[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     
      

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             U.S. GOVERNMENT PUBLISHING OFFICE 
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                    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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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