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

                        IMPROVING DRUG PRICING TRANSPARENCY AND
                          LOWERING PRICES FOR AMERICAN CONSUMERS

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 21, 2019

                                   __________

                               Serial No. 116-37

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

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

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    40-555 PDF                  WASHINGTON : 2021

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

                        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 \1\.....................     6
        Prepared statement...........................................     7
    Hon. Jan Schakowsky, a Representative in Congress from the State
      of Illinois, opening statement.................................     7
        Prepared statement...........................................     8
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, opening statement......................................     9
        Prepared statement...........................................    11
    Hon. Eliot L. Engel, a Representative in Congress from the State
      of New York, prepared statement................................   121

                                   Witnesses

    Lisa Meengs Joldersma, Senior Vice President, Pharmaceutical
      Research and Manufacturers of America..........................    12
        Prepared statement...........................................    15
    Kristin Bass, Chief Policy and External Affairs Officer,
      Pharmaceutical Care Management Association.....................    24
        Prepared statement...........................................    26
    Madelaine Feldman, M.D., Coalition of State Rheumatology
      Organizations, Alliance of Specialty Medicine, President.......    33
        Prepared statement...........................................    35
    Frederick Isasi, JD, MPH, Executive Director, Families USA.......    43
        Prepared statement...........................................    45
    Mark Miller, Ph.D., Executive Vice President of Healthcare,
      Arnold Ventures................................................    53
        Prepared statement...........................................    55
    Douglas Holtz-Eakin, Ph.D., President, American Action Forum.....    70
        Prepared statement...........................................    72

                               Submitted Material

    H.R. 2064, to amend title XI of the Social Security Act to
      require manufacturers of certain drugs, devices, biologicals,
      and medical supplies, submitted by Ms. Eshoo...................   122
    H.R. 2069, Stopping the Pharmaceutical Industry from Keeping
      drugs Expensive Act............................................   127
    H.R. 2087, the Drug Price Transparency Act, submitted by Ms.
      Eshoo..........................................................   138
    H.R. 2115, the Public Disclosure of Drug Discounts Act, submitted
      by Ms. Eshoo...................................................   145
    H.R. 2296, the FAIR Drug Pricing Act of 2019, submitted by Ms.
      Eshoo..........................................................   148
    H.R. 2376, the Prescription Pricing for the People Act of 2019,
      submitted by Ms. Eshoo.........................................   157
    H.R. 2757, the CLAY Act, submitted by Ms. Eshoo..................   162

    ----------
    \1\ Mr. Butterfield presented Mr. Pallone's statement orally.
    Letter of May 21, 2019, from Monica M. Bertagnolli, M.D.,
      President, FACS, Fellow American Society of Clinical Oncology,
      to Mr. Pallone and Mr. Walden, submitted by Eshoo..............   168
    Letter of May 21, 2019, from Lauren Aronson, Executive Director,
      The Campaign for Sustainable Rx Pricing, to Ms. Eshoo,
      submitted by Ms. Eshoo.........................................   170
    Letter of May 21, 2019, from Nancy A. LeaMond, Executive Vice
      President and Chief Advocacy and Engagement Officer, AARP, to
      Mr. Pallone, et al., submitted by Ms. Eshoo....................   173
    Letter of May 21, 2019, from Bari Talente, Esq., Executive Vice
      President, Advocacy, National Multiple Sclerosis Society, to
      Ms. Schakowsky, submitted by Ms. Eshoo.........................   175
    Letter of May 1, 2019, from Alliance of Specialty Medicine, et
      al, submitted by Ms. Eshoo.....................................   186

     IMPROVING DRUG PRICING TRANSPARENCY AND LOWERING PRICES FOR AMERICAN
                                   CONSUMERS

                                  ----------

                             TUESDAY, MAY 21, 2019

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:34 a.m., in
    the John D. Dingell Room 2123, Rayburn House Office Building,
    Hon. Anna G. Eshoo (chairwoman of the subcommittee) presiding.
        Members present: Representatives Eshoo, Engel, Butterfield,
    Matsui, Sarbanes, Lujan, Schrader, Kennedy, Cardenas, Welch,
    Ruiz, Dingell, Kuster, Kelly, Barragan Blunt Rochester, Burgess
    (subcommittee ranking member), Upton, Shimkus, Guthrie,
    Griffith, Bilirakis, Long, Bucshon, Brooks, Mullin, Hudson,
    Carter, Gianforte, and Walden (ex officio).
        Also present: Representative Schakowsky.
        Staff present: Jacquelyn Bolen, Professional Staff; Waverly
    Gordon, Deputy Chief Counsel; Tiffany Guarascio, Deputy Staff
    Director; Josh Krantz, Policy Analyst; Una Lee, Senior Health
    Counsel; Aisling McDonough, Policy Coordinator; Joe Orlando,
    Staff Assistant; Alivia Roberts, Press Assistant; Tim Robinson,
    Chief Counsel; Samantha Satchell, Professional Staff Member; C.
    J. Young, Press Secretary; Mike Bloomquist, Minority Staff
    Director; S. K. Bowen, Minority Press Assistant; Margaret
    Tucker Fogarty, Minority Staff Assistant; Peter Kielty,
    Minority General Counsel; Ryan Long, Minority Deputy Staff
    Director; James Paluskiewicz, Minority Chief Counsel, Health;
    and Brannon Rains, Minority Staff Assistant.
        Ms. Eshoo. Good morning, everyone. The Subcommittee on
    Health will now come to order. 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

        Last week, our subcommittee held a hearing to essentially
    follow the money in the drug supply chain. We came away with
    much valuable information, but we also found there are many
    secrets, secret decisions about how drugs are priced, secret
    deals between drug companies and the PBMs, and secret
    agreements between PBMs and insurers.
        Today, we're considering seven bipartisan bills that
    essentially unmask the secrets, that secret process, and ensure
    that low-income seniors can afford their medications and build
    on the drug-pricing package passed by the House last week.
        The first and very important bill ensures that seniors can
    afford their drugs. Representatives Cunningham and Bilirakis
    introduced the Creating Lower Cost Alternatives for your
    Prescription Drugs Act. The bill eliminates cost-sharing for
    generic drugs for low-income Medicare enrollees and caps their
    out-of-pocket costs for other drugs. Nearly 25 percent of
    seniors who take drugs report it is difficult for them to
    afford their medications. This bill will not only save seniors
    money, it will also help save their lives in many instances.
        The second group of bills exposes how drug prices are set.
    The SPIKE Act, proposed by Representatives Horsford and Reed,
    and the Fair Drug Pricing Act, proposed by Representatives
    Schakowsky and Francis Rooney, require drug manufacturers to
    justify large spikes in drug prices.
        The Reporting Accurate Drug Prices Act, proposed by
    Representatives Doggett and Buchanan, requires manufacturers to
    report the average sales price of Medicare Part B, ``B'' as in
    boy, drugs. This bill makes sure Medicare is paying the right
    price for Part B drugs.
        The Sunshine for Samples Act, proposed by Representatives
    Chu and Nunes--all kinds of partners in this--directs companies
    to report the price and quantity of the free samples of drugs,
    devices, and medical supplies they give to healthcare
    providers. The bill does not prohibit free samples. Instead, it
    will help us to see how free samples influence drug pricing and
    distribution.
        The third group of bills exposes the deals between PBMs and
    the other stakeholders in the drug supply chain. The Public
    Disclosure Act of Drug Discounts Act, authored by
    Representatives Spanberger and Holding, requires PBMs to report
    the discounts they negotiate with drug manufacturers. This
    transparency will help to ensure the discount is passed down
    through the chain to patients. To patients--I want to
    underscore that.
        The Prescription Pricing for the People Act, authored by
    Representatives Nadler and Collins, directs the FTC to review
    PBMs' behavior and whether it is anticompetitive or not. At our
    hearing last week, we learned that three PBMs control the
    majority of the market, and those PBMs own large pharmacy
    chains and specialty pharmacies, and we believe that has
    potential conflicts of interest. With this bill, the FTC will
    scrutinize PBMs to ensure there are not any distortions of the
    market.
        Last week, I said we needed to examine the system from
    beginning to end because, in order to fix it, we have to
    understand all the parts of it first, and then act. With these
    seven bills today, I think we are taking important action. Each
    bill is directed to reform the drug supply chain, and
    transparency is only as good as the accountability and
    enforcement that has to follow.
        So, I want to welcome our witnesses, thank them for being
    here today with us. We look forward to your important
    testimony.
        [The prepared statement of Ms. Eshoo follows:]

                    Prepared Statement of Hon. Anna G. Eshoo

        Last week, our Subcommittee held a hearing to follow the
    money in the drug supply chain. Instead of answers, we found
    secrets.
        Secret decisions about how drugs are priced. Secret deals
    between drug companies and the PBMs, and secret agreements
    between PBMs and insurers.
        Today, we consider seven bipartisan bills that unmask the
    secrets and ensure that low-income seniors can afford their
    medications. The bills build on the drug pricing package passed
    by the House last week.
        The first and most important bill makes sure seniors can
    afford their drugs. Representatives Cunningham and Bilirakis
    introduced the Creating Lower Cost Alternatives for Your
    Prescription Drugs Act. The bill eliminates cost-sharing for
    generic drugs for low-income Medicare enrollees and caps their
    out-of-pocket costs for other drugs. Nearly 25 percent of
    seniors who take drugs report it is difficult for them to
    afford their medications. This bill will not only save seniors
    money, it can also save lives.
        The second group of bills expose how drug prices are set.
        The SPIKE Act, proposed by Representatives Horsford and
    Reed, and the FAIR Drug Pricing Act, proposed by
    Representatives Jan Schakowsky and Francis Rooney require drug
    manufacturers to justify large spikes in drug prices.
        The Reporting Accurate Drug Prices Act, proposed by
    Representatives Doggett and Buchanan require manufacturers to
    report the average sales price of Medicare Part B drugs. This
    bill makes sure Medicare is paying the right price for Part B
    drugs.
        The Sunshine for Samples Act, proposed by Representatives
    Chu and Nunes, directs companies to report the price and
    quantity of the free samples of drugs, devices, and medical
    supplies they give to healthcare providers. The bill does not
    prohibit free samples. Instead, it will help us see how free
    samples influence product pricing and distribution.
        The third group of bills expose the secret deals between
    PBMs and the other stakeholders in the drug supply chain.
        The Public Disclosure of Drug Discounts Act authored by
    Representatives Spanberger and Holding requires PBMs to report
    the discounts they negotiate with drug manufacturers. This
    transparency will help to ensure the discount is passed down
    through the chain to patients.
        The Prescription Pricing for the People Act authored by
    Representatives Nadler and Collins directs the Federal Trade
    Commission to review PBMs' anticompetitive behaviors. At our
    hearing last week, we learned that three PBMs control the
    majority of the market and those PBMs own large pharmacy chains
    and specialty pharmacies, a potential conflict of interest.
    With this bill, the FTC will scrutinize PBMs to ensure there
    are not any distortions of the market.
        Last week I said we needed to examine the system from
    beginning to end because in order to fix it, we have to
    understand it, and then we will act. With these seven bills
    today, we're taking important action. Each bill is directed to
    reform the drug supply chain, but transparency is only as good
    as the accountability and enforcement that must follow.
        Welcome to our witnesses and we look forward to your
    testimony.

        Ms. Eshoo. And now I recognizes the ranking member of the
    Subcommittee on Health, Mr. Burgess, for five minutes for his
    opening statement.

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

        Mr. Burgess. I thank the chairwoman for the recognition.
        We have convened this morning once again to address an
    issue that affects and complicates the lives of many of our
    constituents, that of drug pricing. When I return home to north
    Texas and conduct meetings in my district office, I frequently
    hear the very personal stories of individuals and families who
    are struggling to afford their medications.
        Unfortunately, solving this problem is not as
    straightforward as you might hope. As exemplified by our recent
    drug supply chain hearing, there are a number of stakeholders
    and they are interwoven throughout the supply chain, making up
    the existing convoluted system.
        Our counterparts on the Ways and Means Committee have taken
    a first pass at addressing transparency in H.R. 2113, the STAR
    Act. On its face, transparency sounds like a useful and good
    thing. In other markets in the United States, people can shop
    around for goods and seek the best price or value. In
    healthcare, that is more easily said than done because of the
    intricate nature of the system, especially the drug supply
    chain. It is especially important that, as we evaluate this
    legislation, we consider the possibility of unintended
    consequences for both the patient and for the market.
        This committee laid the groundwork in 21st Century Cures
    for the development and treatments and cures that really--until
    the passage of that bill, some of those things were science
    fiction and now they are becoming reality. Two and a half years
    after Cures was signed into law, I am receiving meeting
    requests from stakeholders who bring good news about how this
    law is producing real results for patients.
        We must strike this delicate balance with the policies that
    we pass through this committee to ensure that they do not
    dampen the success or deter future investment in biomedical
    research and innovation. No surprise, I do have some thoughts
    about Section 2 of H.R. 2113, which requires a notification and
    public posting of companies that launch a drug at a price of
    $26,000 or more. So, there are some newer therapies, and these
    may be a single dose or a single shot, that can cure an
    individual of a rare disease. The cost of research and
    development and clinical trials that goes into these treatments
    is immense. We must consider the potential impact that this
    requirement could have on the industry. The incentives for drug
    development in this space are working, but scaring companies
    away from investing in such drugs does not serve patients who
    might benefit from this innovation.
        I am reminded of the comments of a former colleague who
    served before I got here, J. C. Watts of Oklahoma, who said,
    ``you can attribute a lot of things to capitalism and capital,
    but it's not necessarily courageous.'' So, if we make it
    difficult, capital will go elsewhere. And yet, we want the
    innovations in this space. So, the FAIR Act does not include
    this launch-price trigger, and I think that is a good place to
    start.
        I would also like to take a minute and express some
    concerns about Section 3 of H.R. 2113. This policy would
    require manufacturers of drugs, devices, biologics, and medical
    supplies to report on the samples they give to healthcare
    providers each year, and this information would be publicly
    posted. I fear that this policy could lead to a sort of public
    shaming of companies that are trying to benefit patients.
    Should such a policy deter manufacturers from providing samples
    to physicians, I promise you, patients will be harmed.
        As a physician, I can say that I have seen the benefits of
    samples for patients firsthand. Sometimes a patient's insurer
    requires a prior authorization process that delays the
    patient's access to medication. A sample of the medication
    allows the patient to begin receiving timely treatment.
    Additionally, physicians may use samples in clinical decision
    making. For example, if a new drug has come to market that may
    work better for a patient, the doctor can use the sample to
    establish whether or not the patient responds in an improved
    way to the new drug without subjecting the patient to financial
    burden or, if side effects develop, to an unnecessary purchase.
        Again, I appreciate the bipartisan work that the Ways and
    Means Committee has done. However, we are the Energy and
    Commerce Committee. We should be in the vanguard. We should be
    in the lead. And I believe there are some areas in this policy
    that we need to think through a little more thoroughly.
        I want to thank all of our witnesses in advance for their
    thoughts on this legislation, and I look forward to working in
    a bipartisan fashion.
        I yield back my time.
        [The prepared statement of Mr. Burgess follows:]

                 Prepared Statement of Hon. Michael C. Burgess

        Thank you, Madam Chair. We have convened this morning once
    again to address an issue that affects and complicates the
    lives of many of our constituents--drug pricing. When I return
    home to North Texas and conduct meetings in my district office,
    I frequently hear the personal stories of individuals and
    families who are struggling to afford their medications.
        Unfortunately, solving this problem is not as
    straightforward as we all would hope. As exemplified by our
    recent drug supply chain hearing, there are various
    stakeholders interwoven throughout the supply chain, making up
    the existing convoluted system. Our counterparts on the Ways
    and Means Committee have taken a first pass at addressing
    transparency in H.R. 2113, the STAR Act.
        On its face, transparency sounds like a useful and good
    thing. In other markets in the United States, individuals can
    shop around for goods and seek the best price or value. In
    healthcare, that is more easily said than done because of the
    intricate nature of the system, especially the drug supply
    chain. It is especially important that as we evaluate this
    legislation we consider the unintended consequences for both
    the patient and the market.
        This Committee laid the groundwork in 21st Century Cures
    for the development of treatments and cures that Americans
    have, until now, only dreamed were possible. Nearly two and a
    half years after Cures was signed into law, I am receiving
    countless meeting requests from stakeholders who bring good
    news about how this law is producing real results for patients.
    We must strike a delicate balance with the policies we pass
    through this Committee to ensure they do not put a damper on
    this success or deter investment in biomedical research and
    innovation.
        I do have some thoughts about Section 2 of H.R. 2113, which
    requires a notification and public posting of companies that
    launch a drug at a price of $26,000 or more. There are one-shot
    therapies that can cure individuals of rare diseases, and the
    cost of research and development that goes into these
    treatments is immense. We must consider the potential impact
    that this requirement could have on the industry. The
    incentives for drug development in this space are working and
    scaring companies away from investing in such drugs does not
    serve patients who might benefit from this innovation. I am
    pleased that Ms. Schakowsky's FAIR Act does not include this
    launch price trigger.
        I would also like to take a minute to express some concerns
    about Section 3 of the H.R. 2113. This policy would require
    manufacturers of drugs, devices, biologics, and medical
    supplies to report on the samples they give to healthcare
    providers each year, and this information would be publicly
    posted. I fear that this policy too could lead to a sort of
    public shaming of companies that are trying to benefit
    patients. Should such a policy deter manufacturers from
    providing samples to physicians, patients will be harmed.
        As a physician, I can say that I have seen the benefit of
    samples for patients first-hand. Sometimes a patient's insurer
    requires a burdensome prior authorization process that delays a
    patient's access to medication. A sample of the medication
    allows the patient to receive more timely treatment.
    Additionally, physicians may use samples in clinical decision
    making. For example, if a new drug has come to market that may
    work better for a patient, a physician can use a sample to
    establish whether or not the patient responds better to the new
    drug without subjecting the patient to whatever the financial
    burden of the drug may be.
        Again, I appreciate the bipartisan work that the Ways and
    Means Committee has done, but I do believe that there are some
    areas of this policy that we need to think through thoroughly.
    Thank you to our witnesses for offering their thoughts on this
    legislation, and I look forward to working on this in a
    bipartisan manner.

        Ms. Eshoo. The gentleman yields, and I thank him for his
    opening statement.
        I now would like to recognize the gentleman from South
    Carolina, who is going to offer the chairman of the full
    committee's opening statement.
        Mr. Butterfield. Thank you, Ms. Eshoo.
        Let me correct the record. I am from North Carolina.
        Ms. Eshoo. I am sorry.
        Mr. Butterfield. I know you Californians, whenever you hear
    the word ``Carolina,'' you think of the South.
        Ms. Eshoo. Well, we have north and south in California,
    too. So, I should have been--I am sorry for not being accurate.
        Mr. Butterfield. Thank you for your friendship.
        Ms. Eshoo. A great State.
        Mr. Butterfield. Thank you.
        Ms. Eshoo. The great State of, right?
        [Whereupon Mr. Butterfield read Mr. Pallone's statement.]

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

        Mr. Butterfield. Thank you, Ms. Eshoo, for holding this
    latest hearing in our series on prescription drug pricing. I
    say ``latest hearing'' because this is not the first and
    certainly will not be the last.
        Democrats are serious about the problem of rising drug
    prices. It is a complicated problem, I acknowledge that. Its
    consequences are very far-reaching.
        I represent the 1st District of North Carolina, where many
    hard-working families are struggling every day to afford the
    basic necessities of life. Steep price hikes have the potential
    to force these communities into decisions between paying their
    bills and purchasing medications that are vital to their
    health. All too often, these circumstances result in rationing
    prescription drugs or the abandonment of treatment altogether.
        And so, Madam Chair, I have long held that quality and
    affordable healthcare is a basic necessity, a right that every
    American must have equal access. Consumers should be able to
    anticipate the price of their prescriptions and must be able to
    rely on those prices to remain stable from year to year.
        All of us understand that corporations exist to make a
    profit. I have acknowledged that in many hearings and I
    understand that dynamic. Pharmaceutical investment and
    innovation have led to unprecedented breakthroughs in
    treatments that have improved health outcomes and patient
    quality of life.
        However, unlike most consumer products, for many a
    prescription is the literal difference between life and death.
    Therefore, the need to fund new innovations must be balanced.
    It must be balanced with the obligation to make medications
    widely available and affordable to the public.
        And so, we find ourselves here today, hopefully in a
    bipartisan way, in pursuit of that goal; as Congress continues
    to work with every entity along the pharmaceutical supply chain
    to find practical solutions to the pricing issue that both
    support innovation and reduce costs for consumers.
        I look forward to today's discussion. I thank those who
    have authored these amendments. And, in particular, I thank the
    gentlelady from Illinois for her passion and her leadership on
    this issue.
        [The prepared statement of Mr. Pallone follows:]

                 Prepared Statement of Hon. Frank Pallone, Jr.

        Thank you, Chairwoman Eshoo, for holding this latest
    hearing in our series on prescription drug pricing.
        The problem of rising drug prices is a complicated one and
    its consequences are far reaching. I represent the First
    District of North Carolina, where many hard-working families
    are struggling to afford basic necessities like housing,
    childcare, and more than ever, their prescription drugs.
        Steep price hikes have the potential to force these
    communities into decisions between paying their bills and
    purchasing medications that are vital to their health. All too
    often these circumstances result in rationing prescriptions or
    the abandonment of treatment altogether.
        I have long held that quality and affordable healthcare is
    a basic necessity, a right that every person in the United
    States must have equal access to. Consumers should be able to
    anticipate the price of their prescriptions and must be able to
    rely on those prices to remain stable from year to year.
        All of us understand that corporations exist to make a
    profit. Pharmaceutical investment and innovation have led to
    unprecedented breakthroughs in treatment that have improved
    health outcomes and patient quality of life. However, unlike
    most consumer products, for many, a prescription is the literal
    difference between life and death. Therefore, the need to fund
    new innovations must be balanced with the obligation to make
    medications widely available and affordable to the public.
        We find ourselves here today in pursuit of that goal as
    Congress continues to work with every entity along the
    pharmaceutical supply chain to find practical solutions to the
    pricing issue that both support innovation and reduce costs for
    consumers. I look forward to today's discussion.

        Ms. Eshoo. I yield at this time to the gentlelady from
    Illinois, Ms. Schakowsky.

     OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Ms. Schakowsky. I thank the gentleman for yielding. And I
    thank the chairwoman of this subcommittee for allowing me to
    wave on to this hearing on a topic so important to all of us.
        The pharmaceutical industry is worth almost $1 trillion,
    and I believe they are holding American consumers hostage. Our
    constituents are suffering and some are dying--we actually have
    the names of the dead, some of them--because they can't afford
    life-saving and life-enhancing drugs that they need.
        And why have drug prices skyrocketed, sometimes a thousand
    percent? Well, that is a really good question. And because drug
    companies have hidden the price policies, consumers have no
    choice but to pay the price, if they can--until now. My
    legislation, the Fair Drug Pricing Act, H.R. 2296, is a
    bipartisan, bicameral bill that will force the drug companies
    to be transparent, which is the very least that we can expect
    from them.
        The bill does two things. Pharmaceutical manufacturers must
    notify HHS and submit a transparency and justification report
    30 days before they raise the price of certain drugs by more
    than 10 percent or by more than 25 percent over three years.
    The report will require manufacturers to provide the
    manufacturing, research, and development costs for the drug,
    net profits attributed to the drug, marketing and advertising
    spending on drugs, and others.
        Unlike H.R. 2069, the SPIKE Act, which is also being
    considered today, my bill does not allow manufacturers to pick
    and choose what information that they would like to disclose.
    And unlike the SPIKE Act, my bill requires HHS to make all of
    the nonproprietary information from these reports' public and
    available to everyone online for everyone to see.
        For the first time ever, this bill will offer taxpayers
    nationwide notice of price increases and bring basic
    transparency to the market for prescription drugs. The bills
    being considered today are only a start, and transparency is
    only a piece of the puzzle in bringing down the cost of
    prescription drugs.
        These bills are all bipartisan, and I am proud that
    Representative Rooney joined me in reintroducing this. Senator
    Baldwin and Senator Braun in the Senate are also doing this
    bill. So, I hope that we will have positive consideration of
    it.
        And let me also enter into the record a very important
    letter from the National Multiple Sclerosis Society,
    representing people who are having trouble paying for the
    spiked prices in their drugs.
        I yield back.
        [The prepared statement of Ms. Schakowsky follows:]

                   Prepared Statement of Hon. Jan Schakowsky

        And thank you to both the Chairman and Subcommittee Chair
    for allowing me to waive on to this hearing on a topic that is
    deeply important to me.
        PhRMA is opposed to any legislation that would require
    pharmaceutical manufacturers to provide basic transparency to
    the American people.
        The pharmaceutical industry is worth almost ONE TRILLION
    dollars and they are holding American consumers hostage.
        Our constituents are suffering, and some are dying.
        We have their names.
        Because they can't afford the live-saving, life enhancing
    drugs they need.
        Why have drug prices skyrocketed?
        Sometimes by 1000 percent?
        That's a really good question.
        And because drug companies hide their pricing policies,
    consumers have no choice but to pay the price.
        Until now.
        My legislation, the FAIR Drug Pricing Act, H.R. 2296, is a
    bipartisan, bicameral bill that will force the drug companies
    to be transparent-which is the least we can expect from them.
        The bill does two things.
        Pharmaceutical manufacturers must notify HHS and submit a
    transparency and justification report 30 days before they
    increase the price of certain drugs by more than 10 percent-or
    by more than 25 percent over three years.
        The report will require manufacturers to provide:

         the manufacturing, research and development costs
    for the drug;
         net profits attributable to the drug;
         marketing and advertising spending on the drug;
         and other information that the Secretary decides
    is necessary.

        Unlike H.R. 2069, the SPIKE Act, which is also being
    considered today, my bill does not allow manufacturers to pick
    and choose what information they would like to disclose.
        And unlike the SPIKE Act, my bill requires HHS to make ALL
    of the non-proprietary information from these reports publicly
    available online for anyone to access.
        For the first time ever, this bill will offer taxpayers
    nationwide notice of price increases and bring basic
    transparency to the market for prescription drugs.
        The bills being considered today are only a start, and
    transparency is only one piece of the puzzle in bringing down
    the cost of prescription drugs.
        These bills are all bipartisan, and I am proud that
    Representative Rooney joined me to reintroduce my bill this
    Congress.
        Senator Baldwin reintroduced the FAIR Drug Pricing Act in
    the Senate earlier this month and was also joined by Senator
    Braun.
        The American people are crying out.
        Prescription drug prices are literally killing them.
        We must act, and we are being given the opportunity to do
    so right now.
        When the FAIR Drug Pricing Act passes, PhRMA will finally
    have to answer to the American people.
        I believe that we have a responsibility to protect and
    serve the best interests of the American people.
        Not the interests of extraordinarily wealthy pharma
    executives and Wall Street investors.

        Ms. Eshoo. The gentlewoman yields back. And now, I would
    like to recognize the ranking member of the full committee and
    offer my condolences to him on your Trailblazers. They played
    well, but not good enough.
        [Laughter.]
        Mr. Walden. Really? This is how we are going to start?
        [Laughter.]
        Yes. Boy, and I was going to say nice things about you this
    morning.
        [Laughter.]
        Ms. Eshoo. The gentleman is recognized for five minutes for
    his opening statement.

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

        Mr. Walden. It was tough in overtime last night.
        Ms. Eshoo. It was. It was.
        Mr. Walden. And it was close.
        Ms. Eshoo. It was a great game.
        Mr. Walden. ``Close'' only counts in horseshoes, not
    basketball, but we appreciate that, Madam Chair. Yes, thanks
    for that reminder this morning.
        [Laughter.]
        Now let's get on about our serious business.
        Patients need our help. They need our help to force down
    the price of their medical care, especially when it comes to
    the cost of drugs. And what good is a prescription if a patient
    cannot afford to pay for their medicine? I mean, that is how it
    kind of comes down. Drug pricing is, obviously, of great
    concern to all Americans and to our President. It has come up
    at nearly every one of the 20 town halls I have done so far
    this year in my district. Blockbuster drugs come with budget-
    busting prices.
        Too often, prices continue to rise, and while there are
    numerous reasons given, patients rely on these medications.
    When market forces weaken or fail, then we need to step in with
    Federal common-sense legislation.
        And we have taken steps recently by passing into law a
    requirement that companies pay the proper rebate under the
    Medicaid program. We have passed the Orange and Purple Book
    reforms on the House Floor. And while I remain dismayed by the
    unnecessarily partisan approach, when the bill came to the
    floor, we did reach agreement here through bipartisan
    negotiations on several other provisions that will increase the
    availability of generic drugs.
        This subcommittee has also built off the foundation we laid
    last Congress by examining how the Medicare program pays for
    drugs and peeling back the layers of pharmaceutical pricing and
    supply chain. And I thank the Chair for her leadership in that
    regard.
        I am glad we are examining legislation I hope we can find
    bipartisan agreement on, but we must also ensure that in these
    efforts we are actually pursuing policies that will provide a
    benefit for patients. We have got to put the patient first. We
    need to ensure that, as we work to shine a light on how drugs
    come to market and are priced, that we realize that the market
    must also be sustainable to produce the next generation of
    cures and treatments.
        We are living in an amazing time of innovation. It is
    producing cures for conditions we didn't even have a name for
    30 years ago. The promise of what lies ahead is truly
    staggering in their ability to relieve human suffering from
    conditions from hemophilia, to sickle cell, to muscular
    dystrophy. We are on the cutting edge of solving all of those.
        So, in our efforts to bring more transparency to the
    system, which I support, we must inherently first do no harm.
    For example, I am concerned that provisions of some of the
    bills before us could actually allow manufacturers to back in
    the rebates paid by their competitors or allow wholesaler
    stockpiling that could lead to shortages in an attempt to
    provide notification of price increases.
        As I mentioned, this committee has been a leader, a leader
    in encouraging the innovation that patients are benefitting
    from today through our work on the FDA user fees and from the
    work to pass the 21st Century Cures, led by my friend and
    colleague, Fred Upton. While the results of those efforts are
    truly remarkable, we also know that the cost of bringing a drug
    to market, especially one that targets an orphan or neglected
    disease, is high. We cannot ignore that. We should not randomly
    categorize as bad actors those who have done what this
    committee has, frankly, encouraged them to do, investing in
    cutting-edge therapies like gene editing and regenerative
    medicine, because their list price is over an arbitrary amount.
    Because I can tell you, these new drugs improve or save lives,
    and that is better than investing in just another me-too drug.
        In that light, I believe any policies pursued by this
    committee must put the patient front and center. That is why,
    as currently drafted, I am concerned about some of the policies
    that could have the risk of decreasing the ability of
    physicians to provide patients samples of drugs, to help those
    who cannot afford their medication, those who have prior-
    authorization or coverage issues, from starting treatment, to
    inform medical judgment, or help patients manage side effects
    related to their current medication. Now I think working in a
    bipartisan spirit, as we have done before, with the help of our
    witnesses today, I am hopeful we can address these concerns.
        And on a final note, thanks to Chairman Eshoo and thanks to
    Chairman Pallone for exercising our committee's jurisdiction on
    these bills. That is important, too. While most have been
    marked up by other committees, we are, after all, the committee
    of primary jurisdiction.
        So, with that, Madam Chair, thanks for the hearing. Thanks
    for your condolences on the Blazers. And I will yield back the
    balance of my time.
        [The prepared statement of Mr. Walden follows:]

                     Prepared Statement of Hon. Greg Walden

        Patients need our help to force down the price of their
    medical care, especially when it comes to the cost of drugs.
    What good is a prescription if a patient cannot afford to pay
    for their medicine?
        Drug pricing is of great concern to all Americans. It's
    come up at nearly every one of the 20 town halls I've held this
    year in my district. Blockbuster drugs come with budget-busting
    prices. Too often prices continue to rise, and while there are
    numerous reasons given, patients rely on these medications.
    When market forces weaken or fail, then we need to step in with
    federal, commonsense legislation.
        We have taken steps recently, by passing into law a
    requirement that companies pay the proper rebate under the
    Medicaid program. We have passed the orange and purple book
    reforms on the House Floor. And while I remain dismayed by the
    unnecessarily partisan approach when the bill came to the
    Floor, we did reach agreement through bipartisan negotiation on
    several other provisions that will increase the availability of
    generic drugs.
        This subcommittee has also built off the foundation we laid
    last Congress by examining how the Medicare program pays for
    drugs and peeling back the layers of the pharmaceutical pricing
    and supply chain, and I thank the Chair for her leadership in
    that regard.
        I am glad we are examining legislation that I hope we can
    find bipartisan agreement on, but we must also ensure that in
    these efforts we are actually pursuing policies that will
    provide a benefit for patients. We need to ensure that as we
    work to shine a light on how drugs come to market and are
    priced that we realize that the market must also be sustainable
    to produce the next generation of cures and treatments. We are
    living in a time of innovation that is producing cures for
    conditions we didn't even have a name for 30 years ago. The
    promise of what lies ahead is truly staggering in their ability
    to relieve human suffering from conditions from hemophilia to
    sickle cell to muscular dystrophy.
        So, in our efforts to bring more transparency to the
    system, which I support, we must inherently first, do no harm.
    For example, I am concerned that provisions of some of the
    bills before us could allow manufacturers to "back in" the
    rebates paid by their competitors or allow wholesaler
    stockpiling that could lead to shortages in an attempt to
    provide notification of price increases.
        As I mentioned, this committee has been a leader is
    encouraging the innovation that patients are benefiting from
    today through our work on FDA user fees and 21st Century Cures.
    While the results of those efforts are truly remarkable we also
    know that the cost of bringing a drug to market, especially one
    that targets an orphan or neglected disease, is high. We should
    not randomly categorize as bad actors those who have done what
    this committee has encouraged them to do: invest in cutting-
    edge therapies like gene editing and regenerative medicine
    because their list price is over an arbitrary amount. Because I
    can tell you, these new drugs improve or save lives. That's
    better than investing in just another "me too drug."
        In that light I believe any policies pursued by this
    committee must put the patient front and center. That is why as
    currently drafted I am concerned about policies that could have
    the risk of decreasing the ability of physicians to provide
    patients samples of drugs to help those who cannot afford their
    medication, those who may have prior authorization or coverage
    issues from starting treatment, to inform medical judgement or
    help patient's mange side effects related to their current
    medication.
        Working in a bipartisan spirit, with the help of our
    witnesses today, I'm hopeful we can address my concerns.
        On a final note, thanks to you, Chairwoman Eshoo and
    Chairman Pallone for exercising our Committee's jurisdiction on
    these bills. While most have been marked up by other
    committees, we are the committee of primary jurisdiction.

        Ms. Eshoo. I thank the gentleman and he yields back.
        I would like to remind all Members that, pursuant to
    committee rules, all Members' written opening statements shall
    be made part of the record.
        I now would like to introduce our witnesses that have
    willingly come forward today, and we appreciate each one of you
    being here.
        Ms. Lisa Joldersma--did I pronounce your name correctly? Is
    here. She is the senior vice president, insurance and State
    issues, for the Pharmaceutical Research and Manufacturers of
    America.
        And her son Garrett is here with us, too. So, I hope you
    find this interesting, Garrett. If nothing else, you will know
    the complicated business your mother is in. So, welcome to both
    of you.
        Ms. Kristin Bass, the chief policy and external affairs
    officer with the Pharmaceutical Care Management Association,
    welcome to you.
        Dr. Madelaine Feldman, she is the president of the
    Coalition of State Rheumatology Organizations, the Alliance of
    Specialty Medicine. Thank you to you.
        Mr. Frederick Isasi, executive director of Families USA,
    welcome to you.
        Dr. Mark Miller, the executive vice president of
    healthcare, Arnold Ventures, welcome to you, sir.
        And Dr. Douglas Holtz-Eakin, president of the American
    Action Forum, welcome to you.
        And our thanks to each one of you again for joining us
    today.
        At this time, the Chair will recognize each witness for
    five minutes. So, the light that means the most is the red
    light. That means, like when you are driving, you stop.
        I think several of you have already testified. So, you know
    what the system is.
        Now I would like to call on Ms. Joldersma. You are
    recognized for five minutes for your testimony, and we thank
    you again for being here with us today. You may begin.

    STATEMENTS OF LISA JOLDERSMA, SENIOR VICE PRESIDENT, INSURANCE
    AND STATE ISSUES, PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF
       AMERICA; KRISTIN BASS, CHIEF POLICY AND EXTERNAL AFFAIRS
    OFFICER, PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION; MADELAINE
       FELDMAN, M.D., PRESIDENT, COALITION OF STATE RHEUMATOLOGY
    ORGANIZATIONS, ALLIANCE OF SPECIALTY MEDICINE; FREDERICK ISASI,
    JD, MPH, EXECUTIVE DIRECTOR, FAMILIES USA; MARK MILLER, Ph.D.,
     EXECUTIVE VICE PRESIDENT OF HEALTHCARE, ARNOLD VENTURES; AND
      DOUGLAS HOLTZ-EAKIN, Ph.D., PRESIDENT, AMERICAN ACTION FORUM

                      STATEMENT OF LISA JOLDERSMA

        Ms. Joldersma. OK. Thank you very much and good morning,
    distinguished members of the subcommittee. And thank you,
    Chairman Pallone, Chairwoman Eshoo, Ranking Member Walden, and
    Ranking Member Burgess, for the invitation to testify today.
        I am Lisa Joldersma, and I am senior vice president at the
    Pharmaceutical Research and Manufacturers of America, or PhRMA.
    As many of you know, PhRMA represents the leading research-
    based biopharmaceutical companies.
        Since the year 2000, our companies have collectively
    invested half a trillion dollars in the search for new
    treatments and cures, including more than $70 billion in 2017,
    which I would note is an amount twice the entire operating
    budget of the NIH. These investments yield breakthroughs and
    continuous progress against both chronic and acute conditions.
        Creating, discovering, and developing a new therapy is a
    challenging, high-risk endeavor, with just 12 percent of those
    molecules that enter clinical trials ultimately securing FDA
    approval. In other words, of those molecules entering the
    clinical trial phase, 9 times out of 10 we fail, and it is not
    for lack of trying. The average cost to develop a new medicine
    is $2.6 billion, and the entire process takes an average of 10
    to 15 years from start through FDA approval. Despite these
    difficult odds and increasingly challenging science, PhRMA
    members persist, supported by private investment, and in
    collaboration with others, including the NIH.
        While medicine's importance to healthcare has grown
    considerably over the years, the share of U.S. healthcare
    spending attributed to drugs has been largely stable.
    Prescription drugs consume roughly 14 percent of national
    health expenditures today. That includes both drugs dispensed
    at retail and administered in the hospital, and these are CMS
    numbers from the National Health Expenditures data.
        Growing reliance on generic medicines, which currently
    represent 90 percent of all prescriptions filled in this
    country, is a key element to keeping our prescription drugs
    system affordable overall. And I would note that growth in
    biosimilars, thanks to the leadership of many on this
    committee, is expected to further help constrain costs moving
    forward.
        And yet, patients are really, really struggling to afford
    their medicines. And I want to be really clear today that, for
    our part, PhRMA accepts that a product's list price does
    influence what patients pay. In today's world of multi-tiered
    formularies, drug exclusion lists, and rising cost-sharing,
    however, there are other entities that play a significant role
    in what patients pay as well.
        PhRMA is focused on changing the status quo and bringing
    forward solutions that will sustain innovation, ensure safety,
    and help patients. For too many patients today, even those with
    insurance, they are struggling to afford their medicines, as
    you all know well. This is the most pressing issue that we need
    to work collectively to solve.
        With regard to specific measures before the subcommittee
    today, I will say that PhRMA supports greater transparency
    across the healthcare system. We believe our industry already
    makes a fair amount of information publicly available, but we
    do understand that policymakers and purchasers are looking for
    more from us. We will come to the table to help shape
    meaningful transparency across the drug supply chain.
        When evaluating alternative proposals, we really have three
    questions in mind that help shape specific feedback that we
    provide. First, is the measure likely to yield information that
    will be helpful or meaningful to patients? Always patients
    first. Second, does the measure give companies a reasonable
    opportunity to comply? Is it prospective in nature? And
    finally, are there appropriate protections for confidential and
    proprietary information, so we can prevent harmful interference
    in the market?
        In closing, I would like to say that we do believe greater
    transparency is an important part of the solution to the
    problems we are discussing today, but they will not be enough
    on their own. We also need to take steps to promote
    competition, to address misaligned incentives in our current
    system, and to explore ways to make insurance work better for
    sick patients who need today's medicines and those who are
    waiting for tomorrow's.
        Thank you very much.
        [The prepared statement of Ms. Joldersma follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. We thank you, Ms. Joldersma.
        And now, I would like to recognize Ms. Kristin Bass for
    five minutes of her testimony.
        Welcome again and thank you.

                       STATEMENT OF KRISTIN BASS

        Ms. Bass. Thank you, Chairwoman Eshoo, Ranking Member
    Burgess, and members of the subcommittee.
        I am Kristin Bass, the chief policy and external affairs
    officer for PCMA, which is the trade association for the PBM
    industry. I am pleased to be here today to talk about the
    important transparency bills before the subcommittee and to
    discuss how PBMs lower prescription drug costs for 200 million
    Americans with health coverage through employers, labor unions,
    health plans, Medicare, and Medicaid.
        Every day in this country, people go to the pharmacy to get
    needed drugs to make their lives better. PBMs' only mission is
    to increase affordability and access to those drugs for
    consumers and our clients. PBMs are an important link in a
    chain that includes manufacturers, wholesalers, physicians,
    pharmacies, and pharmacy service administrative organizations,
    all working to get needed therapies to patients.
        Within that chain, our companies are the only ones whose
    mission is to help control costs. PBMs can only help lower
    prescription drug costs for patients when there is sufficient
    competition among drug companies. Where there are competing
    clinically-equivalent brand drugs that will work equally well
    for patients, PBMs negotiate rebates or discounts off the
    manufacturer's list price to arrive at the lowest net-cost
    drug. The rebates are, then, used by health plan sponsors to
    reduce patient premiums, out-of-pocket costs, or both.
        We are proud that our industry has delivered results.
    According to Federal data, in 2018, overall U.S. spending on
    drugs increased only 3.3 percent and, in 2017, four percent.
    One large PBM reported a decline in costs for its clients in
    2017. That is our industry's mission.
        Yet, we know that today too many individuals still find
    their drugs unaffordable. Driving more competition among drug
    companies is the key to providing relief for patients. I want
    to commend the subcommittee for your work on the CREATES Act
    and legislation limiting pay-for-delay agreements.
        Greater transparency can also be part of the solution, and
    the PBM industry is supportive. We support transparency to
    empower patients and their physicians. Our industry provides
    real-time benefits tools, so physicians and patients know
    immediately in the doctor's office what drugs are on formulary
    and what the patient's cost-sharing will be.
        PBMs are transparent to our clients, including how the PBM
    is paid for its services and the negotiated rebates. And we
    support transparency to policymakers. PBMs already report on
    all price concessions, costs and fees in Medicare to CMS, and
    we support legislation that would provide that data to
    congressional advisors at MedPAC and MACPAC. And that is just
    for our industry.
        We would support additional transparency for others in the
    supply chain, manufacturers, wholesalers, and the PSAOs. And
    this gets us to the bills under consideration today. With
    respect to H.R. 2115, we support aggregate reporting of
    rebates. We urge the subcommittee to make sure manufacturers
    cannot use public reports to calculate competitor's discounts
    and avoid competition, and, thus, keep drug costs high, a risk
    that has been validated by the FTC. We want to empower
    patients, not drug companies. We have some ideas for how to
    ensure maximum transparency without risking higher drug costs,
    premiums, and cost-sharing, and are happy to work with
    subcommittee staff on those.
        With respect to H.R. 2376 and its provisions to direct FTC
    to scrutinize our industry's business practices and level of
    competitiveness, we welcome and support this review. While the
    FTC has previously examined PBMs extensively and concluded that
    we operate in a competitive market, to the benefit of consumers
    and our clients, we are confident that additional FTC study of
    our industry will further validate previous conclusions.
        We strongly encourage the subcommittee to expand FTC's
    review to all others in the prescription drug supply chain to
    ensure a complete and transparent picture of all those who play
    a role. In addition, increased manufacturing reporting can help
    bring sunshine into their pricing and marketing practices, as
    addressed in the bills that are the subject of today's hearing.
        I will conclude by again commending the subcommittee for
    considering ways to reduce prescription drug costs. We
    appreciate the opportunity to testify, and I look forward to
    answering your questions.
        [The prepared statement of Ms. Bass follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you, Ms. Bass.
        I now would like to recognize Dr. Feldman. You have five
    minutes for your testimony, and thank you again for being here
    today with us. You can proceed.

                  STATEMENT OF MADELAINE FELDMAN, M.D.

        Dr. Feldman. Chairman Eshoo, Ranking Member Burgess, and
    distinguished members of the subcommittee, thank you for
    inviting me to testify on behalf of the Alliance for Specialty
    Medicine, a nonpartisan coalition of national medical societies
    representing more than 100,000 specialty physicians.
        My name is Madelaine Torregano Feldman. I am president of
    the Coalition of State Rheumatology Organizations and have been
    a rheumatologist for 30 years. I practice full-time in New
    Orleans.
        I treat a variety of autoimmune diseases, but perhaps the
    one I see the most often is rheumatoid arthritis, or RA.
    Treatment for RA has changed dramatically since I graduated
    from medical school. We used to be able only to provide
    symptomatic relief, but now there are therapies that actually
    help us halt the disease activity, stop joint destruction, and
    even reduce the cardiovascular risks associated with rheumatoid
    arthritis.
        Lower-priced generics are always used first before the
    specialty drugs. Now the list prices of these specialty drugs
    have risen to the point where many patients can no longer
    afford even their co-insurance, based on that list price. I
    hope you will find it helpful my feedback as a practicing
    physician.
        I would like to first talk about the samples provision in
    the prescription drug STAR Act. Section 3 would broaden the
    scope of the Sunshine Act to include the total quantity and
    value of samples in manufacturers' reporting. We are concerned
    that this provision might have serious unintended consequences
    for patient care. Let me tell you how we use these samples in
    rheumatology.
        It is important to stress the physicians; we derive no
    financial benefit from the samples and, in fact, it costs us
    resources in staffing and managing this very complex inventory.
    Because patients can wait weeks to over a month before getting
    final approval and, then, actually getting the prescribed
    medicine, it is extremely important to have on hand these
    samples to start the patients right away. I mean, it can make
    the difference between saving a joint or not. We are also able
    to see if the drug causes any tolerability issues, and all of
    this at no cost to the patient or the payor.
        In its June 2017 report, MedPAC recommended reporting on
    samples to oversight agencies, researchers, payers, and health
    plans under confidential data use agreement. They did not
    recommend publishing it publicly online. I fear that broadening
    MedPAC's recommendation to public online publishing will have a
    chilling effect on manufacturers' willingness to provide us
    with these samples because of the potential of false shame
    campaigns on Twitter and the like. This can be harmful to the
    doctor-patient relationship and undermines patients' trust in
    their physicians. And I can tell you, sometimes that trust is
    more important than the medication itself. In light of these
    concerns, we urge Congress to more closely follow MedPAC's
    recommendations to accomplish the important goals of H.R. 2113
    without the bill's unintended consequences.
        Next, I would like to briefly discuss Section 5 that would
    increase transparency of PBMs. The current rebate system
    creates perverse incentives to increase list prices that
    everyone in the drug delivery system profits on except for the
    patients. I would be happy to explain why competition actually
    increases prices as opposed to decreasing them. I have seen
    where some drugs with lower list prices are not allowed to be
    on the preferred formulary.
        Full transparency of price concessions to PBMs would shed
    light on how the preferred formularies are designed and why
    they can change every 6 to 12 months for no clinical reason and
    actually stop payment for drugs that have stabilized my
    patients.
        Less egregious than that behavior is something that
    happened a week and a half ago to one of my patients who it
    took us nearly two years to find the right drug for his
    rheumatoid arthritis. We had given him the generics and even
    other specialty drugs. He was sent a notification from his PBM
    asking him to switch to a completely different specialty drug,
    one that had a completely different mechanism of action, like
    asking a cancer patient in the middle of successful treatment
    to change their drug.
        In order to help us fully understand the financial
    considerations that are overriding the clinical ones, we
    support transparency, not only for the formulary rebates, but
    all of the price concessions, admin fees, price-protection
    fees, even if disclosures are only to regulatory agencies.
        I have provided comments on two additional policies and
    would be happy to answer any questions on those.
        The Alliance for Specialty Medicine is truly encouraged by
    Congress' bipartisan attention to drug pricing. While we
    believe some policies under consideration may need changes to
    avoid unintended consequences, we are supportive of increased
    transparency in the drug supply chain.
        Thank you so much for your consideration of our viewpoints.
        [The prepared statement of Dr. Feldman follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you, Dr. Feldman.
        I now would like to recognize Mr. Frederick Isasi for five
    minutes for your testimony. Welcome and thank you.

                      STATEMENT OF FREDERICK ISASI

        Mr. Isasi. Thank you so much, Chairman Eshoo and Ranking
    Member Burgess. And members of the Subcommittee on Health,
    thank you for this opportunity to speak with you today.
        I am Frederick Isasi, executive director of Families USA.
    For nearly 40 years, we have served as one of the leading
    national voices for healthcare consumers, both in D.C. and on a
    State level.
        We are here today because American people are hurting.
    Families across this nation are being put in terrible
    positions, choosing between securing prescription drugs for
    themselves, and their children, and their financial security.
    The problem is growing worse every year. And what is most
    important to say is that this problem was created by Congress
    in our Federal patent and exclusivity laws, and only Congress
    can solve it.
        Our families needed you to act. Today's bills are a step in
    the right direction, and we need much bolder action as well.
    Let me give you a sense of what the suffering of our families
    looks like.
        Approximately one in three families, 80 million people,
    have not taken prescription drugs as prescribed because they
    simply cannot afford them. Some skip a dose, cut their pills in
    half, and others simply get sicker.
        We are one of the wealthiest nations in the world. We are
    spending two or three times more than other wealthy nations on
    healthcare. And yet, this is the life to which we subject our
    nation's families.
        So, what does it look like to be a family struggling with
    drug costs? Let me tell you about Catherine from Wheeling,
    Illinois. She worked hard. She had a career as a secretary. And
    then, in her late fifties, she developed a cough and it wasn't
    going away. How many of us have had similar problems? But,
    then, within three months of going to the doctor for the cough,
    she was told she had a rare lung disorder and that, without a
    lung transplant, she wouldn't live to see the end of the year.
    Her condition worsened.
        Her doctors prepared her to die and Catherine prepared
    herself to die. And then, she got the call; a new lung had been
    found. She was going to live. This all happened about five
    years ago, this incredible gift and a new chance at life.
        But, unfortunately, her experience has turned into
    something else. Catherine takes 36 pills a day, including anti-
    rejection and pain medication. Catherine, a Medicare
    beneficiary, has to ration her medications to make them last.
    She spends an astounding $1,000 each month on her medications,
    which is exactly half of her income. Think about what this
    means. Catherine, after living through the experience of almost
    dying, receiving a lung transplant, fighting for her life, is
    left to spend half of her income to pay for medications.
        You won't be surprised to know that Catherine sold her
    home. She moved in with her parents. Her mom is 86 and her dad
    just passed away at 89. She lives an extremely frugal life.
    But, as her drug costs escalate year over year, she moves
    closer and closer to financial ruin and deep poverty. At the
    end of each year, she finds herself thousands of dollars short.
    She lives each day with the anxiety of wondering how she will
    find the money to pay for the drugs keeping her alive. That is
    the life that Catherine lives with amazing grace and courage,
    as do so many other Americans.
        As Catherine struggles each day, the drug industry
    continues to enjoy some of the highest margins in the nation,
    making billions upon billions of dollars. And remember, the
    reason their profits are so astronomically high is not that
    they are inventing the best drugs for our families. It is
    because Congress, all of you, continue to grant them the
    ability to charge whatever they possibly can get. They abuse
    Federal laws to extract higher prices. They can only do this
    because of Congress' inaction.
        And despite the astounding amounts of money they are
    making, you will hear industry say that, if Government Acts to
    stop these abuses, innovation will dry up. It is not true. Do
    not be fooled.
        How much are they spending on so-called innovation right
    now? Of their trillion dollars--a trillion dollars in worldwide
    revenue--are they spending 3-quarters on innovation? No. Are
    they spending half? No. Are they spending at least a third? No.
    Are they spending a fourth? No. Industry is spending less than
    a fourth of their revenue on innovation, much more on marketing
    and on profit. And, of course, all of their innovation is on
    the backs of taxpayers who funded the underlying research.
        Instead of innovating in drug development, they innovate in
    their legal strategies to extend exclusivity. In fact, more
    than 3-quarters of new patents are for existing drugs. Think
    about that. From an industry glutted with money, where, indeed,
    is the innovation?
        Thank you for your work on the bills being considered
    today. I am pleased to say that Families USA supports all the
    bills under consideration. We believe that price transparency
    can help families and policymakers better understand how prices
    are set. However, these bills alone will not meaningfully
    affect the price of drugs.
        We strongly support the Doggett bill and other proposals
    aimed at bringing down price. In the midterms a few months ago,
    the American people sent a strong signal to Capitol Hill. An
    astounding 82 percent of Republicans and 90 percent of
    Democrats said taking action to lower prescription drug prices
    should be a top priority for this Congress. Now is the time for
    Congress to act boldly on behalf of their constituents.
        Thank you for this opportunity to testify.
        [The prepared statement of Mr. Isasi follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you, Mr. Isasi.
        I now would like to recognize Dr. Mark Miller for five
    minutes of his testimony, and thank you for being here. You may
    proceed.

                    STATEMENT OF MARK MILLER, Ph.D.

        Dr. Miller. Chairman Eshoo, Ranking Member Burgess, and
    distinguished members of the committee, I appreciate you asking
    Arnold Ventures to testify today.
        Arnold Ventures is a philanthropy dedicated to reforming
    dysfunctional markets and programs to assure a better return on
    investment. We work to develop evidence and ideas to improve
    public policy. We believe strongly in markets, but we also
    believe in evidence-based intervention when markets fail.
        With respect to drugs, our objective is to protect
    innovation, but to explicitly lower the cost for the employer,
    the taxpayer, and, most importantly, the patient. We believe
    that there are strong reasons for the Congress to act. We spent
    $470 billion on drugs in 2016. That number is expected to grow
    24 percent by 2020. In Medicare Part D, we spend $100 billion
    after rebates. That number is projected to double in the next
    10 years. In Medicare Part B, we spend $30 billion. That number
    has doubled since 2010. In Medicaid, we spend $30 billion net.
    That number has increased 50 percent since 2011.
        Meanwhile, at the Federal level, this is deficit-financed.
    Three in 10 Americans can't afford their prescriptions, and 40
    percent of U.S. families can't produce $400 in an emergency.
        To that end, we urge the Congress to act comprehensively on
    the drug issue.
        No. 1, to curb patent abuses and other anticompetitive
    behaviors, so that when a drug is available as a competitor, it
    can actually get to market.
        No. 2, remove market distortions through greater
    transparency and reforming price inflationary actions, such as
    the misuse of rebates and fees and the misuse of coupons.
        No. 3, directly address high launch prices and price
    increases for those drugs that do not have competitors through
    such actions as reference pricing, negotiation, or inflation
    rebates.
        More precisely, with respect to Medicare Part D, consistent
    with MedPAC recommendations, the committee should consider a
    series of reforms to change the payment structure to increase
    pressure on the PBMs to more aggressively negotiate for lower-
    cost drugs; for example, by requiring the PBMs and the
    manufacturers to pick up substantially all of the Part D
    catastrophic cost. Concurrently, that policy should offer
    greater protections to the beneficiary when they hit the
    catastrophic cap.
        Those proposed reforms also include modifications to the
    copayment for the LIS, for the low-income subsidy population,
    in order to encourage them to use lower-cost drugs when they
    are available. That is the right policy direction, but those
    policies need to be designed very carefully to assure that they
    result in taxpayer savings and don't cut off access to
    important drugs.
        Where there is no competition and PBMs have no leverage
    over prices, we would suggest that you consider such tools as
    an inflation rebate, pricing to the clinical value of the drug,
    or a negotiation strategy. These tools would allow the Medicare
    program to address situations where the manufacturer has set
    excessive prices in the absence of competition.
        With respect to Part B, we would suggest moving from a
    percentage-based payment to a flat fee, empowering physicians
    to form their own purchasing groups to negotiate prices, and
    consider lowering the overall payment using the average sales
    price blended with an international price index.
        Turning to the public justification of price increases,
    there is value in that information as a policy source and as a
    motivation for policy action. But, without additional action,
    that in and of itself will not curb drug prices.
        That said, a well-designed policy should set a minimum drug
    price, trigger reporting on both a percentage and an absolute
    dollar basis, require legal attestation of a ranking company
    official, and avoid disclosing proprietary information.
        With respect to the Sunshine Act, we recommend reporting
    payments made to patient groups who often act as a proxy for
    the manufacturers, and we would report the economic value of
    the samples provided to physicians. However, if public
    reporting can't be reached, at a minimum, the sample value
    should be made available to oversight organizations and
    researchers.
        In closing, any policy that you undertake will involve a
    number of difficult tradeoffs across stakeholders, and we know
    that there will be stiff resistance from the status quo. But we
    also know that the status quo has produced noncompetitive
    behaviors, higher taxpayer spending, and higher prices for the
    patients.
        Arnold Ventures and its grantees stand ready to work with
    you on these difficult issues. I would like to thank you for
    your attention. I will look forward to your questions.
        [The prepared statement of Dr. Miller follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you, Dr. Miller.
        I was just sent a nice, handwritten note from my colleague,
    Mr. Long. And I should have done this at the outset of our
    hearing this morning. People are wondering what these yellow
    roses are all about. Well, today is the 100th anniversary of
    women's suffrage. And the suffragettes distinguished themselves
    as the vote was being taken, I think the final vote in the
    State of Tennessee. The suffragettes and their supporters wore
    yellow roses. Those that opposed them wore red. So, we are
    celebrating today, with the yellow roses, women gaining the
    right to vote in our country, the 100th anniversary. So, that
    is what the yellow roses are all about. We didn't attend an
    early-morning wedding.
        [Laughter.]
        But, nonetheless, this is a great celebration.
        So now, I would like to recognize Dr. Holtz-Eakin. Welcome
    to you. You are an accomplished testifier.
        [Laughter.]
        And we look forward to your five minutes of testimony.

                STATEMENT OF DOUGLAS HOLTZ-EAKIN, Ph.D.

        Dr. Holtz-Eakin. Thank you, Chairwoman Eshoo, Ranking
    Member Burgess, and members of the committee, for the privilege
    of being at this important hearing.
        Drug prices are a very important topic in the United
    States. And I want to say a couple of things about the debate
    in general, and then, a few remarks on the pieces of
    legislation under consideration today.
        The first thing I would emphasize is that, at least to my
    eye, there is not a broad, general, widespread drug-pricing
    problem. Instead, it is important to recognize that we have
    some targeted areas with extreme drug-pricing issues, notably
    in specialty drugs, largely in oncology drugs right now, and in
    sole-source drugs that are off-patent. In thinking about
    solutions, it is often best to identify the problems first, and
    I would focus on those.
        The second is that there is often relatively little clarity
    about which price people are trying to effect, and there are
    very different measures of price bandied about. There is the
    list price of manufacturers, probably the most important price.
    There is the net price post-rebate at which the drug is
    acquired. And then, there is also the price a beneficiary
    actually pays at the counter, including all the out-of-pockets,
    the one that is probably the most important to the American
    public. Thinking clearly about price allows you to avoid
    situations where you simply shift costs, but don't change the
    fundamental problem or address the issue itself.
        And then, lastly, I think it is important to recognize that
    this is a difficult world of tradeoffs. There are no simple
    solutions because, in the end, there is a tradeoff between
    financial incentives like prices and the innovation that has
    made the United States the premier place for medical science on
    the globe. And being cognizant of that as you go forward is
    very important.
        And secondly, for this hearing, the notion of transparency
    is not an unambiguously good thing. There are moments where
    transparency becomes quite costly and perhaps not worth it, and
    also situations where it interferes with the incentives to
    compete vigorously and to have fierce negotiation, which we
    should want in our health markets, particularly our
    pharmaceutical markets.
        So, in looking at the bills under consideration today, I
    think some concerns do arise. For example, the SPIKE Act, which
    looks at backward-looking triggers for price increases or an
    absolute value of $26,000 for a drug, that is not independently
    the value of that drug, as Ranking Member Burgess mentioned in
    his remarks. It does trigger a set of disclosures and
    documentation that is quite intrusive and costly to produce.
    And when combined with the potential for the Secretary to offer
    a variety of different triggers backward-looking in launch
    prices, it could be a quite costly measure or transparency,
    with no particular accountability measure included that would
    guarantee any effort on drug prices. And so, I would be
    concerned about that.
        The FAIR Act is similar in character. It has some, in my
    view, virtues of targeting. It is forward-looking as opposed to
    backward-looking, and I think that is an advantage in this
    setting. It excludes rare disease and vaccines, focuses on
    those drugs by physicians and hospitals, but has the same sort
    of potentially costly structure. And so, I worry about the
    transparency that generates no end result in those situations.
        With regard to the samples, which has come up a couple of
    times already, samples are very important to beneficiaries. I
    think that has been documented. And so, you don't want to
    damage this valuable source of drugs. I think it makes sense to
    build on the existing reporting, rather than inventing new
    reporting; provide the information to the FDA, and provide this
    information to oversight and to professional researchers, so
    that the information about the influence of samples on the
    competition in the market is learned, but the damaging public
    disclosure is avoided. And I think that is something that the
    committee should think a little bit about.
        Finally, with regard to providing public documentation of
    drug rebates negotiated by PBMs, I really have two sets of
    concerns. I understand why this committee should care deeply
    about how well the Part D program is functioning. I am a long-
    time fan of the Part D program, having been present at its
    birth, and I think it is our best entitlement program. I
    occasionally say I like it more than my children. I won't
    repeat that today. Oops, it is too late.
        But I don't think the same sort of information should be
    provided for commercial transactions. These are in the end
    private contracts, and I don't think they should be publicly
    disclosed. So, collecting the information on Part D, making
    sure that for Part D there is vigorous competition that is
    effective is appropriate and should be done. Again, that means
    proprietary information provided to oversight and to
    researchers, not necessarily disclosed into the public domain.
        So, I really do appreciate the chance to be here today.
    These are in the end difficult issues on one of the most
    important topics facing the American public. And I look forward
    to the chance to answer your questions.
        [The prepared statement of Dr. Holtz-Eakin follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Ms. Eshoo. Thank you very much, Dr. Holtz-Eakin.
        And again, we all want to thank our witnesses for being
    here today and the testimony that you have given.
        We have now concluded those opening statements and we are
    going to move to members' questions. Every member I think knows
    that they have five minutes to ask questions of our witnesses.
    And I will start by recognizing myself for five minutes.
        Dr. Feldman, you said that PBMs have pushed you to
    prescribe higher-priced drugs, is that right?
        Dr. Feldman. Thank you.
        What I have found is there are some drugs that have come to
    market with lower list prices that have been unable to get onto
    the formulary because their list price was too low. And what I
    mean by that is, the price concession, for example, the rebate
    would be the list price times the discount times the market
    share.
        Ms. Eshoo. So, the one on the list----
        Dr. Feldman. Yes. So, yes, the lower list price----
        Ms. Eshoo. You put on the table that PBMs pushed you to
    prescribe a higher-cost prescription drug.
        So, I want to go to Ms. Bass and say to you, what is the
    answer to that?
        Ms. Bass. Our companies always negotiate to the lowest net
    cost.
        Ms. Eshoo. So, why was she pushed to a higher-priced drug?
        Ms. Bass. Because the lowest net cost of that drug was
    lower than the drug with the lower list price.
        Ms. Eshoo. So, the higher was lower, and the lower is
    higher? I mean, I don't quite get this.
        Ms. Bass. But, yes, it----
        Ms. Eshoo. Maybe you can rephrase it?
        Dr. Feldman. Yes. So, competition can raise prices or lower
    prices. Because the price concession is the highest price
    concession, which ultimately, they are calling the lowest cost,
    sometimes to get at the highest price concession you need the
    highest list price. And therefore, a drug with a lower list
    price can't offer as big of a percent rebate. But I think that
    shouldn't be how it is. I think the lowest list price should
    get preferred status.
        Ms. Bass. So, the way the math works on that, let me just
    quickly say----
        Ms. Eshoo. Quickly.
        Ms. Bass [continuing]. If both drugs had different pricing,
    but they came in at the same low net cost, that would be great,
    but----
        Ms. Eshoo. If they came in or you negotiated lower?
        Ms. Bass. Our companies negotiate to the lowest net cost.
    And if it is a lower list price drug that has the lowest net
    cost, that is the preferred drug.
        Ms. Eshoo. Well, there doesn't seem to be an agreement
    here. Dr. Feldman is shaking her head in the negative.
        Dr. Feldman, why do you think that drug manufacturers will
    not give samples to doctors if there is a public reporting
    requirement? I wasn't so clear on why you----
        Dr. Feldman. Why I feel that way?
        Ms. Eshoo. Yes.
        Dr. Feldman. So, for example, it goes back to the list
    price of the drug.
        Ms. Eshoo. Well, I mean, because the FDA already requires
    drug samples to be reporting. So, the reporting burden, at
    least on the surface to me, I don't think would be a deterrent.
        Dr. Feldman. I can tell you, if it actually worked to the
    opposite--I mean, some of the samples that are given, the list
    prices of those are $6,000 a month. And you usually get three
    months at a time.
        Ms. Eshoo. So, you are saying that it is better that people
    don't know what it is and that , in turn, motivates samples
    being contributed?
        Dr. Feldman. What I fear is that, when it looks like the
    pharmaceutical manufacturers are giving this much money to the
    doctor, that it may make them not do that. However, if it had
    just the opposite effect where everyone thought, oh, look how
    generous pharma is, and it actually didn't affect the ability--
    I just want to do whatever will keep the samples coming for our
    patients.
        Ms. Eshoo. I understand. I understand. I don't think that
    the case has been definitely made on the point that you raise.
    Maybe it will be, but I am not so----
        Dr. Feldman. I understand.
        Ms. Eshoo. I am not convinced.
        We are looking for money. We are looking for savings across
    the entire system, so that at the end of this chain, this
    pipeline--and you heard members on both sides of the aisle say
    this--so that the patient captures the savings, so that the
    price at the counter goes down.
        Now there are some things that are real market influencers,
    and I want to examine this. I have thought for many years that
    research and development is the top cost. But, as it turns out,
    the marketing of drugs exceeds that; it outstrips it. And we
    only, I think, actively study and market drugs that are on
    patent. Is there any major drug company that advertises
    generics? Anyone know the answer to that? I think I know the
    answer. I stay up late at night. I haven't seen one, but I am
    missing them; I don't know have the TV on at the right time.
        I think that that kind of stands the system on its head
    because it is a huge cost. And I understand costs. There are
    many costs to bring a drug to market. But you know what? When
    it exceeds research and development, which is absolutely
    essential, I think that we have an issue here.
        There is marketing to physicians and other healthcare
    professionals. Is there anyone here that can put a price tag on
    that? Do you know, Dr. Holtz-Eakin or Dr. Miller? No? Mr.
    Isasi?
        Mr. Isasi. What we know, this is very hard information to
    get at, in part, because the pricing and the payments in
    industry are so obfuscated. But we know that they are spending
    maybe 20 to 25 percent of their revenue on----
        Ms. Eshoo. Well, we know that marketing to physicians and
    other healthcare professionals by companies increased from
    $15.5 billion in 1997 to $20.3 billion in 2016. That is about a
    30 percent increase.
        Mr. Isasi. And it is much more than they are spending on
    R&D; on innovating.
        Ms. Eshoo. Does PhRMA want to weigh-in on this--wish to
    weigh-in on it?
        Ms. Joldersma. Yes, I do. Thank you, Chairwoman.
        I would say at the outset that I think it is important to
    check our facts. We do hear regularly that the pharmaceutical
    industry spends more on advertising and marketing than we do on
    R&D. And at least speaking for my membership, that is patently
    false. Frequently, comparisons over State marketing
    expenditures, because those expenditures are pulled from the
    sales and general administration figures which includes a whole
    host of things other than marketing----
        Ms. Eshoo. Why don't you get us some definitive information
    from your viewpoint?
        Ms. Joldersma. Sure. I would be happy to do that,
    absolutely.
        Ms. Eshoo. That would be helpful to make part of the mix.
        I have gone over my time. I now would like to recognize the
    ranking member of the subcommittee, Dr. Burgess from Texas, for
    five minutes for his questioning.
        Mr. Burgess. Thank you.
        And, Dr. Feldman, as I look online, you reference that you
    have been practicing rheumatology for 35 years. I am a little
    older than you are. So, I actually remember not only that there
    wasn't much with which to treat rheumatoid arthritis, some of
    the treatments we had were probably as hazardous as having the
    disease itself. I mean, colloidal gold shots? Does anybody do
    that anymore?
        Dr. Feldman. Very rarely.
        Mr. Burgess. And, of course, aspirin to toxicity, you raise
    the dose until the ear-ringing became so loud that people
    couldn't hear.
        So, I, for one, am grateful that, as I look online, there
    are--what?--eight or nine biologics that are available? I mean,
    these are relatively-new medicines that really are game-
    changers as far as providing not just relief for your patients,
    but preservation of function, which previously wasn't
    available. I mean, that is a good thing, right? We have got
    nine agents that now are available to you.
        I will confess, when I watch some of the ads on TV--and I
    play a little game. I have one of the pharmacy pricing apps on
    my phone. So, I type in the name of the drug. I, for one, would
    like to see--I think Secretary Azar is onto something when he
    says we ought to disclose what the cost to the patient would
    be. I mean, look, when I see all those ads, and if I were
    having to make a decision which drug to start, do I want the
    one that Phil Mickelson is on or do I want the one Cyndi Lauper
    likes to take? I don't know, I mean, as a patient, I don't know
    how to judge that.
        But I think that information could be helpful. It might
    even be helpful to a physician to know that as well. Just going
    down this list of medicines, they are all fairly expensive, but
    some are more expensive than others. And if it is something you
    are going to be on over the long term--but you correctly said
    it would be wrong for a formulary or an insurance company,
    anyone else, to change your patient's medication. That is the
    practice of medicine, and we should not let that happen other
    than by a physician.
        Now, on the issue of advertising generics, look at my
    State, and I assume most states are the same. I write a
    prescription, and the pharmacist can actually substitute a
    generic. Even if I write, ``Dispense as written,'' I don't know
    whether they always agree with that. So, no, generics may not
    be advertised, but at the same time the pharmacist has the
    ability to substitute the generic equivalent for the patient at
    the pharmacy counter, is that not correct?
        Dr. Feldman. Yes.
        Mr. Burgess. So, I mean, if I am in the business of selling
    a generic, why would I advertise? I have got the good people at
    Crestor already doing the ads for me. I don't need to spend my
    money doing that.
        I think that the thing is that you have got eight or nine
    medicines that are now advanced treatments for rheumatoid
    arthritis. And in your professional lifetime, certainly my
    professional lifetime, at the beginning of our professional
    careers those things were not available. So, it is a great
    thing that they are available now.
        I do not know how many trials there were that didn't work
    out. I suspect there were. I don't know how you go back and
    price that in. I suspect that that is difficult to do. You gave
    a figure of what, 12 percent success rate? I mean, that is a
    lot of dry holes that you are drilling in order to get the home
    run. I want you to drill those dry holes. I think that is
    important. I want you to have eight or nine medicines that not
    just treat a patient's symptoms now, but preservation of
    function.
        And that was the whole purpose in doing cures. We are
    getting to a place where things that were just unthinkable a
    few years ago are now within our grasp. A single-shot therapy
    to cure a disease that otherwise not just would bankrupt an
    individual, but a family; perhaps even a health plan, and now a
    single shot that can cure it. I don't know how you price that
    in. We are going to have to figure that out, and that is why
    these discussions are so important; because we do have to
    figure that out for the future.
        Sickle cell disease, which was featured on ``CBS 60
    Minutes'' a couple of months ago, the cost for this therapy
    that Dr. Collins referenced as a cure for sickle cell - I mean,
    that is a big deal.
        We heard in this very room at this very table in 2016 the
    witness for the Sickle Cell Disease Association said there has
    been no new sickle cell FDA-approved treatment in 40 years. So,
    when we look at the cost of this new sickle cell therapy, when
    we look at that cost, I think we have to look at it in light of
    the fact that for 40 years we didn't improve at all. And what
    was the cost over those 40 years where we didn't improve? And
    we have got to somehow find a way to amortize that going 40
    years into the future.
        It is a good time to be in the business that you all are
    in.
        Ms. Eshoo. The gentleman yields back.
        Mr. Burgess. And we appreciate so much you being here
    today. We have got some tough decisions to make and we are
    anxious to get on about making them, apparently.
        Ms. Eshoo. Thank you, Dr. Burgess.
        Mr. Burgess. I will yield back.
        Ms. Eshoo. And the gentleman yields back. It is a pleasure
    to recognize the gentleman from North Carolina, Mr.
    Butterfield, for his five minutes of questioning.
        Mr. Butterfield. Thank you very much, Madam Chair.
        Let me just begin with Ms. Joldersma. I am sure I got that
    wrong. I have a little trouble with names.
        Ms. Joldersma. Joldersma.
        Mr. Butterfield. OK.
        Ms. Joldersma. Yes, not to worry.
        Mr. Butterfield. I will just call you Lisa. How about that?
        Ms. Joldersma. You can call me Lisa. I prefer it.
        Mr. Butterfield. Yes.
        Ms. Joldersma. Lisa J., if you will.
        Mr. Butterfield. Yes. Thank you.
        I am very pleased to hear that your member companies
    support the whole notion of transparency. That is a very
    important word now. It means sunlight. And thank you so much
    for making that acknowledgment today, especially with respect
    to prescription drug pricing.
        I guess my question is sort of a reversed-type question.
    What information would you consider to be inappropriate for
    transparency?
        Ms. Joldersma. That is a very good question.
        Mr. Butterfield. Yes.
        Ms. Joldersma. I think as many on the committee and other
    witnesses have noticed, we do need to be concerned about very
    commercially-sensitive information, proprietary information;
    that if released publicly, could cause conduct distortions in
    the market that we may not love. That is why I think both of
    the transparency approaches on the table today do attempt to
    protect proprietary and confidential information; and that is a
    very, very good thing.
        Mr. Butterfield. And I suppose you are struggling every day
    to try to find a balance between those two interests?
        Ms. Joldersma. Absolutely.
        Mr. Butterfield. Would that be correct?
        Ms. Joldersma. Absolutely.
        Mr. Butterfield. What circumstances would require you to
    significantly raise drug prices? I mean, what would be the
    circumstances that would precipitate an increase in drug
    prices, other than corporate profit?
        Ms. Joldersma. Well, sure, there are many, many
    circumstances.
        Mr. Butterfield. Just give me two or three examples, yes.
        Ms. Joldersma. Two or three examples? Increased costs,
    increased supply chain, expanded indications, expanded value.
    Maybe we learn that a drug is more effective than we previously
    thought it was.
        Mr. Butterfield. Wouldn't that be corporate profit?
        Ms. Joldersma. No.
        Mr. Butterfield. Yes, that would be separate from corporate
    profit?
        Ms. Joldersma. Yes. And I do want to talk about corporate
    profit briefly. A lot of people say that this industry's
    profits are far out of whack with other industries. And the
    truth is, that is because traditional accounting measures are
    not recognizing the high level of risk that this industry takes
    on.
        And when you are talking about a 90 percent failure rate,
    the fact of the matter is, that 10 percent of the time when we
    don't fail, yes, it is true that the investors, the private
    entities that invest and that help us fund this very difficult
    scientific search for cures----
        Mr. Butterfield. Let me switch over to Ms. Bass. My time is
    clicking away. Ms. Bass, in your testimony you discuss the need
    to increase transparency in order to lower cost and improve the
    overall quality of care. Do you acknowledge that rebate
    practices are driving increased drug costs or do you dispute
    that?
        Ms. Bass. We would dispute that.
        Mr. Butterfield. Are you suggesting that the PBMs are
    sufficiently transparent or is there room for improvement?
        Ms. Bass. As I testified, we are happy to report aggregate
    rebates. We have the same concerns that others on the panel
    have with respect to putting out information publicly that
    would allow for tacit collusion. Often, when one competitor
    learns that he or she has discounted more deeply than another
    competitor, what happens is that competitor doesn't discount as
    deeply the next time. And that is our big concern.
        Mr. Butterfield. You are a nonprofit entity, if I am not
    mistaken, a 501(c)(6)?
        Ms. Bass. We are the trade association for the industry,
    yes.
        Mr. Butterfield. Which means that you are not in the
    business to make a profit. You are in the business to,
    according your 990 submission, you are in the business to lower
    prescription drug cost and increase access.
        Ms. Bass. Our trade association represents the companies
    who are in the business to lower prescription drug costs and
    increase access, yes.
        Mr. Butterfield. But you have told the Internal Revenue
    Service that your mission is to lower prescription drug costs.
    That is on your Form 990 that you submitted.
        Ms. Bass. It sounds like we need to amend our form to say
    we represent the companies whose mission it is to lower
    prescription drug costs and increase access.
        Mr. Butterfield. Take a look at that, if you would, please.
        Ms. Bass. I will. Thank you.
        Mr. Butterfield. Dr. Miller let me switch over to you, if I
    can. In your testimony, you discuss the importance of
    transparency and the consequence of Congress' inability to act
    to increase it. Why is transparency so important to
    implementing effective reforms? And you will have 15 seconds. I
    am sorry.
        Dr. Miller. What I would say is I think transparency can
    compel the issue forward. It may produce useful information for
    the Congress and other policy actors to act. I don't think
    transparency, in and of itself, will be enough to affect the
    drug price issues that you are facing now.
        Mr. Butterfield. Thank you.
        I yield back. Thank you.
        Ms. Eshoo. I thank the gentleman and he yields back. I now
    have the pleasure of recognizing the ranking member of the full
    committee, the gentleman from Oregon, Mr. Walden, for five
    minutes.
        Mr. Walden. Thank you, Madam Chair.
        And I have got a question to Ms. Joldersma and Dr. Holtz-
    Eakin and Dr. Feldman.
        H.R. 2064 is an attempt to provide transparency, but I am
    worried that the bill will have unintended consequences for
    patients. Manufacturers of drugs and devices often provide
    samples to providers that help low-income patients who may have
    trouble accessing a therapy, either because they lack insurance
    or an insurer does not provide robust coverage for a drug or a
    device. Yet, this bill places new reporting requirements on
    manufacturers. And my question is, doesn't this bill create a
    perverse incentive for manufacturers to simply not provide
    samples to physician offices? And can you describe how low-
    income patients benefit from samples provided by drug and
    device manufacturers, and any other unintended consequences?
    And I would just throw that out to the three of you.
        Ms. Joldersma. Thank you for that question.
        Very briefly, I think there is a real question as to
    whether this could cause the lessening of provision of samples.
    I would also note that a significant amount of information is
    already reported to the FDA with regard to samples. So, in some
    respects, this is kind of creating a duplicate bureaucracy, if
    you will, and a duplicate reporting. So, our preference would
    be to work with what FDA already has.
        Mr. Walden. To me, it also seems like a real convenience
    when you're with your physician, and they say, ``Here, why
    don't you take these, and then, go get this?'', and whatever.
    Dr. Feldman, what is your view?
        Dr. Feldman. Yes. You know, we agree with MedPAC's
    recommendation under drug use confidential agreements. I mean,
    it can be something as simple as mandated mail orders for
    patients will deliver refrigerated drugs on the front porch in
    New Orleans in the middle of the summer.
        Mr. Walden. That would seem to be a problem.
        Dr. Feldman. And the medication is destroyed. So, then, of
    course, we can offer them samples.
        Mr. Walden. OK. Dr. Holtz-Eakin?
        Dr. Holtz-Eakin. Yes, I don't know that it would eliminate
    the samples, but I think that is a risk you don't have to take.
    I mean, there are ways to collect the data you are interested
    in, have them available to researchers and oversight without
    the public disclosure the people are worried about. I would
    recommend that.
        I guess the other thing I would mention is, there is
    existing reporting for drugs, but this expands that to include
    the devices. And I would think it would be worth the committee
    asking itself whether it is worth doing that. That is a costly
    new set of reporting, and I am not sure samples are all that
    typical in the device world.
        Mr. Walden. OK. That is a good point. And I think I don't
    have too many people rushing me at town halls saying, ``Please
    add more reporting requirements, more regulations, more
    rules.'' Yet, we know there is a place for that, but I think we
    have to be really judicious when we go down that path because
    we don't want to create more bureaucracy, more time away from
    caring for patients, and, also, I want to put the patient
    first.
        I know a lot of States have been passing legislation to get
    to the bottom of why drug prices are increasing through price
    increase disclosure legislation. But the bills we are talking
    about today go beyond any State law currently on the books, I
    believe.
        So, my question would be, do you worry about the burden of
    companies complying with a patchwork of 50 different State laws
    plus a Federal law? And should Congress, if we go down this
    path, consider preemption language? Ms. Joldersma, would you
    like to comment on that?
        Ms. Joldersma. Absolutely. I think we have seen
    transparency legislation enacted now in seven or eight states.
        Mr. Walden. Right.
        Ms. Joldersma. Obviously, today we have two different
    approaches before us.
        Mr. Walden. Right.
        Ms. Joldersma. There were competing approaches in the
    Senate as well. So, certainly, harmonization of these reporting
    requirements is a high priority, and preemption would be one
    way to achieve that.
        Mr. Walden. All right. Dr. Holtz-Eakin, do you want to
    comment on this?
        Dr. Holtz-Eakin. Drugs are nationally-traded commodities.
    There should be a single set of rules that prevail across all
    50 States. I think preemption makes a lot of sense.
        Mr. Walden. OK. And on transparency and PBM reporting, my
    question is, can you detail concerns of where too much
    disclosure could be anticompetitive? I have heard this from
    people. I am into disclosure. I am into public right to know. I
    think the more out there, the better. But I also recognize
    there comes a point where too much disclosure could actually
    have an unintended and reverse consequence; if a consolidated
    market was able to back in competitors' rebates, for example.
    So, Dr. Holtz-Eakin, can you comment on that?
        Dr. Holtz-Eakin. I think that is a real concern. If you can
    identify the deal that your competitor is getting, that is
    information that allows you the ability to perhaps negotiate
    less vigorously and get a higher price. We never want to let
    that happen. And so, all of these desirable attempts to ensure
    that these markets are competitive and work on behalf of
    beneficiaries, especially in Part D, I applaud. But disclosing
    those individual contracts and deals is a step in the wrong
    direction.
        Mr. Walden. All right. Ms. Bass, could you comment on that
    as well?
        Ms. Bass. Sure. It sounded like you wanted specifics. And
    what we would recommend would be making sure--the bill calls
    for reporting by class--you would need to make sure that every
    class had at least three drugs; otherwise, there wouldn't be
    reporting because you could back into rebates.
        We would want to make sure that the reporting was lagged,
    preferably three years, again, to give a little bit of time
    between contracts. And we would want to make sure it wasn't
    PBM-specific, but across PBMs, for the same reason.
        Mr. Walden. All right. I thank you all.
        And I know the Chair has been quite generous with giving me
    extra time, I guess in recognition of the Blazers' defeat. So,
    we appreciate that generosity this morning.
        Ms. Eshoo. All around nice man. All around good guy.
        Mr. Walden. I yield back.
        Ms. Eshoo. The gentleman yields back.
        I just want to add something here. I believe that this
    particular legislation, that it is referencing a class of
    drugs. So, it is not one at a time. It is a class of drugs. And
    I think that we have to, all Members are going to have to do a
    deep dive on the actual wording and that is our job to do. But
    I thought I would throw that in the mix.
        Now it is a pleasure to recognize a real gentlewoman from
    California, Ms. Matsui, for her five minutes of questioning.
        Ms. Matsui. Thank you very much, Madam Chair.
        And I want to thank all the witnesses for appearing before
    us today.
        We have been discussing in this committee that there is a
    need for greater transparency--that is really a word that we
    keep throwing around--but an entire drug supply chain that
    really gives us clear insight into the formulary and
    negotiations, price concessions, and market dynamics, that
    ultimately drive up the price consumers pay for the medications
    at the pharmacy counter.
        Now drug price list increases have outpaced general
    inflation, medical inflation, and overall wage growth for many
    years. Lacking transparency, these price increases often seem
    arbitrary, indiscriminate, and very confusing. I am
    particularly interested today in discussing the trend of list
    price increases for drugs that are already on the market. A
    recent analysis found that prescription drug costs are
    primarily attributable to year-over-year price increases for
    drugs already on the market, not the introduction of new,
    innovative therapies or improvements to existing medications.
    And MedPAC has determined that, for high-cost Part D enrollees,
    the growth in drug spending was largely due to increases in
    average price per prescription filled.
        Ms. Isasi, you mentioned in your testimony that increases
    in invoice prices for current drugs under exclusivity have
    generated $108 billion in revenues, and that without these
    price increases, revenues would have been flat over the last
    decade for brand pharmaceutical companies, and overall spending
    on drugs would have fallen due to increased utilization of
    generic drugs. That is a staggering statistic and speaks to the
    motivations some manufacturers may have to raise prices for
    drugs already on the market. Mr. Isasi, from your perspective,
    what are the reasons that prices are increasing for drugs
    already on the market?
        Mr. Isasi. Thank you very much for the terrific question.
        I think it is really important. You know, we, all of us,
    want what is best for America's family, and we want to
    incentive innovation in the development of new drugs. That is a
    really important goal. But what we know is the current system
    is not doing that. As you point out, what has happened is so
    much of the pharmaceutical market share has migrated from
    patented, name-brand drugs to generics. And the drug companies
    are not developing the innovations that we need. So, instead,
    they are just raising the prices on the remaining patented
    drugs as fast and as quickly as they can.
        And there are terrible examples of this. I mean, I will
    give you one example. Just last year, Catalyst Pharma acquired
    rights to Firdapse. It is a 20-year-old drug used to treat
    neuromuscular disease. And the price increased to $375,000. The
    drug was previously available from Jacob's Pharmaceutical and
    could be purchased for free through an FDA program, right?
    Those are the kind of abuses we are talking about.
        Ms. Matsui. OK. Dr. Miller, do you agree?
        Dr. Miller. Yes, I agree. I agree with the direction of
    your conversation. The attention or where I would direct your
    attention is, both in Part B and in Part D, you could consider
    inflation rebates which would penalize back part of the revenue
    that a manufacturer gets through its price increase. And you
    could devote that money to giving greater patient protections.
        Ms. Matsui. OK. So, Dr. Miller, it seems the rising prices
    for a product that has been long on the market kind of
    represents a market failure. Is this a typical market response
    for products outside the pharmaceutical marketplace?
        Dr. Miller. Well, as a general proposition, and what I
    understand about how broad your question is, no, it is not a
    typical. And insulin is, in particular----
        Ms. Matsui. Right.
        Dr. Miller [continuing]. A poster child for the problem.
        Ms. Matsui. So, both Mr. Isasi and Dr. Miller, from your
    perspectives, do you believe that research and development cost
    significantly account for the drug price increases? And I think
    I know the answer to that.
        Dr. Miller. No.
        Ms. Matsui. OK. What about high launch prices?
        Mr. Isasi. No. And let me give you the example. Sovaldi is
    a great example.
        Ms. Matsui. Yes.
        Mr. Isasi. Sovaldi was purchased by Gilead. They did not
    develop the drug. Their Wall Street analyst said, charge ``X''
    amount, and then, they almost quadrupled it. Right?
        Ms. Matsui. Right. OK.
        I have a PBM question. As I understand it, one way of PBM
    to keep costs down for plans is by keeping patients' out-of-
    pocket costs high. Simply put, what the plan pays as a net cost
    for a drug is calculated as a list price minus the rebate,
    minus the patient out-of-pocket share.
        Dr. Miller, you mentioned some of the embedded incentives
    in your testimony. From your perspective, how are drug supply
    chain rebates preventing patients' cost-sharing from coming
    down?
        Dr. Miller. So, I mean, I want to be clear when I answer. I
    do think there is a role for negotiation and there is a role
    for a net price analysis and thinking through it, because those
    savings can be spread more generally through the benefit. But,
    given the current State of play, in particular, in Part D,
    there are drugs being placed on preferred formularies because
    of the rebate, and that is driving the out-of-pocket for the
    beneficiary and making it hard for the patient to afford it at
    the counter.
        Ms. Matsui. OK.
        Mr. Isasi. Yes, and to the chairwoman's earlier question,
    when you were told, Chairwoman Eshoo, that the net cost was
    lower, the question is, to whom? The net cost to whom?
        Ms. Matsui. OK.
        Mr. Isasi. Right? Not the beneficiary sitting in the
    pharmacy.
        Ms. Matsui. Right. OK.
        I think I ran out of time. I yield back. Thank you.
        Ms. Eshoo. Excellent.
        The gentlewoman yields back. It is a pleasure to recognize
    the gentleman from Michigan, Mr. Upton, the former chairman of
    the full committee. Your time, five minutes.
        Mr. Upton. Thank you, Madam Chair. It is a delight to be
    here.
        And I just have got a couple of questions. When we worked
    on 21st Century Cures, we spent a whole lot of time about
    thinking about policies that advanced new treatments for
    patients who had no therapies available, sort of like what
    former Chairman Walden said about sickle cell. But one of our
    main goals was to reduce the burden of discovery and
    development for small companies to ensure that new therapies
    got to patients who literally had no hope.
        So, I am a little bit worried about the SPIKE Act, which is
    one of the bills that we are looking at today, looking at
    perhaps an opposite approach. The bill sets an arbitrary launch
    price level that triggers burdensome price reporting for
    companies. Many of the drugs produced for the orphan diseases
    are often developed by small companies. So, the price threshold
    doesn't always account for rebates and discounts provided by
    the manufacturers. If we are going to consider Federal price
    reporting, shouldn't we keep the focus on price increases, what
    was said a little bit earlier, rather than launch prices of
    orphan drugs produced by smaller companies advancing cures? Dr.
    Holtz-Eakin, what is your reaction to that?
        Dr. Holtz-Eakin. A couple of thoughts. I mean, in the end,
    I think it is important to focus on what the beneficiary ends
    up paying, and often, there is a big gap between list and what
    they pay. Often, they pay the list, and that is through the
    rebate structure. So, I think thinking through that carefully
    is important.
        I do think that the kind of documentation that is
    envisioned by the SPIKE Act is unprecedented. I have never seen
    any kind of a request anywhere else in the economy; and for
    smaller manufacturers, it is going to be quite burdensome. I
    would be concerned about that.
        And I don't see that this produces any particular pressure
    on pricing. And so, it is a pretty expensive piece of
    transparency that may or may not be effective.
        Mr. Upton. So, my next question is concerned about the H.R.
    2064, the Sunshine for Samples Act of 2019. It impacts both
    drugs as well as devices. So, in 2017, MedPAC recommended that
    Congress expand the Physician Sunshine Act and require drug
    companies only. It didn't include medical device companies. So,
    as you look at device companies, they often provide, I guess,
    some free devices that are used, like prosthetics and others,
    to measure, but really a device is a one-time deal. And what
    are your reactions to including devices as well onto this bill
    versus just pharmaceuticals?
        Dr. Holtz-Eakin. I think it would make sense to not include
    the devices, see how effective the bill would be, if it goes
    forward on the drug front. And then, you could always revisit
    that issue going forward. But devices are very different than
    the drugs in terms of the one-time aspect. And there is no
    existing reporting. So, that is the most costly part of what
    would be envisioned on this.
        And I would just again say, I think building on what is in
    place as opposed to creating a new reporting channel makes a
    lot of sense; and that you can have oversight and you can have
    the FDA be required to provide the data to professional
    researchers to make sure that samples are used for the
    therapeutically-appropriate functions, and not to distort
    physician decisions. That is really what you want to know. All
    that can be done without putting this on a public website.
        Mr. Upton. Thank you. I yield back.
        Ms. Eshoo. The gentleman yields back. I now recognize the
    gentleman from New Mexico, Mr. Lujan, for five minutes of
    questioning.
        Mr. Lujan. Thank you, Madam Chair.
        Dr. Miller, you noted in your testimony that more and more
    drugs are saving people's lives or vastly improving their
    health outcomes and quality of life, are launching
    unsustainable prices that are simply unaffordable. What tools
    are currently available to control launch prices for the first-
    in-class, sole-source, novel therapies, and are there any
    mechanisms currently in place that constrain the price for
    these drugs?
        Dr. Miller. As a general proposition. I would say, no, that
    the mechanisms are not in place. I think it goes back to some
    comments earlier. When you grant a patent, you are granting a
    monopoly and the company can come first to class and charge any
    price.
        I think the tools that I am trying to direct your attention
    to in the testimony and some of my comments is, in Part D, you
    might think of additional tools in the instances where you
    don't have a competitor. Part D was created to exploit
    competition and have the PBMs negotiate, but you are still
    going to have drugs that don't have competition. And you might
    want to think about things like pricing to the clinical value
    of the drug or some kind of negotiations strategy.
        Mr. Lujan. How should we better ensure manufacturers are
    accountable to the public when setting prices for newly-
    launched drug products?
        Dr. Miller. Well, I think if you were to pursue the
    mechanisms that I just mentioned to you, that would bring a
    greater accountability at least a better price, to the Medicare
    beneficiary and to the taxpayer, if that is what you meant.
        Mr. Lujan. The question that we had last week at hearings
    as well was the notion that there is a system that has been
    established such that you post your launch price, which I
    regard it as the highest price. And then, you have a lot of
    negotiations. There are discounts. There are rebates. There are
    other pieces that get to different lowest prices, if you will,
    that you have for each partner. And I just have a hard time
    understanding why we just don't get to that lowest price to
    begin with. They know how low they are willing to go. They know
    where they are going to be. So, if this is truly going to take
    into consideration the impacts to the patient and lowering
    costs, then that is where we should start.
        Mr. Isasi. Is it Isasi?
        Mr. Isasi. Isasi.
        Mr. Lujan. Isasi.
        Mr. Isasi. Yes.
        Mr. Lujan. You noted in your testimony that the threshold
    to trigger reporting requirements for newly-launched products
    should be reduced from the current amount included in H.R. 2069
    of $26,000, the median income of average Medicare
    beneficiaries. Can you explain why Families USA would like to
    see this threshold price reduced for reporting purposes?
        Mr. Isasi. Yes, absolutely. Thank you for the question.
        It is critically important that we understand that, as
    these changes take place, industry is going to adapt, right?
    And so, what we will find is all the launch prices will come in
    just under whatever threshold is set. So, we have got to lower
    the threshold to a threshold that is based on the actual
    realities of the families who are in the benefit.
        And to your earlier question, I also want to mention that a
    lot of folks don't realize this, but from the industry's
    perspective, even companies that aren't American, they start
    here in the U.S. launching first here, because we are willing
    to pay the highest price, twice, three times, four times more
    than the rest of the world, right? They start here. They set an
    incredibly high price. Then, they go out in the rest of the
    world and negotiate because we don't negotiate.
        Mr. Lujan. I still want to talk a little bit more about the
    average Medicare beneficiary. One, I agree with your response
    to the first question. That is a concern that I have as well.
    How do we address that? And how do we set up a better
    environment when it comes to fairness?
        To the question that I asked Dr. Miller, the number of
    people that are going to go without these therapies because
    they can't afford them----
        Mr. Isasi. That is right.
        Mr. Lujan [continuing]. Which is growing in the United
    States.
        The advocacy that you are bringing forward in your
    testimony about lowering the amount that is listed in H.R.
    2069, the $26,000--and in your case, it would be a lower
    number--but $26,000 is how much a family would make, would earn
    in a year. And all that this is saying is, if you are going to
    list your drug price higher than a Medicare beneficiary makes
    in an entire year, you should say why. Does that sound fair?
        Mr. Isasi. Very fair.
        Mr. T4Lujan. Madam Chair, I think that, as we talk about
    pricing care and the notion that, if you just leave it alone,
    and if Congress walks away and no one wants to be a part of
    this, that it will fix itself, it has not worked yet. And too
    many people out there are suffering and they are getting hit
    every day. And we should be reminded that we made a commitment,
    when we went to the American people over the last two years,
    that we would pass legislation to lower the cost of
    prescription drug prices for the American people, and we had
    better deliver on it.
        And with that, I yield back.
        Ms. Eshoo. Amen.
        The gentleman yields back. I now would like to recognize
    the gentleman from Virginia, Mr. Griffith, five minutes for
    questioning, sir.
        Mr. Griffith. Thank you very much, Madam Chair.
        Let me say, so that everybody is clear, my Democratic
    colleague just said that, you know, taking no action isn't
    working. He is right. And we are going to have to take action.
    And so, we will have to sort out what is the best action that
    we can take. But I think both sides of the aisle are dedicated
    to figuring out how we fix this. And there are all kinds of
    different ways to do it and all kinds of issues.
        Dr. Feldman, in your oral testimony, I was very taken with
    what you were saying. You indicated you had a patient who had
    gotten a call to change their drug. I believe it was for
    rheumatoid arthritis, is that correct? And I want to know who
    called them, not the individual's name, but was it the PBM? Was
    it the insurance company? Who called them and said, ``Hey,
    let's switch you over to this new drug''?
        Dr. Feldman. It was the PBM, and they received a
    notification in the mail.
        Mr. Griffith. So, they received a notification in the mail
    from the PBM. And were you ever consulted about that?
        Dr. Feldman. No. In fact, the patient brought it to me and
    said, ``I've been asked to switch to this drug, a lower-cost
    alternative.'' And it is not necessarily a lower list price.
    This happens all the time when you have midyear formulary
    changes. Patients just get dropped. They won't even pay for it
    anymore. So, this at least was slightly less egregious than the
    complete exclusion of a drug from preferred formulary.
        Mr. Griffith. But you also indicated that this drug was not
    similar. It was not really an alternative for that patient. Can
    you explain that to me?
        Dr. Feldman. It treats rheumatoid arthritis, but it was not
    a therapeutic equivalent drug. You know, there are different
    mechanisms of action in the immune system. And the drug that
    this patient finally ended up on affected T cells in a certain
    way. This one was something, a different drug entirely that did
    not affect the same part of the immune system. So, it would be
    ridiculous for me to change it.
        Mr. Griffith. So, let me try to break this down into more
    simple terms that I can understand, and hopefully, the folks
    back home who will be watching this later or watching it now
    will be able to understand. So, antacids, I take Zantac because
    I have lots of food allergies, and a lot of times a stomach
    upset is caused by my allergies. That being said, Tums doesn't
    do much for me, as a result of that, and Zantac has an
    antihistamine in it. Are you saying that what they did was they
    took him off the Zantac that had something that could help him
    and moved him onto something like the Tums, which might be a
    very good product for some people, but doesn't work for me? Is
    that what you are trying to say?
        Dr. Feldman. Scientifically, it is not the same----
        Mr. Griffith. OK.
        Dr. Feldman [continuing]. But, conceptually, yes.
        Mr. Griffith. Conceptually? OK.
        [Laughter.]
        At least I got the concept.
        Ms. Bass, all right, shouldn't PBMs at least be trying to
    contact doctors? Look, my stomach upset is not a big deal. But
    somebody that has got rheumatoid arthritis, that is a big deal.
    Shouldn't the PBMs be contacting the doctor to say, for this
    patient, does this switch make sense because we are trying to
    save some money? Now I don't mind anybody trying to save some
    money, but let's make sure it works for the patient.
        Ms. Bass. So, in those kinds of situations, there are
    definitely appeals rights for everybody in Medicare and every
    private sector plan. And PBMs absolutely work with doctors to
    figure out in that instance what the right thing is.
        Mr. Griffith. But most patients don't understand the
    appeals rights. They don't understand the appeals process. They
    just know they have gotten this. And what about the cases like
    Dr. Feldman said? In some cases, they don't even give you a
    choice; it is a matter of ``We are no longer paying for the
    drug that you have been on for the last four years or five
    years that has been effective for you, and we are switching you
    over to this drug. And you can pay for that other drug, if you
    want to, but we are not paying for it.'' That really can be
    disruptive, wouldn't you agree?
        Ms. Bass. It sounds terribly disruptive, I agree.
        Mr. Griffith. So, what can we do about that?
        Ms. Bass. Again, there are exceptions in Medicare Part D,
    and there are processes to go through. And in that instance,
    the patient would have to go through that with his or her
    physician.
        Mr. Griffith. So, the physician and the patient are going
    to have to have a lawyer to help them figure out the process,
    is that what you are saying?
        Dr. Feldman. And that is why we need the samples to
    continue the patient on the correct medication because it can
    take six to eight weeks to go through an appeals process.
        Mr. Griffith. Thank you. So, that way, you have more time
    to go through the appeals process. Well, that makes sense.
    Thank you, Dr. Feldman.
        How many different PBMs are members of your association?
        Ms. Bass. Right now, there are about 15.
        Mr. Griffith. About 15? So, across the country we have
    about 15? Or how many PBMs do we have? Some of them probably
    aren't members, I guess.
        Ms. Bass. There are 66 full-service PBMs in the U.S., and
    there are more organizations that provide PBM services.
        Mr. Griffith. Does that seem like maybe we have got a
    little monopoly going in the PBM industry?
        Dr. Feldman. Three PBMs control nearly 80 percent of the
    population.
        Mr. Griffith. Yes, that is why I was asking the question.
    And I understand you can't answer that because you have got an
    association to represent. But the point is that, when we hear
    testimony that the PBMs are asking our drug manufacturers to
    raise the list price, and then, many of them get a percentage
    of the cost of the drug for handling it, it looks like to me,We
    have got, the fox is in the henhouse and we are going to have
    to take some action.
        I yield back, Madam Chair.
        Ms. Eshoo. I thank the gentleman and he yields back. And
    now, I would like to recognize the gentleman from Oregon, Mr.
    Schrader, for five minutes of questioning.
        Mr. Schrader. Thank you, Madam Chairman. I appreciate it
    very much.
        Yes, I would associate myself with the remarks of the last
    two Members that talked because industry is, unfortunately, in
    a situation where there are a lot of changes. The pricing
    structure is completely opaque and very complex. I don't blame
    anyone in any of the industry sectors for that. It has just
    grown up that way. But, as a result, it calls for,
    unfortunately, our work here to make it a little more
    transparent. And everyone, apparently, loves transparency, but
    what that means is in the eye of the beholder; is what we are
    hearing now. So, that would be, unfortunately or fortunately,
    our judgment call, hopefully based on hearings we have had. We
    have had a number of hearings, and hopefully, will give the
    American people some assurance that we are on their side and
    trying to help, not stifle innovation, but at the same time
    make sure they get the best deal possible out there.
        Ms. Joldersma, I appreciate you being here. I appreciate
    your discussion on the role that rebates may play and having a
    higher list price drug get a preferable placement on the
    formulary. Could you give any examples of medicines where you
    think that might be the case?
        Ms. Joldersma. Well, it is challenging for me, as a trade
    association, to speak to what would really be a very
    proprietary arrangement. But I can say that I noticed last week
    one of our member companies did testify here and talk about the
    difficulties it has had with formulary uptake after it did
    lower the list price of one of its blockbuster medicines
    really. So, there is that in the record.
        I believe that other statements have been made on the
    record in the diabetes space, where we have seen companies who
    have launched authorized generics with the hope of being able
    to lower that list price, and they, too, have faced some
    challenges. So, there certainly are examples.
        Mr. Schrader. All right. So, then, do you think public
    disclosure of the discounts, including administrative fees,
    would be helpful in preventing this?
        Ms. Joldersma. So, yes, we do agree that more disclosure is
    required in that, including administrative fees would be
    important. We have seen the fees that manufacturers paid to
    manufacturers increase enormously; really in the last several
    years. And at least my read of the current statute is that a
    whole swath of administrative fees are excluded from reporting
    under Section 1150(a) that was enacted by the ACA.
        Mr. Schrader. It seems a little bit like PBMs almost
    double-dip. You have the rebate situation. The price
    negotiating goes on. Then, there is also this administrative
    fee, which seems a little inappropriate.
        Ms. Bass, I appreciate the explanation of the role, at
    least in your testimony, of the P&T committees and evaluating
    all the clinical and medical evidence that is out there before
    making coverage recommendations. Does cost and rebate amount
    play at all in these determinations?
        Ms. Bass. The P&T committees work solely on the clinical
    efficacy of the drugs. And then, they give their
    recommendations to the PBMs, and the PBMs then go and negotiate
    to the lowest----
        Mr. Schrader. So, if that is the case, then, how would you
    explain the higher list price drug with a greater drug rebate
    receiving a more favorable formulary placement oftentimes?
        Ms. Bass. If the lower list cost drug came down as low on
    the net cost basis, it would be on the formulary.
        Mr. Schrader. So, it does have an impact, apparently? Do
    you support increase in transparency in the fees, including
    administrative fees I just talked about that you'll receive
    from the pharmaceutical companies; and also, DIR payments that
    go on with the pharmacies?
        Ms. Bass. All of the fees and pharmacy DIR are reported in
    Medicare Part D to CMS.
        Mr. Schrader. So, you wouldn't object to them being public?
        Ms. Bass. So, again, we have issues around public reporting
    when it is very clear and would get at, would allow for tacit
    collusion. But, in the aggregate, no.
        Mr. Schrader. OK. A question for Dr. Feldman on the
    samples. I listened to Dr. Burgess talk about his lack of
    attention to the samples from the standpoint of what he is
    going to prescribe. He knows what he thinks that patient needs
    best. I would assume Dr. Bucshon would feel much the same way.
    The samples, to your testimony--I was a veterinarian for many,
    many years--do provide an opportunity for a patient to get
    much-needed care they couldn't get otherwise in the interim. So
    to me, the sample issue seems much to do about nothing. Is
    there really a reason to collect all of this data and go down
    that road, in your opinion?
        Dr. Feldman. As long as it keeps the samples coming for the
    patients that need them, I am happy. And I do have specific
    examples of the question about a lower-price drug not getting
    on the formulary, if anyone wants to know.
        Mr. Schrader. Well, maybe we could get that to my office
    after the hearing is finished.
        Following up a little bit, would utilizing existing
    frameworks for evaluating the quality of a physician and their
    conduct, how they do things, be a suitable metric for lifting
    prior authorization? You have testified about how that really
    makes it difficult; ergo, these samples become important. We
    are trying to find ways to lessen the requirements for prior
    authorization. Are there some policies, either that a
    physician's office, a hospital, whatever, follows that might
    give us some guidance to help us help you?
        Dr. Feldman. Yes. With specific guidelines and pathways
    developed by certain physician groups, we can bypass PAs on
    things from MRIs to certain drugs. And I think that is a
    valuable way to make it easier for the patient to get the
    proper medication.
        Mr. Schrader. If we could get some of that, that would be
    outstanding.
        And I yield back. I am sorry.
        Ms. Eshoo. The gentleman yields back. I now recognize the
    gentleman from Indiana, Mr. Bucshon.
        Mr. Bucshon. Thank you, Madam Chairwoman.
        I was a surgeon before I was in Congress.
        Ms. Eshoo. Dr. Bucshon, I am sorry.
        Mr. Bucshon. Yes, thank you.
        I would agree, Mr. Schrader, that the sample issue is a red
    herring. I mean, I will just say, as a physician, the basic
    premise that we practice medicine based on this type of thing
    as a group is false. I would decide what type of medication
    that a patient is on and, then, ask my staff, ``Hey, do we have
    any samples of this?'', not the other way around.
        The other thing is, from a PBM perspective, I don't like
    restricted formularies, and I particularly don't like it when
    non-medical people don't allow access to medications for
    patients based on profit. And we have heard a lot of testimony,
    and that may not be pervasive across the industry, but there
    clearly is substantial evidence that that is happening.
        And I don't believe it when people say that drug companies
    aren't being called literally daily and talking about their
    list prices and the margins and other things like that. That is
    happening, and the incentives are just not aligned.
        The last thing I will say, and then, I have a couple of
    questions, is we have been going after providers now since the
    last 1980s, cutting reimbursement to the people that actually
    are in the arena taking care of patients. And it has solved all
    our problems, right? It is the providers' fault. They make too
    much money. They are doing too many procedures. They are
    prescribing too many drugs. Well, the reason we haven't been
    able to make a dent in medical prices--in fact, it is worse not
    only in this, but other areas of medicine--is because that is
    not the problem. And now, we have got shortages of physicians
    nationwide as a result, including particularly in primary care.
        Ms. Joldersma, as part of H.R. 2087, the Drug Price
    Transparency Act, all drug manufacturers will be required to
    submit information to the Secretary on the average sales price,
    ASP, for physician-administered drugs coming under Medicare
    Part B. However, it is my understanding that certain medical
    devices that are reimbursed under the drug benefit could be
    excluded from this requirement. In keeping with the spirit of
    transparency and market-based pricing, is there opposition to
    including a policy change to ensure all such devices reimbursed
    as drug products also would be subject to ASP reporting?
        Ms. Joldersma. From the perspective of PhRMA, no, there is
    no opposition.
        Mr. Bucshon. OK. Well, Chairwoman Eshoo, I hope we can work
    together to address this issue and the legislation as it moves
    forward.
        And so, I just want to again, on the samples, Dr. Feldman,
    you raised the issue, and again, is there any evidence in your
    view anywhere that samples that are given to physician offices
    have any effect on overall practice of medicine? And also,
    doing this type of reporting, do you feel like it would do
    anything to lower drug prices?
        Dr. Feldman. I don't think it will do anything to lower
    drug prices. And, no, they have absolutely no bearing on my
    prescribing habits whatsoever.
        Mr. Bucshon. Mr. Holtz-Eakin, do you think particularly
    that the sample issue is a big enough issue that it would have
    any substantial impact on lowering drug prices? As you pointed
    out, the key here is out-of-pocket costs. That is what we are
    trying to get down.
        Dr. Holtz-Eakin. I don't think the sample issue drives
    much.
        Mr. Bucshon. Yes. So, there is just really, really no
    evidence that that would be the case.
        And I guess, Ms. Bass, what do you think of the
    administration's proposed rule on rebates?
        Ms. Bass. We don't think that the administration's proposed
    rule on rebates will do anything to lower list prices.
        Mr. Bucshon. How come?
        Ms. Bass. Because the manufacturers set the list prices,
    and the PBMs negotiate lower net costs, but PBMs are not
    involved in list prices.
        Mr. Bucshon. Don't get me wrong, I know that PBMs have a
    value-added role in this whole thing. My personal view is that
    the proposed rule, although the devil is in the details, is
    something that is going to lower, going to take away the upper
    pressure on list price. I mean, I know the PBMs all say that it
    won't make any difference at all, but I would argue that it
    does. I mean, what is your view on that?
        Ms. Bass. We would respectfully have to agree to disagree.
    We do think that there is a conversation to be had around the
    use of the price concessions PBMs negotiate.
        Mr. Bucshon. OK. Fair enough.
        Ms. Bass. But, right now, they are used for premium in Part
    D. And what the Secretary is trying to get at, I believe, in
    part, aside from lower list, is to help people at the pharmacy
    counter.
        Mr. Bucshon. OK. With your indulgence, Madam Chairwoman,
    Mr. Holtz-Eakin, you had a little comment on that?
        Dr. Holtz-Eakin. Just from the economics of it, if you have
    the ability to negotiate rebates, you ought to have the ability
    to negotiate prices, and it is the same negotiation. It will be
    more effective if the rule covered not just Part D, but the
    commercial market as well. I mean, that would make a
    difference.
        Mr. Bucshon. I agree with that. Thank you.
        I yield back.
        Ms. Eshoo. The gentleman yields back.
        Did you want to add something to that, Dr. Miller? You
    looked like you were just ready to turn your microphone on.
        Mr. Bucshon. Excuse me. I didn't recognize him to respond
    to my question.
        Ms. Eshoo. I am recognizing him. I am recognizing him.
        Mr. Bucshon. OK. Fair enough.
        Dr. Miller. I mean, we think the most credible analysis is
    that it ends up in the Part D program, adding to the cost of
    the taxpayer, and that it doesn't have a significant effect on
    list prices.
        Ms. Eshoo. Thank you.
        I recognize the gentleman from California, Mr. Cardenas.
        Mr. Cardenas. Thank you very much, Madam Chair, and thank
    you for recognizing as the chair, as you have the right to do
    so.
        Also, I would like to thank the ranking member for having
    this committee as well, to both of you.
        I am very proud to serve on the Energy and Commerce
    Committee and proud to say that we take the time to consider
    many perspectives, so that we can move forward with meaningful
    legislation. And the bottom line is that, right now, Americans
    across the country are hurting. It is our job to tackle these
    big problems like drug pricing to help all Americans, to give
    them real choices that don't involve choosing between keeping
    their families fed and keeping them healthy.
        With that in mind, we have had several hearings now on
    prescription drug pricing. One thing we have been hearing about
    it is how efforts to cut costs are just not making it to the
    everyday American citizen.
        Ms. Bass, thank you for being here today.
        I am interested in discussing how price concessions and
    rebates directly impact consumers and whether insurance plans
    or their beneficiaries are more likely to benefit from these
    negotiated prices. You mentioned that plan sponsors can
    determine how PBM-negotiated price concessions are used. Can
    you explain some ways that health plans, and specifically
    prescription drug plans, will use the rebates and other price
    concessions that PBMs acquire?
        Ms. Bass. Sure. Thank you for the question.
        In Part D, the rebates are used, essentially, to buy down
    the premium or to lower the premium and to keep it affordable
    across all beneficiaries. In the commercial market, plan
    sponsors use rebates across their health plan sometimes to help
    offset hospital costs. In other instances, they think about the
    rebates when they are setting their enrollees' cost-sharing.
    So, your $10 generic copay and your, say, $30 preferred brand
    copay, your health plan is probably taking into account the
    rebates it gets when it determines that level of cost-sharing.
    So, it goes sometimes toward premium, sometimes toward cost-
    sharing. It depends on the plan. In Part D, it is almost always
    for premium.
        Mr. Cardenas. So, what you just described is, it could be
    that, the biggest beneficiary of the system that we have today
    might actually be favoring the decision making of an insurance
    provider, not necessarily directly to the end-user, the
    citizen?
        Ms. Bass. I guess the way I would characterize it is, if
    whoever the plan sponsor is decides to use it for premium, it
    benefits all enrollees with a lower premium. If the plan
    sponsor decides to put it toward cost-sharing, then it helps
    the people who are using drugs that have rebates, and 61
    percent of brand drugs do.
        Mr. Cardenas. OK. All right. Are plan sponsors required to
    disclose how they utilize price concessions?
        Ms. Bass. In Medicare, every plan sponsor reports its
    rebates, its fees, which we talked about earlier, to CMS; and
    CMS is aware of how those are used. In the commercial market,
    the PBM discloses to the plan sponsor what its rebates are; but
    plan sponsors are not required to publicly disclose, or even
    really--to the Secretary how they use the rebates.
        Mr. Cardenas. OK. I would like to point out that, on H.R.
    2376, the Prescription Pricing for the People Act would require
    the Federal Trade Commission to study the role of PBMs in the
    supply chain and report to Congress on recommendations. Do you
    have any recommendations on how we can best ensure consumers
    are directly benefitting from the cost savings generated by
    price concessions and rebates negotiated by PBMs? Ms. Bass?
        Ms. Bass. So, first of all, we welcome the FTC review. And
    our recommendations are that, in Part D, you, as policymakers--
    and, in fact, you are overseeing the plan sponsors--have a
    conversation about should that money be used for reducing
    premium, holding down the premium, or should it be used for
    reducing cost-sharing? And that is a conversation you, as
    policymakers, should have, and we welcome that conversation as
    well.
        Mr. Cardenas. Again, Madam Chair, I really appreciate the
    opportunity for us to cover this very important issue. And
    healthcare is complicated.
        Earlier today I was able to meet with a young woman in my
    office who actually grew up in my ZIP code. Very few people in
    my ZIP code actually make it to four-year institutions. She
    went beyond that and she is currently studying to be a doctor.
    She is in her third year. And I asked her what motivated her.
    And what motivated her was her little brother who passed away
    from a non-diagnosed illness that he had since he was born. He
    was a little boy when he died. And then, when her father got
    very ill, she urged him to go to the doctor and he said, ``I
    never want to see another medical bill again.'' And shortly
    thereafter, he died from a heart attack.
        My point is, here we have a young person as an example of
    an American citizen who decided that is how I am going to try
    to make the world a better place, by becoming a doctor. I hope
    that we have that same urgency, as Members of Congress, to try
    to get down to the bottom of these issues and to make the world
    a better place for American citizens, and for everybody in this
    country, by doing what we can in the way that we have been
    appointed to do so or elected to do so.
        So, again, thank you to the witnesses.
        And thank you, Madam Chair. I yield back.
        Ms. Eshoo. The gentleman yields back. Thank you for your
    beautiful words.
        I now have the pleasure of recognizing the gentleman from
    Florida, Mr. Bilirakis, who has an important bill with Mr.
    Cunningham, the Creating Lower Cost Alternatives for Your
    Prescription Drugs Act. The gentleman is recognized for five
    minutes of questioning.
        Mr. Bilirakis. Thank you. Thank you, Madam Chair. I
    appreciate it. Thank you for holding this very important
    hearing.
        We have had a couple of hearings on this issue, and we
    should be focusing on this issue because this is what a lot of
    our constituents care about. I have a lot of seniors in my
    district and a large veterans population; and lowering
    prescription drug prices is an utmost priority for me.
        To that end, I want to ask a question of Dr. Holtz-Eakin.
    To that end, the bill that I recently introduced, as Madam
    Chair pointed to, alluded to, with Congressman Cunningham, the
    Creating Lower Cost Alternatives for Your Prescription Drugs,
    or CLAY, the CLAY Act, is a great first step, in my opinion,
    modernizing Part D to lower prescription drug costs. However,
    it is a first step, and I believe that modern Part D has been
    an outstanding program, one of the greatest programs we have
    had. And it has been below budget, like 40 percent below
    budget, and it has helped out our seniors. But we must upgrade
    it and modernize it.
        I understand that AAF has a comprehensive proposal for
    modernizing Part D. Would you please share your input with the
    committee, Doctor, please?
        Dr. Holtz-Eakin. Well, certainly we would be happy to
    provide a copy of the paper that Tara O'Neill Hayes wrote, who
    is here with me today.
        It is similar in spirit to what Dr. Miller discussed in his
    remarks, which is what we see in Part D is the most rapidly-
    growing Government cost, taxpayer cost, is in the reinsurance
    area. So, it is above the catastrophic maximum. And so, the
    proposal, in essence, says: ``Why don't we have the
    prescription drug plans and the pharmaceutical industry be
    responsible for their share of the costs above that
    catastrophic maximum, so that the incentives to have high-
    priced drugs are diminished? Why don't we fully protect
    taxpayers against their out-of-pocket by having a catastrophic
    maximum where they don't owe any more past that? And then, have
    a sort of typical 80/20 split for the remainder of the drugs,
    so that PDPs have a real strong incentive to get PBMs to
    negotiate on their behalf for the remainder of the drugs.''
        Where typically they are not sole-sourced there is more
    competition, and the possibility of vigorous competition is
    much more likely. So, it is a good program. It is not broken.
    It has been very successful. But we can sharpen the basic
    negotiating incentives that were built into the program, make
    it better going forward.
        Mr. Bilirakis. Very good.
        Again, Doctor, Congress developed incentives to encourage
    development of rare disease therapies--and I work on that
    issue--where innovation was previously almost nonexistent. How
    might the SPIKE Act in its current form have an outsized impact
    on future innovation for rare disease drug development? And how
    can we best address this concern?
        Dr. Holtz-Eakin. I guess I would say a couple of things.
    You know I have my reservations about the SPIKE Act. I
    mentioned them in my written testimony and in my opening
    remarks. There is nothing about it, I think, that guarantees
    lower drug prices. It is most likely to impact those startups
    specializing in those kinds of drugs and where launch prices
    are typically very high. And so, you will be above this
    arbitrary threshold with that very high-value drug. And I worry
    about diminishing those incentives.
        Having said that, I just want to echo something Dr. Miller
    said, which is I don't think transparency in the end is going
    to deal with the places where we have high drug costs in the
    United States. And the things under consideration today have
    merit, but they are not ultimately the solution. It is
    fundamental reforms of the type you talked about in Part D. I
    think those are important in Part B, where there is no
    particular reason to give 6 percent of the ASP to delivery of a
    drug. That is uncorrelated with the cost of actually treating a
    patient. So, reimburse for that instead. Those are the reforms
    that I think will be more effective than just transparency.
        Mr. Bilirakis. Thank you.
        One other question. Often when discussing high drug prices,
    we tend to focus on what is wrong without mentioning what is
    going right to ensure we achieve the desired result in a way
    that does not undermine the progress that has already been made
    or produce other negative, unintended consequences. Can you
    share with us what is currently working and how we might
    double-down on these efforts?
        Dr. Holtz-Eakin. As I noted at the outset, there is a
    tradeoff between financial incentives like prices and
    innovation. We are literally in an era with unprecedented
    innovation in the capacity to treat illnesses that were not
    previously deemed to be treatable. And all that is evidence of
    the power of that incentive, and I think it is important to
    hold onto that.
        I also think it is very important to think ``price for
    who?'' That has come up several times. And keep focusing on the
    fact that in some cases--so, for example, with the rebate rule,
    if, in fact, list prices don't go down, then there is a chance
    that premiums will go up for everybody. But the people who are
    going to be protected are those who have the biggest drug costs
    and the most severe conditions. That is exactly what an
    insurance program should do. And so, let's keep track of whose
    price is being affected as much as prices in general.
        Mr. Bilirakis. All right. Thank you very much.
        I yield back, Madam Chair.
        Ms. Eshoo. The gentleman yields back. I now would like to
    recognize the gentleman from Vermont, Mr. Welch, five minutes.
        Mr. Welch. Thank you.
        Just starting to acknowledge something that Dr. Holtz-Eakin
    said, we have made a lot of progress in pharma. Unfortunately,
    the price is starting to kill us.
        And I want to go to you, Ms. Joldersma. You mentioned that
    R&D is a big deal; there are 9 failures for every one success.
    And you said you spend a lot on R&D. My question is this: would
    you, on behalf of your member organizations and companies,
    provide to the committee specific and concrete information as
    to how much each company claims it has spent on R&D, how much
    it has spent on advertising, how much it has spent on stock
    buybacks, and how much it has spent on the top five paid
    compensation executives? Would you do that?
        Ms. Joldersma. I would have to consult with my counsel to
    know if----
        Mr. Welch. This is not a mystery here. I mean, what is the
    big deal? Pharma is claiming that it spends all its money on
    R&D, but it won't show us the books. So, at a certain point,
    count me as skeptical.
        Now, Dr. Miller, I think your research shows that what
    pharma claims it needs to spend is about 176 percent higher
    than what actually is required in order for them to get the
    return.
        Dr. Miller. I just want to be clear that the research I am
    citing is by other people. It was summarized in my testimony.
    There were a couple of things that were said. The amount of
    revenue that comes out of the United States alone exceeds
    worldwide R&D investments by something like 70 percent. And
    there have been studies that Arnold Ventures supported that
    show that the costs of producing the drugs are less than being
    claimed by the industry.
        Mr. Welch. Suggesting it is an inflated claim by pharma?
        Dr. Miller. Suggesting that.
        Mr. Welch. I mean, Madam Chair, all of us, R's and D's,
    whatever side we are on, we want to know what the facts are.
        So, you won't answer me now. You have to go back to your,
    quote, ``counsel''. Go back to your counsel and, then, answer
    me, and tell us whether we are going to get that information.
    But, while I am at it----
        Ms. Joldersma. Sir, I would be happy to provide the wealth
    of information that is already filed by our companies annually.
        Mr. Welch. I do not want a ``wealth of information''. I
    want four issues. One, R&D spending; 2, stock buybacks; 3,
    advertising; 4, executive compensation. That is all I want, not
    a ``wealth of information''.
        Ms. Joldersma. I believe that is all available, and I would
    be happy to provide it.
        Mr. Welch. All right. While I am at it, I want to ask this
    question: there is the justification of R&D. Sanofi increased
    the price of its drug Lantus by 171 percent from $99 in 2010 to
    $270 in 2018. That drug had been on the market since 2001.
    Presumably, the R&D that was done to put that drug on the
    market was done before 2001. How much R&D was part of the
    justification for that explosion in the price between 2010 and
    2018?
        Ms. Joldersma. I am not sure of the answer, but I suspect
    that it would be R&D for treatments and cures that we are still
    waiting for, not for that product.
        Mr. Welch. Give us the facts, all right?
        Now, Dr. Holtz-Eakin, you have made some criticisms that I
    actually think have merit about nibbling on the edges with
    transparency. I want transparency when there is a claim that it
    justifies the price increases. In some of the reporting, that
    is a big hassle. In the heart of this, you have nibbled around
    the edges, but what it reflects is the frustration that states
    and payers are having to try to get some grip on how they are
    getting hammered every year.
        And my question is whether some of the suggestions Dr.
    Miller makes you agree with, where we have to really bite the
    bullet and have the Government play a role. Our Government is
    the only one in the Western industrialized democracies where we
    stand aside and let the consumer get hammered. Price
    negotiation, would you be supportive of some of the price
    negotiation suggestions that Dr. Miller is making to apply to
    commercial as well as the PBMs and the rebates?
        Dr. Holtz-Eakin. Let me disappoint you. I mean, when I was
    CBO Director, we wrote any number of studies that said that
    negotiation wouldn't lower spending. CBO just recently issued a
    response to, I believe it was Senator----
        Mr. Welch. Without a formulary. It is with or without a
    formulary.
        Dr. Miller, why don't you----
        Dr. Holtz-Eakin. That is a key part of it, yes.
        Mr. Welch. That is right.
        Dr. Holtz-Eakin. It is a key part of it.
        Mr. Welch. And you get savings with a formulary. The
    formularies we have now are not done on behalf of the public.
    They are done for the benefit of the PBMs.
        Dr. Miller, give me your top three steps we have to take in
    order to start bringing to heal these outrageous drug prices.
        Dr. Miller. The first thing is, in Medicare Part D, adopt
    the changes that have been recommended that bring more pressure
    on the PBMs and change the risk structure, which both of us
    agree on. There is a whole set of patent, anticompetitive
    behaviors, legislation, that you are moving on; you need to
    move on; you need to move further.
        The last one-this is where we disagree potentially-on the
    drugs where there is not competition, that is where we are
    recommending that you think about things like negotiation and/
    or reference pricing. And we think it can be done without
    formulary exclusion; and I am happy to talk to you and your
    staff about that.
        Mr. Welch. Thank you.
        I yield back. I thank the witnesses. I thank the Chair.
        Ms. Eshoo. The gentleman yields back. I now recognize the
    gentleman from Oklahoma, Mr. Mullin, for five minutes of
    questioning.
        Mr. Mullin. Thank you, Madam Chair.
        And thank you for the witnesses to be here.
        I am going to focus on the FAIR Act, and there is going to
    be a little bit of a difference of approach. This is the
    difference between the gentleman from Vermont and myself. We
    both agree that drug pricing is too high, 100 percent. We 100
    percent agree with that. We do agree there has to be something
    done. The approach is what is different.
        See, I believe in private industry. I believe that, when
    the Government gets in things, the entry to the industry only
    gets more difficult and the less competition is there at that
    point. The more regulation that you put on the industry, the
    less people are going to enter into that industry. It is just
    matter of fact.
        When you start looking at the FAIR Act, you start looking
    at what it is wanting the companies to do. What that is, it is
    just one step closer to what I think the ultimate goal is to
    some Members in Congress, and that is to take over the industry
    and be Government-run. That is the quickest way you can
    possibly kill an industry.
        I mean, when you look at the FAIR Act and it says they want
    the total revenue and net profit generated from the qualifying
    drug for each calendar year since the FDA approved it, the
    total cost associated with marketing and advertising for the
    drug, the total revenue and net profit of the manufacturer, not
    the drug, for the manufacturer for 12 to 36 months, what does
    that have to do with anything? The compensation for the
    executives, what does that have to do with the Federal
    Government? Since when does the Federal Government get into the
    fact that they can limit the compensation for a non-Federal
    employee? But that is exactly what the FAIR Act is going to.
        What we want to do is figure out how Congress can make it
    more competitive. See, Congress is not in the business of
    creating businesses. We should not be in the business of
    creating jobs. What we should be in the business of is creating
    an environment for entrepreneurs to create jobs. When you allow
    competition in the market, then you are going to start seeing
    the competitive prices move downward.
        Now, Dr. Miller, what you said a while ago, I think there
    might be something that we can work on there. When you said
    where Congress should maybe look at is when there is no one
    else in the market, when it is a specialty drug. I could see
    that. I could see where there could be a way for us to possibly
    find an area to where we could help come up with a rebate or
    come up where you kind of look at it with the insurance, with
    someone with preexisting conditions, where we can help offset
    maybe some of that cost. There could be some areas for us to
    work on there.
        And I agree there is plenty of bad actors here. I think
    everybody has some stake to blame in this. And what I don't
    want to happen is that Congress overreacts. And I believe that
    is where we are moving, especially when you start looking at
    the FAIR Act.
        So, I am going to ask, ma'am, and I am going to do my best
    with your name--Joldersma?
        Ms. Joldersma. That will work.
        Mr. Mullin. That will work? How do you actually pronounce
    it?
        Ms. Joldersma. Well, ``Yeldersma'' is how they would say it
    in the homeland. So, you are exactly right. But we say
    ``Joldersma'' here in the U.S.
        Mr. Mullin. Joldersma?
        Ms. Joldersma. Yes.
        Mr. Mullin. I am going to say ``ma'am.''
        [Laughter.]
        So, let me get into some questions, first of all, for you.
    Is PhRMA opposed to reporting price increasing to the
    Secretary?
        Ms. Joldersma. No, in fact, it is already publicly
    disclosed.
        Mr. Mullin. OK. What kind of problems do you see with the
    Fairness Act then?
        Ms. Joldersma. With the FAIR Act?
        Mr. Mullin. FAIR Act. Sorry. Yes, it is not Fairness Act.
    That is another bill I am working on.
        Ms. Joldersma. One leading concern is it is somewhat
    ambiguous, but it appears that it could be applying
    retroactively. Because one of the triggers is a 3-year trigger,
    you know, you think about that. Taking, in fact, in 2019, we
    are concerned that that is effectively imposing the requirement
    going back to price increases that were taken three years ago.
    That retroactivity seems not ideal and not a great precedent,
    and it is certainly challenging to comply with the law in good
    faith when the law was not even on the books at the time the
    conduct occurred. So, that is probably our top issue.
        Mr. Mullin. The FAIR Act requires, I believe, a 30-day
    notice.
        Ms. Joldersma. Yes, sir.
        Mr. Mullin. Is that time acceptable or is there a better
    timeframe for you?
        Ms. Joldersma. So, it does require a notification of price
    increases 30 days in advance. It goes to the Secretary. We are
    concerned that that could lead to some negative behavior in the
    market, including potentially opportunistic buying at the lower
    price, stockpiling. That could lead to drug shortages, et
    cetera. So, in general, we are very concerned with advanced
    notice.
        Mr. Mullin. Thank you.
        With that, I will yield back. Thank you, Madam Chair.
        Ms. Eshoo. The gentleman yields back. And now, I have the
    pleasure of recognizing the gentlewoman from New Hampshire, Ms.
    Kuster.
        Ms. Kuster. Thank you, Madam Chair.
        And thank you to all of you for your patience, bearing with
    us.
        So far, we have had multiple hearings on the critical issue
    of our bipartisan efforts to lower prescription drug prices.
    And the bottom line is simple: drug spending is placing an
    undue burden on our constituents, patients across this country,
    and taxpayers who are footing the bill for our public programs.
        Mr. Miller, you mentioned in your testimony, `` whether we
    like to admit it or not, we are actually rationing drugs in our
    country. And in our current system, patients and payors are
    forced to make difficult tradeoffs and choices.''
        I want to step into, I understand there is no silver bullet
    on bringing down the rising cost of drugs, but I do want to
    focus in on your testimony, if I could, Mr. Miller. You
    mentioned how transparency efforts under consideration would
    not necessarily lead to lower drug prices, though they might
    help us understand more clearly why drug prices are increasing
    at the rates that they are. Do you believe that requiring
    justification for launch prices and price increases will at
    least slow the rate of growth in drug prices or that
    pharmaceutical companies might reconsider price increases with
    transparency?
        Dr. Miller. I think you could have some small Sentinel
    Effect. I think, ultimately, it doesn't stop the wave.
        Ms. Kuster. So, your advice seems to be to go further than
    that and go toward the negotiation of volume discounts. And in
    particular, I am looking at the Medicare negotiation based on
    leveraging volume discounts. And you mention Part D
    negotiation. Can you elaborate on how Part D negotiation might
    look? Especially taking into consideration the high cost of
    drugs now with limited competition, it seems to me both the
    patient and the taxpayer are paying more than they should.
        Dr. Miller. OK. Yes, I will. But, very quickly, I just want
    to remind you part of our recommendations are start to rebuild
    the competition in the market. I don't want to forget that.
        Ms. Kuster. OK.
        Dr. Miller. That is a very important----
        Ms. Kuster. And that is important.
        Dr. Miller. Absolutely important.
        Ms. Kuster. I concur.
        Dr. Miller. We also think, in Part D, once again, bringing
    the pressure to the PBMs and the manufacturers in the
    catastrophic cap, to kind of force negotiations where, in fact,
    you do have competitors, is very important. And then, I am
    stepping into your question. OK?
        Ms. Kuster. OK.
        Dr. Miller. Sorry about that.
        Ms. Kuster. Got it.
        Dr. Miller. But, you know, you will still always be faced
    with very expensive drugs that don't have competition. And so,
    there are a few ways we would suggest that you might think
    about that. One is you think about a reference price. So, we
    look at the clinical value of the drug and say that the
    Medicare program will cover this drug, but the price it will
    pay and the beneficiary's copayment will be tied to the
    clinical value.
        Ms. Kuster. And let me just stop you there. Clinical value
    maybe as compared to hospitalization or as compared to future
    surgery? How do you determine clinical value?
        Dr. Miller. Usually, what you are doing is talking about
    the performance of the drug in and of itself on the value it
    adds to the life of the patient. That is usually how that is
    done.
        Ms. Kuster. OK. Longevity or quality of life.
        Dr. Miller. You could engage in other studies like
    hospitalization watchful waiting, WAW, but mostly what we are
    talking about here are clinical and cost-effectiveness analysis
    that talk about extending the patient's life, that type of
    thing.
        Let me just give you one other to your question. You could
    think of a negotiation process in which you set lanes for the
    bids, so that you are saying there is some range of negotiation
    between the manufacturer and the Government, but it is not
    completely wide open. And you might use some of the clinical
    effectiveness to set those ranges or international prices, some
    set of considerations.
         Why I am making this point is it is a way to try and get a
    more rigorous process that CBO might give credit for.
        Ms. Kuster. So, let me ask you this: do you think that the
    Federal Government is taking maximum advantage of their volume
    purchasing power, if you will, in the negotiations? I am just
    wondering, for example, if we were to consolidate, say, for
    Medicare and Medicaid, veterans, Federal employees, DOD, all of
    these together, do you think that we could do better in the
    price negotiation for the drugs where there is an equivalent,
    where we are talking about competition?
        Dr. Miller. I see. So, in this instance, you are moving the
    conversation. You are not talking about the drugs that don't
    have competition? You are talking about the drugs that do have
    competition?
        Ms. Kuster. Right.
        Dr. Miller I haven't thought about it, and I just want to
    say one thing. There are certain tradeoffs you would have to
    contemplate in how you do that. For example, in Medicaid, there
    are very large discounts. And so, if you move to a different
    system, you have to ask yourself, do you lose those discounts?
        Ms. Kuster. Right. Can you do better than that discount?
        Dr. Miller. Yes, can you do better? And then, VA, which I
    am very uninformed on, the same question. But a very----
        Ms. Kuster. Just as a theoretical concept, would you agree
    that the larger the volume share----
        Dr. Miller. Yes, and that is exactly where I was going.
    Just a straight economics, bigger volume, bigger ability to
    extract discounts because it is harder to walk away.
        Ms. Kuster. Thank you. I yield back.
        Ms. Eshoo. The gentlewoman yields back. I now would like to
    recognize the gentleman from North Carolina, Mr. Hudson, for
    five minutes of questioning.
        Mr. Hudson. Thank you to the Chair.
        And thank you to our panel for being here today. This is
    very informative.
        Every time I go home, I hear from my constituents about
    high drug prices. I will never forget the constituent I met
    years ago who told me that she literally some months had to
    choose between picking up her prescription and paying for
    groceries. This is a problem.
        And in this committee, we have a long history of bipartisan
    work to address the most serious problems facing Americans. I
    believe we should continue that work, but I am having a tough
    time seeing what some of the policies that were proposed here
    will accomplish for American patients.
        Doing some rough, back-of-the-envelope math, I took one of
    the most recent examples of a drug failure, Biogen's Alzheimer
    drug, and looked at what it would take to recoup their
    investment. Biogen spent $950 billion seeking a cure for
    Alzheimer's that ultimately failed. It was disheartening for me
    and many others, particularly those who have relatives with
    Alzheimer's, but also illuminated what it takes to bring a drug
    to market.
        So, back-of-the-envelope math, let's say Biogen was
    successful with the latest attempt. There are 5.8 million
    people in the United States with Alzheimer's. So, assuming
    every single one of them was able to access this drug, Biogen
    would have to charge, roughly, $164,000 to break even on all
    their research. This is, arguably, a bargain compared to not
    only the roughly $350,000 of cost to care for an Alzheimer's
    patient over a lifetime of the illness, but also the emotional
    cost that families endure watching a loved one deteriorate
    right before their eyes, as my family has experienced.
        Under the SPIKE Act, this price or anything higher would
    have triggered a naming-and-shaming exercise. What benefit does
    this have for patients? Ideally, patients would be taken out of
    the middle of this conversation.
        And this brings me to my questions, which the first one I
    will open to the entire panel. The FAIR Act includes high
    penalties for noncompliance. Where should those penalties,
    where should that revenue go to? As it is currently written, do
    you see them going to benefit patients or is it going back to
    the Treasury to be spent by politicians? Shouldn't they be
    explicitly designated to help those who need it most and not
    just go to the Treasury for Congress to spend? I would just
    open it up to the panel, if anyone would like to talk on that.
        Ms. Joldersma. We would agree. We would note that the fees
    are quite high. And, yes, it would be ideal to have those fees
    going to help patients.
        Mr. Hudson. Anybody else? I see some nods. OK.
        Dr. Feldman. It is kind of a no-brainer, back to the
    patients.
        Mr. Hudson. OK. I will assume everybody agrees.
        Ms. Bass, in your testimony, you mentioned the real-time
    benefit tools to help physicians and patients know what drugs
    are on formulary and what the cost-sharing would be. How could
    your industry, the PBM industry, facilitate making this a
    reality?
        Ms. Bass. So, those tools are already in use. And I think
    one of the issues, everybody understands that it needs to be as
    streamlined as possible for physician workflow. And so,
    hopefully, the interoperability exercise that the
    administration is currently undergoing will help make sure that
    every physician has access and it works really quickly. But all
    of our PBMs, most of our PBMs are making that product available
    already in the marketplace.
        Mr. Hudson. Great.
        And, Ms. Joldersma. I hope I am not butchering your name. I
    know lots of states have been passing legislation to get to the
    bottom of why drug prices are increasing. But the bills we are
    talking about today go beyond any State law currently on the
    books. Do you worry about the burden of companies complying
    with a patchwork of 50 State laws plus this Federal law?
    Because if there ever was a time for preemption, it seems to me
    like this would be it. What are your feelings?
        Ms. Joldersma. Absolutely. There are, I think, seven or
    eight different approaches already on the books in states.
    There are additional states who are probably today considering
    different approaches. We have different approaches that are
    coming to light here in the Congress as well. And all of that
    is just added cost that is not going to research and it is not
    going to help patients. So, absolutely, harmonization/
    preemption are high priorities.
        Mr. Hudson. Great. Well, I appreciate that.
        And, Madam Chair, I look forward to continuing to work with
    you to focus on patients, and we have a long track record of
    working together in a bipartisan way on this committee. I think
    as long as we continue to focus on the patients and use common
    sense, I think we can get there.
        So, with that, I will yield back.
        Ms. Eshoo. The gentleman yields back. And now, the
    gentlewoman from California, Ms. Barragan, is recognized for
    five minutes for her questioning.
        Ms. Barragan. Thank you.
        I want to follow up on that. You know, while we are here in
    Congress drafting legislation and debating what to do, we have
    seen States taking up legislation that shines light on
    manufacturers' drug pricing. Part of that is attributed to the
    fact that Congress isn't moving and Congress isn't doing
    anything; that States are acting to help consumers and to help
    people who are rationing their drugs.
        In my own State of California, they passed a drug
    transparency law in 2017. It requires drug companies to notify
    health insurers and Government plans at least 60 days in
    advance if they plan to increase a drug price by more than 16
    percent in a 2-year period. Now the law also requires the
    companies to explain the reason behind the increase in price,
    with all of the information provided to the State made public
    online for citizens to review.
        Now PhRMA sued to block the California law. This may be
    because the law was effective in shining a light on upcoming
    price increases. For example, it showed that Valeant was going
    to raise the price of a generic glaucoma medication by 63
    percent and that Teva Pharmaceuticals planned a 49 percent
    price increase for an inhaled solution to prevent asthma
    attacks.
        Ms. Joldersma, you testified that PhRMA supports
    transparency. In this case, PhRMA sued to block this California
    law that would have transparency. Did PhRMA sue to block the
    California law because you are concerned about the unfair drug-
    pricing policies of drug manufacturers?
        Ms. Joldersma. No, we sued to block the California law
    because we believe it is unconstitutional in at least two ways,
    the Dormant Commerce Clause and, also, First Amendment
    compelled speech. And we are also concerned about the impact
    that that 60-day advance notification could have on the market;
    given the opportunity it creates for bulk purchasing,
    stockpiling, and----
        Ms. Barragan. OK. Let me ask you another question. So, if
    Congress passed that same law, you would have the same
    concerns, is that correct?
        Ms. Joldersma. Well, the Federal Government, obviously, has
    different authority to regulate interstate commerce.
        Ms. Barragan. I am just asking, if Congress passed the same
    law, would you have the same concerns?
        Ms. Joldersma. First Amendment compelled speech remains a
    concern.
        Ms. Barragan. OK. I am just going to take that as a yes,
    because it is just a yes or no.
        Ms. Joldersma. Yes.
        Ms. Barragan. I have other questions I want to get to.
        Ms. Joldersma. The answer to that is yes.
        Ms. Barragan. Thank you very much.
        Ms. Joldersma. Yes.
        Ms. Barragan. So, during the drug supply chain hearing a
    week ago, Amgen raised the issue of lowering the list price of
    their cholesterol drug by 60 percent. However, PBMs have not
    shifted this drug from high-cost formulary tiers to lower-cost
    tiers which carry lower copayments.
        Ms. Bass, you testified that the mission of the association
    you represent, the PBMs, is to help control cost. So, do you
    support patients having access to these lower-price drugs? It
    seems that when you have a specific instance like in this one,
    we are not seeing the movement.
        Ms. Bass. So, I testified that the mission of our companies
    is to provide access to lower-cost drugs. I can't speak to
    specific company decisions with respect to these drugs, but our
    companies negotiate to the lowest net cost and make their
    decisions accordingly.
        Ms. Barragan. OK. Well, thank you.
        So, Mr. Isasi, I am dead-focused on trying to find
    meaningful solutions to the drug-pricing problem. My
    constituents continue to demand that we find a way to
    significantly lower the price of medications. In your
    testimony, you discuss that, while you are supportive of these
    transparency bills, that transparency legislation alone will
    not significantly affect the price of prescription drugs. You
    go on to state that Medicare Part D negotiation should be
    enacted as a meaningful step to lower prices. While you discuss
    one specific negotiation bill in your testimony, I would like
    you to focus on the policy generally. Do you have any
    projections on the impact on drug pricing if we enact Medicare
    Part D negotiation? And then, beyond Medicare negotiation, what
    other policies should Congress pass to meaningfully lower
    prices?
        Mr. Isasi. Sure. Thank you very much for the question.
        So, this question of the projected savings is very
    difficult, in large part because industry has done a very good
    job of veiling what the actual price is that we are paying, how
    the monies are flowing; and so, it is a very, very difficult
    thing to model.
        But what we know for sure is that, in order for it to work,
    something as simple as just saying ``the Government can
    negotiate'' won't work. We need to have a serious way to put
    teeth in negotiations to make sure that industry shows up and
    in good faith negotiates. So, there are lots of policies. One
    of them would be something like allowing others to produce a
    drug if the pharmaceutical industry isn't willing to negotiate
    a fair price. Another one is imposing a tax on excess profits,
    things like that. So, there is a lot of different methods; but
    you have to real teeth in negotiations or it won't work.
        But what we do know is, just common sense, as I mentioned
    earlier, the pharmaceutical industry starts in the U.S. when
    they launch prices most often because they know we don't
    negotiate. So, they get a very, very high price in the United
    States, and then, they go around the rest of the world and they
    start negotiating.
        And so, for example, we know that we spend maybe 50 percent
    or 100 times more than other countries on drugs, not all drugs,
    but many drugs. For example, in Norway, Humira is almost twice
    as much as what we are paying; Crestor is four times more in
    Australia and in France. So, we know in those cases, Government
    negotiation results in fourfold decrease in price.
        And then, another thing we know is that, as I mentioned,
    manufacturers start in the U.S. The last thing to say is, I
    think there are three really important policies to think about
    beyond negotiation. The first is to think carefully about those
    increases in price year over year, because it is not just the
    launch prices. We have heard that industry has had a really
    hard time because so many of the drugs go to generic. So, they
    just increase prices far above inflation year over year. So,
    the idea of thinking about how price should be tied to
    inflation year over year is really important.
        Two, as Dr. Miller mentioned, we need to understand the
    value of the benefit.
        Ms. Eshoo. Excuse me to interrupt because it is over the
    time, but there is also a 1:30 classified briefing for all
    Members of the House. And I think that it is important that
    everyone be able to get there.
        So, the gentlewoman yields back. And I now would like to
    recognize the gentleman from Georgia, Mr. Carter.
        Mr. Carter. Thank you, Madam Chair, and thank you for
    having this hearing. This is extremely important.
        Thank you to each and every one of you for being here.
        Dr. Feldman, earlier you had a conversation about list
    price. And my colleague before me just mentioned about list
    price, and we were taking about it.
        Ms. Bass, you mentioned that your concern was net price.
    Let me ask you, a copayment to a patient, is it based on list
    price or net price?
        Ms. Bass. Copayments are a set price.
        Mr. Carter. Copayments are a set price? They could be a
    percentage. Is that percentage based on a list----
        Ms. Bass. Oh, sure.
        Mr. Carter. Is that percentage based on the list price or
    the net price?
        Ms. Bass. Co-insurance is typically based--it depends on
    the plan, but in Medicare, say, co-insurance is based on the
    list price.
        Mr. Carter. On the list price. So, if the list price is
    higher, then the copay to the patient could be higher? Yes?
        Ms. Bass. That math works.
        Mr. Carter. That math works. Good. That is new math, but it
    still works. Great.
        Let me ask you, in Medicare Part D, also, patients go from
    deductible to the donut hole, and then, into the catastrophic.
    Is that based on list price or is that based on net price? It
    is based on list price.
        Ms. Bass. The deductible, yes.
        Mr. Carter. So, the higher the list price, the quicker they
    get into the donut hole; the quicker they get into
    catastrophic. And if they get into catastrophic, then the
    taxpayer is the one who is on the hook because they are paying
    the majority of it, not the plan sponsor, not the insurance
    company, correct? That is correct.
        Let me ask you, Dr. Feldman, you mentioned, correctly, that
    when Ms. Bass was asked about how many members or how many PBMs
    there were in the nation, there were 66, I believe you said.
    However, you mentioned that there were three PBMs that control
    80 percent of the market, and that is correct. Not only that,
    but also those three PBMs that control 80 percent of the market
    also have an insurance company that they own and also have
    pharmacies they own. In fact, that vertical integration carries
    over into that.
        You mentioned that you had some patients who came in and
    had a letter that said that they had to change a particular
    drug to something else that was on the formulary. Just out of
    curiosity, any of those, the insurance or the pharmacy is owned
    by that PBM, or would you know that?
        Dr. Feldman. This was a particular PBM that is now owned by
    an insurance company.
        Mr. Carter. Exactly. So, in other words, the PBM is
    directing that patient to use a drug on the formulary through
    their mail order pharmacy or through their pharmacy. It may not
    be a mail order. Because we know that Aetna owns Caremark, owns
    CVS. We know that Express Scripts owns Cigna, owns Express
    Scripts mail order. We know that Optum is owned by United and
    has their own mail order as well.
        So, what we are essentially talking about here is taking
    money out of one pocket and putting it in the other pocket.
    Because if you ask the PBMs where are these discounts, as the
    chairlady likes to say, or rebates going, they say, ``well,
    they are going to the plan sponsor to decrease the premium.''
    Well, who is setting that premium? The insurance company that
    they own in many cases. So, that vertical integration is
    something that is very concerning.
        Let me change gears here for just a second and ask Dr.
    Miller and Dr. Holtz-Eakin: Earlier Ms. Joldersma was asked
    about one of the parts of this bill that says that drug
    companies would have to give notification before they went up
    on a price. And there was concern about stockpiling. Are you
    familiar with spread pricing and how that works, either one of
    you?
        Dr. Miller. Yes.
        Mr. Carter. OK. And do you agree in her assessment that,
    you know, if we know that if a pharmacy or a wholesaler knows
    that a price is going to be going up, that there is a
    possibility that they would stockpile those drugs in order to
    buy them at a lower cost and, then, also to be able to keep
    them, so that they can sell them at the higher price?
        Dr. Miller. My own comments are--and I just want to preface
    by saying I still don't think that the transparency has a huge
    effect, but----
        Mr. Carter. Did I ask you that? What I asked you about was
    this fair pricing.
        Dr. Miller. To the question that you are asking----
        Mr. Carter. Thank you very much.
        Dr. Miller [continuing]. I think I would say that I would
    not do a prior notice.
        Mr. Carter. You would not do a prior notice?
        Dr. Miller. For the reasons that you are raising.
        Mr. Carter. Thank you.
        Dr. Holtz-Eakin. I would be concerned about that as well.
        Mr. Carter. Absolutely. And I can tell you from firsthand
    experience, and from having been in business and owning a
    pharmacy for 30 years before I became a Member of Congress,
    that was something we did all the time. If we knew the price
    was going up, of course, we are going to buy it at the lower
    price and stockpile it. So, there is a danger there, and I
    would warn you very carefully in this legislation to be careful
    of that. That is something that could happen.
        Madam Chair, I want to thank you again for holding this
    hearing.
        And also, the Prescription Pricing for the People Act that
    has the FTC, an investigation into potential anticompetitive
    business practices and the PBM-pharmacy relationship, that is
    an issue that our committee has asked the FTC to investigate.
    And I hope, Madam Chair, that will come to us and that we will
    have access to that report, so that this committee can look at
    it.
        Thank you, Madam Chair, and I yield back.
        Ms. Eshoo. I thank the gentleman. He yields back. Recognize
    the gentleman from Maryland, Mr. Sarbanes, for five minutes of
    questioning.
        Mr. Sarbanes. Thank you. Thank you, Madam Chair.
        Thanks to the panel.
        Mr. Isasi, I assume you are familiar generally with how,
    for example, state-level insurance commissioners regulate the
    premium hikes that health insurance companies bring on an
    annual basis, where they ask for information to justify those
    proposed increases. And then, as well, we see the example of,
    say, electric utilities--sorry, I have a cold--who have to
    justify any rate increases that they propose and provide a good
    deal of information.
        Do you have a sense of how the kind of information that we
    have available to us from the pharmaceutical companies or the
    PBMs compares to the kind of information that is available to
    the public or to the commissions that operate in those other
    arenas that I mentioned?
        Mr. Isasi. It is a much poorer quality, because it is not
    being collected to understand how the rates are being built. It
    is just being collected.
        Mr. Sarbanes. Yes. And I am increasingly intrigued by using
    that example as a kind of reference point for the kind of
    insight that we should be getting into the drug pricing.
    Because, frankly, I think if you look at the impact on the
    public of drug prices, it is hard to argue that it isn't as
    extensive and permeating as those other things are, where we
    bring a different kind of approach.
        I wanted to ask Ms.--I can't see your name all the way down
    there at the end----
        Ms. Joldersma. Lisa.
        Mr. Sarbanes [continuing]. Ms. Joldersma----
        Ms. Joldersma. Call me Lisa.
        Mr. Sarbanes [continuing]. And Ms. Bass, talk to me a
    little bit about the excuse/explanation for resisting some of
    the transparency measures that we have suggested, based on the
    concern about proprietary information. What is the argument
    there exactly?
        Ms. Bass. I will start. So, I will cite OACT, the Office of
    the Actuary, and CBO as well, in suggesting that if pricing
    becomes public, which it would under the Secretary's rebate
    rule, prices go up, OACT and CBO think, by about 15 percent. In
    other words, competitors are not willing to discount as deeply
    when they know the competition's less deep discount. And so,
    prices, the net cost, the way we talk about it, float upward.
    And probably there would be about, according to OACT and CBO--
    and we think that is about right--a 15 percent loss, in effect,
    of savings, or a 15 percent increase.
        Mr. Sarbanes. Do you buy that, Mr. Isasi? And if you do buy
    it, do you think the approach I was just discussing a moment
    ago could be an antidote to the result that was just being
    described; i.e., if that kind of transparency creates some
    pressures in the direction Ms. Bass just suggested, then the
    counter-pressure could be authority residing within some
    Governmental entity to come in and push back on that? So, maybe
    you could speak to that.
        Mr. Isasi. That is right. So, that is the fundamental
    question here: is it just transparency or is it transparency
    with teeth? And I think it is really important to note that we
    need to have transparency with teeth. We have to have an
    ability for the Government to come in and say--and this is
    what, again, 80 percent of Republicans, 90 percent of
    Democrats, are asking for, right?--the Government to come in
    and say, ``That's not a fair price. We will not pay it.'' You
    have to combine both things together.
        Mr. Sarbanes. Yes. Well, I am for transparency with teeth,
    just for the record.
        And maybe, Dr. Holtz-Eakin is for transparency with teeth.
    He did wonder or worry about, or at least observe, that
    transparency alone might not achieve the goals that we seek.
    And I share some of that, those misgivings. But I think
    transparency in combination with other measures we could take
    would get us to a place that we want to get to on behalf of
    Americans who are paying too much for their drugs.
        With that, I yield back my time. Thank you.
        Ms. Eshoo. The gentleman yields back. Now I would like to
    recognize the gentleman from Montana, Mr. Gianforte.
        Mr. Gianforte. Thank you, Madam Chair.
        And thank you for the panel for being with us today.
        I continue to hear from Montanans about the cost of their
    prescription drug medications and the difficulties they face in
    trying to pay for their drugs. During our first hearing on drug
    prices this Congress, I spoke about a constituent in Great
    Falls whose lupus medication had increased by hundreds of
    dollars in recent years. The price increase put her and her
    family, made them financially unstable. Unfortunately, her
    story is not uncommon.
        We need to find common-sense solutions, and I look forward
    to finding those with my colleagues across the aisle, to make
    drugs less expensive, increase transparency where it is needed,
    and put patients first.
        Although I appreciate the FAIR Act and understand what it
    is trying to accomplish, as a business owner, when I look at
    the list of reporting requirements in the bill, I do have some
    concerns. It seems that there are requirements that
    manufacturers might not be able to provide answers for.
        Dr. Holtz-Eakin, can you speak to the challenges of
    gathering the required information regarding research and
    development and manufacturing costs?
         Dr. Holtz-Eakin. Well, certainly I think the reporting
    requirements are extraordinarily extensive. I have never seen
    anything like it. And if you started today and had to go back,
    you might not have the records in place to do it, especially
    the smaller firms. Going forward, you would have to put in
    place the sort of mechanisms to collect that on a regular
    basis.
        Mr. Gianforte. So, do you believe, based on the complexity,
    that it might be the situation that certain firms would not be
    able to comply with these new rules?
        Dr. Holtz-Eakin. I would suspect that at the outset, yes.
        Mr. Gianforte. OK. I am also concerned that the FAIR Act
    gives the Secretary very broad authority to include other
    information that the Secretary considers appropriate.
    Typically, I would say, I am all in favor of flexibility for
    the Secretary, but the list of regulations in the bill is
    already incredibly robust. To me, it seems that if something
    was left out or needs to be added, it should be done
    legislatively as opposed to through the Secretary.
        So, I just want to follow on, if I could, Dr. Holtz-Eakin.
    Can you speak briefly to the estimated cost to consumers of
    these regulations?
        Dr. Holtz-Eakin. I don't have an estimate of the cost. But
    I just want to echo something you just said. You can imagine
    putting in place systems to collect the data because you want
    to comply with the law, assuming it was passed. And then, the
    Secretary changes the nature of the information that you have
    to provide. You now are back at the starting situation where
    you haven't collected it and you have to go back. So, it could
    get progressively more costly if that is how it transpired.
        Mr. Gianforte. OK. So, if you can't comment specifically on
    cost, if all these new reporting requirements were signed into
    law, and the Secretary decided there was more information that
    he needed, how do you think that would affect new drugs coming
    to market?
        Dr. Holtz-Eakin. I think they would be more costly to
    provide and they would be more expensive.
        Mr. Gianforte. OK. Which is not the objective that we are
    shooting for.
        Dr. Holtz-Eakin. Yes.
        Mr. Gianforte. A question, if I could, for the whole panel.
    I support transparency across healthcare. I think that
    consumers need to know exactly what they are paying for. It is
    my understanding that the rationale behind these bills is that
    the Federal Government is a large payor in the system today;
    therefore, we need to know about price increases. That makes
    sense.
        I support the idea of flagging large increases in price,
    but looking at the whole picture, pharmaceutical spending
    accounts for less than 20 percent of what the Government spends
    on healthcare. Are there other aspects of healthcare in the 80
    percent that need to report price or fee increases as well to
    the Federal Government? For example, do hospitals have to
    report increases in surgical supplies or procedures that
    Medicare is going to cover?
        Dr. Miller. One thing to keep in mind is that hospitals on
    the Medicare side do report a cost report and they do lay out
    what their cost structures are. However, you have a very
    similar situation in the hospital industry where you have high
    degrees of consolidation and high prices escalating. So, there
    is certainly a question that could be brought to bear in there.
        Mr. Gianforte. OK. Other comments?
        Dr. Feldman. From the physician's point of view, we are
    told every year how much we are paid. So, that information is
    already out there.
        Mr. Gianforte. So, we should be arguing for, we should be
    working for transparency in all areas? Anybody else who would
    like to add anything?
        Mr. Isasi. We strongly agree with that. And the problem of
    price in healthcare is not just a pharmaceutical issue, but it
    is a big pharmaceutical issue.
        Mr. Gianforte. And I think our constituents expect us to
    look at all of healthcare costs, certainly drugs-that is the
    topic today-but more broadly.
        Comments?
        Ms. Joldersma. I would like to just follow up quickly on
    something that Representative Sarbanes raised. He did mention
    the rate review framework put into place for health insurers
    and the fact that they have to give advance notice of
    increases----
        Mr. Gianforte. Unfortunately, my time is up, and I yield
    back, Madam Chair.
        Ms. Joldersma. It is only one year, not three.
        Ms. Eshoo. The gentleman yields back. I now would like to
    recognize the gentleman from Kentucky, Mr. Guthrie, for five
    minutes.
        Mr. Guthrie. Thank you very much. Sorry, I was in another
    hearing on a committee that I am the ranking member of the
    subcommittee. So, I wasn't here for a lot of discussion. So, I
    will just ask a couple of questions. I know we are pushing
    against a deadline here.
        So, for Dr. Feldman and Dr. Holtz-Eakin, MedPAC recommended
    that the information provided to the Secretary regarding
    samples be shared with specific other entities. How might this
    information be helpful to oversight agencies, researchers,
    payers, and health plans? And how is selectively sharing this
    information different from publicly posting it?
        Dr. Feldman. Public posting it leaves it open to anyone
    with any opinion to create a campaign on Twitter and various
    social media, which can lead to really false impressions of
    what the samples really do accomplish for patients.
        Mr. Guthrie. OK.
        Dr. Holtz-Eakin. I think that is the chief concern. And
    professional analysis of the data should be welcomed.
        Mr. Guthrie. OK. Thank you.
        And everybody here wants transparency and lower drug
    prices, but we have to get this right. So, if you are looking
    at the SPIKE and the FAIR Act, the SPIKE and the FAIR Act use
    different definitions for a manufacturer. While the FAIR Act
    uses the proper Food, Drug, and Cosmetic Act definition, the
    SPIKE Act uses a definition for a manufacturer that is
    improper.
        And, Ms. Joldersma, drafting concerns have been raised
    that, while the intent of the drafters was to provide
    discretion to the manufacturer on which materials would justify
    their SPIKE disclosure, the language is not clear or
    prohibitive that the Secretary cannot reject such a
    justification or ask for additional disclosures from the
    manufacturer. The question is, do you agree that this is an
    issue, and if we pursue this bill, the language needs to be
    clarified?
        Ms. Joldersma. I do.
        Mr. Guthrie. What are the issues that would happen if you
    didn't clarify it?
        Ms. Joldersma. I am sorry?
        Mr. Guthrie. So, the issues, if it wasn't clarified, then
    it would open up to----
        Ms. Joldersma. If it wasn't clarified, I think that, given
    the certification requirement in that bill, I think
    manufacturers would believe they have to provide every single
    thing listed as illustrative in the bill, regardless of whether
    it was applicable to the actual increase or not.
        Mr. Guthrie. So, as our colleague here defined,
    manufacturer in the FAIR Act is the better route?
        Ms. Joldersma. They both have issues that we would like to
    work with the committee on.
        Mr. Guthrie. OK. Thanks. Fair.
        And one final question, Dr. Holtz-Eakin. You note in your
    testimony that there are elements of transparency that can have
    inverse market impacts. Can you explain this issue more and how
    Congress can ensure helpful transparency is done while not
    driving unwanted behavior?
        Dr. Holtz-Eakin. You simply don't want to disclose the
    outcome of other people's negotiations, so that competitors can
    take advantage of it. So, that kind of transparency is actually
    counterproductive.
        Mr. Guthrie. What would be an example of that?
        Dr. Holtz-Eakin. Well, if, for example, Mark cut a deal on
    a big rebate for his drug and I found out about it, I would be
    like, well, geez, I didn't get that rebate. And that would lead
    that negotiation to have less vigor the next time around; they
    may not give such a big rebate.
        Mr. Guthrie. Well, thank you. I appreciate that.
        And I will yield back.
        Ms. Eshoo. The gentleman yields back. I will recognize the
    gentlewoman from Illinois, who is the sponsor of the FAIR Drug
    Pricing Act, Ms. Schakowsky, for five minutes. And I think
    because Ms. Schakowsky is waved onto the subcommittee, that she
    will be the last Member that is questioning. So, hold on,
    testifiers; you are just about through.
        Ms. Schakowsky. I thank the chairwoman for allowing me. I
    will be as quick as possible.
        This is what people with multiple sclerosis are facing, for
    example, showing the increases over just three years in the
    cost of their drugs. Betaseron went from $65,000 to $92,000 in
    those three months. Avonex went from $62,000 to $88,000 in
    these two months--in those three years. I am sorry.
        You know, the whining that is going on about having to talk
    about some transparency is really irritating to me. The drug
    companies tell us all the time that it is about research and
    development; it costs so much. How much? That is the question
    in the FAIR Act, which is my bill. How much? If you are going
    to use that as the excuse for raising the prices, then I think
    we have an absolute right to know how much is being spent.
        The ten top drugs that are advertised on television - and
    we are going to see, because of the cooperation with the
    President of the United States, those list prices next to the
    drug on television - the ten top ones, every month it is either
    between $500 per drug up to $17,000 per drug per month. And so,
    we want to know how much are you really spending on marketing
    and advertising.
        Believe me, these are not extraneous questions. These are
    what consumers want to know. They want to know the
    manufacturing cost. They want to know how much money are you
    making. ``I can't afford your medication,'' they say. And so, I
    am going to get sick. And so, I want to know, how much are you
    making off of me when I can actually pay for this?
        So, really, the idea that transparency is going to cause
    all these problems, and problems for consumers, I wonder if my
    friend Mr. Isasi, whatever, could answer that.
        Mr. Isasi. Isasi. No problem.
        Ms. Schakowsky. Isasi? No Isis, OK.
        Mr. Isasi. No, not Isis; Isasi.
        I would say that we share your skepticism about this
    concern, very much share this skepticism. And it is the very
    least, as you say, when people's lives are hanging in the
    balance and they are making decisions that in some cases end up
    in their death because they can't afford their drugs. At the
    very least, there could be more transparency about the way
    these funds are flowing.
        And I want to point out that the makers of the top 12 best-
    selling drugs in the United States have filed, on average, 125
    patents per drug; for an industry filing, 125 patents per drug.
    It seems like a little transparency about how they are spending
    their money isn't much of a burden.
        Ms. Schakowsky. I really appreciate that.
        We do have to go to a classified briefing.
        I just want to say I think, at the very least, consumers
    deserve transparency. But I also want to agree with you, it has
    to be with teeth. We are going to do more than this getting
    transparency. We are going to have to lower the cost of
    prescription drugs. People are dying. They can't afford it. So,
    this is just the beginning.
        Thank you very much, and I yield back.
        Ms. Eshoo. The gentlewoman yields back.
        Pursuant to committee rules, Members have 10 business days
    to submit additional questions for the record, to be answered
    by the witnesses who have appeared. And I ask each witness to
    respond as promptly and as fully to the questions that you
    receive.
        I ask unanimous consent to enter into the record the
    following documents:
        A letter from the American Society of Clinical Oncology
    regarding H.R. 2296, 2087, and 2064.
        A letter from the Campaign for Sustainable Prescription
    Pricing in support of H.R. 2296, 2069, 2087, 2064, 2757.
        A letter from the AARP in support of H.R. 2296, 2069, 2087,
    2115, and 2064.
        A letter from the National Multiple Sclerosis Society.
        And a letter from the Alliance of Specialty Medicine
    regarding H.R. 2113.
        There aren't any objections. So, without objections, these
    documents will be placed into the record.
        Ms. Eshoo. I want to thank all of the witnesses once again.
    You have been here for three hours. You have worked hard, and I
    think that the hearing has been more than worthwhile,
    recognizing that we have a great deal to do.
        I also think that we need to really scrub your written
    testimony because many of you really put forward worthwhile
    ideas that we didn't get to ask questions, and they are
    worthwhile and deserve the full attention of committee members.
        So, with that, the House subcommittee will now adjourn.
        [Whereupon, at 1:36 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                   Prepared Statement of Hon. Eliot L. Engel

        Madame Chairwoman Eshoo, thank you for holding today's
    important hearing on drug supply chain transparency.
        U.S. prescription drug spending rose by 41 percent between
    2007 and 2017. While some of this growth was due to
    innovation--such as CAR--T therapies and hepatitis C cures-much
    of it can be attributed to price spikes. The price of insulin,
    a century old drug, for instance, has doubled since 2012
    without much change to the underlying formula.
        Due to the lack of transparency, my constituents often get
    a pricing surprise when they arrive at their pharmacy. This can
    blindside consumers, putting them in situations where they have
    to choose between filling a life-saving prescription or
    purchasing other necessities.
        The shroud of secrecy that veils the drug supply chain can
    make it challenging even for experienced health care
    professionals to determine the cost of a medication, let alone
    average-day Americans. As with buying groceries, my
    constituents deserve to know the cost of their prescription
    drugs ahead of time.
        I look forward to working with my colleagues on efforts to
    shine light on this murky segment of our healthcare system.
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