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


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

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                          OVERSIGHT AND REFORM
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            OCTOBER 1, 2020

                               __________

                           Serial No. 116-123

                               __________

      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                    
41-983 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
                          Taylor Jones, Clerk

                      Contact Number: 202-225-5051

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

                              ----------                              
                                                                   Page
Hearing held on October 1, 2020..................................     1

                               Witnesses

Mr. Robert Bradway, Chairman and Chief Executive Officer, Amgen 
  Inc.
    Oral Statement...............................................     4

Mr. Mark Trudeau, President and Chief Executive Officer, 
  Mallinckrodt Pharmaceuticals
    Oral Statement...............................................     5

Mr. Thomas Kendris, U.S. Country President, Novartis AG
    Oral Statement...............................................     7

* Opening statements and the prepared statements for the 
  witnesses are available at:  docs.house.gov.

                           INDEX OF DOCUMENTS

                              ----------                              

The documents listed below are available at: docs.house.gov.

  * Letter from the Mayor of Rockford, Illinois, Thomas McNamara; 
  submitted by Rep. Maloney.

  * Questions for the Record: to Mr. Bradway at Amgen Inc.; 
  submitted by Rep. Porter.


 
                       UNSUSTAINABLE DRUG PRICES:.
                        TESTIMONY FROM THE CEOs
                               (PART II)

                              ----------                              


                       Thursday, October 1, 2020

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

    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2154, Rayburn House Office Building, Hon. Carolyn Maloney, 
Chairman of the Committee, presiding.
    Present: Representatives Maloney, Norton, Clay, Lynch, 
Connolly, Raskin, Rouda, Wasserman Schultz, Sarbanes, Welch, 
Speier, Kelly, DeSaulnier, Plaskett, Gomez, Tlaib, Porter, 
Comer, Jordan, Gosar, Foxx, Massie, Grothman, Palmer, Cloud, 
Gibbs, Higgins, Miller, Steube, and Keller.
    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 welcome to Day Two of our landmark series 
of hearings with drug company CEOs. Yesterday we heard from the 
CEOs of three drug companies: Celgene, Bristol Meyers Squibb, 
and Teva. And what we learned was shocking. Drug companies are 
hiking their prices higher and higher, and placing an even 
greater burden on the very patients who rely on these drugs to 
survive. We learned that these skyrocketing prices are simply 
unsustainable, both for government programs and American 
families.
    We also learned that claims by drug companies that their 
price increases are necessary for research and development are 
completely bogus. The internal company documents we obtained 
show that drug companies hike prices almost entirely for 
selfish reasons. They do it to meet internal revenue targets, 
or to increase their own bonuses, in some cases. Drug companies 
certainly spend some funds on research and development, but 
nowhere near the windfall profits they are bringing in as a 
result of their massive price increases.
    Finally, in the cases we examined yesterday we learned that 
drug companies target our country for their biggest price and 
for their biggest price increases, charging the American people 
more than the entire rest of the world combined.
    They do it simply because they can, because Federal law 
currently bars our government from negotiating directly with 
drug companies to lower prices for Medicare. According to the 
non-partisan CBO, allowing the Federal Government to negotiate 
directly with drug companies could lower spending on brand name 
drugs by about $456 billion. So, let that number sink in. It is 
nearly half a trillion dollars.
    Today is Day Two, and we will hear from three more 
executives. We will hear from the CEO of Amgen, which 
repeatedly raised the prices of two drugs: Enbrel, which is 
used to treat rheumatoid arthritis and other painful 
inflammatory diseases, and Sensipar, which is used to treat the 
effects of kidney failure and parathyroid cancer.
    We will hear from the top U.S. executive from Novartis 
about the company's massive price increases for Gleevec, a drug 
that treats chronic myeloid leukemia, a rare form of cancer of 
the blood and bone marrow.
    And we will hear from the CEO of Mallinckrodt about the 
pricing of its drug called H.P. Acthar Gel, which is used to 
treat a rare seizure disorder in little babies.
    We are going to keep our opening statements short because 
we want to hear the testimony from our guests. But I would now 
like to turn to our ranking member for his opening statement.
    Mr. Comer. Thank you, Madam Chairwoman, for holding this 
hearing. I would like to reiterate a few points brought up at 
yesterday's hearing.
    First, Republicans have introduced legislation, H.R. 19, 
full of bipartisan provisions that the House could pass today 
and could be signed into law by the end of the week, to 
decrease the cost of prescription drugs for all Americans.
    Second, pharmaceutical innovation is vital to enabling 
Americans to live longer and healthier lives, but we must 
ensure those innovative products are accessible and affordable 
for all Americans.
    Third, while brand pharmaceutical manufacturers play a 
significant role, we must look at the entirety of the 
pharmaceutical marketplace, including PBMs, health insurers, 
generic manufacturers, and wholesalers, to truly solve this 
problem permanently.
    At this time, Madam Chair, I would like to yield the 
balance of my time to Representative Massie.
    Mr. Massie. Thank you, Ranking Member Comer, and thank you, 
Madam Chairwoman. I anticipate today's discussion and testimony 
will involve the U.S. patent system, and so in this opening 
statement I want to read the patent and copyright clause that 
is in the Constitution. This clause was so uncontroversial that 
it was accepted by all of those who were drafting and voting on 
the Constitution, unanimously and without debate.
    It says, ``The U.S. Congress shall have power to promote 
the progress of science and useful arts by securing, for 
limited times, to authors and inventors the exclusive right to 
their respective writings and discoveries.''
    So, some people who haven't studied this issue too much 
think that perhaps patents are the reason that drug prices are 
high, but the reality is on a lot of the drugs the patents have 
expired and there is no restriction from the Patent Office to 
keep somebody from making the generic versions of the drugs. 
But there are other impediments not involving patents that stop 
these generics from coming to market. So, I hope we find out 
what those are about.
    Then I also want to say that our Founding Fathers were 
really smart here. They knew that if the owner had a limited 
period to recoup their investment, the inventor and the owner, 
then they would be able to find the capital and the backers to 
develop these ideas and discoveries. So, even if you had 
scientists who would come up with new drugs, for free--let's 
say they just gave the idea away--these new drugs require 
millions, hundreds of millions in some cases, of development in 
order to bring them to market, and without a patent, which is 
the equivalent of a deed, like a deed to a piece of property--
nobody would develop a piece of property if they couldn't get a 
secure title to the property--patents work the same way. They 
allow the investors to get secure title to the idea so that 
they can then invest the money that is required to bring that 
to market and to test it and make sure it is safe for all human 
beings.
    So, I look forward to a robust discussion on that, and with 
that I yield back.
    Chairwoman Maloney. I want to thank my colleagues, and with 
your indulgence, because of my cough, I would like to just lead 
up to the video that we want to play before we go into it. But 
I did want to respond to my good friend and colleague, Mr. 
Comer. I agree we should work on this issue. It is important to 
the American people. It should be bipartisan. But since you 
mentioned your bill, I am going to mention mine, H.R. 3, which 
would merely allow our country to negotiate for lower drug 
prices for Medicare, as we do with the Veterans Association. It 
has passed the House. It is now in the Senate.
    But what I would really like to do right now is to honor 
and remember our former chairman, Elijah Cummings, who launched 
this investigation 18 months ago. His No. 1 priority then, and 
our No. 1 priority now, is the health and the well-being of the 
American people, who are being harmed on a daily basis by these 
astronomical price increases.
    So, I would like to conclude my statement by playing a clip 
of three individuals, patients and doctors, who are being 
directly and negatively affected by the actions of these three 
drug companies. And if could now play that video and move 
quickly forward.

    [Video shown.]

    Chairwoman Maloney. Thank you. Thank you very much. I will 
now introduce our witnesses, and we are grateful for their 
attendance today and for their testimony.
    Our first witness today is Mr. Robert Bradway, who is the 
Chairman and CEO of Amgen. Amgen sells the anti-inflammatory 
drug, Enbrel, and the chronic kidney disease drug, Sensipar. 
Then we will go to Mr. Mark Trudeau, who is the President and 
CEO of Mallinckrodt Pharmaceuticals. Mallinckrodt sells the 
autoimmune and inflammatory disease drug, H.P. Acthar Gel. 
Finally, we will hear from Mr. Thomas Kendris, who is the U.S. 
Country President of Novartis. Novartis sells the cancer drug, 
Gleevec.
    The witnesses will be unmuted so we can swear them in. 
Please raise your right hands.
    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. Thank you. Let the record show that the 
witnesses answered in the affirmative.
    Without objection, your written statements will be made 
part of the record.
    With that, Mr. Bradway, you are now recognized for your 
testimony. If you could unmute your mic.

   STATEMENT OF ROBERT BRADWAY, CHAIRMAN AND CHIEF EXECUTIVE 
                      OFFICER, AMGEN INC.

    Mr. Bradway. OK. Thank you. Good morning, Chairwoman 
Maloney, Ranking Member Comer, and other members of this 
committee. My name is Bob Bradway and I am the CEO of Amgen, a 
leading biotechnology company based in Thousand Oaks, 
California.
    Before I begin my formal remarks, I want to acknowledge the 
work of Elijah Cummings on drug pricing issues as chairman of 
this committee. I know he is sorely missed by his former 
colleagues and I wanted to recognize his work dedicated to 
improving access and affordability for patients.
    For 40 years, Amgen's unwavering mission has been to serve 
patients. We do that through innovative medicines and high-
quality biosimilars that treat many of the world's most serious 
and costly illnesses. We are also engaged in the fight to 
understand, treat, and prevent COVID-19.
    We employ nearly 14,000 people here in the U.S., where we 
conduct a vast majority of our cutting-edge research and eco-
friendly manufacturing.
    Amgen is deeply committed to meeting the needs of every 
patient, every time. Therefore, it is of great concern to us 
when patients who might benefit from our medicines can't get 
them.
    We are committed to responsible pricing. A few recent 
examples: In 2018, we launched a new migraine prevention 
treatment called Aimovig, at a price that was between 20 and 65 
percent below market expectations. We also made Repatha, a 
medicine proven to reduce heart attacks and strokes in patients 
with stubbornly high cholesterol levels, available at a 60 
percent reduced price. This helped lower out-of-pocket costs 
for patients, especially seniors on Medicare.
    Over the last two years we have launched biosimilars to 
some of the top-selling medicines in the country, and plan to 
bring more to market over time, providing patients with more 
affordable treatment options.
    Overall, the average net price for Amgen medicines across 
our entire portfolio in the U.S. declined in 2018 and 2019, and 
we are on track for further declines this year.
    Enbrel is an Amgen medicine that treats patients with 
autoimmune disorders such as moderate to severe rheumatoid 
arthritis. Enbrel highlights the tension between ensuring 
patients have access to critical, innovative medicines and the 
out-of-pocket costs they are also required to pay. Physicians 
tell stories of how their waiting rooms were cluttered with 
canes, crutches, and wheelchairs. Thanks to Enbrel, countless 
patients have been given a new lease on their lives.
    Since Enbrel's approval, we have invested hundreds of 
millions of dollars in studies for additional uses and to make 
it more patient friendly. As an example, we recently introduced 
an easy-to-use self-injection device designed for Enbrel 
patients whose disease has sapped the strength in their hands.
    But innovations like this cost money, and that is partially 
why we have increased the list price of Enbrel in the past. But 
what has driven up the list price more than any other factor is 
the pressure we face to match the price increases of the market 
leader. I know this sounds strange. Companies in virtually 
every other industry compete by offering the lowest price. 
Unfortunately, the current rebate system in the U.S., created 
with good intent, now often leads to a situation in which not 
getting kicked off formulary requires matching a competitor's 
higher price. These higher prices increase the already 
significant rebates paid to the middlemen, who largely dictate 
which medicines patients can access, regardless of which 
medicines their physician prescribes.
    Worst still, these rebates, paid on all our medicines, do 
not translate into lower costs for patients, and that is 
because they don't get passed on to patients at the pharmacy 
counter. There is no question that the present rebate system is 
dysfunctional and does little to serve the very patients it was 
designed to benefit.
    As we wrestle with the worst public health and economic 
crises of our lifetime the time is now and the place is here to 
craft the changes that are needed. Innovative 
biopharmaceuticals are part of the solution to the burden 
serious diseases impose on patients and society. Amgen can 
strive for reforms to improve affordability for patients. 
However, a single manufacturer cannot make that happen alone.
    We stand ready to work with members of both parties, the 
administration, and other stakeholders to develop policy 
solutions, help improve access and affordability for our 
patients without stifling innovation. There are so many 
diseases to confront and patients to help. If we all stay 
focused on what is best for patients, I am confident we can end 
up in a better place.
    Thank you for the opportunity to speak to you this morning.
    Chairwoman Maloney. Mr. Trudeau, you are now recognized.

   STATEMENT OF MARK TRUDEAU, PRESIDENT AND CHIEF EXECUTIVE 
             OFFICER, MALLINCKRODT PHARMACEUTICALS

    Mr. Trudeau. Chairwoman Maloney, Ranking Member Comer, and 
members of the committee, thank you for the opportunity to be 
here today.
    I started in the pharmaceutical industry as a research and 
development engineer nearly 40 years ago. Over the course of my 
career I have worked on pioneering treatments for several 
critical diseases, including some of the very first for HIV. 
The leadership roles that I have had in other regions of the 
world have allowed me to better understand both the strengths 
of the U.S. health care system and its challenges. I have 
devoted myself to this industry because, like the nearly 3,300 
employees of Mallinckrodt I know that the therapies that we 
make improve the lives of patients and their families.
    This has been a year of unprecedented challenges. When 
COVID-19 hit we mobilized to identify therapies to combat the 
diseases. We consulted with the FDA and NIH regarding potential 
evaluation of INOmax, our inhaled nitric oxide therapy for the 
treatment of COVID-19-related respiratory complications, and 
supported an independent clinical trial being coordinated by 
Mass General. As of today, nearly 250 hospitals and U.S. health 
systems have used INOmax as an experimental treatment for 
COVID-19 patients.
    We also secured our supply chain to avoid manufacturing 
interruption for the critical medications we make and donated 
54,000 pieces of PPE, several ventilators, and more than 16,000 
gallons of hand sanitizer manufactured in our Missouri plant. 
We also engaged with Members of Congress and Federal agencies 
like BARDA to discuss leveraging our extensive experience 
making high-quality, U.S.-made generics at our plants in 
Missouri, New York, Illinois, and North Carolina, to bring home 
the manufacturing of essential medicines and active 
pharmaceutical ingredients.
    Today we are the only American manufacturer of 
acetaminophen, a key active pharmaceutical ingredient in many 
medicines, which we proudly make in Illinois and North 
Carolina.
    Our resolve to help patients with critical conditions has 
never been stronger, and we understand and share the American 
people's concerns over the availability and affordability of 
prescription drugs. Mallinckrodt is steadfastly committed to 
knocking down barriers to patient access. That is particularly 
true with Acthar Gel.
    Acthar is a complex injectable biopharmaceutical product, 
FDA approved for 19 serious conditions, including infantile 
spasms, lupus, multiple sclerosis, nephrotic syndrome, and 
rheumatoid arthritis. Acthar is life-changing therapy for a 
small group of patients for whom other treatment options have 
failed, or patients whose conditions, if left untreated, may 
lead to physical and developmental impacts requiring life-long 
care, causing great financial strain on families and the 
American health care system.
    Acthar is not patent protected. We do not block generic 
competitors from entering the market. It is our policy to 
provide reference samples to generic manufacturers upon 
request, and we have supported legislation like the CREATES Act 
to ensure appropriate access to those samples.
    Since we acquired Acthar in late 2014, we have invested 
more than $660 million into modernizing the product, including 
over $470 million in R&D activities and close to $190 million 
in manufacturing advancements. We have initiated nine clinical 
trials with targeted combined enrollment of nearly 1,100 
patients, a large number given the rare or complex conditions 
Acthar typically treats. Results from one study of patients 
with persistently active rheumatoid arthritis showed that 
treatment with Acthar resulted in low disease activity for an 
astounding 62 percent of patients for whom standard treatments 
did not work.
    Since we have owned Acthar, the list price has increased, 
on average, around five percent annually, not factoring in 
inflation or significant discounting that we started when we 
acquired it. In two of the last six years we didn't take any 
price increase, and last year the net price of Acthar went 
down, as it will again this year. We have also improved the 
ability of patients with a prescription to obtain Acthar 
through our robust free drug and commercial copay assistance 
programs, which lead to many patients paying nothing out of 
pocket.
    Like all of Mallinckrodt's employees, I am dedicated to 
bringing more breakthrough treatments to the market, including 
Terlipressin, one of two treatments we are developing for 
patients with advanced liver disease; StrataGraft, our 
investigative regenerative skin therapy, which may reduce the 
need for autografting in certain burn patients; and Adrabetadex 
for Niemann-Pick Type C disease, a high mortality rare disease 
affecting children and adolescents.
    We will not waver in our commitment to serving patients 
with critical conditions who need better options. Thank you 
again for the opportunity to be here today.
    Chairwoman Maloney. Thank you. Mr. Kendris, you are now 
recognized.

 STATEMENT OF THOMAS KENDRIS, U.S. COUNTRY PRESIDENT, NOVARTIS 
                               AG

    Mr. Kendris. Thank you, Chairwoman Maloney. Chairwoman 
Maloney, Ranking Member Comer, members of the committee, thank 
you for the opportunity to speak with you today.
    My name is Tom Kendris and I am the U.S. Country President 
for Novartis, a leading global medicines company. We use 
innovative science to develop transformative medicines that 
improve and extend people's lives. We also develop generics and 
biosimilars through our Sandoz division, the second-largest 
generics company in the United States. Our medicines reach 
close to 800 million people every year. Globally, we are over 
100,000 people, with approximately 15,000 employees in the 
United States. Our global R&D headquarters is in Cambridge, 
Massachusetts, and we have several manufacturing sites across 
the U.S.
    I have been with Novartis for 25 years, and I still marvel 
at the passion of our people to tackle the most complex medical 
challenges. Gleevec was one of the most significant medical 
advancements in recent history. It revolutionized targeted 
therapy for cancer. Before Gleevec was introduced in 2001, the 
five-year survival rate for a patient with chronic myeloid 
leukemia was only 30 percent. Now the vast majority of CML 
patients have a normal lifespan. What's more, Novartis 
continued to study whether the drug could treat other diseases, 
and today it is approved for six other rare cancers, saving 
tens of thousands of lives.
    A more recent example of our transformative treatments is 
the development of a gene therapy to treat spinal muscular 
atrophy, a rare genetic neuromuscular disease that affects 
primarily babies. The treatment is one of the first gene 
therapies to be approved in the U.S., with a single injection. 
Some babies who would otherwise have died by the age of two or 
three are now going to kindergarten and growing up like other 
children.
    In cell therapies we developed the first CAR-T therapy to 
treat a rare form of pediatric and young adult leukemia. This 
therapy can bring a patient from the brink of death to 
remission. The first patient ever to receive this therapy has 
been cancer-free for eight years and is now going to high 
school and leading a normal life. Spending time with this young 
patient's family is one of the great privileges of my career.
    Beyond rare diseases and cancers, we are reimagining how 
innovative medicines might improve public health broadly, 
particularly in sickle cell anemia, malaria, and cardiovascular 
disease.
    I would like to be clear with the committee, however, that 
at Novartis we recognize that these innovations don't matter if 
patients cannot afford or get access to them. In the U.S., 
issues of price and access present systemic challenges that 
must be addressed together by industry and policymakers, and 
Novartis is committed to being part of the solution. While CMS 
predicts national health spending to grow at an average rate of 
5.4 percent through 2028, the average net price of our 
medicines is expected to decrease by 2.5 percent in 2020.
    Value-based pricing is a critical tool in addressing 
affordability and access. When setting prices, we at Novartis 
consider multiple factors, including the improvements the 
medicines offer patients, both clinically and in terms of their 
quality of life, and the benefits that the medicines offer to 
the health care system and to society.
    The industry should adopt a similar approach, and patients 
should have access to treatments with low cost-sharing, to 
encourage the use of the most cost-effective options available. 
We also seek to lower costs by developing low-cost biosimilars 
and generics through our Sandoz division, which brought the 
first biosimilar to market in the U.S.
    Over the past five years, Novartis has provided medications 
at no charge to nearly 300,000 U.S. patients experiencing 
financial hardship or who have limited or no prescription drug 
coverage. Eligible patients with commercial insurance often pay 
less than $30 for a 30-day prescription for the vast majority 
of Novartis' products.
    The pharmaceutical industry used to be revered. That trust 
has eroded, however, and our industry must work to regain it. 
At Novartis we understand that this trust is earned, not just 
from bringing breakthrough medicines to patients but by pricing 
these medicines responsibly and ensuring broad access. While we 
live in an incredible era of progress in human health, we will 
only be successful if we can make both of these goals a 
reality. At Novartis we are passionately committed to doing so.
    Thank you for your time this morning and I look forward to 
answering your questions.
    Chairwoman Maloney. Thank you. I thank all of you.
    I now recognize myself for five minutes for questions, and 
I thank Mr. Comer for allowing me to go over a little of my 
time. I certainly grant the same to him, and more, to his 
colleagues on your side of the aisle.
    Yesterday we heard the CEOs claim over and over again that 
they had to raise drug prices to help pay for research and 
development and promote innovation. But the internal documents 
we obtained showed that these claims were false. Instead, they 
showed that these price increases are intended to generate more 
and more revenues for the drug companies.
    Mr. Trudeau, let's start with you. In your written 
statement today you made the statement, and I quote, ``At 
Mallinckrodt we believe that pricing for an innovative therapy 
should reflect the value that the treatment brings to patients, 
providers, and the health care system as a whole,'' end quote.
    But your company didn't acquire Acthar Gel because you 
thought it was an innovative therapy. It was a very old drug. 
You acquired it to meet your financial objectives.
    I would like to go through three quick slides with you. 
First is Exhibit 66, and it is up on the screen.
    [Slide.]
    Chairwoman Maloney. This is a slide from a presentation 
that was prepared when you were considering the acquisition of 
Questcor, which made Acthar. As a preliminary matter, these 
talks about Quincy, Quincy was just the code name you used for 
your real company, Questcor, right?
    Mr. Trudeau. That is correct, Madam Chairwoman.
    Chairwoman Maloney. Thank you. The title of the slide says, 
and I quote, ``Questcor is a rapidly growing specialty 
pharmaceutical company with a premium-priced product.''
    Mr. Trudeau, the premium-priced product was Acthar, and 
premium-priced just means really expensive. Right?
    Mr. Trudeau. That is actually not true. What it refers to 
is that it was priced at a premium to other competitive 
therapies.
    Chairwoman Maloney. Well let's look at the next slide, 
Exhibit 67.
    [Slide.]
    Chairwoman Maloney. If you look at the fourth bullet, this 
slide says your acquisition would allow Mallinckrodt to, quote, 
``achieve aspirational goals with a single transaction,'' end 
quote. By ``aspirational goals'' you are talking about huge 
revenues, and that is exactly what you got. Acthar sales 
accounted for a third of your company's net sales from 2017 
through 2019. Isn't that right?
    Mr. Trudeau. The sales are roughly correct, but our 
aspirational goals were actually to transform the company. 
Mallinckrodt was originally a generics and imaging company and 
we were looking to make a transformation to a company that was 
focused on research, investment, and the opportunity to address 
patients with severe and critical conditions who are 
underserved by current therapies.
    Chairwoman Maloney. Well, let's now look at Exhibit 68.
    [Slide.]
    Chairwoman Maloney. Mr. Trudeau, I will just read the 
headline. It says that your modernization strategy will define 
the future of Acthar as either a growth asset or a, and I 
quote, ``cash cow,'' end quote. Isn't it true that this is how 
you really see this drug, not as an innovative therapy but as a 
``cash cow''?
    Mr. Trudeau. No, that is not true, and this document, which 
I was just recently made aware of, actually was a draft 
document that was never shown to our board.
    But that term is typically applied to products for which no 
investment is likely to be going forward, and, in fact, that is 
exactly the opposite with what we have done with Acthar. We 
have invested nearly $660 million since we acquired the product 
in 2014.
    Chairwoman Maloney. OK. A cash cow is a profit-making 
thing. What is a cash cow? That is what you said. I think the 
document speaks for itself.
    Mr. Bradway, may we turn to you? Your company's talking 
points claim, and I quote, ``At Amgen we price our products to 
reflect the economic value that is delivered to patients, to 
providers, and payers, the unmet medical need, the size of the 
patient population, the investment and risk undertaken, and the 
need to fund continued scientific innovation,'' end quote.
    But your internal documents tell a very different story. 
So, let's look first at Exhibit 36.
    [Slide.]
    Chairwoman Maloney. This is a pricing committee 
presentation from December 2016. In this document your pricing 
committee is basing its decision not on innovation or research 
and development but on what another company, AbbVie, might do 
with a similar drug. Isn't that right?
    Mr. Bradway. Yes, Madam Chairwoman. That is correct, and it 
is important to note what is happening in this discussion. What 
this reflects is the nature of the--the structure of the 
biopharmaceutical industry through which we compete for 
formulary position for our medicines with other molecules in 
the same therapeutic category. So, what you are seeing here is 
a snapshot of a discussion about how we position Enbrel versus 
other molecules that we compete against in this anti-
inflammatory category.
    Chairwoman Maloney. Well, this document, it has three 
scenarios for what AbbVie might do, and it plans out what your 
company will do in response. Mr. Bradway, these pricing 
executives are not discussing any of the things that you 
mentioned in your talking points. They are not discussing 
research and development, unmet needs, investments, risk 
undertaken, innovation. Instead of competing with other 
companies to beat their prices you are all increasing them in 
lockstep. Isn't that right? That is what the document says, and 
I think it is scandalous.
    Mr. Bradway. What you see here is a document that 
illustrates the competition that exists to keep medicines like 
Enbrel on formulary. Again, if I may be allowed, Madam 
Chairwoman, let me say a few words about the structure of the 
market that requires the kind of rebating that is implied in 
this document.
    As I said, Enbrel competes against 20 different molecules 
in the anti-inflammatory space. We offer rebates which secure 
our position on the formulary of the intermediaries who 
determine which medicines are available for patients to use, 
and what the effects are of the scenarios that the team is 
considering in order to make sure that this medicine remains 
available for those patients who are already on it and those 
patients whose physicians want to add them to their therapy. 
So, they are looking at a range of scenarios, and implicit in 
this is the rebate that would be associated with those 
scenarios for the product.
    Chairwoman Maloney. Well, let's move on to Mr. Kendris. In 
your written testimony you say, and I quote, ``Given its life-
changing attributes we have committed to making Gleevec 
accessible to patients who need it,'' end quote. But one of the 
documents obtained by the committee shows that executives 
priced Gleevec as high as possible, and they priced it so high, 
from the documents, to meet revenue targets without triggering 
negative backlash.
    Let's put the slide on the screen, and this is Exhibit 3.
    [Slide.]
    Chairwoman Maloney. This is a slide of Gleevec's pricing 
scenarios, including the risk to Novartis' strategic financial 
plan, quote, ``if action not taken in 2013,'' end quote. If you 
look in the top right-hand box, the description of the 
aggressive pricing model says, quote, ``delivers greatest 
upside while keeping single increases below the 10 percent 
threshold,'' end quote. This aggressive model recommends five 
price increases of 9.9 percent over the course of three years.
    Mr. Kendris, my question is, your company chose the most 
aggressive pricing model, didn't it?
    Mr. Kendris. Madam Chairwoman, in the next sentence, right 
after the one you read, the document which I am seeing this 
morning recommends enhancements to our patient support 
programs. So, Madam Chairwoman, what I would say is that over 
the years since Gleevec was introduced onto the market its 
value increased exponentially, because of the five new 
indications that we obtained for Gleevec in rare cancers and 
the tens of thousands of patients whose lives were saved. Over 
time it became clear that the remissions, not only in CML but 
in all of those cancers, were robust and long-lasting.
    In 2001, we didn't know that. We didn't know how long 
patients would live and survive after they were given Gleevec. 
But over time we found out that they did. And we turned cancer, 
all of these six cancers, from a fatal condition first to a 
chronic condition and then, with a follow-on product, Tasigna, 
we turned it into a treatment-free remission condition, 
basically a cure. They don't have to take a pill any longer.
    So, Gleevec was tremendously valuable, and the price 
increases we took were--we certainly took them over those 
years, Madam Chairwoman, but we were always the lowest-priced 
product in the class. The product has been generic now since 
2015. We haven't taken a price increase since 2015, and today 
55 percent of what we manufacture of Gleevec is given away to 
patients who can't afford it and given away for free.
    Chairwoman Maloney. Well, the bottom line is that Novartis 
went with the pricing strategy that would maximize net sales, 
raising Gleevec's price five times in three years.
    The point here is that all the claims by drug companies 
about why they need to increase prices to pay for research and 
development and for innovation, they are simply not true. These 
documents show that they are increasing prices simply to make 
more money, plain and simple. That is why we need to finally 
allow the government to negotiate directly for lower prices, 
like all other countries.
    Again, these drug companies make more off the United States 
than all the other countries in the world combined, buying 
their products.
    There will be further questioning on the rebates and how 
they are really not working, or not getting to people, but I am 
over my time as I am, and I want to now recognize Mr. Massie 
for the same amount of time, for his questions. And thank you 
very much for allowing me to go through the slides. Thank you.
    Mr. Massie. Thank you, Madam Chairwoman. Mr. Trudeau, you 
mentioned that Mallinckrodt was a manufacturer of generic 
drugs, and that was a big part of your market in the beginning. 
In general, what percent of prescriptions in the United States 
are generics?
    Mr. Trudeau. I believe it is approximately 90 percent at 
this point.
    Mr. Massie. So, 90 percent of the prescriptions that are 
written and filled in the United States, roughly, are for 
generic drugs. I think that is fantastic. But is the cost of 
generics in the United States significantly higher than in 
other countries? How do we compare when you go on a generic 
label?
    Mr. Trudeau. Well, typically the United States generic 
market has been amongst the most efficient, meaning that prices 
drop most rapidly in the U.S. We have a very efficient market. 
And generic prices typically, in a relatively short amount of 
time, many times within a year, drop to about 10 percent of the 
branded price. So, we have a system that works from a generic 
perspective, certainly relative to other countries.
    Mr. Massie. And what are some of the challenges you face 
when you want to make a generic drug, say after a brand name 
drug goes off patent? What are some of the hurdles that you 
have to overcome to get a generic drug to market?
    Mr. Trudeau. Well, the primary thing that you have to do is 
generate bioequivalent status. You have to demonstrate that 
your product is bioequivalent to the branded product. That 
requires some clinical work. Sometimes it requires other 
investment, research and development investment. Then, of 
course, you need to be very efficient, from a manufacturing and 
distribution standpoint, because you are competing in a very 
aggressive, competitive marketplace.
    Mr. Massie. Is there something that we can do in Congress 
to make it easier to get to a generic label from a brand name 
label after a drug goes off the patent?
    Mr. Trudeau. I believe the generic environment today is 
actually quite good. I think there has been significant 
improvements on the regulatory side in improving the throughput 
of generic approvals. I think the statistics show that the FDA 
has generated significantly more approvals of generic products 
over the last couple of years. That certainly adds to 
competition, and that is certainly likely to drive down prices.
    Mr. Massie. In order to produce a generic without 
infringing on a patent, the patent has to expire, I suppose, 
but can you also license the patent or is that not typical in 
the drug industry?
    Mr. Trudeau. Certainly, it could be done but that is not 
typical. Mostly generic products enter the market after the 
expiration of patents.
    Mr. Massie. And what is the lifetime of a patent?
    Mr. Trudeau. Well, a patent can vary, but the lifetime is 
typically going to be on the order of 20 years. But recognize 
that is from the actual discovery itself, and much of that 
timeframe is actually taken up by research and development. 
Many times, when you launch a branded product you may only have 
a couple of years left on the patent, because most of that time 
has been eroded because it has taken time to develop the 
product.
    So, you know, typically it is 20 years. It can vary a 
little bit. But that is typically the timeframe.
    Mr. Massie. That is 20 years from when the invention 
occurs, and like you said sometimes you are only left with a 
few years to try and recoup the investment. How many of the 
drugs that you develop actually result in a profit?
    Mr. Trudeau. Well, on the generic side, typically you are 
likely to be reasonably successful because again you are not 
driving innovation necessary. But what you are doing is you are 
driving down cost because you are able to bring competitive 
products to the market.
    On the branded side it is a little bit different. On the 
branded side I think, you know, the likelihood of success while 
you are actually driving innovation is dramatically lower. We 
have heard some statistics that 1 in 100 or so drugs ever makes 
it to market. That is probably in the range. It is a high-
failure, high-risk environment when you are developing any kind 
of new innovation, as we all know.
    Mr. Massie. Thank you. I have got a few questions for Mr. 
Bradway. Mr. Bradway, you talked about the sort of, I don't 
know if you used the word ``convoluted'' but it seems 
convoluted to those of us who aren't in the industry and trying 
to understand the drug pricing schemes and how it involves 
pharmacy benefit managers and rebates.
    Can you tell us roughly what percent of the money that my 
constituents spend on drugs, or the government spends on drugs 
for my constituents, goes to pharmacy benefit managers, Mr. 
Bradway?
    Mr. Bradway. Yes, I can tell you that the intermediaries, 
in general, which include the PBMs, have about 46 cents on 
every dollar in the pharmaceutical industry. So, 46 percent of 
what you see in the U.S. drug industry reflects revenues that 
go to the intermediaries, including the PBMs.
    Mr. Massie. So, that is almost half of the drug price that 
the consumers pay or the government pays goes to an 
intermediary instead of the drug company?
    Mr. Bradway. Or instead of directly to the patient. That is 
correct.
    Mr. Massie. And when my constituents pay their copay on a 
drug, you mentioned that there are rebates that are paid. Do 
the rebates go to my constituents? Who do they go to?
    Mr. Bradway. Thank you for raising this question, 
Congressman. I think this is important for you and your 
constituents to appreciate.
    The copay is a function of list price and the rebates are 
also a function of list price. So, as list price rises, the 
rebates to the intermediaries rise as well. However, the other 
consequence of raising list price is that the patient at the 
pharmacy counter is having to pay a copay of now a higher list 
price, and the discounts that have been given to the 
intermediaries are not provided at the pharmacy counter to the 
patient.
    So, we have wound up with a situation where the 
intermediaries are getting the rebates and not directly 
transferring that benefit to the patients. So, the 
intermediaries are seeing their share of the pie increase while 
asking the patients to reach into their pocket and pay more in 
the form of copay.
    Again, that copay is not collected by the innovative 
industry. That copay is collected by the intermediaries in the 
system.
    Mr. Massie. So the copay, because of the way the pharmacy 
benefit managers work and the other intermediaries, the copay 
that my constituents see, or the check that they have to write 
out, or sometimes they have to borrow the money for that copay, 
that copay isn't based on the actual price that goes to the 
drug company or the final price that the drug company receives 
for that drug. It is not even based on the real price of the 
drug once you count the rebates. It is based on a higher 
effective price. Is that correct?
    Mr. Bradway. That is correct. You are absolutely right. 
Your constituents are paying a copay, again, which is a 
fraction of the list price, and the innovative company is 
receiving what is known as the net price, which is the list 
price minus the rebate returned to the intermediaries. And in 
the United States, the estimate of the rebates is approximately 
$150 million, but as I said earlier, 46 percent is in the hands 
of the intermediaries.
    Mr. Massie. Madam Chairwoman, do I have time for one more 
question? OK.
    So, can you explain to us, Mr. Bradway, what the intent was 
when we came up the pharmacy benefit manager system, what the 
intent was and how it was designed to make drugs more 
accessible or a lower price, and how that mission has possible 
wandered over the years?
    Mr. Bradway. Sure, Congressman. I perhaps might point out 
two things. First, the structure of the rebate system that I am 
referring to is one that was created by legislation that 
enables us to interact with the intermediaries in a way that 
includes paying them rebates in order to secure formulary 
placement for our medicines.
    But, you know, again, I don't want to just point the 
fingers at the PBMs. I think we heard in Mr. Trudeau's 
testimony one of the useful functions that the PBMs have played 
in our system through the years, which is helping convert 
patients to generic drugs when they are available. It is one of 
the reasons that we have 90 percent of the prescriptions 
actually being written for generic drugs.
    I think the question, however, is whether they are playing 
an appropriate role when it comes to innovative, brand-
protected innovations and design formularies that separate 
physician and the patient from one another at the pharmacy 
counter, where patients can't be sure that they are going to be 
able to walk away from the pharmacy with the medicine that 
their doctor intended them to have because of the structure of 
the rebate system that is in place in our industry.
    Mr. Massie. It feels like to me, just in closing, we need 
some kind of truth in pricing here. If people bought cars this 
way and the actual price of the car wasn't what the consumer 
paid, and financing was based on a price that wasn't the real 
price, I think we would be outraged. So, maybe that is 
something we could look into.
    I thank the chairwoman for her indulgence, and I yield 
back.
    Chairwoman Maloney. Thank you. I now recognize 
Representative Norton. Representative Norton, you are now 
recognized.
    Ms. Norton. Thank you very much, Madam Chair. I hope you 
can hear me.
    Chairwoman Maloney. Yes, we can hear you.
    Ms. Norton. I want to thank you for this very important 
hearing. In fact, the subject matter, drug pricing, is so 
important that you have scheduled two days, one after the 
other, on this subject, so we can clear this matter up.
    I want to say to Mr. Bradway, Mr. Trudeau, and Mr. Kendris 
that we very much appreciate your joining us. Your testimony 
has been very helpful. We recognize, though, that you produce 
drugs that are crucial lifelines to patients and to their 
families. And you heard from the two witnesses who opened these 
hearings that far too many families lose access with each price 
increase, and that is before we get to the generic state of a 
drug.
    Mr. Bradway, your company has raised the price of Enbrel 27 
times since 2002. Amgen's profits from Enbrel has grown from 
$1.25 billion in 2003 to more than $5 billion today.
    Now to turn to the other Amgen drug under investigation, 
Sensipar. Since launching the drug in 2004, Amgen has raised 
the price more than 20 times. Amgen's U.S. sales price for 
Sensipar also rose from $36 million in 2004 to $1.4 billion in 
2018.
    Mr. Trudeau, since acquiring Questcor, and, by extension, 
Acthar, in 2014, Mallinckrodt has raised Acthar's already high 
price by more than $8,200 per vial. That is a 26 percent 
increase. From 2014 to 2019, your company generated nearly $6 
billion in net sales of Acthar.
    Mr. Kendris, since launching Gleevec in 2003, your company 
has raised the price 22 times. Due to these price increases, 
your profits have grown from $1 billion in 2009 to more than 
$2.5 billion today.
    Now nearly one in four Americans taking prescription drugs, 
against this backdrop, report difficulty affording their 
medicine. We began the hearing today with testimoneys from 
these two patients, who are on these medications for their 
lives but are struggling to make ends meet. Like many other 
families, they have to make heart-wrenching decisions to afford 
these vital drugs.
    Mr. Bradway, yes or no. Will you commit to lowering the 
list price of Enbrel and Sensipar in the United States?
    Mr. Bradway. Sensipar is now off patent in the United 
States and the price of Sensipar has fallen by some 95 percent. 
And as I said in my opening remarks, we have lowered our net 
prices across our portfolio in the U.S. over the past two 
years, and we are on track to repeat that again in 2020.
    Ms. Norton. Mr. Trudeau, yes or no, and I am afraid Mr. 
Bradway did not give me a yes-or-no answer. Will you commit to 
lowering the list price--and the reason I asked for a yes or no 
because my time up--will you commit to lowering the list price 
of Acthar in the United States? Yes or no.
    Mr. Trudeau. I will commit to lowering the net price of 
Acthar in 2020 down to levels that it was in 2015.
    Ms. Norton. Thank you. Mr. Kendris, yes or no. Will you 
commit to lowering the list price of Gleevec in the United 
States?
    Mr. Kendris. Congresswoman Norton, we have--the product 
went generic five years ago and we have lowered the price by 
giving discounts on the branded product, huge discounts, 40 or 
50 percent discounts.
    Ms. Norton. But I mean the list price. I mean the list 
price, sir.
    Mr. Kendris. Yes, we have given discounts on the list price 
post-generics, and we haven't raised the price. So we have, in 
effect, lowered the price and we are giving away 55 percent of 
what we manufacture now for free to patients who cannot afford 
their medicine. So, we are doing everything we can, 
Congresswoman, to make sure that every patient who needs 
Gleevec can get Gleevec.
    Ms. Norton. Thank you. Madam Chair, the problem is that 
they are not doing everything they can, and that is why this 
hearing is so important. I yield back.
    Chairwoman Maloney. Thank you.
    Mr. Gosar, you are now recognized for questions. Mr. Gosar.
    Mr. Gosar. Thank you, Madam Chairwoman, and I am certainly 
happy that I follow my good friend, Thomas Massie, because he 
set the stage for me perfectly.
    It seems to me that this hearing and yesterday's hearing 
are a little tone-deaf. We have countless states that have shut 
down with businesses crumbling due to the overreactions to 
COVID-19, yet we are here talking about how certain drugs need 
to have government-controlled prices. Yet there are millions 
who are thrust into unemployment because of these harsh 
restrictions. And this hearing isn't even focused on the drugs 
or therapeutics that most people have on their mind--a vaccine 
to COVID-19. But since we are here, I plan to get a little 
substance out of this hearing.
    Today we have CEOs of some of the biggest pharmaceutical 
companies here with us. The way my colleagues on the other side 
of the aisle view prescription drugs and price tags are very 
top line. They see a drug that helps people but since it is not 
cheap, therefore we need the government to negotiate these 
prices. In typical fashion, you identify the problem properly 
but butcher the solution with more government. Ronald Reagan 
once said, ``It isn't the government that is the solution. It 
is part of the problem.''
    As a doctor in a past life, the first step when diagnosing 
an ailment is look to the source and keep it as simple as 
possible. If there is something preventative that can be done 
to stop the problem from reoccurring, why not try?
    Let's put this theory into practice. Why are drug prices so 
high? Many point to PBMs, greedy executives, a flawed patent 
system. Does anyone want to point a finger at the Federal 
Government? I know I do. In any prescription drug chain you 
have health insurers, PBMs, drug makers, pharmaceutical 
wholesalers, pharmacies themselves. What do they all have in 
common? Government influence and control. Right off the bat, 
health insurance companies are exempt from antitrust laws. That 
means they literally do not have to compete.
    Many of my colleagues have been mentioning an infusion of 
competition to help lower prices, but how do you suppose we do 
this when a link in the chain can legally monopolize? I have 
been fighting my entire political career and before that to 
repeal this 75-year-old statute, because you can't even imagine 
a world where health insurers have to compete for your 
businesses instead of leaving most Americans with little to no 
options.
    As for other entities involved in the drug process like 
PBMs, these companies became a main focus of Obamacare and 
actually fueled the creation of new rules by CMS under the 
Obama Administration to come down on PBMs. And how about 
pharmacies and how they must deal with 340B contracts that set 
strict price controls on various drugs? No market force there.
    And what about the drug makers we have here today? I am 
sure they could go on all day about how the government is 
involved in their day-to-day business. Just the FDA regulations 
alone could keep you guys talking for days, but unfortunately I 
only have so much time.
    My colleagues on the other side of the aisle want to point 
to our current system and say that this is the free market. 
Well, if this is the free market and this is competition, it is 
failing America. What we now have is nowhere near a free 
market. It is crony capitalism at best, and it is just the 
excuse my colleague are using to push us closer to socialized 
medicine, where folks like these testifying today will be 
decimated and those created therapeutics for those who need it 
will be lost.
    So, I say to you folks here today with us, join the side 
that is simplifying the prescription drug process. Be for the 
side of free market competition, because soon you may look like 
those drug companies in other countries where your profits are 
kept, your innovation is stifled, and your impact on making 
this world a better place will be completely evaporated.
    Now last--hold your breath--I want to thank the majority 
for taking the first step in passing Congressman DeFazio's and 
my bill, the Competitive Health Care Insurance Reform Act, 
unanimously out of the House last week. This is the first step 
in which we create a solution where it is market driven. Now 
let's get the Senate to pass it, and what we see is patients, 
doctors, and the system all benefiting.
    Thank you very much, Madam Chairwoman, and I yield back.
    Chairwoman Maloney. Thank you very much.
    Representative Clay, you are now recognized for questions.
    Mr. Clay. Thank you so much, Madam Chair. Let me also thank 
you for mentioning our late colleague, Elijah Cummings. We knew 
that this was one of his signature issues and thank you for 
keeping his memory alive and keeping this effort.
    Let me start off by thanking all three witnesses for being 
here, and let me say hello to a former constituent, Mark 
Trudeau, who has headed up Mallinckrodt, which has been a part 
of the St. Louis community for almost 150 years.
    And, Mr. Trudeau, let me start with you. You know, part of 
the concern about Acthar is that it is a pretty old drug with a 
relatively high price and yet you have said Mallinckrodt is 
modernizing it. I think you said you have invested more than 
$600 million in it. Tell us why it is important to modernize 
this drug, and aren't there other, more modern therapies that 
can take the place of Acthar?
    Mr. Trudeau. Thank you for the question, Congressman Clay, 
and good to see you as well.
    So, like many opportunities, there are old drugs that have 
been repurposed for new indications and new purposes, for 
example, looking at some of the antivirals that are being 
developed to treat COVID-19, for example. In the case of 
Acthar, we believe that it is quite important to create new 
information, new evidence, things that have led actually to 
changing our label to provide patients and prescribers, as well 
as those responsible for reimbursement, the appropriate 
scientific-based information to make good economic and clinical 
decisions for their patients.
    We are most focused on doing the best that we can for 
patients that are suffering from severe and critical illnesses 
who have relatively few options, and Acthar can make a 
difference in the lives of those patients.
    Mr. Clay. And, you know, I believe in the importance of 
medical innovation, and you have indicated that R&D is a major 
focus of your company and imply that Acthar is funding part of 
that R&D. How much does Mallinckrodt invest in R&D annually, 
and does your pipeline offer any promising options for 
patients?
    Mr. Trudeau. We invest approximately $350 million a year in 
research and development, which is a large number for a company 
of our size. We believe that our pipeline is very promising and 
we have specifically focused on these underserved patients with 
severe and critical conditions that have relatively few 
options. So, we are developing two products for patients with 
severe liver disease, a product for adolescents and children 
that have a high mortality rate, called Niemann-Pick Type C. We 
are also developing a novel biotherapy to treat burns, severe 
burns, to reduce the need for autografting. So, our pipeline is 
really focused on driving innovation for these particular 
underserved patients.
    Mr. Clay. So, in my home state of Missouri COVID-19 has 
been a major concern. It is my view that during a national 
public health crisis like we are facing today pharmaceutical 
and health care companies should be focused on finding 
solutions.
    Perhaps all three witnesses can tell us what your companies 
are doing in response to this national pandemic. Mr. Bradway, 
we can start with you.
    Mr. Bradway. Thank you. We are very active in addressing 
the pandemic. I share your belief that all of the innovative 
biopharmaceutical industry needs to be working together, to 
find ways to develop vaccines, to develop therapies that can 
help prevent the infection from becoming serious, can help 
develop therapies to prevent the immune overreaction, which we 
see for many who are infected with the virus, and to be finding 
other ways to try to diminish the burden of this disease on our 
society.
    But I am impressed by the speed and scale of the efforts 
underway, both at our company and across the industry, and I am 
optimistic that we will have solutions.
    Mr. Clay. Thank you. Madam Chair, can the other witnesses 
respond, or has my time expired?
    Chairwoman Maloney. Time has expired but the witnesses may 
respond.
    Mr. Clay. Thank you.
    Mr. Trudeau. Madam Chairwoman, I am happy to comment on 
that. We agree with the Congressman that it is very important 
that we do everything that we can to combat this challenging 
health crisis that we have created by COVID-19. We have done at 
least four things. One is that we have invested and partnered 
on clinical trials around one of our innovative therapies 
called INOmax, that can potentially help with patients that are 
ventilated as a result of COVID-19. It is being used at 
physician discretion today as an experimental therapy in over 
250 hospitals.
    We have donated PPE, ventilators, hand sanitizer around the 
country, and we have also made available some of our health 
care professionals, at company cost, to be treating patients on 
the front line. We believe it is that important to do 
everything that we can to combat this challenge.
    Chairwoman Maloney. Thank you. Mr. Palmer, you are now 
recognized for questions.
    Mr. Palmer. Thank you, Madam Chairman. I would like to 
start off by saying that obviously we are all interested in 
lowering drug prices, but at the same time we don't want to 
overreach and implement policies that stifle research and 
innovation that has literally brought us lifesaving miracle 
drugs. In fact, we want to encourage the discovery of new 
drugs, but at the same time, you know, discovering these new 
drugs doesn't do a lot of good if people who need the drugs 
can't afford them.
    So, I want to followup on Mr. Massie's points on patents, 
and I brought this up yesterday. I support extending the length 
of patents if an extension will lower drug prices. And what I 
would like to know from each of you, and if you can answer 
concisely so that I can get in a couple of other things I would 
appreciate it, would extending the patent protections reduce 
drug prices? And we will start with Mr. Trudeau.
    Mr. Trudeau. I believe that anything that we can do to 
incent innovation, and extending patent life could be one of 
those things, is likely to give the health care system an 
opportunity to get drugs to patients more efficiently and more 
effectively and potentially at lower prices.
    Mr. Palmer. And Mr. Kendris and Mr. Bradway, if you agree 
with that, or do you have anything to add to that? I want to 
ask a couple of other questions.
    Mr. Bradway. I think innovative biopharmaceuticals are an 
important way to control health care costs. We advocate for 
maintaining the 12 years of data exclusivity, in particular, 
for biologic drugs. So, we think that is an appropriate 
standard, and we see innovation as a way to bring down health 
care costs overall in the United States.
    Mr. Palmer. OK.
    Mr. Kendris. Congressman Palmer, I would agree with what 
the other two witnesses just said and would say that patents 
are essential to incentivize innovative companies to invest in 
high-risk research. And the patent system as it stands right 
now does that, and we support it.
    Mr. Palmer. See, the reason, I think Mr. Massie and I both 
are asking these questions is because it should be obvious to 
everyone that a drug company needs to be able to recover their 
cost. My understanding of the private drug research industry is 
that it has led the way in the development of some incredible 
drugs, but there are also a number of drugs that never made it 
to market. And you have to deal with that stranded cost that 
goes into your decisions on pricing of other drugs.
    So, my question would be what would happen if the 
development of drugs--to the development of these life-
changing, lifesaving drugs, if companies couldn't recover their 
cost? That should be a fairly simple question to answer. Mr. 
Trudeau?
    Mr. Trudeau. Again, I believe my colleagues have agreed 
with this as well. Incentives are important if you are 
undertaking innovation, which inherently has risk. So, any 
additional incentives that can be provided to, you know, 
provide the potential to reduce that risk or increase the 
reward certainly are likely to lead to even more innovation, 
more inventions, and in the case of drugs, probably more 
potential cures or treatments down the line.
    Mr. Palmer. If you guys have some ideas on incentives, 
whether it is write-offs for losses or other incentives that 
the government could provide, I would like for you to provide 
that to me and to this committee in writing.
    But I do want to go back to something else that was 
discussed earlier, and that is the issue of rebates. Some of 
the information that I have gathered over the years--and this 
is not the first time I have looked at this; I started looking 
at this my first term in Congress--seems that there is some 
substantial abuse in the rebates and how this is handled. That 
might be an example of something that the Federal Government 
thought was a good idea at the time that is not working out 
quite so well.
    That said, I would appreciate getting some feedback from 
each of you on incentives that you think would help the 
companies bring these prices down yet not compromise, in any 
way, the ability of companies to develop these drugs that, like 
I say, are not only lifesaving but life-improving.
    Madam Chairman, I yield back.
    Chairwoman Maloney. Thank you. I now recognize Mr. Rouda. 
You are now recognized for questions.
    Mr. Rouda. Thank you, Madam Chairwoman. First, I would like 
to recognize the critical importance of the drugs that all of 
your companies manufacture----
    [Pause.]
    Mr. Rouda. I apologize. The mic was not on.
    Thank you, Madam Chairwoman. First, I would like to 
recognize the critical importance of the drugs that all of your 
companies manufacture to the health and well-being of many 
Americans. The essential nature of the prescription drugs and 
treatments you manufacture make it all the more vital for us to 
ensure their continued availability and affordability for all.
    Mr. Trudeau, Mallinckrodt drug Acthar has proven effective 
and received FDA approval for numerous conditions that you 
outlined in your opening testimony. Acthar was first approved 
by the FDA in 1952, and it was actually priced at below $100 
for 50 years. However, over the past two decades we have seen 
an astronomical price increase at the expense of American 
patients and taxpayers.
    In 2001, Questcor, now a subsidiary of Mallinckrodt, 
acquired the rights to Acthar for $100,000, when the price per 
vial was still at or below $100--a vial, just like this, for 
$100, just 20 years ago. Almost immediately, the price of the 
drug started to increase, and then, in August 2007, the price 
skyrocketed from $1,600 a vial to $23,000 per vial, literally 
overnight. When Mallinckrodt acquired Questcor in 2014 for $5.6 
billion, the price of a vial already exceed $30,000.
    So, today that same vial, from 50 years ago, that cost only 
$100, now costs $39,000, a 40,000 percent increase. Let me 
repeat, a 40,000 percent increase from this to this, in a 
matter of two decades. It is clear, American taxpayers are 
increasingly footing the bill for this drug.
    While the number of Medicare Part D beneficiaries receiving 
Acthar increased by around 25 percent from 2013 to 2018, the 
cost to the Federal Government nearly tripled over that same 
time.
    Mr. Trudeau, do you know how much your company has 
collected from Medicare Part D in recent years?
    Mr. Trudeau. I don't know the exact amount. Certainly, it 
has been many millions of dollars.
    Mr. Rouda. It has. It has actually been approximately $2.5 
billion between 2015 and 2018.
    Mr. Trudeau, when Mallinckrodt acquired Acthar, how much of 
Acthar sales came from Medicare?
    Mr. Trudeau. At the time of acquisition, the Medicare sales 
were approximately 25 to 30 percent.
    Mr. Rouda. That is correct, and that number has grown 
quickly. Do you know what percent is Medicare sales now?
    Mr. Trudeau. I do. It is approximately 55 percent.
    Mr. Rouda. That is what the committee's information shows 
as well. We have gone from 25 percent to actually more than 60 
percent of Mallinckrodt's net sales are from Acthar.
    So, not only is Medicare your largest purchaser but 
internal data obtained by the committee shows that you also 
charge Medicare more than any other payer. Medicare's average 
net price, per vial, right here, is more than $4,300 more than 
what commercial payers pay. Do you know how much the Federal 
Government would have saved if Medicare had received the same 
discount--the same discount--as commercial payers between 2015 
and 2018?
    Mr. Trudeau. I don't know the exact amount, but the number 
would have been significant. In fact, Acthar is not on Medicare 
formularies, which actually prevents access to Medicare 
patients who could actually benefit from the drug. We would be 
very happy to consider similar discounts in Medicare if we had 
formulary positions and could get the same access that we get 
with commercial payers.
    Mr. Rouda. That would be helpful, and I am sure the 
American taxpayer would like to see it since the committee's 
estimate is that it would save American taxpayers $150 million 
a year.
    Unfortunately, Mallinckrodt's 2013 tax inversion to Ireland 
has also burned American taxpayers. Is it safe to say you moved 
your headquarters over there to dodge corporate taxes here in 
the United States by having a lower corporate tax rate in 
Ireland?
    Mr. Trudeau. No. That is, in fact, completely untrue. We 
spun out from a parent company that was Irish, and so this spun 
company, Mallinckrodt, became Irish as well.
    Mr. Rouda. Madam Speaker, I see that my time has expired so 
I shall yield back.
    Chairwoman Maloney. Thank you very, very much for your 
questions.
    Mr. Cloud, you are now recognized for questions. Mr. Cloud.
    Mr. Cloud. Thank you, Chairwoman. It seems to me that 
oftentimes in Congress we go about trying to fix a problem 
before really stopping to ask what is broken about it. And, you 
know, we are talking about drug pricing, which we all agree we 
want to fix. It is definitely out of control. But I think it is 
important we stop to ask what brings costs down in an economy, 
and that is competition and customer accountability through 
price transparency.
    Yesterday I had a chart up here that showed just how 
complicated that pricing system is, which makes it extremely 
hard for a customer to hold the manufacturers accountable or 
the system accountable when it comes to price transparency. In 
any other industry that is really how it work. You have a 
manufacturer that produces a product, the customer is able to 
look at pricing and market keeps prices low.
    Now to foster innovation we have a U.S. patent system, of 
course, that protects research, incentivizes new cures. It has 
led to the U.S. being the undisputed leader in innovation, and 
to that extent the system is working. But what is broken is the 
customer accountability aspect and the price transparency that 
keeps prices in check.
    Even if you think about the American people, they think 
that they go to their doctor, the doctor prescribes the best 
medicine, but that is not really what is happening, Mr. 
Bradway, is it? You talked about PBMs and what you are having 
to do to compete. Can you speak to that?
    Mr. Bradway. Well, yes, so the physician hopefully is 
prescribing the most appropriate medicine for the patient. The 
challenge is, at that moment the physician and the patient may 
not know whether they are actually going to be able to walk 
away from the pharmacy counter with their medicine in hand or 
whether their insurance company is going to try to direct them 
to select something else.
    Mr. Cloud. Right. Manufacturers, basically, you have to pay 
rebates, or some would call it kickbacks even, to get a higher 
placing on the formulary, right?
    Mr. Bradway. Correct. The structure that you have created 
for our industry involves us paying a rebate to the 
intermediaries in order to secure, amongst other things, 
formulary placement.
    Mr. Cloud. So, that is one mechanism in which the market is 
being manipulated, in a sense, breaking that customer 
accountability mechanism.
    Americans also understand, you know, that companies do need 
to make a profit to exist and to create new cures. I don't 
think Americans have a problem with that. We understand that 
the profits today lead to new cures tomorrow. What they do have 
a problem with is abuse of the patent system, namely product 
hopping, adding on patents to extend introduction of generics, 
patent evergreening, you know, small changes to dosages and 
such that have little change but you gain an extension to your 
patent, and then pay for delay. And these are issues, I think, 
that manufacturers do have to take seriously.
    Now while I wish we had PBMs and pharmacies here--and I 
would encourage the chair and the committee to consider that if 
we are going to have a real discussion on pricing--we need to 
have all the players here, because the system is complex and it 
is broken in a number of different areas.
    But my understanding is that Amgen has--you talked about 
Sensipar and you mentioned that the patent is--time has expired 
on that. Are you saying that generics are now available?
    Mr. Bradway. Yes. That is correct. Generics now supply 
approximately 95 percent of the market, and the product 
transacts at about 95 percent less than what was prevailing 
before patent expiration.
    Mr. Cloud. OK. Now we had Teva here yesterday, and my 
understanding is that you had an agreement with them, Amgen 
did, to keep Sensipar--them from producing generics for 
Sensipar for a couple of years. Is that correct?
    Mr. Bradway. No, that is incorrect. We sued Teva for 
infringing on our intellectual property, and they ended up 
settling with us after having launched at risk, settling with 
us for having, again, launched against the uncertainty of their 
patent position.
    Mr. Cloud. OK. But the timing, I guess, is interesting, 
that that lawsuit was dropped at the same time you all ended up 
purchasing some of their properties, I guess.
    The thing that I think is important to note here is that we 
have a couple of bills that we are looking at. One is H.R. 19, 
which actually goes to address these different issues, where 
the system is broken, versus H.R. 3, which is a takeover of the 
system. And, you know, as we look at this I think it is 
important for us to keep in mind, let's not throw out the 
system that has brought the best innovation and has led to new 
cures that have helped so many people here and around the 
world. And I would really caution against a government takeover 
that H.R. 3 subscribes. Thank you.
    Chairwoman Maloney. Representative Welch, you are now 
recognized for questions.
    Mr. Welch. Thank you very much. Mr. Palmer said it well, 
that these drugs are a tremendous health benefit, extending 
lives and alleviating pain, but if we can't afford it, it does 
no one any good. And the question here is about the pricing 
practices of big pharma and how that is putting the cost of 
health care out of reach for individuals, for taxpayers, and 
for employers who are trying to provide health care for their 
employees.
    I want to ask Mr. Bradway about the pricing strategy for a 
few of his drugs. What I understand, Mr. Bradway, Enbrel was 
originally approved by the FDA in 1998 for rheumatoid 
arthritis, and Amgen acquired the rights to sell Enbrel in 
2002. Is that correct?
    Mr. Bradway. That is correct.
    Mr. Welch. So, you bought a product--your company bought a 
product. It didn't create a product. Correct?
    Mr. Bradway. Correct. We bought a product that was in short 
supply, a product for which there were tens of thousands of 
patients on a wait list, seeking therapy, and then----
    Mr. Welch. I get it. Fair and square, you bought the 
product. You didn't invent it. Correct?
    Mr. Bradway. That is correct.
    Mr. Welch. And then you marketed it, and you produced it, 
and you raised the price of it. Correct?
    Mr. Bradway. Yes, but I was trying to explain one of the 
important things that we did was invest in process improvements 
that enabled us to move literally tens of thousands of patients 
off the waiting list and be able----
    Mr. Welch. Well, I am going to the price, because the 
question here is not the legitimacy of what you did. It is 
legal to buy the product. You didn't invent it. One of the 
arguments that pharma makes is it costs so much to ``invent.'' 
Well that didn't happen. What you did is you saw a market and 
you responded to it and you produced it.
    But my understanding is that you have raised the price by 
450 percent, to $5,500 for a monthly supply. It is about 
$70,000 a year. Is that correct?
    Mr. Bradway. Yes, that sounds correct.
    Mr. Welch. All right. And in Canada that is $1,800 as 
opposed to $5,500. Is that true?
    Mr. Bradway. That sounds correct.
    Mr. Welch. OK. Here is the question. Why can't people that 
are Americans get it for $1,800?
    Mr. Bradway. There are a couple of things to observe. 
First, many of the medicines that are approved, the innovative 
medicines like Enbrel that are approved in the United States 
are not available in markets like Canada.
    Mr. Welch. Let's--let's--you know, we are throwing this 
word ``innovative'' around. This product was invented in 1998. 
I mean, this is not new. This is decades old. So, my question 
is why can't an American get the Canadian price?
    Mr. Bradway. Yes. This is a product that we have continued 
to invest in. The product that patients use today is not the 
product that it was in 1998.
    Mr. Welch. So, a Canadian can buy this for $1,800, but you 
won't give the benefit of that price to the United States of 
America and our citizens.
    Mr. Bradway. The product that you see today is not the 
product that it was in 1998.
    Mr. Welch. Let me ask you this. There is a lot of evidence 
in the record now that when your company, and other 
pharmaceutical companies, are making the decision on pricing, 
they have to meet revenue targets. You have got shareholders to 
take care of and you have got executive compensation to be 
mindful of. Correct?
    Mr. Bradway. I don't think of it in that way, no.
    Mr. Welch. You don't think of it but you get the benefit of 
it.
    Mr. Bradway. When we look at the pricing of----
    Mr. Welch. I mean, there are payouts of $100 million to 
executives, and it is really heartbreaking for a lot of folks 
who can't figure out how in the world they are going to get the 
medication for a person in their family that they love.
    Let me ask you this. What is the problem of a company that 
is selling a product in bulk to a buyer, having a discussion 
with that buyer about a bulk price discount? Do you have some 
philosophical objection to that?
    Mr. Bradway. Congressman, that is what happens every day in 
our interaction----
    Mr. Welch. Except with Medicare. It is illegal. It is 
illegal.
    Mr. Bradway. No, it is not----
    Mr. Welch. All right. Would you be agreeable to having a 
discussion with a bulk buyer, who happens to be Medicare, about 
a fair price when they make bulk purchases on behalf of U.S. 
citizens who are on Medicare?
    Mr. Bradway. Congressman, if I may explain, we interact 
every day with----
    Mr. Welch. Well, that is a yes or no. No, that is a yes or 
no. You have got a big buyer, Medicare, and I am asking if you 
are willing to negotiate with them about a bulk price discount.
    Mr. Bradway. The Medicare beneficiaries are represented by 
the insurance plans and the PBMs, with whom we negotiate every 
day for the inclusion of our products on the----
    Mr. Welch. So, that is a no to negotiating with Medicare 
directly.
    Mr. Bradway. Well, Congressman, what I am trying to explain 
is what is happening already today. We do think there are some 
areas for improvement in Medicare, in particular, in Medicare 
Part D, and we have been advocating for a number of those----
    Mr. Welch. I am only asking about negotiating with the 
Medicare program. That is it. Yes or no?
    Mr. Bradway. Yes, I am just trying to make sure, 
Congressman, that you and your constituents appreciate that 
that is already happening today. It is happening through the 
negotiations----
    Mr. Welch. So, why don't we change the law and make it 
legal to do that?
    Mr. Bradway [continuing]. That we are having with your 
intermediaries. So, those discussions are already taking place 
today.
    Mr. Welch. I am asking about a law that makes it legal. 
Right now there is a law that makes it illegal, right? It is 
bizarre that a bulk purchase can't have a discussion and 
negotiate a bulk price discount. That is the law. Do you think 
that is a fair law?
    Mr. Bradway. I don't know that I would agree with your 
construction of the question, Congressman. What I am saying is 
that we have a highly concentrated set of intermediaries in the 
United States health care system, the health care insurance 
companies and the pharmacy benefit manufacturers, and they are 
negotiating for the benefit of Medicare today, or across the 
landscape. Are there improvements that could be made? 
Absolutely. Do we advocate----
    Mr. Welch. Madam Chair, my time has expired, and I yield 
back.
    Chairwoman Maloney. Thank you. Mr. Gibbs, you are now 
recognized for questions.
    OK, we can hear you.
    Mr. Gibbs. Thank you, Madam Chair. First of all, I want to 
thank you for this hearing. I also want to make clear, I know 
Mr. Palmer and others talked about, you know, we want to make 
sure, we want to thank the drug companies for what they do, 
producing these therapeutics and everything, curing cancer and 
making quality of life better, so we should never forget that.
    But I do--you know, listening to all the discussion here 
about the pricing, it is enough to make your head spin. I 
guess, Mr. Kendris, you said that Gleevec is also used for six 
new cancers, OK. Now, has that price come down? I think it 
hasn't come down, has it? What is the status of that, Mr. 
Kendris?
    Mr. Kendris. No, Congressman. We did raise the price over 
the years.
    Mr. Gibbs. Yes, OK. Well, what I am trying to understand, 
in other sectors of our economy, when you have more 
utilization, and obviously you have more utilization of the 
product because you say it is now cleared by FDA to use in six 
types of cancer, so you have more utilization of the product, 
why does the product go up? Is it because it is the formulary 
process that we are having so much discussion and all the 
intermediaries and the complexity of this drug pricing and how 
it is broken? I mean, the price should come down.
    Mr. Kendris. I think the answer to your question, 
Congressman, is that the value of Gleevec went up over those 
years, for a variety of reasons, including the patients 
survived longer, lived longer, it became a chronic disease 
instead of a fatal disease, and more patients were able to 
benefit because we got more indications from the FDA approved 
over those years.
    Mr. Gibbs. I get that. So, more patients are buying it. You 
know, it is being utilized more. But that ought to drive the 
price down, because you can put your fixed costs over more 
customer base. In any other business, in any other industry 
that is how that works. If you are selling a product and you 
can sell more of that product to a bigger customer base, that 
drives down the cost because your fixed costs are more over the 
customer base. Do you see what I am trying to say? Does that 
make sense? But apparently it doesn't work that way with drugs.
    Mr. Kendris. Congressman, in this case--I understand what 
you are saying, but in this case, for these rare cancers, the 
commercial opportunity is actually quite small. The patient 
populations are very small----
    Mr. Gibbs. Let me ask the question----
    Mr. Kendris [continuing]. But the research and development 
commitment is high.
    Mr. Gibbs. That makes sense. That is the first comment I 
have heard today that makes some sense. You did say 65 percent 
of that drug, you give it away. Is that true?
    Mr. Kendris. Today, 55 percent is given away for free, post 
generic approval, since 2016.
    Mr. Gibbs. And I know Mr. Bradway said the same thing about 
Repatha, 60 percent discounts. So, there are a lot of things 
going on there. The drug companies are doing their best to help 
people that need the drug to get the drugs. So, I am kind of 
assuming--does anybody go without these drugs that need it, 
that they are getting it even if they can't afford to pay for 
it?
    Mr. Kendris. We are doing everything we can. When we 
receive a patient complaint, we investigate each and every one, 
and we have a variety of ways of trying to ensure that that 
patient will get access to the product that they need.
    Mr. Gibbs. And then, you know, the other area I think I see 
where the structure is broken is when you talk about 46 percent 
of a cost is going to the intermediaries, PBMs, and that seems 
like a problem. And I think it was you who made the comment, or 
one of the witnesses talked about the generics, and you go to 
the drugstore, the patient, to make sure they get the right 
generic, and the intermediary is doing that with the health 
insurer and everything. I always thought that is where the 
pharmacist fits in. The pharmacist, what role do they have now? 
Are they getting kind of pushed out by the intermediaries, or 
how does that function?
    Mr. Kendris. Well, certainly the pharmacist at the 
drugstore is not responsible for the fact that the discounts 
that the manufacturers are giving to middlemen and 
intermediaries are not being passed on to the patient. That is 
not the responsibility of the pharmacist.
    Mr. Gibbs. No, I understand that. But the pharmacist, if 
they say you can get another drug, a generic alternative, you 
know, and you are negotiating with the intermediaries, the 
PBMs, where does the pharmacist fit into that discussion, that 
the patient does get to make sure that the patient does get the 
right drug if there is a generic equivalent?
    Mr. Kendris. I think the negotiation that you are referring 
to does not include the pharmacist in that case. Negotiating 
with the intermediary, with the middlemen, a contract, and that 
is how we sell it to the middlemen.
    Mr. Gibbs. I am out of time, but I just want to followup on 
that. Do you think we should be looking into the role of the 
intermediaries and how it affects the patient and the doctor 
and the pharmacist, making sure they get the right drug, the 
right generic drug, a generic alternative, and----
    Chairwoman Maloney. The gentleman's time has expired, but 
the witness may answer the question.
    Mr. Kendris. I do, Congressman. I think that we should do 
everything we can to make sure that the discounts are passed 
along to the patient.
    Mr. Gibbs. Thank you. Thank you, Madam Chair.
    Chairwoman Maloney. Mr. Sarbanes, you are now recognized.
    Mr. Sarbanes. Thank you, Madam Chair. Can you hear me OK?
    Chairwoman Maloney. Yes, we can.
    Mr. Sarbanes. I appreciate the hearing, as a continuation 
of yesterday, and I want to thank the witnesses for being here.
    I have heard a lot of you say that, you know, things are 
off patent now, the pricing over the last two years has gone 
down, et cetera. That doesn't excuse the price gouging that 
happens when things are still under patent, you have the 
exclusivity, and so forth. And I just don't buy that these 
price declines were part of your business plan. I think it is a 
response to the scrutiny that you are under, so it is nice to 
talk about that and kind of dance around the essence of the 
price gouging that has been going on for years and years.
    But I don't trust the industry to do the right thing when 
we are not looking at you with these klieg lights, and so we 
need to put more guardrails in place, and this hearing is about 
that. This is why Elijah Cummings started this inquiry 
originally, and we are going to keep following through. And 
there is going to have to be major restricting of how the 
industry operates going forward. I know you are trying to duck 
and cover here, but you better anticipate that that is coming, 
because the American public is fit to be tied about the high 
prices of prescription drugs.
    Mr. Bradway, I want to talk about Medicare Part D. That is 
45 million seniors that are served by that program, and we are 
all contributing as taxpayers to the strength of the Medicare 
program. Your company has collected more than $7 billion in 
gross sales from selling Enbrel to Medicare Part D between 2013 
and 2018. Is that correct?
    Mr. Bradway. Those numbers sound right.
    Mr. Sarbanes. OK. And in the same timeframe you collected, 
or Amgen collected about $4 billion from selling Sensipar to 
Medicare Part D beneficiaries. So, it is an understatement that 
Amgen gets a lot of business from the Medicare program.
    Does Amgen offer Medicare Part D comparable discounts to 
other--to the discounts that you give to other government 
purchasers?
    Mr. Bradway. For example, the Medicaid prices that we offer 
are lower than Medicare, as you know, because it is statutorily 
designed to be lower than the Medicare Part D program. So, it 
is not the case that all of our government----
    Mr. Sarbanes. What about the veterans? What about Veterans 
Health Administration?
    Mr. Bradway. The veterans' health program is also different 
from the Medicare Part D program. It includes both statutory 
price allowances as well as formulary restrictions, which are 
not part of Medicare Part D, as you are aware.
    Mr. Sarbanes. Well, I think Amgen's discounts to the 
Veterans Health Administration are about twice what Medicare is 
currently receiving. But let's face it, that is because the VA 
is allowed to negotiate drug prices with the industry and 
Medicare Part D doesn't get those same opportunities, because 
we don't have that ability to negotiate. We proposed a bill 
last December, House Democrats did. This is common-sense 
legislation that would allow Medicare to negotiate directly 
with drug manufacturers for lower prices, just like the VA and 
the Department of Defense are able to do.
    I am not going to ask you for your position on whether we 
should be negotiating. I think I can guess what it is. But it 
seems to me that if your industry--again, to get back to the 
broader sort of macro picture here--your industry has figured 
out a way to do business with governments overseas that 
negotiate and are much more aggressive on behalf of their 
consumers and their taxpayers in dealing with the industry, and 
your industry has found a way to be able to manage a 
relationship and conduct your affairs even though you are 
giving a better pricing to the VA and DoD because you are 
having to negotiate there.
    So, you will figure out a way, I am confident, to survive 
as an industry, to make reasonable profits, even if we move 
forward and put negotiation in place with respect to the 
Medicare program, which is all we are trying to do. And Mitch 
McConnell and the Senate Republicans have stood in the way of 
this. They have blocked the door to better opportunity for 
consumers and patients for years now, but we are not giving up. 
We are going to keep the heat on, we are going to keep pushing, 
and we are going to do it because every day we have 
constituents coming up to us, scratching their head, looking at 
us in disbelief, and saying, ``Why is it, in a free market 
economy, in the United States of America, you can't negotiate 
on behalf of 45 million Medicare beneficiaries for better drug 
prices?'' We are going to keep pushing on that because it is 
the only thing that makes sense.
    And with that I will yield back, Madam Chair.
    Chairwoman Maloney. Thank you. The gentleman's time has 
expired.
    Mr. Higgins, you are now recognized.
    Mr. Higgins. Thank you, Madam Chair, and I appreciate the 
continuation of this hearing from yesterday. This is incredibly 
important subject matter. And I am finding that the arguments 
from both sides of the aisle are quite similar.
    Mr. Bradway, I am going to address my questions to you, 
sir. Respectfully, I understand businesses across the United 
States have costs associated with opening their doors to the 
public, and in order to stay in business you have be able to 
cover those costs. We know that high costs associated with 
developing new drugs and
    [Inaudible.] Please clarify for us...
    [Inaudible.] ...Recoup development costs, and what would be 
the result of...
    [Inaudible.]
    [Pause.]
    Chairwoman Maloney. We have a technical problem here right 
now. We are going to try to fix it.
    [Pause.]
    Mr. Higgins [continuing]. This time.
    Chairwoman Maloney. There. He is back. Mr. Higgins. We lost 
you for a while. OK.
    Mr. Higgins. Yes, ma'am. I have no receiving signal at this 
time. If we are back on, I don't know if my question was 
received by Mr. Bradway.
    Mr. Bradway. I am afraid I didn't hear the full question, 
so if you wouldn't mind repeating it then I will do my best to 
answer it for you.
    Mr. Higgins. Yes. Basically, sir, let me just quantify 
quickly, in the interest of time. I have a couple of hard 
questions for you, so I am going to begin with a soft one. We 
recognize it costs a lot of money to develop a new drug. We get 
that. We understand the basic business principles are recouping 
initial investment cost. What is the importance of maintaining 
that formula, and what would happen to the development of new 
drugs if there were legislative action out of Congress that 
would restrict research and development of new pharmaceuticals 
and restrict companies investing in that research from 
recouping their initial costs? What would happen to the 
development of new pharmaceuticals?
    Mr. Bradway. I don't think we would see innovative new 
drugs being developed for diseases like Alzheimer's or the many 
forms of cancers that remain not cured today, or autoimmune 
disorders.
    Mr. Higgins. OK.
    Mr. Bradway. And if I may, Congressman----
    Mr. Higgins. I want you to know, we all get that. We 
understand. We understand that there are legitimate expenses 
for the development of new 21st century, high-tech, very 
effective pharmaceuticals. We understand that there are 
investments in many formulas that never make it to market, and 
that becomes part of the expense that needs to be recouped. We 
get that. On both sides of the aisle I am hearing the same 
argument.
    But I must say that I concur with many of my colleagues 
across the aisle here. I do not understand, my constituents do 
not get it, why the same formula drugs, from the same 
manufacturer, across the border in Canada, can be two, three 
times less than it is here in the United States.
    My wife has M.S. The pharmaceuticals are a constant 
challenge. She receives a therapy that is equivalent to like 
chemotherapy for M.S. every six months, and every six months we 
have the same battle with the insurance companies due to 
restrictions from the pharmaceutical companies.
    My constituents don't understand. I don't understand. We 
expect to fix it, and we are going to fix it out of Congress. 
There is a bill in the Senate right now, Madam Chair, that if 
it would be introduced in the House, if it passed in the 
Senate, it would pass in the Senate, it would be introduced in 
the House, it could be law in a couple of weeks. We could 
really move forward to fix this thing.
    But I would like the gentleman to answer, just one more 
time, why are pharmaceuticals so much less in Canada than they 
are in the United States? Because I don't get it, and my 
constituents don't get it either. I give you the floor, good 
sir. You have a minute and five seconds. Explain the variance 
of prices between Canada and the United States.
    Mr. Bradway. I share your frustration and empathize with 
those who are struggling to understand the difference between 
the two systems.
    As I said previously, in the United States 46 cents of 
every dollar are in the hands of intermediaries in the 
pharmaceutical supply chain, not in the hands of the innovative 
companies. In Canada that is not the case. Canada does not have 
46 cents of every dollar----
    Mr. Higgins. But does your company not get to spend the 
Canadian earnings?
    Mr. Bradway. I am trying to----
    Mr. Higgins. You don't get to keep that money?
    Mr. Bradway. No, of course we do. I am just trying to----
    Mr. Higgins. OK. So, let's stop talking about the 
difference of expenses in the United States versus Canada, 
because you have a worldwide market. Do you have a board of 
directors for the United States and then one for Canada, two 
different companies?
    Mr. Bradway. No. Certainly not.
    Mr. Higgins. Thank you. So, your profits are your profits. 
Your expenses are your expenses. Why do the drugs cost so much 
less in Canada than here?
    Madam Chair, my time has expired but I would like the 
gentleman to answer the question.
    Mr. Bradway. Again, I would point out----
    Chairwoman Maloney. The gentleman may answer the question.
    Mr. Bradway. Thank you, Madam Chairwoman. I would point out 
that in the United States many innovative drugs are available 
which are not available in Canada. If you look at drugs 
approved in the United States over the last decade----
    Chairwoman Maloney. Excuse me. That was not the question. 
The question from the gentleman was why does it cost two or 
three times, or upwards, four or five or six times more in the 
United States, where we produce the drug, why does it cost so 
much less in Canada, and I would say in Europe too? As I said 
earlier, we pay more for drugs in America than the entire 
world, combined.
    So, that is his question. What is the answer?
    Mr. Bradway. Thank you, Madam Chairwoman. The answer is 
that countries like Canada are prepared to ration and restrict 
the access to innovative new medicines in exchange for offering 
lower prices to the ones that they choose to grant access to.
    Chairwoman Maloney. Well, I respectfully disagree. The 
answer to that question is to allow Medicare to negotiate 
directly for drug prices with the drug companies, as they do in 
Canada and in Europe, and they are not allowed to do it in the 
United States. And that is one of the things many of us would 
like to do, to lower the price for the people that we work for.
    I would like now to go to Wasserman Schultz. Congresswoman 
Schultz, you are now recognized.
    Ms. Wasserman Schultz. Thank you, Madam Chair. I want to 
pick up where I left off yesterday and ask about another 
nefarious tactic that drug companies use to maintain market 
exclusivity and sky-high prices.
    This committee's investigation shines a spotlight on the 
ways that drug companies use litigation as a key part of their 
strategic plans to delay generic entry. Like yesterday, I again 
want to focus on how prices were inflated for lifesaving 
medication used to treat cancer.
    Mr. Kendris, yes or no. Novartis engaged in patent 
litigation with the first manufacturer to apply to make a 
generic version of Gleevec. Correct?
    Mr. Kendris. Yes, we did.
    Ms. Wasserman Schultz. OK. Some pharmaceuticals challenge 
the legitimacy of Novartis' patents, but rather than litigate, 
Novartis struck a deal with Sun, known as ``pay for delay.'' 
Under the settlement, Sun agreed to delay generic entry into 
the U.S. for six months. Novartis made $1.3 billion in U.S. net 
revenue from Gleevec sales during that six-month delay.
    As the first generic manufacturer, Sun Pharma was entitled 
to 180 days of exclusivity, meaning no other generics could 
enter the market during that period. Although Sun Pharma 
initially announced it would price its generic 30 percent below 
the price of Gleevec, it ultimately entered the market just 6.4 
percent lower than the cost of Gleevec. In an internal email, 
Novartis executives hailed this high price as, quote, ``good 
news.''
    Mr. Kendris, do you think delaying generic entry was indeed 
good news for patients?
    Mr. Kendris. Congresswoman, when we settled that case we 
actually accelerated the introduction of a generic Sun product 
into the U.S. If we had litigated and further litigated, that 
litigation could have gone through the length of the patent, 
which would have been another three years. So, our settlement 
actually meant that the Sun product was on the market faster, 
actually two and a half years, I believe, faster than it would 
have been had we done what you are saying other companies do, 
and I understand that happens. But in our case, we did not get 
paid for delay and there was no litigation that went on for 
years to delay the generic onto the market. It was actually 
accelerated.
    Ms. Wasserman Schultz. You are right. There was no 
litigation because you paid for delay. Published estimates 
suggest that this pay-for-delay settlement with Sun 
Pharmaceuticals created $700 million in excess costs for 
consumers. This is unacceptable.
    Sun Pharma originally said they would price their generic, 
were they allowed to move forward through the normal process 
without being challenged by Novartis to do so, that they were 
going to price their generic 30 percent below Gleevec's price. 
After you paid for delay and after you negotiated the so-called 
better deal sooner for consumers, they only priced it 6.4 
percent below, and delayed their entry into the market by six 
months.
    It is patients that are left holding the bag when companies 
like Novartis exploit the patent system to keep their market 
share. Research shows that 42 percent of cancer patients 
deplete their entire net worth in the first two years after 
their diagnosis. And I will tell you, I am a cancer survivor. I 
know what it is like to go through the 15 months of hell that I 
went through, and the countless stories I have heard from 
constituents who battle cancer every day.
    In total, Novartis sued at least five companies in order to 
prevent generic competition for Gleevec, leading to a class 
action lawsuit that alleged that Novartis was engaging in sham 
litigation.
    And now you know that protection of intellectual property 
rights is important for any company. But when you have 
proactive prices that become anti-competitive, used to delay 
generic entry and drive sales, both patients and the U.S. 
health care system suffer.
    So, if companies don't behave responsibly, Congress must 
act to rein in this unconscionable behavior. No one should be 
unable to afford the medication they need to survive, and 
brand-name companies, every single day try to delay as long as 
possible competition in the market, which drives up costs for 
patients who need this vital access to drugs.
    The annual cost of your drug went as high as $123,000 a 
year for cancer patients. That is insanity. It is robbery, and 
it kills people, as a result of them not being able to afford 
your drug. I don't know how you sleep at night.
    Thank you. I yield back the balance of my time.
    Chairwoman Maloney. Thank you. Thank you for your 
statement.
    Mr. Kendris. Chairwoman?
    Chairwoman Maloney. Mrs. Miller, you are now recognized.
    Mrs. Miller. Thank you, Chairwoman Maloney and Ranking 
Member Comer, and thank you to all the witnesses for being here 
today. I am pleased that we are able to continue with this 
conversation, because as we all know, the United States is the 
leading global innovator for groundbreaking medicine.
    However, now more than ever, during the COVID-19 pandemic, 
it is extremely important that research and innovation is at 
the forefront of pharmaceutical development. While we look 
toward our future we need to ensure that the public and private 
innovators are utilized to address situations such as a 
pandemic and improve access to everyday lifesaving medications.
    Mr. Kendris, how has the COVID-19 pandemic--there you are, 
good--how has the COVID-19 pandemic highlighted the need for 
innovation as we are all racing to develop better therapeutics 
and vaccines?
    Mr. Kendris. In so many ways, Congresswoman. Thank you for 
the question. Many companies, including Novartis, are working 
on therapeutics. We have two of our products in clinical trials 
now to see if they will work for the cytokine storm that COVID-
19 patients suffer. We do not have a vaccines business, but we 
are helping other companies who do. Our company, AveXis, 
formerly AveXis, has agreed to manufacture a vaccine for one 
particular vaccine maker, and we are also making available our 
Sandoz products that would be used to treat--our generics 
products, that would be used to treat COVID-19 patients. We are 
making them available at cost, no profit, or for free. We are 
making them available. We announced that a while ago, toward 
the beginning of COVID-19 pandemic.
    So, we are doing all we can to find therapeutics. We have 
research candidates in the lab, I think about 20 research 
candidates in the lab, so not yet in clinical development, that 
are being investigated for possible use against COVID-19.
    Mrs. Miller. OK.
    Mr. Kendris. We have also--yes, please.
    Mrs. Miller. OK. Well, I was just going to say, I also want 
to know, since Gleevec is classified as a specialty medication 
could you please discuss how this impacts the price and the 
market?
    Mr. Kendris. Gleevec is a very specific medication. It is 
the first targeted drug, the first smart drug, as people call 
it, the very first one, in 2001. As a specialty medication, as 
I mentioned in some earlier questions, the cancers that it 
treats are actually rare diseases with small patient 
populations. CML may be the largest patient population but 
GIST, stomach cancer, that came second, and then five other 
rare cancers that came after that, very rare, small patient 
populations. But Gleevec, because it is a targeted cancer 
therapy, works very, very well, very efficaciously, for those 
cancers. So, it is a specialty product in that it targets these 
specific cancers and helps turn these cancers from fatal to 
chronic, or even, with our follow-on product, to a disease 
where treatment can be--or remission can be obtained treatment-
free. The patient can stop taking Tasigna.
    Mrs. Miller. But that----
    Mr. Kendris. They can't stop taking Gleevec.
    Mrs. Miller. OK.
    Mr. Kendris. So, yes, please. I am sorry.
    Mrs. Miller. Well, I was going to, but you didn't answer 
how it impacted the price, being specialty.
    Mr. Kendris. That is something----
    Mrs. Miller. I will move on, because I do have other 
questions.
    Mr. Kendris. Thank you.
    Mrs. Miller. Many of my colleagues across the aisle 
continue to advocate for single-payer health care that would 
discourage and stifle innovation. If it were to become a 
reality, what would the innovation space then look like for a 
drug like H.P. Acthar Gel and multiple sclerosis?
    Mr. Bradway, could you discuss the importance of preserving 
the Bayh-Dole?
    Mr. Bradway. Well, I think you were asking a question about 
a Mallinckrodt drug, so I don't know whether you wanted to 
direct it to Mr. Trudeau or whether you had a more general 
question that you wanted me to address.
    Mrs. Miller. Well, more generally, because I do want to get 
into moving from this into how would the march-in rights affect 
innovation. So, that is just an example.
    Chairwoman Maloney. The gentlelady's time has expired. The 
gentleman----
    Mr. Bradway. Sorry, Madam Chairwoman. I didn't hear your 
statement.
    Chairwoman Maloney. Her time has expired but you may answer 
her question.
    Mr. Bradway. Thank you. Thank you, Congresswoman. I think 
the effect would be chilling on innovation. I think the size of 
the so-called march-in rights for intellectual property would 
have a very deleterious effect on those who commit resources to 
risky research and development.
    Chairwoman Maloney.--yields back. Mr. Khanna, you are now 
recognized for questions.
    Mr. Khanna? Representative Khanna? Is he there?
    Mr. Khanna. Yes, I think I was muted.
    Chairwoman Maloney. OK.
    Mr. Khanna. Thank you, Madam Chair.
    Chairwoman Maloney. We hear you now.
    Mr. Khanna. Can you hear me?
    Chairwoman Maloney. Yes, we can.
    Mr. Khanna. Great. I want to focus my line of questioning 
concerning the Amgen Enbrel drug, and if you could first 
explain, sir, the Enbrel drug--and this is for Mr. Bradway--it 
is an anti-inflammatory drug? Am I understanding that it was 
introduced in 1998?
    Mr. Bradway. That is correct.
    Mr. Khanna. And it is one of the best-selling drugs in the 
world. Is that correct? It is largely for arthritis?
    Mr. Bradway. Yes. It is for a form of arthritis known as 
rheumatoid arthritis and other autoimmune disorders.
    Mr. Khanna. And the primary patent on this expired in 2010. 
Correct?
    Mr. Bradway. No. When you say the primary patent what are 
you referring to? Are you referring to the patent on the 
molecule itself that is Enbrel?
    Mr. Khanna. Yes.
    Mr. Bradway. No, the patent on the molecule that is Enbrel 
has not expired. It was granted in----
    Mr. Khanna. What expired in 2010?
    Mr. Bradway. A different patent but not a patent on the 
molecule.
    Mr. Khanna. What was that patent on?
    Mr. Bradway. That was a use patent.
    Mr. Khanna. So, that expired. Correct?
    Mr. Bradway. Correct.
    Mr. Khanna. How many patent applications have you filed 
since then to try to extend the monopoly on Enbrel?
    Mr. Bradway. I don't know how many patent applications we 
have filed but I would guess several----
    Mr. Khanna. You don't know how many patent applications you 
have filed on one of your most important drugs?
    Mr. Bradway. I wouldn't know that off the top of my head.
    Mr. Khanna. A thousand?
    Mr. Bradway. No. I would guess it's----
    Mr. Khanna. Is it five?
    Mr. Bradway. Excuse me, Congressman. I would guess that it 
is several dozen patents.
    Mr. Khanna. Sixty-eight patents. Doesn't that strike you--I 
mean if you were just talking to your neighbor or some person 
you were growing up with, you know, go back to when you were in 
high school, and they say, OK, you come up with a new drug. 
Let's say, OK, you file a patent. Do you think any person would 
say, yes, we should file 68 patents on a certain drug and 
extend that patent protection until 2037? I mean, just step 
back from your role as CEO. Do you think most Americans would 
think that makes common sense?
    Mr. Bradway. Congressman, I think what is appropriate is 
the question of whether we are investing in innovation that 
deserves to be protected by patents, and fortunately----
    Mr. Khanna. No, I get all that. I get the debate, 
innovation. I understand we need patents. But just from a 
common-sense perspective, there is a drug, people take that 
drug. If you were talking to an ordinary person and you said, 
``We are going to file 68 different patents on this drug to 
protect our rights on it until 2037,'' do you think they would 
think that that was logical?
    Mr. Bradway. Well again, Congressman, I think it would 
require a discussion about what those patents are being issued 
for, what innovation we are claiming in the patents, and we are 
fortunate to have the patent rights in this country protected 
by----
    Mr. Khanna. How much does the drug cost in Europe compared 
to in the United States?
    Mr. Bradway. I don't have the answer to that question, 
Congressman.
    Mr. Khanna. You don't know how much the drug is priced in 
Europe? Would it surprise you if you know that the drug was 50 
percent cheaper for Europeans than Americans?
    Mr. Bradway. No, it wouldn't surprise me, but I remind you, 
Congressman, that we don't and have never sold or marketed the 
drug in Europe.
    Mr. Khanna. But you are selling the drug in Europe where 
you face actually competition. Isn't that correct?
    Mr. Bradway. No, sorry, Congressman. We don't sell the drug 
in Europe. We don't own the product in Europe.
    Mr. Khanna. But my understanding is in Europe the price is 
50 percent--it has similar bio, similar competition, and that 
has caused the price to drop by nearly 50 percent since 2018. 
Is that not accurate?
    Mr. Bradway. Congressman, I wouldn't know the answer to 
that. We don't own the rights to Enbrel in Europe, so you would 
need----
    Mr. Khanna. No, I understand you don't, but Enbrel is being 
sold in Europe for 50 percent less, and you have competition 
there. Correct?
    Mr. Bradway. Again, Congressman, I don't have the facts 
about Enbrel pricing in Europe. We have----
    Mr. Khanna. Can you make a commitment to the American 
people today that no American should pay more than people in 
Europe are paying for Enbrel? I mean, it is a simple thing. Are 
you an American, sir?
    Mr. Bradway. Yes, I am. Proudly.
    Mr. Khanna. OK. So, can you tell your fellow citizens that 
no American should pay more for Enbrel than someone in Europe?
    Mr. Bradway. Well, Congressman, the patent in Europe has 
expired, so the European situation is different from what we 
have in the United States.
    Mr. Khanna. So, the European patent has expired, so you 
think the Europeans don't want innovation for their drugs? I 
mean, so the Europeans don't think they need innovation, yet 
you think you need patents until 2037. I am asking you a very 
simple question. Make a commitment today, to the American 
people, that no one will pay a dime more for Enbrel than people 
pay in Europe. If you love this country, if you love America, 
you should be willing to tell Americans that they shouldn't be 
paying more than the French and the Germans and Europeans. Are 
you willing to make that commitment today, to the American 
people?
    Mr. Bradway. Congressman, I would just repeat that in 
Europe the intellectual property for that product has expired.
    Mr. Khanna. I am just asking you a simple question. You can 
say no. If it were me and someone said will you make a 
commitment----
    Chairwoman Maloney. The gentleman's time has expired----
    Mr. Khanna [continuing]. Paying more than Europeans, I 
would say absolutely. Are you willing to make that commitment?
    Mr. Bradway. We don't sell Enbrel in Europe, Congressman.
    Chairwoman Maloney. I take that as a no.
    Moving along, Mr. Steube, you are now recognized for 
questions.
    Mr. Steube. Thank you, Madam Chair.
    Over 3.5 million Floridians are enrolled in some form of 
Medicare prescription drug coverage. With so many of my fellow 
Floridians and constituents dependent on lifesaving 
prescriptions, I understand the need for affordable drug 
prices.
    Despite the efforts of Republicans to make bipartisan 
progress to reform the prescription drug standards, our 
Democratic colleagues refuse to collaborate. They will try to 
suggest that H.R. 3, which is a key example of partisan 
government overreach, would solve some of the problems that we 
are discussing today. This is not the case, and the Trump 
administration decisively acted to approve a record number of 
generic drugs and bring down overall prescription prices down 
13 percent. Obviously, there is still a lot of work left to do 
and I am glad we are taking steps to discuss this situation and 
hope we can move toward establishing solutions.
    Mr. Bradway, my first question is to you. What is Amgen 
currently doing to assist in this mutual goal of providing 
Americans with lower drug prices?
    Mr. Bradway. Congressman, thank you for the question. As I 
mentioned in my opening statement, our net prices in the United 
States have decreased in 2018 and 2019, and we are on track to 
have further decreases in 2020.
    In addition, Congressman, we have made a significant 
investment in biosimilars and we are making available to 
patients and prescribers biosimilar medicines for some of the 
biggest-selling drugs in the United States, at more affordable 
prices than the innovator products that they are designed to 
replicate.
    In addition, Congressman, we are working with a variety of 
different patient assistance programs through which we give 
away free drugs to those who are uninsured and can't afford 
their drugs or underinsured. We try to provide copay assistance 
for those who are struggling, who have insurance plans but are 
struggling with making payments for their deductibles and 
seeking to make contributions to other charitable foundations 
that can assist patients with their medicines as well.
    So, across the board, sir, we are trying to do quite a lot 
to help make sure that patients who need medicines can afford 
them.
    Mr. Steube. I was interested that in your testimony you 
stated that Amgen voluntarily lowered the list price of one of 
your medicines by 60 percent. However, you described a 
situation where even after lowering the list price some 
patients did not see a meaningful difference in what they had 
to pay out of pocket at the pharmacy. Some of my colleagues 
believe that forcing you to lower your prices will solve all of 
our problems, but it doesn't seem like that happened in that 
instance. Can you explain why?
    Mr. Bradway. Thank you, Congressman. Yes. You are referring 
to a drug called Repatha, which is our product designed to 
lower cholesterol and prevent heart attacks and strokes. It is 
one of our most important innovative new medicines. We lowered 
the list price for that medicine by 60 percent in order to try 
to make it more affordable at the pharmacy counter. Remember, 
that patients pay a copay as a function of list price, so by 
lowering the list price we were lowering their out-of-pocket 
expenses.
    However, we found that it took more than a year for the 
insurance plans to move patients, to direct patients from the 
high list price product to the low list price product. So, we 
ran the experiment and found that it didn't work in the way 
that we thought it would. We see this as an example of how the 
system is not working today for patients, and that is one of 
the reasons why we think we need to reform the rebate system 
that exists in the United States today.
    Mr. Steube. Thank you. I understand there are certain 
payment programs in place which can help patients afford drugs 
like Enbrel and Sensipar. Would you be able to discuss their 
effectiveness in any other similar initiatives that you are 
discussing?
    Mr. Bradway. Thank you. Yes, we have a number of programs 
designed to help patients pay for expensive medicines. So, for 
example, in the case of Enbrel we have copay assistance in 
place so that more than three-quarters of the patients who use 
Enbrel today have a copay of less than $50 a month for their 
medicine.
    When it comes to Medicaid, 93 percent of patients are able 
to receive their medicine at less than $10 a month in copay. 
And when it comes to Medicare, we have 77 percent of the 
patients being able to receive their medicine at less than $50 
a month.
    So, there are examples across our portfolio of the ways 
that patients are benefiting from the support provided to them 
in order to be able to access these innovative, life-changing 
medicines.
    Mr. Steube. Does Amgen utilize rebates for PBMs and how 
does that impact patient price?
    Mr. Bradway. Yes, we do use rebates. Again, rebates are a 
function of list price, so if we increase the list price we 
increase the rebate. You might ask why are we increasing the 
rebates? Why do we feel pressured to increase the rebate, and 
the answer is to secure competitive formulary position for our 
molecules. So, we increase the list price to be able to 
increase the rebate to the intermediaries. The unfortunate 
effect of that is it also increases the out-of-pocket cost for 
patients at the pharmacy counter. And again, that is why we 
advocate for changes that would include passing through the 
rebate at the pharmacy counter.
    Mr. Steube. Thank you. My time has expired. Thank you for 
being here.
    Mr. Bradway. Thank you.
    Chairwoman Maloney. Thank you.
    Congresswoman Speier, you are now recognized for questions.
    Ms. Speier. Thank you, Madam Chair, and thank you all for 
participating today. I appreciate it. I think all of us 
appreciate it. Many others declined the invitation.
    I want to start with Mr. Kendris and Gleevec. Gleevec is a 
miracle drug. My former chief of staff's wife died of CML. Had 
she lived another couple of years Gleevec would have been 
discovered as this miracle drug and her condition would have 
been chronic and she would be alive today. So, we truly 
appreciate the miracle that Gleevec has become for leukemia 
patients.
    I would like to educate the public on what LOE is. It is 
called loss of exclusivity. And I would like for the staff, if 
they would, to put a slide that the committee got that was part 
of a presentation that was, I guess, provided to some of the 
staff of the company, and shows a dramatic increase in the 
price of Gleevec toward the end of its exclusivity.
    [Slide.]
    Ms. Speier. In fact, between 2013 and 2015, Novartis' price 
increase accelerated. It raised the price of Gleevec five times 
in two years. It turned out to be a 20 percent increase in that 
drug.
    Now company executives knew that Gleevec sales would 
decrease once it lost its exclusivity so they tried to get as 
much profit out of the drug for as long as they could. This 
plan was explicitly stated in internal documents by Novartis 
executives who wanted to, quote, ``maximize value of brand 
prior to loss of exclusivity.'' Is that not the case, Mr. 
Kendris?
    Mr. Kendris. Congresswoman, can you identify the document 
that you have in front of you? I don't have it in front of me 
right now.
    Ms. Speier. Well, the staff would be able to provide you 
that, but they are evidently documents you provided to the 
committee.
    Mr. Kendris. Yes.
    Ms. Speier. So, it is a fact. In the last two years of 
exclusivity you raised the price almost 20 percent. There is a 
chart we can put up that shows your net revenues going from 
$1.9 billion to $2.53 billion, and I don't know if the 
committee staff can put that on.
    Mr. Kendris. Congresswoman--I am sorry. Please.
    Ms. Speier. So, I mean, the question is, did you not 
increase the price of Gleevec some 20 percent in the last two 
years because you saw that there was going to be loss of 
exclusivity?
    Mr. Kendris. Congresswoman, I don't know specifically why 
the increases in that period were taken. I was not there in the 
oncology----
    Ms. Speier. All right. We will move on.
    Mr. Kendris. But I can tell you that, as I was saying 
earlier, it is indisputable that Gleevec, that its value 
increased over the time it was on the market, and it was always 
the lowest product in its class, the lowest-priced product in 
his class.
    Ms. Speier. OK. Mr. Kendris, I am reclaiming my time----
    Mr. Kendris. Yes, please.
    Ms. Speier [continuing]. Because I want to go to another 
line of questioning. I just want to point out that Medicare--
this is the Federal Government--paid $5.6 billion to your 
company between 2011 and 2018, and that one-third of all the 
money you made in the United States came from the taxpayers 
through Medicare. And Medicare right now is two years from 
basically falling off a cliff.
    I want to go to each of you now and ask you this question. 
How much money do you spend on marketing? Mr. Kendris?
    Mr. Kendris. Our marketing spend, Congresswoman, is 
approximately 400 million U.S. dollars in direct-to-consumer 
advertising.
    Ms. Speier. OK. $400 million. How much do you spend in 
Europe?
    Mr. Kendris. I am not sure I know the answer to that off 
the top right now but I can get you that.
    Ms. Speier. All right. Thank you. If you would get that to 
the committee.
    Mr. Kendris. Thank you. I will.
    Ms. Speier. Mr. Bradway, how much do you spend in direct-
to-consumer marketing?
    Mr. Bradway. Direct-to-consumer TV advertisement in the 
U.S., less than $200 million.
    Ms. Speier. $200 million. How much do you spend in Europe?
    Mr. Bradway. A fraction of that. Not on TV but in other 
forms of----
    Ms. Speier. In fact, there is no TV allowed in Europe. Is 
that correct?
    Mr. Bradway. I believe that is correct. Maybe
    [Inaudible.]
    Ms. Speier. And then, Mr. Mallinckrodt, how much do you 
spend?
    Mr. Trudeau. We don't spend any money on direct-to-consumer 
advertising, Congresswoman.
    Ms. Speier. All right. Mr. Trudeau?
    Mr. Trudeau. Yes, that was me, Mr. Trudeau. We don't spend 
any money on direct-to-consumer advertising.
    Ms. Speier. All right. My final question is this. Do you 
all commit--and I just need a yes-or-no answer--do each of you 
commit to not increase the cost of your drug, moving forward, 
beyond the inflation each year?
    Mr. Bradway?
    Mr. Bradway. I would point out that we have decreased our 
prices----
    Ms. Speier. So, yes or no, sir.
    Mr. Bradway [continuing]. We have decreased our prices over 
the last three years and increase of list prices have been 
below inflation. So, you know----
    Ms. Speier. Your answer is yes, you would commit to doing 
that.
    Mr. Bradway. My answer is that is how we have been 
operating the business the last couple of years.
    Ms. Speier. OK. Mr. Trudeau?
    Mr. Trudeau. As I said earlier, we are committing to 
reducing the net price of Acthar to 2015 levels by the end of 
2020, which is the first year--2015 was the first year, 
actually full year, we acquired Acthar.
    Ms. Speier. And Mr. Kendris?
    Mr. Kendris. As to net prices, Congresswoman, yes.
    Ms. Speier. All right. Thank you. I yield back.
    Chairwoman Maloney. Mr. Keller, you are now recognized. Mr. 
Keller.
    Mr. Keller. Thank you, Madam Chair. We all need to ensure 
patients access to affordable drugs, particularly those in 
rural areas that rely on essential safety net programs. 
Contract pharmacies are essential to the rural areas of 
Pennsylvania that I have the privilege to represent. About 80 
percent of rural hospitals are 340B. They use pharmacies to 
provide access to outpatient drugs for those who need them, 
many of whom are seniors and/or have chronic conditions.
    Mr. Kendris, thank you for being here. I wanted to ask you 
about your new, quote, ``integrity initiative to address 
duplicate discounts requiring covered entities to register and 
upload 340B claims data originating from contract pharmacies 
onto a new web-based platform.''
    Your announcement from August expresses support for a 
sustainable 340B program. I do have concerns about this 
threatening hospitals in Pennsylvania, and their ability to 
offer home infusion services, telemedicine, and expand their 
outpatient facilities, stretching scarce resources to patients 
in need.
    So, Mr. Kendris, what kind of collaboration have you had 
with 340B hospitals about his integrity initiative?
    Mr. Kendris. Thank you, Congressman Keller, for the 
question. I appreciate it.
    So, Congressman Keller, we support the intent and the 
design of the 340B program to help lower outpatient drug prices 
for the uninsured and the net profit safety net providers that 
you were just describing to your constituencies. They serve 
underserved populations in those communities and the 340B 
program helps them. We support the 340B program.
    However, we also believe that over many years there have 
been some abuses that have grown into the system, and we are 
trying to resolve those abuses. We have raised the problem over 
the years--many companies have--with HRSA, and we are committed 
to ensure that our medicines are accessible to as many patients 
as possible, and through 340B as well. But we believe that the 
current state of the program is somewhat distorted from its 
original intent----
    Mr. Keller. I understand that. If I could just jump in.
    Mr. Kendris. Thank you.
    Mr. Keller. I have a letter dated August 17, explaining 
your integrity initiative. My question was, prior to the letter 
have you talked to hospitals about this program and how it 
might be implemented?
    Mr. Kendris. I believe that our staff is in contact with 
hospitals. We are collecting responses to that letter, and we 
are going to continue to work with them.
    Mr. Keller. So, if I can just jump in, I have got a limited 
amount of time. So, if you are in consultation with the 
hospitals, when were you planning on making this in effect and 
stopping some of the discounts to the 340B hospitals? It is my 
understanding that were to begin at the beginning of this 
month.
    Mr. Kendris. We had asked for the data by October 1st. We 
are still evaluating the responses. We have not heard from all 
the hospitals, and we are evaluating the data that we have 
received, and we are going to continue to evaluate that data. 
And as we move forward, it is going to be based on what we see 
in the data we receive.
    Mr. Keller. So, if a hospital hasn't registered that data 
by October 1st, are they still going to be able to participate 
in the discounts?
    Mr. Kendris. Yes. We still intend to honor valid, 
legitimate 340B discounts, and what we will do is we will see 
the responses, we will look at the data, and then we will talk 
to the hospitals and move on from there.
    Mr. Keller. OK. And a question on the web-based portal. Is 
this a secure platform or should we be concerned about data 
security?
    Mr. Kendris. I believe it is a secure platform. I can check 
with our team on that, but I believe it is.
    Mr. Keller. OK. Do you expect there to be any 
administrative burden on hospitals, or what would that be?
    Mr. Kendris. No. Actually, we believe that it is easy to 
pull this data. It is not burdensome. It is actually the same 
claims data that they have been sharing with the intermediaries 
that we talked about earlier in the hearing. So, the data 
should be available--I think it takes about five minutes every 
two weeks to pull this data.
    Mr. Keller. So, you know that the intermediaries have this 
data already. So, have you asked them for the data, rather than 
make the hospitals do it if it is already available? Have you 
looked at another way to get it?
    Mr. Kendris. I think that relationship is between the 
hospitals and the intermediary, and I think we have to ask the 
hospitals for it. I can check into that, Congressman, but I 
believe that is what we have.
    Mr. Keller. OK. I just would like to end by saying that 
340B discounts are crucial for my constituents, and we should 
be thoughtful about how any changes to the program would affect 
this going forward. We need to ensure that the changes to the 
program are manageable and in the best interest of health 
providers and the patients they serve.
    Thank you, and I yield back.
    Mr. Kendris. We agree, Congressman. Thank you.
    Chairwoman Maloney. Thank you.
    Mr. Connolly, you are now recognized.
    Mr. Connolly. Thank you, Madam Chairwoman.
    Mr. Trudeau, when you acquired Questcor, one of the very 
lucrative drugs in their command was Acthar. Is that correct?
    Mr. Trudeau. That was virtually the only product that they 
had.
    Mr. Connolly. And it is my understanding that when Acthar 
first came on the market a vial, one vial, cost $40. By the 
time you acquired Questcor that price had gone up to almost 
$31,000. Is that correct?
    Mr. Trudeau. That is correct.
    Mr. Connolly. Forty dollars to $31,000 for the same vial. 
And my understanding is the only difference wasn't the 
composition of the drug. It was the status, the legal status of 
the drug, that Questcor was able to get Acthar granted orphan 
drug status before you purchased it. Is that correct?
    Mr. Trudeau. That is not necessarily the only thing but 
certainly that was something that did occur, that Acthar was 
granted orphan drug status.
    Mr. Connolly. Well, should we not correlate the two events, 
with respect to the value put on a vial of the drug? I mean, 
how do we explain going from $40 to $31,000 for the same vial, 
with the same efficacy and impact on a patient, other than it 
got reclassified as an orphan drug, which gave it a seven-year 
market monopoly for that designated use. Isn't that correct?
    Mr. Trudeau. It did get an orphan drug designation. That is 
correct. In addition, the label was actually updated in 2010 to 
reflect the current set of 19 indications.
    Mr. Connolly. Right. So, the skyrocketing inflation in this 
particular drug had nothing to do with PBMs, for example. It 
had to do with the positioning of the drug as an orphan drug 
and the protection that provided, which allowed it to have 
highly enhanced value, which made it an attractive acquisition 
for your company. Is that not correct?
    Mr. Trudeau. Based on FCC filings that Questcor filed at 
the time, the company was actually in an existential situation. 
They had a very essential drug for infantile spasms, and they 
were potentially looking at going out of business and not being 
able to provide that drug anymore to the marketplace.
    Mr. Connolly. So, you kind of came in and saved the day.
    Mr. Trudeau. When we acquired Questcor and we acquired 
Acthar we did three things: one, we invested in clinical trials 
and manufacturing; two, we started engaging with our customers 
to provide discounts and rebates; and three, we provided 
extensive patient assistance programs to minimize patient out-
of-pocket expense and ensure that patients that could benefit 
from Acthar had good access to the drug.
    Mr. Connolly. And when you provide this drug through 
Medicare, for example, what is the discount?
    Mr. Trudeau. We provide all allowable discounts under 
statute, and as I discussed earlier, Acthar is not on any 
Medicare formularies, and certainly if there were an 
opportunity for Acthar to get a formulary position in Medicare 
there might be the opportunity to provide additional discount, 
similar to what we do in the commercial sector.
    Mr. Connolly. Would the discount in this case, with respect 
to, say, Medicare, be about one percent?
    Mr. Trudeau. I believe most recent data is on the order of 
one to two percent. That is correct.
    Mr. Connolly. Yes. So, a $31,000 drug that once cost $40, 
you are giving rebates to Medicare of less than one percent 
between 2015 and 2018.
    Is it also true that your company is looking to use this 
drug for other treatments, other than the original infant 
seizure treatment it was developed for?
    Mr. Trudeau. The company has been developing evidence to 
support the 19 FDA-approved indications that are currently on 
the label.
    Mr. Connolly. And if you do that, do you do that under the 
auspices of your protective status as an orphan drug or do you 
have to redefine that, because it is no longer being used 
exclusively for that original purpose?
    Mr. Trudeau. The orphan drug exclusivity actually expired a 
number of years ago. Acthar is not affected. It does not have 
any exclusivity under any of the traditional patents or other 
exclusivities such as orphan drug. It is a drug that is 
designed primarily for underserved patients that have very few 
alternatives, a relatively very small population that is very 
sick.
    Mr. Connolly. I appreciate that, although I would add when 
you charge $31,000, or now $33,000 a vial, in today's price, I 
think that is not much of an alternative for a lot of patients 
either.
    I yield back, Madam Chairwoman.
    Chairwoman Maloney. Thank you.
    Ms. Foxx, you are now recognized for questions.
    Ms. Foxx. Thank you very much, Madam Chairman. I want to 
thank our witnesses for being here today, for being where you 
are today.
    My first question is for Mr. Kendris. Mr. Kendris, it has 
been said that Gleevec is a magic bullet for people fighting 
chronic myeloid leukemia. Can you discuss why this drug was 
such a game-changer?
    Mr. Kendris. Thank you, Congresswoman, for the question. 
Yes, it was a game-changer. It was the first targeted therapy. 
So, you may have heard the term ``smart drug.'' It was the 
first smart drug. It turned off a particular gene and it was 
able to be extremely efficacious, first in chronic myeloid 
leukemia and then in gastrointestinal stomal tumors, and then 
in five rare cancers, and that is because it was a smart drug. 
It worked very specifically on these very specific cancers, and 
by its mechanism of action the efficacy was so high that, as I 
said earlier, diseases, these six cancers, or seven cancers, 
were turned from fatal conditions for a patient who had died 
before Gleevec, into conditions where they lived and they were 
able to lead normal lives. And now we have developed a follow-
in product, Tasigna, which allows patients to go treatment-
free. If they get remission for a long enough time they no 
longer have to take any drug.
    Ms. Foxx. OK. So, what is the current list price of 
Gleevec?
    Mr. Kendris. The current list price of Gleevec is $120,000, 
and the net price is $85,000.
    Ms. Foxx. OK.
    Mr. Kendris. The price of a generic is $4,200.
    Ms. Foxx. OK. So, how much does the average patient pay for 
it?
    Mr. Kendris. Well, the average out-of-pocket cost for a 
Part D patient, Congresswoman, is $856 a year.
    Ms. Foxx. OK. So, how does the patient get such a discount 
price?
    Mr. Kendris. I think it depends on who the patient is and 
what their insurance coverage is.
    Ms. Foxx. OK.
    Mr. Kendris. The price I just gave you was for a Medicare 
Part D patient, for out-of-pocket cost, $856 average annual 
out-of-pocket cost.
    Ms. Foxx. OK. So, a drug considered a magic bullet, and 
basically it is not quite a cure but it puts people in 
remission, has gone down from $120,000 to $856 for Part D. 
Thank you very much for that.
    So, I would like to ask Mr. Trudeau, how does your company 
decide the right price to set for a new drug that may truly 
save someone's life?
    Mr. Trudeau. Thank you, Congresswoman. What we try to do is 
we try to match the value that we believe that our products are 
going to bring to patients and kind of compare those two. And 
the value is in two ways. One is the benefit that it provides 
to patients themselves and their families, and again, we are 
typically developing drugs for some very devastating diseases 
where there are relatively few alternatives. And then we are 
also looking and creating data, actually, to see what value it 
may bring to the overall health care system.
    So, for example, using the drug might increase the drug 
cost but it might have the impact of reducing overall health 
care costs for a particular disease.
    Ms. Foxx. So, Mr. Bradway, the Congressional Budget Office 
estimates that Democrats' H.R. 3 would result in 38 fewer cures 
being developed over the next decade. What would be the impact 
on patients and innovation if there were 38 fewer cures created 
over the next decade?
    Mr. Bradway. Well, I think that is potentially devastating. 
So, not only devastating to the patients and their families but 
I think also to the economy. I think our economy benefits from 
innovation that enables us to treat serious illnesses. We are 
seeing the benefit of that every day now. So, anything that 
diminishes that opportunity I think would be tragic.
    Ms. Foxx. OK. Very quick question for all three of you. On 
average, how often does your company, or even the whole 
pharmaceutical industry, bring to market a novel or game-
changing treatment or cure? Each one of you answer fairly 
quickly, please.
    Chairwoman Maloney. The gentlelady's time has expired. The 
gentlemen may answer her question.
    Ms. Foxx. Please answer. Mr. Bradway?
    Mr. Bradway. Thank you for the question. We have 22 
different novel, game-changing medicines that have been 
approved throughout our history. We have three, for example, 
this year. We are waiting for registration-worthy data. So, 
from one year to the next is different but 22 through our 
history, three more that we are waiting for this year.
    Mr. Kendris. Congresswoman, it is Tom Kendris. For 
Novartis, I believe it could be more, but I believe last year 
we had at least four. This year I believe we have already had 
two, and we may have more to come this year. So, it is three to 
five almost every year, as an average, I would say.
    Ms. Foxx. Mr. Trudeau?
    Mr. Trudeau. Congresswoman, I think from an industry 
perspective we are trying to get as many novel, lifesaving 
medicines to the market as we can. For our company 
specifically, we are hoping to have two or three in the next 
two to three years.
    Ms. Foxx. Thank you. I am sorry for going over, Madam 
Chairman.
    Chairwoman Maloney. Mrs. Plaskett, you are now recognized 
for questions.
    Ms. Plaskett. Thank you so much, Madam Chair, and thank you 
to the witnesses for being with us this day to answer these 
questions and to provide more information about drug pricing.
    Mr. Bradway, when we talk about high drug prices, many 
times we talk about the list price. And large discounts are 
provided off the list price and then, as part of the insurance 
design patients are charged a percentage as a co-insurance. But 
my understanding is that this is always a percentage of the 
list price and not the discounted price. Is that correct? Do I 
have that correct?
    Mr. Bradway. Yes, you have that generally correct.
    Ms. Plaskett. OK. I know my answer is probably simplistic. 
So, what are some of the ways in which to bring down what a 
patient pays? Your thoughts on that.
    Mr. Bradway. Well, we have advocated for changes to the 
system that would include, for example, passing the rebates 
that have been negotiated between the intermediaries and the 
innovatives comes through to the patients at the pharmacy 
counter. That would have the immediate effect of reducing the 
out-of-pocket costs for the patient in the picking up the 
innovative medicine.
    Second, we have advocated for placing an out-of-pocket cap 
on patients so that after they have paid a certain amount for 
their medicines during the course of the year they reach a cap 
and no longer have to have a copay.
    So, those are two examples of things that we are advocating 
for. And as you may be aware, we have also taken the unusual 
step of even lowering list prices for our medicines by 60 
percent in the case of our game-changing medicine known as 
Repatha, which lower the risk of heart attack and stroke.
    Ms. Plaskett. Great. Thank you. But in some instances the 
list price, they may go up, and there are reasons for that. But 
my understanding, as well, and I hope this is not too 
simplistic, but has the net price, what is actually made off 
the drug, gone down in recent years for any of the products 
that you make?
    Mr. Bradway. Yes, Congresswoman. In 2018 and 2019, and 
again we expect in 2020, that the net prices for our portfolio 
in the United States will have decreased. So, across our 
portfolio net prices have fallen.
    Ms. Plaskett. And then can you explain to us how the net 
prices go down but yet the list price may go up, in many 
instances?
    Mr. Bradway. Yes, Congresswoman. That occurs when the 
rebates that we are giving to the intermediaries exceed the 
increases in list price.
    Ms. Plaskett. Mm-hmm. OK. And can you explain how can 
biosimilars play a role in reducing health care costs and costs 
for patients?
    Mr. Bradway. Yes, Congresswoman. Again, Amgen is a heavy 
investor in biosimilars. We have committed more than $2 billion 
to develop a portfolio of biosimilars. We make three of those 
available today in the U.S., with a plan to add more, to 
patients and prescribers. We provide them at a price that is a 
discount to what the innovative products are charging, and 
commit to having a reliable, safe supply of that lower-cost 
alternative available to patients.
    Ms. Plaskett. Thank you. Thanks so much for that.
    I want to ask any of the witnesses, how have your 
companies, if you are, in fact, involved in the fight against 
COVID-19, what are the steps any of your companies are taking 
to improve diversity in clinical trials?
    Mr. Kendris. Congresswoman, it is Tom Kendris from 
Novartis.
    Ms. Plaskett. Thank you.
    Mr. Kendris. Thank you for the question. So, before COVID-
19 hit our global drug development group was focused on this 
issue for our own clinical trials. It is a crucial step that 
must be taken, because I think the basis of your question, I am 
sure you realize, if a product is studied in a limited patient 
population, after it is approved doctors are comfortable 
prescribing it only in that limited patient population. So, if 
it is not studied in a minority population, whatever minority 
population that is, doctors will be more hesitant to prescribe 
it there because they don't have data.
    So, we recognized before COVID broke that we needed to 
change that in our own clinical trials. Since the COVID-19 
pandemic began, what we have done through our Novartis U.S. 
Foundation is to begin the process of convening other 
companies, and some groups like the NAACP and other groups 
focused on racial equity, to have a conversation about this 
very issue across the industry, so that we can improve 
diversity in clinical trials, in all clinical trials of all 
types, and to address the underlying problems, which have to do 
with many things, but trust for patients who are in clinical 
trials would be one of those things. And that is going to take 
a broader conversation that we are going to try and convene.
    Ms. Plaskett. Yes. Thank you.
    Chairwoman Maloney. The gentlelady's time has expired.
    Ms. Plaskett. Thank you, Madam Chair. I would love to be 
part of that conversation, and I know the congressional Black 
Caucus is very concerned about this, and we would love to offer 
any thoughts and discussions on this.
    And thank you, Madam Chair, for holding this hearing. I 
wanted to, at some point, ask these gentlemen, in another form, 
about how do we move manufacturing back to U.S. flags and what 
we can do to support bringing that infrastructure and those 
jobs back to our country.
    But thank you for the hearing.
    Chairwoman Maloney. Mr. Grothman, you are now recognized 
for questions.
    Mr. Grothman. First I have a question for Mr. Kendris, and 
this is kind of a followup on a previous question. I also am 
concerned about the 340B program. Right now there are companies 
out there like Eli Lilly--I am aware they are not here today. 
They have refused to continue to offer the 340B prescription 
drug discounts to contract pharmacies that our kind of safety 
net hospitals, critical access hospitals, and community health 
centers rely upon.
    To my knowledge, Novartis, at this point, has not refused 
to provide new discounts. However, you have been requesting 
claims data in order to prevent potential duplicative 
discounts.
    Are you willing to give us assurances today that Novartis 
will be a good steward of the 340B program moving forward and 
will not do what Eli Lilly has done?
    Mr. Kendris. Our intent, Congressman, is to be a good 
steward of the program. As you said, we have asked for data 
from the hospitals that will help us to avoid paying multiple 
duplicate discounts. So, we support the program, and allowing 
hospitals to use our discounts to provide the patient care that 
was originally intended by 340B. But what we don't support is 
allowing intermediaries, middlemen, to profit from the program.
    Mr. Grothman. OK. The next question, I guess, is really for 
any one of you. I guess maybe I should pick somebody else. 
Maybe we will pick Mr. Trudeau.
    Specialty biologics are some of the major drivers of 
prescription drug costs because they often treat very 
particular diseases with limited patient populations. Evidence 
has shown that introduction of biosimilars in the market 
reduces that cost for patients. Since all your companies do 
have biologics on the market, how has the introduction of 
biosimilars impacted the price of your medications, and have 
any of you tried to prevent biosimilars from coming to market 
in an effort to stifle competition? And a followup question, 
how can Congress incentivize companies to break more 
biosimilars to market?
    Mr. Trudeau. Congressman, thank you for the question. We 
are focused on what is in the best interest of patients, 
meaning that patients have access to the best possible 
medications they have for their condition at the lowest 
possible cost. We also support competition. Biosimilars, in 
some markets, have been shown to enhance competition. Our 
company does not produce biosimilars, so that might be a 
question better directed to one of the other individuals.
    Mr. Grothman. OK.
    Mr. Bradway. Congressman, this is Bob Bradway from Amgen. 
We are active in the biosimilar market. We have invested a 
couple billion dollars to develop our capabilities here in the 
U.S. We think this will provide an appropriate alternative 
choice for patients and providers.
    So, far we have launched three medicines, the first two in 
the cancer field, where we have had very strong receptivity to 
our product offerings. So, we are providing those at a discount 
to the originator products and see a significant market 
already, after a short time being on the market. So, we think 
that the industry as created by the legislation known as BPCIA 
is working effectively, and the U.S. is nearly----
    Mr. Grothman. OK.
    Mr. Bradway [continuing]. Biosimilars, and expect us, 
again, to be an important opportunity for patients and 
providers.
    Mr. Grothman. Let me just give you a quick yes-or-no 
question on this. President Trump's FDA released a biosimilar 
action plan which streamlined the process to approve 
biosimilars. We believe this is resulting in significantly more 
approvals of biosimilars than under the Obama Administration, 
which was not as aggressive in this area.
    Would you agree the President's plan is saving patients 
money?
    [No response.]
    Mr. Grothman. OK. I will give you a different question. Do 
you agree, you know, in trying to get more biosimilars to 
market under the President's plan, is that saving patients 
money?
    Mr. Kendris. Congressman, it is Tom Kendris from Novartis. 
I am not sure that I am familiar with the President's plan, but 
we have Sandoz, as I mentioned earlier, a generics company and 
a biosimilars company. We brought the first biosimilar to 
market, Zarxio, in 2015. So, we certainly support biosimilars, 
and Zarxio itself----
    Mr. Grothman. Let me give you a quick followup question 
because I am on my final minute here.
    Mr. Kendris. Sorry.
    Mr. Grothman. I am going to be introducing a bill, or have 
introduced, H.R. 8190, a Biosimilar Insulin Access Act, which 
will expand on what President Trump has done. Will you guys 
pledge not to get in the way of any expansion of biosimilars? 
Is that something you are going to fight, or do you--will you 
agree that we should be getting more biosimilars to market?
    Mr. Kendris. Congressman, it is Tom Kendris. I think 
generally speaking we support more biosimilars coming to the 
market. Sandoz has biosimilars in its pipeline and is actively 
trying to get them onto the U.S. market, and that will help 
patients and reduce health care costs in the U.S.
    Mr. Grothman. Thank you.
    Chairwoman Maloney. The gentleman's time has expired. 
Representative Raskin, you are now recognized.
    Mr. Raskin. Thank you, Madam Chair.
    Mr. Kendris, our investigation found that drug companies 
use anticompetitive tactics to prevent generic competition in 
order to prop up profits. Novartis engaged in pay for delay, 
where companies pay off generic competitors to delay their 
entry into the market. Novartis struck a deal with the first 
generic competitor to postpone its entry by six months. This is 
on Gleevec. The generic originally announced it would price its 
product 30 percent below Gleevec, but then they ultimately set 
the price at only six percent below Gleevec.
    Experts say that these various maneuvers employing a six-
month delay and then a six-month duopoly, resulted in $700 
million in excess costs to payers alone, in a single year, in 
1915-'16. And you collected your highest net revenue from 
Gleevec during that two-year period when more than 100 Novartis 
employees collected more than $1 million a year, and the CEO, I 
understand, earned a total of $72 million that year.
    One strategy of anticompetitive exclusion is to engage in 
restrictive contracts with health plans and pharmacies to 
ensure that those health plans and pharmacies only cover or 
dispense the branded, or non-generic, form of the drug. These 
contracts are called National Drug Code locks on generics, or 
NDC blocks, for National Drug Code.
    Internal records showed that Novartis developed and 
implemented an NDC block strategy. Novartis offered higher 
Gleevec rebates or discounts to health plans in exchange for 
their plans blocking generics from the covered drug list. This 
meant that Gleevec would automatically be substituted instead 
of a generic version.
    Mr. Kendris, do you agree that NDC blocks are fundamentally 
anticompetitive?
    Mr. Kendris. Congressman Raskin, no, I don't agree with 
that. I think payer contracting actually saves the health plans 
and the brand is cheaper than the generics in that case. What 
we did was we lowered the price of the branded product with 
steep discounting, and we competed with generics on price with 
our brand.
    Mr. Raskin. Well, but why did you need to institute a 
formal block to keep the generics from being in competition at 
that point?
    Mr. Kendris. It wasn't to prevent generics to be in 
competition. There were physicians and patients who wanted 
branded Gleevec, and in order not to be automatically 
substituted at the pharmacy counter those patients wanted 
Gleevec, and these payers, who we contracted, wanted to get 
Gleevec brand to them.
    Mr. Raskin. Well, you actually promoted to consumers the 
idea that they should only order Gleevec. Tell us about your 
dispense-as-written campaign for doctors to write ``dispense as 
written'' or ``DAW'' on prescriptions.
    Mr. Kendris. That is a campaign to make sure that doctors 
and patients know that if they want Gleevec, the branded 
product, and many patients who are stable, in remission from 
cancer, want to stay on the branded product and not go to a 
generic, if they want that they need to write--they need the 
doctor to write the prescription for Gleevec, the brand, or 
they will be automatically substituted at the pharmacy. So, 
that is what ``dispense as written'' means, and it is for the 
patients and the doctors who would like to keep the patient on 
Gleevec as opposed to being switched to a generic automatically 
at the pharmacy.
    Mr. Raskin. But don't you actually try to influence 
consumers or patients in that choice? You say, ``It is your 
right to ask your pharmacist for branded Gleevec. Tell them to 
dispense as written. The power is in your hands. Demand the 
brand. Multiple generics can lead to patient confusion. If you 
get generic your medication may change shape, color, size, from 
month to month.'' Aren't you actually out there campaigning 
against generics and making the patient believe that they need 
to get the branded pill?
    Mr. Kendris. Look, Congressman, we have our own generic 
company that sells thousands and thousands of generics every 
year. In fact, they are the second-largest seller of generics 
in the United States. So, we don't do what you just described. 
What we are doing is we are reaching out to patients and 
doctors who already want to stay on the brand, and we are 
educating them how they have to do it. They will not be able to 
stay on the brand if they want to unless they write a 
prescription for Gleevec.
    Mr. Raskin. Did you pursue the NDC blocks in order to try 
to keep Novartis' market share up, even with generics in the 
market? Is that why you went for the NDC block strategy?
    Mr. Kendris. No. That is part of the negotiation with the 
payer in the contracting process.
    Mr. Raskin. OK. Well, Madam Chair, I just think that these 
NDC blocks were tremendously profitable for Novartis, as they 
have been for other companies, and the cost is not paid by the 
company. It is paid by the patients, it is paid by Medicare, 
and all of us through increased prices.
    But thank you for your testimony. I yield back to you, 
Madam Chair.
    Chairwoman Maloney. Thank you.
    Mr. Comer, you are now recognized.
    Mr. Comer. Thank you, Madam Chair. My first few questions 
will be addressed to Mr. Bradway with Amgen.
    Sir, you explained in your opener that net prices are not 
the same as list prices. You said that part of the list price 
calculation includes benefits to patients. Can you quickly 
explain how you are able to calculate that?
    Mr. Bradway. Yes. The list price is the price that we 
establish. The rebates are the price that we pay to the 
intermediaries, creating a net price. It is the net price that 
we receive. And the patient then pays a copay as a function of 
the stated list price.
    Mr. Comer. While patients no doubt benefit from these 
lifesaving drugs, I think you can understand that patients have 
a hard time understanding that cost benefit calculation. How 
can patients be sure they are getting the best price available 
for their medicine?
    Mr. Bradway. Thank you, Congressman. I think that is an 
important issue, the issue of transparency, and it is very 
difficult in the system that is in place today. It is 
difficult, for example, because patients don't get the benefit 
of the rebate at the pharmacy counter. In fact, it is very hard 
for a patient to have any idea what rebate has been negotiated 
between their plan sponsor, their PBM, and the innovative drug 
company. So, it is a challenging problem, even for the 
initiated patient who wants to try to get the answer to your 
question.
    But we and others publish our list prices, for example, on 
the website, for our individual medicines. We provide an 
indication of the range of rebates and, therefore, give a sense 
for what the net price is. But our net price is different for 
individual payers, based on the contracts that we have 
negotiated with each of them individually.
    Mr. Comer. I spent a lot of time in the hearing yesterday 
talking about my dissatisfaction with the PBMs and that 
process, so I am going to shift gears and mention that for a 
second.
    Mr. Kendris with Novartis, this is an incredibly 
complicated process. It seems to me that the savings are not 
always being passed on to the consumer. President Trump, in one 
of his recent Executive orders, mandated that PBMs pass these 
rebates onto Medicare Part D patients, but this covers only a 
small percentage of the patient population.
    Mr. Kendris, what can we, in Congress, do to ensure 
patients are benefiting from these discounts rather than 
middlemen like PBMs?
    Mr. Kendris. Ranking Member Comer, thank you for the 
question. I think one answer to your question, quickly, would 
be transparency, and I think that we need to encourage patient 
access and affordability. And I think there are three ways.
    We can give access to value-based products, value-priced 
products with low cost-sharing so we encourage their use and we 
don't restrict their access to formularies. We can cap what 
patients have to pay in out-of-pocket costs for drugs in 
Medicare Part D. And we can require plans to share some of the 
discounts they negotiate for drugs with patients. Those savings 
should be passed along to patients at the pharmacy counter. 
Those three things would encourage patient access and 
affordability.
    Mr. Comer. And I agree 100 percent with your statement 
about transparency. Who is the agency or bureaucracy in charge 
with overseeing the PBMs and their transparency? Who holds the 
PBMs accountable? Educate me on that.
    Mr. Kendris. That is a very good question, Ranking Member 
Comer, and I think perhaps HHS is the answer. Perhaps HHS 
should be overseeing the PBMs, and to some extent they probably 
do. But I think the oversight and the changes in terms of 
passing on discounts at the pharmacy counter is something that 
needs to happen. Maybe it is HHS. Maybe it is a different 
approach. I am not sure.
    Mr. Comer. And I think that is something, Madam Chair, I 
mentioned to you after the hearing yesterday, that is something 
that we should certainly look into more when we are going to 
continue our efforts to investigate the out-of-control costs of 
drugs for Americans.
    One other thing, and my time is running out, but just to 
touch on what Representative Keller mentioned with the price 
difference between Europe and the United States, I don't think 
any of like that but I am curious, how much do you spend on 
litigation in Europe versus the United States? Is there a big 
difference in your litigation costs?
    Mr. Kendris. I believe there probably is. I would have to 
get back to you with specifics, Ranking Member Comer, but there 
is a probably a difference.
    Mr. Comer. If both of you all could get that back to me I 
would just love to know, out of curiosity.
    Madam Chair, I yield back.
    Chairwoman Maloney. Mr. Gomez, you are now recognized, and 
Mr. Gomez is the vice chair of this committee.
    Mr. Gomez. Thank you so much. Mr. Trudeau, I want to 
followup on something you said to Chairwoman Maloney when she 
asked you about the cash cow slide. Can we put up Exhibit 68 
again, please?
    [Slide.]
    Mr. Gomez. So, now let's just review this slide. It refers 
to Acthar as, and I am quoting from the title here, ``a cash 
cow.'' Now Mr. Trudeau when Chairwoman Maloney asked you about 
this you downplayed it. You said, ``Oh, it is just a draft and 
it was never sent to the board.'' You were pretty much implying 
that your companies doesn't view this drug as a cash cow. Do 
you still stick with the assertion that your company does not 
view Acthar as a cash cow? Yes or no.
    Mr. Trudeau. Yes, I do.
    Mr. Gomez. OK. Thank you. Are you familiar with the term 
``synonym.'' Synonym?
    Mr. Trudeau. Cinnamon?
    Mr. Gomez. Syn-o-nym. Yes, the term that basically refers 
to one word means the same thing as another word, right, or 
nearly the same thing. Are you familiar with that concept?
    Mr. Trudeau. I am, sir, yes.
    Mr. Gomez. OK. So, we obtained some emails that I want you 
to take a look at, and it is from your company's execs.
    In fact, one of these email chains, your corporate 
executives have a discussion about this exact term, and I 
quote, ``Do we really want to say 'cash cow' to the board?'' He 
obviously recognized how bad this sounds. So, then your 
company's chief commercial officer responds. In his own email 
he wrote, and I quote, ``Instead of 'cash cow' I will replace 
it with 'profit maximizer'.'' So, replacing one term with 
another term, ``cash cow'' with ``profit maximizer,'' doesn't 
change the intent of your company, which is to make as much 
money as possible, right?
    So, Mr. Trudeau, you were under oath when you answered 
Chairwoman Maloney's question. You swore to tell the truth and 
the whole truth. Were you trying to mislead the committee?
    Mr. Trudeau. Not at all. We don't think about Acthar in 
any----
    Mr. Gomez. OK. So, let me reclaim my time. Can we put up 
the next slide?
    [Slide.]
    Mr. Gomez. This is the actual slide that was sent and was 
included in the final presentation that was prepared for the 
board, and it includes the term ``profit maximizer.'' Do you 
deny that, Mr. Trudeau?
    Mr. Trudeau. No, I don't.
    Mr. Gomez. OK. So, that was the whole point that Ms. 
Maloney was trying to make, that your company is trying to 
maximize profits. Then you denied it, and then you downplayed 
this document. You said you removed the word ``cash cow,'' but 
there was no question that you were trying to maximize profits, 
right? ``Cash cow'' and ``profit maximizer,'' you just replaced 
one term with another, but the intent was the same, to make the 
most money.
    I think you owe the chairwoman and this committee an 
apology. How do you respond?
    Mr. Trudeau. Very clearly, sir, these were options that 
were being considered, but I think the actions are what you 
need to focus on----
    Mr. Gomez. No. I am going to reclaim my time.
    Mr. Trudeau [continuing]. And that is that we----
    Mr. Gomez. Do you--what--do you agree that the main 
purpose--your team replaced one term with another, right, one 
term with another, and it was the same intent, to maximize 
profit, right?
    I would like to put up--and your team, your company, has 
brought in nearly $6 billion in net sales from Acthar. I would 
like to put up Exhibit 76 on the screen, please.
    [Slide.]
    Mr. Gomez. The presentation emphasizes that the merge was 
a, quote, ``unique opportunity that should be pursued 
urgently'' because this deal would, quote, ``provide rapid 
revenue and earnings growth.'' In fact, soon after the 
acquisition your executives boasted about how well this 
strategy worked, highlighting to shareholders that Acthar had 
already contributed $123 million toward net sales in only six 
weeks. In an investor briefing in October 2014, Mr. Trudeau, 
you personally explained that your company's primary goal was 
to deliver, quote, ``top-level shareholder returns by focusing 
on highly profitable specialty drugs like Acthar.'' Do you 
recall saying that?
    Mr. Trudeau. I don't recall that specifically but it 
wouldn't surprise me that I did say that.
    Ms. Scanlon. Yes. And the reason why is that, you know, 
just changing the term from ``cash cow'' to ``profit 
maximizer'' doesn't change your intent. The intent of your 
company is not to help the bottom line of the health outcomes 
for the American people or for the public in general. It is to 
maximize your profits.
    Your company then proceeded--you already had this drug and 
it was already highly profitable, and then you proceeded to 
increase the drug by more than $82,000 per vial, an additional 
26 percent increase. So, I believe that you misled this 
committee, I believe that you owe the chairwoman an apology, 
and I believe that you owe the American people an apology as 
well.
    With that, Madam Chair, I yield back.
    Chairwoman Maloney. The gentleman yields back.
    Mrs. Tlaib, you are now recognized for questions.
    Ms. Tlaib. Thank you so much, Chairwoman. Let's talk about 
the sham patient assistance programs, which we hear a lot from 
companies like yours. I know because, you know, many of the big 
pharma companies use many of these programs in some ways to 
hike up prices so that they are completely unaffordable, and 
then they offer these charitable programs so that patients can 
afford the very drug you have made unreasonably expensive.
    So, these so-called fake assistance programs do not get 
into the underlying problem, and as many constituents tell us, 
which is that these drugs simply do not have to be expensive, 
that it is a choice, a choice that every CEO testifying today 
makes. And it is really a choice that is killing people, in my 
district and across the Nation.
    So, I know you all there are a lot of documents this 
committee has obtained. These are not things that are coming 
and falling out and these are not theories. They are all 
documentation that proves what we are trying to explain to all 
of you, is that these schemes, again, are hurting people. So, 
the internal documents obtained by this committee through the 
investigation show that these so-called sham--you know, they 
are sham charitable programs--are really just money-making 
schemes.
    So, let's start with Novartis' copay assistance program. In 
one of your response letters to the committee you stated that 
Novartis used its copay programs to, quote, ``ensure that every 
patient who needs Gleevec has access to it.'' Mr. Kendris, 
would you consider Novartis' copay and other patients 
assistance programs a financial investment or charity?
    Mr. Kendris. Congresswoman Tlaib, we are trying to make 
sure that patients can get access to Gleevec, so when they 
can't afford it, for whatever reason, we try and make it 
available----
    Ms. Tlaib. Sure. Sure.
    Mr. Kendris [continuing]. In a variety of different ways, 
and that is one of them.
    Ms. Tlaib. Yes. Well, let me--so the documents don't kind 
of match up what you are trying to say here. So, documents 
again obtained by the committee also show that Novartis viewed 
its copay programs as investment, and strategically--this is a 
scheme here--you all used it, the copay program, to drive 
demand for Gleevec, particularly after it began competing with 
generic versions of the drug.
    I would like to put up Exhibit 15 upon on the screen.
    [Slide.]
    Ms. Tlaib. So, it appears to be an analysis of when to 
launch the so-called enhanced copay program in anticipation of 
the generic competition. Can you see that, Mr. Kendris? I want 
to direct your attention to the table.
    Mr. Kendris. Yes. Hold on one second, Congresswoman. I am 
getting a paper copy of it because I don't see it very well on 
the screen. But I have it now. So, it says, I think on the top, 
I don't see it on the screen but is the one that you are 
referring to, does it say ``the optimal scenario is a six-month 
pre-LOE start''?
    Ms. Tlaib. That is right.
    Mr. Kendris. OK.
    Ms. Tlaib. So, Novartis expected that every dollar it put 
into the enhanced copay program--you know, the scheme--that it 
would get back a return or investment of between 5.1 and 8.9 
dollars. That means for every $1,000 put into this copay 
program, you would expect upwards of nearly $9,000 in profit. 
Am I reading that correct?
    Mr. Kendris. I am not sure, Congresswoman.
    Ms. Tlaib. Mr. Kendris, you are under--listen, you took an 
oath----
    Mr. Kendris. I am sorry.
    Ms. Tlaib [continuing]. To be very specific, you are seeing 
this as investment. In your own charts, from your own company, 
to this committee you are literally making $9,000 in profit 
when you insert $1,000 into these sham charitable programs.
    Mr. Kendris. Congresswoman, I am not sure I understand this 
chart the way you are describing it.
    Ms. Tlaib. OK. So, according to the slide----
    Mr. Kendris. Sorry.
    Ms. Tlaib [continuing]. According to the slide----
    Mr. Kendris. Yes.
    Ms. Tlaib [continuing]. The optimal scenario was to launch 
the copay programs six months before your company lost 
exclusive rights to the drug, and then a generic version would 
become available. That is because launching six months prior 
would result in the greatest return on investment by keeping 
patients on Gleevec before lower-cost generics entered the 
market. Does that sound right to you?
    Mr. Kendris. Congresswoman, I am looking at the chart, and 
I see what you are saying----
    Ms. Tlaib. OK.
    Mr. Kendris [continuing]. And I would like the opportunity 
to take this back and talk to----
    Ms. Tlaib. OK. Well, let's look at another document.
    Mr. Kendris [continuing]. At my oncology business unit. 
Yes. Sure. Thank you.
    Ms. Tlaib. In 2013, Novartis executives appeared to have 
conducted a literature review to consider enhancing its patient 
assistance programs, the scam. Let me put this document on the 
screen. It is Exhibit 14.
    [Slide.]
    Ms. Tlaib. I hope you can see that. As you can see, 
executives noted--it is highlighted there--that for patients 
that have higher copays there is a risk that they may not 
adhere to the drugs. But then the review reached this 
conclusion, quote, ``Because cancer drugs are a necessity for 
patients, there is less sensitivity to price increases.'' What 
this document is saying, basically, is that cancer patients 
will keep taking drugs, no matter the price, because they 
simply have no choice. Am I reading that correct, Mr. Kendris?
    Mr. Kendris. Congresswoman, the next sentence says 
something that I also think is a fact----
    Ms. Tlaib. Mm-hmm.
    Mr. Kendris [continuing]. That research shows that there is 
an upper limit of OOP costs at which patient adherence begins 
to decline. So----
    Ms. Tlaib. Well, you can try to mislead the public, but 
when it comes down to----
    Mr. Kendris. I am not trying to mislead. It is----
    Ms. Tlaib. Mr. Kendris, your own documents are basically 
saying, which is really sickening, that it doesn't matter 
because these are lifesaving drugs. Let's go ahead and increase 
the prices, even though you don't have to. You have increased 
the prices to make more of a profit off of people that are 
suffering from cancer. And all these scams and these, you know, 
so-called patient assistance programs that you mislead 
everybody into trying to look like good citizens, they are not. 
They are money-making schemes. And it is, again, verified over 
and over again in documentation provided to this committee.
    I yield.
    Chairwoman Maloney. The gentlelady yields. Thank you.
    Mrs. Porter, you are now recognized for questions.
    Ms. Porter. Thank you for being here. I want to hear today 
about innovation. As you know, this is our second day of 
hearings with the CEOs of big pharma companies, and we have 
heard so much important information about the very real costs 
of research and development, R&D.
    Mr. Bradway, what was Amgen's total revenue in 2017?
    Mr. Bradway. Oh gosh. Approximately $22 billion.
    Ms. Porter. OK. So, it was $23.7 billion. How about 2018?
    Mr. Bradway. I don't have that at hand but it again it 
would be 24----
    Ms. Porter. That is OK. I have it handy. $22.8 billion. 
2019, $23.4 billion. This totals up, because I know it is hard 
to do math on the fly, to $69.9 billion.
    Mr. Bradway. Thank you.
    Ms. Porter. Mr. Bradway, over those three years that we are 
talking about, 2017 to 2018, how much of its own revenue did 
Amgen invest in that really important research and development 
work?
    Mr. Bradway. Approximately $10 billion.
    Ms. Porter. OK. So R&D, taking you at your word here, was 
about $10 billion. Great. That is a big number. Investing in 
R&D dwarfs some of your other expenses. Is that right? It is 
one of your largest expenses.
    Mr. Bradway. That is correct.
    Ms. Porter. How much did Amgen spend on lobbying over that 
same three-year period?
    Mr. Bradway. I don't have the exact number but it is 
approximately $10 million a year.
    Ms. Porter. That is correct, $32.52 million on lobbying. 
How much did Amgen pay for the salaries of the top five, the 
top five executives over this two-year period?
    Mr. Bradway. Oh goodness. It is about, I would guess, $6.5 
million per year, so $13 million would be my guess.
    Ms. Porter. Thirteen million? Would you like to revise? 
Take a look right here, sir.
    Mr. Bradway. Sorry. You asked salary. I gave you an answer 
to the question about salary.
    Ms. Porter. Oh, I am sorry. Let me rephrase. How much did 
Amgen spend on compensation for the top five executives?
    Mr. Bradway. That is the number you have written on the 
board. Thank you.
    Ms. Porter. Could you say that number please, for the 
committee?
    Mr. Bradway. Yes. I will assume that your number is 
correct. It is $124 million.
    Ms. Porter. OK. Wonderful. And then my final question is 
how much did Amgen spend on stock buybacks in that same two-
year period?
    Mr. Bradway. Sorry. Two-year or three-year period?
    Ms. Porter. Right here. Three-year period. Sorry.
    Mr. Bradway. Three-year period. I don't know the number off 
the top of my head, but that includes the period where tax 
reform was implemented, so I would guess it on the order of $30 
billion.
    Ms. Porter. Right around this number. Can you say it for 
the committee? I am not a witness, sir, so I can't testify as 
to your profits. I need you to state the number.
    Mr. Bradway. The number that you have written is $28.6 
billion.
    Ms. Porter. Thank you. So, you spent double, more than 
double, almost triple on stock buybacks over the three-years as 
you did on R&D. Is my math correct? $10 billion is roughly one-
third of $28.6 billion.
    Mr. Bradway. Yes, but what you haven't included there is 
the capital that we allocated to acquire research and 
development externally, which would be about $19 billion in 
that period.
    Ms. Porter. OK. You make an anti-inflammatory drug called 
Enbrel, which is used to treat conditions like arthritis. Mr. 
Bradway, did Amgen do the research that led to the creation of 
Enbrel?
    Mr. Bradway. No, not the originally discovery, but we have 
done millions of dollars of work on----
    Ms. Porter. It is just a yes or no. Did you do the research 
that led to the creation of Enbrel?
    Mr. Bradway. Congressman, I stand by my answer. The Enbrel 
that you use, that patients use today, did we do the research 
and development work associated with it? Absolutely. Quite a 
bit of it.
    Ms. Porter. Did you yourself oversee the trials of the 
drug? Did any executive at Amgen help invent this breakthrough 
drug?
    Mr. Bradway. No, I did not. I was not involved in 
breakthrough development of the drug or the discovery of the 
drug.
    Ms. Porter. In fact, Enbrel was invented in an academic 
medical center, and its discovery was funded largely by 
taxpayers. Amgen later acquired the biotech company who 
manufactured Enbrel. Amgen did not directly pay for the 
discovery of Enbrel. Correct?
    Mr. Bradway. No, that is incorrect. Your statement is 
wrong. Enbrel was discovered by scientists at a biotechnology 
company called Genentech.
    Ms. Porter. OK. What I would like to do now, Mr. Bradway, 
is I would like for you to please explain to the American 
public why you and four other executives deserve to pay 
yourselves tens of millions of dollars each year. I have got an 
empty whiteboard ready to take down your justifications.
    Mr. Bradway. I recognize that that is a considerable sum of 
money. I would, of course, point out that I don't have any 
direct input to my compensation. That is derived by the board 
and it is forwarded to a vote of the shareholders, who 
overwhelmingly supported the compensation package for me and 
the other main executive officers.
    Ms. Porter. Reclaiming my time, sir. Do you not know why 
you are getting hundreds of millions of dollars, tens of 
millions of dollars a year? What is the justification? I would 
like to show the American people.

    Mr. Bradway. Our compensation is consistent with 
competitive positions at other companies like ours.

    Ms. Porter. Mr. Bradway, reclaiming my time. The other guy 
gets paid too much too isn't a justification. I would like to 
hear what you do to deserve $124 million in salary, you and 
your top five executives, over a three-year period.

    Mr. Bradway. Well, more than----

    Chairwoman Maloney. The gentlelady's time has expired. The 
gentleman may respond to her question.

    Mr. Bradway. OK. More than 90 percent of my compensation is 
based on performance measures that include how our shares 
perform relative to the market, and our compensation program is 
aligned with that of our owners, our share owners. So, a large 
part of my compensation reflects the fact that we have been 
creating value for our share owners by advancing innovative 
medicines like those that we have in the marketplace today.

    Ms. Porter. I wish you would focus on creating value for 
sick patients, Mr. Bradway, not just your shareholders. I yield 
back.

    Chairwoman Maloney. The gentlelady yields back.

    Mrs. Kelly, you are now recognized for questions. Mrs. 
Kelly?

    Ms. Kelly. Thank you, Madam Chair. I want to take a moment 
to address an argument we have heard a lot about today, that 
pharmacy benefit managers are responsible for rising drug 
prices. Mr. Trudeau, I would like to start with you first.

    The average net price per unit of Acthar, which is the 
price of the drug after subtracting all rebates and discounts 
has increased every single year since--I am not going to 
pronounce this right, but Mallinckrodt purchased Acthar. I 
would like to put on the screen a graph of the average net 
price per vial of Acthar between 2015 and 2018.

    [Slide.]

    Ms. Kelly. This graph was created using data your company 
provided to the committee. You can see on the chart that in 
2015, the average price was around $30,000, and in 2018 it was 
around $33,000, basically increasing by nearly $3,000 in three 
years, and that is after factoring in rebates and cost.

    Is it fair to say that Acthar's price increased at a faster 
rate than any discounts or rebates provided to PBMs or others 
in the supply chain?

    Mr. Trudeau. I don't believe that is true. We have actually 
increased discounting significantly to our customers well 
beyond the rate of increase that is shown there.

    Ms. Kelly. OK. In addition, data your company provided to 
the committee revealed that the rebates that paid Medicare for 
Acthar are practically nonexistent, in stark contrast to 
Mallinckrodt's documented efforts to perpetuate this misleading 
narrative. Excuse me. Between 2015 and 2018, the rebates that 
you paid to Medicare averaged less than one percent. By 
comparison, rebates paid to TRICARE for Acthar averaged more 
than 26 percent.

    So, turning to you, Mr. Bradway, U.S. net price of Enbrel, 
again, the price of the drug after subtracting all rebates and 
discounts, has also increased since 2014. The same is true for 
Amgen's drug, Sensipar. Even though rebates were stable, Amgen 
increased the price of Sensipar by 34 percent between 2015 and 
2018.

    And finally to you, Mr. Kendris, data provided to the 
committee reveals that between 2011 and 2015, the net price of 
your cancer drug, Gleevec, increased by double digits annually. 
At the same time, your data suggests that the rebates Novartis 
paid for Gleevec remained lower than big pharma would lead the 
public to believe. Between 2009 and 2015, before Gleevec lost 
exclusivity, the average of all discounts and rebates provided 
by Novartis related to Gleevec sale was just 15 percent of 
total gross sales.

    Let's be clear. PBMs certainly play a role in our current 
pricing system. We won't deny that. But based on the data we 
have received it is equally clear that pointing the finger at 
PBMs is a convenient way for drug companies to deflect blame 
for their own actions. So, it simply cannot be that it is just 
PBMs are responsible for all of these price increases.

    I don't know if anyone wants to comment on that.

    [No response.]

    Ms. Kelly. If not I will yield back my time.

    Chairwoman Maloney. The gentlelady yields back, and the 
chair now recognizes Mr. Comer for his closing comments.

    Mr. Comer. Thank you, Madam Chair, and I will be very 
brief. We have had two long days of hearings. Hopefully in the 
future we can come together, instead of identifying all the 
problems we can try to work toward some solutions to those 
problems.

    I want to mention that many of the problems that my friends 
on the other side of the aisle mentioned today can be solved in 
H.R. 19, our bill, the Republican bill. For example, 
Representative Wasserman Schultz mentioned several times the 
pay-for-delay settlement. You know, we don't like that. I don't 
think anybody likes that. That is bipartisan, and that is in 
our bill, H.R. 19. So, I think that there is an opportunity to 
work together on this issue moving forward, and I certainly 
hope that we can do that.

    With that, again, I appreciate the hearings that we had. I 
appreciate all the witnesses that came before us over the last 
two days, and hopefully we can work together moving forward, 
because this is an issue the American people are demanding 
Congress address. And I think that we can do that and I hope 
that moving forward we work in a bipartisan way to have 
solutions to the problems.

    I yield back.

    Chairwoman Maloney. The gentleman yields back, and I thank 
the gentleman, and I can assure you that my colleagues and I 
are open to working with you for solutions and solving this 
problem.

    But before I close I would like to enter into the record a 
letter to the committee received from the mayor of Rockford, 
Illinois, Thomas McNamara. The mayor's letter explains the 
various essential services that the city would have funded with 
the $500,000 that it spent on Acthar. He mentions installing 
350 streetlights, planting 2,000 trees, or replacing two miles 
of sidewalk.

    I ask unanimous consent to place this letter into the 
record. Without objection, so ordered.

    Chairwoman Maloney. With that let me close by thanking the 
six, all six of the CEOs who agreed to participate in these two 
days of landmark hearings. And I would like to thank the staff 
for all the work that they did in preparing these hearings.

    To me, the single most remarkable revelation coming out of 
these hearings is the claim by drug companies that they need to 
raise their prices for research and development or to promote 
innovation. This is completely and utterly false, it is 
baseless, and I think Ms. Porter underscored this is in her 
comments.

    The internal documents that we obtained show that the 
pricing discussions going on inside these companies have 
nothing to do with research and development or promoting new 
innovation. They show a meticulous, even ruthless focus on 
squeezing every possible dollar out of the pockets of the 
American people and the American taxpayers. Whether you call it 
a ``cash cow'' or a ``profit maximizer,'' it shows that these 
companies view these drugs as a profit basis, in profit-based 
terms, and that was clear in the documents we saw.

    I want to make clear also that these drugs are lifesaving 
and life-changing in many, many ways, and we are grateful for 
that. But we cannot let these drug companies continue to target 
our country, the United States of America, for the biggest and 
deepest price increases anywhere in the world.

    Not everyone knows this but we have a law on the books in 
this country that bars our country from negotiating directly 
with drug companies to lower prices for Medicare, one of the 
biggest drug purchasers in the world. Of course, the companies 
know this and they exploit it to the tune of hundreds of 
billions of dollars, and that is what these new documents 
showed.

    These companies make profits in Europe where they 
negotiate, in Canada, where they negotiate, and in all sorts of 
other countries that negotiate. But we, in America, we have our 
arms tied behind our back and we are not allowed to negotiate, 
to help our people, and that is not a free market. A free 
market is when two people or two parties come to a table and 
agree to a price one is willing to pay and the other is willing 
to accept. Our system is the opposite of a free market. It lets 
the drug companies increase their prices over and over and over 
again, dozens of times, by thousands and thousands of dollars, 
as we heard today and saw in the documents.

    This is absolutely unsustainable. We need to pass the 
legislation that Elijah Cummings championed and that President 
Trump used to support before he broke his campaign pledges. We 
finally need to let our government negotiate, just remove this 
block that does not allow us to be treated fairly. We are 
exploited in this system.

    Now I want to let members know that these two days of 
hearings will not be our last. We have heard testimony from six 
CEOs, but we have been investigating several other companies as 
well. So, I will keep members appraised of the additional 
hearings, potentially when we return in November and in 
December.

    And finally, I want to thank the members of our committee 
on both sides of the aisle. This is a critical issue for all of 
our constituents, and I believe all members demonstrated your 
command of the material and your desire and drive to help your 
constituents and to help the American people.

    I sincerely hope we can take these findings and move 
forward on real legislative changes to help American families 
together. And with these two days of hearings I again thank the 
staff that has worked incredibly hard on this, and this hearing 
is adjourned.

    [Whereupon, at 1:36 p.m., the committee was adjourned.]

                                 [all]