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


                       UNSUSTAINABLE DRUG PRICES:
                        TESTIMONY FROM THE CEOs
                                (PART I)

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                          OVERSIGHT AND REFORM
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 30, 2020

                               __________

                           Serial No. 116-122

                               __________

      Printed for the use of the Committee on Oversight and Reform
      
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]      


                       Available on: govinfo.gov,
                         oversight.house.gov or
                             docs.house.gov
                             
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
41-982 PDF                  WASHINGTON : 2020                     
          
--------------------------------------------------------------------------------------                             
                             
                   COMMITTEE ON OVERSIGHT AND REFORM

                CAROLYN B. MALONEY, New York, Chairwoman

Eleanor Holmes Norton, District of   James Comer, Kentucky, Ranking 
    Columbia                             Minority Member
Wm. Lacy Clay, Missouri              Jim Jordan, Ohio
Stephen F. Lynch, Massachusetts      Paul A. Gosar, Arizona
Jim Cooper, Tennessee                Virginia Foxx, North Carolina
Gerald E. Connolly, Virginia         Thomas Massie, Kentucky
Raja Krishnamoorthi, Illinois        Jody B. Hice, Georgia
Jamie Raskin, Maryland               Glenn Grothman, Wisconsin
Harley Rouda, California             Gary Palmer, Alabama
Ro Khanna, California                Michael Cloud, Texas
Kweisi Mfume, Maryland               Bob Gibbs, Ohio
Debbie Wasserman Schultz, Florida    Clay Higgins, Louisiana
John P. Sarbanes, Maryland           Ralph Norman, South Carolina
Peter Welch, Vermont                 Chip Roy, Texas
Jackie Speier, California            Carol D. Miller, West Virginia
Robin L. Kelly, Illinois             Mark E. Green, Tennessee
Mark DeSaulnier, California          Kelly Armstrong, North Dakota
Brenda L. Lawrence, Michigan         W. Gregory Steube, Florida
Stacey E. Plaskett, Virgin Islands   Fred Keller, Pennsylvania
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
Katie Porter, California

                     David Rapallo, Staff Director
                    Alexandra Golden, Chief Counsel
                          Elisa LaNier, Clerk

                      Contact Number: 202-225-5051

               Christopher Hixon, Minority Staff Director
                                 ------                                
                         
                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on September 30, 2020...............................     1

                               Witnesses

Mr. Mark Alles, Former Chairman of the Board and Chief Executive 
  Officer, Celgene Corporation
    Oral Statement...............................................    11

Dr. Giovanni Caforio, Chairman of the Board and Chief Executive 
  Officer, Bristol Myers Squibb Company
    Oral Statement...............................................    13

Mr. Kare Schultz, President and Chief Executive Officer, Teva 
  Pharmaceutical Industries Ltd.
    Oral Statement...............................................    14

Opening statements and the prepared statements for the witnesses 
  are available in the U.S. House of Representatives Repository 
  at: docs.house.gov.

                           INDEX OF DOCUMENTS

                              ----------                              

The documents entered into the record during this hearing are 
  available at: docs.house.gov.

  * Three Letters from Chairman Cummings to the White House; 
  submitted by Chairwoman Maloney.

  * Questions for the Record: to Dr. Giovanni Caforio; submitted 
  by Chairwoman Maloney and Rep. Katie Porter.


 
                       UNSUSTAINABLE DRUG PRICES:
                        TESTIMONY FROM THE CEOs
                                (PART I)

                              ----------                              


                     Wednesday, September 30, 2020

                  House of Representatives,
                 Committee on Oversight and Reform,
                                                   Washington, D.C.

    The committee met, pursuant to notice, at 10:07 a.m., in 
room 2154, Rayburn House Office Building, Hon. Carolyn B. 
Maloney [chairwoman of the committee] presiding.
    Present: Representatives Maloney, Norton, Cooper, Connolly, 
Krishnamoorthi, Raskin, Mfume, Wasserman Schultz, Sarbanes, 
Welch, Speier, Kelly, DeSaulnier, Lawrence, Gomez, Ocasio-
Cortez, Pressley, Tlaib, Porter, Comer, Jordan, Foxx, Massie, 
Hice, Grothman, Palmer, Cloud, Higgins, Norman, Roy, Miller, 
Armstrong, Keller, and Steube.
    Chairwoman Maloney. The committee will come to order.
    Without objection, the chair is authorized to declare a 
recess of the committee at any time.
    I now recognize myself for an opening statement.
    Good morning, and thank all of you for being here today.
    A year and half ago, on January 29, 2019, our former 
chairman, Elijah Cummings, held this committee's first hearing 
of the new Congress. The topic of that hearing was the same 
issue we are examining this week, the astronomical price 
increases of prescription drugs.
    Chairman Cummings cared deeply about this issue. As the 
very first witness to come before our committee, we invited Ms. 
Antroinette Worsham. You may remember her. She testified about 
the devastation of losing her daughter, who had to ration 
insulin because she simply could not afford it.
    Since Chairman Cummings is not with us today, I would like 
to ask the committee's indulgence to play a short clip of his 
opening statement from that hearing.

    [Begin video clip.]

    Chairman Cummings. I have been waiting a very long time to 
hold this hearing. For the past decade, I have been trying to 
investigate the actions of drug companies for all sorts of 
drugs, old and new, generic and brand name.
    We have seen time after time that drug companies make money 
hand over fist by raising the prices of their drugs, often 
without justification and sometimes overnight, while patients 
are left holding the bill. The pharmaceutical industry is one 
of the most profitable in the world and one of the most 
powerful. Fourteen drug companies each made more than $1 
billion in profits just in the third quarter of 2018, and they 
have the best lobbyists money can buy.
    Let me be clear. There are powerful interests here that do 
not want us to interfere with those massive profits. But there 
is a strong bipartisan consensus that we must do something, 
something meaningful to rein in the out-of-control price 
increases. Even President Trump has said that drug companies 
are ``getting away with murder.''
    But tweaks are not enough. We need real action and 
meaningful reform. We all recognize that research and 
development efforts on groundbreaking medications have made 
immeasurable contributions to the health of Americans, 
including new treatments and cures for diseases that have 
affected people for centuries. But the bottom line is that the 
ongoing escalation of prices by drug companies is simply 
unsustainable. This is a matter literally of life and death, 
and we have a duty to act now.
    Our constituents are demanding it, and I am grateful that 
we are finally starting down the road with this hearing.

    [End of video clip.]

    Chairwoman Maloney. I remember Chairman Cummings at that 
hearing so very well, sitting right here in this very chair, 
listening intently to Ms. Worsham's testimony, his fierce 
determination, his empathy. I remember how he promised at the 
end of that hearing to do everything in our power to make sure 
no family ever faces this situation again.
    At that moment, Chairman Cummings was in the process of 
launching our committee on one of the most comprehensive and 
in-depth investigations of drug pricing ever conducted by 
Congress. Today, 18 months later, I am honored to report some 
of our initial findings.
    At the outset, it is important to note that drug companies 
make products we all need. We rely on this industry to develop 
critical new therapies, treatments, and vaccines. But our 
committee's investigation has revealed deeply troubling facts 
about how these companies price the drugs we all rely on.
    Our committee has now reviewed more than a million pages of 
documents from some of the largest and most profitable drug 
companies in the world. These include internal corporate 
strategy documents and communications among top executives. Let 
me briefly describe three main findings from these documents.
    First, the documents show that these price increases are 
unsustainable either for government health programs or patients 
themselves. The documents have reviewed--that we reviewed show 
that drug companies continue to raise prices while raking in 
record profits and continue to put their products further out 
of reach for patients in need.
    To start this week's back-to-back hearings, we will hear 
today from the CEOs of three companies. We will hear from the 
former CEO of Celgene and the former CEO of Bristol Myers 
Squibb, which acquired Celgene last year. These companies sell 
the cancer drug Revlimid. They have tripled the price of this 
drug since 2005. Today, a course of this drug is priced at more 
than $16,000 a month. That is just per month.
    We will also hear from the CEO of the drug company Teva, 
which sells the multiple sclerosis drug Copaxone. The company 
raised the price of this drug 27 times in 1997. A yearly course 
is now priced at $70,000, nearly seven times higher than when 
it was first introduced. To put this in perspective, that is 
more than the median household entire income for the year in 
the United States.
    Second, the document reveals--by the committee--show that 
these massive price increases are based on generating windfall 
profits for these companies, their shareholders, and their 
executives.
    We have all heard the talking points from the drug 
companies and their lobbyists, claiming they need to raise 
prices to pay for research on lifesaving medications, that 
pharmacy middlemen are driving up the prices, or that they are 
committing significant funds to helping patients who can't 
afford the drugs. But the committee's investigation shows that 
those claims are utterly bogus. They do not hold water. The 
documents we reviewed show that time and time again drug 
companies hike prices to meet their earnings targets and in 
some cases so executives can get their personal bonuses for the 
year.
    Finally, these documents show that drug companies are 
targeting the United States for the biggest price increases in 
the world. They know the Federal Government is currently 
prohibited by law from negotiating directly with drug companies 
to lower prices for Medicare beneficiaries.
    This may be the starkest finding of all. I was astonished 
to see some of the new documents we will be discussing today. 
The United States is where the drug companies are increasing 
their prices much more than in any other country, and this is 
where they are making billions--billions--of dollars in 
profits.
    Last December, the House passed H.R. 3, and we named it in 
honor of Elijah E. Cummings, Lower Drug Costs Now Act. This 
legislation would authorize Medicare to negotiate directly with 
drug companies for lower prices.
    President Trump supported this change on the campaign 
trail. But unfortunately, he broke his campaign promise, and he 
now opposes the change. The White House issued a statement 
declaring that if H.R. 3 were presented to the President, ``He 
would veto the bill.''
    Instead of taking on the pharmaceutical industry like he 
promised, President Trump appointed former industry executives 
to key positions. These included Joe Grogan, the former 
Director of White House Domestic Policy Council. Mr. Grogan 
personally wrote an op-ed opposing H.R. 3 one week before we 
passed it in the House.
    Here is the bottom line. As a result of President Trump's 
reversal, drug prices have continued to skyrocket under his 
tenure, and drug company executives have continued to get rich. 
A recent report found that drug companies have raised the list 
prices of more than 600 single-source brand-name drugs by a 
median of 21.4 percent just between January 2018 and June 2020.
    By any measure, President Trump has failed to rein in out-
of-control drug prices. There is no doubt that he has been 
scrambling ahead of the election. He promised to hand out a 
paltry $200 discount cards, but he has failed to explain how 
this will help people facing tens of thousands of dollars in 
drug costs.
    The President also claimed he is banning U.S. companies 
from charging more than they charge abroad. But experts exposed 
this tiny demonstration project as a transparent and futile 
attempt to create the impression of action where there really 
has not been any.
    Let me close with this. As Chairman Cummings would have 
wanted, we need to focus on the people this affects the most. I 
would like to place statements from two patients who want to 
share their experiences with us about these two drugs, and we 
will now play the patient videos.

    [Begin video clips.]

    Ms. Hamrin. I am Ramae Hamrin. I am 50 years old, and I am 
from Bemidji, Minnesota. I am a single mom with two kids in 
college.
    In 2018, I was diagnosed with an incurable cancer called 
multiple myeloma. Before my diagnosis, I was a high school math 
teacher and a long distance runner. But now I can no longer do 
either.
    I rely on a drug called Revlimid to keep me alive. My out-
of-pocket costs are around $15,000 a year, which is impossible 
for me to cover on my fixed income. In order to keep taking 
this drug, I will have to deplete my life savings, cash out my 
401K, and sell my house. When those funds run out, I am not 
sure what I will do.
    Usually, I am a planner, but I cannot plan for this. I am 
terrified for my future. My circumstances make me feel helpless 
at times, but I am grateful that I can share my story with all 
of you.
    I urge you to consider patients like me as you work to hold 
drug companies accountable and fix this broken system.
    Thank you.
    Ms. Humphrey Ball. Hello, my name is Therese Humphrey Ball. 
I am 66 years old, and I live in Portage, Indiana. I spent my 
life working as a nurse, watching people struggle to afford 
prescription drugs. I never thought it would happen to me, 
until 2003 when I was diagnosed with multiple sclerosis.
    Shortly after my diagnosis, I began taking Copaxone, which 
cost $1,800 per month at that time. After one year of paying 
for my treatment, I wiped out my savings. And after that, I had 
to rely on grants to cover the cost.
    In 2017, I lost my grants, and at that time, the price of 
Copaxone had risen to $6,000 a month. I could no longer afford 
it. So, I went without the drug.
    When I was not on the drug, I lost short-term memory and 
experienced other declines in my cognitive functions. This 
makes it difficult for me to enjoy the things that I love like 
spending time with my grandchildren.
    My condition shouldn't progress faster just because drug 
companies want to make a few extra bucks. This drug company 
price gouging needs to change. As each of you works to reform 
this system, I hope you consider patients like me.
    Thank you.

    [End of video clips.]

    Chairwoman Maloney. Thank you, and I now recognize the 
ranking member for as much time as he would like for his 
opening statement.
    Mr. Comer. Thank you, Chairwoman Maloney.
    I appreciate you calling this very important hearing today 
on the issue of drug prices. This is a critical issue for my 
constituents, indeed for all of our constituents, and I am 
committed to working with you to identify and implement reforms 
that will improve access and affordability to prescription 
drugs.
    This concern is also shared by the President. Over the 
course of the last three years, President Trump has taken bold 
steps to address drug prices.
    Under the current administration, drug prices have fallen 
over 13 percent from the expected trend. Under President Trump, 
a record number of generic drugs have been approved, saving 
Americans tens of billions of dollars. Under the Trump 
administration, terminally ill patients are given a chance to 
explore innovative treatment options.
    So, we are all in agreement that drug pricing is a crucial 
issue for us to consider. However, I am worried, Madam 
Chairwoman, about the apparent intentions of the majority in 
holding this week's hearings.
    Instead of considering potential reforms in a productive 
and bipartisan manner, these hearings seem designed simply to 
vilify and publicly shame pharmaceutical company executives. A 
productive set of hearings would consider the pros and cons of 
various reforms and would seek to retain the positives from the 
current system while identifying improvements where necessary 
and possible.
    Instead, Democrats seem eager to cast our witnesses as 
villains and to place all blame for cost and access issues on 
the private sector. The causes, I think, are far more 
complicated. Many of the greatest healthcare initiatives and 
innovations of the past 100 years have happened in America, and 
they have happened not because of government dictates, but as a 
result of the tireless work of individuals having the freedom 
to experiment and compete and improve all of our lives.
    At this moment in time, the entire world is cheering on the 
pharmaceutical industry to find a safe and effective vaccine to 
stop COVID-19. That is the path to a more complete return to 
normalcy, to reopening our economy, to getting our kids back to 
school, and getting parents back to work.
    Under the Trump administration, we are seeing the fastest 
vaccine development in history. It is unprecedented. A mere 43 
days passed between sequencing of the coronavirus RNA and the 
start of vaccine development. As Dr. Fauci and others have 
testified, safety is not being sacrificed, but the financial 
risks are high. I am hopeful Democrats on this committee can 
stop the repeated attacks on the vaccine development process, 
which do nothing but undermine the efforts of so many 
government and private sector scientists.
    Returning to the matter before us today, the policy 
challenge is ensuring we don't kill the motive to develop new 
cures while at the same time taking targeted steps to address 
specific concerns regarding cost and patient access. The 
problem, Madam Chairwoman, is not that the free market has 
failed. Rather, the problem is that overly complex regulations 
and Government interventions in the market have distorted 
incentives and created barriers to competition.
    I don't believe that more bureaucracy is the answer. We 
must rethink regulations that distort prices and ensure that 
adequate competition happens in the marketplace. And yes, we 
should consider any needed reforms to what the Founders 
envisioned as a limited guarantee to profit from an invention 
that at times has been distorted into an unlimited ability to 
exclude others from selling similar prescription drugs.
    I look forward to hearing from today's witnesses about how 
best to ensure that America remains at the forefront of 
innovation and discovery while addressing prescription drug 
pricing and accessibility. I hope we choose to do that in a 
manner that takes into account the complexities of modern 
pharmaceutical development and the lifesaving innovations 
companies such as those appearing before us today have provided 
us all instead of creating false and simplistic narratives 
about the private sector.
    Thank you, Madam Chairwoman, and I yield back.
    Chairwoman Maloney. Thank you. I now recognize Ms. Foxx, 
who is the ranking member of the Committee on Education and 
Labor, for her opening statement.
    Ms. Foxx. Thank you very much, Madam Chairman.
    Many Americans pay too much for prescription drugs. It is 
not right, and Congress needs to step up. Luckily, we have a 
solution that can lower costs at the drugstore for patients and 
seniors. This solution can be passed into law before the 
election.
    The Lower Costs, More Cures Act, H.R. 19, the Republican 
alternative to Democrats' H.R. 3, combines many bipartisan 
reforms to lower out-of-pocket spending, protects access to new 
medicines and cures, strengthens transparency, and champions 
competition. To the contrary, Democrats' H.R. 3 would actually 
eliminate 38 new drugs over the next two decades, new drugs 
that could cure Alzheimer's, cancer, or COVID-19.
    H.R. 19, the Republicans' bill, would make research and 
development more competitive by reducing companies' ability to 
game the system and engage in anti-competitive behavior. H.R. 3 
would hide the cost of prescription drugs behind a wall of 
Medicare bureaucracy. The Republican bipartisan bill, on the 
other hand, would require insurance companies and PBMs to be 
more transparent where drug costs would be available to 
patients at the doctor's office before the prescription is even 
written.
    H.R. 3 makes no effort to require pharmacy benefit managers 
to pass rebates from manufacturers to patients. H.R. 19 would 
require that a portion of rebates to PBMs be passed directly to 
the patient at the point of sale, saving seniors millions.
    H.R. 3 attempts to use the power of the Government to steal 
companies' intellectual property to decrease the cost of the 
drug in the short run. H.R. 19 clears the way for more generics 
and biosimilars to come to market, increasing competition, 
rapidly driving down cost for patients, and ensuring access to 
new, innovative medications.
    H.R. 3 ignores the cost of administering cancer treatments 
for Medicare beneficiaries. H.R. 19 cuts the cost of 
chemotherapy in half by providing incentives for high-quality 
care instead of merely giving priority to the location of 
treatments.
    Instead of passing common sense reforms contained in 
Republicans' H.R. 19, Democrats have chosen to discard months 
of bipartisan work and conduct this partisan hearing to attack 
companies that are working to help the American people. 
Democrats had a choice to help Americans or help Speaker 
Pelosi. Sadly, they chose to help Speaker Pelosi.
    Thank you again, Madam Chairman. I yield back.
    Chairwoman Maloney. Thank you. I now recognize Mr. Hice, 
who is the ranking member of the Subcommittee on Government 
Operations, for an opening statement.
    Mr. Hice. Thank you very much, Madam Chair.
    As my colleague from North Carolina just mentioned, H.R. 3 
really would completely gut the pharmaceutical innovations 
which we all so desperately need and we rely upon. In fact, the 
Congressional Budget Office said that it would result in 38 
fewer cures over the next 20 years. That is a significant 
number.
    They also estimated that it would result in as many as 100 
fewer cures from coming to the market. Now just think of that, 
100 cures from coming to the market. We just saw a video. It 
could result in potentially a cure from deadly diseases like 
multiple sclerosis like we just saw, or ALS, or Alzheimer's, or 
even COVID-19.
    We don't need to have cures that could potentially come in 
the market not coming to the market. But according to CBO, that 
is what would happen with H.R. 3. And by the way, these cures 
don't come cheap. It is not unusual for some of these 
medications to cost as much as $2.5 billion through R&D and so 
forth to even come to the market to begin with.
    And that is not even to mention, it is not even to consider 
the fact that more than 90 percent of these drugs that enter 
into FDA clinical trials never gain FDA approval. So, we have 
got enormous expense with these companies trying to bring 
medication to the market, 90 percent plus of which never make 
it to the market.
    So, listen, let me just be clear. The FDA's rigorous 
process is a huge reason why so many Americans trust that the 
medications and the vaccines that come to market are safe and 
dependable. And unlike many of my colleagues on the other side 
of the aisle, I trust the process, and I know that it will 
bring a safe and effective vaccine to the American people for 
COVID through Operation Warp Speed.
    Biopharmaceutical companies are far outspending the Federal 
Government for R&D for cures for various diseases, and that is 
exactly why we need to be willing to work in order to make 
innovation easier so that more Americans can live fuller and 
happier lives, not killing innovation with too much government.
    So, I am sad to see that today's hearing shows, frankly, at 
least in my opinion, that my colleagues on the other side of 
the aisle are not interested in a bipartisan solution to bring 
more cures to save American lives. Instead, they think it is 
more beneficial for their re-election campaigns to attack 
pharmaceutical executives, and I greatly think that is a huge 
mistake for the American people.
    With that, Madam Chair, I appreciate the time, and I yield 
back.
    Chairwoman Maloney. Thank you. I now recognize Congressman 
Roy, who is the ranking member of the Subcommittee on Civil 
Rights and Civil Liberties, for an opening statement.
    Mr. Roy. Well, I want to thank you, Chairwoman Maloney, and 
really seriously thank you for giving us time to have opening 
statements. You didn't have to do that, and we are grateful 
that you did so.
    We all recognize that prices are and ought to be a major 
concern to all Americans because lives literally depend on 
their existence, their ability, and importantly, their 
effectiveness. Notably, the drug pricing issue is heavily 
focused on blockbuster biological drugs, and yes, that costs a 
lot of money.
    Consider 0.4 percent of U.S. prescriptions are biologics, 
but 46 percent of drug spending. Ninety percent of the drugs 
sold in the United States are generics and relatively 
inexpensive. So, let us have hearings. Let us keep perspective 
on focusing them on solving the problem as a whole rather than 
vilifying certain actors.
    Let us not play the game. The game in Washington is to 
clearly target one industry for political purposes who, of 
course--in this case you are talking about drug companies, of 
course, they have got plenty of blame to share for the high 
price of the drugs, but hardly all the blame. Let us look at 
pharmaceutical benefit managers, the Patent and Trademark 
Office and various patent holders, insurance companies, the 
FDA, hospital corporations, and of course, the Government 
regulations--Federal, state, and local.
    Last year in a hearing, one of my colleagues who happens to 
no longer be part of the committee, Katie Hill, was 
eviscerating a drug company, Gilead, a company that makes HIV 
lifesaving drugs, for making profit. I said something to the 
effect of ``I hope they do make a profit,'' but with the caveat 
that this kind of innovation saved my life when I was battling 
Hodgkin's lymphoma and the caveat that we root out the swamp 
games played that result in regulated corporate crony profit 
versus the kind of profit that drives innovation to save lives.
    Many of us have had our lives saved by the innovative work 
of scientists all around the globe, likely many from drugs 
created by the companies represented here. I would note 
Chairman Cummings, whom we all miss--and I was glad you played 
that video--rightly noted that these companies often make money 
off of patents wrapped around Government research, and I agreed 
we should address that. I think most of us do.
    But he also specifically gave me time to highlight my life 
story and perspective and pulled me aside after the hearing to 
agree that we must have innovation, that we must ensure we have 
the drugs to save lives. And I would note these are the 
companies we are hoping are working overtime to produce COVID 
vaccines as we speak.
    Chairwoman Maloney, you raised the issue about how these 
companies price their drugs, and indeed, it is a troubling 
situation. But it is heavily this body's fault. We have allowed 
a complex morass of Government regulations, coupled with 
insurance companies, to have total control of our healthcare 
system, empowering PBMs and major hospital corporations to roll 
over customers because there is no market. There is no doctor-
patient relationship that is sacrosanct and that enables 
patients to price things properly in a market.
    This is a problem that Congress has largely created. If we 
want to address it, we need to look at the entire supply chain 
from top to bottom. If you look specifically, like in 2018, on 
patents, Sanofi's Lantus, a type of insulin, had 74 patents 
providing protection from competition, making it harder for 
diabetics to access cheaper insulin. This is what happens with 
limited competition.
    Since 2016, the FDA has approved roughly 2,500 generic 
versions of 620 brand-name drugs. Pharmaceutical drugs with at 
least four generic competitors reduce the price of the brand 
drug by an average of 39 percent, but the FDA is costly and 
inefficient. On average, it can take more than a decade and 
$2.6 billion in research costs to get a new treatment through 
the FDA and to market. And only 1 in 1,000 drug formulas ever 
get to preclinical testing. Only eight percent of those get FDA 
approval.
    And once the drug clears the labyrinth of patent law and 
the wisdom of the almighty FDA, the drug still has to make it 
on the formulary of your insurance plan in order for you to 
receive your discount. The healthcare bureaucracy this body has 
created is guilty of lining the pockets of these companies 
beyond what the market would demand, both insurance and pharma, 
and not to forget PBMs, who are far from innocent here.
    In 2018, the United States spent $335 billion on retail 
prescription drugs, 10 percent of our national health 
expenditure. But we spent $1.2 trillion on insurance, 34 
percent of the national health expenditure. So, where should 
the focus be? The healthcare system or just pharma?
    As we all agree, our folks who require expensive drugs, our 
system should be able to help them defray cost. This is usually 
understood to happen through insurance and risk adjustment. But 
it has become too expensive for most Americans, and often it is 
this body's fault.
    The ACA's regulation caused premiums to more than double 
from 2013 to 2017, increase overall by 60 percent from 2010 to 
2017. Individual deductibles increased 76 percent.
    Worse yet, CMS data shows that while premiums were spiking 
due to Obamacare, unsubsidized people on the individual market 
were losing their coverage. In just two years from 2016 to 
2018, unsubsidized enrollment declined by 2.5 million people, a 
40 percent decrease. This makes it harder to defray cost and 
forces many to pay the list price, which could be avoidable. 
There are always bad actors who take advantage of the 
vulnerable, but let us not forget Congress' role in creating 
the very system causing it.
    I know I am running out of time. Chairwoman Maloney, I 
would also point out that each one of these companies are 
working today to engage in the fight to create a vaccine 
against the virus. Innovation in the pharmaceutical industry is 
critical. Without it, lives are literally lost.
    None of us want unaffordable drugs. We want affordable 
drugs rather than expensive drugs that the rest of the world, 
frankly, piggybacks upon the back of the Americans. And to do 
that, let us do what this body literally never does anymore--
roll up our sleeves, restore personalized healthcare, empower 
patients and doctors, and remove all the bureaucrats and 
middlemen who are the ones driving up cost.
    I look forward to hearing from the witnesses, and I 
appreciate, really seriously appreciate the time that you gave 
us this morning, Chairwoman Maloney.
    Chairwoman Maloney. Thank you. I now recognize my colleague 
and very good friend Congressman Welch, who worked very closely 
with Chairman Cummings on this issue, for his opening 
statement.
    Mr. Welch. Thank you very much, Madam Chair, and I thank my 
colleagues.
    Every single American, every single taxpayer at one point 
or another is going to need pharmaceutical assistance. And 
every single American and every single taxpayer, everybody who 
pays a premium, every employer who pays premiums on behalf of 
his or her employees needs relief from prices that are 
absolutely beyond reach.
    The question for this Congress is whether our Government 
will play a role, an active role to stop price gouging by the 
pharmaceutical industry? And let me be candid. There is a 
disagreement about that.
    This legislation would enable the Government, on behalf of 
the people it serves, to negotiate prices when it purchases 
prescription drugs from the pharmaceutical industry. This is 
not a question of whether those are necessary. It is not a 
question of whether the investigatory and research work that 
pharma does is good. It is. It is about whether there is any 
limit on what the pharmaceutical industry can charge the 
taxpayer, the Medicare program, the Medicaid program, employers 
who provide insurance to their employees.
    What Elijah understood is that the Government that is here 
to serve the people has a responsibility to do things that 
protect them from price gouging. And yes, it is true. Many of 
these pharmaceutical industries have come up with lifesaving 
and pain-relieving medications. But they are killing us with 
the prices they charge.
    And what this report shows is that there is very clear 
strategy on the part of the pharmaceutical industry to boost 
its prices in the place where it can, and that is the United 
States of America. Ours is literally the only country where the 
government won't protect its citizens from price gouging.
    Now the profits--no, nothing wrong with profits. But price-
gouging profits, yes. And tactics used that are tried and true 
by the pharmaceutical industry to extend the life, that 
monopoly that they get granted by this Congress by making an 
ever-so-slight change in the medication itself and claiming 
that that entitles them to extend that patient, where you have 
companies that are charging like $70,000 for a drug, it helps. 
But who can pay that? Who can pay that?
    And then we see the pharmaceutical industry coming up with 
very, very skillful ways to appear to be helping, like 
donations to third-party foundations that help patients to 
``afford.'' Well, they have done an analysis that you are going 
to see in this report where they very self-consciously realize 
that that boosts sales for them, and they make money by making 
that as an investment.
    Now what has happened here is that that temptation that 
pharma has to use its uninhibited pricing power has transformed 
America's pain into pharma's profit. That is what has happened, 
and we can address many of the things that my colleagues have 
talked about with regulation and find ways to do things that 
will help on the margins.
    But what Elijah knew is that the only way to really get 
fair pricing was to have negotiation. By the way, negotiation 
is core to a free market economy. A buyer and a seller have a 
discussion and decide what it is worth to the seller and what 
it is worth to the buyer. We are the only buyer, the Medicare 
and Medicaid program, where we don't negotiate. And when you 
negotiate, you save money, as Vermont has done.
    Now when Elijah and I met with President Trump and Elijah 
was presenting his price negotiation plan, the President said 
he was for price negotiation and that pharma was ripping us 
off. And Elijah was hopeful. The President has failed to 
fulfill his promise. We are here to keep Elijah's commitment.
    Thank you, Madam Chair. I yield back.
    Chairwoman Maloney. Thank you. I thank the gentleman for 
his hard work and statement.
    Now I would like to introduce our witnesses. We are 
grateful to have their testimony, and I want to thank the 
witnesses for being so accommodating with their schedules so 
that we could have them here together.
    Our first witness today is Mark Alles, who is the former 
chairman of the board and CEO of Celgene. Celgene sold the 
cancer drug Revlimid until November 2019. Then we will go to 
Dr. Giovanni Caforio, who is the chairman of the board and CEO 
of Bristol Myers Squibb. Bristol Myers Squibb has sold Revlimid 
since November 2019. Finally, we will hear from Mr. Kare 
Schultz, who is the president and CEO of Teva Pharmaceutical 
Industries. Teva sells the multiple sclerosis drug Copaxone.
    The witnesses will be unmuted so we can swear them in. The 
witnesses will rise and raise their right hands.
    And the witnesses, do you swear or affirm that the 
testimony you are about to give is the truth, the whole truth, 
and nothing but the truth, so help you God?
    [Response.]
    Chairwoman Maloney. Let the record show that the witnesses 
answered in the affirmative.
    Without objection, your written statements will be made 
part of that record.
    And with that, Mr. Alles, you are now recognized for your 
testimony.

   STATEMENT OF MARK ALLES, FORMER CHIEF EXECUTIVE OFFICER, 
                      CALGENE CORPORATION

    Mr. Alles. Chairwoman Maloney, Ranking Member Comer, and 
members of the committee, thank you for the opportunity to 
discuss Revlimid, a life-extending medicine approved by the FDA 
for the treatment of rare and incurable blood cancers.
    My name is Mark Alles, and I've had the privilege of being 
part of the research-based pharmaceutical industry for more 
than 30 years. Before I joined this industry, I served in the 
Marine Corps and the Marine Corps Reserve, and before that, I 
taught junior high school. I've strived to bring the values of 
integrity, service, and respect to every part of my career.
    Revlimid was discovered, developed, and brought to patients 
by my former employer, Celgene Corporation. Based in Summit, 
New Jersey, Celgene was a global biopharmaceutical company that 
specialized in the discovery, manufacturing, clinical 
development, and delivery of innovative medicines for the 
treatment of cancer and serious inflammatory diseases.
    I joined Celgene in 2004, and after serving in multiple 
different roles in the company, I was appointed chief executive 
officer in 2016 and chairman of the board in 2018. My last day 
with Celgene was December 2, 2019, after Celgene was acquired 
by Bristol Myers Squibb in November 2019. At that time, the 
company employed more than 8,000 people worldwide, with 
approximately 5,600 employees in the United States.
    One of the most clinically important therapies discovered 
by Celgene is the novel medicine lenalidomide, marketed as 
Revlimid. Revlimid's primary use is for the treatment of 
multiple myeloma, a rare and incurable blood cancer. Celgene 
invested approximately $800 million over 14 years to invent and 
develop Revlimid before its first FDA-approved use in late 
2005.
    Revlimid is a unique, patented molecule that required a 
completely independent development program and a full FDA 
approval process. Revlimid has become a standard of care for 
the treatment of myeloma, based on several large clinical 
studies that have demonstrated significant patient benefits.
    Since Revlimid's initial FDA approval, the company 
continued to invest several hundred million dollars into the 
research and development of this medicine. At the time it was 
acquired, Celgene had and was sponsoring more than 50 
additional Revlimid clinical studies for patients with 
different types of cancer.
    As is common in drug development, some of these studies 
were not successful, did not succeed. However, several of these 
studies were successful and resulted in six additional FDA 
approvals, including the most recent in 2019. Since 2005, more 
than 700,000 patients have been treated with Revlimid 
worldwide.
    At Celgene, pricing decisions for our medicines were guided 
by a set of long-held principles that reflected our commitment 
to patient access, the value of a medicine to patients and the 
healthcare system, the continuous effort to discover new 
medicines and new uses for existing medicines, and the need for 
financial flexibility. In 2018, the company publicly committed 
to full pricing transparency by limiting price increases to no 
more than once per year and at a level not greater than the 
Centers for Medicare and Medicaid Services' projected increase 
in the national healthcare expenditures for the year, absent 
exceptional circumstances.
    To help ensure patient access to our medicines, the 
company's patient support programs provided copay assistance to 
eligible commercially insured patients and provided free 
medicine to eligible patients. More than 140,000 people in the 
United States prescribed a Celgene cancer medicine received 
some form of assistance.
    Celgene sold and offered to sell samples of its patented 
medicines to generic manufacturers so long as those companies 
met critically important safety standards. These requirements 
were established to protect the public from the risk of severe 
birth defects associated with the known and suspected 
teratogenicity of some of its products, including Revlimid. In 
fact, multiple generic versions of Revlimid are licensed to 
enter the U.S. market within the next two years.
    Celgene Corporation was a research-driven biopharmaceutical 
company, which invested heavily in the discovery and 
development of innovative therapies that are now helping to 
improve the lives of tens of thousands of people worldwide. In 
considering legislative changes, I urge Congress to maintain 
many of the strong incentives that currently exist to encourage 
and support medical innovation.
    Finally, because my mother died from a neurodegenerative 
disease, my son lives with insulin-dependent diabetes, my 
daughter has autism, and my older brother is being treated for 
an incurable blood cancer, all of us are severely impacted by 
this pandemic. This issue matters to me at a deeply personal 
level. I hope and believe that these incentives will lead to 
new treatments that society and my family will benefit from 
today and long after these medicines become generic drugs.
    Thank you, and I look forward to answering your questions.
    Chairwoman Maloney. Thank you. Thank you very much.
    And we will now recognize Mr. Caforio. You are now 
recognized, Mr. Caforio.
    [Pause.]
    Chairwoman Maloney. Mr. Caforio, are you unmuted?
    Dr. Caforio. I am unmuted.
    Chairwoman Maloney. You are now recognized.
    Dr. Caforio. Thank you. Can you hear me?
    Chairwoman Maloney. Yes, we can.

 STATEMENT OF GIOVANNI CAFORIO, M.D., CHIEF EXECUTIVE OFFICER, 
                      BRISTOL MYERS SQUIBB

    Dr. Caforio. Chairwoman Maloney, Ranking Member Comer, and 
members of the committee, thank you for the opportunity to join 
this important conversation begun by Congressman Cummings, who 
championed affordable healthcare and continued by Chairwoman 
Maloney. This is an important issue for all Americans.
    Today, advances in medicine are progressing at remarkable 
speeds. As a physician, I'm excited by the science, but also 
concerned that without a system to protect all patients and 
enable affordable access, we risk these advantages being out of 
reach.
    Medicines like Revlimid highlight these advancements and 
the challenges that come along with it. We have seen 
extraordinary gains in patients with multiple myeloma, the 
blood cancer treated by Revlimid. The five-year relative 
survival has doubled over the past 25 years, turning what was 
once a dire diagnosis into a manageable disease for some 
patients.
    Revlimid is one of the most significant contributors to 
these improved survival rates. We continue to unlock our 
scientific understanding of multiple myeloma, and our research 
today is purely next-generation treatments that build on 
Revlimid's success and progress.
    For example, we are now on the cusp of personalized 
medicines for multiple myeloma that use patients' re-engineered 
cells to fight cancer. BMS and Celgene have exceptionally 
strong records in R&D. Both recognized for the highest R&D 
investments as a share of R&D across all industries.
    This year alone, we expect to invest nearly $10 billion in 
R&D. As part of our efforts, we are conducting urgent research 
on COVID-19, providing 1,000 proprietary compounds to partners, 
examining two medicines in clinical trials, and enacting a 
robust philanthropic response.
    The scientific and capital investment put toward developing 
Revlimid is instructive. Thalidomide, as you may recall, was 
prescribed outside the U.S. without a thorough understanding of 
side effects and caused tens of thousands of infant deaths and 
severe birth defects.
    Celgene, however, continued to invest in its research and 
development for 14 years. Ultimately, this led to the invention 
of Revlimid. Revlimid's value to patients is truly 
immeasurable, and patients should have access regardless of 
ability to pay. For this reason, we have robust patient 
assistance programs providing financial support to hundreds of 
thousands of patients, with copay assistance and three 
medicines worth billions of dollars.
    That being said, I do recognize that patient assistance 
programs are an imperfect solution to access challenges. I 
welcome the opportunity to work with you and others to advance 
critical reforms that more efficiently deliver care to patients 
and provide savings to the healthcare system.
    We believe in the importance of a healthy generic market, 
and we applaud the administration's success with speeding the 
approval of generics and Congress' passage of the CREATES Act. 
At the same time, we must prioritize American innovation, which 
leads the world in developing new therapies for patients.
    At Bristol Myers Squibb, we are committed to discovering, 
developing, and delivering innovative medicines that help 
patients. In an unprecedented year, our work has never been 
more critical. I look forward to answering your questions.
    Thank you.
    Chairwoman Maloney. Thank you. Mr. Schultz, you are now 
recognized. Mr. Schultz, please unmute.

   STATEMENT OF KARE SCHULTZ, CHIEF EXECUTIVE OFFICER, TEVA 
                        PHARMACEUTICALS

    Mr. Schultz. Thank you.
    Chairwoman Maloney, Ranking Member Comer, and members of 
the committee, thank you for the chance to appear before you 
today.
    My name is Kare Schultz, and I am the president and CEO of 
Teva Pharmaceutical Industries. I understand that the committee 
is interested in the pricing of Copaxone, the company's 
specialty medicine for the treatment of multiple sclerosis, or 
MS. But before I discuss Copaxone, I would like to tell you 
more about Teva and its role in the healthcare industry.
    Teva is a global pharmaceutical company committed to 
helping patients access affordable medicines and benefit from 
innovations to improve their health. We were founded in Israel 
120 years ago and operate worldwide, with a significant 
presence in the United States.
    Teva is the global leader in providing affordable 
medicines, with the industry's largest portfolio of generic 
medicines and a strong portfolio of specialty medicines, 
including Copaxone. On the strength of our generic business, 
Teva drives access and provides direct savings to patients and 
healthcare systems around the world.
    For example, in the United States, Teva saved the 
healthcare system $41.9 billion, including $5.9 billion in 
savings directly to patients in 2018. We also provided over $40 
million worth of medicines to almost 13,000 patients in 2019.
    Teva is committed to helping patients through rigorous and 
innovative scientific research, and we take great pride in 
that. This defines how we do business and how we approach 
medicine. In order for any pharmaceutical company to research 
and develop new drugs or improve old ones, the price of 
successful medicines must reflect the significant cost of 
ongoing research and development projects.
    The public only sees and pays for the drugs that are 
ultimately approved by the Government, like Copaxone, but you 
have to expend a lot of resources and endure many 
disappointments before bringing to the market safe and 
effective medicines. Teva will continue to invest in new 
breakthrough treatments and find new ways to extend and expand 
patient care beyond medicine.
    And Copaxone is one of the best examples of our dedication 
to innovative research and patient support. Our significant 
investment in researching, developing, and commercializing safe 
and effective treatments led us to introduce Copaxone in the 
United States in 1996. And since then, Copaxone has become a 
preferred treatment for MS.
    Since first introducing Copaxone, we have continued our 
studies and most recently in 2014 introduced a more efficient 
version of that drug that only needs to be administered three 
times a week, as opposed to daily. This results in more than 
200 fewer injections per patient each year. As a result, 
Copaxone has been competitively priced based on both the value 
it brings to the MS therapeutic area and the research and 
development needed for its continued advancement.
    The historical Copaxone price increases of interest to the 
committee all predate my tenure at Teva, and Teva has not 
increased the list price of Copaxone since January 2017. 
Moreover, the net price of Copaxone has declined over the last 
several years, which is expected given our competitors' generic 
entry into the market, something we at Teva are very familiar 
with as a company primarily focused on generic drugs.
    Teva is also dedicated to supporting our patients and 
improving patients' user experience in all the ways we can. For 
example, Teva spends a significant amount of resources on a 
program called Shared Solutions. Through Shared Solutions, we 
provide both medical and financial assistance to Copaxone 
patients.
    Teva also provides patients with 24/7 access to phone 
support from MS-certified nurses, a range of peer resources, 
and educational programs for patients and MS professionals. 
These comprehensive benefits represent substantial cost to 
Teva, and the price of Copaxone reflects the product value, 
including these patient support services.
    But Teva is also committed to ensure that patients have 
affordable access to their MS therapy. For example, Shared 
Solutions have a team of dedicated benefit specialists who help 
research patients' coverage and insurance benefits so patients 
are able to receive the most affordable care possible. Teva 
acknowledges that the pharmaceutical industry as a whole needs 
to be mindful and responsible about the pricing of medications 
and understands that each company plays a role in keeping down 
healthcare costs.
    Teva renews its commitment today to continue to provide 
access to high-quality generic medicines, to create innovative 
solutions for patients, and to strive to make healthcare more 
accessible and affordable. We appreciate the continued efforts 
of the committee to understand the overall value of specific 
medications and look forward to working with the committee and 
answering your questions.
    Thank you very much.
    Chairwoman Maloney. I thank all of you for your testimony.
    I now recognize myself for five minutes for questions.
    I want to talk about internal documents our committee 
obtained as part of our investigation showing that drug 
companies are targeting the United States for their biggest 
price increases anywhere in the world.
    They do this in part because Federal law currently 
prohibits the government from negotiating directly with drug 
companies to lower prices on behalf of Medicare beneficiaries.
    So, Mr. Alles, I would like to start with you. I would like 
to put up a slide that we obtained from your company, Celgene. 
Please put the document up.
    [Slide.]
    Chairwoman Maloney. And do you have a copy of it now, Mr. 
Alles, that you can see it?
    This document that is in the reports that we gave you, this 
is an internal presentation from October 2018 and it was made 
to your company's corporate market access committee. That is 
the committee that is responsible for approving your company's 
price increases.
    Can you see the document, Mr. Alles? Do you have it?
    Mr. Alles. Madam Chairwoman, I see the document on the 
Webex but I am looking for a copy of it here in the room, and I 
have it----
    Chairwoman Maloney. Well, this document----
    Mr. Alles. I have it now.
    Chairwoman Maloney. Yes, you have got it? OK.
    Mr. Alles. Yes.
    Chairwoman Maloney. This document, basically, gives your 
company's view of the world and how much money you can make in 
different countries. I want to ask you about the United States, 
on the bottom left, and compare that to the European Union on 
the top right.
    If you look at the U.S. it says, and I quote, ``highly 
favorable market with free market pricing,'' end quote. Now you 
say free market pricing but the government, the Federal 
Government, can't negotiate with you to lower prices under 
Medicare.
    So, that is absolutely terrific for your profits, and I 
understand why you think it is highly favorable. But then if 
you look at the EU, you say things are only, quote, 
``manageable,'' end quote, and then you highlight, quote, 
``stagnated price growth,'' end quote, as a result of price 
negotiations.
    Now, you call it stagnated price growth. But the rest of us 
call it negotiating to bring prices down for people, for our 
patients.
    Your company loves the U.S. because you can keep increasing 
prices here as high as you want, and Medicare, which covers 
millions of Americans, isn't allowed to negotiate.
    But in the EU, where they do negotiate price increases, 
are, in your own words, stagnated or not increasing.
    So, here is my question. Isn't it true that for the past 
decade you targeted the United States for the biggest prices 
and the biggest price increases in the entire world?
    Mr. Alles. Madam Chairman, thank you for the question.
    As I look at this slide, it seems to accurately reflect our 
assessment of the market access and the pricing environment in 
the different regions of the world at that time.
    I think it also speaks to that the United States is the 
world's leader in medical innovation and the free market 
pricing opportunity in the U.S. continues to drive much of the 
research and development and medical innovation for the world.
    So it also, I think, describes not as well as I would like 
that there are fundamental differences around the world with 
economies and countries and the systems. But in the end, it 
does highlight that the United States is the home of medical 
innovation and that is a free market environment.
    Chairwoman Maloney. But since launching Revlimid in 2005, 
you raised the price 22 times. In the 10 years from 2009 to 
2018, your company reported $51 billion in net worldwide 
revenues from this drug alone and $32 billion of that came from 
the United States.
    You charge more for this drug here in the U.S. and you made 
more money from this drug here in the U.S. than in every other 
country combined.
    Let me turn to Mr. Schultz. I have an internal document 
from you company, Teva, that also shows how executives view the 
U.S. Let me put this document up on the screen. This is Exhibit 
32.
    [Slide.]
    Chairwoman Maloney. This is an internal presentation from 
September 2016. The top of the slide reads, and I quote, ``What 
does Teva do well in pricing,'' end quote.
    The first bullet on the slide says, quote, ``Pricing 
negotiation strategy and able to increase prices 
successfully.'' And underneath that bullet it reads, and I 
quote, ``Influenced heavily by U.S. being allowed to hike 
prices,'' end quote.
    And below it, it says, and I quote, ``We apply more 
frequent price changes once, twice a year, and many on a 
continuous basis,'' end quote.
    Let me repeat this. You say, ``We apply more frequent price 
changes in the U.S. once, twice a year, and many on a 
continuous basis.''
    Mr. Schultz, this presentation seems clear. You are 
highlighting your ability to raise prices here in the United 
States because you are allowed to do so, where in other 
countries you are forced to negotiate prices down for patients 
and for people.
    Isn't that right?
    Mr. Schultz. Madam Chairwoman, thanks for that question.
    As you might know, I joined Teva as CEO on the 1st of 
November 2017, which means that I haven't seen this document 
before and I am not aware of actually what happened before I 
joined.
    I can assure you, however, that since I joined Teva 
Pharmaceuticals in November 2017 there has been no changes, no 
price increases, to the list price of Copaxone, and in the same 
period there has been a dramatic reduction of the actual net 
pricing that Teva Pharmaceuticals sells the product for to the 
tune of a price reduction in 2018 of more than 20 percent, 
again in 2019 of more than 20 percent. So, that is really what 
I can comment on.
    Chairwoman Maloney. Well, this document, clearly, shows why 
we need to pass and sign into law H.R. 3. Chairman Cummings was 
right and President Trump was right, before he broke his 
promise and reversed his position.
    We need to get rid of this ridiculous law that says the 
government cannot negotiate drug prices.
    I now recognize Mr. Palmer for his questions.
    Mr. Palmer. Before I begin, Madam Chairman, I would like to 
say that I do miss Elijah and miss him calling me brother. No 
disrespect to your chairmanship, but he was, in my opinion, a 
good man.
    Chairwoman Maloney. Thank you. We all miss him. Thank you.
    Mr. Palmer. If I may reclaim that time.
    I think it is obvious that we don't want to do anything to 
stifle research and innovation that has brought us--literally, 
brought us miracle drugs. I think we are about to see that with 
the COVID-19 vaccine.
    We have got members of this--of Congress, including Mr. Roy 
and others, that have had drugs have a major impact in their 
lives. It was mentioned multiple myeloma.
    I am happy to hear about the advances there. That cancer 
took my father-in-law's life in 2000. I think all of us have 
stories like that and I think the fact is that we want to 
encourage innovation.
    We want to encourage this research that can bring us these 
miracle drugs. But that will do people little good if they 
can't afford those drugs.
    And one of the things that my colleague, Chip Roy, 
mentioned was patents, and we have seen situations where the 
patent protections are so short that it seems obvious, or at 
least to me from a business perspective, that some of the price 
hikes are forced upon the companies to try to recover their 
cost because there is billions of dollars that are invested in 
the development of a drug, and many of these drugs never come 
to fruition. They never get to market, and companies have to 
take that into account in their pricing.
    But what I want to know is, is if extending patent 
protections would be of any value to reducing the cost of 
drugs. Mr. Alles, if you wouldn't mind responding.
    Is it Elles, or how do you pronounce that? Celgene.
    Mr. Alles. Yes. Thank you for the question. It is Alles, 
sir, but I will answer to anything that sounds like my last 
name. So, no worries.
    Mr. Palmer. Well, I started calling you Mark but that is 
inappropriate.
    Go ahead.
    Mr. Alles. The question is very complicated but it is a 
critical question. I believe that if patent reform extended the 
patent life of a medicine, coupled with modernizing these 
reimbursement access challenges, for example, capping the out-
of-pocket cost for Medicare beneficiaries, along with the 
CREATES Act that passed at the end of 2019 that did tighten up 
some of the areas that could have been used to extend the 
existing patents under existing law.
    So, I think there are a combination of things that could 
happen together that would have the opportunity to lower 
pricing.
    At Celgene we also thought that managing the company's 
patented medicines where we took into account the lifetime 
value of the medicine with its initial approval versus what has 
historically been the pricing practice, which is, over time, 
increasing the price in the U.S. to, as you say, offset 
failures, offset clinical research costs, offset other 
unexpected or sometimes expected expenses, one finds a 
different relationship in how to manage price.
    And that is actually what we did at the beginning of 2018 
with our pledge to use medical inflation as a marker for annual 
price increases.
    Mr. Palmer. Let me suggest to you--I appreciate the answer. 
I would like to hear from the industry what incentives the 
Federal Government could provide to help address some of these 
issues of stranded cost, and maybe extending patents and tax 
incentives and other things like that so that we can make sure 
that these drugs are available to the people who need them.
    And one of the things that concerns me is a report that 
came out of England that the British National Health System was 
denying coverage to 25 cancer drugs that included drugs for 
treating breast cancer and bowel cancer and prostate cancer.
    We don't want to have that happen here. We also--I think we 
are going to have to address the issue of overregulation, 
particularly with common drugs that should be very inexpensive 
like insulin, like the EpiPen, where we have literally 
regulated the companies into shutting down and it left the 
production of those drugs to just one or two companies that had 
a monopoly.
    And the last thing, if I may, Madam Chairman, if you will 
extend my time just a little bit, is when we start looking at 
covering drugs through a national health care system, I want us 
to avoid situations like occurred in Oregon and California 
where you had Barbara Wagner, who had treatable cancer but the 
Oregon health plan would not cover it.
    Instead, offered to pay for her hospice or assisted suicide 
drug, and then Stephanie Packer in California, 31 years old, 
mother of four children, and her insurance company wouldn't pay 
for it but they would pay the assisted suicide drug, and her 
co-pay would only be $1.20.
    We want to avoid that. We want to incentivize companies to 
continue to do this fabulous research.
    I think we ought to have an Operation Warp Speed for cancer 
drugs, Madam Chairman. I think we see an example of how this 
could work if we all get our minds around it and get committed 
to it.
    With that, I yield back and I thank you for your 
indulgence.
    Chairwoman Maloney. Thank you.
    I now recognize Ms. Norton. You are now recognized for 
questions.
    Congresswoman Norton?
    Ms. Norton. Thank you very much, Madam Chair. I want to 
thank you for this very important hearing, and I note that it 
is a two-day hearing, signaling the importance of this hearing 
on drug pricing to the American people.
    I want to say that the notion of negotiation is very close 
to me. I taught negotiation when I was a tenured professor at 
Georgetown Law School.
    So, the notion that in a market system we are having to 
debate the notion of negotiation for any market item is very 
peculiar to me.
    Mr. Alles, Mr. Caforio, Mr. Schultz, I want to thank you, 
all three of you, for joining us today and I want to 
acknowledge and let you know that I appreciate the innovative 
work you are doing, the life-saving drugs that your companies 
are producing, and even, as you have testified, the assistance 
you are granting some patients.
    You, of course, understand from the videos the chair played 
that there are millions of Americans who cannot afford these 
drugs. Your companies are crucial lifelines, which is why I 
appreciate what you are doing so much.
    For that reason, though, every time your companies raise 
prices, you push these lifelines and opportunities for good 
health even further out of reach.
    Now, because I have a limited amount of time, I am going to 
have to ask you not to give me an extended reply but to give me 
a yes or no answer.
    I am simply trying to establish for the record the answers 
to the questions I am asking. So, please abide by the 
discipline I have been submitted to and the amount of time that 
I must, therefore, submit you to.
    Mr. Alles, I understand that your company, Celgene, raised 
the price of Revlimid more than 20 times since it came to 
market in 2005.
    I also understand that Celgene generated $32 million in net 
income from U.S. sales of Revlimid between 2009 and 2018, and 
that over that same period of time Celgene's annual profits 
have increased from $780 million in 2009 to $4 million in 2018.
    Do these numbers sound correct to you, yes or no?
    Mr. Alles. I would just make one correction for the record. 
Thirty-two million would be $32 billion.
    Ms. Norton. Billion. I am sorry. Billion.
    Mr. Alles. That is fine. I just--I believe those numbers 
would be correct. I believe they would be.
    Ms. Norton. Thank you very much.
    A monthly course of Revlimid is about $16,000. That is 
triple the price it was in 2005.
    Mr. Caforio, after Bristol Myers Squibb acquired Celgene in 
2019, you raised the price yet again. Is that right?
    Dr. Caforio. Yes, Congresswoman. We increased the price by 
six percent in January of this year.
    Ms. Norton. Turning to you, Mr. Schultz, I understand that 
your company, Teva, has raised the price of Copaxone 27 times 
since bringing it to market in 1997.
    I also understand that the same monthly course of Copaxone 
is now seven times more expensive than it was in 1997 and that 
since 1997 Teva has collected more than $34 million in U.S. net 
sales for Copaxone.
    Mr. Schultz, do these numbers sound correct to you?
    Mr. Schultz. I wasn't there at the time but they sound 
correct to me.
    Ms. Norton. Thank you.
    Mr. Schultz, are you aware that nearly one in four 
Americans taking prescription drugs report difficulty in 
affording their medicine?
    Mr. Schultz. I am very aware of that and, therefore, I am 
also very thankful for providing nearly one out of 10 generic 
prescriptions in the United States market.
    Ms. Norton. Thank you very much.
    Mr. Caforio--thank you. My time is running out.
    Mr. Caforio, are you aware of that, that nearly one in four 
Americans taking prescription drugs report difficulty affording 
their medicines?
    Mr. Caforio?
    Dr. Caforio. Congresswoman, I am aware of that and that is 
why we very actively support every patient we can with a number 
of patient assistance programs.
    Ms. Norton. Pardon me. Are you aware of that number, Mr. 
Alles--Mr. Alles, that one in four Americans taking 
prescription drugs report difficulty in affording them?
    Mr. Alles. I am aware of that number, yes.
    Ms. Norton. Thank you very much, and I see my time has 
expired.
    Thank you, Madam Chair.
    Chairwoman Maloney. The gentlelady yields back.
    Ms. Foxx, you are now recognized for questions.
    Ms. Foxx. Thank you very much, Madam Chairman.
    This--my first questions will be for any or all of the 
witnesses. I understand that your industry and companies are 
working to develop new treatments, therapies, and vaccines to 
fight the spread of COVID-19.
    What country do you expect to deliver the first credible 
and widely used vaccine for COVID-19?
    [No response.]
    Ms. Foxx. Could the witnesses answer, please?
    Dr. Caforio. Thank you, Congresswoman. This is Giovanni 
Caforio.
    Thanks for your question. I know that companies around the 
world are working day and night to develop not only vaccines 
but also treatments for COVID-19 and we are cooperating like we 
have never done before to shorten what is typically a 10-to 15-
year processing to, potentially, one to two years, and we are 
working 24/7, which is really what we do as an industry.
    As has been said before, innovation in our industry happens 
primarily in the United States. Many of the companies that are 
working on treatments and vaccines are U.S. companies.
    A lot of the research is happening in the U.S. But there 
are companies from, of course, other parts of the world that 
are working on this as well.
    What I know is whether it is a new medicine or a new 
vaccine, whenever innovation is made available to patients, it 
is available right away.
    In our country, it is sometimes delayed in terms of its 
access outside of the U.S. We are working to make sure that 
doesn't happen in the case of COVID.
    But I am confident that we will accelerate the development 
of treatments and vaccines for the U.S. and for U.S. patients.
    Ms. Foxx. Well, we know that the United States is the most 
likely country to develop the first credible vaccine. So, if 
one of the other witnesses could say, what are the best 
incentives for developing these new treatments, therapies, and 
vaccines?
    Mr. Alles. Congresswoman, this is Mark Alles.
    It is very clear that the ability to have flexibility, 
financial flexibility, built into the innovation cycle allows 
for the multi-national companies that Dr. Caforio was speaking 
about to shift those resources when crises occur and, 
certainly, COVID-19 is a crisis.
    So, I think the innovation cycle that is representative of 
the U.S. market does two things. It allows for that shift and 
it also provides access more often than not to these new 
medicines in the United States first.
    For example, one of the indications for Revlimid that was 
available to the U.S. citizens immediately upon approval took 
13 years longer to be available to patients in the United 
Kingdom.
    So, these structural issues are accompanying some of the 
development issues, and then the economic challenges of how 
innovation is rewarded in the United States but not necessarily 
in the rest of the world.
    Ms. Foxx. OK.
    Mr. Schultz, let me ask you the next question. If the 
United States had implemented the same drug price controls that 
many of our European allies have in the last few decades, would 
we be more or less likely to develop a vaccine for COVID-19?
    Mr. Schultz. I would say you would definitely be less 
likely simply due to the fact, as my peers from the industry 
mentioned, that the financial incentives would be less.
    But one interesting fact which is in line with this whole 
problem of access to new medicines is that nearly all new kinds 
of drugs are available in the United States, more than 95 
percent of them.
    I think if you just go to Canada it is something like 56 
percent only of the recent innovations in the cancer medication 
that is available in Canada.
    So there is, of course, a clear link between financial 
incentives and the motivation to do research and development in 
a certain geography and launch products in a certain geography.
    In the long run, of course, 10, 20 years out, most of these 
drugs will, of course, be available all over the world also as 
generics.
    Ms. Foxx. Thank you very much. I think anybody who has had 
any kind of experience with capitalism or any kind of reward 
system understands that human beings respond better to rewards 
than to punishment.
    I mean, we have known that for a long time. Thank you all 
very much.
    Madam Chairman, thank you very much for recognizing me.
    Chairwoman Maloney. Thank you.
    Mr. Connolly has generously offered to handle our 
committee's work on the floor. So, we are going to recognize 
him now so that he can go to the floor.
    Mr. Connolly, you are now recognized for your questions.
    Mr. Connolly. I thank the chairwoman and I thank her very 
much for holding this hearing.
    I do want to preface my questioning by, frankly, taking 
issue with my friends on the other side of the aisle. If you 
listen to their narrative, you would never know that 600 
single-source brand name drugs--brand name, not blockbusters, 
not newly developed drugs--went up in price for the American 
consumer by 21 percent in just a two-year period between 2018 
and 2020.
    You would never know, listening to their narrative, that 
long-time drugs a hundred years old like insulin, which is not 
a new drug and not a dime of new R&D went into it, increased 
and skyrocketed in price, threatening the health of American 
diabetics and prediabetics into the tune of millions.
    You would never know, in their rushing to defend CEOs 
against attacks by this side of the aisle, apparently, that 
only a few years ago we had Martin Shkreli at that table, a man 
who bought a company that had--was the sole source for a 
lifesaving drug, and gouged the price not because of the need 
to reinvest or to have a return on investment, but because he 
could and he had no conscience. And he went to jail.
    That is the CEO we want to look at. We want to protect the 
American consumer, and if my friends on the other side of the 
aisle decide they don't want to do that, I think they are 
taking a bad step.
    And that is what this hearing is about and I commend you, 
Madam Chairman--Chairwoman, for holding it.
    Mr. Alles, if we could put up the graph showing the 
historic price evolution between Europe and the United States--
not that one--on your drug, Revlimid, if I am pronouncing it 
directly.
    [Slide.]
    Mr. Connolly. And if we--yes, if we look at that graph, 
when you introduced Revlimid in Europe, it actually cost a 
little bit more than it did here in the United States. And yet, 
over time a huge divergence occurred. So, the European price 
kind of straight lined. But the American price went up and up.
    And that is because you described--your company described 
this as saying that the United States was a free market 
investment and Europe was something else. Do you make a profit 
on that drug in your sales in Europe or is it a loss leader?
    Mr. Alles. We do make a profit on the drug in the aggregate 
European Union.
    Mr. Connolly. OK. So, I guess that capitalism my friend, 
Ms. Foxx, was just talking about is alive and well in Europe.
    It is just you can make even more profit here in the United 
States because of the free market environment, which I think 
means we don't negotiate that price in a lot of public 
programs. Would that be a fair statement?
    Mr. Alles. I think in the aggregate, Congressman, what we 
are seeing is the innovation cycle and R&D that goes into 
developing a cancer medicine like Revlimid worldwide in this 
window of time.
    Mr. Connolly. Is there a different--I am sorry. I am 
running out of time. Is there a difference between the R&D 
investment in Europe versus the R&D investment--I mean, it is 
the same drug.
    Mr. Alles. It can be quite different. Clinical trials can 
be wrong more completely in the United States or more could be 
happening here than across Europe. So yes, those R&D expenses 
could be quite different.
    Mr. Connolly. Well, with respect to that, if we look at 
Exhibit 7, your own forecast said that you were going to have 
modest price increases in this drug here in the United States 
through 2018, independent of volume, and that you would 
stabilize the price of a pill at $470 by 2019.
    Instead, that pill went up to $750. Was that also because 
of unanticipated R&D costs? How could you get that price per 
pill so wrong?
    Mr. Alles. I am looking at the document that you are 
describing and I don't know that we got the estimate of R&D 
wrong. But the opportunity for increased investment and the 
opportunity for new drugs is, clearly, there.
    Mr. Connolly. No, you got the price of the pill wrong. You 
got the price of a pill wrong. That is a pretty big 
differential, especially when it hits the pocketbook of an 
American consumer. Would you not agree?
    Mr. Alles. I see the difference between the European Union 
price and the forecast that is here. But I also don't see the 
increase investment in R&D. For example, in 2018 it approached 
$5.7 billion. So, I can see here these are numbers that are 
forecast.
    Mr. Connolly. Well, I will just end here. That difference--
that difference means that for an American consumer dependent 
on this lifesaving drug, it can cost more than $16,000 a month, 
and I don't think that is an appropriate cost.
    It is not a bearable cost for most Americans, and that 
gives them the kind of choice the chairwoman showed us in the 
videos, heartbreaking videos of American consumers who are 
forced with kind of price escalation to make the terrible 
choice between controlling their illness or letting it go, and 
that ought not to be the kind of Sophie's Choice any American 
faces.
    I yield back.
    Chairwoman Maloney. The chair now recognizes Mr. Hice.
    You are now recognized for questions.
    Mr. Hice. Thank you, Madam Chair, and I want to thank all 
of our witnesses for being here today as well and for the 
difficult task that you have of working through R&D and trying 
to make a profit while at the same time provide medications not 
only here in the United States but abroad.
    I do wish that my friends on the other side of the aisle, 
if they were serious about true reform and lowering prices we 
would be looking at something like H.R. 19 instead of pushing 
something like H.R. 3, which we all know would not help lower 
drug prices and, again, as I mentioned earlier in my opening 
statement there would be fewer drugs available as a result of 
H.R. 3.
    And this is not just me saying words. This is according to 
the CBO, and they confirmed that there would be a loss of cures 
available on the market, and I don't know why that in any 
shape, form, or fashion is considered to be a good idea. Seems 
like a poor idea. In fact, it seems like a dangerous idea to go 
down that path.
    So, for whatever reason, some of my friends on the other 
side, at least the appearance is that it is worth it to lose 
cures, potential cures, in order to push H.R. 3 through as 
opposed to H.R. 19, the Republican legislation which addresses 
many of the issues, frankly, that we are talking about today 
without destroying the marketthe free market, innovation, the 
ability to get drugs through the process and to people who need 
it.
    I mean, just think of it. Again, eliminating any cure, any 
cure, for whatever the disease might be, from Alzheimer's to 
sickle cell to various cancers, ALS. I mean, you name it.
    Which one of these diseases with a possible cure that could 
not come to the market would--that is unsatisfactory. We just 
simply cannot go down that path of eliminating any potential 
cure for some of these serious diseases.
    H.R. 19 would have capped seniors' out-of-pockets costs. It 
would have required insurance companies to make information 
about drug costs available while in the doctor's office, and a 
host of other things.
    So, I want to thank each of the companies who are here 
today. I know every one of you are involved in developing 
treatments and vaccines for--potentially, for COVID-19 and 
this, again, highlights how important the investments are that 
you make, and policies that incentivize investment in 
pharmaceutical innovation is a good thing, and that is where we 
need to be focused.
    Of course, right here in the United States no doubt this is 
the epicenter of research and development for a host of 
diseases and that includes COVID-19.
    And, finally, I want to just acknowledge and thank the 
administration for the great work that they have done in 
lowering drug prices.
    As you can see from the poster behind me, there has been 
drastic decrease in prices, and you look at this and 
beginning--and by the way, this is stats from the Bureau of 
Labor Statistics, but in June 19 the U.S. saw the 
largest single year drop of prescription drug prices since 
1967. This is great progress in the right direction.
    The FDA approved a record number of affordable generic 
drugs last year for the third consecutive year. That would be 
under this current administration.
    In October 2017, the FDA published a list of brand drugs 
that are off patent and off exclusivity without any generic 
competition and they announced that they will expedite a review 
of the generics submitted on that product list.
    In October 2018, the FDA approved 110 generic drugs and 
tentatively approved 18 more. All of this results in a $26 
billion reduction in cost. Twenty-six billion dollars in cost 
savings.
    And then we have also some executive orders from the 
president, four of them, to lower the cost of drug prescription 
prices. So, this is a huge issue.
    We are moving in the right direction and, again, I want to 
thank our witnesses and these companies for being here. I think 
we need to get beyond talk and look at actual action that is 
taking place to lower prescription drug costs.
    And with that, Madam Chair, I will yield back. Thank you 
very much.
    Chairwoman Maloney. Thank you.
    Mr. Cooper, you are now recognized and you must turn your 
video on.
    Mr. Cooper, you are now recognized.

    [No response.]

    Chairwoman Maloney. OK. We are having some technical 
difficulties.
    I now recognize Mr. Raskin. You are now recognized. We will 
go back to Mr. Cooper later.
    Mr. Raskin?
    Mr. Raskin [continuing]. So, I used that by contrast to a 
majority of all the states shall be necessary. It is your 
choice.
    So, you know, I am not saying what----

    [Inaudible.]

    Chairwoman Maloney. OK. We are--we are now--we have some 
technical problems. We are now going to Ms. Wasserman Schultz. 
You are now recognized.

    [No response.]

    Chairwoman Maloney. Robin Kelly, you are now recognized.
    Ms. Kelly. Thank you, Madam Chair, and I thank the 
committee for bringing us together to discuss drug 
affordability, and I thank all of our witnesses for being 
willing to testify today.
    The medications each of your companies make are critical to 
the patients they serve. Yet, the cost of these medicines can 
make them unaffordable, putting lives at risk.
    Dr. Caforio, does your company have any programs or 
initiatives to help patients afford Revlimid? Have you expanded 
these programs during the current COVID-19 discussion? If not, 
can you share why not?

    [No response.]

    Ms. Kelly. Can't hear. You are on mute.
    Dr. Caforio. Can you hear me, Congresswoman?
    Ms. Kelly. Yes.
    Dr. Caforio. Thank you for your question.
    Yes, I would like to say, first of all, that it is 
absolutely important, essential for us, that any patient that 
needs one of our medicines has access to it. In answering your 
questions, we have a number of programs to help patients and I 
will just mention a few examples.
    Through our foundation, we provide free medicine to 
patients that are in need and eligible. These are mostly 
uninsured or under insured patients.
    In one year, Bristol Myers Squibb provides approximately $2 
billion of free medicine for patients. In the U.S., we help 
100,000 patients every year.
    For Revlimid specifically, in 2019 we provided, in that 
case through Celgene, approximately $500 million worth of free 
products.
    We also provide a co-pay assistance program support to 
patients that have commercial insurance and have challenges 
with paying their co-pay, and for Revlimid specifically that 
support was approximately $20 million last year.
    We did act quickly at the beginning of the COVID pandemic 
because we thought it was really important to do that. So, we 
expanded our program, and for any U.S. patient that lost their 
job or insurance because of COVID, they are receiving any 
Bristol Myers Squibb medicine for free.
    Additionally, we do make contributions to independent 
charitable organizations because we do know that there are 
patients we cannot help directly and we do make those 
contributions so that patients can have access to grants and 
support their out of pocket cap.
    We do understand, and I do, that all of those are solutions 
that may help some of the patients. When you look at the 
totality of our program we believe we have a program that is as 
broad as we can implement.
    We definitely would like to do more, and I would like to 
work with the committee to think about policy reforms that can 
help companies like Bristol Myers Squibb help even more 
patients.
    Ms. Kelly. I know Bristol Myers Squibb has expressed a 
commitment to addressing health disparities including a $300 
million investment announced last month.
    But with the skyrocketing prices, you know, that could 
exacerbate the same health disparities and, specifically, 
Revlimid can be used to treat multiple myeloma. Incidence of 
multiple myeloma in African Americans is two to three times 
that in whites. A $300 million investment does not erase the 
health care disparities issues.
    So, what impact have you seen with the increasing price? 
What impact has it had on minority communities in particular, 
and does increasing the price lead to less access for those 
groups?
    I am not sure if you track it or not.
    Dr. Caforio. Well, Congresswoman, we do know and I think 
the COVID pandemic this year has demonstrated very clearly to 
all of us that some communities are disproportionately more 
impacted, and we try to help in many different ways.
    As I mentioned, we expanded our support programs that are 
able to provide our medicines for free to many more patients 
this year. That includes underserved communities and those 
communities that have been impacted more.
    Ms. Kelly. Do you track that? Do you track how many in 
those communities are taking advantage?
    Dr. Caforio. I don't have exactly the statistics yet. But 
we are tracking the utilization of our programs and I would be 
happy to followup with you because----
    Ms. Kelly. Yes, I would love to see that.
    Dr. Caforio [continuing]. It is really important.
    Ms. Kelly. I would love to see that.
    Dr. Caforio. Absolutely.
    Ms. Kelly. Thank you. My time is up. Thank you, Madam 
Chair.
    Chairwoman Maloney. Thank you.
    Congressman Cloud, you are now recognized.
    Congressman Cloud?
    Mr. Cloud. Thank you. Appreciate you holding this hearing. 
This is, certainly, extremely important to the people we all 
represent and something we know we have needed to deal with for 
quite some time now, the extraordinary increase in drug 
pricing.
    Dr. Caforio--really, probably any of you could speak to 
this, but Dr. Caforio, could you speak to--this is a hearing on 
drug pricing.
    Could you speak to the pricing system, so to speak? The 
difference between what you price a drug at and what the 
customer pays and kind of the process it goes through, kind of 
a brief explanation?
    Dr. Caforio. Yes. Thank you, Congresswoman. I would be 
happy--Congressman, sorry--I would be happy to do it.
    Let me just start by saying that the pricing systems in the 
U.S. are very complex, and one of the objectives we should have 
working together is to resolve some of that complexity and 
realign the incentives to make sure we help the patients 
better.
    We do price our medicines in the U.S. based on the value 
they deliver to patients, to health care systems, to society, 
and we do take patient affordability aspects into consideration 
because they are very important to us.
    The system, as I said, is complex in the commercial space, 
so for patients that have insurance through their employer, of 
course, we work with insurance plans and PBMs to ensure that 
our products are reimbursed and often provide very significant 
rebates and discounts. We would like to see those transferred 
to patients and they often are not. This is an area that is 
important to us.
    Of course, the focus of today is primarily on the important 
government program Medicare, and in Medicare as well across 
many areas, there are, of course, plans that manage that 
program and there is significant competition in Medicare as 
well and for some products that results in----
    Mr. Cloud. I am going to--I am going to break in here for a 
second because we got--running out of time here. But, 
basically, this is--would you say this is somewhat an accurate 
chart as to drug pricing scheme?
    Dr. Caforio. Congressman, it is difficult for me to see it. 
But----
    Mr. Cloud. OK. Well, the thing that I would note is that 
there is manufacturers, drug wholesalers, pharmacies, PBMs, 
pharmacy benefit managers, and we are speaking only to the 
manufacturers today.
    And I would just suggest that while there is definitely a 
lot we need to talk to manufacturers about if we are going to 
come up with a good pricing--if we are going to have a true 
discussion about that that we probably need to bring these 
other elements into the discussion as well.
    Over the last few years, of course, we know that the Trump 
administration has produced record number of generics. They 
have approved a number--they have approved three years in a 
role a record number of generics. Do generics generally bring 
the pricing down for the consumers?
    Dr. Caforio. Yes, Congressman, and in fact, 90 percent of 
prescriptions in the U.S. are for generics.
    Mr. Cloud. OK. And the other two CEOs would agree with 
that?
    Mr. Schultz. This is Kare Schultz. Thank you for that 
question, Congressman Cloud.
    Yes, generics definitely brings down the price 
dramatically, and as it was just stated by Dr. Caforio, more 
than 90 percent of the prescription volume in the United States 
is from generics. We are very proud to, basically, provide one 
out of 10 prescriptions of generics in the U.S.
    The pricing typically drops by somewhere between 60 and 99 
percent within a year from the launch of a generic version of a 
drug.
    Mr. Cloud. OK. And we also know President Trump also passed 
an executive order dealing with most favored nation status to 
gauge our pricing more on an international price index.
    And then as Mr. Hice mentioned, 2019 was the largest drop 
since, I think, 1967 for prescription drug pricing. It is also 
interesting to me that, you know, while we have H.R. 3 out 
there, which is, again, an attempt to kind of take over this 
from a government standpoint, we have another option out there, 
H.R. 19, which does address pay for delay, product hyping, 
patent evergreening, which are serious issues that need to be 
dealt with.
    And, certainly, you know, I think we all agree it is a 
bipartisan issue that we want to lower drug pricing. But as we 
have seen with the Obamacare and Affordable Care Act, the 
intentions don't necessarily turn into actual policy. When we 
saw the attempt to get everybody health insurance actually led 
to extraordinary increase in health insurance with actual 
decrease in actual care.
    So, it is extremely important that we make sure that we are 
equipped to deal with this properly.
    Now, one question I do have--oh, my apologies, Chairwoman. 
I read the clock wrong.
    Chairwoman Maloney. OK.
    Mr. Raskin, you are now recognized.
    Mr. Raskin. Thank you very much, Madam Chair, for calling 
this extremely important hearing.
    Mr. Schultz, I have questions for you. The prices of your 
product, Copaxone, have gone way up over the last two decades. 
It is more than 10 times what it used to cost. Your profits 
have been soaring. It is in the billions.
    The executive compensation has increased dramatically. I 
understand your top executives are all making $4 million, $5 
million, $6 million.
    By the way, what is your salary, Mr. Schultz?
    Mr. Schultz. I have a salary which is combined of different 
elements. But, basically, my sort of the basic salary would be 
$2 million and then I would have----
    Mr. Raskin. What is your total compensation package you 
negotiated for when you accepted the job?
    Mr. Schultz. The ongoing compensation package was in the 
range of $12 million----
    Mr. Raskin. Twelve million. OK. So I want to ask about R&D 
because we have heard already today inevitably that the 
exorbitant prices that d,rug companies are charging for 
medication in America are necessary to invest in research and 
development.
    In just a little example, Copaxone cost our constituents 
$126 a day, which is four times what it costs in Germany, $33 a 
day, five times what it costs in the United Kingdom, $25 a day, 
and seven times what it costs Vladimir Putin's constituents in 
Russia, $18 a day.
    But we are told if we put any limits on price increases in 
America, which is the only country on Earth which doesn't limit 
drug prices, we will stifle innovation. We will deprive our 
people of the next cure, and we take that seriously.
    That is a sobering answer to us when people complain about 
the skyrocketing price of prescription drugs because R&D is 
costly and critically important to discovering the next 
treatment or next cure of the killer diseases.
    But our examination of your company data, Mr. Schultz, 
reveals that Teva is not investing nearly as much in R&D as big 
pharma might lead the American people to believe and, 
certainly, not enough to justify the extraordinarily high 
prices our constituents are paying while, you know, there is 
something of a bonanza for the salaries of the executives of 
the company, and so on.
    Your companies raised the price of Copaxone 27 different 
times since bringing it to market more than two decades ago. 
Its current price is $7,114 for a monthly course.
    Has your company ever justified these price increases by 
claiming that its Copaxone revenues are used to invest in 
scientific research and development?
    Mr. Schultz. Congressman, thank you for that question.
    The way that pharmaceutical products are priced, and let me 
just state up front that I was not there during this time you 
are referring to for Copaxone. I only started late 2017.
    Since then, we have not increased the price of Copaxone and 
we have actually significantly decreased the next sort of----
    Mr. Raskin. OK. Forgive me, because I am running out of 
time.
    So, the fact is that your company's talking points that 
were produced to this committee--it is page 5 of Exhibit 57 in 
the materials--show your executives being directed to justify 
price increases for Copaxone on exactly this basis, quote, ``so 
the company can invest in researching new developments that 
directly translate to increased options for Copaxone 
patients.'' In other words, it is an echo of what we have heard 
from some of our colleagues today.
    But other documents your company produced to the committee 
directly contradict those talking points. Take a 2016 internal 
presentation to the board of directors, which indicated that 
Teva spent the least amount of money on R&D among all major 
pharmaceutical companies. I want to put that slide on the 
screen, Madam Chair. It is Exhibit 56.
    [Slide.]
    Mr. Raskin. And, Mr. Schultz, do you know how much your 
company has spent on Copaxone R&D compared to what it has made 
in profits on Copaxone? And I understand that you are 
relatively new to the company.
    Mr. Schultz. Yes. So, I wouldn't know the details of that. 
No, I don't know----
    Mr. Raskin. All right. Let me--let me give you the details 
then.
    Your company has made more than $34 billion--$34 billion--
from Copaxone but it reported to the committee that it has 
spent two percent of that on R&D expenditures for Copaxone 
patients. So, in direct contradiction to the talking points 
that we got from your company and that we are hearing today, 
Teva could not report to the committee a single R&D expenditure 
that took place after 2015.
    Yet, there have been multiple price increases since 2015. 
How would you justify that to the kind of patients that we saw 
on the video at the beginning of our hearing who cannot make 
ends meet, who are desperate, who are talking about selling 
their cars, selling their houses, having to move?
    How can you justify increasing the prices of this 
desperately needed drug while there have been no investments in 
scientific research and development while those price increases 
are being imposed?
    Mr. Schultz. First of all, as you know, I didn't join the 
company until the end of 2017.
    Mr. Raskin. So, you don't justify it. You think it was 
wrong. And have you been brought in to clean house?
    Mr. Schultz. I have been brought in because the company 
came into financial trouble for a number of reasons, one of 
them being the patent expired for Copaxone and the associated 
price decline, the other one being having put on major debt and 
that meant that I was brought in to, basically, restructure the 
company and reduce costs so that the company could honor its 
commitments in terms of its financial----
    Mr. Raskin. So, the company got addicted to the cash cow of 
Copaxone----
    Chairwoman Maloney. The gentleman's--the gentleman's time 
has expired.
    Mr. Raskin [continuing]. And when there was some 
competition, then at that point it became a crisis.
    Chairwoman Maloney. The gentleman's time has expired.
    Mr. Raskin. Madam Chair, this is precisely why we need to 
give the government and Medicare the power to negotiate for 
lower drug prices because our patients and our taxpayers are 
getting ripped off by big pharma.
    I yield back.
    Chairwoman Maloney. I agree.
    Mr. Norman, you are now recognized for questions.
    Mr. Norman. Thank you, Ms. Chairman. I just want to thank 
you for holding this hearing.
    You know, one thing is you hear both sides discuss the 
problems we face with high drug costs. Here is what we agree 
on. Miracle drugs that cure cancer, cure a lot of the illnesses 
we have, are no good if our patients can afford it.
    Second, I agree that the price of insulin, as an example, 
which has been around a hundred years or more, that doesn't 
require any research and development, that ought to be stopped.
    And the difference, I think, in both--in my friends on the 
other side of the aisle, they look to just government. Let us 
let government get involved.
    Now, on our side, you have heard a lot of different 
testimony about H.R. 19. Let us look at the one thing that 
helps this great American system thrive is the competition will 
bring down pricing.
    So, I would ask my friends on the other side of the aisle, 
H.R. 19, take a look at it. It stops companies from withholding 
generic drug samples.
    It stops the exclusivity of products as insulin that has 
been around for a long time, for prices to be hiked up. It 
stops product hopping where a company will say that one--they 
introduce a drug that has--there is no difference in getting a 
higher price when the drug does exactly the same thing as the 
old drug.
    That is the type thing we ought to be looking at, and I 
would urge my colleagues on the other aisle to take a look at 
this. Public disclosure of pricing ought to be highlighted.
    So, I would urge you to look at H.R. 19. One of the things 
I am really interested in is the PBMs. Could any of the 
panelists, any of our witnesses, go into the effects that--of 
pharmacy benefit managers and how it affects the drug prices?
    Anybody?
    Dr. Caforio. Congressman, thank you. I am happy to provide 
my perspective.
    First of all, let me say that as I mentioned earlier the 
pricing system in the U.S. is really complex, and I do agree 
with you that our objective is that every patient that needs 
one of our medicines has access to it.
    Specifically----
    Mr. Norman. I agree with you. But it is at an affordable 
price. Every patient needs it, but if you can't afford it what 
good is a drug?
    Dr. Caforio. I agree with you, and that is why we do 
everything we can to help patients with affordability programs 
to be able to afford their medicines.
    There is one area where we would like to be able to do 
more, which is to provide patients with Medicare co-pay 
assistance. That will be extremely helpful for patients that 
are struggling to afford their out-of-pocket costs.
    We also support measures such as introducing out-of-pocket 
caps in Medicare, which would be, again, really helpful to some 
of the patients that are struggling with our medicines.
    Specifically to your question on PBMs, PBMs play an 
important role. At the same time, our concern is that the 
significant rebates and discounts that the industry provides 
for some medicines in order to have formulary listing don't 
make their way to patients at the pharmacy counter, and our 
perspective is that patients should be benefiting from those 
rebates and discounts and our industry would be supportive of 
reform that looks at that anomaly and realigns incentives so 
that the discounts we provide can make a real difference in 
terms of affordability for patients.
    Mr. Norman. Then I would ask your company to lead the way. 
Get us a blueprint what would do just what you said where 
patients can afford drugs, as an example, insulin, that is 
unaffordable for so many families. How about you leading the 
way with that?
    Let me hear from the other witnesses.
    Mr. Schultz. This is Kare Schultz from Teva. Thank you for 
that question, Congressman Norman.
    The PBMs, they play a significant role in that they 
consolidate and negotiate on behalf of managed care plans and 
other customers that they had who, again, of course, take care 
of the patients that are insured under those schemes.
    It is correct that over the lifetime of a pharmaceutical 
product the rebates typically increase as time goes on and more 
competition enters into the marketplace, and it is not abnormal 
to see rebate levels somewhere between, let us say, 25 percent 
and 65 percent.
    And, of course, it matters a lot to patients that the 
rebates are actually passed on to the patients and, therefore, 
there has been a lot of debate and pharma has also been 
supporting that the rebate structure could be more transparent 
than it is today. So, I think that is the difference in----
    Mr. Norman. Transparency. Let me--I am running out of time. 
Transparency. Help us do that. Help us see what PBMs negotiate 
and what they charge the groups that they are selling products 
to. Help us more--have more transparency with that.
    I yield back.
    Chairwoman Maloney. The gentleman's time has expired.
    The gentleman's time has expired.
    Mr. Mfume, you are now recognized.
    Mr. Mfume. Thank you very much, Madam Chair. I am 
particularly thankful that you are holding this hearing.
    Five months ago, I was re-elected again to fill this seat, 
a seat that was previously held by my dear friend of 42 years, 
Congressman Elijah Cummings, and I appreciate the comments that 
I have heard earlier with respect to those of you who served 
with him and miss him like we all do.
    Congressman Cummings represented Maryland's Seventh 
congressional District for 23 years, and throughout his time in 
Congress, he championed a lot of things, but nothing more 
dedicated than this effort to lower cost of prescription drugs. 
In fact, on March 8, 2017, Congressman Cummings went to the 
White House to meet with President Trump about this and to talk 
about a key piece of legislation that we are here talking about 
today that would give the Federal Government the authority to 
do a number of things, but most of all to drive down the price 
of prescription drugs. That legislation would guarantee real 
price reductions on what was then and what continues to be now 
soaring prices of these drugs.
    According to his own statement following the meeting that 
day, Chairman Cummings said the President ``seemed enthusiastic 
about the idea and pledged--pledged--to work together to pass 
the legislation.'' But despite numerous good faith efforts by 
Chairman Cummings to followup, President Trump never responded. 
He abandoned his commitment to work jointly, and he instead 
issued a statement saying, and I quote, if the bill were 
presented today in its current form, he would, in fact, veto 
it.
    So, in many respects, we are here today because President 
Trump failed to fulfill his promise. As a result, seniors and 
retirees and others continue to face immeasurable suffering 
simply because they can't afford to buy a pill or to take a 
shot. Their pain and their suffering can't be quantified, but 
the collective costs of the greed of big pharma can be 
calculated.
    Take, for example, the Teva Pharmaceuticals company, which 
we have heard from today, and their CEO. A drug, as we all know 
and has been mentioned, has been used effectively to treat 
multiple sclerosis. Since 1997, Teva has raised the price of 
the drug 27 times, 27 times, to its current price of $5,800 a 
month. That is nearly seven times more expensive than when it 
was first introduced. Between 2002 and 2016, Teva's U.S.

    [inaudible] $11 million to $3.3 billion.

    So, Mr. Schultz, I would like to start with you, and I know 
we are challenged by time here. We are all limited. The good 
thing is that this hearing will go on for a while. It is my 
understanding, sir, that Teva negotiates directly with 
Government players like Veterans Affairs. Is that correct?
    Mr. Schultz. That's correct, sir.
    Mr. Mfume. And it is also my understanding that Teva does 
not directly interact with or negotiate with Medicare. Is that 
correct?
    Mr. Schultz. We do negotiate with Medicare plans. So, the 
way it works is that we will negotiate with a Medicare plan, 
which would be run by an insurance company typically. So, not 
directly with Medicare, per se, but with a Medicare plan 
represented by an insurance provider----
    Mr. Mfume. And that is indirectly. So, if Teva negotiated 
directly, which is what I am asking, would that, in your 
opinion, lower the cost of Copaxone?
    Mr. Schultz. Now that's a very complex question to answer 
because it could go both ways, and the reason why it could both 
ways is that it really depends on the circumstances--how many 
competitors are there in the market for the drug, how many 
patients are there in that plan that you are discussing. So, it 
is very complex----
    Mr. Mfume. But Mr. Schultz, in all likelihood, the answer 
probably would be yes. I think you would agree with that. I 
mean, otherwise, why even enter into the negotiations?
    Let us talk about 2013. That year, the average net cost, 
meaning the cost after discounts, that the VA paid for Copaxone 
was $2,019. Do you know the average paid that same year by 
Medicare for the drug, sir?
    Mr. Schultz. No, I don't know that, sir.
    Mr. Mfume. It was $4,200, twice as much. So, that is quite 
a difference in a drug going to two different agencies within 
the Government simply because the Government prohibits one of 
the agencies from not negotiating at all.
    My time is just about expired, sir. But can you give us, in 
your opinion, since you have been with the company now for the 
last 30, 36 months, what do you suggest we do at this 
particular point in time as a legislative body, and what do you 
suggest Americans do, whose hands are tied and who need the 
drug?
    Mr. Schultz. So, I would like----
    Chairwoman Maloney. The gentleman's time has expired, but 
Mr. Schultz may answer the question, please.
    Mr. Schultz. Thank you very much, Chairwoman.
    So, I'll need to give you two different answers because 
there are two parts in your question. The first part is what do 
I suggest that could be done to the U.S. healthcare system? 
This is a very difficult question about a very complex system, 
which is a huge organism, as we just saw, with many, many 
different players taking part in it.
    What is important is, of course, to secure innovation and 
secure access. I think we can all agree to that. But I also 
think it's important to try and make the system slightly less 
complicated because it's very difficult, even for a 
pharmaceutical manufacturer as we are, to see through the 
system and understand what is actually happening.
    And one of the reasons why you might see let's say more 
preferential access in time of negotiations, as you saw with 
the VA, is also because they offer a very simple model. They 
will offer and say, OK, we will buy X million of X doses of 
something. And then, of course, just like if you go to a big 
store that sells 1,000 pieces at a time, you get a cheaper 
price than if you buy one at a time.
    So, the whole complexity of the system is a part of what is 
driving overall cost, where some--other healthcare systems are 
less complex. So that's one element.
    The other element to your question is what about Copaxone 
right now? And I'm sorry that I have to repeat myself, but the 
price of Copaxone has collapsed. The revenues of Copaxone for 
Teva Pharmaceuticals has collapsed. The irony is that's the 
reason why I came into the job I have today, because we've been 
lowering the price of Copaxone ever since I joined the company 
at the end of 2017.
    So, the price you mentioned before----
    Mr. Mfume. Madam Chair, I know I don't have any time here.
    Chairwoman Maloney. OK.
    Mr. Mfume. But to use the word ``collapse'' after you have 
raised the drug price 27 times. So, did it collapse by two 
percent? Is that a real collapse? I think we ought to be 
careful with the way we use wording here, and to suggest to the 
American public, after you have raised the price 27 times, that 
it collapsed is a little bit misleading.
    I yield back, Madam Chair.
    Chairwoman Maloney. Mr. Keller, you are now recognized for 
questions.
    Mr. Keller. Thank you, Madam Chair.
    Americans pay too much for their healthcare, and the rising 
cost of prescription drugs needs to be addressed through 
bipartisan cooperation. Now more than ever, we need to ensure 
that patients, especially those with preexisting conditions, 
have access to affordable prescription drugs.
    Having traveled around northeastern and north central 
Pennsylvania meeting with patients, hospital administrators, 
and medical professionals who have repeatedly told me, among 
other things, that the best way to tackle the issue is to 
address patient reform and get generics to market faster, 
pursue price transparency solutions so consumers know the true 
cost of their medication, and incentivize innovation to help 
find new cures.
    There has been some discussion today around H.R. 3, a 
partisan Government-centric approach that would allow the 
Government to set prices through forced negotiation, resulting 
in fewer cures and less innovation in the pharmaceutical drug 
market and ignoring the good bipartisan work done on this issue 
that would make significant progress toward lowering drug 
prices. H.R. 19, the Lower Costs, More Cures Act, introduced by 
Energy and Commerce Committee Ranking Member Walden, would 
improve price transparency so that patients can have access to 
more information and shop the marketplace as a true consumer, 
get generics to market faster, and encourage innovation, 
instead of stifling it as H.R. 3 does.
    I do have a question for Dr. Caforio. Some of my colleagues 
in Congress support moving toward socialized medicine. Can you 
speak to the effects of socialized medicine on the pursuit of 
medical innovations such as Revlimid and other drugs designed 
to treat cancer?
    [Pause.]
    Chairwoman Maloney. Can you please unmute so you may answer 
the question?
    Dr. Caforio. Yes, Congressman. Can you hear me?
    Mr. Keller. Yes, we can now.
    Dr. Caforio. Thank you. Thank you for your question.
    Well, let me start by saying I am a physician by training. 
I was trained in Europe. I had the opportunity to live in 
multiple countries, and I've been working and living in the 
U.S. for most of my career. And I've had experiences with 
multiple healthcare systems around the world, and access to new 
medicines for patients is the number-one priority.
    I want to emphasize that when we develop and introduce a 
new cancer medicine in the United States, that is available to 
patients immediately. And of course, we need to work to make 
sure it is affordable to some of the patients that are 
struggling today.
    I do have experience with countries where there is a 
significant delay with new patients having access to medicines. 
I can tell you that one of my experiences is in multiple 
myeloma, where innovative cancer medicines have increased the 
survival of patients with multiple myeloma after five years 
from 10 percent to over 50 percent in the last 10 years. And I 
do know that the medicines that are responsible for this 
improvement are still not available in more than one country 
around the world.
    So, I think our objective should be to address the 
challenges that exist with the affordability of medicines for 
patients in the U.S., of course. We must be working together to 
make sure that no patient has the experience we heard earlier 
this morning. But it is absolutely essential that we continue 
to reward innovation and that we are able to provide a new 
medicine when it is available to every patient immediately.
    Mr. Keller. Thank you. I appreciate that.
    I have heard several times during the hearing this morning 
that the pricing system in the United States is very complex, 
and my colleague from Texas, Representative Cloud, had a chart 
that shows the many different parts of the system, from 
manufacturers to the PBMs and so on. And the people I see in 
the room today, you are just one part of the entire system, 
from manufacturing the drugs or producing the drugs to getting 
it to the patient.
    None of you witnesses with us today have any other role 
other than being the manufacturer of the drugs? Is that 
correct?
    Dr. Caforio. That's correct.
    Mr. Keller. So, I would think that if we have a complex 
system and there are many parts to it, if we really wanted to 
get down to making sure that the drug was produced and 
delivered to the patient in a cost-effective way so that it was 
affordable, instead of having just one part of the supply chain 
in the room today, the committee--the majority in the committee 
would have invited everybody in that supply chain to make sure 
we could come up with a solution that would benefit us and get 
toward a real solution, rather than just some messaging.
    So, I yield back. Thank you.
    Chairwoman Maloney. The gentleman's time has expired. The 
chair recognizes Ms. Wasserman Schultz. You are now recognized 
for questions.
    Ms. Wasserman Schultz. Thank you, Madam Chair.
    Encouraging generic competition is crucial to ensuring that 
brand-name drugs become more affordable, but some drug 
companies have resorted to exploitative tactics that delay 
generic competition, which is----
    Chairwoman Maloney. Representative, would you turn your 
video on so we can see you? By law, we have to have your video 
on as you speak.
    Ms. Wasserman Schultz. My video is on.
    Chairwoman Maloney. Thank you.
    Ms. Wasserman Schultz. At least on my end, my video is on. 
All right. Can you see me now?
    Chairwoman Maloney. Yes, we can see you now. Thank you.
    Ms. Wasserman Schultz. All right. Let me begin again.
    Encouraging generic competition is crucial to ensuring that 
brand-name drugs become more affordable, but some drug 
companies have resorted to exploitative tactics that delay 
generic competition, which, in turn, keeps drugs high for 
patients.
    Mr. Alles, I would like to ask you a few questions about 
Celgene's use of its safety program as it relates to Revlimid, 
the oral chemotherapy treatment. As a breast cancer survivor, 
the high cost of cancer treatment is very personal to me. A 
Risk Evaluation and Mitigation Strategy, or REMS, is an FDA-
required program that ensures that high-risk drugs are used 
safely.
    Mr. Alles, I am sure you are familiar with this program and 
that manufacturers are not allowed to use REMS to impede 
generic manufacturers' applications to FDA. Is that right? Mr. 
Alles?
    [Pause.]
    Ms. Wasserman Schultz. Madam Chair? Mr. Alles?
    Chairwoman Maloney. Mr. Alles, please unmute and answer the 
question.
    Mr. Alles. I did hear the question, and you are correct, 
Congresswoman.
    Ms. Wasserman Schultz. OK. FDA required Celgene to 
implement a REMS safety program for Revlimid due to its risk 
for use by pregnant women. As a mother of three, this is 
something that I can certainly appreciate, and still, I think 
it is important to understand implementing this program for its 
intended purpose.
    This program is supposed to be used to protect patient 
safety. Correct, Mr. Alles?
    Mr. Alles. That is the goal of the program, yes.
    Ms. Wasserman Schultz. OK. And Mr. Alles, did Celgene also 
view the REMS program as a way to delay generic entry?
    Mr. Alles. We did not. As I said in my prepared testimony, 
we did offer to sell and would sell samples of our products to 
generics once they agreed to our common sense safety standards 
and an indemnification process.
    Ms. Wasserman Schultz. Thank you. Let us take a look at a 
slide from a Celgene internal presentation about its REMS 
program. This is Exhibit 11.
    See the second key discussion point. Celgene viewed the 
program as useful for the ``prevention of generic 
encroachment.''
    Mr. Alles, prevention of generic encroachment just means to 
delay generic competition. There is just no other way to read 
that. So, I will ask you again. Did Celgene use its REMS 
program to try to prevent generic competition, yes or no? And 
you are looking at a document that whose definition, 
``prevention of generic encroachment,'' would seem to be 
exactly that.
    Mr. Alles. I see the slide, and I understand some of the 
words, but I don't know the context. And what I can say----
    Ms. Wasserman Schultz. Oh, come on. Come on.
    Mr. Alles [continuing]. Is that a generic--a generic 
manufacturer would need to replicate the exact same standard in 
the branded version of the REMS program. So, as long as the 
generic, with their abbreviated application, would, in fact, 
meet that same rigorous standard----
    Ms. Wasserman Schultz. OK.
    Mr. Alles [continuing]. Then, yes, it would be approved.
    Ms. Wasserman Schultz. Thank you. Reclaiming my time, 
according to the FDA, Celgene's REMS program delayed 14 generic 
manufacturers from purchasing enough samples of Revlimid to 
obtain FDA approval. And while these samples were eventually 
provided, an expert analysis estimated that the delay cost 
consumers as much as $637 million.
    Who knows how many cancer patients skipped, split, or 
rationed the medication because you were able to keep 
competitors at bay and prices high with these anti-competitive 
tactics.
    Isn't it also true that Celgene even tried to obtain usage 
of safety--isn't it also true that Celgene even tried to obtain 
additional patents on the REMS program itself?
    Mr. Alles. I'll begin with the second question, 
Congresswoman, and in fact, we listed, pursuant to statute and 
regulations, a patent on the REMS program that we created in 
conjunction with the FDA for the safe distribution of medicines 
that you know one dose in a pregnant female would lead to 
severe birth defects.
    Ms. Wasserman Schultz. No, no, no----
    Mr. Alles. So, we did--we did patent that----
    Ms. Wasserman Schultz. Reclaiming my time----
    Mr. Alles [continuing]. Pursuant to regulation.
    Ms. Wasserman Schultz. Reclaiming my time, the FDA very 
specifically said that they did not think that providing 
samples to generic manufacturers would create a safety concern, 
and you very clearly in the company's own presentation define 
``generic encroachment'' as a key goal. There is no--anyone 
with common sense understands that generic encroachment meant 
that you were trying to block other generic companies from 
being able to get access to develop the drug.
    Thankfully, Congress has created--has acted to address 
inappropriate usage of safety programs through the CREATES Act 
last year. But this example demonstrates how drug companies 
will continue to exploit loopholes unless and until Congress 
acts to close them, regardless of whether these strategies 
inflate the cost of medications for people living with cancer. 
And that is exactly what your heinous policy that your company 
has followed has allowed.
    It is unacceptable. It is offensive to me as a cancer 
survivor, and I really strongly suggest that you take back to 
your company just the things that have come to light here and 
rethink the way you handle the process of approving generic 
competitors to access the materials they need to produce the 
drugs.
    Thank you, Madam Chair. I yield back.
    Chairwoman Maloney. Congressman Grothman?
    Mr. Grothman. Can they hear me? First of all, for Dr. 
Caforio, when did BMS acquire Celgene?
    Dr. Caforio. Congressman, in November 2019.
    Mr. Grothman. Two thousand and when?
    Dr. Caforio. Nineteen. Last year.
    Mr. Grothman. OK. And what was the list price for Revlimid 
immediately prior to the acquisition?
    Dr. Caforio. I don't have that figure in front of me, 
Congressman. I know we had provided it, and it has been 
mentioned before in the hearing. I'm happy to give you some 
information that show up on all the lists, list prices.
    Mr. Grothman. I guess what I am looking for, did the price 
increase dramatically in January 2020?
    Dr. Caforio. In January 2020, we looked at the price of all 
of our medicines. When we do that, we consider multiple 
factors--the value of Revlimid, our investment in R&D in this 
area, considerations related to affordability. We did increase 
the price by six percent.
    Mr. Grothman. That is all, six percent?
    Dr. Caforio. Six percent, yes.
    Mr. Grothman. OK. Have there been any price increases this 
year?
    Dr. Caforio. That was the--that was the one price increase. 
Our practice has been, since 2018, to limit price increases to 
only those medicines where we have active and significant 
clinical research programs ongoing, limit it to six percent. 
And when you look at the net price of our total portfolio in 
the U.S., since 2018, it has been flat.
    Mr. Grothman. OK. Mr. Schultz, I have a question for you. 
As I understand it, Teva entered into an agreement with Amgen, 
which appears to be a pay-for-delay sort of contract. Is that 
accurate?
    Mr. Schultz. I really wouldn't know. If it happened, it 
must have happened way before I joined the company.
    Mr. Grothman. I am sorry. Was there a payment made to delay 
the introduction of a generic?
    Mr. Schultz. No, I'm not aware of that, but it's an 
allegation which I guess is linked to the period before I 
joined the company. So, I don't know anything about it.
    Mr. Grothman. OK. So, you don't know for sure whether there 
was such an agreement or not?
    Mr. Schultz. No, I'm sorry. I don't.
    Mr. Grothman. OK. That is almost incredible, but OK. I will 
come back to Mr. Caforio. Is there generic competition for 
Revlimid currently on the market?
    Dr. Caforio. Congressman, there is not because Revlimid is 
still protected by patents until 2027. So, its exclusivity has 
not expired, and the patents expire beginning in 2027.
    What I can tell you is that those patents were reasserted 
last year by the Patent Office, which denied secondary review 
because of their strength. And they protect important 
innovations surrounding the invention and development of 
Revlimid. And there will be patents, patents of Revlimid--
sorry, there will be generics of Revlimid in the next few 
years, beginning in 2022.
    Mr. Grothman. Some critics have said that Revlimid is 
essentially the same as a drug called thalidomide. Can you tell 
us, is it essentially the same or not?
    Dr. Caforio. Congressman, that's not my understanding. 
Revlimid is a completely different medicine that Celgene 
developed with a 14-year program that started synthesizing 
hundreds of compounds. It is--belongs to the same class as 
other medicines, but as it always happens in our industry, 
every new medicine is developed as a new medicine. It is--it 
has a different safety profile. It has a different efficacy 
profile.
    It has clearly advanced in the treatment of multiple 
myeloma. It is an independent medicine.
    Mr. Grothman. OK, I will give you a broader question here 
before I run out of time. Right now, it seems to me from what 
we see on the Internet that in the United States, per capita, 
we pay about 50 percent more for pharmaceuticals than Canada, 
Japan, or Germany, and about twice as much as Italy and 
Ireland.
    To what do you attribute that? It is kind of a dramatic 
difference.
    Dr. Caforio. Well, Congressman, the difference comes from 
the fact that innovation is recognized and rewarded in the 
United States, and this is the reason why innovation-based 
industry is primarily a U.S. industry, and much of the research 
we do takes place in the U.S. Medicines are readily available 
to many patients in the U.S. I can tell you in the case of 
Bristol Myers Squibb, we invest almost $10 billion a year as a 
U.S. company in research and development, that there are 13,000 
dedicated scientists that work at the company, and the reward 
of innovation for us is really important in order to continue 
to fund R&D.
    We are discussing multiple myeloma, where Revlimid has made 
a very big difference for patients. At the same time, in the 
next three years, we will invest more than $2 billion in the 
development of the next generation of multiple myeloma 
medicines, and some of them represent extraordinary innovation. 
And the reason why we can do that is because we have a system 
that rewards innovation, and that system is one we should be 
working together on to make sure that----
    Chairwoman Maloney. The gentleman's time has expired. OK, 
thank you.
    Mr. Grothman. Thank you.
    Chairwoman Maloney. I now recognize Mr. Sarbanes. You are 
now recognized for questions, Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Madam Chair. Can you hear me OK?
    Chairwoman Maloney. We can hear you, and we can see you.
    Mr. Sarbanes. Thank you. Thanks for the hearing.
    I want to echo those who indicated that we sorely miss 
Chairman Cummings. On this issue, he was a bulldog. He never 
let go.
    And unfortunately, the President talked a good game. He 
often talked about how he was going to take on the 
pharmaceutical industry, but in the end, it turned out he was 
weak-kneed. He ended up being a pushover. He caved to the 
industry. And we know that Elijah Cummings wouldn't have done 
that, and you are not doing that either, Chairwoman Maloney. 
So, thank you for calling this hearing.
    I wanted to just take a moment to address an argument that 
we heard articulated today by these companies, which is that 
the pharmacy benefit managers are the ones responsible for 
these rising drug prices. And look, there is no love lost 
between me and the PBMs. I know that they dropped the ball on 
pricing as well, and frankly, I think from the standpoint of 
the average consumer and patient out there, the pharmaceutical 
companies and the PBMs and a lot of other players are part of a 
really kind of broad conspiracy to hike up these prices of 
prescription drugs.
    But nevertheless, I don't think it is fair to try to push 
the blame off particularly onto the PBMs. It is the 
pharmaceutical companies.
    So, Mr. Alles, let me ask you this. In 2009, the average 
net price of a unit of Revlimid, meaning the price after 
removing discounts and rebates, was $294. In 2014, it went up 
to $396. And in 2018, it was $598. So, your net price more than 
doubled in just that period of time.
    Is it fair to say that Revlimid's price increased at a 
faster rate than any discounts or rebates provided to PBMs or 
to others in the supply chain? Mr. Alles?
    Mr. Alles. Can you hear me, Congressman?
    Mr. Sarbanes. Yes.
    Mr. Alles. Yes, thank you.
    I don't have the numbers in front of me, but I trust that 
the numbers that you've provided are accurate, and it would 
represent a rapid increase in the net price, as you describe.
    Revlimid is a unique molecule, as you heard from Dr. 
Caforio, in the treatment of rare blood cancers, and in the 
marketplace, the use of discounting or other contracts or work 
with PBMs was really not required. It's such a specialty cancer 
drug for this orphan disease, which affects on average about 
50,000 patients a year in the United States, the incidence of 
new cases of about 25,000 to 30,000 a year. So, it's very much 
one of those products that is available, and medical 
hematologists will prescribe it as we distribute it through 
specialty pharmacies.
    So, there really isn't the complexity other than the risk 
management program that you see with other products like----
    Mr. Sarbanes. Well, in that case--just to reclaim my time. 
In that case, you are not really using the rebate or PBM or 
other mechanics as an excuse for why the price had skyrocketed 
and more than tripled between 2005 and 2019. That is what we 
saw in terms of the price hike around Revlimid. So, that really 
falls on the company. I mean, you are in the position to having 
to explain why there was such a significant increase there.
    But let me go to Mr. Schultz because I am going to run out 
of time here. Unlike Revlimid, Teva has provided significant 
rebates for your drug Copaxone. Is that correct?
    Mr. Schultz. That's correct, yes.
    Mr. Sarbanes. Yes. But even with these rebates, before 
generic competition entered the picture, Copaxone's net price, 
again after rebates and discounts, increased by more than 75 
percent in just eight years. Is that right?
    Mr. Schultz. I'm not really aware of that because I wasn't 
there at the time. So, I only really know----
    Mr. Sarbanes. OK. Well, it is the case, and I just want to 
congratulate you on being able to answer, from my estimate, 
about 50 percent of these questions by saying you weren't there 
at the time. I understand and appreciate that, but it would 
have been nice to come maybe equipped a little bit better with 
what the situation was at the company with respect to these 
drugs prior to entering there because in some ways, you have a 
responsibility to have a historical perspective.
    But in any event, the net price jumped from $2,214, $2,214 
in 2009. It then went to $3,113 and, in 2017, $3,886. And it 
only decreased, as we discussed, when the generic option came 
in. So, PBMs had some role in the pricing, and again, I don't 
let them off the hook. But clearly, the pharmaceutical 
companies are still a major culprit when it comes to the price 
gouging, and that is why we are bringing this attention to your 
activity.
    And with that, I yield back, Madam Chair.
    Chairwoman Maloney. Thank you. The gentleman's time has 
expired. Mr. Higgins, you are now recognized for questions. Mr. 
Higgins?
    Mr. Higgins. Thank you, Madam Chair and Ranking Member. 
Thank you for holding today's hearing, which is focused on a 
subject that affects everyone in the country.
    We are hearing today from my colleagues across the aisle 
that the solution to the issue of high drug costs is their bill 
H.R. 3. I have issues with H.R. 3. H.R. 3 would result in a 
huge expansion of Government control over patients' healthcare 
that would result in actually fewer cures and less access for 
Americans to drugs and treatments.
    If we were genuinely worried about this issue, then we 
would work on compromise legislation that would have a chance 
of making it to the President's desk rather than messaging 
bills that never had a chance of getting consideration by the 
Senate, with zero bipartisan input and some very 
unconstitutional language, in my opinion.
    Now that being said, we must recognize as a nation that it 
is part of a legitimate narrative across the country, the 
citizens that I serve, we have genuine complaints about the 
price of pharmaceuticals. So, you gentlemen that appear on this 
panel today have to answer some difficult, but legitimate 
questions.
    Introduction of generic drugs, I am going to ask Mr. 
Caforio. Regarding generic drugs, introduction into the 
marketplace generally produces positive economic benefits for 
consumers. Would you at least--by the essence of that 
statement, would you agree with that, sir?
    Dr. Caforio. Congressman, I fully agree.
    Mr. Higgins. OK. In the interest of time, it is understood 
across the board that when generic drugs are introduced into 
the marketplace, then needed pharmaceuticals become more 
affordable for regular Americans. And this is the cornerstone 
of our concern and why you are here today.
    So, you had stated in response to another colleague who was 
questioning you that, the note that I took, you mentioned, good 
sir, that the drugs that you introduce are unique. They are 
each unique.
    And generally, we would agree with that, but would you 
please address pharmaceutical companies' tendency to make very 
small changes in the formula of a drug and, therefore, extend 
their period of protection and delay the introduction of 
generic drugs or market that very slightly changed Rx formula 
through the insurance companies and through the management 
system that exists. Just talk to us about the just slight 
change of the formula of the drug and why should that stop a 
generic drug from being introduced? To me, that is gaming the 
system.
    Dr. Caforio. Thank you, Congressman.
    Let me just start by saying that our policy is to patent 
meaningful innovations, and our patents reflect meaningful and 
important innovations. In many cases, it's about new diseases, 
new treatments. In some cases, it's about new dosing, the use 
of different manufacturing technologies. But our approach is to 
patent meaningful innovation that is beneficial for patients.
    Mr. Higgins. Would you say that meaningful innovation in 
the formula of an existing drug that is approaching the 
expiration of its protection on the patent and you are looking 
at the introduction of generic drugs with that same formula, 
would you say a meaningful change in the formula that is not 
recognized across the board by the medical field and by 
doctors? If the doctor says it is not a meaningful change, then 
how is it that the board of directors in a pharmaceutical 
company would determine that it is a meaningful change?
    Explain to us what you mean, good sir, by a meaningful 
change.
    Dr. Caforio. Sure. I believe that for most pharmaceutical 
products at the time in which we introduce a new medicine, we 
are just at the beginning of a development program that lasts 
for many years. And the way we think about meaningful changes 
are changes that are recognized as innovation that can be 
patented and innovation that is, therefore, protected.
    We think about across the entire period in which we invest 
in a medicine, and we do that in context in which I and we 
recognize the importance of generics. In fact, it is a fact 
that 90 percent of drugs are generics in the U.S. that allows 
us to be able to continue to have sort of room for innovation.
    So, I think that the patent system is designed in order to 
protect innovation that is meaningful that's determined by us 
as researchers. It's determined by the Patent Office that 
grants us with patents. And the objective is to protect and 
reward the investments we made----
    Chairwoman Maloney. The gentleman's time has expired. Mr. 
Welch, you are now recognized for questions.
    Mr. Welch. Thank you. Thank you, Madam Chair.
    I think one of the reasons that a lot of us are focusing on 
the executive compensation is that the model is higher prices, 
higher profits, and higher bonuses. And it is not just that the 
individuals that are making significant amounts of money, the 
executives, it is about a significant burden on taxpayers, on 
the companies that are purchasing employee-sponsored 
healthcare--or employer-sponsored healthcare, and I want to ask 
a little bit about that.
    First of all, Dr. Caforio, between 2006 and 2017, according 
to the committee report, the Celgene--the top Celgene 
executives were paid $400 million. Can you address that?
    Dr. Caforio. Congressman, as you--as you know, we acquired 
Celgene in 2019. I'm not familiar with all the details of past 
compensation of Celgene executives. I'm sure they will----
    Mr. Welch. No, that's in the--yes, that is in the report. 
Here is my question. Does that in any way seem like a little on 
the high side to you?
    Dr. Caforio. Congressman, I cannot comment on those 
figures. I'm not familiar with them. I do not know what they--
what they cover.
    Mr. Welch. It is in the report. So, assuming the report is 
correct, I am asking your opinion about whether that amount of 
compensation, $400 million, is on the high side?
    Dr. Caforio. Congressman, I have received the report just a 
few minutes before the beginning of the hearing. I don't know 
what the figure refers to. That would have been a decision of 
the board of directors of Celgene, and it is not a topic I'm 
familiar with.
    Mr. Welch. All right. Yes, I am telling you, first of all, 
what is in the report. So, it is $400 million during that 
period of time. Executive pay at Teva between 2012 and 2017 was 
$119 million.
    Now sales of your product Revlimid have increased as a 
result of the Medicare Part D program. Correct?
    Dr. Caforio. Sales of Revlimid have increased for a number 
of reasons. The primary reason is the number of indications and 
diseases the product is used for.
    Mr. Welch. But you are familiar with Medicare Part D that 
is a benefit to seniors and then enables them through the 
Government to purchase that product. Correct?
    Dr. Caforio. Absolutely.
    Mr. Welch. Yes. And the price of one pill is about $719. Is 
that correct?
    Dr. Caforio. I am sure it is correct. Yes, Congressman.
    Mr. Welch. Let me go to Mr. Alles. Is it true that Celgene 
raised the price of Revlimid 23 times after it was brought to 
market in 2005, including as many as three times in one year?
    Mr. Alles. I will agree that the price has gone up in the 
20-time range, Congressman. I don't have the number in front of 
me. But specific to 2017, I do recall that there were three 
price increases that year, yes.
    Mr. Welch. OK. And Dr. Caforio, Bristol Myers Squibb 
increased the price of Revlimid again after acquiring Celgene. 
Correct?
    [Pause.]
    Chairwoman Maloney. Mr. Caforio, would you unmute yourself 
and answer the question?
    Dr. Caforio. Thank you, Chairwoman. I'm sorry, but it 
appears that I need to be unmuted centrally.
    Yes, we did increase, Congressman, the price of Revlimid at 
the beginning of 2020.
    Mr. Welch. And do you know how much the out-of-pocket 
expense is to a Medicare beneficiary after the Government pays 
these increased prices?
    Dr. Caforio. Yes, Congressman, I know. And I know it can be 
significant. We have looked at that and----
    Mr. Welch. It is $15,000 a year, and the average Medicare 
beneficiary probably gets a Social Security of about $22,000 or 
$23,000. Do you know how much Revlimid costs the Federal 
Government through Medicare Part D?
    Dr. Caforio. I know, Congressman, that it is a widely used 
medicine, that it has significant----
    Mr. Welch. Well, it is $4 billion. I really don't 
understand why you don't know these numbers because these are 
the numbers that come down to the individual patient who can't 
afford the out-of-pocket, even with the help of the Medicare 
Part D.
    Did Celgene--Mr. Alles, did Celgene provide discounts to 
Medicare Part D plans for Revlimid?
    Mr. Alles. We provided all discounts by statute, 
Congressman, yes.
    Mr. Welch. I don't know that we have any of that 
information. Would you provide the contracted price reductions 
information to this committee?
    Mr. Alles. If there were statutory discounts, we provided 
them. We did not discount Revlimid through commercial plans 
widely. But yes, we'll followup with any of that information. I 
don't have it with me today.
    Mr. Welch. All right. Dr. Caforio, has Bristol Myers Squibb 
begun providing any discounts to Medicare for Revlimid since it 
acquired Celgene?
    Dr. Caforio. Congressman, we have continued to provide all 
statutory discounts.
    Mr. Welch. I do want to go back to this executive pay. 
Ultimately, that is paid for by taxpayers, employers, and by 
individual patients. Do you have any reservations about $100 
million being paid to six executives over two years?
    Chairwoman Maloney. The gentleman's time has expired, but 
the gentleman may answer his question, please.
    Dr. Caforio. Congressman, I--with respect to executive 
compensation, what I can tell you refers to Bristol Myers 
Squibb. I'm grateful to be well-compensated. The decisions 
about our compensation are made by our board of directors, and 
whether it's about our executives or any employee in our 
company, they are really structured in a way that looks at 
compensation across our industry and other industry and creates 
the conditions for us to be able to attract and develop talent 
in the company.
    Chairwoman Maloney. The gentleman's time has expired. Mr. 
Comer, you are now recognized, and you may go over as much time 
as you need because Mr. Welch did go over time, too.
    Thank you.
    Mr. Comer. Thank you, Madam Chair.
    And I don't believe we can have a credible hearing on 
unsustainable drug prices without mentioning PBMs. I know a few 
people have mentioned that today, but PBMs are unnecessary 
levels of bureaucracy, which, according to every independent 
pharmacy in my congressional district, have no rhyme or reason 
for the bills they send to the pharmacies. I think that is 
something that this committee needs to look into, and I hope, 
Madam Chair, moving forward that that is an area where we can 
have bipartisan agreement in exploring what role they play in 
unsustainable drug prices.
    But we are talking about drug prices, and obviously, it is 
a concern for all of our constituents, regardless of who we 
represent. But our constituents also rely on new treatments and 
cures being developed.
    Today's witnesses represent two sides of this debate. Teva 
is the world's largest manufacturer of generics, and Bristol 
Myers Squibb is one of the largest brand-name manufacturers. 
So, I would like to ask Dr. Caforio and Mr. Schultz the same 
question. How do we balance these two objectives?
    And Dr. Caforio, representing Bristol Myers Squibb, you can 
go first.
    Dr. Caforio. Thank you, Congressman.
    I think that balancing the two objectives of continuing to 
invest in research and development and bringing new treatments 
and cures to patients with the need to ensure that medicines 
are affordable to patients is really important. And I would say 
the most important part for my answer is that I do agree that 
our system requires change, and I know that Bristol Myers 
Squibb and the industry is really open to working with this 
committee, with Congress, with the administration to find ways 
of evolving our system to become less complex and help patients 
more.
    It is possible to find that balance, and there are some 
measures we could take immediately. Allowing companies to 
provide Medicare patients with support, financial support for 
their copay would be helpful to patients. That could be done 
very rapidly.
    Similarly, introducing an out-of-pocket cap in Medicare 
would alleviate a lot of the burden that exists today in 
patients. Ultimately, I think we need to work together to think 
about how the system evolves to account for the speed at which 
innovation has happened.
    Mr. Comer. From a generic manufacturer standpoint, how 
would you address that?
    Mr. Schultz. Mr. Comer, thanks for the question.
    I'd like to give a slightly broad answer, and I apologize 
if it takes a little while. So, I think the system basically 
works well, and you can address that from the fact that most of 
the innovation in modern pharmaceuticals really takes place in 
the United States. And a lot of new medications have been 
introduced over the last, let's say, 40 years due to this 
system. And of course, the system basically rewards innovation 
by granting patents, which means that for a period of time, the 
pricing is not the normal competition where everybody can join.
    And the reason why that's necessary is that less than 1 out 
of 100 initial projects actually make it through all the way to 
the marketplace. The rest, they fail on the way, and that means 
that that risk nobody would take. If they launched the product, 
everybody would be copying, and they would never make back 
their investment.
    So, the basic idea about patents works, I think, extremely 
well, as has been seen by the many, many innovations and the 
prolonged life span in the big picture of Americans over the 
past 40 years, which has partly been due to better 
pharmaceuticals. That being said, of course, you cannot keep on 
getting that sort of benefit of a patent which gives you a 
better pricing situation when you launch this product that 
you've developed over 15, 20 years. That has to stop at a 
certain point in time, and then prices have to come down for 
Americans.
    I'm happy to report that the generic industry does work 
very well. It provides high-quality medications based on the 
initial innovations, and it provides these products at a high 
quality and at a fraction of the price. And when I talk about 
very dramatic price reductions, I think that is really the case 
because most of the generics in the United States today, they 
probably had a price, a net price which is less than 10 percent 
of the list price of the originator. So, a price drop of more 
than 90 percent, that is substantial.
    And that system also basically rewards--we saw a graph 
earlier today of how the total pricing is actually trending 
downwards in the United States. Now that's a combination of 
competition on innovative drugs, but also of the competition 
from generic drugs. Because every time the new drug enters the 
market, of course, it has some benefits, but the benefits have 
to be seen in relationship to the pricing. And therefore, the 
presence of many high-quality generic drugs in the marketplace 
is a part of balancing the whole market.
    So, I believe in a free market----
    Mr. Comer. But Mr. Schultz?
    Mr. Schultz. Sorry.
    Mr. Comer. Mr. Schultz, let me interrupt and ask you this 
because we are on a clock here, and I have gone over a little 
bit. What is an adequate amount of time for a brand-name 
company who invents and gets a patent on a new drug, what is an 
adequate amount of time, in your opinion, for the patent to 
exist before generic manufacturers can come in there?
    Recognizing the fact that obviously the brand-name company 
spend a lot of money on research and development. We have all 
gone over that. But from your standpoint, what is an adequate 
amount of time before the generics can come in in the 
marketplace?
    Mr. Schultz. Thank you, Mr. Comer.
    I believe that the current regulation in the United States 
is a fair amount of time for the original innovation and for 
the original patent and, thereby, if they are creating them for 
the innovation. I think the issue is that sometimes--I'm not 
saying in any way that any of the companies present would ever 
do that. But some companies have been seen to make a lot of 
patents which are not that substantial.
    And they have had to be challenged. That's part of the 
generic business model that we have to challenge these many 
patents that are often not really living up to the innovation 
standard that should be in a patent, and then those patents 
eventually get revoked or turned down. And then the generic can 
launch.
    So, you could argue that somehow it's not the original 
patent that's the problem. It's not the patent life of the 
original patent, but it's sometime the sort of exuberance of 
many surrounding minor patents that really do not have the 
innovation in them that they ought to have. And that's maybe 
something you would say that could be looked at more 
holistically to avoid that you get so many patents around a 
product that it delays the generic competition.
    Mr. Comer. Thank you, Madam Chair. My time has expired, but 
I look forward to working with this issue--working with you on 
this issue moving forward. I certainly hope we can examine the 
PBMs and every other factor that contributes to skyrocketing 
drug prices for our constituents.
    Chairwoman Maloney. I look forward to working with you.
    Congresswoman Speier, you are now recognized for questions.
    Ms. Speier. Thank you, Madam Chair, and thank you for 
hosting this hearing.
    And to our three panelists, let me start off by saying that 
what you do is remarkable. You are saving lives with these 
innovative drugs. Fifty thousand Americans who have blood 
cancers that Revlimid can assist is remarkable.
    But here is the issue. As the President often says, who is 
the sucker here? The United States is the biggest spender, the 
Government of the United States is the biggest spender of 
drugs. We are at 44 percent. In a number of years, we will be 
at 47 percent. So, the taxpayers are picking up the tab for all 
of the expenditures of drugs in this country.
    If we look at that and then we look at Celgene, which in 
2017--in just that one year raised the cost Revlimid 15 
percent, 15 percent in one year, that was $3.3 billion in 
Medicare spending in that one year for that one drug. Between 
2009 and 2018, half of all the revenues generated for Celgene 
in the world came from the United States, $33 billion. And we 
represent four percent of the population in the world. So, at 
one point or another, we have got to say are we just suckers?
    Now, Mr. Alles, you have a remarkable drug, but your price 
increases have put this wonder drug out of the reach of most 
Americans. I would like to first put up on the screen a graph 
that shows Revlimid's price per pill since 2005. It has gone 
from $215 a pill to the price today of $765--or $763.
    The price for a monthly course in 2005 was $4,500. Mr. 
Alles, do you what the price of a monthly course of Revlimid is 
today?
    Mr. Alles. I believe, Congresswoman, it's in the $15,000 
range. We heard that number today from a number of people.
    Ms. Speier. It is actually $16,000. So, why did Celgene 
raise the price of Revlimid by more than 250 percent over the 
last 15 years?
    Mr. Alles. During that same period, Congresswoman, the 
portfolio of Celgene drugs grew from two medicines--are we--I 
think I'm muted.
    Ms. Speier. No, you are not muted. We can hear you.
    Mr. Alles. Oh, OK.
    Ms. Speier. I am specifically asking you why you increased 
the price of Revlimid 250 percent from 2009 to--over the course 
of 15 years.
    Mr. Alles. To fund what became a very important portfolio 
of cancer drugs. Two products are now 10 products, including 
products that treat pancreatic cancer, breast cancer, lung 
cancer, different forms of blood cancers, and severe 
inflammatory diseases. So, approximately 30 to 35 percent of 
that revenue and the price increase that accompanied the 
generation of that revenue was reinvested into research and 
development that has produced some of the most important cancer 
medicines that we haven't talked about today, outside of 
Revlimid.
    Ms. Speier. OK. Reclaiming my time. Sir, you evidently 
received remarkable compensation in the last two years that you 
were the president or CEO of Celgene. You and I believe six of 
your colleagues--or five of your colleagues received upwards of 
$400 million.
    Why are the taxpayers of this country picking up the tab 
for those extraordinary salaries on top of picking up a tab for 
an increase in a drug that went up 250 percent so you can fund 
other drugs? At some point, the Federal Government cannot be 
the ultimate sucker here.
    Mr. Alles. With respect to Revlimid, the success of one 
medicine in a pharmaceutical company is often the drug and the 
revenue that pays for the innovation and the failures across a 
number of years of development. With respect to compensation, 
as my colleague Dr. Caforio spoke to, those compensation 
packages are arrived at through competitive analyses and from 
our independent board of directors.
    In order to build a company that could discover drugs----
    Ms. Speier. All right. Let me ask you----
    Mr. Alles [continuing]. Like Revlimid, we need a 
competitive compensation plan to be able to sustain the 
company.
    Ms. Speier. I think my time has expired, but Madam Chair, 
if I could just ask one more question?
    Chairwoman Maloney. One more question.
    Ms. Speier. I want to know what each of you are willing to 
do to bring down the cost of drugs to the U.S. taxpayer.
    Mr. Alles. May I go first?
    Ms. Speier. Of course.
    Mr. Alles. Thank you.
    I think that the discussion today is illustrative in that 
all stakeholders--industry, the PBM insurance industry, and of 
course, all of you--we need to come together and find as an 
objective and an outcome of legislation how to cap out-of-
pocket costs for patients/beneficiaries so they have the 
predictability and the affordability that we all want.
    I think the way to do that is for industry, along with the 
insurance industry, to come together with Congress and work 
together on that goal. The way we pay for that, of course, 
requires a lot of give-and-take. But if that was the goal of 
H.R. 19 and H.R. 3, I think we would really be helping the 
American consumer and the American taxpayer.
    Dr. Caforio. Congresswoman, from my perspective, I would 
like to commit to two things. First of all, working with the 
committee to understand how we can evolve policy in a way that 
is more helpful to patients.
    Specifically, I am supportive, as I have mentioned before, 
of a company like ours to provide financial assistance to 
patients in Medicare, to support them with their copay and out-
of-pocket exposure, if that will be possible in the future. 
It's not possible today. I am supporting of working on the 
establishment of an out-of-pocket cap in Medicare as well.
    Ms. Speier. Thank you. Yield back.
    Chairwoman Maloney. And thank you. Go ahead.
    Mr. Schultz. This is Kare Schultz. So, from Teva 
Pharmaceuticals, we would be committed in the future to 
continue to be committed to two main things. The number-one 
thing is to ensure that we remain the leaders in generics in 
the United States and keep on supporting patients by always 
developing and launching generics or biosimilar versions of 
originator drugs so that they can become accessible and 
affordable for all Americans.
    Besides that, we would also love to work with the committee 
on increasing transparency and reducing paid by patients in the 
different channels, be it Medicaid, Medicare, or the managed 
care segment.
    Thank you.
    Chairwoman Maloney. Thank you. We now recognize 
Congresswoman Lawrence. You are now recognized.
    Mrs. Lawrence. Thank you, Madam Chair.
    I would like to ask a question to doctor--Mr. Caforio. In 
July 2018, Celgene announced a pricing policy that would limit 
the price increases to, and I quote, ``no more than once a year 
at a level no greater than the Centers for Medicare and 
Medicaid Services' projected increases in the national health 
expenditures of the year.''
    So, my question, Dr. Caforio, in the beginning of this 
year, Bristol Myers raised the list price of Revlimid to $763 
per pill, and that was a six percent increase. The projected 
increase in the national health association for 2020 was 5.4. 
So, it appears that you have already failed to meet that part 
of Celgene's pricing pledge.
    So, I ask this question. Has Bristol Myers Squibb committed 
to not taking any further price increases for Revlimid this 
year?
    Dr. Caforio. Thanks, Congresswoman.
    We are not taking--we will not take additional price 
increases for Revlimid this year. Our practice has been to look 
at a number of factors and limit price increases in our 
medicines to a maximum of six percent and only to those 
medicines where we have active research and development program 
ongoing. And that practice has resulted in our net price for 
the total portfolio of our medicines in the United States since 
2018 to be flat.
    Mrs. Lawrence. So, my question to my colleagues and to you, 
Doctor, is do we need to set some regulations on R&D? Because 
it seems like that is the invisible line, how the industry 
defines R&D, what we see as lay people on the other side trying 
to protect the American public. Because a drug that is not 
changing, how are you increasing it, saying it is R&D when it 
has been approved, the trials have been done, and you are 
selling it?
    So, where is this R&D increase? And my question will be 
will you commit here today to stop raising the price, moving 
forward, of Revlimid?
    Dr. Caforio. So, Congresswoman, there are two important 
considerations with respect to R&D. First of all, and 
importantly, when a medicine is first approved and introduced 
in the marketplace, it's often the beginning of a research and 
development process. In fact, we heard today that Revlimid was 
approved in 2005, and it was approved for three indications in 
a different disease.
    Research continued, and it's only thanks to research that 
happened later that we discovered its role in treating multiple 
myeloma. The last indication for Revlimid was approved last 
year for a form of lymphoma where it wasn't approved before.
    I think what's most importantly is that research and 
development expenses we have, the investments we make are 
actually directed at the totality of our portfolio, and 90 
percent of the programs we work on will not work. So, when we 
think about research and development choices and the research 
and development investments we make, they're really directed at 
the total of our science.
    As I mentioned earlier, in multiple myeloma, we are 
currently investigating 13 new medicines that will take what 
Revlimid has accomplished and take it one step further. And we 
have plans to invest over $2 billion in the next three years in 
new medicines for multiple myeloma beyond Revlimid.
    So, that's our strategy. That's the way we think about 
research and development.
    Mrs. Lawrence. So, this is where the confusion comes in. 
So, if you are testing other medicines, if they are 
implemented, you will charge the R&D to that. So, how does that 
R&D cost get placed on Revlimid?
    And what I need to know, does that mean that this medicine 
will continuously keep moving up and increasing in cost, 
although you will--if you implement another drug, you are going 
to tack onto that drug the R&D cost. So, it seems like double 
dipping here, and that is the part I just--I am so frustrated 
with and I don't understand, sir.
    Dr. Caforio. Yes, Congresswoman, I'm happy to provide my 
perspective.
    You know, what I know is that of the new medicines in 
development that I described, many will not work and will never 
be approved by the FDA because this is the nature of our 
business.
    Mrs. Lawrence. So, then do you put that, do you put the 
cost of that R&D----
    Chairwoman Maloney. The gentlewoman's time has expired. He 
may answer her question, but your time has expired.
    Mrs. Lawrence. Does that mean that the drugs that you are 
testing that fail, that you put it on an existing drug to cover 
the cost of that? Is that what you are saying?
    Dr. Caforio. No. We look at our total investment in R&D, 
and then we look at our total portfolio market in medicines. 
And our objective is to have a system in which the reward for 
the investments we make in R&D is recognized. And that's--
that's the way our industry works, and that's how we can fund 
very high-risk lengthy and costly R&D programs.
    Chairwoman Maloney. The gentlewoman's time has expired.
    Mrs. Lawrence. We need change, Madam Chair. Thank you.
    Chairwoman Maloney. Thank you. Mr. Gomez, you are now 
recognized for questions. Mr. Gomez?
    Mr. Gomez. Thank you, Madam Chair.
    I want to move, go back to the issue of patent protection. 
I think everybody recognizes the development of a new 
formulation of existing drugs can improve patient outcomes and 
expand treatment options. But we have also seen that drug 
companies use newer versions of the same drug to extend their 
monopoly pricing power.
    I mean, the gentleman from Louisiana even was asking 
question about it, and he is not considered a liberal by any 
stretch of the imagination. And monopoly pricing power was also 
a key focus of the USMCA negotiation. I was one of the eight 
negotiators from the Democrat side to negotiate with the White 
House, and we successfully eliminated the 10-year guarantee of 
market exclusivity for biologics, which would have enshrined 
these monopoly prices that companies often seek to extend in 
perpetuity.
    And we actually turned it into one of the most progressive 
trade deals in the history of this country, and it passed 385--
385 to 41 in the House, Republicans and Democrats, 89 to 10. 
So, this issue is a big issue.
    So, I want to ask Mr. Schultz, I would like to ask you a 
few questions about Teva's decision to develop and launch the 
40-milligram version of Copaxone. Unlike the original 20-
milligram version, which was taken daily, Copaxone's 40-
milligram is taken three times a week.
    Teva originally tried to develop a daily 40-milligram 
version of Copaxone. However, studies showed no difference in 
efficacy between the daily 20-milligram dose and the daily 40-
milligram dose. Is that correct?
    Mr. Schultz. Unfortunately, part of that development was 
way before my time at Teva.
    Mr. Gomez. OK. There is actually a press--reclaiming my 
time. Actually, it is a yes or no question, and it is actually 
yes, right, because Teva issued a press release. And if you 
need a copy of it, we can send it to you.
    After these findings, Teva began to develop a 40-milligram 
dose to be taken three times a week, but the documents reviewed 
by the committee suggest that many of Teva's own scientists 
opposed pursuing this research. One scientist reported that 
members of the company's Innovative Research and Development 
Division were ``strongly against the study since they had no 
scientific rationale/value.'' This is Exhibit 47 in your 
materials.
    The same scientist noted that the company's lifecycle 
management team was aware of and even agreed with the 
scientists' concerns but thought that ``such a study had its 
business value.''
    Mr. Schultz, the lifecycle management team is on the 
business side of the company, isn't it?
    Mr. Schultz. No, I'm not aware of what that situation was--
--
    Mr. Gomez. I am not asking about that. I am asking the 
lifecycle management team is on the business side of your 
company. Correct?
    Mr. Schultz. Not necessarily, no. Typically, lifecycle 
management is taking part in the R&D conversation. So, the 
lifecycle projects would typically be organized within the R&D 
organization, but I'm not aware of the particular exhibit 
you're referring to.
    Mr. Gomez. OK. Well, we will get you the exhibit as well. 
When a marketing team later analyzed the new dose in 2010, they 
highlighted that it would result in ``patent protection 
extension'' and be a ``barrier to generic entrants.'' This 
exhibit is Exhibit 15 in your materials. We should get that one 
to you as well.
    These documents show that Teva executives viewed the new 
40-milligram dose as a way to extend Teva's monopoly in the 
market. The market analysis also noted that the 40-milligram 
dose provided no scientific advantage over the 20-milligram 
dose.
    Teva has claimed that it developed the 40-milligram dose 
because it is more convenient for patients than the daily 20-
milligram dose, and you described Copaxone as one of the best 
examples of Teva's dedication to innovation and research and 
patient support in your written testimony. But documents 
produced by the committee show that Teva has decided against 
researching the efficacy of administering the 40-milligram drug 
once per week, which would have been more convenient, right? 
Less frequent, more convenient. That is basically how it goes.
    Mr. Caforio, earlier you said that when you were getting 
questioned, ``meaningful innovation.'' Do you believe it is 
meaningful innovation when there is no scientific improvement 
in the dosage? Is it a meaningful innovation to do it three 
times a week?
    Dr. Caforio. I don't know Copaxone and the issue you're 
referring to.

    Mr. Gomez. I take back my time because I--Teva's internal 
documents show that Teva's CEO at the time worried it would 
lead patients to take two injections of a cheaper generic 
version of Copaxone's 20-milligram rather than Teva's 
Copaxone's 40-milligram. I am assuming, Mr. Schultz, you are 
going to say ``I wasn't aware of that.'' So, I am not even 
going to bother asking you. You might as well get off the 
screen.
    So, in summary, you guys, all you were doing was trying to 
find a way to extend the patent protection of a particular 
drug. That is all you were doing. Not based on that it was 
going to improve the outcomes for patients. It was just going 
to improve the outcomes for your bottom line for the long term, 
right?
    Even your scientists said don't do it because it doesn't 
improve the outcomes. And if you had a choice to make it more 
convenient, you chose not to followup on that study to make it 
once a week, right? Once a week injection is more convenient 
than three times or daily.
    So, that is the problem, that nobody--nobody believes the 
fact that you are trying to improve the outcomes for patients. 
They believe that you are trying to improve your bottom line, 
and you are undermining not only--not only your own business, 
but you are undermining the American public's confidence that 
when they take a drug and they pay more for it, it is actually 
going to be beneficial.
    With that, I yield back.
    Chairwoman Maloney. The gentleman's time has expired, but 
you may respond, if anyone would like to respond to his 
question.
    Mr. Schultz. Yes, I would like to just give a quick 
response. So, I worked 30 years in pharmaceuticals and 
developed a lot of medications in the space of CNS, in the 
space of diabetes, and many of these drugs have to be injected.
    And over the course of 30 years, the potential in this 
technological development, which has not come cheap and not 
come easy, years ago, it would be normal to have a product that 
was freeze-dried. You would have to reconstitute it in a vial. 
You would take it out with a syringe, and you would be 
injecting yourself with a syringe. Once a day, twice a day, 
three times a day. This would be quite inconvenient, socially 
not very easy, and it would reduce the quality of life in 
patients in those different disease areas, including MS.
    Now over the period of time, a lot of work has been put in 
by the pharmaceutical industry to make it easier for people to 
take their drugs. And some people who do not know about chronic 
disease, they'll say what's the difference if you take it three 
times a day from a syringe and a vial, or you take an injection 
once a week or once a month?
    I can tell you it's a huge difference to people's quality 
of life and their treatment because what happens if it's 
inconvenient, unpleasant to take your medication, then you skip 
dosing. And that's proven in many, many trials. And when you 
skip dosing, you don't get the efficacy of the drug you need.
    That means that people have an inconvenient way for the 
drugs to get----
    Chairwoman Maloney. The gentleman's time has expired.
    Mr. Schultz [continuing]. And that's why treatment----
    Chairwoman Maloney. Thank you very much.
    Mr. Schultz [continuing]. Look at better delivery 
mechanisms. Thank you.
    Chairwoman Maloney. OK. Thank you. Mrs. Miller, you are now 
recognized for questions.
    Mrs. Miller. Thank you, Chairwoman Maloney and Ranking 
Member Comer, and thank you to all of our witnesses for being 
here today.
    We can all agree that patients need access to lifesaving 
cures, and they need these drugs at a cost that will not break 
the bank. I am a cosponsor of H.R. 19, the Lower Costs, More 
Cures Act, which would help accomplish these goals.
    Last year, the House passed H.R. 3. The Congressional 
Budget Office estimated that at the low end, this legislation 
would prevent 38 new cures from coming to market, while other 
estimates said it would put more than 100 fewer cures in the 
hands of patients. Either way, just one less lifesaving drug on 
the market is one too many.
    What if the cures that were taken out in H.R. 3 is the cure 
for leukemia or ALS? We must be able to encourage innovation 
without the heavy hand of the Federal Government and put 
lifesaving prescriptions in the hands of the patients at a 
reasonable price. H.R. 19 would do all of this.
    Dr. Caforio, how much does your company spend yearly on 
research and development?
    Dr. Caforio. Congresswoman, approximately, $10 billion.
    Mrs. Miller. Thank you. Mr. Alles, now I am going to pose 
the same question to you. How much does your company spend 
yearly on research and development?
    Mr. Alles. In the last year before Bristol Myers Squibb 
acquired Celgene, my recollection is that the total R&D spend 
was $5.7 billion, which was 37 percent of our revenue that 
year.
    Mrs. Miller. Mr. Schultz, how much money does your company 
spend yearly on research and development?
    Mr. Schultz. Teva Pharmaceuticals spends approximately $1 
billion per year.
    Mrs. Miller. OK, thank you. Now I am going to ask you all 
the same question again.
    Dr. Caforio, how does the cost of research and development 
affect the pricing of new drugs?
    Dr. Caforio. It does affect it, Congresswoman, because as I 
mentioned earlier, our investment in research and development 
is extremely significant. It's one of the highest in the 
industry. We know that many of the programs that we work on 
will ultimately not work, and I have many examples of large, 
long, and expensive clinical development programs in brain 
cancer, lung cancer, prostate cancer, and other diseases that 
have failed.
    So, the need to obtain a return on our research and 
development investment is one of the important factors 
impacting the way we think about the price of medicines. Of 
course, the other one is the usual patient affordability and 
making sure that every patient can have access to our 
medicines. But R&D is an important factor.
    Mrs. Miller. OK. Mr. Alles, how did the cost of research 
and development affect the pricing of your new drugs?
    Mr. Alles. In fact, the scenario at Celgene was quite 
unique in that almost every disease that we researched was 
considered an orphan disease. That is fewer than 200,000 
patients in the United States per year.
    So, the diseases we've been talking about today, multiple 
myeloma, myelodysplasia, leukemia, et cetera, these are very 
rare diseases. In fact, one of our medicines that was approved 
during the time we were taking price increases on Revlimid is a 
drug called Idhifa, which is for a subset of acute myeloid 
leukemia, and approximately 4,000 people in the United States 
per year are afflicted by that biomarker-driven disease.
    So, we targeted these rare, unmet needs on the belief, 
first by the Orphan Drug Act, that we would over time be able 
to recoup our investment and build a successful company. So, it 
had everything to do with our direction, our strategy to invest 
in and develop drugs for very small, rare, difficult cancers.
    Mrs. Miller. Thank you. Mr. Schultz, how does the cost of 
research and development affect the pricing of your new drugs?
    Mr. Schultz. It does, of course, affect it directly and 
indirectly. About half our research actually goes into generic 
biosimilars. And of course, that research is less costly 
because the drug has already been proven by the originator to 
work. So, there we save money getting new high-quality 
biosimilars or generics into the marketplace. We're solving 
these, same as I mentioned before, to the tune of more than $40 
billion U.S. per year for the U.S. healthcare system.
    But the other part is similar to what happens at BMS and 
what used to happen at Celgene. It is much more high-risk, 
innovative research, and as I said before, out of 100 projects 
you start, on average 1 of them makes it finally to the 
marketplace. So, of course, there is a cost for all the 
failures that also gets allocated to the products that do make 
it to the market.
    Mrs. Miller. Thank you. Many of my colleagues here today 
would have us believe that march-in rights are necessary for 
the well-being of the American public. This means that the 
Government could essentially come in at any time and take back 
patents from drug companies. How do you all think march-in 
rights, do you think they would show innovation?
    Dr. Caforio. Yes, Congresswoman. I think that continuing to 
recognize and reward innovation through the patent where we 
currently have an intellectual property protection is the 
reason why our industry can make long-term investments in 
research and development.
    Mrs. Miller. Anyone else?
    Mr. Schultz. This is Kare Schultz. Yes, I would support 
that. It's basically the foundation for the innovation in 
pharmaceuticals is the patent system. If there were to be no 
protection after 10, 15, 20 years of hard R&D work, then nobody 
would undertake the risk because then there would simply be no 
balance between the risk and the reward.
    Chairwoman Maloney. The gentleman's time has expired. 
Congresswoman Tlaib, you are now recognized for questions.
    Ms. Tlaib. Thank you so much, Chairwoman Maloney, for this 
important hearing and for our committee staff for all their 
hard work.
    Mr. Schultz, I am sure serving as the CEO, you may have 
little to no contact with how your actions hurt real people, 
like my residents in 13th District Strong. Your actions have 
consequences, as you have heard from many of my colleagues. It 
has hurt people like Ms. Lisa McRipley, who lives with MS in my 
district. Lisa pays $6,000 per month for her MS medication and 
about an additional $1,000 just to treat her symptoms of pain, 
fatigue, and balance.
    Now, Mr. Schultz, I know $7,000 per month may not seem like 
much to you as the CEO of Teva Pharmaceuticals. But Lisa 
doesn't have $7,000 of disposable income per month. The vast 
majority of Americans don't.
    I understand that Copaxone, the drug used for MS, was first 
introduced on the market in 1997, and the wholesale acquisition 
at that time was only $8,000 annually. Today, it is $70,000. 
So, Mr. Schultz, yes or no, do you believe it is reasonable for 
Lisa in my district and others like her to pay nearly $70,000 a 
year to access Copaxone?
    Mr. Schultz. No, I would not think that would be reasonable 
at all, but fortunately, there would not----
    Ms. Tlaib. Thank you. I just asked for a yes or no. It is 
not reasonable. So, let us talk about other items that your 
company does.
    So, I also know that the drug companies frequently mislead 
the public by claiming charitable programs help ensure that 
patients who need medications can get them. But those programs 
do not cover everyone, and they are not reliable for patients, 
and they actually drive up the cost for many of my residents. 
In fact, I actually asked Lisa, who is on Social Security, if 
she was able to access such charitable relief, and she had no 
luck.
    Documents obtained by this committee, Mr. Schultz, suggest 
that these programs actually serve drug companies' own 
financial interest. Mr. Schultz, does your company donate to 
third-party independent charities which cover Medicare 
beneficiaries' out-of-pocket cost for Copaxone?
    Mr. Schultz. We do contribute to charities----
    Ms. Tlaib. Thank you.
    Mr. Schultz [continuing]. To further secure access.
    Ms. Tlaib. Great. So, Mr. Schultz, yes or no, would you 
consider donation to these foundations to be financial 
investments?
    Mr. Schultz. No. I would not consider it to be, no.
    Ms. Tlaib. OK. Well, let me tell you why you are misleading 
us right now. Internal documents provided to the committee show 
that Teva company did view these programs as financial 
investments, even described them that way.
    In your own 2008 Copaxone work plan, which is Exhibit 37 in 
your materials, estimated that the company would lose over $11 
million in sales if it reduced its ``investment in Medicare 
Part D grants by $44.3 million,'' as you can see here. The work 
plan also estimated that Copaxone net sales would decline by 
$45 million in 2011 if your company were to ``eliminate 
Medicare PAP investment.''
    So, Mr. Schultz, it seems that Teva company expected 
Copaxone sales to decline if it decreased donations to these 
grants. Is that correct?
    Mr. Schultz. This is more than 10 years before I joined the 
company, and I wasn't there. So, I did not----
    Ms. Tlaib. No, it is pretty clear. It is pretty clear, Mr. 
Schultz. In my district, Mr. Schultz, we call this a ``side 
hustle.'' Your pharmaceutical company makes these so-called 
charitable donations so you look like you give a shit about 
sick people. But in reality, these are just another scheme by 
your corporation to make money off of sick people, Mr. Schultz. 
Lisa needs her medication to live. She is not part of a hustle 
and should not be one.
    Let us turn to Teva's program to cover the copays of 
Copaxone patients with commercial insurance. Again, this is how 
you are misleading the public. According to Teva's own internal 
analysis, the company spent $54.6 million on commercial copay 
program in 2014. But in return, you all got $257 million back. 
That is 371 percent profit, Mr. Schultz.
    Mr. Schultz, these are companies' own estimates. I am not 
making--this is your own documents, and they suggest that what 
you and other corporate executives claim to be charitable-type 
programs are actually profit-motivated efforts to retain 
patients and generate sales.
    I want to close off with Lisa's words, and this is so 
important because rarely do we put a human face behind so much 
of the actions by these corporations. Lisa said, ``We need this 
medication to have a decent life. There is no cure right now to 
MS, so we need this because we want to continue to contribute 
to society. We want to make an impact.''
    So, Mr. Schultz, you need to go back and actually stop 
misleading the public and making sure that these drugs, again, 
have people's quality of life in jeopardy, their right to live 
in jeopardy. I ask all of you and for my colleagues to please 
pay attention to many of these documents again submitted to the 
record.
    Thank you so much. I yield.
    Chairwoman Maloney. Thank you. I now recognize Ms. 
Pressley. You are now recognized for your questions. Ms. 
Pressley?
    Ms. Pressley. Thank you very much, Madam Chair, and I so 
appreciate that we can continue the work started by our beloved 
colleague, our former chairman Elijah Cummings, in 
investigating drug pricing.
    Now I represent the Massachusetts Seventh congressional 
District, a diverse, dynamic, and vibrant district, and one of 
the most unequal in our country. And we certainly see those 
disparities play out when it comes to health and economics. So, 
let me be clear. The lack of access to affordable lifesaving 
medications is an injustice. It represents an act of economic 
violence and an attack on the basic principle that healthcare 
is a fundamental human right.
    Across the Commonwealth of Massachusetts, the Massachusetts 
Seventh congressional District, which I represent, has the 
highest rate of new diagnosis of multiple myeloma, and black 
residents are more than twice as likely to die from the disease 
than white residents. Now multiple myeloma is a cancer that 
compromises an individual's immune system and places them at 
increased risk, especially during the ongoing coronavirus 
pandemic.
    Revlimid is a drug used to treat multiple myeloma. 
Unfortunately, due to no reason other than greed, the company 
Celgene raised the price of this lifesaving drug from $215 to 
$719.
    Mr. Alles, I appreciate your succinct answers with my 
colleagues, and so I will ask the same from you in my line of 
questioning. So, Mr. Alles, for the record, yes or no, do you 
believe that pharmaceutical companies should prioritize people 
over profit?
    Mr. Alles. We can only do well by doing good.
    Ms. Pressley. Yes or no?
    Mr. Alles. We have to take care of people for us to be able 
to be successful. So, we have to prioritize people and the 
medicines we develop for the diseases they have if we're going 
to be successful.
    Ms. Pressley. Over profit. OK. Well, that wasn't a yes or 
no. So, I will take that as a yes.
    According to documents from our investigation, from 2009 
through 2018, Revlimid generated $51 billion in net revenues, 
including $32 billion from the U.S. alone. Now to understand 
how Celgene accumulated such massive revenues, let us follow 
the money from the beginning.
    So, Revlimid was developed from a precursor drug called 
thalidomide, which Celgene acquired in 1992. Mr. Alles, was 
thalidomide a new drug when Celgene acquired it?
    Mr. Alles. Thalidomide was not a new drug when we licensed 
it from Rockefeller Institute.
    Ms. Pressley. OK.
    Mr. Alles. In fact, it was an old drug that had a very 
notorious history of causing birth defects.
    Ms. Pressley. So, it has been used since the 1950's, and in 
1996, a researcher found that the drug was effective in 
treating multiple myeloma. So, Mr. Alles, did you know this 
study was funded by a grant from the National Institutes of 
Health with taxpayer money?
    Mr. Alles. I was not aware specifically that the only 
funding was an NIH grant, but I would not be surprised----
    Ms. Pressley. OK.
    Mr. Alles [continuing]. In 1996 if some funding was 
provided by the Government.
    Ms. Pressley. Reclaiming my time. I am sorry, I am running 
out of time. So, then through three different studies, 
researchers found that a chemical variation of thalidomide, 
which would later be named Revlimid, was even more effective in 
treating multiple myeloma. So, later, more investigators 
working with the Mayo Clinic and a cancer research 
collaborative showed that Revlimid worked with another drug to 
treat newly diagnosed patients.
    So, Mr. Alles, did you know these studies were also funded 
by NIH with, once again, taxpayer money?
    Mr. Alles. Congresswoman, I do not know the studies you're 
referring to specifically, but what I can say is that the 
development of Revlimid and the discovery of Revlimid in its 
initial form was something that Celgene uniquely discovered.
    Ms. Pressley. So, just reclaiming my time. I am sorry. So, 
it was only after----
    Mr. Alles. After that, I agree with you that most of those 
studies were done----
    Ms. Pressley. Just reclaiming my time. It was only after 
these numerous federally funded studies that Celgene invested 
in the trials needed to obtain FDA approval. Isn't that right, 
Mr. Alles?
    Mr. Alles. The studies that were sponsored by Celgene that 
led to the newly diagnosed approval, the study was a large 
randomized trial that was run globally and included----
    Ms. Pressley. Just reclaiming my time because----
    Mr. Alles [continuing]. Institutions in the U.S.
    Ms. Pressley. Because we have the timeline, which bears out 
what I am asserting in this moment. It was only after these 
numerous federally funded studies that Celgene then invested in 
the trials to obtain FDA approval.
    So, by the time Celgene decided to invest its own money in 
Revlimid, taxpayers had already contributed significantly, and 
your company was confident of its future billion-dollar 
success. We know this because an internal memo from your 
company stated as much.
    In fact, Mr. Alles, you wrote that the company's analysis 
``grossly underestimated the cumulative annual sales potential 
for Revlimid.'' Do you recall writing that to a colleague?
    Mr. Alles. I saw that document this morning, and I did 
remember writing that. It accompanied a paper that described a 
study.
    Ms. Pressley. OK, thank you for acknowledging that you 
wrote that. So, despite the taxpayer investment in its 
development, Celgene reported to the committee that it does not 
provide any negotiated documents or Revlimid counts to Revlimid 
to Government healthcare programs. So, this is a classic 
example of profits over people.
    So, while the occupant of this White House does not pay 
Federal income taxes, my constituents in the Massachusetts 
Seventh do. Veterans, immigrants, single parents, and we have 
paid to develop Revlimid, and your company charged those same 
taxpayers hundreds of dollars to use this lifesaving 
medication.
    So, although you are no longer with Celgene, I hope that 
you will discourage the companies you advise from showing the 
same greed and contempt for the taxpayers that underwrite these 
various estimates. We live in the richest country on the 
planet, yet drug prices are so high that people cannot afford 
to stay alive. This is about the right to live, and the 
American public deserves better.
    Thank you, and I yield back.
    Chairwoman Maloney. Thank you. The gentlewoman's time has 
expired. Ms. Ocasio-Cortez, you are now recognized for 
questions. Ms. Ocasio-Cortez?
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman, for holding 
this incredibly important hearing and one that, as many others 
have noted, was an issue that was

    [inaudible] to our former chair, Chairman Elijah Cummings.

    And thank you, Mr. Schultz, for participating in today's 
hearing and offering your expertise and insight.
    I want to talk today about my constituents with multiple 
sclerosis and the exorbitant costs that they have been--that 
they have been facing in their diagnosis and their disease. And 
I would like to start by putting up on the screen two graphs 
that show the net price per day of Copaxone 20-milligram and 
40-milligram in five different countries in 2015.
    Now these graphs were created by our team here on the 
committee using data that your company provided. And as you can 
see here that the daily net price of Copaxone 20-milligram was 
just $29 in Spain, $33 in Canada, $40 in Germany. But it was 
more than double that, $97, in the United States. That is per 
day, $97 to live per day.
    And we have similar information for Copaxone 40-milligram, 
which, in 2015, cost $33 in Germany per day, $29. But more than 
almost four times that, $129, in the United States.
    So, Mr. Schultz, why is the price of Copaxone so much 
higher for people with multiple sclerosis in the United States 
than those in other countries?
    Mr. Schultz. Now the data is, of course, from before I 
joined. So, I don't know exactly how the pricing was back then. 
But I can give a general comment on it that, as has been 
discussed earlier in this hearing, there is very early access 
and very broad access in the United States, and it often comes 
with a higher list price than the price you see in Europe.
    So, that's just a fact, and that's what you see in these 
numbers.
    Ms. Ocasio-Cortez. OK, well, thank you, Mr. Schultz. I am 
sorry I have to reclaim my time because it is so limited.
    But your company's internal documents seem to tell a 
different story. The explanation provided by those documents 
for these price discrepancies was that you were forced to 
charge lower prices abroad. In fact, one of your company 
strategy plans obtained by the committee noted that from 2007 
to 2009, they faced ``downward price pressures in Europe.''
    Mr. Schultz, do you know whether Teva was, in fact, 
pressured to lower the price of Copaxone in Europe in those 
years?
    Mr. Schultz. No, I have no knowledge of that. That's more 
than 10 years before I came to the company.
    Ms. Ocasio-Cortez. But that is quite all right, thank you. 
Thankfully, we do know, and the answer is that it was.
    And while Teva was forced to put pressure, was forced to 
lower the price in Europe, in that same two-year period, the 
company raised the price on U.S. multiple sclerosis patients by 
60 percent in the same two years that they were reduced in 
Europe. And when generic products entered the market in 2017, 
the U.S. list price started to finally steady. But outside of 
the United States, the availability of generics actually 
resulted in a decrease in the list price.
    So, Mr. Schultz, isn't it the case that most European 
countries use some form of price negotiation based on external 
reference pricing?
    Mr. Schultz. That's correct. There are differences from 
country to country, but many countries use some kind of 
reference pricing, and other countries use some kind of value 
based.
    Ms. Ocasio-Cortez. I see. And is that why Teva lowered 
prices abroad, but not in the United States?
    Mr. Schultz. No, you can't look at it that way because in 
the United States, you have this strange system that you have a 
WAC price, which is a list price, which is a price nobody ever 
pays. You have a patient that pays maybe, you know, $10 to $50 
on a WAC price that might be

    [inaudible].

    And then you have a lot of rebating going to PBMs----
    Ms. Ocasio-Cortez. I see.
    Mr. Schultz. So, it's very opaque in the U.S.
    Ms. Ocasio-Cortez. So, it is my understanding that your 
testimony today is that European countries having price 
negotiation and the United States not having price negotiation 
has nothing to do with the fact that Copaxone is almost four 
times the price in the United States than it is in countries 
like Spain or Germany or Canada?
    Mr. Schultz. No, I wasn't saying that. I was saying that 
the system is different. And in the U.S., you have many 
different parties negotiating. Whereas in many European 
countries, you're only negotiating with one party.
    And typically, there's a big volume on the table, and of 
course, your negotiation position will change. That's also why 
the consolidation of PBMs has led to higher discounts.
    Ms. Ocasio-Cortez. Thank you. And Mr. Schultz, sir, I have 
one last question. Even with charging those lower prices, does 
Teva turn a profit in Europe?
    Mr. Schultz. Yes. Teva has, overall for the total business, 
a profit in Europe, yes.
    Ms. Ocasio-Cortez. Thank you.
    Chairwoman Maloney. Ms. Porter? Ms. Porter, you are now 
recognized.
    Ms. Porter. Thank you.
    Mr. Alles, you were CEO of Celgene until fairly recently 
and, as my colleague Ms. Tlaib was showing, Celgene makes 
Revlimid, a cancer drug. Do you know what the price of Revlimid 
was when it first hit the market in 2005?
    Mr. Alles. I don't remember the number, but it was 200----
    Ms. Porter. Reclaiming my time. Reclaiming my time. It was 
$215 for one pill. Do you know what the price of Revlimid was 
in 2013?
    Mr. Alles. I can look it up, but I don't recall. I don't 
have it in front of me.
    Ms. Porter. Four hundred 12 dollars per pill. How about the 
price--let us get into more recent where your memory may be 
jogged. How about 2017?
    Mr. Alles. I would say approximately $700 a pill. But 
again, I don't have it in front of me.
    Ms. Porter. Seven hundred 19 per pill. And today, Revlimid 
costs $763 per pill. I am curious. Did the drug get 
substantially more effective in that time? Did cancer patients 
need fewer pills?
    Mr. Alles. During that time, the development of Revlimid 
included six additional indications, some in lymphoma and the 
balance in patients with different segments of multiple 
myeloma.
    Ms. Porter. Reclaiming my time. So, Mr. Alles, you 
discovered more patients who might benefit from paying $763 a 
pill, but being able to use the drug for more patients doesn't 
necessarily more price. Did the drug start to work faster? Were 
there fewer side effects? How did you change the formula or 
production of Revlimid to justify this price increase?

    Mr. Alles. The indication changes are for subsets of 
different patients with disease.

    Ms. Porter. Reclaiming my time. Mr. Alles, I understand 
that. What I am trying to understand from you is how did the 
drug improve? If I were to look at a pill and analyze it from 
2005, when it cost $215, and I looked today when it costs $763, 
would that pill be the same?

    Mr. Alles. I understand your question about the pill. The 
pill, the manufacturing for it, would be the same.

    Ms. Porter. Right. Thank you. So, to put that in 
perspective, you hiked the price by $500, when the average 
Orange County senior only has $528 left in their bank account 
after they have paid their basic monthly expenses. The average 
Orange County senior can't even afford one pill.

    And you said recently that nobody pays the list price, but 
that is not correct. Do uninsured patients sometimes pay the 
list price?

    Mr. Alles. I can imagine there are circumstances where 
underinsured or uninsured patients would be paying close to or 
at the list price. I don't know of any specific circumstances, 
but I would guess that they do exist.

    Ms. Porter. Reclaiming my time, Mr. Alles. I want to turn 
to one other number, if you would help me. Do you know what 
this number is?

    Mr. Alles. I--I don't, but----

    Ms. Porter. Does it ring any bells?

    Mr. Alles. I think you're referring to my compensation in 
some way.

    Ms. Porter. In some way. This was your compensation in 2017 
for being CEO of Celgene, and that is a lot of money. It is 200 
times the average American's income and 360 times what the 
average senior gets on Social Security.

    Now of that $13 million, about $2.1 million came from your 
company hitting yearly earning targets, and more than half of 
the bonus formula was based on those targets. Any increase in 
the price of Revlimid would also increase your bonus by 
increasing earnings. Isn't that right, Mr. Alles?

    Mr. Alles. If revenues increased and expenses did not, then 
earnings would be enhanced----

    Ms. Porter. Thank you. Mr. Alles, in fact, the Oversight 
Committee----

    Mr. Alles [continuing]. And that was a part of the 
calculation of my compensation.

    Ms. Porter [continuing]. Found that if you hadn't increased 
the price of Revlimid, you wouldn't have gotten your bonus. Mr. 
Alles, do you know how much you personally received in bonuses 
over two years, the last two years, just because Celgene raised 
the price of this one drug, Revlimid?

    Mr. Alles. I received very generous compensation, but I 
don't know the exact number that you're referring to.

    Ms. Porter. In fact, you personally received $500,000 
personally just by tripling the price of Revlimid.

    So, to recap here, the drug didn't get any better. The 
cancer patients didn't get any better. You just got better at 
making money. You just refined your skills at price gouging. 
And to be clear, the taxpayers spent $3.3 billion on Revlimid, 
$3.3 billion--Medicare, $3.3 billion.

    Mr. Caforio, Bristol Myers Squibb, your company, acquired 
Celgene and its drug Revlimid. Is that correct?

    Dr. Caforio. That's correct, Congresswoman.

    Ms. Porter. If the price of Revlimid had only been 
increased to reflect inflation, the cost would be about $286 
today, according to the Fed's inflation calculator, $286 per 
pill. Will you commit to lowering the price of Revlimid to $286 
per pill?

    Dr. Caforio. No.

    Chairwoman Maloney. The gentlewoman's time has expired, but 
the gentleman may answer the question. Please respond to the 
question.

    Dr. Caforio. Yes. No, I can't commit to that. We--we did 
look extensively at the price of Revlimid and the value of 
Revlimid when we acquired Celgene. And I can commit to 
continuing to work to ensure that patients that need Revlimid 
have access to Revlimid, and we are doing all we can in order 
to make that happen.

    Ms. Porter. Mr. Caforio, I just would like, for the 
committee's clarification, a yes or no. Will you commit to 
lowering the cost of Revlimid----

    Mr. Comer. Madam Chair, her time has expired.

    Chairwoman Maloney. Your time has expired. But the 
gentleman may answer if he would like.

    Dr. Caforio. I already answered. I can't commit to that.

    Chairwoman Maloney. All right, thank you.

    Thank you. The gentlelady's time has expired.

    Before we adjourn, I want to address the members on the 
other side of the aisle who have stated repeatedly throughout 
this hearing that we should be working in a bipartisan basis, 
and this is a critical issue to the people of America, I agree. 
And we want to work on a bipartisan basis.

    And Chairman Cummings tried to do so. He was one of the 
first senior Democrats to go to the White House after the 
election, and he met with President Trump on March 8, 2017. He 
took the President's campaign promises at face value, that he 
wanted the U.S. Government to finally be able to negotiate for 
lower prices. He ran on that platform.

    Chairman Cummings gave the President a copy of his draft 
bill that would do just that. He asked for his input on the 
draft bill, which turned into H.R. 3. He asked to work 
together, and he asked repeatedly for the President's support. 
But President Trump fell off the face of the Earth. Chairman 
Cummings sent letter after letter after letter to the President 
in good faith and a bipartisan way.

    He sent on one April 20, 2017, reiterating his request to 
work together. I have a copy of it right here. He sent another 
one on June 21, 2017, and I have a copy right here. And then he 
sent a third letter, and this was on October 25, 2017, and I 
have a copy of that letter.

    And I would like to ask unanimous consent to place all of 
these letters in the record.

    Without objection.

    Chairwoman Maloney. Do you know what President Trump's 
response was? Zero. He never responded to Chairman Cummings 
again. He broke the promise he made during the campaign to 
support legislation to finally let Medicare negotiate, and he 
broke the pledge he made directly to Chairman Cummings in the 
White House to work together in a bipartisan way.

    So, to my colleagues who are complaining that we didn't 
work on a bipartisan basis, you should be directing your 
criticism directly to the President. He is the one who went 
back on his promises, and he is the one that refused multiple 
times the efforts by Chairman Cummings to work together.

    In closing, I want to thank all of our panelists for their 
testimony, and I want to commend my colleagues on both sides of 
the aisle for participating in this very important 
conversation.

    Mr. Comer. Madam Chair?

    Chairwoman Maloney. You will be recognized.

    Tomorrow, we will continue this conversation with Part II 
of our hearings on the skyrocketing price of prescription 
drugs, and at that hearing, we will finally hear from three 
more drug company executives from Amgen, Mallinckrodt, and 
Novartis.

    So, I look forward to seeing all of you tomorrow at 10 
a.m., and I recognize for comments my distinguished colleague 
and note that, without objection, all members have five 
legislative days within which to submit additional written 
questions for the witnesses to the chair, which will be 
forwarded to the witnesses for their response. And I ask the 
witnesses to respond promptly as they are able.

    And I recognize my good friend and colleague, the ranking 
member of the committee, for his closing comments and thank him 
for his participation and his willingness to work in a 
bipartisan way.

    Mr. Comer. Well, thank you, Madam Chair.

    And that is true. We sincerely want to work together. I 
think this is a bipartisan issue. But with respect to the 
letters that you mentioned, that this committee, that former 
Chairman Cummings, yourself, and all the members of the 
committee have sent the President, you all have sent so many 
letters from this committee to the President, I would say that 
they view that as junk mail because they get so many letters 
from this committee.

    I think moving forward, we need to pick some issues where 
there is bipartisan agreement, and this is an issue. 
Republicans have already passed--proposed a bill, H.R. 19, that 
does many of the things that many of your members reference 
during this hearing. So, I think that the potential is there.

    I recognize the fact that there is probably not going to be 
any mood for true bipartisanship over the next 30 days, but 
hopefully, after the election, we can work together and move 
forward to try to do what our constituents want, and that is to 
try to get some type of reform with respect to drug pricing.

    With that, I yield back.

    Chairwoman Maloney. Thank you for your participation, your 
comments, and I will see you tomorrow at 10 a.m.

    This meeting is adjourned.

    [Whereupon, at 1:54 p.m., the committee was adjourned.]

                                 [all]