsors can then elect to share those
    savings with members, either through a point of rebate plan
    design, they can lower premiums, or lower overall copays and
    coinsurances.
        Ms. Eshoo. So there is one more step in it. The insurers
    and others need to make that decision.
        Mr. Eberle. Correct.
        Ms. Eshoo. And we are going to have them on the second
    panel.
        Mr. Eberle. Correct.
        Ms. Eshoo. To Express Scripts, tell me about the specialty
    pharmacy. Do you own specialty pharmacies?
        Ms. Bricker. Yes, we do own a specialty pharmacy called----
        Ms. Eshoo. And why? How does that work?
        Ms. Bricker. So specialty pharmaceuticals are those that
    are really high-cost and require careful education around how
    to administer the product, ensuring that it is taken
    appropriately, ensuring that it is best managed. And so there
    are a team of specialty pharmacists and nurses that work very
    closely with physicians to ensure that patients are actually
    taking the medicine appropriately and correctly.
        Ms. Eshoo. It is a business that you have set up.
        Ms. Bricker. It is a pharmacy.
        Ms. Eshoo. Well, I have gone way over my time.
        I am going to recognize now the ranking member of the
    committee, Dr. Burgess for five minutes of questioning.
        Mr. Burgess. Thank you. People who have heard me at this
    type of hearing before know that I sometimes say if we don't
    understand the difference between Sovaldi and Daraprim, we are
    going to get the wrong answer to this.
        So bearing that in mind, Sovaldi being a breakthrough cure
    for hepatitis C and we are grateful. It is a gift that we are
    able to cure a disease that when I was in my residency training
    program it didn't even have a name and now is a cure; not a
    treatment, a cure.
        But maybe our PBMs at the end of the table, if I could just
    ask a question. When I go online and look at the price for
    Daraprim, why is it still so expensive? Sovaldi has come way
    down with competition. Daraprim has been around a long time, it
    is no longer on patent, no one is trying to recoup a research
    cost. How come it costs so much?
        Mr. Eberle. I am not sure that we can address the question
    of how that list price is established. We pay the list price
    that is set. It is a generic. There are not rebate/discounts
    available. So we are working to negotiate the best price we can
    but we are not setting the list price for that product.
        Ms. Bricker. Yes, my answer would be similar. We, too, are
    outraged by the list price of Daraprim and Sovaldi when it
    launched. Your observation is accurate that with competition in
    hep C, pricing came down. We are really proud of the work that
    we were able to do in working with manufacturers to secure
    those deep discounts. But in Daraprim, it is an outrage and,
    unfortunately, I am not able to shine any light on why they
    have set the price they have.
        Mr. Burgess. Well, it is a single manufacturer. And I guess
    what I don't understand is why, but with what they are charging
    for the drug I would think someone would be saying hey, ``I
    will do that for half price.'' Because when I go on my app that
    I have for drug prices, it is--I mean it is way up there. For a
    month's therapy, it is like $60,000. It is unbelievable.
        Ms. Bricker, I was grateful to hear you bring up the issue
    of your Patient Assurance Program. We have another subcommittee
    on the Energy and Commerce Committee. We had a hearing on
    insulin prices. Heaven help me, I do not ever want to run an
    insurance company. I can't imagine how difficult that is, but
    my observation that morning was that if I did run an insurance
    company and I had a patient who I was responsible for, and had
    some sort of longitudinal relationship with, and they were
    unfortunate enough to be diagnosed with diabetes, I would want
    to pay for their medicine. I wouldn't want them leaving the
    pharmacy without their script because untreated diabetes is a
    whale of a lot more expensive than treated diabetes.
        Is that something that you all have found in your business?
        Ms. Bricker. Absolutely. We focus many of our programs on
    ensuring adherence or compliance with medications, not just in
    diabetes but in many chronic diseases.
        But to your point, thank you for acknowledging the Patient
    Assurance Program. It did allow us to roll out a program that
    offers insulin, all insulin, at $25 a month and we did that in
    collaboration with the manufacturers.
        Mr. Burgess. And is that $25 a month, is that still a
    barrier for some patients? Do you have a mechanism by which a
    patient can still get access to their medicine if that $25,
    although that is significantly better than other options, but
    do you have an option for that patient if the $25 is a barrier?
        Ms. Bricker. As testified in the prior committee, the
    manufacturers often offer additional patient assurance or
    foundational dollars to support those that have a financial
    need. And so we do attempt to work with them as well.
        Mr. Burgess. And Mr. Hessekiel, you brought up a point. You
    said that cost-sharing assistance is available to patients on
    commercial insurance but not to those on public insurance. Is
    that correct? Did I understand you right?
        Mr. Hessekiel. That is correct. Legally, under current law,
    we are not allowed to provide cost-sharing, coinsurance,
    copayment assistance to patients on public healthcare plans.
        Mr. Burgess. But you would if you could. It is not because
    you are hard-hearted. It is because you are prevented by law?
        Mr. Hessekiel. Absolutely. I have been making rounds on the
    Hill now, since we started our government affairs function,
    with one singular purpose which is to ask that something be
    done so that we can extend that so that patients who have
    cancer can get that assistance.
        Mr. Burgess. And just so I am clear on that, that is a
    legislative fix, not an administrative fix. The good folks over
    at the Department of Health and Human Services can't just
    promulgate a rule and fix that. We have to fix that.
        Mr. Hessekiel. It actually could be addressed either way.
        Mr. Burgess. Either way?
        Mr. Hessekiel. Yes, there is an OIG rule that views that as
    a form of kickback, and so it is seen as an inducement to try
    and get patients on drugs.
        I want to be very clear. We are not advocating for the----
        Mr. Burgess. Correct.
        Mr. Hessekiel [continuing]. Elimination of that restriction
    across public health plans. We are saying that for cancer
    patients and patients with catastrophic disease----
        Mr. Burgess. It makes sense.
        Mr. Hessekiel [continuing]. Who have gotten a diagnosis of
    this devastating illness and the next thing they know, they are
    in financial distress in order to deal with it.
        Mr. Burgess. Well, I will follow-up with you offline about
    that because that is bothersome to me as well and I share your
    concern about that.
        And I have got a ton more questions; but we are out of
    time. So I am going to be submitting significant questions for
    the record and would appreciate your prompt response to those.
        Thank you very much.
        Ms. Eshoo. The gentleman yields back.
        It is a pleasure to recognize the gentlewoman from
    California, Ms. Matsui, for five minutes of questioning.
        Ms. Matsui. Thank you very much Madam Chair. And I think we
    are really very happy to have this session here today to try to
    untangle the drug supply chain.
        One of the things that struck me about this hearing ,and
    standing out about this, is that the rising drug costs and need
    for greater transparency in the whole chain. And I don't think
    anyone sitting here today or the Federal Government has really
    a complete picture into this; and that is why we are here
    today.
        Now this lack of transparency has really caused some States
    to take action. California, Vermont, Nevada, and Oregon have
    laws regarding transparency; and it is my hope that we might
    consider Federal legislation regarding transparency. Certainly,
    it will benefit our Federal health programs and so American
    families understand.
        We have already seen good actors in the manufacturing space
    take meaningful steps to increase transparency. For example,
    both Sanofi and Janssen have agreed to disclose the drug price
    increases each year. Sanofi has also announced they will put
    limits on how much it will increase drug prices annually. This
    is a first great step but much more needs to be done.
        I would like to ask all of our drug manufacture witnesses
    here today, Mr. McCarthy, Mr. Niksefat, Mr. Hessekiel, do you
    believe that greater transparency in our healthcare system
    would help to improve our understanding of what is driving up
    the cost of prescription drugs and care in this country? Just a
    yes or no.
        Mr. McCarthy. Yes.
        Mr. Niksefat. Yes, we support it across the entire system.
        Ms. Matsui. OK.
        Mr. Hessekiel. Absolutely.
        Ms. Matsui. OK, if Congress were to pursue financial
    transparency in the drug supply chain, what would that look
    like? Are there lessons learned from some of the State actions?
        Mr. McCarthy. So my view would be a Federal transparency
    bill should look across all of healthcare because I believe it
    is not only important to inform consumers but we have talked a
    lot about value-based care and the shift to value-based care. I
    believe some sort of Federal transparency bill will be
    essential for us to be able to compare value across different
    healthcare interventions; and I believe that is one of the
    barriers that is preventing us from moving to value-based care
    now. It is very difficult to look across the spectrum of
    healthcare to assess which intervention is most valuable.
        Mr. Niksefat. We believe the best way to increase
    transparency within the system is to allow and ensure that
    patients always receive the negotiated discounts at the point-
    of-sale; and that will shine a light across everything across
    the entire system.
        Ms. Matsui. OK, Ms. Bricker, in your testimony, you discuss
    increasing price transparency for patients and provider at the
    point of prescribing as one proposal to lower drug price costs
    for patients.
        Can you explain how this proposal might work and what
    benefit could it bring to patients?
        Ms. Bricker. Yes, thank you for the question.
        So, we are highly supportive of tools that are at the
    fingertips of prescribers. This information is available today;
    but connectivity between physicians, electronic medical record,
    and this information is a barrier. So we want to do more to
    ensure that every physician has this information.
        It would explain what drug was on formulary. It would
    explain the out-of-pocket cost. It would explain if there was
    prior authorization required, and all of that would be known
    real-time.
        We are also supportive of tools for patients so that they
    can make informed decisions. We have those today at Express
    Scripts, but they are not universally available across all drug
    plans.
        Ms. Matsui. OK. Now, I realize the formulary management is
    a common strategy used by pharmacy plan sponsors to control the
    cost of prescription drugs. I am interested in better
    understanding of how this practice impacts patient access to
    behavioral health medications, including medication-assisted
    therapies and antipsychotics.
         When building your national formulary, what factors do you
    consider when making initial coverage and tier placement
    decisions for FDA-approved treatments for behavioral health
    disorders?
        Ms. Bricker. Yes, so it starts with an independent panel of
    physicians that review the clinical attributes of the product.
    Once they have determined that a product should or could be
    included on formulary, we work with the manufacturers to secure
    discounts.
        From that, then we determine the best net cost products and
    put those on formulary as preferred status.
        Ms. Matsui. OK. Continuing on here, I am really concerned
    because I am looking at some of these costs, we are talking
    about here and there are various aspects we talk here about
    Part D. But in Part B, we are looking at the fact that without
    rebates, the cost of prescription drugs could keep increasing.
    Is that correct?
        Ms. Bricker. Yes, that is correct.
        Ms. Matsui. And I guess I am going to ask the manufacturers
    why would that be so.
        Mr. Niksefat. We believe that Part B is also a competitive
    marketplace and the competition can drive prices down.
        Ms. Matsui. You all agree on that? OK.
        Mr. McCarthy. I would just add, Congresswoman, I think
    there is work to be done in terms of the uptake of biosimilars
    and we would be happy to talk about that.
        Ms. Matsui. Well, I have run out of time. So, I yield back.
    Thank you.
        Ms. Eshoo. The gentlewoman yields back.
        Now I would like to recognize the gentleman from Illinois,
    Mr. Shimkus, for five minutes of questioning.
        Mr. Shimkus. Thank you, Madam Chairman, and welcome.
        As a Member of Congress, except for a few of us, we are
    expert generalists. We know a lot about a little bit; and so
    that is why hearings like this are just very important as we
    are trying to figure out your business models and how it
    relates to our constituents and your customers and the like.
    That is why I really appreciated Dr. Burgess' questions on
    Sovaldi and Daraprim.
        And I think in this debate for us, we know probably the
    prescription drugs we are taking and then we get the--
    hopefully, we do, and then we will get the anecdotal story of a
    constituent like I shared in our last healthcare hearing, who
    brought me a box of biosimilars that was 20--how much was it--
    $310 over a year's use monthly dosage. And I went into this
    debate on Medicare D, and the donut hole, and trying to figure
    out how does that work.
        So we get these smatterings; but trying to put the value
    chain together is very challenging. So I want to thank the
    chairman for having this. And we had a similar one in the last
    Congress trying to work through this.
        A point that I want to make, because on the two panels. I
    have a large rural area. I have 33 counties. So I know
    Walgreens is on the next panel. They are, obviously, a national
    chain. We still have a lot of local community pharmacists,
    standalone operations that they are the only one there. And so
    as we talk about the value chain, Madam Chairman, for me a lot
    of times in my debate on; how this focus is on that local
    community pharmacist, because some of these pricing mechanisms
    really hurts these individual pharmacists.
        So I have made statements to the like and I understand the
    big picture but when you have a county that only has 5,000
    people in, you know we have to make sure that they still have
    the same access to life-saving drugs as anyone else does.
        Having said that, I want to look at issues that were kind
    of addressed by Dr. Burgess also, is where are we getting in
    the way or what can we do through regulations or rules, like
    Dr. Burgess mentioned in the Medicare D space, on Mr.
    Hessekiel's comment. But where else might there need to be
    either a promotion of rule changes or legislative fixes?
        So sometimes, for example, do we have any recommendations
    how reforms to existing laws like Stark or the Anti-Kickback
    statute could accelerate value-based contracting within
    Medicare and Medicare Advantage?
        And that is really for everyone, if you could go by really
    quick. So we can start with Mr. McCarthy.
        Mr. McCarthy. So yes, I agree. While those laws were well-
    intentioned, they didn't contemplate value-based agreements.
    Having exemptions for value-based agreements both in the Anti-
    Kickback statute and from the best price provisions would
    enable us to accelerate value-based agreements.
        Mr. Niksefat. I agree with Mr. McCarthy.
        Amgen is a leader in value-based care and we believe that
    we could extend several of the programs that we offer in the
    commercial marketplace to the Medicare marketplace if reforms
    were put in place.
        Mr. Hessekiel. I am going all in on my change to the rules
    concerning being able to provide coinsurance, cost-sharing
    assistance to Medicare Part D beneficiaries; but I do, speaking
    on behalf of Exelixis, we do agree that changes should be made
    to facilitate value-based arrangements.
        Ms. Bricker. Yes, at Express Scripts, we are also
    supportive of reform so that manufacturers can participate in
    value-based contracts and programs for Medicare and government
    programs.
        Mr. Eberle. We agree as well. Value-based programs offer a
    unique way to impact the cost of prescription drugs and
    whatever we can do to expand that across all lines of business
    we would be in favor of.
        Mr. Shimkus. So who wants to, in the last 40 seconds,
    define value-based for members who have been here for a long
    time and for the new members of the committee?
        Mr. Niksefat?
        Mr. Niksefat. Yes, certainly. We have defined value-based
    contracts as those available contracts that really take a look
    at the value of a medicine and potentially an outcome of that
    medicine and either provided further discounts or a further
    cost, if the drug performs as it should.
        So for example, in Repatha, we offer a so-called outcomes-
    based rebate. If a patient who is taking Repatha unfortunately
    has a heart attack or stroke, we will refund the entire value
    of that patient's medicine back to the health plan. Given that
    these events can take many years to develop, we are able to
    offer those in the commercial marketplace; but we have a harder
    time offering them in the Medicare marketplace.
        Mr. Shimkus. I appreciate that. Thank you very much.
        Madam Chairman, I yield back.
        Ms. Eshoo. I can't help but think that you said you set the
    value at the beginning when you are setting your price, though.
        I would now like to recognize the gentleman from North
    Carolina, Mr. Butterfield, for five minutes of questions.
        Mr. Butterfield. Thank you very much, Madam Chair, for
    convening this very important hearing. I think it is important
    to all of us and we can tell that by the attendance here today.
    The members, even though they have two or three hearings going
    on at the same time, members are trying their best to go in and
    out to hear from these witnesses. And so thank you so very much
    for the hearing and certainly thank you to the witnesses.
        You know I, some years ago, was taught that corporations--I
    guess I was taught this in law school--corporations exist to
    create a product and to make a profit. That is 101 in corporate
    law, to make a good product and to make a profit. And I assume
    that most, if not all of you, agree with that statement.
        But in the world of drug manufacturing, how do you
    reconcile the corporate desire for profit against the fact that
    you make a drug that can save lives?
        And I represent a low-income district in eastern North
    Carolina, and so many of my constituents simply cannot afford
    drug prices. They cannot afford the out-of-pocket costs and
    they cannot afford the other costs associated with healthcare.
        And so how do you reconcile, Mr. McCarthy, the appropriate
    goal of a company to make a profit against the need to create
    affordable medications?
        Mr. McCarthy. Well for us, it is fairly simple. We feel
    like we will succeed through our innovation. If we are able to
    develop an innovative medicine and bring it to patients in
    need, we will do well, the health system will do well, but,
    most importantly, our patients will do well.
        Mr. Butterfield. What are some of the factors in price
    points that drug manufacturers consider in establishing prices?
        Mr. McCarthy. So as I mentioned earlier in response to the
    chairwoman, we always start with what the burden of the disease
    is and what are available treatments to that patient. How are
    they managing that condition? What is the burden to the system?
    Does it result in hospitalization? Does it lead to death? That
    is always our starting point.
        And then we look at what benefits does our medicine bring
    and it has to be either safer, more effective, deliver savings
    to the system; otherwise, we don't pursue it. Those are the
    main factors-but we also look at the population. Some of the
    diseases we are looking at now have very, very tiny
    populations. They are very rare conditions.
        So we look at that and we look at affordability. But we
    also look at our ability to sustain investments and innovation.
        Mr. Butterfield. So, affordability is a consideration.
        Mr. McCarthy. It is absolutely a consideration.
        Mr. Butterfield. What about with Amgen, same thing?
        Do you consider affordability?
        Mr. Niksefat. Yes, sir, we do.
        Mr. Butterfield. That is a factor in drug pricing?
        Mr. Niksefat. Yes, it is.
        Mr. Butterfield. All right.
        Someone mentioned earlier in their testimony that one
    legislative solution could be capping out-of-pocket costs for
    Part D, and I certainly agree with that; and I am trying to
    think that through. If an out-of-pocket cap is put in place
    under Part D, what are the corresponding changes on the other
    side of the ledger? Does the cost for the insurance company go
    up? I mean how do you compensate for the cap?
        Mr. McCarthy. So I will offer to answer that, since I was
    the one who raised it.
        I think there could be thoughtful reform to the Part D
    benefit. And what we would consider, what we would like to
    discuss more, is possibly closing the coverage gap and then
    shifting the various responsibilities in the catastrophic phase
    so the cap would eliminate the five percent patient
    responsibility in the catastrophic phase. And then there would
    be shared responsibility between the manufacturers, the plans,
    and the Government. That would be our recommendation.
        Mr. Butterfield. Thank you for that.
        Some people suggest that drug manufacturers are tone deaf
    when it comes to the affordability of drugs, and I think that
    may have been the case some years ago, but I have discerned a
    change in attitude among all of you over the last three or four
    years and I want to thank you for it. And I look forward to
    working with each one of you as we, together, try to lower drug
    costs in this country.
        Thank you so very much for coming. I yield back.
        Ms. Eshoo. I thank the gentleman. The gentleman yields back
    and I thank him for his excellent questions.
        I now would like to recognize the gentleman from Virginia,
    Mr. Griffith, for minutes of questioning.
        Mr. Griffith. Thank you very much.
        Ms. Bricker, thank you so much for being here. I have asked
    a lot of tough questions in other hearings to PBMs and I still
    have lots of questions but one of the things I noted in Mr.
    Eberle's testimony was he said that one of the problems that
    all of us could make is if we start making decisions that are
    based on partial information. And when folks don't show up,
    even if we are going to ask tough questions and maybe have a
    disagreement, if they don't show up and give us that
    information, then we are making decisions based on partial
    information and we will make even more mistakes than we might
    otherwise make as human beings.
        And so we are just trying to get the information and I do
    appreciate you being here. I know some of the colleagues of
    yours chose not to be here today and I regret that for them;
    but am very pleased that you are here. So thank you for doing
    that because we need full information.
        Mr. Eberle, you know I like your model, from what I can
    tell. It is not going to solve all the problems in the chain
    but I would like for you to talk about that some because one of
    the concerns that I would have is you actually said in your
    written testimony that one of the values of PBMs, and you laid
    out some things that PBMs do that are valuable and that we
    shouldn't throw the baby out with the bath water, more or less.
        One of the things you said was that PBMs act as a
    counterbalance to the massive market power of drug
    manufacturers and pharmacy chains. So what if the pharmacy
    chain and the PBM are owned by the same people?
        Mr. Eberle. Well I don't know that I can comment on that
    specifically. We don't have that situation for the organization
    we work for.
        How we do that, our negotiations with pharmacies and with
    manufacturers is, with pharmacies in particular, we are looking
    at gathering access discounts. Does the client want a broader,
    limited network doing the Geo Access requirements so that we
    can make sure that there is a pharmacy available so that we
    never have a network where there isn't a pharmacy within range?
    And we have, that as then, a competitive negotiation with the
    pharmacies to determine our network.
        Mr. Griffith. Now I do have to ask because I represent a
    very large rural district, what is within range?
        Mr. Eberle. So there are a number of standards. Both State
    Medicaid and CMS developed Geo Access Standards that we apply
    both to those Federal programs but also to any State or our
    commercial books of business.
        So they set standards based on rural, urban, and suburban
    area, how many pharmacies within specific ranges of that. And
    that sets the Geo Access standard.
        Mr. Griffith. Okay and I appreciate that.
        I like the concept of charging a certain fee because one of
    the things that I pushed on in another hearing that we had on
    this issue because this is a bipartisan concern, the drug
    pricing across the board, and we are trying to get to the
    bottom of it. One of the things I pushed on was it looks like
    that the cost of the drug in many of the other cases, in the
    spread model that you mentioned in your testimony, the price of
    the drug can push the amount of money that the PBM receives for
    processing that drug.
        And you indicated that could create a conflict of interest
    for the PBM because if they then encourage the manufacturer to
    increase the price of the drug, even if they rebate it back
    down to the same price that it would have been before they
    increased the increase or asked for the increase, they are
    still receiving, even if it is only one or two percent, they
    are then receiving a larger amount of money for processing and
    that fee, ultimately, gets passed on to the consumer.
        Is that pretty much what I understood you to say?
        Mr. Eberle. Very similar, yes. We wanted to take any
    incentive out, either from the rebate spread or from the
    pharmacy network spread, and really just have our clients know
    exactly what we are charging for that service. So that is how
    we approach it.
        Mr. Griffith. And so the folks back home understand, when
    you are talking about clients, you are not talking about the
    person who goes to the drug store to buy the drug. You are
    talking about the insurance companies and other plans. Isn't
    that correct?
        Mr. Eberle. Yes, we represent anyone that provides pharmacy
    benefits. So that could be a health plan. It could be a State
    and local municipality. It could be just a large or small
    employer but any provider of pharmacy benefits.
        Mr. Griffith. And I believe you indicated, I think to Ms.
    Eshoo, earlier, that if you passed that on to those folks,
    those people who have the pharmacy benefits, the insurance
    company, et cetera, then it is between them and their consumers
    as to whether or not they pass that on to the individual
    patient. Isn't that correct?
        Mr. Eberle. Correct. They can make the decision as to
    whether within their plan design if they offer a point-of-sale
    rebate as part of that plan design. Do they use those dollars
    just to offset their overall pharmacy costs and share that
    either through lower premiums or lower copays and coinsurances?
        Mr. Griffith. Right and that is one of the reasons why we
    need to have transparency and you also advocated for
    transparency. But that is one of the reasons when you have
    transparency across the entire drug supply chain, because the
    manufacturers have a role, the PBMs have a role, the insurance
    companies have a role, and the pharmacies have a role. Isn't
    that correct?
        Mr. Eberle. Correct, absolutely.
        Mr. Griffith. I appreciate it and I yield back. Thank you
    very much.
        Ms. Eshoo. I thank the gentleman, again, for excellent
    questions.
        I now would like to recognize the Chairman of the full
    committee, Mr. Pallone, for his five minutes of questioning.
        Mr. Pallone. Thank you, Madam Chair.
        I want to discuss the pricing methodology that
    manufacturers consider when a novel therapy is about to launch
    onto the market and what, if any, constraints there are on
    price in those instances.
        We know that first-in-class novel drugs can change lives,
    sometimes even with a single dose, and lead to improved health
    outcomes for patients who may not otherwise have options for
    treatment. However, I am concerned this also means that the
    market lacks the necessary tools to manage prices or restrain
    costs since there is no competition.
        So let me start with Mr. Bricker. How does Express Scripts
    control the cost of these sole-source drugs when they lack
    competition?
        I am going to go around. So, try to be brief.
        Ms. Bricker. Without competition, it is very difficult to
    extract additional discounts from manufacturers. We rely
    heavily on that independent board of physicians to determine
    whether or not the product must be included on formulary. But
    more and more, we just encourage competition, and biosimilars
    coming to market, and a faster pathway for generics and others.
        Mr. Pallone. So I was going to ask you and Mr. Eberle what
    are the options available to PBMs to constrain the cost of
    these drugs, short of keeping these new therapies off the
    formulary list but I think you already gave me your response.
        So let me go to Mr. Eberle.
        Mr. Eberle. A very similar answer. If there is no
    competition and there is only one therapy for a specific
    indication or disease state, PBMs are very limited in what we
    can do to control list price. We have no control over list
    price and very limited in terms of what we can negotiate in
    terms of discounts.
        We do use an independent group of physicians and
    pharmacists to develop utilization use criteria to determine to
    make sure that the right patients are getting that product but
    beyond those clinical controls, our ability is somewhat
    limited.
        Mr. Pallone. Well let me go back to the two of you again.
    It is my understanding is that sole-source drugs often do not
    have any significant rebates. Is that true and can you explain
    why, briefly?
        I will go back to Ms. Bricker.
        Ms. Bricker. Yes, so 90 percent of all prescriptions that
    are dispensed are generics. Of the ten percent that are branded
    products, about 25 percent offer a rebate or a discount. And so
    there is a very large percentage of branded products that do
    not offer discounts today.
        Mr. Pallone. Do you want to add to that or, if not, do you
    agree?
        Mr. Eberle. I agree.
        Mr. Pallone. All right.
        Mr. Eberle. I would just add one quick comment that
    generally there needs to be competition for a manufacturer to
    be willing to negotiate a discount.
        Mr. Pallone. OK. So again, to both of you or maybe just one
    of you, given what you just said, would the Trump
    administration's proposed rule to eliminate rebates in Part D
    have any measurable impact on the issue of high prices for
    sole-source drugs?
        You could just say yes or no, if you want.
        Ms. Bricker. No.
        Mr. Eberle. No.
        Mr. Pallone. OK, so let me now go to Mr. McCarthy and Mr.
    Niksefat.
        Can you explain what additional considerations your
    companies take into account when pricing a novel therapy that
    lacks competition? How do you determine the price in those
    cases? And then I guess, do you have any solutions for how to
    control cost for these therapies?
        Mr. McCarthy.
        Mr. McCarthy. So I have explained the considerations we go
    through when pricing a medicine. And I will point out when we
    do price it, we----
        Mr. Pallone. Just specifically for the novel therapy.
        Mr. McCarthy. For the novel therapies, we specifically have
    to assess the value that that therapy brings. And then when we
    negotiate with the plans, whether it is a sole source or not
    sole source, they have significant negotiating tools to, as I
    said, they can either accept us on formulation, they have tools
    to restrict us, prior authorization, step therapies, others, or
    they can, in some cases, exclude us from therapies. But even--
    --
        Mr. Pallone. But I mean is there anything specific, and
    then I will ask the same of Mr. Niksefat, anything specific
    that you would recommend for these novel therapies?
        Mr. McCarthy. Well, one solution I included in my written
    testimony on these novel therapies is we say we price according
    to the value. We are willing to stand behind that and to agree
    to get paid based on that value and not get paid if it doesn't
    work.
        So I think moving to value-based agreements, where we are
    standing behind the value that we set, is a strong market-based
    way to keep those prices in check.
        Mr. Pallone. Mr. Niksefat?
        Mr. Niksefat. Thank you, Chairman Pallone.
        Since I have been at Amgen, the products that we have
    introduced into marketplace have either already faced
    competition once we were there or were going to face
    competition shortly thereafter.
        And so I don't have any specific policy proposals for you
    but, we would be happy to check with our team and get back to
    you.
        Mr. Pallone. Oh, yes, I mean any of you are more than
    encouraged to get back to me on any of these questions through
    the Chair.
        But I mean clearly we need better tools to drive down
    prices, particularly when there is a lack of competition with
    these novel drugs. So this is going to be one of the main
    things that we are going to be looking at.
        Thank you, Madam Chair.
        Ms. Eshoo. I just want to comment that Amgen has gone to
    court to tie up biosimilars. That should be understood here.
        I now would like to recognize the gentleman from Kentucky,
    Mr. Guthrie, for five minutes.
        Mr. Guthrie. Thank you, Madam Chair. Thanks for the
    opportunity to be here and thanks to you all for being here
    today.
        And I just want to comment, one, as we move forward in this
    and I am the Oversight&Investigation Subcommittee here and we
    have already had one hearing on insulin, specifically. So we
    are trying to figure out how all this works and what public
    policy needs to move forward to make it more affordable and
    transparent.
        But I think Mr. Hessekiel said one thing that we are one
    country that no other--I know a lot of people try to compare
    our health system to other industrialized countries; but we are
    one that produces miracles out of our health system. Dr.
    Burgess mentioned hepatitis C. I don't think it is a Medicare
    Part D procedure but I heard yesterday that, essentially, the
    people who have gone through sickle cell anemia have been
    cured. Their blood type doesn't even show that they have sickle
    cell anemia after that.
        So we have a lot of stuff happening in our country and we
    have to be careful as we move forward that we do protect
    consumers and we make sure consumers are moving forward but we
    don't have unintended consequences, as you mentioned, of moving
    forward.
        The one thing that because I am kind of going back: some of
    you were in Oversight&Investigation, our Investigation and
    Oversight Committee, and it seemed when we were talking that
    PBMs say the pharmaceutical company sets the price and we
    negotiate discounts. Well I have heard, I don't think it was in
    that meeting, but talking to pharmaceutical companies, well we
    have to raise our price because if we don't get our price high,
    we don't get on the formulary because they are driving for the
    discounts. And so we are just trying to figure out what the
    correct answer in that is.
        So I want to start with--and Ms. Bricker, thanks for
    coming. We appreciate your willingness to be here today, and
    Mr. Eberle.
        So just an example, when there is a generic available on
    the market at a lower price than the brand price, do you always
    include the generic, the brand product, or both on your
    formulary and why would you choose one over the other, if you
    do make that choice?
        Ms. Bricker. Yes, thank you for the question.
        The consideration is one of net price. We look at the list
    price minus any discounts.
        So in that example that you provided, we would look at the
    list price of the generic versus a brand product that offer a
    discount and then determine the best price for clients.
        Mr. Eberle. And similarly, we would definitely look at the
    overall net cost. In almost every situation, a generic is going
    to have that lower overall list price. We will then also look
    at in clinical efficacy is there a clinical advantage that the
    brand has over the generic or vice-versa? And that could take a
    part in terms of a step therapy protocol, a prior authorization
    protocol to ensure the lowest cost product is used first.
        Mr. Guthrie. OK. Well, Mr. McCarthy, did you all have
    instances of what you could view as like generic or lower
    priced drugs that you can't get on the formulary? Because I
    have heard people from manufacturing side say that the rebates
    drive the list price. All you really care about is the net
    price as well. It seems like both sides only care about the net
    price because that is what you receive but it seems like, for
    some reason, we are having increase in the list price. And
    insulin has gone up 200 percent over the last few years and
    that is not a blockbuster drug that we are moving forward.
        So would you all comment on have you had trouble getting
    lower priced drugs on a formulary with the PBM? And so I guess
    the point, with the rising cost of the list price for insulin
    isn't driven by the PBM. It is driven by the manufacturing
    company.
        Mr. Niksefat. Sir, we don't have any experience failing to
    get a lower generic type drug on our formulary. We have had
    some experience having difficulty getting our low list price
    option of Repatha on the formulary, and we believe that is at
    least in part due to the fact that our failing is in a
    competitive marketplace that we have to compete both on lowest
    net price and largest total rebate. And that lower list price
    can result in a lower total rebate overall.
        Ultimately, we think that the discounts that are provided
    into the marketplace need to be provided to the patient at the
    pharmacy counter when they pick up their drug.
        Mr. McCarthy. And we have had significant challenges
    getting biosimilars on formulary. And these are much lower cost
    biologic products and we bring them at a significant discount.
    But because of rebate strategies for the innovative biologic,
    it makes it very difficult for us to get on formulary.
        So while Congress has done a fantastic job approving a
    great pathway for biosimilars, these products are still not
    delivering their potential in savings because they are not
    being used in the marketplace.
        Mr. Guthrie. Would you all like to comment on that last
    comment?
        Ms. Bricker. Yes, I disagree with that position. It is in
    the net cost that we would take the consideration. And so as
    biosimilars come to market, they have to bring value. They have
    to be less expensive, as we would expect a generic product to
    be less expensive than the innovator.
        And so I would encourage the manufacturers here to my right
    to consider that, as they are launching their list prices and
    especially those of biosimilars.
        Mr. Eberle. I agree.
        Mr. Guthrie. OK, I only have eight seconds left so I won't
    ask another question.
        So I appreciate you all being here today. It is important
    for us to try to figure this out.
        Thank you.
        Ms. Eshoo. I thank the gentleman.
        I now would like to recognize the gentlewoman from Florida,
    Ms. Castor, for five minutes of questioning.
        Ms. Castor. Thank you very much, Madam Chair, and good
    morning.
        This committee has been very focused on how we can lower
    drug prices and it is a top concern for my neighbors back home.
    Rarely does a trip to the grocery store or a constituent
    meeting go by when this issue is not raised.
        Now the committee has heard expert testimony that brand
    manufacturers are using deceptive litigation strategies and
    gaining regulatory requirements to keep competition out of the
    market. One example of this behavior is the pay-for-delay
    agreements and I am very concerned how pay-for-delay settlement
    agreements complicate drug pricing.
        And my colleagues on this committee are concerned as well,
    if you have been following the activity in this committee. That
    is why we passed Congressman Bobby Rush's legislation that
    would prohibit these types of agreements in a bipartisan vote
    last week--last month. And we are not the only ones who are
    concerned. FDA Commissioner Gottlieb, before he left, raised
    concerns with the effects of the agreements and appeared before
    Congress and said we do not know when generic products would
    have entered the market if the patent litigation had continued
    and the companies had not settled with an agreement to delay
    marketing.
        The Federal Trade Commission is also clearly very concerned
    about the anti-competitive effects of these agreements. FTC did
    a study that found that these anti-competitive deals cost
    consumers and taxpayers $3.5 billion in higher drug costs every
    year. The FTC also brought cases against many manufacturers
    that have entered into these agreements, most notably, FTC v.
    Actavis. That was decided by the Supreme Court in 2013. That
    involved a 9-year pay-for-delay that was finally settled just
    recently.
        The Supreme Court, in those cases, they were also clearly
    concerned. You had Justice Scalia and Kagan, they raised
    concerns during oral arguments that the Hatch-Waxman framework
    had unintentionally reduced the incentive for other generics to
    continue litigating, once the first applicants had settled.
        And finally, the HHS Secretary is concerned with these
    agreements. Secretary Azar acknowledged the need to address and
    discourage them and the administration's budget proposal
    included a policy to disincentivize manufacturers from making
    these arrangements.
        So I want to ask you all are you in agreement with all of
    the experts, and this committee, and the FDA, the FTC, Supreme
    Court? I want to ask you all yes or no; and I will start with
    Mr. McCarthy.
        Do you believe that patent settlement agreements have
    resulted in prolonged periods of higher prices for at least
    some drugs in the supply chain; yes or no?
        Mr. McCarthy. Yes, we believe Hatch-Waxman got it right,
    that we should protect innovation during the period and when
    that expires, we should remove barriers to generic entry.
        Ms. Castor. OK, thank you. Yes or no?
        Mr. Niksefat. I am not aware of any instance where Amgen
    has participated in pay-for-delay. Amgen----
        Ms. Castor. Just yes or no. Here, I will read it again. Do
    you believe that patent settlement agreements have resulted in
    prolonged periods of higher prices for at least some drugs in
    the supply chain?
        Mr. Niksefat. So I am not part of Amgen's intellectual
    properties and so I can't answer that.
        Ms. Castor. OK, yes or no?
        Mr. Hessekiel. Yes.
        Ms. Bricker. Yes.
        Mr. Eberle. Yes.
        Ms. Castor. Thank you. I hope we can all agree that these
    agreements sometimes defy the goals of the Hatch-Waxman
    framework.
        Mr. McCarthy, Pfizer has said publicly that it only enters
    into agreements like this when they allow for earlier generic
    market entry. Can you explain what led Pfizer to this policy?
        Mr. McCarthy. Yes, thank you for the question.
        As I said, we fully believe that Congress got it right with
    Hatch-Waxman and we respect that.
        We vehemently believe we should protect that incentive for
    innovation, and that should be respected, and we should be able
    to have that period of patent protection during the life of the
    patent. But when it expires, we need to welcome and remove
    barriers to generic entry because a healthy innovative industry
    depends on a healthy generic industry, and visa-versa.
        Ms. Castor. Thank you.
        Mr. Niksefat, does Amgen have a similar policy? If not, can
    you explain why not?
        Mr. Niksefat. So again, ma'am, I am not part of our
    intellectual property team but I am aware that Amgen has never
    participated in pay-for-delay.
        Ms. Castor. And you don't know why not? Or you don't know
    do they have a similar policy that----
        Mr. Niksefat. I am sorry. In my job, I am just not exposed
    to that. So I can get back to you.
        Ms. Castor. OK. Well, please do, on Amgen's position,
    because we are all concerned about the market effects of these
    type of agreements. I mean nine years, that was litigated for
    10 years. That is not any help to the consumers, given the
    widespread interest in curbing this type of abuse. I hope we
    will see Congressman Rush's bill pass the House and Senate and
    be signed by the President shortly.
        Thank you.
        Ms. Eshoo. The gentlewoman's time has expired.
        It is a pleasure to now recognize the gentleman from
    Illinois, Mr. Bucshon--wrong. Billy, Mr. Long. How could I have
    missed that? He was here before I was.
        Mr. Long. I am small, a lot of people miss me.
        Ms. Eshoo. Yes, he is just small and quiet, never noticed.
    But you are recognized for five minutes of questioning.
        Mr. Long. I do want to apologize I had to step out but I
    stepped out for a very good reason. We just had a presser with
    the Gold Star Moms over on the Triangle. And Debbie Lee spoke
    and Debbie's son was the first casualty Navy Seal of the Iraq
    War. And it was a very moving ceremony and we need to do
    everything that we can to support our Military and our Gold
    Star Moms and widows. And with this being Mother's Day, I felt
    like my attendance was required over there.
        Ms. Bricker, thank you for being here today. And I know
    that some of your counterparts didn't want to come for one
    reason or another but, as we look at ways to lower the cost of
    prescription drugs which everyone in this room, that is their
    goal, there is a lot of discussion about rebates and if PBMs
    should move rebates to the point-of-sale.
        I have got kind of a 3-part question here. Could you talk
    about the level of flexibility you offer on how your plan
    sponsors can use the rebates? Number one, do you make point-of-
    sale rebates available to your clients; and if so, what are the
    trends and how are those rebates--how do they use those rebate
    savings?
        Ms. Bricker. Thank you for the question, Congressman.
        Yes, so Express Scripts has supported rebates at the point-
    of-sale for nearly 20 years. Today, we have over 3,000 clients.
    Those are unions, they are employer groups, they are health
    plans. And this is available to all of them, but very few have
    opted to do this.
        Instead, they take the value of those discounts that we are
    able to negotiate with manufacturers and deploy them in
    different ways. They create lower copay and coinsurance
    programs and also offer lower premiums to both employees, as
    well as to beneficiaries in the market.
        Mr. Long. What are you seeing in terms of changes in
    premiums and out-of-pocket costs among these plans that apply
    rebates differently?
        Ms. Bricker. Every plan is different and the considerations
    that they will take as part of their overall benefit design
    varies.
        I will say that the proposed rule by HHS is troubling in
    that requiring rebates at the point-of-sale actually doesn't
    address the key issue, which is overall cost of product. It
    just rearranges really where the value is deployed.
        And as I mentioned previously, you know ten percent of
    products that are dispensed are brands and of those, only 25
    percent get a rebate. And so it is a misconception that by
    putting the rebates at the point-of-sale that patients will
    somehow benefit. All will have to be faced with a higher
    premium and only a few will actually benefit at the point-of-
    sale.
        Mr. Long. OK. During the Oversight and Investigation
    Subcommittee hearing on insulin, you know that Express Scripts
    has a Patient Assurance Program that caps copays for insulin at
    $25. What other disease conditions can this program be
    initiated for and can we do this in Medicare; and if not, why
    not?
        Ms. Bricker. Yes, so we are really excited about our
    Patient Assurance Program, are able to offer affordability for
    all patients with diabetes, and are excited to explore other
    disease states in partnership with manufacturers. The best
    candidates are those that have really high list prices and
    still offer a rebate. And so we are looking at, as we explore
    both heart disease as well as inflammatory conditions, to name
    a couple.
        It is not available today for Medicare. As mentioned
    previously, concerns around Anti-Kickback statute are namely
    the concerns that prevent us from being able to deploy the same
    tool for the Government business.
        Mr. Long. OK. I need to move on to this next gentleman
    because his mother-in-law can throw a rock and hit my house in
    Springfield.
        So Mr. Niksefat, could you talk about the current barriers
    to value-based contracts and what can we do to improve the
    ability of manufacturers to enter into more value-based
    agreements?
        Mr. Niksefat. Yes, thank you, Congressman, and say hello to
    my mother-in-law, please.
        We think there are two things that can be fundamentally
    done. One is addressing some of the issues that were brought up
    earlier around the Anti-Kickback statute, along with how
    Medicare performs certain reconciliation of payments that would
    allow for greater use of value-based contracting in the
    Medicare program, specifically. We have over 35 different
    value-based contracts within the U.S. but the population we can
    offer to Medicare is limited because of these issues.
        The other piece that we believe needs to be put in place is
    potentially additional flexibility around Medicaid price
    reporting, which makes these programs very hard to determine an
    actual net price within the best price construct and, again,
    limits us on the total time period that that is available for a
    value-based contract to play out; especially in a disease that
    may have a significant time before an outcome is measured.
        Mr. Long. OK. And what would the more creative value-based
    agreements look like and how could they deliver savings and
    better care if we remove the current regulatory barriers?
        Mr. Niksefat. Yes, we think right now our value-based
    contracts largely supplement existing discounts in the
    marketplace. What we think could occur is that these value-
    based contracts could actually completely replace them by
    allowing for different types of mechanisms that measure the
    long-term outcome of an entire population and allow us then to
    adjust the price to see if what we are seeing in the real world
    does something different than what we saw in clinical trial.
        Mr. Long. OK. And now that I have taken care of the rock-
    throwing situation, I will go back to Mr. Bricker, and I know
    my house windows are safe now.
        Ms. Bricker, we have had a number of hearings looking at
    the drug supply chain and what could be done to lower drug
    costs. What would be some of the policies you think Congress
    could take in the next few months to lower drug prices for
    consumers?
        Ms. Bricker. And so we have a few ideas that I shared in
    written testimony but, to name a few, allow the tools that are
    working really well in Medicare Part D to be applied in
    Medicare Part B.
        Looking at modernizing the Medicare Part D benefit, we have
    mentioned the catastrophic phase and the incredible burden that
    beneficiaries are faced with when in the catastrophic benefit.
    And so those were a couple.
        I see I am out of time but I will follow up with additional
    ideas that we have.
        Mr. Long. I am out of time. I wish I had time to ask Mr.
    Niksefat why I live in Missouri with his mother-in-law and he
    lives in California but I will let him explain that later.
        I yield back.
        Ms. Eshoo. Separation of emotions.
        The gentleman yields back.
        I recognize Mr. Sarbanes of Maryland for five minutes of
    his questions.
        Mr. Sarbanes. Thank you, Madam Chair.
        I want to thank you all for being here. I know you think a
    lot about competitive advantage in your various industries.
    Obviously, that is important to your success.
        I wanted to ask you to reflect with me for a moment on a
    different competitive advantage, which has to do with sort of
    access to policymakers, the ability to influence legislation up
    here in Washington. The public has a perception, which I think
    is fairly grounded in reality, that industries like the PBM
    industry, the pharmaceutical industry, there are many more but,
    just for today's proceedings, have undue influence on how
    policy gets made in Washington with respect to drug pricing and
    all kinds of other things.
        That influence comes from many things but, among them, and
    I think high on the list of things that the public is reacting
    to, is the tremendous amount of money that goes into purchasing
    lobbyists, which are deployed here. I think the pharma industry
    has one of the highest ratios of lobbyists to Members of
    Congress of just about any industry out there. So that is part
    of the public's grievance, as well as a lot of money that just
    flows up here in the form of campaign contributions, et cetera.
    There are no saints here. We are all on the receiving end of
    this ecosystem.
        But I would just be interested for you to comment, if you
    would, on whether you think that the ability to channel so much
    money into lobbying, into other things does give you a
    competitive advantage over other points of view on policy that
    could be brought forth by folks who maybe don't have the same
    kind of deep pockets and resources.
        And if you want to say yes, it does give us a competitive
    advantage, I don't begrudge you that because I get it. If you
    can find a way to have an advantage up here in terms of
    influencing policy, why wouldn't you want to use that for the
    benefit of your bottom line?
        But if you could maybe just speak to that because all of
    you certainly allocate a certain amount of your budget to
    making sure you get the access and you have the influence that
    can make a difference in terms of how your business operates.
    And I will start with you, Mr. McCarthy.
        Mr. McCarthy. OK. To be honest with you, it is not my area
    of responsibility so I am not sure if I can comment on whether
    it gives us a competitive advantage or not. But I do think all
    of us at Pfizer feel like we have a responsibility to play a
    role in the regulatory and legislative process.
        I can't comment on whether it gives us a competitive
    advantage or not.
        Mr. Niksefat. Likewise, sir, I am not part of our
    Government Affairs team and have no influence or insight into
    their resourcing overall. So I can't comment but we can get
    back to you.
        Mr. Hessekiel. Thank you very much for your comment,
    Congressman.
        So that is exactly why we are here. So I speak for a
    section of the pharmaceutical industry that few people actually
    appreciate, especially given the statistics that I referenced
    that two out of three new drugs approved by the FDA last year
    actually originated in companies that are small
    biopharmaceutical emerging companies. And we don't have a voice
    in Washington. Exelixis is not a member of PhRMA. We are a
    member of BIO. And we don't hear the realities, the pains and
    challenges that are faced of bringing an important new drug to
    market represented in the debate because I think a lot of
    people take for granted that it is all great big companies with
    huge budgets and throwing a lot of money at problems.
        Mr. Sarbanes. So you may be an example of someone who is at
    a competitive disadvantage because you don't have the same
    resources to deploy into those activities that I was talking
    about.
        Ms. Bricker?
        Ms. Bricker. I don't believe that it results in a
    competitive advantage. From Express Script's perspective, the
    reason I am here today is to help be part of the solution and
    to educate lawmakers like yourself on ideas that we have in the
    supply chain to actually bring down cost. And so any amount of
    time that is spent here is really with the idea of helping to
    educate and to bring solutions forward.
        Mr. Sarbanes. Well, I appreciate that. I wasn't as focused
    on the time spent as the money spent, in terms of how that
    influences things up here.
        I am out of time, so I yield back. Thank you all very much.
        Ms. Eshoo. The gentleman yields back.
        Thank you, Mr. Hessekiel, for what you said. Your company
    is--that model is replicated throughout my congressional
    district in Silicon Valley. So, I certainly understand it and I
    think it is one of the reasons that we wanted you here today;
    so that the small bio people would have a voice in the hearing
    and in policymaking.
        I now would like to recognize the gentleman from Indiana.
    And this time you are really going to be recognized, Mr.
    Bucshon.
        Mr. Bucshon. I appreciate that.
        Ms. Eshoo. Yes.
        Mr. Bucshon. First of all, I want to start out and agree
    with Ms. Castor that the bills that we passed in a bipartisan
    way in our committee recently should pass the House, and pass
    the Senate, and be signed by the President. However, at this
    time, it appears that those bills will not be brought to floor
    standalone. And so the opportunity for that to happen is going
    to be minimized, especially in the Senate. And I would
    encourage the majority to reconsider that decision and bring
    bipartisan bills that will actually address the problem to the
    floor standalone so that we can all be supportive of those.
        A question I have for Mr. McCarthy and Mr. Niksefat is:
    Does direct-to-consumer marketing increase the demand for a
    drug?
        Mr. McCarthy. I am not sure if it increases the demand for
    the drug but we do believe that advertising does create
    awareness of diseases and available treatments.
        Mr. Niksefat. We agree with Mr. McCarthy. It increases
    awareness and availability of treatment.
        Mr. Bucshon. Okay because, as a physician, you probably
    know my position, I don't like direct-to-consumer marketing
    because I think it confuses patients and it makes them ask
    physicians for primarily new, very high-priced drugs. And then
    if you don't provide those, they just go to somebody else who
    does.
        So with that question, if that is true, it brings awareness
    and it is going to increase demand, would you think that that
    would increase the price? Does that have any effect on that,
    the price of the drug?
        I mean if you have a product that has no demand, there is
    no price. If you have a product that is in high demand--it is a
    supply and demand question.
        Mr. McCarthy. I don't believe direct-to-consumer
    advertising has impact on the price.
        Mr. Bucshon. OK.
        Mr. McCarthy. It is not a part of our pricing decision.
        Mr. Bucshon. OK, fair enough.
        Mr. Niksefat. The same, we do not consider a direct-to-
    consumer advertising when setting the price of a product.
        Mr. Bucshon. OK. Yes, I am not saying it is directly. I am
    saying as part of an increased demand. That is what my question
    is.
        The same two, do PBMs ask you to increase list prices? Do
    you get calls, and letters, and stuff from PBMs saying you need
    to increase your list price because our margin isn't where it
    should be?
        Mr. McCarthy. I am not aware of any such request.
        Mr. Bucshon. Because we could, the committee could ask for
    any communications between your companies and PBMs and see if
    that is the case. We could. I am not going to ask for that
    today.
        But I mean I have been told that by companies like yours
    that one of the factors is that PBMs put almost daily pressure
    on the list price. Now the PBMs will disagree with that; I
    understand that.
        Mr. Niksefat. I am not aware of any of those instances.
        Mr. Bucshon. OK. Is there formulary pressure to increase
    your list price? Because that is another avenue. It is not just
    the rebate. It is pressure to say well, sorry, but we are not
    going to have your drug on formulary if you don't do this or
    that.
        Mr. McCarthy. There are certainly competitive pressures to
    raise rebates, or discounts, as the chairwoman would like me to
    use the term.
        Mr. Bucshon. Discounts, OK.
        Mr. Niksefat. Like I laid out in my testimony, we feel like
    we have to compete both on lowest net pricing and total
    discount.
        Mr. Bucshon. OK. And Ms. Bricker, do you want to respond to
    that?
        Ms. Bricker. Yes, I would.
        Mr. Bucshon. Give your perspective on that situation.
        Ms. Bricker. Yes, we have called publicly and in private
    conversations with every manufacturer for them to take action
    to lower list price and we stand by that here today as well.
        Mr. Bucshon. OK, great.
        Ms. Bricker. And agree that I think they are making my
    point, that formulary decisions are based on net cost, which is
    the list less any rebate that is offered or discount that is
    offered.
        Mr. Bucshon. OK, fair enough.
        And I am interested, Mr. Eberle, in your business model, do
    you feel like--you know again, there is a disagreement about
    whether rebates increase pressure on list price and if we
    eliminate rebates like HHS is proposing, or Members of Congress
    are proposing in some cases, that that will lead to companies
    increasing, you know it will be an uncontrolled increase in
    list.
        You have a different model. Do you see that happening? Do
    you see within your model that that results in increased list?
        Mr. Eberle. I do think that from a PBM perspective, with
    our pass-through model or with the traditional model, rebates
    are a tool to help lower costs. If that tool is taken away from
    us, it does take away a very significant lever that we have to
    work for on behalf of our client.
        Mr. Bucshon. Because your model doesn't rely on rebates,
    right?
        Mr. Eberle. It doesn't rely on rebates for revenue. We
    don't generate any revenue from it.
        Mr. Bucshon. That is what I am talking about.
        Mr. Eberle. Right, no. So from a Navitus perspective,
    rebates or a change in rebates would not impact our bottom
    line.
        Mr. Bucshon. Correct.
        Mr. Eberle. Our concern is that it would drive up the cost
    of care for our plans and their members.
        Mr. Bucshon. Based on what?
        Mr. Eberle. Based on if the rebates go away, what is the
    controlled pressure on manufacturers to compete on pricing?
        Mr. Bucshon. Well you still have your formulary part,
    right?
        Mr. Eberle. We do. So I think what you are arguing is that
    there may be another way, either rebate or discount, to do
    that. And that would be great but there has to be some
    mechanism to encourage the manufacturers to participate in
    lowering their prices in competitive products.
        Mr. Bucshon. I would disagree with that but I appreciate
    your perspective.
        Thank you. I yield back.
        Ms. Eshoo. The gentleman yields back.
        I now would like to recognize the gentleman from New
    Mexico, Mr. Lujan, for his five minutes of questions.
        Mr. Lujan. Thank you, Madam Chair.
        And I thank everyone who agreed to be before us today and I
    would ask that you make your responses as concise as possible.
    I want to talk today about the concept of value-based
    arrangements.
        Mr. McCarthy, in your testimony, you defined what a VBA
    would look like. You say, ``If our medicines do not produce all
    the results we expect, we would be paid less and if they
    produce those results, we would be paid more. If done
    correctly, these arrangements focus on the appropriate
    therapeutic areas, can align the interests of patients, health
    plans, and biopharmaceutical companies around one shared goal:
    ensuring positive health outcomes for the patient.''
        What is the difference between a value-based payment and an
    outcome-based payment?
        Mr. McCarthy. Well, I think they are very similar. So I
    will give you an example of a couple of the types----
        Mr. Lujan. Very similar, actually, answers the question.
        Mr. McCarthy. Yes, very similar. Yes.
        Mr. Lujan. If they are very similar, we can jump into that
    a little bit later.
        Mr. McCarthy. Oh, OK.
        Mr. Lujan. Which one of these is described in your example,
    an outcome-based payment or a value-based payment?
        Mr. McCarthy. Well it is hard to distinguish them and I
    will tell you why. If you improve the outcomes, it is
    delivering greater value. So I think it is just a different way
    of saying the same thing.
        Mr. Lujan. So does your statement include both, then?
        Mr. McCarthy. Yes.
        Mr. Lujan. OK.
        Mr. Niksefat, in your testimony, you state that Amgen is
    the leader in value-based partnerships with over 120 of these
    agreements. I believe you are also the arbitrator for these
    negotiations.
        In those 120 agreements, how much money have you saved
    patients?
        Mr. Niksefat. So the 120 number is worldwide. Within the
    U.S. I know of over 35. And those discounts can provide, again
    in certain cases, like our Repatha outcome-based rebate, 100
    percent refund of the----
        Mr. Lujan. Can you get me a dollar amount of how much
    money----
        Mr. Niksefat. I don't have a dollar amount on me, sir.
        Mr. Lujan. No, can you get back to us?
        Mr. Niksefat. We can look into it and get back to you.
        Mr. Lujan. You can get back to me with an answer?
        Mr. Niksefat. We will look into it and get back to you,
    sir.
        Mr. Lujan. Well, that is not certain. Will you get an
    answer to me of how much money the 35 agreements you have in
    the United States have saved patients?
        Mr. Niksefat. We can look into that. Many of them are very
    new and they have not yet paid out because the period over the
    term of the contract has not completed yet.
        Mr. Lujan. There is a dollar amount of money you have saved
    or you have not saved and what I am asking is that you get that
    back to us.
        What data are you tracking for patient savings?
        Mr. Niksefat. We track the total discount that we would pay
    under these outcome-based arrangements for patient savings.
        Mr. Lujan. I appreciate that.
        Ms. Bricker, in your testimony, you state that ``you are
    the head of all value-based contracts at Express Scripts.'' In
    your role with this PBM, what is the baseline against which you
    are measuring savings and how was this data developed?
        Ms. Bricker. So the baseline is we compared those that are
    participating in the value-based programs versus those that are
    not. We, today, cover over ten disease States, many of them the
    highest cost or specialty classes, and working with
    manufacturers to put their value, as mentioned, if a product
    isn't working or if we are not meeting certain metrics, then
    refunds or value goes back to the payors.
        Mr. Lujan. So I have heard a lot about list price today and
    this is complicated. I get that. So I am trying to make sense
    of it, especially in a way that I can understand it so I can
    explain it to my mom and to my constituents.
        The list price sounds like the highest price. Is that
    correct? Would the list price translate to the highest price,
    Mr. McCarthy?
        Mr. McCarthy. Generally, yes.
        Mr. Lujan. Mr. Niksefat?
        Mr. Niksefat. It is the highest price by which we sell the
    medication.
        Mr. Lujan. So if the conversation today is about how we get
    to the lowest price, why don't you just start with the lowest
    price?
        You start with the highest price and then you negotiate all
    these wonderful benefits for the American people and you say
    oh, we are going to give you a rebate or, as our chair points
    out, we are going to give you a discount. But it is based on
    some price that is the highest price.
        So if we are talking about setting up a system that is
    ultimately going to get the lowest price, let's start with that
    because, correct me if I am wrong, you have one highest price,
    one list price. Is that correct, Mr. McCarthy?
        Mr. McCarthy. We have one list price, that is correct.
        Mr. Lujan. Mr. Niksefat?
        Mr. Niksefat. Yes, that is correct.
        Mr. Lujan. Mr. Hessekiel?
        Mr. Hessekiel. That is correct.
        Mr. Lujan. And Mr. Eberle, Ms. Bicker, is that your
    experience is that there is one list price?
        Ms. Bricker. Yes.
        Mr. Eberle. Correct.
        Mr. Lujan. Is it fair to say there are many lowest prices?
    Depending on each agreement that you have with each plan, do
    you establish a lowest price for each one of those contracts,
    Mr. McCarthy?
        Mr. McCarthy. There is a net price that is negotiated for
    each of the contracts.
        Mr. Lujan. Is it fair to say that different agreements have
    different lowest prices?
        Mr. McCarthy. Different agreements, yes, have different net
    prices that are generally lower than the list prices, if there
    is a rebate involved.
        Mr. Lujan. Is that true with you as well, Mr. Niksefat?
        Mr. Niksefat. Yes.
        Mr. Lujan. So there are many different lowest prices. So
    the question that I also have is for Ms. Bricker, as my time
    runs out: How do we know that patients/customers are getting
    the full rebate, and are you willing to disclose whatever is
    negotiated with the pharmaceutical companies, and are the
    pharmaceutical companies willing to disclose publicly what is
    negotiated with the partners that you are entering with
    publicly?
        Ms. Bricker. Yes, so the people that hire us, our clients
    have full visibility into the discounts that we negotiate, yes.
        Mr. Lujan. And Mr. McCarthy and Mr. Niksefat, are you
    willing to disclose publicly what those negotiated rebates are?
        Mr. Niksefat. Again, we believe that all of these discounts
    should be available to the patient at the pharmacy counter,
    which will shed light onto the prices in the marketplace.
        Mr. Lujan. Are you willing to disclose them publicly?
        Mr. Niksefat. That would represent a public disclosure.
        Mr. Lujan. Are you willing to disclose them publicly----
        Mr. Niksefat. Yes.
        Mr. Lujan [continuing]. Not through the policy you are
    talking about, which requires a change in Congress. You can
    voluntarily do that today.
        Are you willing to disclose that price publicly?
        Mr. Niksefat. We are not willing to do that today, unless
    that price makes its way to the patient at the pharmacy
    counter.
        Mr. Lujan. Mr. McCarthy?
        Mr. McCarthy. We have, I believe, disclosed the total
    amount of rebates that we pay.
        Mr. Lujan. I appreciate that. Thank you for the time.
        Ms. Eshoo. The gentleman yields back.
        I now have the pleasure of recognizing the gentlewoman from
    Indiana, Mrs. Brooks.
        Mrs. Brooks. Thank you, Madam Chairwoman.
        I am going to continue on my colleague from across the
    aisle's questions about the pricing specifically; and I want to
    focus on the lowest net cost.
        And so while he focused on the list price, Ms. Bricker and
    Mr. Eberle, can you tell us how you determine lowest net cost?
    Ms. Bricker?
        Ms. Bricker. Sure. We take the list price less any discount
    that is offered by the manufacturer.
        Mrs. Brooks. Mr. Eberle?
        Mr. Eberle. Very similar. It does vary by brand and
    generics. Generics have a different--there are not rebates on
    generics so we are looking at what the pricing of a generic is
    available in the marketplace. So we do surveys to determine
    what pharmacies are actually buying that drug for. We look at
    that.
        On a brand drug that is rebated, it is the list price minus
    any rebates/discounts that we receive from manufacturers and
    pharmacies. That combined with the--that sets the net cost. And
    then we look at things in terms of clinical value. How does
    that cost and value compare?
        Mrs. Brooks. We heard earlier in testimony about
    administrative fees and I believe the pharmaceutical companies
    talked about administrative fees.
        Do you include administrative fees, Ms. Bricker and Mr.
    Eberle?
        Ms. Bricker. Yes, all discounts that are provided by the
    manufacturer are in consideration.
        Mrs. Brooks. So I am getting a little bit confused about
    discounts and administrative fees.
        Ms. Bricker. So the manufacturer admin fees are also
    discounts.
        Mrs. Brooks. How are administrative fees discounts?
        Ms. Bricker. They are providing that as additional value
    towards the list price. So it is a reduction of list price.
        Mrs. Brooks. And so let me ask the pharmaceutical
    companies, how do you--do you agree with that statement----
        Mr. McCarthy. Yes.
        Mrs. Brooks [continuing]. That the administrative fees are
    something that you just include in your discount?
        Mr. McCarthy. We tend to talk about them, yes, in the same
    general category of rebates or discounts.
        Mrs. Brooks. OK and everyone agrees with this? I am just
    trying to make sure we are all talking about the same thing.
        Mr. Niksefat. We describe them as administrative fee
    discounts, ma'am.
        Mrs. Brooks. OK.
        Mr. Hessekiel. I would like to--it is important to draw a
    distinction between discounts and fees for services at fair
    market value.
        Mrs. Brooks. That is what I am struggling with. So thank
    you for acknowledging that.
        So a discount, in normal vernacular, is taking an amount
    off of whatever the actual price is and a fee is something
    additional that you pay for the work being done or for the
    administrative work? What makes up administrative fees, then?
        Mr. McCarthy, what do you believe--what is an
    administrative fee? How is that defined?
        Mr. McCarthy. So it goes to the PBM for administering the
    services around managing the formulary for our medicine. I
    believe Ms. Bricker mentioned, as an example, some of the
    programs they are administering around affordability, and copay
    costs, and participating in those programs. For example, there
    would be a fee arrangement involved to participate in those
    additional programs. So that would be one example.
        Mr. Niksefat. We view them as from the perspective of that
    they are included in the request for proposals that we receive
    from the supply chain. And again, we treat them as just
    administrative fee discounts because we don't believe that they
    represent services to the manufacturer.
        Mrs. Brooks. OK. Anything further?
        Mr. Hessekiel. Nothing further from me.
        Mrs. Brooks. And so are there differences, then, in how the
    various PBMs define lowest net cost? In the various PBMs you
    deal with, are there differences in how they define lowest net
    cost? Is that always negotiated?
        Mr. McCarthy.
        Mr. McCarthy. Yes, every negotiation is different with
    every PBM customer, yes.
        Mrs. Brooks. But there are different facts that go into
    that negotiation.
        Mr. McCarthy. Generally speaking, you know the main point
    of our negotiation with the PBMs is to do one thing. It is to
    secure access for our medicine. So in that respect, that is the
    common denominator that permeates through every negotiation we
    have with all of our PBMs.
        Mrs. Brooks. And how about the differences between the
    types of things you are negotiating? Can you discuss the types
    of items you are negotiating in trying to get to the lowest net
    cost?
        Mr. Niksefat. We are discussing formulary placement, cost-
    sharing tier, the route by which a patient will get access
    through step therapy, and prior authorization. So it is a
    multitude of different items across the entire supply chain,
    not just with PBMs.
        Mrs. Brooks. Thank you.
        My time is up. I yield back.
        Ms. Eshoo. I thank the gentlewoman for her questioning. She
    yields back.
        The gentleman from Oregon, Mr. Schrader, is recognized for
    five minutes for his questions.
        Mr. Schrader. Thank you, Madam Chair. I appreciate it.
        Mr. Eberle, I am very interested in the transparency of
    this drug supply chain. I appreciate everyone stepping up and
    being here today; particularly with the PBMs, because they are
    the intermediary that negotiates with the pharmacies and the
    pharmaceutical companies.
        One proposal that has been put out there to address the
    issue would publicize the aggregate price data by class of
    drug. Do you think this would help at all in demonstrating the
    variability of the prices and get to where we need to be?
        Mr. Eberle. I am not familiar with the details but yes, I
    believe that concept would have value.
        Mr. Schrader. OK.
        Mr. McCarthy, talking about out-of-pocket costs and the
    caps, and you get to Part D and the catastrophic pickup.
    Currently, the Feds pick up 80 percent; the insurers, 15
    percent; and the individual, five and no cap actually on the
    out-of-pocket costs for them. Do you have a proposal about or
    how do you think that should be shared as we get into that
    catastrophic phase?
        Mr. McCarthy. I believe the best way to approach it would
    be to think about collapsing the benefit design in Part D so
    that we would eliminate the coverage gap, where currently the
    manufacturers pay 70 percent in the coverage gap and moving
    that into the catastrophic to help fund the gap. So we would go
    right from coverage limit to catastrophic, where there would be
    a cap on patient out-of-pocket cost. And then the financial
    burden in that phase would be shared between the manufacturers,
    the plans, and the Government.
        Mr. Schrader. Mr. Niksefat?
        Mr. Niksefat. We would welcome the opportunity to work with
    the committee on modernizing the Part D benefit but I don't
    have any specific proposals around the restructuring with me
    today.
        Mr. Schrader. Would your company be willing to be part of
    the solution and help out paying it?
        Mr. Niksefat. Absolutely, we look forward to being part of
    the solution.
        Mr. Schrader. All right, very good.
        Value-based agreement--the biggest cost concern I see
    facing the United States of America, patients as well as the
    Federal Government, is the great new specialty drugs you all
    are bringing to market at this point in time; and they are a
    life-saving opportunity for many folks that had no hope before.
    But they affect a very small population and, as a result,
    recouping the investment becomes difficult without high prices.
        So there has been discussion. You have offered up being
    part of the solution and having value-based agreements. So to
    that end, it is difficult to write those agreements. And the
    question would be - maybe three different questions.
        How would you mitigate the risk in this day and age when a
    patient is likely to move from one carrier to another, Mr.
    McCarthy and then Mr. Niksefat?
        Mr. McCarthy. Yes, so that I think is a really excellent
    question. I don't have a solution for how we manage the
    liability as patients go from plan to plan.
        And I think that is going to be a difficult question for
    us, especially as we move to even more advanced technologies
    like gene therapies, where these therapies could be curative
    over a lifetime. And then if there is a value-based agreement
    associated with that, which I fully expect there will be, how
    do we track those patients and how does that liability for
    those patients? I don't have an answer to that but I would very
    much like to work with this committee on a solution to it.
        Mr. Schrader. OK, Mr. Niksefat.
        Mr. Niksefat. Congressman, similar when patients move from
    plan to plan, although it does actually happen fairly
    infrequently in the commercial marketplace, it is very hard to
    follow that patient across the spectrum and ensure that the
    value-based contract can actually still apply. We have made
    some attempts but it is not perfect at this point.
        Mr. Schrader. Similarly, FDA approval data, including
    safety, effectiveness, et cetera, how do we or how would you
    suggest policy assist in adjudicating some of the disputes that
    might come up over metrics and outcomes, Mr. Niksefat?
        Mr. Niksefat. In several of our agreements today we build
    in a third-party firm to help as part of that process. It is
    not always necessary. Many of the outcomes that can be tracked
    can be tracked very easily within existing data infrastructure
    but when it gets more complicated, we usually at least have the
    option of a third party to help at the end of those contracts.
        Mr. Schrader. Mr. McCarthy, a comment?
        Mr. McCarthy. No, I agree and I believe that the more we
    rely on real-world evidence and real-world data, the better off
    we will be able to define those outcomes and to measure them.
        Mr. Schrader. The last question in my remaining few seconds
    on the rebate system for Ms. Bricker and Mr. Eberle.
        Can each of you speak to whether you include patient cost-
    sharing information in calculating the net cost for purposes of
    determining what drugs will be covered and whether it will be
    placed on the formulary?
        Ms. Bricker.
        Ms. Bricker. We do not.
        Mr. Schrader. OK.
        Mr. Eberle. We do when we look at tiering. We first
    determine the net cost; but we do look at member cost-share in
    terms of formulary placement.
        Mr. Schrader. Very good.
        Well, thank you all very, very much again.
        And I yield back, Madam Chair.
        Ms. Eshoo. I thank the gentleman.
        I now would like to recognize the gentleman from Oklahoma,
    Mr. Mullin, for five minutes of his questions.
        Mr. Mullin. Thank you so much.
        I have got a follow-up for my colleague, Mrs. Brooks, from
    her questioning. If you guys consider the PBMs administrative
    fees to be a discount, is that fee also passed onto the
    insurance companies and the clients?
        I don't know who wants to take that on.
        Mr. Niksefat. We don't control what is passed on to the
    clients, sir.
        Mr. Mullin. So who does control that? Is that the PBMs?
        Mr. Niksefat. That would be the member of the supply chain
    we negotiate with, in this case, a PBM, yes.
        Mr. Mullin. Most of the time the way that I understand
    administrative fees, is this just another way to get more out
    of the consumer? Why wouldn't an administrative fee just be
    part of the drug? I mean why would we consider that a discount?
    Isn't that part of it? Isn't an administrative fee part of
    delivering the product?
        I mean in our companies, I can't charge the customer for
    administrative fees on top of what I am charging them. I mean
    the administrative fee is part of it. Is that not accurate?
        You guys are looking at me like a deer in the headlights.
        And I am going to go back to what Chairman Burgess said
    earlier, that if you guys--if we don't figure out how to do
    this, we are going to do it ourselves because all of us,
    regardless of what side of the aisle we are on, we are all
    getting just peppered with our constituents about these prices.
    And so you can either choose to be part of the solution or we
    are going to consider you part of the problem; and that is not
    what we are trying to do. We really are trying to help here.
        But the PBMs and you guys are both pointing to each other
    and no one is taking the responsibility here. So someone help
    me here. Is the PBMs the problem here? Are they adding value to
    the customer or are they adding cost to the customer? Because
    what I am seeing is, they are charging administrative fees. And
    it seems like to me they are adding cost; and that defeats the
    purpose of a PBM.
        Mr. Niksefat. Congressman, let me try.
        The RFPs that we receive from several members of the supply
    chain include minimum bid requirements. In many PBM RFPs, it
    includes this administrative fee discount and it is a condition
    of being able to respond.
        Mr. Mullin. How is an administrative fee on top of the cost
    be in a discount? I don't know what world that is considered a
    discount.
        Mr. Niksefat. Again, it is an additional percentage off the
    list price, that we offer as a discount, and it is categorized
    as an administrative fee.
        Mr. Mullin. But if we can discount it later on, why can't
    we just discount it to begin with?
        Mr. Lujan from New Mexico and I never agree on anything.
    This is the first time I am ever going to say we actually agree
    on something.
        Why can't we just start there and then the discount starts
    from that point?
        Mr. Niksefat. Congressman, we believe that ultimately all
    discounts in the marketplace should be passed on to the
    consumer and the patient at the point-of-sale at the pharmacy.
        Mr. Mullin. Well if you believe that then why don't we do
    that? And I am sorry, you are the only one talking to me.
    Anyone can jump in here.
        Sir, I saw you shaking your head yes. Your thoughts on
    this?
        Mr. Hessekiel. As I said before, and thank you,
    Congressman, in my mind, there are two categories. There is
    either fees for services that are provided at fair market value
    or there are discounts. And I think it is as simple as that.
        Mr. Mullin. So how do you have fees and discounts at the
    same time?
        Mr. Hessekiel. I don't have an answer to that question.
        Mr. Mullin. That is right. And I am not opposed, guys, to
    anybody making a profit. That is the whole idea of being in
    business. But it is interesting to me, after we had a hearing
    on insulin and the cost of insulin going up; I had a parent of
    a Type 1 diabetic child call me and say: ``It is funny that my
    insulin dropped in half today. Literally, the day after the
    hearing. And I thought, gee, that is ironic. I don't agree with
    all the hearings you do but that one worked.''
        I get back to the point, though, people; we are going to
    have to figure this out. And I am not wanting to come against
    businesses. That is not what I am trying to do but from Mrs.
    Brooks' questions to my questions, and the questions before me,
    I am really not getting the answers. We are talking around in
    circles.
        Where's the solution? Help us help you. Give us something
    that we can do in Congress that can help lower the cost and I
    will run with it.
        Mr. McCarthy.
        Mr. McCarthy. Congressman, as I laid out in my written
    testimony, when we set the price we set it based on the value.
    We then negotiate to get formulary access with the PBMs and
    there is a discount that is negotiated as part of it. That is
    the competition. That is the market forces at work.
        I think the failing here is that those discounts on those
    medicines we are negotiating: one, the patient is not aware of
    them and two, they are not benefitting them.
        So our recommendation is----
        Mr. Mullin. Well that still goes back to the question: Why
    don't we just start with a discount to begin with? And so the
    patient can always have access to it because you don't have to
    research at that point. Get the prices at the best value to
    begin with.
        Mr. McCarthy. If we just tried to lower our price now, it
    would jeopardize--under the system as it exists today, it would
    jeopardize our ability to get formulary access. And we have
    tried it. We have tried lowering the list price.
        Mr. Mullin. Give me on thing. How can Congress simplify it
    to get it directly to the patient without all the middlemen in-
    between? What is something that we need to eliminate?
        Mr. McCarthy. Well I would recommend, as I said, a passing
    rebate reform that enables the patients to benefit directly
    from those discounts.
        Mr. Mullin. Can I ask one more question?
        Ms. Eshoo. Sure, go ahead.
        Mr. Mullin. Would eliminating the PBMs, would it help?
        Mr. McCarthy. I think the PBMs play a role and administer a
    service that if they don't exist, someone is going to have to
    replicate. They administer--they do a lot more than negotiate a
    rebate. And if the PBMs are eliminated, the plans and the
    sponsors would have to replicate those services.
        Mr. Mullin. My time is up. Madam Chair, thank you.
        Ms. Eshoo. I thank the gentleman.
        I just want to comment that I love the questions of members
    from both sides to just peel, layer-by-layer, the onionskin
    back on this. And it is so important for us to do it. It really
    is the essence of having a hearing.
        I now would like to recognize the gentleman from Vermont,
    Mr. Welch. Who if there is anyone that has done a deep dive on
    pricing, it is him. You are recognized for five minutes of
    questioning.
        Mr. Welch. Thank you.
        Ms. Eshoo. Fasten your seatbelts, witnesses.
        Mr. Welch. No--thank you--not really. Look, the bottom line
    here is that the pharmaceutical industry creates life-saving
    and -extending drugs and pain-relieving drugs. That is a good
    thing. You are killing us with the price and that is on both
    sides--both sides--and we are trying to get to the bottom of
    this.
        And there are some practices that might have been really
    outrageous. There appears to be in this room common agreement
    on two things. There ought to be transparency--transparency on
    the rebates and, I think, transparency on how much is really
    spent on R&D because that is the pitch that is always made. We
    want to have innovation but we are never told how much is spent
    on R&D versus advertising and everything else.
        So is anyone here opposed to giving us transparent
    information about the rebates, about the R&D, what it really
    is? Raise your hand if you are.
        All right, I am going to take that as a yes. All right.
        There are some practices I am curious to know whether you
    are OK with. On this question of R&D, oftentimes it is not R&D;
    it is the leveraged buy-out, or it is just an acquisition of
    another company. A good example of that was when Gilead, who
    spent not a nickel on R&D, purchased the company that in fact
    had created a drug sofosbuvir; which is of course for
    hepatitis. Gilead bought it, and never put a nickel into it,
    and then marketed it as Sovaldi at $84,000 a treatment - way
    higher than the price that you would pay in England - and
    essentially paid its acquisition price back in a year.
        I am just going to ask you, Mr. McCarthy, is that a
    practice that you think Pfizer should emulate if it had an
    opportunity to do that?
        Mr. McCarthy. Congressman, what I can say is Pfizer is a
    science-based company. We have research discovery labs in
    Cambridge, in California----
        Mr. Welch. No, I understand that. We talked yesterday and I
    am impressed with that.
        Mr. McCarthy. Yes.
        Mr. Welch. But this has nothing to do with research. It is
    just the green eyeshade people with Harvard MBAs figuring out a
    good company to buy where they know they have got incredible
    pricing power and then they are going to have the Medicare
    program pay for it. They are going to have employer-sponsored
    healthcare people pay for it. I don't see that as R&D.
        But I will go on to another question. I will talk to you,
    Mr. Niksefat. Amgen did something that, in my view, was pretty
    outrageous. They had a really good drug. And you guys do some
    tremendous research, I will give you that, but you did in 2013,
    when this Congress had to pass a fiscal cliff bill in order to
    keep the lights on in government, in the dark at night what
    Amgen was successful in doing was getting a provision put in a
    bill that exempted it from the Medicare pricing restrictions
    because it had expired. You got two more years on it. It cost
    taxpayers $500 million--500 million bucks.
        So where is the R&D in that? That is just leveraging and it
    is what Mr. Sarbanes was talking about earlier. I mean what is
    your view on what Amgen did in that particular case?
        Mr. Niksefat. Sir, I am not familiar with that situation so
    I can't comment.
        Mr. Welch. Yes, I would be interested in having somebody
    from Amgen who is familiar with that case telling us how they
    managed to get $500 million out of the taxpayers.
        There has been some discussion also about other patent
    abuse, where we have passed legislation. So I will pass on
    that.
        But let me ask about--you gave very good testimony, Ms.
    Bricker, about how this rebate system works. But are there pay
    walls out there? It is like what Mr. McCarthy was talking about
    from Amgen. They came up with a competing drug that they were
    unsuccessful in getting past the rebate wall because of the
    effectiveness of Johnson and Johnson bundling together various
    drugs so that they got on the formulary and kept, in this case,
    Pfizer with its lower cost but effective alternative in getting
    on.
        Can you comment about that and whether that is a practice
    that you see as having any benefit to consumers and taxpayers?
        Ms. Bricker. At Express Scripts, we don't negotiate by
    bundle. So I don't negotiate--I look at the net cost of an
    individual product independently of all other products in a
    portfolio.
        And so while I am aware that there are some that do turn to
    those practices, we do not.
        Mr. Welch. Tell us a little bit about that pay wall
    practice that pharmaceutical companies will employ in order to
    get them on the formulary and keep others off the formulary?
        Ms. Bricker. Again, we don't do this today but what I
    understand the practice to be is that a manufacturer would
    negotiate that it would give us certain discounts, so long as
    all of their products were included on the formulary or a
    subset thereof.
        Mr. Welch. OK, my time is up. I just want to make a
    comment.
        All of us have a concern about a formulary. Is that going
    to restrict patient access? What we have are formularies where
    we don't have a clue as to why the formulary is what it is. And
    that is another area, in my view, we need transparency.
        I yield back and I thank the witnesses.
        Ms. Eshoo. I thank the gentleman.
        I now would like to recognize the gentleman from Georgia,
    Mr. Carter, for five minutes of questions.
        Mr. Carter. Thank you, Madam Chair. Thank you, and thank
    you for having this hearing today. And thank each of you for
    being here.
        I want to start with you, Mr. Niksefat. You know we have
    heard a lot about list prices. I am familiar with AWP, AMP, net
    cost, all these other things. But the list price that we are
    talking about here, in fact Ms. Bricker, in her opening
    statement, said the problem starts with list price, not with
    rebates or discounts, if you will.
        As I understand it, you actually lowered your list price
    here recently on one of your products. Is that correct?
        Mr. Niksefat. That is correct. For our flagship
    cardiovascular product Repatha, we introduced an option into
    the marketplace at a 60 percent reduced list price.
        Mr. Carter. Well, that is exactly what we want you to do.
    So you did that.
        Mr. Niksefat. We did, sir, and we did it with the hope of
    improving patient affordability, especially for Medicare
    patients, where their cost-sharing is tied directly to the list
    price.
        Mr. Carter. Did it increase patient access?
        Mr. Niksefat. We have seen it increase patient access in
    certain areas but uptake has been slower than you would expect.
    Overall, only about half of commercial beneficiaries can have
    access today to the lower list price option of Repatha and only
    about 60 percent of Medicare beneficiaries can have access
    today.
        Mr. Carter. So when you decreased the list price, it put
    you on the formulary and put you into a different tier,
    correct?
        Mr. Niksefat. In certain instances, we have not yet gained
    formulary access for the low-list price option.
        Mr. Carter. Why not? That is exactly what we want you to do
    is to decrease the list price so that you can have better
    access and patients can have better access to that. I am having
    trouble to understand that it wouldn't automatically go on to a
    different tier and become more available.
        Mr. Niksefat. We are trying, sir. We have ensured that our
    low-list price option is always available.
        Mr. Carter. Well, let me ask you this. I don't mean to
    interrupt but let me ask you this.
        It is my understanding that after you lowered that, that
    you got notification from the PBM that you needed to give them
    seven quarters' notification before you can decrease the list
    price?
        Mr. Niksefat. So I am not going to comment on any specific
    contract document that we received, around confidentiality, but
    I will say that we have seen new more exotic constructs some in
    from across the supply chain around discounts that appear to be
    creating hurdles to list price reductions.
        Mr. Carter. Mr. McCarthy, have you had any experience with
    that?
        Mr. McCarthy. We, as I mentioned earlier, have experienced
    difficulty getting our biosimilars on formularies.
        Mr. Carter. OK, let's don't. Let's talk about just--let's
    leave biosimilars out of it right now and concentrate on this.
        It is my understanding that the PBMs are requiring you,
    before you decrease the list price, to give them a 7-quarter
    notification. Have you seen anything similar to that?
        Mr. McCarthy. We have seen--we have received one letter to
    that effect, yes.
        Mr. Carter. OK. So let's just take it the opposite. What
    about when you increase the list price, do you have to give
    them any notification? Certainly, they would want notification
    before you do that.
        Mr. McCarthy?
        Mr. McCarthy. Yes, that would be part of our annual
    negotiations with the plans as part of the formulary.
        Mr. Carter. But do you have to give them any notification
    that you are increasing a list price?
        Mr. McCarthy. I don't believe so.
        Mr. Carter. OK but you have to give them notification that
    you are decreasing it. I am appalled here. I am not following
    this. Because that is exactly what we want to do.
        Because if you decrease the list price, then that is going
    to decrease the amount of whatever you want to call it, the
    rebate or the discount and, therefore, they have got to know
    this.
        Mr. Niksefat, you decreased the price on Repatha and then
    still you weren't--your drug, even though you discounted it,
    the competitors stayed as the option there, as the preferred.
    Is that correct?
        Mr. Niksefat. Our primary competitor in this case remained
    at their original list price for a period of about five months
    and has recently matched our move and also added a low-list
    price option in the marketplace. But the competitive dynamic
    did create a situation where we found it tougher to negotiate
    to get formulary access when we were competing against someone
    who could offer a larger net rebate to get to the same net
    cost.
        Mr. Carter. I want to ask you--I will ask Mr. Eberle. Mr.
    Eberle, do you--and this is a simple yes or no, if you don't
    mind. Does your company ever ask for an advance notice of a
    manufacturer decreasing their price?
        Mr. Eberle. No.
        Mr. Carter. OK, Ms. Bricker, does your company, Express
    Scripts, ever ask for an advance notice of a company decreasing
    their price?
        Ms. Bricker. Absolutely not.
        Mr. Carter. Now you are saying absolutely not.
        Ms. Bricker. Absolutely not and I would implore them all to
    lower them today.
        Mr. Carter. OK, you are on record as saying that. I want to
    make sure you understand that.
        Ms. Bricker. I understand that.
        Mr. Carter. So there is no clause that says that you have
    to give them a 7-quarter notice in any of your contracts.
        Ms. Bricker. Absolutely not.
        Mr. Carter. OK, that is fine if that is the way you want to
    answer that.
        Let me ask you something, Mr. McCarthy. One of the
    arguments that I have heard that has been made here is that the
    pharmaceutical rebates at the point-of-sale that is being
    proposed by CMS, one of the changes that they are going to
    make, that those rebates, discounts, if you will, that they are
    not going to get to the patient, that the manufacturer is going
    to keep them. How would you respond to that?
        Mr. McCarthy. In our written testimony, we are strong
    supporters of passing those discounts through to the consumer,
    so that they benefit from the lower net prices, which are going
    down.
        Mr. Carter. Would you agree that that would be beneficial
    and that the increase in transparency with the discounts being
    given at the point-of-sale will benefit consumers?
        Mr. McCarthy. Yes.
        Mr. Carter. Mr. Niksefat?
        Mr. Niksefat. Yes.
        Mr. Carter. And finally, I am sorry, Mr. Eberle.
        Ms. Eshoo. Eberle.
        Mr. Carter. Eberle, I am sorry--not Eberle. The third
    manufacturer. I am sorry. Please excuse me.
        Mr. Hessekiel. Hessekiel, yes. Thank you, Congressman.
        Mr. Carter. At the point-of-sale.
        Mr. Hessekiel. Yes.
        Mr. Carter. That you would agree?
        Mr. Hessekiel. I would agree.
        Mr. Carter. Absolutely.
        Ms. Bricker?
        Ms. Bricker. Only a subset of patients will benefit. All
    will have an increase in premium.
        Mr. Carter. All will have an increase in premium.
        Ms. Bricker. Yes, that is supported by the
    administration's----
        Mr. Carter. Why is it that when Secretary Asar testified
    before this committee he said the single best tool we have to
    completely change how drugs are priced in this country would be
    changing this rule? And you disagree with that?
        Ms. Bricker. I think there are many agencies that have
    confirmed the cost associated with doing that.
        Mr. Carter. And finally, Mr. Eberle--Eberle. Excuse me.
        Mr. Eberle. I agree, the change in the rebate process will
    only benefit a subset of patients, and will also only benefit a
    subset of patients that have high deductibles and coinsurances;
    where approximately 50 percent of the patients today have flat
    copays.
        So if you have a $100 drug with a $50 rebate but the member
    only has a $20 copay, where does that $50 go?
        Mr. Carter. But the point is is that you would agree that
    transparency will help in the system. You are 100 percent pass-
    through, so it is not going to impact you at any point
    whatsoever.
        Mr. Eberle. It will not impact our bottom line at all. Our
    concern is representing our clients, who pay for pharmacy
    benefits and they are risking the increasing cost that it may
    give them.
        Mr. Carter. Right. OK, I am way over.
        I appreciate your indulgence, Madam Chair. Thank you very
    much.
        Ms. Eshoo. Let the record show that you were given 2-1/2
    extra minutes because I thought you were on a roll.
        Mr. Carter. Trust me.
        Ms. Eshoo. How is that?
        Mr. Carter. Trust me, we are going to let the record show
    about the testimony that was just given here.
        Ms. Eshoo. Yes, I know. Well, I am a patient chair.
        Five minutes goes by very quickly when you are trying to
    ask penetrating--not only ask a penetrating question but get a
    full answer. So I have a deep appreciation of that.
        With that, I recognize the gentle doctor from California,
    Mr. Ruiz, for five minutes of questions.
        Mr. Ruiz. Thank you. Thank you very much. This is a very
    important topic, of course, and I am going to give it a
    different twist. It is going to be about step therapy and how
    that relates to this conversation.
        But overall, the unifying theme is asking ourselves the
    question: What is best for the patient? And what is best for
    the patient is the patient's experience, not only in their
    health--are they improving? Are they living well? Are they
    preventing illnesses? And also, how much does it cost for the
    patient out-of-pocket?
        I was very disappointed when I spoke with a pharmaceutical
    company the other day and we talked about the high prices. And
    the way that they start talking about it is while their net
    prices, overall revenue have gone down. We should never have a
    conversation about our healthcare system starting off with what
    the net profit of a corporation is and that is going to be the
    anchor of our conversation. It should always start off with
    what is the population's health. What is the burden of disease?
    What is the burden of pain and suffering from patients, from
    illnesses that we cannot prevent or that we cannot treat;
    either because it is too expensive or a system is primarily
    focused on other things like corporate profit?
        So that is why today I want to talk about step therapy, in
    the sense of what is best for the patient. Step therapy is a
    means to save insurance companies money by creating a step-wise
    fashion of forcing patients to use cheaper drugs first, and
    then step-wise getting them more expensive drugs; before they
    finally get to a drug that perhaps may be the best for them.
        The problem is that these bureaucracies are so strict that
    patients sometimes have already tried all those previous drugs,
    and because of a change in insurance companies, they have to go
    back and use those. And that is detrimental to their health if
    those drugs had significant side effects, did not work, did not
    improve outcomes, or had a high noncompliance rate because they
    were too cumbersome to take. So that doesn't allow the
    physician or the patient to determine what is best for them.
        And oftentimes, these drugs are determined through
    formularies. So I want to ask you, Ms. Bricker, and then you,
    Mr. Eberle, what is your role in designing step therapy and
    managing those formularies with the insurance companies.
        Ms. Bricker. Yes, thank you for the question. So our step
    therapy edits, and prior authorizations are determined by a
    team of clinical pharmacists and physicians. To the point you
    made around someone that is being asked to try something that
    they have already attempted and have failed, we have a process
    for the physician to communicate that and then that is then
    overridden.
        And so we think it is really important that----
        Mr. Ruiz. So what is your role as PBMs? Do you have a role
    or is it just that you select the medications that go into the
    formularies?
        Ms. Bricker. We certainly design formularies and then we
    support clinical edits and clinical criteria in order to----
        Mr. Ruiz. Do you have veto in that?
        Ms. Bricker. Veto?
        Mr. Ruiz. Do you have input into which drugs they use
    first, and second, and third?
        Ms. Bricker. Yes, it is in support of the formulary and
    clinical education.
        Mr. Ruiz. OK, so you are part of that team that decides
    which medications to use first, second, and third.
        Ms. Bricker. I am not, personally, no.
        Mr. Ruiz. No, not you but PBMs.
        Ms. Bricker. Yes.
        Mr. Ruiz. Somebody from the PBM company.
        Ms. Bricker. Yes.
        Mr. Ruiz. OK, and you?
        Mr. Eberle. Yes, we utilize a P and T Committee that has an
    independent group of physicians and pharmacists that determine
    which products are appropriate for step therapy or prior
    authorization.
        Mr. Ruiz. OK, so what safeguards do you have in place to
    protect the patient from having to repeat a harmful or
    ineffective treatment because of step therapy requirements?
        Mr. Eberle. Absolutely. So our step therapies are designed
    to catch new starts, someone who hasn't been on any existing
    therapy. So if we get information that says for all the reasons
    you mentioned that it may not be appropriate, we have controls
    to allow that as a part of our quality accreditation.
        Mr. Ruiz. Oh, so if somebody was on a more expensive
    medication now moves to the insurance company of your client,
    it is not on your formulary, will you allow them to use that
    more expensive medication that works for them?
        Mr. Eberle. Right, so that is part of the criteria review
    process. So if the generic is not appropriate for them, yes,
    that is when an exception will be made.
        Mr. Ruiz. What determines not appropriate for them?
        Mr. Eberle. The rules from the physicians on the P and T
    Committee determine what----
        Mr. Ruiz. OK, so I get a sense that they are not consistent
    throughout the industry.
        Mr. Eberle. I would--each PBM, each health plan----
        Mr. Ruiz. OK, so they are not consistent.
        Mr. Eberle. There wouldn't be.
        Mr. Ruiz. Another thing is how do you measure the impact in
    a patient's health that these step therapy and prior
    authorizations are having?
        Mr. Eberle. It is very tricky to do and we would definitely
    look at adherence and compliance as being some of the metrics
    that we have. If we have access to medical data, we will
    incorporate that into the review as well. We do rely heavily--
    --
        Mr. Ruiz. Well, you work for health insurance companies.
    You should have access to health outcomes.
        Mr. Eberle. Correct. Some of our clients are health plans
    but not all of them.
        We do rely heavily on the physicians on our committee in
    helping us make those decisions.
        Mr. Ruiz. Well you know I know patients who suffer from
    complex chronic illnesses who are being forced to start over
    with a drug they have already used, or a drug that had a pretty
    significant side effect profile, or a drug that they had to
    take four to six times a day when they work out in the mines or
    out in the manufacturing, where it is difficult to keep track
    while you are constantly having to focus on what you are doing
    at hand, and it is not working for them.
        Mr. Eberle. Right.
        Mr. Ruiz. So I am working on a bill with Dr. Wenstrup, a
    Republican physician in Congress, to create a set of exemptions
    based on the doctor and patient experiences so that we can make
    sure we get the right medication to the patient for their
    benefit.
        Mr. Eberle. We would support that and love to be part of
    that process.
        Mr. Ruiz. I yield back. Let the record show I only went
    over a minute and 1/2.
        Ms. Eshoo. I see that. I see that.
        Mr. Ruiz. So let the record show you have favorites.
        Ms. Eshoo. I am going to get myself into trouble because on
    who got more in the overtime. But anyway, you received some and
    thank you for your great questions.
        This issue of step therapy is something that every member
    on both sides of the aisle has spoken to. And we had MedPAC
    that testified their mission is fiscal responsibility but I
    reminded the gentleman that came to represent them that there
    are people that have actually lost their lives because they
    were put in the wrong step for this exercise that is, I
    understand, meant to constrain costs but there isn't a balance
    with what some very, very sick patients need and they lose
    their lives.
        So we have got to bring some sensibility back to this and
    it is a worthy subject for you to have raised.
        With that, I would like to recognize the gentleman - and he
    is a gentleman - Mr. Gianforte, from Montana. I always love to
    say his name, Gianforte. Isn't that beautiful? Thank God for
    the Italians.
        Mr. Gianforte. Thank you, Madam Chair. And Chairwoman
    Eshoo, I want to thank you for holding this hearing today. I
    think it is an important topic.
        I continue to hear from Montanans about the burden of high
    drug costs and I look forward to digging. I am going to take a
    little different angle today. Hopefully a new topic will be
    good here.
        I am interested in common sense solutions. I have heard
    from many of our rural hospitals about waste they incur with
    drugs from oversized drug packaging. These hospitals run on a
    very tight margins and every dollar in their operation is
    vital.
        I have also heard from eye care providers about the high
    cost of prescription eye drops and waste they have when their
    patients get oversized bottles of eye drops.
        In 2016 alone, it is estimated that between private
    insurers, patients, and the Government, about $3 billion was
    spent on unused cancer treatments that were just thrown into
    the garbage. These medications are incredibly expensive and, at
    the end of the day, these costs are passed on to patients and
    taxpayers.
        So Mr. McCarthy, at Pfizer, what are you doing to decrease
    drug waste?
        Mr. McCarthy. Well first of all, I agree there is a
    tremendous amount of waste in our healthcare system.
    Specifically, I am not--I want to be able to give you a really
    factual answer. And to be honest with you, I would rather go
    back and talk to my manufacturing colleagues and really get you
    a more fulsome explanation of some of the things we are doing
    in our manufacturing facilities to address waste.
        Mr. Gianforte. I would ask you to do that.
        Mr. McCarthy. Yes.
        Mr. Gianforte. I know you create many different products.
    Are you aware of any single-dose medications that you sell in
    multiple sizes so that the rural hospitals can order the ones
    that are appropriate for their patients?
        Mr. McCarthy. I really, I would like to get back to you and
    just to give you a more fulsome and thoughtful answer to that.
        Mr. Gianforte. OK but the research I had indicates that you
    do this in other countries but you don't do it here in the
    United States. A 250-pound man needs a different dose than a
    130-pound woman for the same drug. These are very expensive
    drugs and yet, hospitals end up having to order a single size
    and the remainder gets thrown in the trash, costing taxpayers,
    insurance, and patients billions of dollars each year,
    according to the data we have.
        So I would very much appreciate that feedback and, if you
    do have practices in place to right-size these dosages so that
    we are not throwing stuff, so much expensive drugs, in the
    garbage; that would make more available for other patients,
    obviously.
        Mr. McCarthy. True. OK.
        Mr. Gianforte. Ms. Bricker, PBMs are hired to manage drug
    benefits of clients to bring their costs down. Can you talk
    about drug waste and what you are doing to reduce it?
        Ms. Bricker. Yes, thanks for the question.
        We are focused on adherence of product and ensuring that
    patients are taking the right drug, at the right dose, and at
    the right time, and continuing to stay on therapy as prescribed
    and as warranted, given their disease or their diagnosis.
        We spend a tremendous amount of research and innovation
    within our Therapeutic Resource Centers, which are Centers of
    Excellence in our specialty pharmacy, that ensures that, again,
    patients that have very complex diseases are partnered with
    pharmacists who are specializing in that disease-state. So we
    are at the front end, ensuring that patients are on the right
    dosage and on the right therapy and, if they happen to stop
    therapy, why. Is it because of cost or a side effect?
        Mr. Gianforte. Well, I am particularly interested in this
    waste issue, where rural hospitals have to order drugs more
    than they need, they don't have the volume, the remainder goes
    in the trash. What are you doing to prevent that?
        Ms. Bricker. Unfortunately, we don't operate in the Part A
    or B space. We only operate in the Part D space.
        We do believe that if, given the opportunity to operate in
    you know the management of pharmaceuticals in A and B, we could
    have greater leverage over manufacturers in this regard.
        Mr. Gianforte. OK, last question, if I could, Ms. Bricker.
        Are you aware of any practices today at PBMs that encourage
    waste that we ought to be looking at? Because this is an area
    where there are billions of dollars of opportunity that could
    be returned back to patients.
        Ms. Bricker. No. I agree but I am not aware of a practice
    that PBMs are doing to encourage waste.
        Mr. Gianforte. Mr. Eberle?
        Mr. Eberle. I am not aware of anything.
        Mr. Gianforte. Are you able to order drugs in the right
    size for individual patients, so that there is no waste?
        Mr. Eberle. We can but we are really--we work in the
    outpatient pharmacy benefit, where you are typically getting a
    month's worth of medication and not the inpatient setting,
    where you may have only one dose.
        Mr. Gianforte. OK. Well, we have to continue looking at
    these drug costs from every angle. I think waste is one we
    ought to be able to address. I would appreciate any suggestions
    from the committee in a follow-up.
        And Madam Chair, I am yielding back, almost on time.
        Ms. Eshoo. Excellent. The gentleman yields.
        And I have the pleasure of recognizing the gentleman from
    Massachusetts, Mr. Kennedy, for five minutes of his questions.
        Mr. Kennedy. Thank you, Madam Chair. I want to thank the
    witnesses for being here and your testimony.
        Mr. Niksefat, I wanted to start with you, if I can. Your
    testimony, you explain how you price drugs and it was,
    actually, pretty similar to Mr. McCarthy. And you said, ``Amgen
    establishes a list price for our medicines in the context of an
    established set of pricing principles. These principles guide
    that the prices of our medicines account for the economic value
    that is delivered to patients, providers, and payers and unmet
    medical need, the size of the patient population, the
    investment and risk undertaken, and the need to fund continued
    scientific innovation--those five principles.''
        So I want to take those one-by-ones, as we consider the
    price of one of your drugs, Neupogen, which sells for about
    $300 average sale price for a 300- microgram dose in the U.S.,
    and how that also correlates with a $115 dose in Denmark. And
    so let's try to walk through as well that, eight years ago,
    that price was $239 in the United States.
        And so you say that the price is based on economic value to
    patients. That is presumably the same for American patients as
    for Danish patients. Is that right?
        Mr. Niksefat. When we look in economic value, we look in
    the context of the healthcare system it participates in, as
    well as the overall economic conditions of the country that it
    operates in.
        Mr. Kennedy. And so is that why it is nearly three times as
    high in the U.S. as it is in Denmark?
        Mr. Niksefat. I can't comment on that. I wasn't aware of
    the price in Denmark until you informed me. I will say that
    most foreign countries have significant price controls, as well
    as mandated pricing that goes along with the socialized
    medicine.
        Mr. Kennedy. So I appreciate that. Denmark, as it turns
    out, was rated by Avik Roy as one of the countries that was
    free and a competitive market for drugs, not a country that
    engages in price controls. I am not sure if you are aware of
    Mr. Roy's analysis.
        Mr. Niksefat. I am not.
        Mr. Kennedy. So moving on, then, you say that the price is
    based off of the size of the patient population. Presumably,
    that means a higher price for a smaller patient population. The
    population of Denmark is about one-50th the size of the United
    States. Can you comment as to why that arrow would continue in
    the opposite direction?
        Mr. Niksefat. The population is the population to be
    treated, not the population of the country.
        Mr. Kennedy. And presumably, the population to be treated
    in Denmark would be smaller than the population to be treated
    in the United States.
        Mr. Niksefat. In total, yes, but we look at it as the total
    population to be treated.
        Mr. Kennedy. You said the price is based on investment and
    risk undertaken. It is the same product in both countries, so I
    was wondering if you could explain why the investment and risk
    undertaken could be different in the two countries.
        Mr. Niksefat. The risk and investment undertaken is, in
    general, one. However, there are specific studies that are done
    for specific countries.
        Mr. Kennedy. OK. So you say that you need to fund continued
    scientific innovation. And now setting aside the fact that you
    are calling on taxpayers to fund an awful lot of those research
    costs, everyone agrees that the ability to extract those
    payments to fund your own pipeline has an expiration date. That
    was in testimony earlier around exclusivity.
        Neupogen has been on the market since 1991. That is 28
    years. Is it really appropriate to continue to keep charging
    the taxpayer for those research risks on the back of an old
    product?
        Mr. Niksefat. So Neupogen is subject to direct biosimilar
    competition and that biosimilar competition now has the vast
    majority of the market share. And so in my mind, Neupogen is a
    test case in proof that the biosimilar market and the lapse of
    exclusivity is working within the United States.
        Mr. Kennedy. So if I understand that correctly, though,
    since the competitive entry of Granix from 2012 and Zarxio in
    2015, Neupogen's price has risen and is still the market share
    leader both in total revenue and unit volume. Is that not the
    case?
        Mr. Niksefat. It is not the case in unit volume, sir. And
    in total, Neupogen unit volume, if I remember correctly, is
    approximately below a third of the entire market.
        Mr. Kennedy. And revenue?
         Mr. Niksefat. I am not aware of the revenue comparison.
        Mr. Kennedy. So but the argument that then you are just
    making, we just went through those five principles, just to be
    clear, that economic value to patients, presumably the same,
    although you pointed to the fact the pricing is per, for that
    economic cost for the actual health system, it is the size of
    the patient population, which presumably is going to be higher
    in the United States than it is in Denmark. It is about the
    investment and risk undertaken, which is equal. It is about the
    need to fund scientific innovation, which you pointed to the
    biologic and biosimilar marketplace, although, at least from
    the information that I understand, is that it is still the
    market share leader in total revenue and unit volume, although
    I will take you at your word on the unit volume part. And the
    marketplace in Denmark is actually open and free.
        So if we are pricing according to those principles, how
    does this work? What is the justification for a drug on the
    market for nearly 30 years that has gone up, over the course of
    the past eight years, that a biosimilar market does not
    actually accomplish what it seeks to do and given your
    testimony, you said this is open and working successfully?
        Mr. Niksefat. Again, sir, on the biosimilar front, we
    have--biosimilars have a majority share of the marketplace. And
    I believe Neupogen is the example of a working biosimilar
    marketplace.
        Mr. Kennedy. And the last question, and I know I am over
    time, but given that Amgen is also a biosimilar company, do you
    stand make more money on biosimilars if the price of the brand
    and biosimilar products stay high or if there is true
    competition and those prices get pushed lower?
        Isn't it ideal for Amgen that a biosimilar competition is
    weak and you can still charge a high price for Neupogen after
    28 years?
        Mr. Niksefat. We have not yet faced weak biosimilar
    competition, where we have faced biosimilar competition, and we
    believe that we will be able to bring our biosimilars to the
    marketplace, improve affordability, and save costs based off
    the level playing field that exists today.
        Mr. Kennedy. I look forward to that happening.
        I yield back.
        Ms. Eshoo. I just want to insert here that I especially
    appreciate Mr. Kennedy's questionings, especially around the
    biosimilar market. Your great uncle and I were the authors of
    the legislation to create the pathway for generics,
    biosimilars. And the Europeans are doing much better with this.
    We have maybe about 20 products on the market in the United
    States but there are some darker reasons as to why more are not
    coming to the market. And I think the committee needs to
    examine that at some point but I especially appreciate your
    line of questioning.
        I now would like to recognize the gentleman from Florida,
    Mr. Bilirakis, for his five minutes of questioning.
        Mr. Bilirakis. Thank you, Madam Chair. I appreciate it very
    much. Thank you for holding the hearing.
        Ms. Bricker, price transparency is key to informed consumer
    choices, obviously, and it ultimately empowers patients. I
    agree that patients and their care team should have access to
    prescription drug pricing, prior authorization, and step at the
    point of prescribing, not just at the point of dispensing. And
    I know we have addressed this issue but I think it is worth
    going over again.
        The question is: How many providers have access to this
    information at the point of prescribing and how might we
    incentivize more providers to utilize this information in their
    practice?
        Ms. Bricker. Thank you for the question, Congressman. This
    information is available to all prescribers but, unfortunately,
    not all are utilizing it from an Express Scripts perspective.
        Mr. Bilirakis. And why not?
        Ms. Bricker. Because they each use a unique electronic
    medical record that then has to create connectivity to the
    systems at Express Scripts. So it is available to them but not
    all are able to use it because, again, of that just
    connectivity issue.
        From an electronic prior authorization perspective, 60
    percent of our prior auths are done electronically and we aim
    for that to be even higher. It is faster for the patient and it
    is more convenient for the prescribers.
        Mr. Bilirakis. OK, I will move on to the next question.
        Is it true under Medicare Part D that the rebates collected
    go directly to the beneficiary? Is that correct, the full
    rebate?
        Ms. Bricker. The full rebate is passed to the plan sponsor.
    So, the health plan, if you will, receives the full rebate.
        Mr. Bilirakis. The plan sponsor receives the full rebate.
        Ms. Bricker. Yes.
        Mr. Bilirakis. OK.
        Ms. Bricker. And then it makes its way to the beneficiary
    through lower premiums and lower coinsurances or copays.
        Mr. Bilirakis. OK but the entire rebate makes its way to
    the beneficiary. Is that the case?
        Ms. Bricker. The entire rebate goes to the plan sponsor.
        Mr. Bilirakis. OK. So it doesn't go--so it does not go
    entirely to the beneficiary.
        Ms. Bricker. It is not going to----
        Mr. Bilirakis. It goes to the plan sponsor.
        Ms. Bricker. It goes to the plan sponsor and then that, in
    turn, lowers premiums for beneficiaries----
        Mr. Bilirakis. OK.
        Ms. Bricker [continuing]. Or out-of-pocket costs at the
    point-of-sale.
        Mr. Bilirakis. OK but there is no guarantee that it is all
    going to go to the beneficiary. All right. Another question: On
    average, how long does it take your network to fill a
    prescription?
        Ms. Bricker. I am sorry.
        Mr. Bilirakis. On average, how long would it take your
    network to fill a prescription?
        Ms. Bricker. My network? I am sorry I don't understand the
    question.
        Mr. Bilirakis. Well, let's say part of your network, let's
    say a company--well, a pharmacy that is part of your network,
    how long would it take for them to fill a prescription, would
    you say on average?
        Ms. Bricker. I am sorry I don't have those statistics. I
    would say from my personal experience, anywhere from 15 minutes
    to one day, depending on how busy they are or other factors.
        Mr. Bilirakis. OK. All right, has it taken longer than
    let's say a couple days? Has that been your experience in some
    cases?
        Ms. Bricker. In some cases it can, if the product is not in
    stock, or if they need to talk to the physician, or you know,
    get additional information, it could certainly.
        Mr. Bilirakis. But how often does that happen?
        Ms. Bricker. I think probably Walgreens will be better to
    speak to this.
        Mr. Bilirakis. OK, I would like to--OK, yes, please. Anyone
    from--anyone else want to add something to that?
        OK, maybe we can discuss it a little bit further.
        Ms. Bricker. Sure.
        Mr. Bilirakis. I would like to.
        All right, Mr. McCarthy, bringing new prescription drugs to
    market is an expensive and long process. We have all talked
    about that. There are 7,000 known rare diseases impacting 30
    million Americans; 95 percent of these diseases have no
    treatment. As you know, 83 percent of the rare diseases affect
    populations of 6,000 people or less.
        Right now, rare disease patients are taking off-label
    prescription drugs to treat their conditions and there is no
    guarantee that the off-label prescription drug will be
    effective or even safe for them because of the dosage, in some
    cases.
        What are the current barriers to repurposing the major
    market prescription drugs for life-threatening rare diseases
    and pediatric cancers? In other words, the drug shows promise
    but we want it to go through the FDA process to make sure they
    are safe and, obviously; we want the insurance companies to
    cover so that our patients have access. What are some of the
    barriers to that?
        Mr. McCarthy. So thank you for the question, sir.
        Mr. Bilirakis. Sure.
        Mr. McCarthy. So Pfizer, as you may know, is committed to
    conducting research in rare diseases and we just were happy to
    receive approval this week for a rare disease medicine to treat
    cardiomyopathy, which is a very rare debilitating condition
    that leads to death. So we are very committed to doing research
    on rare diseases.
        In terms of your question about repurposing medicines for
    use in rare diseases, I think the biggest challenges associated
    with doing so are clinical, demonstrating that the medicine is
    safe and effective for that use. There are lots of reasons why
    medicines don't make it to market--safety, efficacy--but I
    believe the biggest barriers would be the clinical barriers in
    demonstrating that it actually works and is safe in that
    condition.
        Mr. Bilirakis. OK, very good.
        I guess I yield back. You are right, those five minutes do
    go fast, Madam Chair. I appreciate it very much.
        Ms. Eshoo. They do. I thank the gentleman. He yields.
        And I now would like to recognize the gentlewoman from
    Michigan, Mrs. Dingell.
        Mrs. Dingell. Thank you, Madam Chair. I do thank all of the
    witnesses for coming. I think you would probably rather be at
    the dentist than with us right now. But as you can tell, all of
    us have the same questions and we are hearing from people every
    single day.
        I am going to use the inhaler now as, I think, the latest
    example of insulin and EpiPens; where I started to hear about
    it when I was out and about and finally, like the tenth time,
    when I was at a clinic that helped serve--that takes care of
    the underserved, they told me it was the most expensive
    medicine that they were stocking.
        So I walked into three different pharmacies and discovered
    that it is about $700 to them. Blue Cross Blue Shield's Private
    or what I would call the autos, is $40 copay; Blue Cross Blue
    Shield FEP is $80. At town halls, I have had people tell me it
    costs $400 copay, $350 copay. It is a problem.
        And you know the United States pays the highest
    prescription drug prices of anybody in the world. And each part
    of the drug supply chain bears some responsibility for what is
    happening. And I can tell you I don't think any of us--well,
    some people out there may say that we are, but I don't think we
    are stupid and we are trying to understand where each of the
    costs are coming in and it is simply, it is not transparent. I
    think we are all there.
        But I am first going to ask Ms. Bricker and Mr. Eberle,
    building on what my other colleagues have been asking, the
    question is how would you say PBMs contribute to higher prices;
    and do you believe that there are industry reforms that are
    needed?
        Ms. Bricker. Thank you for the question. I exist to keep
    prices down and I am hired voluntarily by 3,000 clients that
    are employers, and health plans, and unions, and local
    governments to do just that. And so it is counter to our
    mission to in any way influence an increase in price.
        Mrs. Dingell. And so you would say that PBMs are completely
    blameless and that you don't need any reforms. I forgot to tell
    you, by the way, this is $7, according to Dr. Ruiz, in Mexico.
        Ms. Bricker. Our goal is to lower prescription prices. So
    we do everything that we can to do that.
        Mrs. Dingell. Mr. Eberle?
        Mr. Eberle. Similar, our mission is to lower drug costs in
    a manner that instills trust and confidence with our payers. We
    work with pharmacies, manufacturers, and everything we can to
    bring costs down. That is the sole purpose we exist as a PBM.
        Mrs. Dingell. OK, I am now going to go to Mr. Niksefat. In
    your written testimony, you said the U.S. biosimilar market is
    healthy and robust. At the hearing that we had last week, we
    heard testimony from MedPAC that the biosimilar market has
    brought only modest savings for consumers so far.
        Can you explain why you think the current market is robust,
    when we have heard independent nonpartisan testimony just last
    week to the opposite?
        Mr. Niksefat. Yes, thank you for the question
    Congresswoman.
        Again, with our product Neupogen, we have been facing
    biosimilar competition for three years now and the biosimilars
    have the majority market share within the market. And our
    market share has been falling, quarter over quarter, since
    their entry.
        We also see biosimilar competition to our drug Neulasta and
    are seeing uptake in biosimilars in that marketplace. We
    believe because we have one of the largest biosimilar
    portfolios we are bringing into the marketplace, that we can be
    successful if we price the products right and resource them
    correctly to ensure uptake in the marketplace.
        Mrs. Dingell. Thank you.
        Mr. McCarthy--I am moving fast because minutes go fast--you
    said in your written testimony that when a medicine's patent
    expires, lower cost generics are made available.
        At the end of last year, Pfizer's drug Lyrica was scheduled
    to go off patent. And by the way, I know about it because I
    have seen the television ads. But instead, the company gained
    20 more years of patent protection just because it slightly
    altered the drug's formula, allowing it to be taken as one pill
    instead of two or three.
        I think that most Americans are fine with companies
    receiving patents and recouping R&D costs. We all agree there
    and we want genuine innovation. But are drug companies gaming
    the patent system? Are they making profit? Do you think
    changing a drug's formula so it could be taken as one pill
    instead of two is worth an additional 20 years of higher
    prices?
        Mr. McCarthy. Congresswoman, thank you for the question.
        First of all, as I mentioned earlier, we believe that
    Congress got it right with Hatch-Waxman and that we should have
    a period of exclusivity and when that expires, generics and
    biosimilars should come into the market. I am not sure which
    patent you are referring to but we expect generic Lyrica in the
    market in months, not years.
        And you know sometimes there are additional patents on
    formulations and other things that are, if their incremental
    innovations, are valid but they generally don't prevent generic
    competition from coming in from the main molecule. Once that
    patent expires, generics can come into the market.
        Mrs. Dingell. I have more but I am over. And I will let you
    give the Republicans more time today.
        Ms. Eshoo. I thank the gentlewoman. The Republicans are
    finished.
        Now, we have more. I want to recognize the gentlewoman from
    Delaware, Ms. Blunt Rochester. And then we have two members
    that are not members of the subcommittee but great
    contributors, and have served on the subcommittee before, and
    the rules of the committee allow them to waive on and ask
    questions, too.
        So now we are going to go to the gentlewoman from Delaware.
        Ms. Blunt Rochester. Thank you, Madam Chairwoman, so much
    for this important hearing. It is obvious by the interest on
    both sides of the aisle and the fact that this is actually
    something that we agree on, that we all recognize that there is
    not one simple fix, or one simple solution, and that this is a
    very complex issue.
        The future of this debate will increasingly focus on
    innovative drugs, precise, individually-tailored medicines that
    treat complex conditions but often at significant cost. And
    when we talked to stakeholders about this and even in this
    today, we have heard a lot about value-based arrangements. And
    so I want to start there with my questions.
        Mr. McCarthy, could you talk a little bit about--are there
    any other things that you would change to encourage companies
    like yours to enter into value-based arrangements under
    Medicare? I mean we have already heard some about past
    legislation, Anti-Kickback Laws, but can you talk about any
    other things that you would do--that we should do to encourage
    companies like yours to enter into VBAs under Medicare?
        Mr. McCarthy. Yes, thank you for the question,
    Congresswoman.
        I believe the two ideas we discussed earlier would be very
    helpful in moving us to value-based agreements--would be a
    change in the Anti-Kickback statute, as well as the best price
    provisions to enable us to execute those value-based
    agreements.
        Ms. Blunt Rochester. Excellent.
        And I just wanted to piggyback on Congressman Welch asked
    this question of the whole panel about the need for
    transparency on rebates and how much is spent on R&D. And I
    noticed that Mr. McCarthy, you had your finger on the button,
    as if you were going to speak but you didn't. So I want to give
    you an opportunity, and the rest of you as well, if we really
    are all on the record in agreement that there should be
    transparency, both on the rebates and also on R&D.
        Mr. McCarthy. Yes, so on both of those points we do publish
    our R&D figures every year and this year, we spent over $8
    billion on R&D. And we publish that every year.
        And in terms of rebates or discounts--sorry, Chairman--you
    know we do believe that if the market is working to negotiate
    these discounts for medicines, that a patient should know about
    those discounts and should get the benefit of them.
        Ms. Blunt Rochester. OK, I am going to switch to Mr.
    Hessekiel.
        Cancer is one of the areas of medicine where we are seeing
    very expensive drugs. I have had constituents call crying about
    the cost of their drugs. And as a pharmaceutical company
    exclusively focused on cancer, it seems like your products
    would be well-suited for value-based arrangements.
        Have you entered into any of these agreements?
        Mr. Hessekiel. Thank you for the question, Congresswoman.
        We have not entered into these arrangements. I don't
    believe that we have been approached to enter them in any
    significant manner.
        I would echo Mr. McCarthy's comments of we are eager to
    embrace value-based arrangements but there are going to have to
    be some regulatory changes in order, frankly, to make all the
    stakeholders comfortable to proceed.
        Ms. Blunt Rochester. Did you want to share any challenges
    that you feel in addition to----
        Mr. Hessekiel. No, I think those are two very significant
    challenges.
        Ms. Blunt Rochester. OK and this question is for Mr.
    Eberle. How do you think value-based arrangements will affect
    the PBM sector and what role does your company expect to play,
    as they become more prevalent in the pharmaceutical market?
        Mr. Eberle. I think the PBM role will kind of play that
    intermediary role that we do today. So working with our clients
    and the manufacturers to negotiate value-based agreements that
    make sense for both parties, that are practical, can be
    administered, measured, and I see that as an extension of the
    rebate contracting; we do today.
        Ms. Blunt Rochester. That makes me want to shift.
        Mr. Schrader talked about the issue of disputes but I want
    to go to the issue of outcomes and how you really measure them.
    So, I am going to turn to Ms. Bricker.
        If you could tell us a bit more about the types of drugs
    for which Express Scripts commonly sees VBAs and outcomes that
    you are seeing. Are patients really benefitting from these
    arrangements?
        Ms. Bricker. Thanks for the question.
        We have been administering value-based-design programs
    since 2014. We have the largest portfolio in the industry of
    these programs. So I will provide you a list of those and the
    outcomes as a follow-up.
        But to name one, Inflammatory Care Value is one of our
    flagship programs. It looks at the specialty products for
    rheumatoid arthritis, for arthritic psoriasis. These products
    are oftentimes started and then stopped. And we have worked
    with the manufacturers that produce them and if a patient, in
    fact, starts therapy and then stops therapy, we give a refund
    back to the plan sponsors.
        But as highlighted here many times, we are unable to do
    those in the Government space and hope to do that.
        Ms. Blunt Rochester. Thank you. I am going to shift to the
    opioid epidemic. We are fortunate to have testifying at the
    same time the Director of Public Health for the State of
    Delaware, Karyl Rattay, and we, in Delaware, have been
    expressly hit very hard. You know like naloxone has increased
    30 percent since 2017. We have seen triple, double, 600 percent
    increases.
        And one of my questions is both for Mr. McCarthy and Mr.
    Niksefat. What actions do you think could be taken to ensure
    that in times of crises we can access needed drugs to help
    America fight back?
        Mr. McCarthy. Thank you for the question.
        Ms. Blunt Rochester. And I have 13 seconds.
        Mr. McCarthy. So I will be quick. First of all, Pfizer
    proudly has a naloxone donation program. We have donated
    hundreds of millions of doses of naloxone to help.
        And then I also believe on the innovative side, developing
    new novel pain treatments that don't have abuse potential are
    two important steps.
        Mr. Niksefat. Ma'am, at Amgen, we take the mantra of every
    patient every time to make sure that we can always supply the
    entire marketplace.
        I don't have any specific policy solutions for you today.
        Ms. Blunt Rochester. One of my big concerns is that when we
    have these epidemics that price gouging doesn't happen, that we
    don't take advantage of a crisis in our country and then
    benefit from that. And so that is one of the areas that we will
    be working on and we look forward to following up with you on
    that.
        And I yield back, Madam Chairwoman.
        Ms. Eshoo. I thank the gentlewoman and it is such a
    pleasure to have her as a new member of the subcommittee.
        Now, the gentlewoman from New Hampshire, Ms. Kuster, for
    five minutes of questioning.
        Ms. Kuster. Thank you, Madam Chair, and thank you for a
    very informative bipartisan discussion. This has been a long
    morning for all of you.
        I want to dive right in because we are all hearing from our
    constituents and we have got challenges. Just yesterday in my
    Concord, New Hampshire office, we heard from a constituent. A
    mere six weeks into 2019, she hit her catastrophic limit in
    Medicare due to therapy she needs related to asthma. Asthma is
    about as common as any preexisting condition. Twenty-five
    million Americans have asthma.
        And, so I want to try to capture some of what we have
    talked about today but I think I would go further. The Chair
    said let's use the term discounts. I would use the term volume
    discounts because I think people may have been listening to
    this hearing today and not really understand what is at the
    core of these negotiations. If you buy more of something, you
    are going to get a better price.
        And it is not the topic of what we are here for today but I
    just want to say for the record that I would like to see the
    Federal Government get the best price with the volume that they
    have, including Medicare Part D, Federal employees, the VA, and
    everything else included.
        So I think there is an advantage and that is really what
    PBMs are about. Our role is how to get that to the consumer.
        So I want to address the sort of perverse incentives in the
    supply chain and we have danced around this a little bit today
    with starting with the list price. Recently, I saw an earnings
    report of a PBM who is not here today. So I want to make that
    very clear for the record. We are not talking about the PBMs
    who did have the courage to come forward and I appreciate it.
        This report showed that the adjusted operating income is
    expected to decline for this company for the year, citing,
    quote: ``lower brand inflation as a factor.'' Brand inflation,
    meaning that drug manufacturers did not increase the list price
    prescription drugs as much as the PBM had anticipated; thus,
    negatively impacting the PBM's earnings.
        So Ms. Bricker and Mr. Eberle, can you explain this in the
    context of your business? Can you help elucidate why this would
    happen or what it is referring to?
        Ms. Bricker. Historically, manufacturers have taken,
    oftentimes, double-digit price increases and there was a trend
    year over year of that continued level of price increases. This
    year and the year prior, we have seen moderation in price
    increases, likely because of the spotlight and the pressure
    that is being put on those list prices.
        Ms. Kuster. Can you get at because the fees are based upon
    a percentage, and I think this was maybe the point that was
    made earlier, that the higher the list price, the greater the
    fees--the greater the revenue?
        Ms. Bricker. Certainly, the revenue because the pricing of
    the medication is based off of a derivative of the list price.
    And so that is not to say the profits of that company or our
    company but the actual revenues associated are impacted
    certainly by the list price.
        Ms. Kuster. To Mr. Eberle.
        Mr. Eberle. Our organization takes a very different
    approach with that. Our only revenue is the admin fees we
    charge our clients, so the PBM services. So as drug prices go
    up or down, that has zero impact on our profit and loss, on our
    P and L. And we did that----
        Ms. Kuster. And would you say that is your competitive
    advantage in the marketplace vis-a-vis other PBMs?
        Mr. Eberle. It is definitely one of our differentiators,
    yes.
        Ms. Kuster. OK, thank you.
        What I wanted to follow-up for Mr. McCarthy and the others,
    along the same lines, is there financial pressure on your side
    to increase list price and, if so, could you explain?
        Mr. McCarthy. I wouldn't say that there is pressure to
    increase the list price. I would say in a competitive
    negotiation there is always pressured to negotiate larger
    discounts, yes.
        Mr. Niksefat. I would say there is structural pressure
    within the entire supply chain to deliver a bigger and bigger
    discount every year, without much focus on net cost and net
    value across the entire system.
        Ms. Kuster. So it is sort of a perverse incentive, in a
    sense, economically.
        Mr. Niksefat. It creates and environment that is
    structured, yes.
        Mr. Hessekiel. Thank you, Congresswoman. I am not
    immediately aware of communications to benefit.
        Ms. Kuster. OK. And for all the witnesses: For the record,
    is it true that the only person that truly pays the list price,
    which is often the highest price, would be a consumer that
    showed up without the benefit of insurance or a discount
    through a PBM?
        We will just go quick down the line.
        Mr. McCarthy. Yes but also, even if they have insurance, if
    it is on the deductible or on the coinsurance basis.
        Ms. Kuster. Yes, OK.
        Mr. Niksefat. It is often that the patient is the only one
    exposed to the list price.
        Ms. Kuster. Yes.
        Mr. Hessekiel. In our section of the market with--yes, the
    patient could be, if there is a high coinsurance requirement
    and if they are a Medicare Part D patient, then the very reason
    why they may be experiencing and even have to abandon therapy
    might be the high list price.
        Ms. Kuster. Thank you.
        Ms. Bricker. In our experience, there isn't anyone that is
    actually paying the list price. Even if you don't have
    insurance and you go to a local pharmacy and you pay the cash
    price, there is a discount that they are applying at the point-
    of-sale. But it is the basis by which those discounts are
    determined.
        Ms. Kuster. OK, I think I have 45 seconds.
        The Congressional Budget Office recently completed an
    analysis showing that specialty drugs accounted for one percent
    of prescriptions, but about 30 percent of spending on Medicare
    Part D, and spending on specialty drugs tripled from 2010 to
    2015.
        I am wondering, on this end, can you offer your perspective
    on why you believe specialty drug spending has grown so rapidly
    and what is the impact that that has on beneficiaries of your
    products?
        Ms. Eshoo. Can I just insert myself in this because you are
    over by almost 1-1/2 minutes now?
        Ms. Kuster. I apologize.
        Ms. Eshoo. And it is an excellent question but it is going
    to take a long answer.
        Ms. Kuster. I apologize.
        Ms. Eshoo. If the witnesses, because you are responsible
    for or obligated to answer the questions of members and those
    that are submitted in writing, would you be willing to take
    your answer in writing, Ms. Kuster?
        Ms. Kuster. Absolutely.
        Ms. Eshoo. Wonderful.
        Ms. Kuster. I apologize. I yield back.
        Ms. Eshoo. No, that is all right. Thank you. No, I have had
    people go over the line today but there are so many great
    questions.
        Now, I believe Mr. Engel, the gentleman from New York is
    next and then I hope we can get to the two members that are
    waving on and be able to dismiss the panel because I think
    there are going to be floor votes. And then we will come back
    for the second panel.
        So Mr. Engel, you are recognized for five minutes of your
    questions.
        Mr. Engel. Thank you, Madam Chairwoman. There are so many
    things to say and to add. I am going to try to get it all in
    but it is really hard.
        Obviously, I, too, have heard these horror stories from my
    constituents about not being able to afford prescription drugs.
    And the aggravating part of that, on top of that, is that our
    nation, the wealthiest in the world, pays more for the same
    drugs than our peer countries and you could keep going. Even in
    some of the medications that I use, you have insurance and then
    you have to have such a tremendous amount of a copay, it really
    makes it ridiculous. Other developed nations are able to
    achieve savings because they are not afraid to leverage the
    purchasing power of the national insurance program.
        So let me say as the chairman of the Foreign Affairs
    Committee, I travel all over the world and meet with leaders
    from every corner of the globe and even though these countries
    negotiate drug prices, they still have access to the same life-
    saving medications of Americans. So I just think that to begin
    the next phase of our drug pricing work, I want to encourage my
    colleagues to work on common sense legislation, which would
    repeal the Non-Interference clause, it has to be done.
        Let me ask this question. In response to rising drug
    prices, analysts have noted a shift in drug formulary designs
    in the emergence of narrow formularies. So chronic conditions,
    such as asthma, which affects a significant number of my
    constituents, have multiple treatment options. And I have heard
    from my constituents who have asthma that narrow formularies
    often only cover one of the several FDA-approved inhalers and
    often it is not the one that their doctor thinks are best for
    them. So as a result----
        Ms. Eshoo. Mr. Engel move your microphone a little closer
    so that everyone can hear exactly what you are saying.
        Mr. Engel. Oh, OK. I am sorry.
        Ms. Eshoo. That is fine. Go ahead.
        Mr. Engel. We used to share a microphone in the old days.
    Remember?
        Ms. Eshoo. Yes, I remember.
        Mr. Engel. Ms. Bricker, let me ask you what steps do you
    take to ensure that your formularies did not restrict access to
    medications that a physician determines is best for his or her
    patient?
        Ms. Bricker. Yes, thank you for the question.
        So we leverage the council, the independent panel of
    physicians and pharmacists on our P and T Committee and they
    determine which products need to be included on formulary.
        Once we develop the formulary, we are also then looking at
    clinical criteria to support that formulary. If a patient is
    established on therapy and they are unable to or have already
    tried a preferred product on formulary, that information can be
    shared with us and then we will grant that as part of an
    appeal.
        Mr. Engel. All right, thank you very much.
        I want to touch on one more thing and, that is, I am going
    to ask you a question, Mr. McCarthy. According to the Census
    Bureau, they say that about 6,000 of my constituents are
    uninsured. For life-saving drugs, such as a hep C cure, can
    amount to $1,000 per pill and the price increases have really
    hurt these people the most, since they have to pay every penny
    of that increase. A significant number of Americans, as
    everyone knows, are underinsured, meaning that their health
    plans don't provide adequate coverage.
        So Mr. McCarthy, in your written testimony, you highlight
    the challenges that these families face by citing a recent L.A.
    Times survey that found half of insured Americans could not
    meet their deductible or coinsurance. So in setting the list
    price for a drug, what steps do you take to ensure that
    uninsured and underinsured Americans can afford their
    medications?
        Mr. McCarthy. Thank you for the question, Mr. Congressman.
        So as I mentioned earlier and you acknowledged, we take
    affordability into consideration when we set the list price and
    we do everything we can to make sure that patients who are
    uninsured or underinsured can afford their medicine. We have a
    program called Rx Advances that allows patients, who are
    underinsured or uninsured who are 400 times the poverty level,
    obtain our medicines at low or no cost. And we have helped
    millions of patients get access to our medicines who have
    trouble affording them.
        Mr. Engel. OK, thank you.
        Madam Chair, thank you for having this very important
    hearing. We are all hearing the same thing from our
    constituents. They don't care how we get there but they want us
    to get there. They want to be able to afford their medications.
    And I believe it is unconscionable that in the richest country
    in the world, where we have the technology, so many people just
    cannot get their meds because they simply cannot afford them
    and that really must change.
        And knowing you for just a few short years, like 25, I know
    this is a priority of yours as well and I look forward to
    working with you, Madam Chair, and changing the system for our
    country. Thank you.
        Ms. Eshoo. We are all going to work together on that.
        I thank the gentleman and also, obviously, for his
    leadership of one of the most important committees in the
    Congress and that is Foreign Affairs. Thank you.
        Now, I think--yes, there is a vote on the floor. I will
    stay as long as I can. And let's get the questions from the two
    Members that have waived on. The gentleman from--oh, Ms.
    Schakowsky is first.
        The gentlewoman from Illinois, Ms. Schakowsky is recognized
    for her five minutes of questions.
        Ms. Schakowsky. Thank you, Madam Chair. Thank you for
    letting me waive on to the committee.
        Mr. Niksefat, in the testimony you originally submitted to
    this committee, you claimed that one of Amgen's drugs,
    Repatha----
        Mr. Niksefat. Repatha.
        Ms. Schakowsky [continuing]. Repatha, is unavailable to
    your company's own employees because of your multi-year
    agreement with a PBM that favors high rebates. Is that true,
    yes or no?
        Mr. Niksefat. Ma'am, our benefits team spoke to our PBM
    team yesterday and received clarification for this
    misunderstanding----
        Ms. Schakowsky. So you did change things.
        Mr. Niksefat [continuing]. Which is why I corrected my
    testimony to ensure that it was correct for the record.
        Ms. Schakowsky. Right. Well so one hour later, after
    learning that your PBM, Express Script, who is also here today,
    planned to call that statement, quote, ``flat out false,'' you
    did submit new testimony and removed that claim. And that is
    what you were just saying.
        Mr. Niksefat. Again, ma'am, we received notification late
    yesterday afternoon that the misunderstanding--of the
    misunderstanding and we corrected the testimony accordingly.
        Ms. Schakowsky. So though I believe that we need greater
    transparency in the rebate process, it is just unacceptable
    that you were willing to tell a falsehood in your official
    congressional testimony the day before you were called out. It
    just makes us wonder if we can expect our witnesses to tell the
    truth, how we can believe anything.
        Mr. Niksefat. Again, ma'am, our benefits team received
    clarification after months of discussions late yesterday and we
    corrected the testimony to ensure that it was accurate.
        Ms. Schakowsky. I understand. I understand.
        So taxpayers absolutely deserve more transparency about why
    their drug prices are very high. Last month I introduced a bill
    called the Fair Drug Pricing Act with Republican Representative
    Francis Rooney. I hope you will all take a look at that. This
    bill would require pharmaceutical manufacturers to notify HHS
    and submit a transparency and justification report 30 days
    before they increase the price of certain drugs, actually
    depending on their price, by more than 10 percent or by more
    than 25 percent over three years.
        This bill will, for the first time, give taxpayers notice
    of price increases and bring basic transparency to the process.
    Again, Mr. Niksefat, would you be willing to submit a public
    and truthful transparency and justification report to HHS that
    includes the manufacturing research and development cost for
    the drug whose price you plan to increase, the net profits
    attributable to that drug, the marketing and advertising
    spending on that drug, and other information as deemed
    appropriate?
        Mr. Niksefat. Ma'am, I am not familiar with that policy and
    I don't make those decisions on behalf of Amgen. So
    unfortunately, I can't comment on that.
        Ms. Schakowsky. Well, I certainly hope that those of you
    that are in the drug-pricing business will take a look at that
    information because we hear all kinds of reasons to justify why
    these prices are skyrocketing, why people literally are dying
    because they can't afford their drugs and, at the very least,
    we have other bills that would actually require the lowering of
    prices.
        This is just to shine a light on that. And this bill or
    certainly some transparency bill is going to be required if we
    are going to move forward on what is the number one issue of
    consumers right now. All the polling before the 2018 election
    said that the price of prescription drugs is the main problem
    that people are facing. I, myself, have stood behind people at
    the drug store who have turned in their prescription and then
    had to walk away.
        We know that compliance with drugs is way down, especially
    with things like insulin, people trying to make it on less than
    the prescribed amount that they are supposed to have. We have
    the names of people who have died.
        And so all of you need to be looking at what are you
    willing to do and studying what you may be forced to do, if you
    don't do it on your own.
        And so again, I appreciate the opportunity to be here.
    Thank you. I yield back.
        Ms. Eshoo. I thank the gentlewoman for making the time to
    come and question today.
        I now would like to recognize the gentleman from Florida,
    Mr. Soto, for five minutes of his questions.
        Mr. Soto. Thank you, Madam Chairwoman.
        So we are here today deconstructing the drug supply chain.
    I have got to say it is pretty dizzying when you look at this
    whole system. As best I could see it, manufacturers develop
    cures, pharmacy benefit managers negotiate on behalf of Federal
    health plans, insurers, and plan sponsors, group purchasing
    organizations, negotiating on behalf of hospitals and
    physicians. Physicians meet with patients and get paid by the
    plans, the insurers, and the sponsors, as well as the
    hospitals. Then they meet with the pharmacist and the
    pharmacists finally distribute those prescription drugs to
    patients.
        So as you could appreciate it, it is pretty hard for the
    average American, let alone the average Member of Congress to
    really sort through all this stuff. So I appreciate you being
    here to go through this.
        First, Ms. Bricker, you all had mentioned the high
    deductibles. And obviously, there is a proliferation of junk
    plans. So, this is also a big driver of a lot of the costs. Is
    that correct?
        Ms. Bricker. Benefit design certainly impacts what the
    patient will pay at the counter. And so yes, to the extent that
    there is a high deductible health plan or a coinsurance, we
    would expect beneficiaries to be subject to higher out-of-
    pocket.
        Mr. Soto. And Mr. Eberle, let's say your company gets a
    reduction of $1,000. How much of that is passed on to a health
    plan?
        Mr. Eberle. $1,000.
        Mr. Soto. And how much of that $1,000 reduction is
    guaranteed to be passed on to the patient?
        Mr. Eberle. That is up to each health plan and how they
    decide to do that but they typically use those dollars to
    control premiums and control copays.
        Mr. Soto. So it is a wide range of differences in how much
    of that savings gets passed down.
        Mr. Eberle. It doesn't get passed down directly to that
    member. It is spread out across the entire plan, typically.
        Mr. Soto. So it wouldn't be a lower overall cost that they
    would have then less out-of-pocket expenses?
        Mr. Eberle. It would result in a lower overall premium that
    they are paying.
        Mr. Soto. But not a lower out-of-pocket expense. OK.
        And you know we have seen the huge increases in insulin
    prices. A while ago, many of us were shocked by the increase of
    the anti-parasitic drug, Daraprim from $13.50 to $750.
    Obviously, people went to jail related to things like that.
        Mr. McCarthy, should we be regulating the difference
    between keeping older, well-established drugs that have already
    been researched, already been out there, lower as opposed to
    newly discovered drugs where a bunch of research has just
    happened? Should we be making a distinction in regulating the
    prior, these older well-established drugs from huge spikes?
        Mr. McCarthy. So it is a very good question, Congressman
    and it there are very different dynamics in those two markets.
    In the generic marketplace, the generic prices in the U.S. are
    probably lowest in the world, which creates a different problem
    because those are very, very low price and it is hard for
    competitors to sustain investments in generic drugs and that is
    why you end up with single-source drugs.
        So something to be done to continue to promote competition
    and new entries in the generic drug space I think is something
    that would be valuable, yes.
        Mr. Soto. What about you, Mr. Niksefat, should we be
    distinguishing between really cracking down on great increases
    in older, well-established drugs versus these new drugs that
    are just rolled out?
        Mr. Niksefat. This isn't a policy I have personally studied
    within my role, Congressman, but our team would be happy to get
    back to you.
        Mr. Soto. And what about you, Mr. Hessekiel?
        Mr. Hessekiel. I would have to say the same, we are a
    manufacturer of innovative drugs and that dynamic hasn't
    presented itself to us yet.
        Mr. Soto. Thanks.
        So we heard from MedPAC about how this is really an area
    where we are seeing increase in cost. Some of these drugs have
    been researched years ago. They have been beyond break even to
    profit and then we see just spikes for no other reason than
    there are companies that can do that. We certainly get that
    compared to a new breakthrough drug that took billions of
    dollars of research and we want to continue to have that
    research done. But I think this committee definitely needs to
    draw a big distinction and make sure we are not seeing these
    surprise spikes and increases of drugs that have been out there
    for many years with no new research or costs associated with
    them.
        And with that, I yield back.
        Ms. Eshoo. OK, we have votes on the floor. We have
    completed not only the testimony of the witnesses but the
    questions of all of the members of the subcommittee, which I
    think are outstanding. The members are not in the hearing room
    but I want to salute each one of you, everyone on both sides of
    aisle, as well as the members that waived on.
        And to the witnesses, we always make an announcement that
    Members have 10 days to submit their written questions. You
    have the wonderful obligation to respond to those questions in
    full.
         So everyone has thanked you. I began by thanking you. I
    want to close by thanking you because you said yes to come. And
    even though Mrs. Dingell said at this point you probably would
    rather be at the dentist having a root canal, yes there are
    tough questions but they are legitimate questions and thank you
    for working hard to answer them.
        We have challenges in our country. And I have always
    thought no matter how tall the challenges are, because it is
    America, we can meet them. We can meet them and we are going to
    in this case. We have learned from you and we have learned from
    the answers that we don't necessarily agree with. In other
    cases, the answers were really enlightening.
        But Congress is going to move and we want to move together
    so that we end up keeping the promise to the American people
    that their prescription drug will not bankrupt them or allow
    them to die without them; because that is really what it is.
    While we protect the efficacy of drugs, that we have them be
    affordable, but also that we not kill innovation in our country
    because that is where the hope comes from.
        So I thank the witnesses and with that--well, we don't
    really adjourn. We are going to recess until I call the
    subcommittee back to order. Thank you, everyone.
        [Recess.]
        Ms. Eshoo. We will call the Health Subcommittee back to
    order.
        Let me start out by thanking each one of you for your
    willingness to be here today to testify. It is an important day
    for the subcommittee. We did a deep dive this morning, which
    spilled over into this afternoon and I did mention to someone
    here, I think to Dr. Eschenbacher, this isn't called the
    healthcare industry for nothing. There are many, many parts and
    you represent important parts of it.
        Our overall goal, as you know, on both sides of the aisle
    is to see to it that the Congress produces effective
    legislation that will actually lower the price of prescription
    drugs for the American people. There are so many working parts,
    layers, and each one has more than one thing tucked into it.
    But I think the deep dive and your presence to help us do that
    is really essential to do essentially an MRI on the system and
    you are here to help us.
        So, I welcome you. And I want to--I am not going to make
    any statement so that we can get right to the witnesses.
        Would you like to make a statement, Dr. Burgess?
        Mr. Burgess. I am good.
        Ms. Eshoo. OK, thank you.
        So with that, we want to welcome Dr. Estay Greene. He is
    the Vice President of Pharmacy Services at Blue Cross Blue
    Shield of North Carolina; Dr. Lynn Eschenbacher, she is the
    Chief Pharmacy Officer at Ascension; Doctor--we have lots of
    doctors--Dr. Jack Resneck, Chair of the Board of Trustees for
    the American Medical Association; Dr. Richard Ashworth,
    President of Pharmacy at Walgreens--I have one maybe a mile
    from my home. There are always long lines there, by the way. I
    think business is good. Ms. Leigh Purvis, who is the Director
    of Health Services Research at AARP, thank you for being with
    us.
        We look forward to the testimony that each one of you are
    going to provide.
        So we will start with Doctor--well, why don't we start from
    the left, Dr. Greene? Yes, so we will start with----
        Mr. Bilirakis. Madam Chair.
        Ms. Eshoo. Yes.
        Mr. Bilirakis. Before we proceed, I just want to recognize
    Dr. Greene and say that he is a good friend and constituent
    from North Carolina. We welcome him to the committee.
        Ms. Eshoo. Isn't that wonderful? And thank you.
        Mr. Bilirakis. Yes.
        Ms. Eshoo. Thank you for sending our colleague to the
    Congress and that we are blessed to have him on this committee
    for his leadership.
        Mr. Bilirakis. Thank you.
        Ms. Eshoo. Would you like to recognize someone?
        Mr. Burgess. Well I just also want to acknowledge Dr.
    Greene's presence. I think he worked with Dr. Patrick Conway,
    who used to be at CMS and was, obviously, a good friend to this
    committee after his time at the agency. So send our best to Dr.
    Conway. Thank you.
        Ms. Eshoo. Wonderful. OK, away we go.
        Dr. Greene, you are now recognized for your five minutes.
        I don't know how many of you are familiar with the light
    system. The most important light is the red one and that means
    stop. OK? Thank you.
        And you are welcome to summarize your written statement, if
    you care to, abbreviate it. If you want to say something orally
    that you don't have in your written testimony, we welcome all
    of it.
        So you are recognized, Dr. Greene, and thank you again for
    being with us.

     STATEMENTS OF ESTAY GREENE, Phar.D., VICE PRESIDENT, PHARMACY
       SERVICES, BLUE CROSS BLUE SHIELD OF NORTH CAROLINA; LYNN
    ESCHENBACHER, Phar.D., CHIEF PHARMACY OFFICER, ASCENSION; JACK
       RESNECK, M.D., CHAIR, BOARD OF TRUSTEES, AMERICAN MEDICAL
    ASSOCIATION; RICHARD ASHWORTH, Phar.D., PRESIDENT OF PHARMACY,
        WALGREENS; AND LEIGH PURVIS, DIRECTOR, HEALTH SERVICES
                             RESEARCH, AARP

                   STATEMENT OF ESTAY GREENE, Phar.D.

        Dr. Greene. Good afternoon. My name is Estay Greene. I am
    the Vice President of Pharmacy Services at Blue Cross and Blue
    Shield of North Carolina.
        I would like to thank Chairwoman Eshoo and Ranking Member
    Burgess for their leadership in holding today's hearing and
    providing the opportunity to discuss key ways to improve
    patient access and affordable prescription drugs.
        Since 1933, Blue Cross of North Carolina has offered its
    customers high-quality health insurance at a competitive price
    and has led the charge toward better health and more consumer-
    focused healthcare in our State. We are a not-for-profit
    company and we employ more than 4,700 North Carolinians and
    serve more than 3.89 million customers. We are active in the
    group, individual, State, Federal employee, and Medicare
    marketplaces. We will soon be entering the Medicaid marketplace
    as well.
        In my remarks today, I will address how Blue Cross of North
    Carolina engages with the drug supply chain, Blue Cross of
    North Carolina activities to help patients afford prescription
    medications, and policy solutions to address rising drug
    prices.
        First, Blue Cross of North Carolina holds ownership of a
    PBM, Prime Therapeutics, along with 17 Blue Cross Blue Shield
    owner-clients. Prime Therapeutics, a not-for-profit, assists
    with the administration of the pharmacy benefit, including a
    variety of services to Blue Cross of North Carolina's members,
    such as handling pharmacy claims, contracting, and developing
    preferred and non-preferred retail pharmacy networks, providing
    customer assistance, and developing formularies and utilization
    management programs.
        The most significant PBM role is to leverage its volume of
    covered lives when negotiating with manufacturers for discounts
    on prescription drugs to secure the lowest net prices for our
    health plan and, ultimately, for our members.
        Second, Blue Cross of North Carolina is engaged in several
    initiatives to improve member access to prescription drugs,
    including by lowering drug costs and enhancing transparency. I
    would like to highlight three of these initiatives today.
        Our company made a decision, starting on January 1st of
    2019, to pass back drug rebates directly to customers when they
    buy rebated drugs. Here is how it would work for a member who
    hasn't yet met their deductible: If you are taking a
    prescription drug that costs $300 and there is a $100 rebate on
    the drug, you will now pay $200 for that medication. In the
    first quarter of 2019, we passed back $3.13 million to our
    members in rebates. But even with passing back more than $3
    million in the first quarter, Blue Cross of North Carolina and
    those same members still paid more than $33 million for rebated
    drugs in that same time span.
        We recently launched a transparency tool around
    prescription pricing, where we sent information to members
    about lower cost options available to them. The tool uses
    claims data to track members' prescriptions. When a less
    expensive, equally effective alternative is identified, the
    member is notified by email or text message. The tool, called
    Rx Savings Solutions, has generated $10 million in member
    savings and has an average savings of $153 per prescription.
        For the last initiative I will mention today, we waived the
    deductible on the purchase of preventative care medications to
    help members with high-deductible health plans save on drug
    costs. Currently, we waive the deductible on preventative
    medications for cancer, cardiovascular events, osteoporosis,
    and asthma.
        While our policy changes will help, much more must be done.
    In just the last three years, drug manufacturers have increased
    the cost for our customers by $360 million but only increased
    rebates by $130 million, pocketing the $230 million of those
    cost increases.
        To significantly address high costs, we have to address the
    main driver: expensive prescription drugs. We believe that
    proposals that increase competition in a pharmaceutical
    industry are necessary to bring lower-cost, equally effective
    medications to patients. Policies we support include:

        The CREATES Act, which is a bipartisan market-based
    solution that confronts some anti-competitive behaviors that
    are keeping lower-priced drugs off the market, such as brand-
    named drug manufacturers refusing to sell their drugs to
    generic competitors. Generic manufacturers need access to
    brand-name products in order to develop generic alternatives
    and get FDA approval;
        Legislation that prohibits anti-competitive pay-for-delay
    arrangements, where brand-name drug manufacturers pay a generic
    manufacturer or make other financial arrangements with a
    generic manufacturer not to bring lower cost alternatives to
    the market;
        And lastly, legislation banning patent abuses that are
    unduly delaying generic and biosimilar entry. In some cases,
    brand-name drug manufacturers are filing dozens of patents that
    extend a product's lifecycle and monopoly pricing power.
    Congress should restore the balance of the Hatch-Waxman Act and
    address this gaming.
        Thank you for the opportunity to discuss how Blue Cross of
    North Carolina provides our members with access to affordable
    drugs and our ideas to improve the prescription drug market and
    patient access.
        I welcome your questions and further discussions.
        [The prepared statement of Dr. Greene follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much, Dr. Greene.
        The clock shows that you have three minutes and 11 seconds
    left but we didn't turn the clock on. So I think you--I think
    we are even. How is that?
        Dr. Greene. I agree.
        Ms. Eshoo. Wonderful. Thank you for your testimony.
        Now it is a pleasure to welcome Dr. Eschenbacher and you
    have five minutes to present your testimony.

                STATEMENT OF LYNN ESCHENBACHER, Phar.D.

        Dr. Eschenbacher. Thank you.
        Chairwoman Eshoo, Ranking Member Burgess, and members of
    the subcommittee, thank you for the opportunity to testify
    before you today.
        My name is Lynn Eschenbacher and I am the Chief Pharmacy
    Officer for Ascension. I am a pharmacist with 20 years of
    experience across multiple sites of care. On behalf of
    Ascension, I want to start by thanking the committee for your
    bipartisan and thoughtful work to address the critical issue of
    high and rising drug prices.
        Ascension is a not-for-profit Catholic health system with
    approximately 165,000 associates and 40,000 aligned providers.
    We operate more than 2,700 sites of care, including 151
    hospitals.
        Ascension's mission, vision, and values guide us in
    everything we do. Ascension's mission is to deliver
    compassionate personalized care to all, with special attention
    to persons living in poverty and those most vulnerable. To
    carry out our mission, we cover all out-of-pocket costs for
    patients with incomes below 250 percent of the Federal poverty
    level and on a sliding scale for patients with incomes between
    250 and 400 percent of the Federal poverty level. Last year,
    Ascension provided nearly $2 billion worth of community benefit
    programs and care for persons living in poverty.
        Managing the cost of our supply chain is critical to what
    we do to carry out our mission. Drug costs are the fastest
    growing part of our supply chain. In the span of four years,
    Ascension, alone, has had to mitigate against a cumulative 34
    percent increase in drug costs totaling $564 million and that
    is after 340B discounts.
        Price increases are frequent and unpredictable. They add to
    the direct cost of care and create administrative burden. For
    hospitals, inpatient stays are generally reimbursed through a
    fixed bundle payment that are set by payors in advance to cover
    the total cost of an admission. Generally, these bundle payment
    amounts are not adjusted during the year when costs go up. When
    drug costs go up, the bundles do not, so we must make
    adjustments elsewhere to make ends meet and to continue to
    deliver high-quality care.
        We typically experience up to 40 new price increases each
    week and see upwards of several hundred price increases each
    January and July. In January, we saw thousands of prices
    increases this year. Just to name one, Tysabri had a three
    percent increase, which will cost an unbudgeted $640,000 this
    year.
        We manage this unpredictable and costly situation in a
    number of ways. A common misperception is that systems like
    ours are able to leverage our size to get significant discounts
    on drugs. The fact is, manufacturers are only willing to
    negotiate the price for about half of the drugs we buy. We have
    no leverage when it comes to drugs that face no competition.
    Manufacturers know this. In fact, of the half that we do have
    contracts, about 70 percent of those don't lock in the price
    even for a full year.
        When the cost of a drug spikes, we explore lower-cost
    alternative therapies that we can implement without
    compromising patient care. If that is not possible, we are
    forced to absorb the higher cost of the drug.
        If we are able to identify a clinically appropriate
    alternative, it is a long and involved process that takes
    months to implement. This process includes clinical
    evaluations, physician buy-in, caregiver education, drug
    stocking, updating the medical records. During that time, we
    continue to absorb the higher price and the administrative
    burden on our clinicians. At the end of the day, these are our
    only options. Manufacturers know this and that is why they will
    only agree to a price on a small percentage of our contracts.
    In those cases, we are told: ``that is the price, and that is
    that.''
        With the finite resources, high drug costs make it harder
    to carry out our mission. That is why the 340B program is so
    crucial. We use all of those savings to provide medications at
    low or no cost. We offer free medical care. We embed nurse
    services in our local school districts, and we operate Medical
    Missions at Home, and more.
        We greatly appreciate the bipartisan work that this
    committee has already done on CREATES and pay-for-delay. We
    agree more can and should be done. My written testimony offers
    a more comprehensive set of recommendations but I would like to
    highlight a few.
        To spur competition, Congress should support faster FDA
    approval and market-entry generics and biosimilars, increase
    funding to public and private research on drug pricing, and
    value, and in patent and data exclusivity of uses. Congress
    also needs to address the fragmentation and artificial barriers
    that exist in the pharmacy marketplace. As we move to more
    value-based care, ensuring continuity of care is essential to
    lowering overall costs. To do so, Congress should look at
    policies that would enable a common pharmacy network design
    across multiple sites of care.
        Thank you for your time and leadership. I look forward to
    answering any questions you have.
        [The prepared statement of Dr. Eschenbacher follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much, Doctor.
        It is now my pleasure to call on Dr. Resneck and you are
    recognized for five minutes.

                    STATEMENT OF JACK RESNECK, M.D.

        Dr. Resneck. Thanks, Madam Chair, for the invitation.
        I am Jack Resneck, Chair of the AMA's Board of Trustees and
    a practicing dermatologist at UCSF.
        Physicians see every day that costs are a major obstacle to
    our patients getting the right medication at the right time.
    High prices for drugs occur across many segments of the
    pharmaceutical industry, from new specialty drugs, to older
    drugs that inappropriately extend the market exclusivity, and
    yes, even to off-patent branded and generic medications. What
    does these shares? A lack of pricing transparency. We need
    basic public information to inform policy solutions.
        Some of my patients with melanoma and severe psoriasis need
    new targeted biologics. We expect new life-altering discoveries
    to be expensive but I have watched as costs continue to
    escalate years after these drugs launch.
        I currently have a patient unable to afford the Enbrel or
    Humira that would alleviate his psoriasis and his painful
    psoriatic arthritis. The list price for a year of these drugs,
    both of them out for more than 15 years, has quadrupled to
    about $80,000 and his PPO specialty drug copay is 30 percent
    until he reaches his deductible. That percent copay is based on
    the full list price, not the secret post-rebate price, so he
    stopped his treatment. This market is broken.
        You heard from the last panel this morning that PBMs, whose
    retained rebate is typically a percentage of the drug price,
    incentivize manufacturers to have higher and higher list
    prices, paired with higher rebates, in order to get on
    formularies. That is not a functional market.
        Health plans have responded to high drug costs by imposing
    more utilization controls that further limit patient access and
    delay treatment, such as frequently changing formularies, step
    therapy, and prior authorization. Physicians around the country
    now spend a lot of time responding to prescriptions that cannot
    be filled. The average physician completes 31 prior
    authorizations per week that takes them and their staff about
    15 hours a week.
        And soaring prices are not limited to innovator therapies
    with recent R&D costs. Frankly, most of the patients I see
    simply need topical or oral medications that have been around
    for decades and used to be inexpensive. But thanks to price
    spikes, even many generics now require prior authorization.
        This month I saw a patient with severe eczema that had
    flared and become infected with staph. She needed clobetasol, a
    generic cream launched 34 years ago, and doxycycline, an oral
    antibiotic approved in 1967. They are each made by multiple
    companies, available in both branded and generic forms, and
    used to cost pennies a day. At the pharmacy, she was told that
    both prescriptions required prior authorization or would,
    otherwise, cost her a combined $600. She didn't fill the
    prescription. She called me more than a little frustrated.
        Four days later, after many phone calls failed to find
    formulary alternatives and a detailed prior authorization
    request had to be faxed in, the insurer did eventually approve
    the request. But meanwhile, she suffered several sleepless
    nights of severe itch, made worse by spreading contagious staph
    infection, until the generic decades-old prescriptions were
    authorized.
        And often, first prior authorization requests are actually
    rejected, which leads to a lengthy telephone appeal trying to
    convince the person at the other end of the phone, who usually
    knows very little about the skin diseases I treat, to overturn
    the denial. Every hour I spend arguing about prior
    authorizations is an hour not spent with my patients. And it is
    not just my time. My practice has several medical assistants
    and nurses who help do this work.
        I am baffled--baffled that it is nearly impossible for me
    to know at the point of care, sitting with a patient, which
    treatment options are on the constantly-changing formularies
    and what a patient's copay will be. For the most part, the
    manufacturers, the PBMs, and the insurers haven't made it
    possible for us, as physicians, to see this information in our
    EHR right while we are prescribing and when it does show up, it
    is often wrong.
        In a world where we are measuring physicians on both their
    quality and costs and where some medical practices are assuming
    risk for the total cost of care, doesn't the physician also
    need the basic transparency of knowing what medications
    actually cost the health plan? With real-time formulary and
    cost information on each of my patients' options, I could make
    rational choices--rational choices to help my patients get
    treated sooner, rational choices to help the taxpayer, health
    insurer, or purchaser to save money, and to save countless
    hours of staff work in my office.
        The AMA has several additional policy recommendations
    outlined in our written statement. I hope we will have time to
    chat about many of those today.
        I want to applaud this committee for its work on drug
    pricing and for the bills that have already come out of
    committee. And we at the AMA welcome the opportunity to work
    with you on behalf of our patients.
        Thanks so much.
        [The prepared statement of Dr. Resneck follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much, Doctor. It is refreshing to
    me to hear from a panel that shares our frustrations. And I am
    not suggesting that others don't understand what we are saying
    but you know each one of you has your feet on the ground. You
    are in the field and you are dealing with this daily. And the
    people that you are talking about are the ones that tell us of
    their experiences that you are describing. So thank you very
    much.
        And now I would like to recognize Dr. Ashworth for five
    minutes for your testimony, sir. Thank you.

                 STATEMENT OF RICHARD ASHWORTH, Phar.D.

        Dr. Ashworth. Thank you, Chairwoman Eshoo, Ranking Member
    Burgess, and members of the subcommittee for the invitation to
    speak today.
        My name is Richard Ashworth. I am the President of
    Operations for Walgreens, and I began at Walgreens over 27
    years ago as a service clerk, and then worked my way up to be a
    pharmacist. And now I serve in an executive role but helping
    patients has always been my passion and the heart of what I do.
        Today, Walgreens has 9,500 locations all across the U.S.
    and we serve nearly eight million customers and patients across
    the country. Our core purpose is to champion the health and
    well being of every community in America and we are eager to
    help this subcommittee find ways to help patients afford their
    medications and stay adherent to their treatments.
        Pharmacists work hard every single day to find lower out-
    of-pocket cost solutions for our patients. However, under the
    current system in Part D, pharmacies are limited in what they
    can do. Pharmacists rely on information that PBMs and health
    plans return to the pharmacy through the claims process. That
    claim guides the pharmacist on what to charge the patient,
    provides some coverage and out-of-pocket cost information. We
    present that information to our patients right at the counter
    in communities. Unfortunately, the work of our pharmacist to
    find additional savings occurs within a system where incentives
    artificially increase the price of prescriptions.
        Let me explain. Walgreens views the issue of drug-pricing
    through two guiding principles: Number one, drug prices have to
    be transparent as they move through the entire supply chain;
    two, savings must be passed on to the patient to lower their
    out-of-pocket costs. These principles are essential, if we want
    to deliver affordable prescriptions to Americans.
        Many transactions often occur after the point-of-sale and
    can increase that final cost of the drug, as the patient has
    higher out-of-pocket costs. These transactions include
    manufacturer rebates and discounts and pharmacy price
    concessions, negotiated and collected by PBMs. These are known
    as direct and indirect remunerations or DIRs.
        Manufacturer rebates are typically offered under a PBM
    contract to exchange a placement on a formulary, which we heard
    this morning. Similarly, pharmacy price concessions are fees
    that PBMs charge pharmacies outside of the normal
    administration fee process that typically relates to network
    participation and sometimes performance arrangements.
        Patients pay cost-sharing amounts on the pre-DIR-negotiated
    gross price. Let me give you an example. If a patient comes in
    and has a drug cost of $300 and the patient's copay is 20
    percent, she would pay $60 at the pharmacy counter for that
    drug. But if that same drug had a 50 percent DIR discount,
    whether it be rebates from manufacturers or pharmacy price
    concessions, that price would have dropped to $150 and her
    coinsurance would have been $30--half--at the pharmacy counter.
        When extrapolated to more expensive specialty treatments,
    that cost-sharing obligation gets much higher. That pre-DIR
    gross price can result in patients abandoning their treatment
    altogether.
        Patient beneficiary cost-sharing amounts need to be based
    off the net price, not the gross. That does not happen today.
    Out-of-pocket drug costs are a key predictor of medication
    adherence. Studies show that when patients cannot afford their
    copay or their coinsurance, they abandon treatment. In fact,
    approximately one in five prescriptions, on average, are
    abandoned because they can't afford it. Not taking medications
    as prescribed costs our country over $300 billion annually. We
    need a more transparent approach that would eliminate
    misaligned incentives that currently exist in the Med D
    program. This approach is currently being contemplated under
    proposed regulations through CMS and HHS.
        We believe a benefit design data clearinghouse could
    introduce next level transparency, ensuring patients, along
    with prescribers and pharmacies, have the most accurate
    information they need.
        Today, benefit design and drug pricing information are held
    exclusively by the PBMs and the plans and only limited
    information is shared with either the physician or the pharmacy
    at the point-of-dispensing. Prescribing doctors don't have
    access to this information either and they could help give
    their patients better information to navigate their treatments.
    Now, some PBMs share benefit tools and level information with
    their members through portals and online tools but this
    information is limited and many patients don't even know that
    they exist.
        A benefit design data clearinghouse, though, would enable
    better decision making with the patient ultimately benefitting
    with lower, out-of-pocket costs and a greater level of
    adherence.
        In conclusion, increasing drug prices and patient out-of-
    pocket costs, and that impact on medication adherence, is too
    important to go unaddressed. Walgreens believes passing on the
    savings from manufacturer rebates and discounts, as well as
    those pharmacy price concessions, to patients are the best
    policy solutions currently under consideration. This will lead
    to greater transparency. This will lead to avoiding the
    misaligned incentives that exist today and are taking hold.
    Thank you very much and I look forward to working with you on
    this important issue.
        [The prepared statement of Dr. Ashworth follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much, Doctor.
        So this afternoon's panel, as you all have heard, we have
    representation from pharmacies, from health plans, from a
    hospital system, from physicians, and from a patient. And the
    patient is next.
        Ms. Purvis, thank you very much for being here. You are
    recognized for five minutes for your testimony.

                       STATEMENT OF LEIGH PURVIS

        Ms. Purvis. Good afternoon, Chairwoman Eshoo, Ranking
    Member Burgess, and members of the subcommittee.
        My name is Leigh Purvis and I am the Director of Health
    Services Research in AARP's Public Policy Institute. AARP is a
    nonpartisan, non-profit, nationwide organization with nearly 38
    million members in all 50 States, DC, and the U.S. Territories.
    Thank you for the opportunity to talk about rising prescription
    drug prices and their impact on older Americans.
        Prescription drug prices are a high priority for AARP and
    its members. Medicare Part D enrollees take an average of 4.5
    prescriptions per month, often for chronic conditions. At the
    same time, Medicare beneficiaries often have an annual median
    income of just over $26,000; one-quarter have less than $15,000
    in savings. This is a population that simply does not have the
    resources to absorb rapidly escalating prescription drug prices
    and many are facing the very real possibility of having to
    choose between their medication and other basic needs, such as
    food or housing.
        Meanwhile, today's drug prices are part of what appears to
    be a never-ending race to the top. High-priced specialty drug
    approvals have exceeded traditional drug approvals since 2010
    and the number of people using such drugs is growing.
    Meanwhile, the research pipeline is full of products like
    orphan drugs, biologics, and personalized medicines that face
    little competition and will undoubtedly command even higher
    prices.
        Thus, it should come as no surprise that our members
    consistently tell us that they cannot afford the medications
    they need. In fact, a recent poll revealed that 72 percent of
    our members are concerned about being able to afford
    prescription drugs for themselves or a loved one in the future.
        We also hear from our members directly. One member, Larry
    Zarzecki from Maryland, suffers from Parkinson's disease, which
    forced him to retire from law enforcement 10 years ago. Even
    with his insurance, he pays $3,200 every month for his
    prescription drugs. In his words, he pays for his medications
    with credit cards, and juggling Peter to pay Paul, and has
    recently started tapping his IRA to pay for his prescription
    drugs.
        As part of our long-standing efforts to address this
    challenge, AARP has been tracking the prices of widely-used
    prescription drugs since 2004. A recent Rx Price Watch Report
    found that the retail price increases for widely-used brand-
    name drugs have exceeded the corresponding rate of inflation
    every year since at least 2006. This problem goes beyond a few
    bad actors. Virtually all of the manufacturers we track have
    consistently raised their prices over the past 12 years.
        We also examined how drug companies' relentless price
    increases add up over time and found that the average annual
    cost for widely-used brand-name drugs, now around $6,800, would
    have been just under $2,200 if retail price changes had been
    held to general inflation between 2006 and 2017.
        In contrast, our most recent Rx Price Watch Report focused
    on widely-used generic drugs and found that the vast majority
    saw price decreases in 2017. We also found that the average
    annual price of a brand-name drug was more than 18 times higher
    than the average annual price for a generic drug. This massive
    price difference has been growing over time and is exactly why
    AARP is so focused on eliminating unnecessary barriers to
    generic competition.
        AARP is mindful that high and growing prescription drug
    prices are affecting all Americans in some way. Their cost is
    passed along to everyone with health coverage through increased
    healthcare premiums, deductibles, and other forms of cost-
    sharing. We have also seen massive increases in Medicare
    spending on prescription drugs. According to MedPAC, this
    spending growth has been driven by both higher prices for
    existing drugs and higher launch prices for new drugs. These
    escalating costs will eventually affect all of us in the form
    of higher taxes, cuts to public programs, or both. In other
    words, every single person in this room is paying for high
    prescription drug prices, regardless of whether you are taking
    a medicine yourself.
        Current prescription drug prices are simply not
    sustainable. There is no reason that Americans should continue
    to have to pay the highest brand-name drug prices in the world.
    No one should be forced to choose between buying groceries and
    buying the prescription drugs that they need.
        That is why AARP launched its Stop Rx Greed campaign. Our
    campaign calls on State and Federal legislators to enact
    solutions that target the root of this problem, the prices set
    by drug manufacturers. At the Federal level, AARP is focused on
    three key priorities: increasing generic competition, imposing
    an out-of-pocket cap for Medicare Part D, and allowing Medicare
    to negotiate for the price of prescription drugs covered by
    Part D.
        While there is no silver bullet to a problem of this
    magnitude, we believe that it is imperative to make
    prescriptions more affordable for older Americans and taxpayers
    and help protect critical programs like Medicare and Medicaid.
    It is long past time for Congress to take action to rein in
    high drug prices and we appreciate the leadership of this
    committee.
        Thoughtful efforts to help reduce prescription drug prices
    could save tens of billions of dollars for patients, taxpayers,
    and our healthcare system. More importantly, they will help
    ensure that all Americans have affordable access to the drugs
    that they need to get and stay healthy.
        Thank you and I look forward to your questions.
        [The prepared statement of Ms. Purvis follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much.
        All right, well that concludes the testimony of our
    witnesses. And now we will go to questions of the members.
        And I will recognize myself for five minutes for
    questioning.
        Dr. Greene, Blue Cross Blue Shield of North Carolina holds
    an ownership of a PBM called Prime Therapeutics. Is that
    correct?
        Dr. Greene. Correct.
        Ms. Eshoo. You had that in your testimony.
        Does Prime Therapeutics receive any money from drug
    manufacturers during its negotiations?
        Dr. Greene. You mean in the form of rebates, whenever we
    are negotiating the rebate contracts?
        Ms. Eshoo. Well you know they claim that is not money. They
    call it a rebate. I say it is a discount. But is there anything
    other than this famed discount that is exchanged between you
    and the manufacturers?
        Dr. Greene. With our relationship, we have with our PBM, we
    receive all of the discounts that are passed to the PBM back to
    us that we can give to our customers.
        Ms. Eshoo. And so it goes to the patients?
        Dr. Greene. Starting on January first of this year, we
    started passing back rebates at the point-of-sale to our
    customers. So whenever there is a rebatable drug, we pass that
    back for our fully insured's line of business.
        Ms. Eshoo. Well aren't most of the drugs that you enter
    into--it seems to me that you are negotiating with yourself
    because you have your own PBM. So it is a little bit of a
    different model and I am fascinated by it.
        Why did you go to that? Let me ask you that--probably for
    all the obvious reasons but I think it is still worth asking
    for the record.
        Dr. Greene. We moved to that model because of the
    transparency that we get by having partial ownership in that
    PBM, having full insight into the negotiations that occur with
    the pharmaceutical manufacturers so, again, we have full
    insight to the true total net cost of the product.
        Ms. Eshoo. I think you said it was a non-profit.
        Dr. Greene. It is a non-profit.
        Ms. Eshoo. And so there isn't--it is not a profit-making at
    all. I mean there are some organizations that are in the Tax
    Code that are called non-profits; and then I think of the
    community organizations on the ground in my district. They
    really are non-profit.
        So there really is not a profit made by the PBM?
        Dr. Greene. Correct. It is owned by 17 other Blue Cross and
    Blue Shield entities that are also non-profit.
        Ms. Eshoo. I see and services--it is exclusively for Blue
    Cross Blue Shield.
        Dr. Greene. Prime Therapeutics does have whole contracts
    with other PBMs and other employer groups but our relationship,
    we are a partial owner in that PBM.
        Ms. Eshoo. Now what is the difference? The PBMs that were
    here today, well one of them had a very unique non-profit
    model, but the big PBM, Express Scripts, said that they claim
    that they do have great value because they pass on the savings,
    the discounts that they negotiate with the manufacturers, and
    that they move them along. Well, they move them along to other
    organizations that are part of this chain; but I fail to see
    that the patient is the one ends up being the beneficiary of
    it.
        Of all of your negotiations, do they all go directly to
    reduce the price of the prescription drug or are they going to
    an organization and then, if it is up to them, then they may
    pass along the crumbs?
        Dr. Greene. We are receiving 100 percent of the rebates,
    the discounts that our PBM is negotiating, and starting on
    January first, we started applying them at the point-of-sale.
        Ms. Eshoo. Yes.
        Dr. Greene. Previously in the past, we have used all those
    rebate dollars that actually translate into our State filings
    for medical loss ratio calculations because discounts are
    considered part of the medical expense that would actually buy
    that down, which would actually decrease that medical expense.
        Ms. Eshoo. OK, I appreciate that.
        I want to get to Dr. Ashworth at Walgreens. You dispense
    millions of prescriptions to the American people. How does
    Walgreens buy its drugs?
        Dr. Ashworth. Thank you for the questions. So we buy----
        Ms. Eshoo. And how do you negotiate the price to pay the
    drug manufacturers?
        Dr. Ashworth. We do that two ways. So for the majority of
    our branded drugs, we buy that through a wholesaler. And our
    wholesaler we use is AmerisourceBergen.
        Ms. Eshoo. Yes.
        Dr. Ashworth. And for all of our generic drugs, we buy that
    ourselves. So we have our own buying group that negotiates
    directly with generic manufacturers to procure medicine.
        Ms. Eshoo. Now the patients that come to Walgreens,
    obviously, to buy their drugs. That was the line that I was
    referring to. It is constant, no matter what time I go to the--
    stop by Walgreens.
        Who determines the price that Walgreens charges the
    patient?
        Dr. Ashworth. So a good question. So the manufacturer sets
    the list price, which was the discussion this morning. The
    insurers and the PBMs negotiate with that and then they are the
    ones that dictate the actual price that the patient pays at the
    pharmacy counter. That is what we get back in that adjudication
    process that I mentioned.
        Ms. Eshoo. Well my time is up. I could do seven rounds with
    this panel but that is not the way it works here. So I will
    yield back.
        And now I would like to recognize the ranking member of the
    subcommittee----
        Mr. Burgess. Let's go to Mr. Shimkus first.
        Ms. Eshoo. OK, at your suggestion, Dr. Burgess, I would
    like to recognize the gentleman from Illinois, my pal, Mr.
    Shimkus, for five minutes.
        Mr. Shimkus. Thank you, Madam Chairman. Yes, that is great.
        How many of you were here for the first panel? Were you all
    here? So, OK. That is good and that is helpful also. So that is
    going to shorten my question.
        I focused on some of the stuff that the Government--that we
    do that might affect this and the two provisions of Stark and
    the Anti-Kickback. So can you go through, from left to right,
    Dr. Greene, and say what you feel on the Stark and Anti-
    Kickback; and, if we made changes, would that be helpful?
        Dr. Greene. Yes, changes are necessary.
        Mr. Shimkus. And helpful, that would be helpful.
        Dr. Eschenbacher. We favor the modernization of Stark and
    Anti-Kickback. We have actually written a white paper on it and
    would be happy to share and be involved in anything going
    further.
        Mr. Shimkus. Thank you.
        Dr. Resneck. We appreciate at the AMA that the
    administration and Congress, through the administration's
    proposal, actually brought attention to the rebates and the
    issues around PBMs. We do have some concerns with some of the
    specifics and the potential impacts on premiums and other
    things. So we would like to engage in follow-up discussions
    around how to move this forward.
        But fundamentally at the end of the day, we do see that the
    current PBM rebate and retained rebate, the portion of it that
    they don't pass back to the health plan, unless the health plan
    owns them, does create incentives that are further keeping this
    from being a functional market. So, we do believe that needs to
    be fixed.
        Mr. Shimkus. Dr. Ashworth?
        Dr. Ashworth. Pharmacies, we would have an opportunity to
    lower out-of-pocket drug costs with some of the adjustments
    that could be made. So we are supportive of that conversation.
        Ms. Purvis. AARP has raised a fair amount of concerns about
    the proposal and, more specifically, about the fact that we
    would see premium increases across the board, as well as
    substantial increases in Federal spending, which is what was
    confirmed by CBO.
        We also have concerns about the fact that not--we don't
    have a clear picture of exactly how many beneficiaries would
    benefit from eliminating rebates. And we also, drawing from the
    CBO analysis, have noticed that it is not going to have an
    impact on list prices and it does seem like prices are going to
    continue growing.
        Mr. Shimkus. Yes, I am just getting help from my expert
    behind me. We may be mixing apples and oranges and you may be
    referring to the value pricing aspect, not just these two
    provisions. And we should visit on that to make sure we are
    clear because I think from the first panel, I mean obviously
    there is great diversity in this debate from the first panel
    and this panel, the providers, there seems to be consistency on
    it from across the board that it is helpful. So let's make sure
    we understand exactly what we are talking about so that we--if
    there is an outlier, we need to know why but, if there is not,
    then that would give us a fundamental to look at, I would
    think, Madam Chairman.
        And I love this transparency debate but I would also ask,
    like because we ask this question in a lot of different arenas,
    so in hospitals, Dr. Eschenbacher, when we go into your waiting
    room, do we see a poster that says an MRI costs this much?
        Dr. Eschenbacher. I know that we are working towards
    providing more transparency around that.
        Mr. Shimkus. But the answer is no. I mean we have been
    trying to push that, cash prices for services versus
    negotiated--you are on the same dilemma that these
    pharmaceutical folks are because there are contractual services
    by insurance services that are negotiated for hospital
    services. And so the full transparent price of someone
    getting--having a cash payment versus a subsidized insurance
    payment, we don't know what that is.
        That is a fair statement.
        Dr. Eschenbacher. As the Chief Pharmacy Officer, I am not
    as much involved with MRIs, or services, or things like that.
    But around the medications, just as Dr. Resneck----
        Mr. Shimkus. Let me go, then. I mean I think we have
    answered. Dr. Resneck, same thing when you go into a doctor's
    office.
        Dr. Resneck. As a physician on the front lines, sitting
    down with individual patients every day, I would love more
    transparency on multiple fronts.
        Mr. Shimkus. But when I go into my doctor's office, I don't
    see a list price if you are going to have a checkup or----
        Dr. Resneck. And we believe in transparency around that as
    well but----
        Mr. Shimkus. I understand. OK, what is good for the goose
    is good for the gander.
        Dr. Resneck. Absolutely, I totally agree with you.
        Mr. Shimkus. OK.
        Dr. Resneck. But I will tell you the dilemma I face, which
    is that the place I work happens to contract with more health
    plans than I can count. And when I am sitting down with a
    patient and they ask me how much something is going to cost----
        Mr. Shimkus. That is the dilemma.
        Dr. Resneck [continuing]. The health plans have made it
    really tough for me at the point-of-care to know that as well.
        Mr. Shimkus. Sure. Yes, I mean I think that is why we are
    having this. It is more difficult, I mean it is a very
    difficult process and procedure. And it is easy to call for
    transparency for others and difficult when you realize you are
    under the same type of rules, and regs, and competing insurance
    companies and you are asked to do it for yourself.
        We have been trying to address transparency in healthcare
    delivery because I do think people will make choices.
        But with that, madam Chairman, my time has expired and I
    appreciate it. I yield back.
        Ms. Eshoo. I thank the gentleman and he returned his time.
        The gentleman from North Carolina, Mr. Butterfield, five
    minutes for questioning.
        Mr. Butterfield. Thank you very much, Madam Chair, and
    thank you to the five witnesses for your testimony this
    afternoon. I am not sure I will use my full five minutes but I
    will get right to it.
        Starting with you, Dr. Greene, good to see you. Thank you
    so very much for coming.
        You mentioned Prime Therapeutics in your testimony and I
    very quickly looked it up on the Secretary of State's Web site.
    Did I understand you to say that it is a non-profit
    organization?
        Dr. Greene. No, not-for-profit organization.
        Mr. Butterfield. Well, that is the same thing--non-profit/
    not-for-profit.
        Dr. Greene. Blue Cross of North Carolina is a not-for-
    profit, which means we are also fully taxed.
        Mr. Butterfield. But Prime Therapeutics, that appears to be
    a for-profit corporation. Does that sound right or not right?
        Dr. Greene. Not right. It should be a not-for-profit
    organization.
        Mr. Butterfield. All right. Well, we will look into it. Is
    it Prime Therapeutics Specialty Pharmacy, LLC?
        Dr. Greene. That is a subsidiary of Prime Therapeutics.
    That would be the pharmacy of Prime Therapeutics.
        Mr. Butterfield. I see. I see that is a subsidiary. All
    right, I am OK with that.
        Dr. Ashworth, let me go to you very quickly. I didn't
    realize that there was a high incidence of unfilled
    prescriptions. I knew it existed but I didn't realize it was as
    high as it is.
        Do you have any data, any hard data that shows who actually
    walks away from unfilled prescriptions?
        Dr. Ashworth. Yes, I appreciate the question. So we do and
    we could follow-up with more information to help you understand
    how those things look.
        There is another side to that equation, which is 30 percent
    of the time pharmacists get rejected when we try and fill the
    prescription. So we are doing the prior authorization and the
    step therapy discussions that we were talking about before. We
    partner with our physician partners many times to try and
    understand formulary changes and different choices that
    patients have. That is why we are advocating for that data
    benefit clearinghouse, so that everybody has access to that
    information at the point when the drug is being dispensed, or
    written by the physician, or when they are at the pharmacy
    counter. It would make a big--it would be next level of
    transparency for the whole system.
        Mr. Butterfield. So is there a correlation between prior
    authorizations and treatment abandonment? Is there a
    correlation between those two?
        Dr. Ashworth. That is a good question. I haven't looked at
    specific data. The intuition tells me yes but we can definitely
    look at that.
        Mr. Butterfield. Someone mentioned one out of 4. Did
    someone mention that earlier?
        Dr. Resneck. I don't have data on that but I can speak from
    my experience, which is we see this all the time. So again,
    because of the lack of transparency, and you heard on the
    previous panel somebody suggest that at the point-of-care there
    are products out there that can help physicians see formularies
    and see patient copays. Unfortunately, they are small
    proprietary products that work for one health plan or one PBM
    and they are not integrated with our EHRs. And so you would
    have to have dozens of different logins and it is very
    difficult.
        So we, unfortunately, spend an inordinate amount of time on
    the phone with our colleagues at pharmacies because their
    computer system, unlike ours, can run individual drugs and we
    just have to try one after the next and waste a ton of their
    time.
        So my patients who get stuck in that situation waiting for
    a prior authorization or waiting to deal with a non-transparent
    formulary, many times, after several days by the time I have
    worked it out, it has at least got me out for a while.
        Mr. Butterfield. Does the prior authorization process need
    to be reformed?
        Dr. Ashworth. I would comment on that.
        Mr. Butterfield. Major reforms or just tweaking around the
    edges?
        Dr. Ashworth. No, we would be up for major reform. In fact,
    thank you, Chairman Eshoo, for shopping at Walgreens. But the
    line you are in is because of this problem right here, is that
    our pharmacists are spending an inordinate amount of time on
    the phone trying to obtain that prescription for the person in
    front of you.
        Mr. Butterfield. Last but not least to our friend from
    AARP, thank you so very much for coming; a great organization
    that I have supported for many years, not just because of my
    age but because of the work that you do.
        AARP has been investigating the impact that rising drug
    prices has on its members. We all know that. How are drug
    prices contributing to racial disparities? Do you have any data
    on that?
        Ms. Purvis. I think to the extent that there are economic
    disparities within those racial disparities, that certainly
    could play a role, or just in the type of coverage that you
    have. If you have a plan that doesn't provide adequate coverage
    for the drugs that you need, that can certainly contribute to
    not having access to the drugs that you need.
        Mr. Butterfield. Thank you.
        Madam Chair, I yield back.
        Ms. Eshoo. I thank the gentleman. I want to join with you
    in praising AARP because they really represented seniors in our
    country very well. They also do a fabulous job of knowing how
    old you are and 10 years before you ever retire, they are right
    in the mail with their invitation to join the organization. So
    you are really spot on.
        Mr. Butterfield. Data privacy.
        Ms. Eshoo. Anyway, thank you.
        Let's see, we don't have anyone on the Republican side.
        Mr. Burgess. Except for me.
        Ms. Eshoo. Yes, Mr. Burgess. I am sorry. What is the matter
    with me? I think this is hearing weariness, nothing to do with
    the panel but maybe I need to run around the block and wake
    myself up.
        The ranking member is recognized for five minutes for his
    questioning.
        Mr. Burgess. Well, I do need to, for full disclosure, point
    out that I am a dues-paying member of both the American Medical
    Association and AARP. And like many of the rank and file of
    those organizations, I am not always in agreement with their
    leadership, however, I do appreciate--well, I appreciate all of
    you being here today and helping us with this question.
        Dr. Ashworth, you have brought up something that I was not
    familiar with, the benefit design clearinghouse that you talked
    about. Is there any way to interface that with Dr. Resneck's
    electronic health record which we required him to buy several
    years ago?
        Dr. Ashworth. Yes, great question. I believe the answer to
    that is yes. What we need is an industry solution, not a
    proprietary solution by each pharmacy benefit management
    company or insurer.
        Mr. Burgess. Well if I may, then that is part of the
    problem because, as you know, we are down to just very few
    vendors in that EHR space and they are fairly proprietary about
    everything that they do, not to mention anyone's initials but
    you know who I am talking about.
        I would like to alleviate Dr. Resneck's burden. I feel his
    pain. He wants to prescribe the right thing for his patient. He
    can't keep every formulary in his head. And even if there were
    just a single national formulary, even then, that is a burden
    to put on the doc who is trying to take care of a clinic full
    of patients.
        How does that end up in his workflow, as he is finishing up
    his interaction with that patient?
        Dr. Ashworth. Yes, I think from a government perspective,
    there is an opportunity to take the Medicare and Medicaid
    programs that are being delivered and to make sure that is on
    one comprehensive program.
        The point you bring up on the commercial marketplace is
    still, if you have an industry solution that is that efficient
    and connects the whole supply chain together with the
    information that is required, then the EHR vendors, the
    pharmacies, the physicians would actually draw to that.
        Because it is proprietary, that is what makes it so
    challenging.
        Mr. Burgess. And there would be a concern that there would
    be movement in--you would be able to move something in a
    specific direction that might favor one product over another.
    So that would be a concern, I could just imagine, that people
    would have.
        You know the data privacy is an interesting thing. I mean
    somehow AARP not only knows when you are turning 49-1/2, they
    also know when you are turning 65 and you start getting those
    Medicare supplement advertisements like clockwork about a year
    before. It is valuable because people do need to sign up for
    Medicare within three months before or after their 65th
    birthday and, if they don't, they are assessed an additional
    charge for the rest of their lives. So there actually is a late
    enrollment penalty in Medicare Part B that many people are not
    aware of. So you do perform a public service but I did tire of
    receiving the notices.
        Dr. Resneck, let me just ask you on the prior authorization
    stuff, I mean I don't hear about that a lot. And again, I feel
    your pain. I want to help. I am not sure exactly what we have
    at our disposal from agency rulemaking or from legislation but
    I would certainly be interested in your thoughts and, obviously
    going forward, lines of communication should be open.
        Dr. Resneck. Yes, it is a mess and I can't overstate what a
    big mess it is. And again, it has expanded into areas we never
    anticipated. We expect there is going to be--when I write a
    prescription for a really sick patient who has melanoma who
    needs a $50,000 oncologic, I get it. When I am writing a
    generic cream that has been around for 40 years, that is
    getting ridiculous to get a prior authorization for that.
        When I prescribe common medications like a retinoid for
    acne and there are silly prior authorization rules well if the
    patient is over age 18, we don't believe they have acne so you
    have to complete a prior authorization just to get it. The list
    goes-on-and-on.
        I had a patient with eczema who needed a new drug called
    dupilumab that has been miraculous for her. And at the one-year
    point, her prior authorization expired so I dutifully submitted
    another one. And it said how is she doing? What is her current
    disease severity? And I said, thinking it would help get it
    approved, the drug is doing great; she is doing wonderful. And
    they rejected it saying she didn't meet the criteria for the
    drug anymore because she had improved.
        So people don't believe it but this is what we go through
    every day.
        So we sat down with--at the AMA, we brought in major health
    plans from around the country and said can we just find some
    areas of agreement to bring some sense to this broken system.
    And we did come up with some areas of agreement for things that
    get approved 97 percent of the time; they shouldn't be on the
    prior authorization list.
        Mr. Burgess. Right.
        Dr. Resneck. For individual docs, who get 99 percent of
    their prior auths approved because they are practicing high-
    quality medicine, they should get gold-carded to protect
    patients from midyear formulary changes or prior authorities
    all of a sudden when the formulary changes. But we have been
    disappointed to see that even though we released a joint
    document with some health plans, we haven't seen movement and
    action on this.
        The administration, HHS and CMS did put in a Part D rule
    recently that is actually coming back to the transparency at
    the point-of-care piece, a requirement that you be able to see
    the benefits. But it was one of those situations where, again,
    it was just for one plan for each Part D plan.
        So we would love to work with you and follow-up on ways to
    make this better. We have got a lot of ideas. We are working in
    a lot of State legislatures as well around protecting patients
    who get subjected inappropriate prior authorization and step
    therapy. We call step therapy fail first because you are
    essentially requiring patients, potentially with major
    malignancies and other things, to try something that we already
    know for some legitimate reason isn't going to work or that
    they failed.
        So we look forward to continuing to work with you.
        Mr. Burgess. Just for the record, I hate step therapy. As
    an asthma patient, I know it often doesn't work. I don't need
    to prove that again if I change insurance time, and time, and
    time again.
        And from the disparity standpoint, there are some African
    Americans--a higher proportion of African Americans who are
    albuterol-resistant for their asthma and we shouldn't make them
    demonstrate that every time they change an insurance plan.
        I yield back.
        Ms. Eshoo. Thank you, Dr. Burgess, for yielding back.
        Now I would like to recognize the gentlewoman from
    California, Ms. Matsui for five minutes of questioning.
        Ms. Matsui. Thank you, Madam Chairman, and I am glad to see
    the witnesses on the second panel here, and I am curious after
    we heard the first panel.
        Thinking about the rebate rule and what your perspective
    might be on this, particularly the administration's proposed
    rule that we eliminate certain rebates from that Part D
    program. The administration's Office of Actuary found that if
    the rule were to be implemented, Federal spending would
    increase by $196 billion in premiums, for Part D beneficiaries
    it would increase by $50 billion. The Office of Actuary also
    noted that manufacturers may use this regulatory change to
    recoup lost revenue streams from other legislative changes.
        And the CBO separately analyzed the proposed rule and
    reported last week that they estimated that the rule would
    increase Federal spending by $177 billion.
        So should the rule go into effect, it is likely to really
    significantly alter how we pay for drugs in the Part D program.
        Ms. Purvis, I think we all know how AARP might feel about
    this but can you provide your perspective--AARP's perspective
    on the rule?
        Ms. Purvis. Sure. Thank you for the question.
        This is actually something that has raised a lot of concern
    for us, for a lot of the reasons that you have already
    mentioned, which is that CBO has already estimated that this is
    going to increase Federal spending substantially. It is also
    going to increase premiums across the board.
        We have also been concerned by the fact that there isn't a
    whole lot of information about how many people are actually
    going to meaningfully see a reduction in out-of-pocket costs,
    because you are talking about people who are taking a drug with
    a meaningful rebate, which we have heard there are not many of
    those, and that drug is also covered under coinsurance. So we
    haven't been able to get a real firm grasp on exactly how many
    people we would actually be helping with this rule. And I think
    the way a lot of people have described it is the juice worth
    the squeeze.
        The other thing that we really have been cognizant of is
    that the vast majority of the estimates we have seen indicate
    that list prices will not change. And CBO also included some
    language that made it seem like price increases will just
    continue business as usual.
        So again, we are not quite sure this is going to get
    exactly what we are looking for.
        Ms. Matsui. OK. You know my colleagues here know Congress
    created the 340B drug program in 1992 to help covered entities
    stretch the scarce Federal resource as far as possible,
    reaching more eligible patients and providing more
    comprehensive services.
        Ms. Eschenbacher, you mention in your written testimony
    that Ascension has hospitals that participate in the 340B
    program. Can you tell us how these hospitals use savings from
    the program to benefit low-income patients?
        Dr. Eschenbacher. Absolutely. Everything that we do, we put
    back towards those low-income patients, and the poor, and
    vulnerable. That is part of our mission. That is part of
    everything we do.
        We do anything from free or low-cost medications and,
    contrary to popular belief, the 340B price for a medication, a
    lot of our low-income and indigent patients are not able to
    even afford that price.
        We do free medical care. We put nurses in local school
    districts. And we do something called a Medical Mission at Home
    and that provides comprehensive care, dental and vision, for
    patients at need.
        Ms. Matsui. That is good. Thank you.
        One way the 340B entities, which include hospitals,
    Federally-qualified Health Centers, Ryan White Clinics, Black
    Lung Clinics, and others get drugs into the hands of patients
    is by contracting with local pharmacies to provide drugs at
    discounted cost, so patients can go to a local pharmacy to
    access these drugs, rather than rely on a pharmacy that might
    be out of the way.
        Mr. Ashworth, your company, Walgreens, operates many of
    these contract pharmacies. Can you describe the importance of
    these contract pharmacies to patients in rural communities?
        Dr. Ashworth. Thank you very much for the question.
        A lot of our Walgreen locations actually sit in underserved
    areas so this is really important to us. And our pharmacists
    are on the front lines every day helping these patients secure
    these medications at a very much reduced price. So it allows
    these individuals to have access to prescriptions they
    ordinarily would not have been able to get. It is deeply
    discounted.
        The other thing I would just mention is that the mix of
    prescriptions we see in our 340B, our locations that can also
    fill for 340B versus ones that do not, has very typical generic
    dispensing rates and brand dispensing rates. So they are pretty
    similar in our 340B pharmacies, just like we see in our non-
    340B pharmacies.
        Ms. Matsui. Thank you.
        And Madam Chair, I yield back.
        Ms. Eshoo. The gentlewoman yields back.
        Mr. Burgess. Could we get Dr. Resneck to answer that?
        Ms. Eshoo. I was just going to do that.
        Dr. Resneck, you, I think wanted to add to the conversation
    with Congresswoman Matsui.
        Ms. Matsui. I am terribly sorry I didn't notice.
        Ms. Eshoo. No, that is all right. I want to give you the
    opportunity to say something about the--wasn't it the rebate
    rule?
        Mr. Burgess. The rebates.
        Ms. Eshoo. The rebates--the discounts.
        Dr. Resneck. At the end of the day, America's physicians
    want our patients to have access and we want our patients to
    have affordability. And we know, when we are looking at the
    parts of the market that are broken, that the rebates and the
    retained rebates staying with PBMs are creating very bizarre,
    unhelpful incentives that are raising prices and it is a
    problem that has to be fixed.
        So I just want to say clearly, we appreciate the focus on
    this.
        Ms. Eshoo. Yes.
        Dr. Resneck. And even if this particular proposal we have
    some concerns with, and it might affect premiums, it might
    actually increase costs, and we do have significant concerns
    with the existing proposal, we appreciate the attention on this
    and really want Congress and HHS to continue to think about it.
    We have ideas. We have supported some other things.
        So we would love to continue the conversation and actually
    fix this issue because it is a big one and it is a real one.
    And just because this proposal is imperfect, we don't want to
    not think about it anymore.
        Ms. Eshoo. Agreed. Thank you.
        The gentleman from Kentucky, Mr. Guthrie.
        Mr. Guthrie. Thank you very much and thanks for having the
    second panel here today. We appreciate it very much.
        Dr. Greene, I am going to ask you a couple of questions. I
    am on O&I Subcommittee for the Oversight and Investigation. We
    are looking into insulin. So we are kind of looking at insulin
    prices and the way that they are covered.
        And so a question is: Does Blue Cross Blue Shield of North
    Carolina exclude certain insulin products from its formulary?
    And if so, why does your plan exclude these products and how
    much will a beneficiary of your plan pay for the insulin
    product if they have to take it anyway?
        Dr. Greene. Yes, insulin is something we have focused on.
    It is actually one of the key reasons why we started to pass
    back rebates at the beginning of January first because that is
    one where we saw a large decrease in the cost, in our net cost
    based on those discounts, that we were not passing back at the
    point-of-sale, and we have realized that the dilemma that
    patients were having about affording their insulin prices.
        We do exclude insulin products. So we are currently, right
    now in our commercial line of business, we have Novo products
    as the preferred lines of insulin. That allowed us to negotiate
    a bigger discount by excluding the Eli Lilly products from the
    formulary at that point in time.
        Mr. Guthrie. OK. So if somebody--so your argument is that
    the insulin is interchangeable. So because you are putting all
    your customers into one product, people get it cheaper.
        Dr. Greene. There is one exception. We do allow the higher
    unit, the 500 dose that is more concentrated for diabetics that
    need that, that dose is on our formulary.
        Mr. Guthrie. So if someone says this Novo product doesn't
    work for me, they need that, they are able to go to a different
    product line?
        Dr. Greene. Correct, they can go through our step therapy
    protocol that we have available online. More than 85 percent of
    our requests come through online. And 45 percent of our
    approvals, we actually approve instantaneously at Blue Cross of
    North Carolina. And that would be a product that a physician
    could easily check boxes to say that the pen didn't work. There
    could be some other problems with the insulin that the member
    was using that we could automatically approve for that member.
        Mr. Guthrie. OK. And I guess Lilly is having a generic
    insulin I think they testified coming forward, coming out, or
    has just come out.
        Dr. Greene. They are decreasing the price. They are having
    an authorized generic of their product, yes.
        Mr. Guthrie. And so that would be something you would have
    to look at as you negotiate moving forward.
        Dr. Greene. Where they set that list price at, our discount
    we are providing at the point-of-sale right now for a Novo
    product is actually less expensive than what Eli Lilly is
    offering as an authorized generic.
        Mr. Guthrie. OK. Well, thank you for that.
        And another question: Has Blue Cross Blue Shield of North
    Carolina ever removed an insulin product from its formulary in
    midyear, mid-contract year? And if so, how did it impact your
    beneficiaries?
        Dr. Greene. Actually, we just did this on April first of
    this year. There was a similar product called Basaglar. Before
    we passed back rebates at the point-of-sale, Basaglar was a
    similar product to Lantus but it had a lower list price. So
    members that are on our high-deductible health plan, we allowed
    them that option. If they wanted to choose to go to the
    Basaglar product, they could and save----
        Mr. Guthrie. Because it had a lower list price----
        Dr. Greene. It had a lower list price and they were paying
    a percent of that. But now that we are passing back rebates at
    point-of-sale, our preferred product, Lantus, is actually less
    expensive than Basaglar, so we are routing patients back to
    that product.
        Mr. Guthrie. OK. So getting to that, where you are giving
    back to your customers, your enrollees; has your plan made any
    efforts to increase transparency for its enrollees and
    physicians regarding the price of insulin? I guess that kind of
    example of that and the plan-specific.
        So I guess it just seem so kind of confusing the way things
    are priced, that your enrollee would have to know that this
    list price is cheaper than the rebate until you gave the rebate
    back. So how did you get that message out or how was it
    transparent?
        Dr. Greene. So whenever we made that change, we actually
    communicated that directly to the members that were impacted
    with the option of why that was available.
        I know Dr. Resneck keeps bringing up an example of a
    steroid cream. When we made a similar change, actually my own
    son was impacted and received a letter from his dad. We had to
    change.
        And he stayed on the same steroid cream, it just went from
    an emollient cream to a regular cream. The price of the regular
    cream was $500 a tube. The price of the emollient cream was
    $50. So again, we had already met our--we are in a high-
    deductible health plan. It looked like zero at the point-of-
    sale but then next January it would have showed up as a $500
    charge.
        So again, that is why we make those type of steps. I know
    some questions are around generics and that is why health plans
    are now looking at those type of generics where there are those
    huge price discrepancies of $450 for a tube of cream.
        Mr. Guthrie. Well, thank you for that.
        Dr. Eschenbacher, I just have a few seconds but in your
    written testimony you note that one program hosted and funded
    by Ascension called the Dispensary of Hope recently added
    insulin to its medication list. Why was it added and what
    specific products were added?
        Dr. Eschenbacher. So it was added and it was from Eli
    Lilly. It was added because we have a lot of our low-income
    patients who are on insulin. We have got stories of family
    members who are sharing insulin with each other and both of
    them uncontrolled.
        So we felt we needed to do something. And Dispensary of
    Hope is our process to be able to provide medications to those
    patients. But since we started--I have got the numbers--but we
    have dispensed thousands of vials so far to our patients.
        Mr. Guthrie. My time has expired but I see Dr. Resneck
    raising his hand. So if the chair allows you to answer, I will.
        Ms. Eshoo. I would be glad to, Dr. Resneck, quickly.
        Dr. Resneck. Thanks so much.
        I just appreciate your bringing up insulin and topical
    steroids came up as well. They are both very important examples
    of something that is not single-source, has been around for a
    while, and where we have seen lock-step price increases and
    shadow pricing, with dramatic price increase every year.
        Ms. Eshoo. What is shadow pricing?
        Dr. Resneck. Shadow pricing is where you have 3, 4, 5
    manufacturers making a drug and if you graph out the price from
    all of them, it is going up at exactly--you know every year by
    about the same amount. So the graphs look exactly like each
    other.
        On the innovator side, we have seen the same thing with
    Enbrel and Humira, for example, where they go up about the same
    every year.
        But I think the insulin example and the topical steroid
    example brings up why, first of all why we are happy with what
    this committee has done already this year in terms of thinking
    about fairness, and competition, and generics but also why we
    at AMA believe additional steps are necessary to give the
    Department of Justice and the Federal Trade Commission
    additional authority to go after anti-competitive behaviors and
    price gouging.
        Because while on these two particular examples, I don't
    know what each individual manufacturer or anybody was thinking,
    or what actually happened, it is very suspicious to us on the
    front line sitting down with a patient where we see products
    that have been inexpensive for years, where every product in
    the class starts marching up in price together across several
    manufacturers.
        So, I just want to say thank you for bringing up the
    insulin example because it touches on that.
        Mr. Guthrie. I appreciate that. Thanks. I yield back.
        Ms. Eshoo. The gentleman yields back. I now would like to
    recognize the gentleman from Oregon, Mr. Schrader, for five
    minutes of his questions.
        Mr. Schrader. Thank you, Madam Chair. Ms. Eschenbacher, you
    have got your GPO but have talked about difficulty in securing
    volume-based discounts. Why is that a--you know, most people
    would assume greater volume, get a little better deal. What is
    the problem there? Are there some levers that we could give you
    to enable more volume-based discounts?
        Dr. Eschenbacher. Thank you very much for the question.
    Yes. You would think that as a system as large as we would--or
    we would be able to get those. And as I mentioned, only about
    half of our medications I am even able to negotiate or we are
    able to negotiate a price for.
        One of the levers that would be very helpful would be
    biosimilars. And so we ran into this this year. Part of using
    biosimilars is changing the culture with physicians,
    prescribers, to use those. So we took it through our
    organization, Inflectra versus Remicade, and we got the buy-in
    to use Inflectra. And we started trying to use it.
        Every one of our claims was being denied, and so very
    quickly we had to stop using it. And so that goes back to the
    payers and the PBMs, and so I would suggest increase the use
    and uptake of biosimilars. Thank you.
        Mr. Schrader. That is very helpful. Cost effectiveness. We
    have had a lot of testimony today on value-based reimbursement
    and going forward there. And I spent some time back in the day
    with the ACA, with the PCORI institution, trying to at least
    get good information, theoretically somewhat unbiased. Everyone
    in the industry got to play into, you know, the evaluation of
    various drugs and devices.
        But we didn't really get into cost effectiveness. You know,
    Dr. Resneck, do you think that the time has come where we may
    want to start looking at that?
        Dr. Resneck. Well, I am glad you brought up value-based
    pricing. Thank you for doing that. I just want to say, first,
    if that means different things to different people, then I want
    to be--because we had some folks from pharma here earlier
    today, and I think from their standpoint it is really
    predominantly about outcomes-based contracting.
        So for them it is about in some cases we are starting to
    see it used as a justification for increasing price on a drug,
    that just because it saves money down the line, and it is
    currently priced at $2,000, maybe we can justify 10. So that we
    have some anxiety about.
        Our focus around value-based pricing is really that benefit
    design should be done in a way to limit patient cost-sharing
    for meds with high benefit, especially for vulnerable patients,
    low-income patients. We think there is a real impact on
    disparities there.
        And to get to your original question, in order to do that,
    we need good data in general. And those are data from lots of
    different sources and data of lots of different kinds, right?
        So we are seeing things like ICER and things like
    DrugAbacus at Memorial Sloan Kettering, and other programs out
    there that are actually doing this multi-source data intake
    when they think about value-based pricing.
        The data does need to be rigorous. It needs to be evidence-
    based. The processes need to be transparent. So that is sort of
    how we are thinking about value-based pricing and the data that
    we are going to need.
        Mr. Schrader. That is what made me think of PCORI as a
    possibility.
        Dr. Resneck. PCORI is going to be a piece of that as well.
        Mr. Schrader. OK. Medication adherence, Dr. Greene, you
    talked a little bit about the measures you have taken to
    improve beneficiary utilization, preventative care medications.
    What type of calculations led to that decision, and is there an
    actuarial presumption that you use to come up with, you know,
    how to establish that?
        Dr. Greene. Whenever we are looking at that from the
    preventative side, we are actually looking at it from an IRS
    rule for high-deductible health plans that allow us to apply
    that for preventable medications, because we do not want to
    prevent access for drugs that can actually have a benefit
    impact to that member without having them go to the hospital.
        So a lot of our medications are cholesterol/hypertension
    medications, asthma medications that, again, can lead to
    unnecessary ER expenses. So we don't want to expose the member
    to the deductible for those high-cost medications, just to co-
    insurance that is available for them.
        And on our Medicare Part D benefit, we actually have ran
    what we call a Value Stars formulary for a number of years. On
    a Medicare Part D benefit, those drugs that are at zero cost
    that have a benefit to the member are actually on tier 6.
        So it is counterintuitive, I believe, probably to a
    physician definitely, and to some of the dispensing pharmacists
    as well. When they use the formulary tool, that is where--under
    guidance, that is where we have to place those drugs is in tier
    6, which is typically on a commercial plan where the highest
    cost-sharing is, but in Medicare it is the lowest cost-sharing
    tier.
        Mr. Schrader. So it looks like we could tweak the ACA some
    and make sure that when we are talking about, you know, no-cost
    preventative counting towards your deductible, we should look
    at some of these preventing medications.
        Dr. Greene. Correct.
        Mr. Schrader. All right. I would assume insulin would
    possibly fall into that category.
        Dr. Greene. It would.
         Mr. Schrader. OK. Very good. Very good. Dr. Resneck, in
    other hearings a little bit I suppose today, there had been
    discussion about reimbursing doctors ASP plus six percent,
    whatever, and it seems to me to get out of that--and I know
    there is an administrative fee or administration fee you
    already have--it seems to me you ought to just have an
    administration fee based on the complexity of the
    administration process.
        Some it is easy; it is a vaccine. Others it is an oncology
    drug that takes hours. Rather than put the doc in the middle of
    this, you know, price, how do you value these things, why don't
    we just give you guys an administration fee for your Part B
    work?
        Dr. Resneck. Well, I think we are willing to look at any
    plan. At the end of the day, it needs to be a fee that covers
    the cost of acquiring and administering the drug, and that is
    what physicians care about. Frankly, we are not really at ASP
    plus 6. Because of the sequester, we are at ASP plus 4.3.
        Mr. Schrader. Now you are on message.
        Dr. Resneck. And they are--what is that?
        Mr. Schrader. I said you are on message.
        Dr. Resneck. Well, I mean, it is--more broadly, I would say
    that there are many physicians who are already underwater at
    ASP plus 4.3, because the ASP is not always accurate. At
    different venues, some people can't actually get a drug for
    ASP. We certainly have small practices that struggle with that.
        So we do think this is an area that needs further
    discussion, and we are--but in terms of the proposals that we
    have seen thus far out there, none of them really have been
    ones that put forth adequate reimbursement to deliver the care
    just to cover the cost even. So, but we are open to taking a
    look.
        Mr. Schrader. OK. I am still good here? No, I am past time.
    Is that right, Madam Chair? I am sorry. I will yield the time
    back. Thank you.
        Ms. Eshoo. The gentleman yields back. I now would like to
    recognize the gentleman from Virginia, Mr. Guthrie, for--Mr.
    Griffith, for five minutes of his questioning.
        Mr. Griffith. We do appreciate you all being here. Thank
    you. Lots of good information. Dr. Eschenbacher, in your
    testimony, you, by voice inflection, indicated some concern
    that 340B might be in trouble. I don't think that it is,
    particularly for what you all are doing. The concerns that we
    have had some hearings and we will probably have--continue to
    have discussions is that it appears that some folks have been
    gaming the system and not using that savings to help the low-
    income folks.
        You all are not doing that, and one of the things that we
    have looked at is just having the ability to say, OK, here is
    the amount of money we saved, and here is how we helped low-
    income folks. And I think that is what a lot of us are
    concerned about.
        But we are not trying to get rid of 340B. We are just
    trying to make sure that we are not having folks taken
    advantage of in the process.
        Dr. Eschenbacher. Yes. We are not afraid of transparency.
    We are signed up for the AHA Stewardship Principles. We will be
    having a Web site. We are actually going to publish all of our
    savings and exactly how we are using. However, we don't believe
    that legislation is needed based on what we have seen.
        Mr. Griffith. Well, if we could get everybody else to do
    what you are doing, I would agree. But if we can't, we might
    have no choice. That is the problem we get sometimes.
        Dr. Ashworth, I want to talk to you about DIR fees. Now,
    for folks watching back home, because oftentimes we forget that
    somebody will be watching these three or four days from now in
    the middle of the night or over the weekend when there is
    nothing else going on, believe it or not, big viewership in
    the----
        Dr. Ashworth. I trust you on that.
        Mr. Griffith [continuing]. Middle of the night. And so that
    is the direct and indirect remuneration, the way that
    pharmacies get paid. And then the whole number gets rejiggered
    later, refigured out later. And one of my complaints has always
    been, particularly from my community pharmacists, that
    sometimes they get a bill because they have changed the DIR fee
    after the fact, and then they end up holding the bag.
        They are not going back to their customer and saying, ``Oh,
    by the way, that drug actually costs more, so we are going to
    have to charge you an additional fee. Please come in and pay it
    before you get your next medication.'' That is not happening,
    nor should it happen. But that seems to be an unfair process.
        You raised a whole new winkle in this for me today, and
    that is is that if they come in and the fee has not yet been
    determined, and they are paying a percentage copay or a
    percentage of what the drug costs, fascinating that the
    insurance companies can calculate exactly how much they
    overpaid, under the new DIR, the pharmacy, particularly the
    small community pharmacists. And I know it hurts Walgreens,
    too, but you all are bigger and can absorb some of that better
    than some of my, you know, one- or two-person pharmacy shops in
    the rural parts of southwest Virginia.
        But that being said, it is fascinating they don't come back
    and give a refund to that patient who overpaid because the DIR
    fee had not yet been calculated. I am just wondering, do you
    think we should just get rid of the whole concept of DIR fees,
    as I think you indicated, at least in part, in your testimony?
        Dr. Ashworth. Yes. A great question. It was--and I agree
    with virtually everything that you said. And independent--small
    independent pharmacies are aligned with chain pharmacies in
    this regard, which is all of the money that sits on the off-
    adjudicated price, right, so DIR fees are broken into two
    areas. One is the manufacturer rebates and discounts, and the
    other one is pharmacy price concessions. They are both DIRs.
    All of that money should go and help for patient out-of-pocket
    costs.
        For pharmacies, many times we don't know what we are
    actually getting paid.
        Mr. Griffith. Right.
        Dr. Ashworth. It is a very strange business dynamic to do a
    service and then not know exactly what you are going to get
    paid on the back end. The calculation, if you get paid or not,
    is a proprietary system sometimes. Sometimes the data is
    available immediately; sometimes it is nine months later;
    sometimes it is not until the end of the contract year.
        So from a pharmacy point of view, we are up for being
    reimbursed for the service that we provide, and we are up for
    us doing a better job for our patients to be adherent. But we
    have got to have--the rules of the system have got to be more
    clearer and more structured.
        Mr. Griffith. Well, don't you think in a modern age that we
    should have a computer system that, you know, pharmacy X or
    pharmacist X can go to the computer at the time that the
    patient is standing there in the drugstore and plug in and find
    out what that cost is both to them and to the patient in real
    time as opposed to getting something a year--and I have had
    pharmacists tell me they get a notice a year later that they
    owe $50,000 for all of the different prescriptions they have
    done.
        Dr. Ashworth. Yes.
        Mr. Griffith. That is really devastating in a small rural
    community where the economy is not particularly strong.
        Dr. Ashworth. I understand. I am 100 percent aligned, and
    that is exactly--what you just described is a data benefit
    clearinghouse that is transparent and open for everybody to
    have access to. The information is available, and the technical
    expertise does exist.
        Mr. Griffith. All right. So my time is just about up. If
    you will work with me and my office, we will try to figure out
    how to do that. And I really don't see that that would be an
    obstacle for having that concept put into something. It may not
    need to be legislation, but we need to get it done one way or
    the other.
        Dr. Ashworth. Happy to follow up.
        Mr. Griffith. Thank you very much. Appreciate it. I yield
    back, Madam Chair.
        Ms. Eshoo. The gentleman yields back. Time again to
    recognize our passionate advocate on this entire issue of
    reducing the price of pharmaceutical drugs, the gentleman from
    Vermont, Mr. Welch.
        Mr. Welch. Thank you. And on those DIR fees, I endorse
    everything that my colleague, Mr. Griffith, said, and
    appreciate you being willing to work with him. I mean, that is
    truly bizarre what happens. It really is.
        There was a story in Politico that was very promising. It
    was about President Trump meeting with Secretary Azar and other
    people, talking about trying to get the prices down. One of the
    things that he talked about was drug importation, and,
    obviously, this would have to be safe. But a lot of the drugs
    that we have in this country are manufactured abroad, and we
    have mechanisms in place to assure the safety of the product.
        Ms. Purvis, would you endorse what seems to be Presidential
    interest in allowing for drug importation plans as a way of
    putting some lid on the prices?
        Ms. Purvis. AARP has been a long supporter of importation,
    with the caveat of course that we, like you, want to make sure
    that the safety of those products is ensured. So we want to
    make sure that FDA plays a robust role in ensuring the safety
    and the quality of the products that are brought in.
        Mr. Welch. My view is the safety issue is a red herring
    because I haven't heard anybody anywhere who is in favor of
    unsafe products, whether they are manufactured here or
    manufactured abroad. But it suggests that if products are
    manufactured abroad, somehow, we can't address the universal
    concern about safety. Would you agree with that?
        Ms. Purvis. We have certainly been aware of comments of
    that nature as well, yes.
        Mr. Welch. Yes. And Dr. Resneck?
        Dr. Resneck. Yes. So the AMA, through our house of
    delegates, has passed policy actually in support of
    reimportation. But we are also looking for accompanying
    security, so we do want a closed distribution chain. We do want
    strong track and trace.
        But I would say that technology has come a long way in the
    last few years, and I don't think those need to be obstacles
    anymore.
        Mr. Welch. Yes.
        Dr. Resneck. And we are getting to a point where this is
    realistic. And, frankly, compared to some of my other patients
    who can't afford medications, who do it on their own on the
    internet, this is much preferable to that, because I do see
    examples where they get----
        Mr. Welch. You know, that is----
        Dr. Resneck [continuing]. That are not the medication----
        Mr. Welch. Why don't you elaborate on that? Because I have
    constituents who resort to the internet because otherwise, they
    get nothing and they are desperate.
        Dr. Resneck. Yes, that happens. You know, we have patients
    who are sick and need help and can't afford their medications,
    and they turn to that and try and do it on their own. And we do
    not have a system in place to guarantee the safety of them
    doing it under those circumstances, but we have great sympathy
    for the situation that our patients are in that requires that.
        So, again, if we had more security around track and trace
    and an actual system put in place to be able to report it, that
    would be----
        Mr. Welch. Thank you, doctor. That is fantastic about the
    AMA. I mean, that is the kind of support that your patients
    need, and I think we need here, to make some steps to bring
    those prices down.
        Dr. Greene, transparency is--again, the Trump
    administration is proposing an advertising of products. They
    have to tell what the price is, and that is a small step on
    transparency. This morning we had a panel before you where
    there was discussion about transparency and how much the
    rebates were.
        There was a request for transparency on how much, in fact,
    the pharmaceutical companies spent on research and development,
    because we never really know, yet all of us want to make
    certain that they can continue to do research and development
    for innovation. What is your view on the role that transparency
    could play in helping us get lower or fairer prescription drug
    prices?
        Dr. Greene. We believe in supplying transparency to our
    customers. That is why we started passing back rebates on
    January 1. And also, in our transparency tool we recently
    launched, a member can actually go onto that site and they can
    pull up the actual drug costs that they are going to experience
    today, which means if they have met their deductible, we pull
    up their co-insurance, and it would also be minus their rebate,
    if it is a rebatable product.
        I think earlier today you also heard on our brand-name
    medications, 90 percent are close to generic while another 10
    percent are brand. We only receive rebates on possibly 25 to 30
    percent of those branded medications.
        Mr. Welch. Right.
        Dr. Greene. So that other 70 percent is still at that high
    list price, especially when you start talking about oral
    oncology medications and some new specialty medications where
    the pharmaceutical industry does not negotiate on those prices.
        Mr. Welch. OK. I want to thank the panel, and I want to
    thank you, Madam Chair, and I will yield back the 30 seconds I
    have. Thank you.
        Ms. Eshoo. Bravo. Thank you. The gentleman yields back. I
    recognize the gentleman from Georgia, Mr. Carter.
        Mr. Carter. Thank you, Madam Chair. Madam Chair, I want to
    thank you for having this hearing today. This is certainly very
    needed, and certainly something that is on the mind of a lot of
    people. And I also want to thank Representative Welch for his
    attention to this matter. I appreciate everyone doing this.
        As you know, currently, I am the only pharmacist serving in
    Congress, and, therefore, I am probably the only one who has
    seen this in real life. And one of the things that I have seen
    is DIR fees. And, certainly, Representative Griffith mentioned
    that just a second ago, although I have to correct one thing he
    said.
        And that is that--he was talking about $50,000 a year. We
    would welcome $50,000 a year. No exaggeration, I have got texts
    that I can share with you from pharmacists who are getting
    bills at the end of the year for $300,000, $500,000. Now,
    folks, that is not a sustainable business model. You just can't
    do that.
        And you talked about, why can't there be a clearinghouse?
    Well, Dr. Ashworth, you are with Walgreens. You understand how
    it works now. When we fill a prescription in a pharmacy, we
    adjudicate the claim. That is, our computer calls their
    computer. It immediately brings back what we are going to get
    paid, what we should be expecting to get paid, and what we are
    to charge the patient.
        Yet a year later we have these DIR fees show up saying
    that, well, you didn't meet this criteria or you didn't meet
    this criteria. By the way, those criteria are always changing.
    The goal posts are always moving. Therefore, you owe us back
    $500,000 or $250,000. No exaggeration.
        Tell me, and I am talking about, you know, small pharmacy
    chains. I am talking about stores in--these two instances that
    I mention here, one owns six stores, the other one owns seven
    stores. I can only imagine what it is like for Walgreens.
        But, Dr. Ashworth, I just want to verify this is not just a
    small independent pharmacy problem. It also impacts the large
    chain pharmacies as well.
        Dr. Ashworth. Great comments, and I support everything that
    you just said. So for Walgreens that number is much, much
    larger, as you can----
        Mr. Carter. I can imagine.
        Dr. Ashworth [continuing]. Imagine. However, I have teams
    of people who work on this, you know, day in and day out to try
    and understand what is happening with DIR fees. That is why we
    support, you know, a lot of the proposals that are coming out
    of CMS and HHS right now to put parameters: around what are the
    metrics, how does the payment run, how much working capital do
    you have to put out in advance, when are you going to get paid,
    and that there is honesty and integrity in terms of how you are
    performing. That is really important right now.
        Mr. Carter. Absolutely. In fact, we had Dr. Matthews here,
    the MedPAC director, just recently. And I was just appalled
    when he told me how much the DIR fees had gone up in over a
    period of six or seven years. I mean, it had gone up from the
    millions into now the billions of dollars. Unbelievable. And as
    I say, this is just not a sustainable business model.
        And that money, you know, where is it going? Is it going
    back to the patients? Well, hopefully, when we have the
    rebates, the discounts, as the chairlady likes to call them,
    when we have those at the point of sale as CMS has proposed,
    hopefully we can see--hopefully we get more transparency.
        You know, Secretary Azar has made it clear that this is one
    of the things that we need, and this can help us in lowering
    prescription drug prices. Dr. Ashworth?
        Dr. Ashworth. Yes. I just agree with that completely, and
    that is why we support transparency so strongly. Because if we
    can find out exactly where that money is going--we know the
    first step of where that money goes, back to the pharmacy
    benefit management companies, but from there we are not certain
    on where that money actually goes to benefit patient out-of-
    pocket costs.
        Mr. Carter. And I find it interesting that we live in the
    world of vertical integration that we have now, and that is
    that the PBM owns the insurance company, and also owns the
    pharmacy.
        So if the PBM is telling me, ``Well, we are sending it back
    to the plan sponsor,'' well, who is the plan sponsor? Oh, we
    own them, too. Oh, you are sending it back to yourself. So you
    are taking it out of this pocket and putting it in this pocket.
        You know, I mean, this is just so obvious that we need to
    do something about this. And I just can't applaud CMS for their
    actions that they are taking, and I support them 100 percent. I
    hope we can get rid of DIR fees. I hope we can have
    transparency with the discounts being at the point of sale.
        It is going--who is it going to benefit? Is it going to
    benefit the small independent pharmacies? It will some. But who
    is it going to benefit most? The patients. And let us never
    forget this is all about the patient. It is all about lowering
    prescription drug costs.
        Folks, I have seen it. I have stood at the counter when
    senior citizens had to make a decision between buying groceries
    and buying medicine. When a mother was in tears because she
    could not afford the medication for her child. This is not a
    partisan issue. This is a bipartisan issue.
        And I applaud you again, Madam Chair. Thank you for calling
    this hearing today. It has been very productive.
        Thank all of you for being here. Thank you for what you do.
    We all share the same goal and that is to lower prescription
    costs for patients.
        Thank you, and I yield back.
        Dr. Greene. Can I make a clarifying comment on the DIR
    fees?
        Ms. Eshoo. I thank the gentleman. Who is talking? You are
    recognized.
        Dr. Greene. Thank you. Sir, on the DIR fees, under Medicare
    legislation, we do have to supply that information, N dollars
    back to the Federal Government. So it has been alluded to here
    several times that there is some money retained with those DIR
    fees.
        Again, we need to collect and provide that money back,
    which, again, comes back to the premium calculation to our
    customers. So, again, if there is any modification----
        Ms. Eshoo. What overage is there in DIRs? I don't--I am not
    so sure--I know that it is in statute. But you know what I am
    struck by, and I think all of my colleagues are, is that we
    have an alphabet soup of terms that all have money attached to
    them. And I think we need to do a really deep dive to follow
    the money.
        There is a saying in politics: follow the money. Well, I
    think in the healthcare industry, in the pharmaceutical
    industry, we have to follow the money. This adds up layer by
    layer by layer by layer. And then to hear what the doctors and
    the pharmacists are dealing with, it just--I don't know.
    Collectively, it makes us all feel like we need to put our
    heads down in some kind of shame that we--the system somehow is
    several-headed.
        And I don't have any question that the patient is not
    receiving any of these goodies that are moving through these
    layers of the system. I don't think anyone has testified here
    today to say that they are, with the exception of the not-for-
    profit PBM, which was small, you have your own, so that you
    wouldn't have to go through the big guys, but I just want to
    put up a Beware sign.
        I am not in the mood to see any more third parties
    established in this system. That is we need is another third
    party. So we have to follow the money, so we can save money and
    bring some sanity to the system.
        So, well, I am glad I got that off my chest.
        Mr. Carter. Madam Chair, I apologize. May I ask unanimous
    consent to add this letter from the National Community
    Pharmacists Association into the record?
        Ms. Eshoo. Yes.
        Mr. Carter. Thank you.
        [The information appears at the conclusion of the hearing:]
        Ms. Eshoo. And now I would like to recognize the gentleman
    from Indiana, Mr. Bucshon, for five minutes of his questioning.
        Mr. Bucshon. Thank you, Madam Chairwoman. Yes. This isn't
    my name. I am subbing. I am supposed to be down there, but I am
    subbing here.
        Eschenbacher, is that how you pronounce it?
        Dr. Eschenbacher. Eschenbacher.
        Mr. Bucshon. Eschenbacher. Ms. Eschenbacher, you provided
    some examples of how your hospitals use 340B revenue. I would
    like to better understand what patient programs, if any, are in
    place with your 340B contract pharmacies.
        First, how many contract pharmacy relationships do your 50
    340B hospitals have?
        Dr. Eschenbacher. We have 800, about approximately 800.
        Mr. Bucshon. 800. Has that increased in the last couple of
    years?
        Dr. Eschenbacher. I believe it stayed the same, but I could
    check on that.
        Mr. Bucshon. Last five years? Because 340B is going like
    this, right? Are 340B discounts passed to the patient at the
    contract pharmacy counter?
        Dr. Eschenbacher. Not today.
        Mr. Bucshon. Not today. OK. So where do they go?
        Dr. Eschenbacher. So when we get the funds back into
    Ascension--so it doesn't happen at the counter. It happens when
    they come back to Ascension and all of the programs that we
    provide across Ascension. We do medical missions at home. We do
    nurses in school districts. We do free medical care.
        The comprehensive care of the patient, we use those monies.
    Also, contrary to popular belief, the 340B price of the
    medication, some of our patients actually can't even afford
    that. So we also help to pay for the products for those
    patients.
        So if they go to a contract pharmacy and they are not able
    to afford it there, they come back to our own retail
    pharmacies, and we have a National Patient Assistance Program
    where we help to care for our patients within own system.
        Mr. Bucshon. OK. Because I was going to ask, is this the
    same for all patient types? And you just described----
        Dr. Eschenbacher. Yes.
        Mr. Bucshon [continuing]. That it is not. Yes. So currently
    do you have--are all of the facilities DSH hospitals that are
    participating in 340B?
        Dr. Eschenbacher. We have got a variety within them, some
    rural referrals, some DSH.
        Mr. Bucshon. Oh. So a combination thereof.
        Dr. Eschenbacher. Yes.
        Mr. Bucshon. The DSH hospitals, do you have to report
    anything to the Federal Government related to how much profit--
    how much margin you have on 340B or what you are using the
    funds for?
        Dr. Eschenbacher. We believe in--or we are not afraid of
    transparency. We have signed on to the AHA's----
        Mr. Bucshon. Right. The question was, do you currently have
    to do any reporting? Like some of your--some of the other types
    of 340B hospitals have some extensive reporting, right? And
    your DSH hospitals, do they?
        Dr. Eschenbacher. We are developing a Web site, and we are
    putting all of that information on a Web site.
        Mr. Bucshon. OK. But right now you don't have to submit
    that to Congress.
        Dr. Eschenbacher. That is correct.
        Mr. Bucshon. Right. Or to the Government, right. So that is
    a level of transparency that you might agree with? The reason I
    am asking that question is because I already know the answer,
    because the American Hospital Association last year was not in
    favor of some of the 340B legislation that was introduced in
    our committee.
        And I am wondering if that kind of--conceptually, if people
    are morphing a little bit on that, realizing there needs to be
    maybe some transparency?
        Dr. Eschenbacher. We don't believe that legislation is
    needed. From some of the things that we have seen reported, it
    might create an undue burden and not necessarily improve the
    program to the patients.
        Mr. Bucshon. OK. And burden on whom?
        Dr. Eschenbacher. On the organizations. The reporting----
        Mr. Bucshon. OK. But, for example, the Ryan White AIDS
    clinics, right, they have an extensive reporting process to the
    Federal Government because they participate in the program. Is
    that true?
        Dr. Eschenbacher. I am not as familiar with that.
        Mr. Bucshon. It is true compared to the others. So I
    understand that most 340B contract pharmacy claims are
    retrospectively identified. So how do you identify the 340B
    patients when they present at the contract pharmacy counter?
        Dr. Eschenbacher. That would be a discussion between the
    pharmacist at the counter and the patient.
        Mr. Bucshon. But how would--does the patient know they are
    a 340B patient?
        Dr. Eschenbacher. In one of our ministries, they have a
    process where they have a card where they identify the
    patients. It looks like a healthcare card that then can
    identify those patients.
        Mr. Bucshon. OK. Because my understanding is patients don't
    really have any idea that they are a 340B, that they would be
    identified as a patient that is a--the reason is because there
    is no specific definition for a patient, is there, really?
        Dr. Eschenbacher. Well, in order to be part of the program,
    you do have to be eligible patient, eligible provider. So there
    are criteria associated with it.
        Mr. Bucshon. OK. Are contract pharmacies paid on a fee
    basis or a percent of the discount?
        Dr. Eschenbacher. It is dependent upon the contract. We
    believe that the fee--or the standard fee-based would be the
    best process associated.
        Mr. Bucshon. Fee-based. OK. Are there contract provisions
    to avoid duplicate discounts when determining 340B eligibility
    and managed Medicaid utilization?
        Dr. Eschenbacher. That is definitely part of the program,
    and we ensure that that is heavily looked at, and there are no
    duplicate discounts.
        Mr. Bucshon. OK. So, I mean, I have an Ascension Hospital
    in my district--it used to be St. Mary's; now it is St.
    Vincent's--but Evansville, Indiana.
        Dr. Eschenbacher. OK.
        Mr. Bucshon. So I know your system well. And I would hope
    that over time that you would be supportive of some DSH
    transparency.
        With that, I yield back.
        Ms. Eshoo. The gentleman yields back. I think it is
    important to state for the record that transparency in the 340B
    program is not--let me put it this way, it is unrelated to this
    hearing today. We are examining how we can lower the price of
    prescription drugs. And while there is an interest on the part
    of some members on this subject, it is----
        Mr. Bucshon. Will the gentle lady yield?
        Ms. Eshoo [continuing]. Let the----
        Mr. Bucshon. Yield for just a brief second?
        Ms. Eshoo. I would be glad to.
        Mr. Bucshon. Yes. My point is that there is some--some
    people believe that because of the dramatic expansion of 340B
    that it is leading to upward pressure on drug prices overall,
    and that was the overall connection I was trying to make, so--
    --
        Dr. Eschenbacher. May I respond to that?
        Ms. Eshoo. Well, I am letting everybody respond to
    everyone. Might as well be consistent. Of course, Dr.
    Eschenbacher.
        Dr. Eschenbacher. We do disagree with that premise. From my
    experience, I have not seen that, so I wanted to respond.
        Mr. Bucshon. Fair enough.
        Ms. Eshoo. Yes. My staff is reminding me that the 340B
    program is 2.1 percent of overall drug spending. So two
    percent, given the numbers, is--it is still something. But let
    it just stand that transparency in that program is not what the
    hearing is set up to examine today, and I appreciate everyone
    understanding that.
        Now, let's see, who is next? My friend from Florida, the
    gentleman from Florida, Mr. Bilirakis, whose father,
    Congressman Mike Bilirakis, was the chairman of this
    subcommittee at one time and I served with. And now I have the
    pleasure of serving with his son. Isn't that wonderful? You are
    recognized for five minutes of questioning.
        Mr. Bilirakis. Thank you, Madam Chair. I appreciate it. And
    thank you for holding this great hearing. It really is great.
    Thanks for giving all of us the opportunity to answer the
    question, or ask the questions. So very important to our
    constituents.
        Again, my constituents are telling me that it is
    difficult--they are having a difficult time obtaining
    prescriptions. They can't--of course, they can't afford the
    prescriptions in a lot of cases, or they must wait a long time
    to get authorization. The process takes too long, in their
    opinion.
        This is actually for Dr. Ashworth of Walgreens. Doctor,
    when you were behind the counter as a pharmacist, what hurdles
    were you dealing with that kept you on the phone instead of
    helping interact or interact with the patients? Because I know
    that pharmacists at one time were called doctors and they
    interacted with patients, and they still do.
        I know that pharmacists are--and we have a lot of
    pharmacists in our family. The patients and customers love
    their pharmacists. But when you have to spend a lot of time on
    the phone, it is hard to interact with the patients.
        So if you can tell me, what are some of the hurdles that
    you have to deal with behind the counter?
        Dr. Ashworth. Thank you very much for the question.
        Mr. Bilirakis. Sure.
        Dr. Ashworth. So I remember very clearly doing it myself. I
    still have a crick in my neck from holding on the phone while I
    am doing other activities to help the pharmacy keep going.
        The first thing that we spend a lot of our time doing is
    actually ensuring that we get the medication covered for our
    patients to subsidize that cost, so that they can afford it. We
    spend a lot of our time on making sure of the clinical
    appropriateness of the medication and things like that for
    sure, but we spend a lot of time talking to physicians' offices
    to get overrides for step therapies and for prior
    authorizations.
        We spend a lot of time on the phone with pharmacy benefit
    management companies, understanding alternative therapies and
    what formularies the health plans or the insurer has for that
    specific patient. And many times we are on the phone with
    foundations and advocacy groups to get secondary and tertiary
    funding areas for patients as well.
        Mr. Bilirakis. And, you know, that can't be done by a tech,
    right? It has to be done by a PharmD; is that the case?
        Dr. Ashworth. You know, some of those activities are done
    by our technicians. Our technicians are beloved by our patients
    because they work on behalf of them each and every day, right
    along with our pharmacist. But a lot of times the conversation
    is around other drug choices, and, yes, that is more
    appropriate for our pharmacist to handle.
        Mr. Bilirakis. All right. Very good. Thank you.
        This is for Ms. Purvis. In your testimony, you mentioned
    how increased competition and access to generics is critical to
    controlling costs. Of course, I agree. I am sure the entire
    committee agrees.
        On average, how much more does a brand name prescription
    drug cost when compared to its generic version?
        Ms. Purvis. Thank you for the question. That actually is a
    fairly high number. When we took a look using our most recent
    price watch reports, we found that on average the brand name
    drug price is over 18 times higher than the generic price.
        Mr. Bilirakis. Eighteen times higher. Unbelievable. OK.
        Dr. Greene, would you explain the coverage determination
    process for prescription drugs?
        Dr. Greene. Are you specifically asking for the Medicare
    Part D process, or just in general?
        Mr. Bilirakis. In general.
        Dr. Greene. In general?
        Mr. Bilirakis. Yes.
        Dr. Greene. So when a provider wants to request a drug
    either we have on prior authorization or a step therapy
    program, we actually offer an online portal. We have offered it
    for a number of years. We have offered it now for close to five
    years, so we have about 85 percent adoption of using that
    online portal.
        What we are able to do by having that online portal is to
    build business rules into those requests. So if the patient
    meets certain benchmarks, we are actually able to provide 45
    percent of the approvals in real time, meaning while either the
    physician or a medical assistant is entering that information,
    they know right then that the medication has been approved.
    That way, within the half an hour, they can go to their local
    pharmacy and pick up that prescription drug.
        If it is not going to be approved, we give a message back.
    Our average turnaround time on all of our requests right now is
    less than one day, and that is our average turnaround time is
    less than a day right now because of that streamlined process.
        Mr. Bilirakis. OK. Give me some--tell me some strategies
    that have yet to be explored that you might recommend in
    lowering drug costs. And why haven't they been explored if you
    know of them? What is holding us back?
        Dr. Greene. One item that is holding us back, and I think
    it has been hit on earlier today, is around what we refer to as
    real-time benefit check, because there are multiple vendors in
    that space. And that would allow a provider to actually,
    whenever they are going to e-prescribe that prescription,
    because the majority of prescriptions are now sent via the e-
    prescribe platform, that actually a real-time check can be done
    with the PBM and come back to that physician.
        So they would know actually what the member is going to
    charge, or if it requires a prior authorization, to provide a
    link so they can immediately fill out that form while they are
    in the medical chart.
        Most of the roadblocks we have seen there is not that the
    technology isn't there, not that we don't want to connect with
    it, it is actually getting into the EMR platform and having
    that updated within those EMR platforms to make those
    connections.
        We understand that one of the vendors in the EMR space, a
    rather large one, is making some enhancements on their newest
    version, but actually is turning that upgrade to allow a real-
    time benefit check, instead of taking days and a lot of IT
    hours, into possibly only a 4-hour upgrade that can be done.
        But, again, that requires that physician or hospital system
    to upgrade to the latest version of that EMR system to have
    that capability. And that was where we would see the biggest
    roadblock is actually with EMRs.
        Mr. Bilirakis. All right. Well, thank you very much. I
    appreciate it.
        And I yield back, Madam Chair.
        Ms. Eshoo. The gentleman yields. And now I would like to
    acknowledge our colleague from Illinois, Congresswoman
    Schakowsky, who, as I said earlier to the--I think the last
    panel--is a member of the full committee, served many years on
    this Health Subcommittee, and is waving on today. That is why
    she is last. But when you hear her, you won't ever think of her
    as a last.
        So I am happy to recognize her for five minutes of
    questioning and welcome her to the subcommittee where she spent
    so much time and did a lot of great work.
        Ms. Schakowsky. Thank you, Madam Chair, and thank you for
    the hearing today. As you well know, as everyone in this room
    knows, the cost of pharmaceuticals has reached a point that no
    one can really ignore it anymore that is in the policy
    business, because in 2018 it was really the number one issue
    that consumers told us, voters told us, was a concern of
    theirs. It is a life-and-death issue, as we have found.
        So I do want to just call your attention to a bill I
    introduced that has to do with transparency, which I don't
    think is the be-all and end-all answer--transparency--but I
    think it is a really important beginning.
        H.R. 2296--I hope all of you will take a look at it. It is
    bipartisan. My colleague, Republican colleague, Francis Rooney
    and I have introduced it, and I am hoping that we are going to
    get a lot of support.
        What this bill would require is that pharmaceutical
    manufacturers notify Health and Human Services and submit a
    transparency and justification report 30 days before they
    increase the price of drugs of a certain cost by more than 10
    percent or by more than 25 percent over three years.
        And the kind of information that we would want includes
    the--I mean, not only does it give taxpayer purchases notice,
    but we want to know the real manufacturing costs, the real R&D.
    We want to know how much profit is realized from that
    particular drug, et cetera. So we are pretty prescriptive about
    what kind of information we want to look at.
        Ms. Purvis, one of the things that we are dealing with is
    that, you know, I volunteer at a food pantry, and by the end of
    the month you see a lot of seniors lining up. The Social
    Security check, their pension, whatever they may get, pretty
    much runs out; and I am just wondering if AARP has seen how
    much flexible income the average Medicare beneficiary has to
    spend each month.
        Ms. Purvis. So I don't have specific numbers on exactly how
    much discretionary income they have, but we do have a lot of
    stories from our members who are making tough decisions, which
    is pretty indicative of the fact that their prescription drug
    prices and costs are completely overwhelming their incomes.
        We always like to remind people that Medicare beneficiaries
    are not nearly as affluent as they are sometimes portrayed,
    with a median annual income of just over $26,000 and less than
    $15,000 in saving. One in four have less than $15,000 in
    savings. So they really do not have the resources to be able to
    absorb the prices and price increases that we have been seeing.
        Ms. Schakowsky. And does AARP have any data on how these
    older Americans spend--how much they spend on prescription
    drugs?
        Ms. Purvis. We have average information from MedPAC. If you
    are looking for something specifically from our members, I am
    happy to get back to you on that information.
        Ms. Schakowsky. Or just in general what seniors----
        Ms. Purvis. Generally speaking, we are mostly focused on
    the people who are really struggling. And what we do have is a
    lot of data around people who are under Medicare Part D who are
    facing out-of-pocket costs that exceed $10,000. So when you go
    back to the median annual income of $26,000 and they are
    spending $10,000 on out-of-pocket costs alone, obviously, that
    is not something sustainable.
        Ms. Schakowsky. So I am very pleased that AARP has endorsed
    this transparency bill, and now it has been introduced in the
    Senate. Senators Baldwin and Braun have introduced it. Again,
    it is a bipartisan bill.
        I am wondering, Ms. Purvis, if it is the view of AARP that
    this very basic form of transparency will ultimately help lower
    the prescription drug prices for older Americans.
        Ms. Purvis. Well, first of all, thank you for your
    leadership on this issue. As you know, we have endorsed the
    bills and we are very interested and intrigued by what it is
    going to do.
        Any level of transparency, frankly, is better than what we
    have right now, and I think the idea that you would require
    drug manufacturers to actually justify their price increases,
    whereas right now we really have no idea what is driving those
    types of pricing decisions, will be incredibly helpful in terms
    of looking at prescription drug prices.
        Ms. Schakowsky. Thank you. I certainly appreciate AARP
    working on this, and so many other issues.
        Everybody take a look at the bill.
        Thank you. I yield back.
        Dr. Resneck. Madam Chair?
        Ms. Eshoo. The gentlewoman yields back. Yes?
        Dr. Resneck. Can I just have one second?
        Ms. Eshoo. For a second.
        Dr. Resneck. Just to say that the AMA is supportive of that
    type of transparency. Thank you for your leadership on this. We
    would even take it a step further and have also supported the
    FLAT Prices Act, which in addition to justification and
    transparency would call on a consequence for large price spikes
    that would involve a reduction in FDA-conferred exclusivity on
    drugs that have price spikes of more than 10 percent in a year.
        So thank you for your leadership on this, and we look
    forward to working on it.
        Ms. Eshoo. Well, I think that all of the Members have been
    heard from. And on behalf of all of the members of the
    subcommittee, we want to thank you for your testimony. We want
    to thank you for your work. We want to thank you for sharing
    your experiences with us.
        Speaking for myself, I have gained an enormous amount of
    knowledge from this panel today. And as it relates to our work,
    it will be highly instructive to us. We have a lot of things to
    fix. We have a lot of things to fix, and there really is an
    urgency to it.
        What gives me--what is a source of inspiration to me here
    is that there is bipartisan agreement on this. So we strengthen
    each other's hands because we agree that this has to--this task
    needs to be addressed. This challenge needs to be met for the
    American people.
        And no matter what age group, no matter where people live
    in our country, you know, the biologics of the biology of an
    individual is being held against them. Medicine is part of
    public health. We have a responsibility to make sure that
    medicines reach people.
        And this is--whatever--however this was ever designed, how
    the system, as it is described, is like a rat's maze. I don't
    know. I think on my best day I could never dream up this kind
    of system. I think it would be not a dream but a nightmare.
        So thank you for what you have shared with us. You have
    enhanced our--broadened our portfolio of thinking.
        And now members are going to have 10 days to submit
    questions to you. As witnesses, you have an obligation to
    respond, and I have every confidence that you will not only
    respond but respond fully. Say exactly what you mean and as
    clearly as possible, and leave out the alphabet soups, OK?
    Thank you so much.
        With that, I request unanimous consent to enter the
    following letters, testimony, and other information into the
    record: a statement from America's Health Insurance Plans, a
    statement from the American Society of Health System
    Pharmacists, a statement from the National Association of Chain
    Drug Stores, a statement from American Pharmacists Association,
    and a statement from the National Community Pharmacists
    Association as well.
        Is that it? OK. No objection? So ordered.
        Ms. Eshoo. Thank you, everyone. The subcommittee is
    adjourned.
        [Whereupon, at 4:12 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 the prescription drug supply chain. Every
    day, my constituents tell me that the skyrocketing cost of
    prescription drugs is becoming unbearable. I have heard too
    many stories of hard-working New York families that have had to
    make the unimaginable decision between purchasing groceries or
    filling a life-saving prescription for their child.
        On top of that, I find it absurd that our nation-the
    wealthiest in the world-pays more for the same drugs than our
    peer countries. Take insulin for example, a drug which seven
    million Americans rely on to manage and control their diabetes.
    A box of insulin pens costing around $700 in the United States
    reportedly costs $73 in Germany and even less in Israel at $57.
        Other developed nations are able to achieve these savings
    because they are not afraid to leverage the purchasing power of
    their national insurance programs.
        As Chairman of the Foreign Affairs Committee, I travel all
    over the world and meet with leaders from every corner of the
    globe. Even though these countries negotiate drug prices, they
    still have access to the same life-saving medications as
    Americans.
        As we begin the next phase of our drug pricing work, I
    encourage my colleagues, on both sides of the aisle, to work on
    commonsense legislation which would repeal the so-called `non-
    interference clause' in the 2003 Prescription Drug, Improvement
    and Modernization Act.
        This horrendous policy, which I voted against, prevents
    Medicare from leveraging its purchasing power to lower the cost
    of life-saving drugs.
        Empowering Medicare to do so would bring immediate relief
    to my constituents.

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