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


                  MAKING PRESCRIPTION DRUGS MORE AFFORD-
                   ABLE: LEGISLATION TO NEGOTIATE A BETTER 
                   DEAL FOR AMERICANS

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 25, 2019

                               __________

                           Serial No. 116-66
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


      Printed for the use of the Committee on Energy and Commerce
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                        energycommerce.house.gov
                        
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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-----------------------------------------------------------------------------------                         
                       
                    COMMITTEE ON ENERGY AND COMMERCE

                     FRANK PALLONE, Jr., New Jersey
                                 Chairman
BOBBY L. RUSH, Illinois              GREG WALDEN, Oregon
ANNA G. ESHOO, California              Ranking Member
ELIOT L. ENGEL, New York             FRED UPTON, Michigan
DIANA DeGETTE, Colorado              JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois             STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina    ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California          CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland           PETE OLSON, Texas
JERRY McNERNEY, California           DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont                 ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico            H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York                 GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice     BILL JOHNSON, Ohio
    Chair                            BILLY LONG, Missouri
DAVID LOEBSACK, Iowa                 LARRY BUCSHON, Indiana
KURT SCHRADER, Oregon                BILL FLORES, Texas
JOSEPH P. KENNEDY III,               SUSAN W. BROOKS, Indiana
    Massachusetts                    MARKWAYNE MULLIN, Oklahoma
TONY CARDENAS, California            RICHARD HUDSON, North Carolina
RAUL RUIZ, California                TIM WALBERG, Michigan
SCOTT H. PETERS, California          EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan             JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas                GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
                                 ------                                

                           Professional Staff

                   JEFFREY C. CARROLL, Staff Director
                TIFFANY GUARASCIO, Deputy Staff Director
                MIKE BLOOMQUIST, Minority Staff Director
                         Subcommittee on Health

                       ANNA G. ESHOO, California
                                Chairwoman
ELIOT L. ENGEL, New York             MICHAEL C. BURGESS, Texas
G. K. BUTTERFIELD, North Carolina,     Ranking Member
    Vice Chair                       FRED UPTON, Michigan
DORIS O. MATSUI, California          JOHN SHIMKUS, Illinois
KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland           H. MORGAN GRIFFITH, Virginia
BEN RAY LUJAN, New Mexico            GUS M. BILIRAKIS, Florida
KURT SCHRADER, Oregon                BILLY LONG, Missouri
JOSEPH P. KENNEDY III,               LARRY BUCSHON, Indiana
    Massachusetts                    SUSAN W. BROOKS, Indiana
TONY CARDENAS, California            MARKWAYNE MULLIN, Oklahoma
PETER WELCH, Vermont                 RICHARD HUDSON, North Carolina
RAUL RUIZ, California                EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan             GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire         GREG WALDEN, Oregon (ex officio)
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
LISA BLUNT ROCHESTER, Delaware
BOBBY L. RUSH, Illinois
FRANK PALLONE, Jr., New Jersey (ex 
    officio)
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     3
    Prepared statement...........................................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     5
    Prepared statement...........................................     7
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     8
    Prepared statement...........................................     9
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................    11
    Prepared statement...........................................    12

                               Witnesses

Robert Fowler, Ph.D., Professor Emeritus, Baldwin Wallace 
  University.....................................................    16
    Prepared statement...........................................    18
    Answers to submitted questions...............................   214
Benedic Ippolito, Ph.D., Research Fellow, American Enterprise 
  Institute......................................................    24
    Prepared statement...........................................    26
    Answers to submitted questions...............................   216
Gerard F. Anderson, Ph.D., Professor, Johns Hopkins Bloomberg 
  School of Public Health, and Director, Johns Hopkins Center for 
  Hospital Finance and Management................................    36
    Prepared statement...........................................    38
    Answers to submitted questions...............................   223

                           Submitted Material

H.R. 3, the Lower Drug Costs Now Act of 2019, submitted by Ms. 
  Eshoo \1\
H.R. 275, the Medicare Prescription Drug Price Negotiation Act of 
  2019,bmitted by Ms. Eshoo \1\
H.R. 448, the Medicare Drug Price Negotiation Act,bmitted by Ms. 
  Eshoo \1\
H.R. 1046, the Medicare Negotiation and Competitive Licensing Act 
  of 2019,bmitted by Ms. Eshoo \1\
Letter of September 19, 2019, from Nancy A. LeaMond, Executive 
  Vice President and Chief Advocacy and Engagement Officer, AARP, 
  to Mr. Pallone, et al., submitted by Ms. Eshoo.................   118
Statement of the AFL-CIO by Richard Trumka, President, September 
  19, 2019, submitted by Ms. Eshoo...............................   121
Letter of September 23, 2019, from Scott Frey, Director of 
  Federal Government Affairs, American Federation of State County 
  and Municipal Employees, to Ms. Eshoo and Mr. Burgess, 
  submitted by Ms. Eshoo.........................................   122
Statement of the American Hospital Association by Tom Nickels, 
  Executive Vice President, September 19, 2019, submitted by Ms. 
  Eshoo..........................................................   124
Statement of America's Health Insurance Plans by Matt Eyles, 
  President and Chief Executive Officer, September 19, 2019, 
  submitted by Ms. Eshoo.........................................   125
Statement of Families USA by Frederick Isasi, Executive Director, 
  submitted by Ms. Eshoo.........................................   126
Statement of Patients for Affordable Drugs Now, September 19, 
  2019, submitted by Ms. Eshoo...................................   128

----------

\1\ The legislation has been retained in committee files and also is 
available at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=110024.
Statement of Pacific Business Group on Health, September 19, 
  2019, submitted by Ms. Eshoo...................................   130
Statement of the Alliance for Retired Americans by Richard 
  Fiesta, Executive Director, September 19, 2019, submitted by 
  Ms. Eshoo......................................................   131
Statement of the California Medical Association by David H. 
  Aizuss, President, September 19, 2019, submitted by Ms. Eshoo..   132
Statement of the American Medical Association by James L. Madara, 
  Executive Vice President and Chief Executive Officer, September 
  24, 2019, submitted by Ms. Eshoo...............................   133
Statement of the UAW by Josh Nassar, Legislative Affairs 
  Director, September 24, 2019, submitted by Ms. Eshoo...........   134
Statement of 340B Health, September 25, 2019, submitted by Ms. 
  Eshoo..........................................................   136
Statement of the National Association of Chain Drug Stores, 
  September 25, 2019, submitted by Ms. Eshoo.....................   138
Letter of September 25, 2019, from Sheila M. Arquette, Executive 
  Director, National Association of Specialty Pharmacy, to Ms. 
  Eshoo and Mr. Burgess, submitted by Ms. Eshoo..................   144
Statement of American Society of Health-System Pharmacists, 
  September 25, 2019, submitted by Ms. Eshoo.....................   150
Statement of the National Grange, September 20, 2019, submitted 
  by Ms. Eshoo...................................................   154
Statement of Americans for Tax Reform, submitted by Ms. Eshoo....   155
Statement of the Partnership to Improve Patient Care by Tony 
  Coelho, Chairman, submitted by Ms. Eshoo.......................   157
Statement of RetireSafe by Mark Gibbons, President and Chief 
  Executive Officer, submitted by Ms. Eshoo......................   159
Statement of the Academy of Physicians in Clinical Research, 
  September 19, 2019, submitted by Ms. Eshoo.....................   160
Statement of the Council for Affordable Health Coverage by Joel 
  White, President, September 19, 2019, submitted by Ms. Eshoo...   161
Article of July 6, 2019, ``MPs to debate new drug after young 
  Heidi denied treatment,'' by Heather Large, Express & Star, 
  submitted by Mr. Upton.........................................   163
Fact Sheets, ``Marketing and Promotion of Medicines: 4 Things You 
  Need to Know,'' PhRMA, submitted by Mr. Upton..................   167
Article, ``What Industry Spends The Most On Research and 
  Development?,'' Craft, submitted by Mr. Upton..................   175
Statement of the National Community Pharmacy Association, 
  September 25, 2019, submitted by Mr. Welch.....................   180
Statement of the American Pharmacists Association, September 25, 
  2019, submitted by Mr. Welch...................................   182
Statement of Hon. Elijah E. Cummings, Chairman, House Committee 
  on Oversight and Reform, September 25, 2019, submitted by Mr. 
  Welch..........................................................   184
Article of July 18, 2018, ``Chinese blood pressure pills sold in 
  the U.S. recalled over cancer-linked ingredient,'' by Zhuang 
  Pinghui, South China Morning Post, submitted by Mr. Flores.....   186
Article of August 14, 2018, ``FDA Recalls: A Reminder that China 
  Controls Much of the World's Drug Supply,'' by Maggie Fox, NBC 
  News, submitted by Mr. Flores..................................   191
Article of November 19, 2018, ``Drug Recalls Put Spotlight on 
  Drug Supply Chains,'' by Matt Smith, WebMD, submitted by Mr. 
  Flores.........................................................   195
Article of January 14, 2019, ``Blood pressure drug recall: FDA 
  investigates foreign plants that made drugs with cancer-causing 
  impurities,'' by Ken Alltucker, USA Today, submitted by Mr. 
  Flores.........................................................   199
Article of January 30, 2019, ``How a Tainted Heart Drug Made in 
  China Slipped Past the FDA,'' by Anna Edney, Bloomberg, 
  submitted by Mr. Flores........................................   203
Article of September 23, 2019, ``FDA expands blood pressure drug 
  recall, again,'' by Sara G. Miller, NBC News, submitted by Mr. 
  Flores.........................................................   210
Article of September 23, 2019, ``More blood-pressure pills 
  recalled over cancer-causing chemical,'' by Kate Gibson, CBS 
  News, submitted by Mr. Flores..................................   212

 
 MAKING PRESCRIPTION DRUGS MORE AFFORDABLE: LEGISLATION TO NEGOTIATE A 
                       BETTER DEAL FOR AMERICANS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 25, 2019

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:29 a.m., in 
room 2322, Rayburn House Office Building, Hon. Anna G. Eshoo 
(chairwoman of the subcommittee) presiding.
    Members present: Representatives Eshoo, Engel, Butterfield, 
Matsui, Castor, Sarbanes, Lujan, Schrader, Kennedy, Cardenas, 
Welch, Ruiz, Dingell, Kuster, Kelly, Barragan, Blunt Rochester, 
Rush, Pallone (ex officio), Burgess (subcommittee ranking 
member), Upton, Shimkus, Guthrie, Griffith, Bilirakis, Long, 
Bucshon, Brooks, Mullin, Hudson, Carter, Gianforte, and Walden 
(ex officio).
    Also present: Representatives Soto, Schakowsky, Walberg, 
Flores, McKinley, Johnson, Latta, and Rodgers.
    Staff present: Jacquelyn Bolen, Counsel; Jeffrey C. 
Carroll, Staff Director; Waverly Gordon, Deputy Chief Counsel; 
Tiffany Guarascio, Deputy Staff Director; Josh Krantz, Policy 
Analyst; Una Lee, Chief Health Counsel; Aisling McDonough, 
Policy Coordinator; Joe Orlando, Staff Assistant; Alivia 
Roberts, Press Assistant; Samantha Satchell, Professional Staff 
Member; C. J. Young, Press Secretary; S. K. Bowen, Minority 
Press Assistant; Jordan Davis, Minority Senior Advisor; 
Margaret Tucker Fogarty, Minority Staff Assistant; Theresa 
Gambo, Minority Financial and Office Administrator; Caleb 
Graff, Minority Professional Staff Member, Health; Peter 
Kielty, Minority General Counsel; Ryan Long, Minority Deputy 
Staff Director; James Paluskiewicz, Minority Chief Counsel, 
Health; Kristin Seum, Minority Counsel, Health; Kristen 
Shatynski, Minority Professional Staff Member, Health; and Evan 
Viau, Minority Professional Staff, Communication and 
Technology.
    Ms. Eshoo. Good morning, everyone. The Subcommittee on 
Health will now come to order.
    The first thing I would like to begin with is all of us 
wishing our wonderful colleague, Congresswoman Matsui, a happy 
birthday.
    Happy birthday, Doris. Happy birthday.
    [Applause.]
    Ms. Eshoo. Happy birthday. Happy birthday. That really is 
sound applause on both sides, Doris. You're in good shape. 
You're in good shape. But we all know that. Blessings on you, 
our friend.
    I want to welcome everyone that's here in the audience. I 
see a lot of red shirts. I think that's all AARP. Thank you for 
being here and for your advocacy.
    The Chair now recognizes herself----
    Mr. Walden. Madam Chair?
    Ms. Eshoo. Yes.
    Mr. Walden. If I could just point briefly.
    Ms. Eshoo. Certainly.
    Mr. Walden. We have a number of Members on our side who 
want to waive onto the sub.
    Ms. Eshoo. Certainly.
    Mr. Walden. How should we accommodate that?
    Ms. Eshoo. Well, I don't think you need permission for 
that. They just need to--I think what we need to know is the 
order in which they arrived, and after all the Members--the 
rules of the full committee provide for following the----
    Mr. Walden. Right. Members on the sub to go first.
    Ms. Eshoo. All members of the subcommittee go first, and 
then the order in which they have arrived today I will 
recognize them.
    Mr. Walden. And then in terms of seating, I know we have--
this is a very small room that was chosen.
    Ms. Eshoo. Well, let's see if we can get some more chairs. 
Let's see if we can get some more chairs. If they don't want to 
stay for the whole----
    Mr. Walden. Should they ----
    Ms. Eshoo. If they don't want to stay for the whole hearing 
----
    Mr. Walden. Right.
    Ms. Eshoo [continuing]. They can come back. The staff--
committee staff----
    Mr. Walden. Well, I think they want to participate.
    Ms. Eshoo. Do you want to be here for the whole----
    Mr. Walden. Well, some will. You know, we have the other 
hearing going on downstairs on vaping at the same time----
    Ms. Eshoo. Right. Right.
    Mr. Walden [continuing]. Which is unfortunate. But----
    Ms. Eshoo. No, we will be happy to recognize them, and 
there are some reserved seats there it says for the press, but 
they haven't taken them. So----
    Mr. Walden. Well, that's--OK. I know you----
    Ms. Eshoo. OK. We will get--what was that again?
    OK. So the staff will make room for them----
    Mr. Walden. All right. Thank you.
    Ms. Eshoo [continuing]. And get name cards for them.
    Mr. Walden. Yes, that would be excellent. Thank you.
    Ms. Eshoo. Absolutely. Thank you.
    I want to thank the Members that are here today to waive 
on. I think it's an important rule of the committee, and I know 
that I have exercised it and it's an important rule of the 
committee. We want to accommodate you.
    So with that, the Chair now recognizes herself for 5 
minutes for an opening statement.

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

    Today, millions of Americans are fighting two battles: one, 
their illness, a condition that they may have, and the cost of 
their prescription drugs to address it.
    One in four diabetes patients ration their insulin. Twenty-
three percent of American seniors report difficulty affording 
their drugs, and 30 percent of Americans have skipped a dose 
due to cost.
    As a nation, we are paying three to four times more for 
these needed drugs than other countries. Every member of this 
committee, every single one of us, has heard from our 
constituents about the high cost of prescription drugs, and 
that is why we are beginning the journey today to address this 
issue in our country.
    We have a law in our country that prohibits Medicare from 
negotiating directly with drug companies--the only developed 
nation in the world with such a law.
    So that is why we are considering four bills to finally 
allow Medicare to negotiate drug prices. 1A\1\
---------------------------------------------------------------------------
    \1\ The proposed legislation has been retained in committee files 
and also is available at https://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=110024.
---------------------------------------------------------------------------
    Two of the bills--H.R. 3 and H.R. 448--limit the negotiated 
price to be in line with what other wealthy countries pay for 
their drugs.
    With these bills, Americans will no longer have to pay so 
much more for their prescription drugs than other countries. It 
is something that when people complain about the price, they 
always pose the question, Why is it that we pay so much more 
and the same drug is cheaper in other countries? It always 
attends that question.
    I think our constituents deserve a much better deal. 
Importantly, H.R. 3 prioritizes insulin as first on the list to 
be negotiated. Humalog, a common insulin, costs the average 
American $2,240 a year. If prices in the United States matched 
those in other countries, the same drug would cost Americans 
$347 a year, seven times less than it does now.
    Under H.R. 3, every American--this is a very important 
element of the legislation--every American, whether they are 
enrolled in Medicare or have private insurance, will have 
access to the lower prices.
    H.R. 3 also ensures seniors can afford their out-of-pocket 
drug costs, bringing those costs down to $2,000 a year from as 
much as $5,100 a year or more. This would be a godsend. This 
would be a godsend to people.
    H.R. 3 also stops drug price hikes like the ones we saw 
from EpiPen and Martin Shkreli's price hike of Daraprim. The 
bill says that if a manufacturer raises the price of any Part B 
or D drug, including generics, above the rate of inflation, the 
manufacturer must lower the price or pay the entire price above 
inflation back to the Treasury.
    When H.R. 3 was introduced last week, I read some of the 
comments from my Republican colleagues, and I want to address 
them head on.
    First, on bipartisanship--I want H.R. 3 to be a bipartisan 
bill because I want this bill--I want legislation to become 
law.
    Secondly, H.R. 3 includes many provisions that President 
Trump and other Republicans have publicly supported. It 
delivers on candidate Trump's support for negotiating drug 
prices.
    H.R. 3 also has a similar policy to President Trump's 
proposal to tie what Medicare Part B pays for prescription 
drugs to international prices.
    H.R. 3 shares provisions with Senator Grassley's drug 
pricing bill, including capping out-of-pocket costs for seniors 
and lifting price hikes to inflation.
    Second, Republicans say that this bill will stifle 
innovation and R&D. We all care about research and development 
and innovation because we want those miracle drugs to get to 
people.
    But if they can't afford them, they simply don't have 
access.
    Today, NIH spends more money on R&D than any single 
pharmaceutical company, and most big drug manufacturers spend 
more today on marketing, sales, and overhead than on R&D, and 
this is a change. At one time, that wasn't the case.
    Third, my colleagues call H.R. 3 socialism. That's the new 
buzz word. Did Republicans call candidate Trump a socialist 
when he said, quote, ``When it comes to negotiating the cost of 
drugs, we are going to negotiate like crazy''?
    Who here has not supported the VA's ability to directly 
negotiate drug prices? Congress unanimously voted--this is 
extraordinary--Congress unanimously voted to give the Secretary 
of the VA authority to negotiate in 1992, resulting in the VA's 
prescription drugs costing about 40 percent less than 
Medicare's.
    The cost of prescription drugs is an enormous burden for 
the American people, and I think it's time for us to level the 
playing field for them.
    [The prepared statement of Ms. Eshoo follows:]

                Prepared Statement of Hon. Anna G. Eshoo

    Today, millions of Americans are fighting two battles--
their illness and the cost of their prescription drugs. One in 
four diabetes patients ration their insulin. Twenty-three 
percent of American seniors report difficulty affording their 
drugs, and 30 percent of Americans have skipped a dose due to 
cost. As a nation, we're paying 3 to 4 times more for these 
needed drugs than other countries.
    Every member of this committee has heard from their 
constituents about out-of-control prescription costs. It's time 
to act.
    Today, a U.S. law prohibits Medicare from negotiating 
directly with drug companies, the only developed nation in the 
world with such a law.
    That's why we're considering four bills to finally allow 
Medicare to negotiate drug prices.
    Two of the bills, H.R. 3, the Lower Prescription Drug Costs 
Now Act, and H.R. 448, the Medicare Drug Price Negotiation Act, 
limit the negotiated price to be in line with what other 
wealthy countries pay.
    With these bills, Americans will no longer have to pay so 
much more for their prescription drugs than other countries. 
Our constituents deserve a much better deal.
    Importantly, H.R. 3 prioritizes insulin as first on the 
list to be negotiated. Humalog, a common insulin, costs the 
average American $2,242 per year. If prices in the U.S. matched 
those in other countries, Humalog would cost Americans $347 per 
year--7 times less than it does now.
    Under H.R. 3, every American, whether they are enrolled in 
Medicare or have private insurance, will have access to these 
lower prices.
    H.R. 3 also ensures seniors can afford their out-of-pocket 
drug costs. When many seniors live on an annual income of only 
$26,000, bringing out-of-pocket costs down to $2,000 per year 
from as much as $5,100 could be a godsend.
    H.R. 3 also stops drug price hikes like the ones we saw 
from EpiPen and Martin Shkreli's price hike of Daraprim. The 
bill says that if a manufacturer raised the price of any Part B 
or Part D drug (including generics) above the rate of 
inflation, the manufacturer must lower the price or pay the 
entire price above inflation back to the Treasury.
    When H.R. 3 was introduced last week, I read some of the 
comments from my Republican colleagues. I want to address them 
head-on:
    First on bipartisanship. I want H.R. 3 to be a bipartisan 
bill because I want it to become law.
    H.R. 3 includes many provisions that President Trump and 
other Republican have publicly supported. It delivers on 
candidate Trump's support for negotiating drug prices. H.R. 3 
also has a similar policy to President Trump's proposal to tie 
what Medicare Part B pays for prescription drugs to 
international prices.
    H.R. 3 shares provisions with Senator Grassley's drug 
pricing bill, including capping out-of-pocket costs for seniors 
and limiting price hikes to inflation.
    Second, Republicans say that this bill will stifle 
innovation and R&D. Today, NIH spends more money on R&D than 
any single pharmaceutical company, and most big drug 
manufacturers spend more today on marketing, sales, and 
overhead than on R&D.
    Third, my colleagues call H.R. 3 socialism. Did Republicans 
call candidate Trump a socialist when he said, ``When it comes 
to negotiate the cost of drugs, we are going to negotiate like 
crazy''? Who here hasn't supported the VA's ability to directly 
negotiate drug prices? Congress unanimously voted to give the 
Secretary of the VA authority to negotiate in 1992 resulting in 
VA's prescription drugs costing about 40% less than Medicare's.
    The cost of prescription drugs is an enormous burden for 
the American people and it's time to level the playing field 
for them.
    I yield my time to Representative Matsui.

    Ms. Eshoo. I now have the pleasure of yielding the 
remainder of my time to Congresswoman Matsui.
    Ms. Matsui. Thank you very much. So I get a little more 
time because it's my birthday, right?
    Ms. Eshoo. Absolutely.
    Ms. Matsui. Thank you, Madam Chair.
    There are many reasons to undertake this important work, 
none more important than the everyday stories from patients 
across the country dealing with high drugs costs, including 
seniors like Cynthia Stockton from Sacramento.
    A few years ago, she developed seizures and discovered a 
brain tumor. She's on Medicare, and without prescription drugs 
her body would shut down and she would die.
    The prescription she takes to treat her muscle spasms and 
seizures and boost her mental health cost a significant amount 
of money for someone on a fixed income.
    Seniors like Cynthia deserve better. They deserve 
affordable medication, and it underscores why we must get this 
right.
    I look forward to working to make that a reality. Thank 
you, and I yield back.
    Ms. Eshoo. The gentlewoman yields back.
    I was going to yield time to Congresswoman Kuster, but I 
don't have any more time. So--I don't. I know that. I just 
looked up at the clock.
    The Chair now recognizes Dr. Burgess, the ranking member of 
the Subcommittee on Health, for 5 minutes for his opening 
statement.

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

    Mr. Burgess. So my thanks to the chairwoman. We are 
convened here today to discuss the very important topic of drug 
pricing. Every one of us has heard passionate personal stories 
from our constituents about the ever-increasing costs of 
prescription drugs.
    So I am committed to addressing this issue and lowering 
out-of-pocket costs for patients. In fact, in December of 2017, 
as chairman of this subcommittee I asked our witness panel at a 
drug supply hearing not just to point out flaws, which they 
did, but to come to us--come to the table with solutions.
    Unfortunately, there wasn't a lot of coming forth with 
solutions. But still, we have pushed forward with discussions, 
most of the time bipartisan discussions, and legislation.
    Throughout last Congress and this Congress we have held 
thoughtful hearings with robust witness panels to offer 
analyses on different drug pricing problems and possible 
legislation.
    But this hearing seems to really come at us fairly quickly 
on a bill that was just released last week, and it does seem to 
be a partisan exercise on this topic today, and that's 
unfortunate.
    This committee has a history of working together to improve 
generic and biosimilar competition. For example, I worked with 
Chairwoman Eshoo on the Purple Book Continuity Act, which has 
passed the House, and I think we can both agree that this is a 
better bill because we shared our ideas and we worked together.
    Additionally, the House passed the CREATES bill. We worked 
on it last Congress, completed it in this Congress, and this 
will prohibit drug manufacturers from gaming the system by 
refusing to sell samples to generic manufacturers.
    CREATES will directly address the thalidomide issues that 
Dr. Fowler mentions in his testimony, and we need to build on 
that foundation to address other aspects of this market 
dynamic.
    Going forward, we should be able to continue a bipartisan 
dialogue instead of being shut out of our conversations 
altogether.
    I do support bipartisan solutions to lowering drug prices 
for American patients. I appreciate that in the past we have 
had bipartisan conversations about modernizing Medicare Part D 
in this Congress, including capping beneficiaries' out-of-
pocket costs.
    I would like to continue those conversations and welcome 
committee activity that enables productive discussions.
    H.R. 3 is a proposal that was drafted behind closed doors 
by Speaker Pelosi and her staff, and it is being forced through 
this committee by the chairman. This committee has a long 
history of working together to address complex issues in the 
healthcare system, including drug pricing.
    Until last week, that was the case in this Congress as 
well. This committee has fought over the years to achieve 
bipartisan success in establishing pathways for new and 
innovative drugs and cures to come to market and get into the 
hands of patients more quickly.
    Through FDA user fee reauthorizations and 21st Century 
Cures we have built a framework that spurs innovation to 
improve the health and well-being of the lives of patients and 
their loved ones.
    Earlier this year, we saw on a ``60 Minutes'' program where 
Dr. Francis Collins of the National Institutes of Health was on 
national television and used the word ``cure'' in referring to 
sickle cell disease.
    I can't tell you how stunning that was for me. The release 
of such great human suffering is priceless. Yet, we do need a 
21st century payment mechanism for our 21st Century Cures.
    We need to ensure that such payment mechanisms do not 
impede innovation. While we should ensure that the government 
money is spent wisely, that should not come at the cost of 
limiting patients' access to care.
    So, Doctor, I am uncomfortable with the idea of government 
action restricting patients' access to lifesaving medications.
    You know, back in the early days of my medical practice 
back in the 1980s--as doctors we like to sit around and gripe 
about stuff, and we did.
    So one of the things we griped about was the fact that 
there were treatments available in Europe that were not 
available in the United States.
    Now, thanks to the establishment of user fees and other 
significant work done by this committee, the Committee on 
Energy and Commerce, to clear that regulatory bottleneck and 
speed the drug approval process over the past four decades, now 
the situation is reversed.
    American doctors have more pharmaceutical tools available 
to treat their patients and alleviate human suffering than do 
their European counterparts.
    So we are going to hear a number of examples of that today. 
I certainly want to thank the committee for the work back in 
the '90s on the user fee agreements that led us to this point, 
and it is in that spirit of bipartisanship I hope we can go 
forward.
    After we have this hearing today and get it out of our 
system, we need to sit down and see if we can't do something 
that will be meaningful.
    [The prepared statement of Mr. Burgess follows:]

             Prepared Statement of Hon. Michael C. Burgess

    Thank you, Madame Chair. We are convened here today to 
discuss the important topic of drug pricing. Every one of us 
has heard passionate, personal stories from our constituents 
about the ever-increasing cost of prescription drugs. I am 
committed to addressing this issue and lowering out-of-pocket 
costs for patients. In December 2017 as chairman of this 
subcommittee, I asked our witness panel at a drug supply chain 
hearing to point out flaws in our system and come to the table 
with solutions. Unfortunately, there was a lack of solutions 
shared, but we still pushed forward with bipartisan discussions 
and legislation.
    Throughout last Congress and this Congress, we have held 
thoughtful, bipartisan hearings with robust witness panels to 
offer analyses of different drug pricing problems and 
legislation.
    Regrettably, we are holding a quickly assembled partisan 
hearing on this topic today.
    This committee has a history of working in a bipartisan 
manner to improve generic and biosimilar competition. For 
example, I worked with Chairwoman Eshoo on the Purple Book 
Continuity Act, which has passed the House, and I think we can 
both agree that this is a better bill because we shared ideas 
and worked together. Additionally, we have passed CREATES, 
which will prohibit drug manufacturers from gaming the system 
and refusing to sell samples to generics manufacturers. CREATES 
will directly address one of the Revlimid issues that Mr. 
Fowler mentions in his testimony, and we must build on that 
foundation to address other aspects of this market dynamic.
    I hope going forward, we will be able to continue a 
bipartisan dialogue instead of being shut out of conversations 
altogether.
    I support bipartisan solutions to lower drug prices for 
American patients. I also appreciate that we have had 
bipartisan conversations about modernizing Medicare Part D this 
Congress, including capping beneficiaries' out-of-pocket costs. 
I would like to continue those conversations and welcome 
committee activity that enables productive discussions.
    H.R. 3 is a proposal that was drafted behind closed doors 
by Speaker Pelosi and is being forced through this committee by 
the chairman. This committee has a long history of working 
together to address complex issues across the healthcare 
system, including drug pricing. Until last week, that was still 
the case this Congress.
    This committee has fought long and hard to achieve 
bipartisan success in establishing pathways for new and 
innovative drugs and cures to come to the market and get into 
the hands of patients faster.
    Through FDA user fee reauthorizations and 21st Century 
Cures, we have built a framework that spurs innovation to 
improve the health, well-being, and lives of patients and their 
loved ones.
    Speaker Pelosi said ``The issue of the cost of prescription 
drugs is one subject that can make grown men cry,'' but how 
about a cure for a life-threatening illness for your loved one? 
Earlier this year, Dr. Francis Collins of the National 
Institutes of Health went on national television and said that 
we have a cure for sickle cell disease. The relief of such 
great human suffering is priceless, yet we do need to have 21st 
century payment mechanisms for our 21st Century Cures, and we 
need to ensure that such payment mechanisms do not impede 
innovation.
    While we should ensure that government money is spent 
wisely, that should not come at the cost of limiting patients' 
access to care. As a physician, I am uncomfortable with the 
idea of government action restricting American patients' access 
to lifesaving medications.
    In the early days of my medical practice in the 1980s, I 
used to gripe with other doctors that there were treatments 
available in Europe that were not yet available in the U.S. 
Thanks to the establishment of user fees and other significant 
work done by the Energy and Commerce to clear the regulatory 
bottleneck and speed the drug approval process over the past 
four decades, American doctors now have more pharmaceutical 
tools available to treat their patients than those in other 
countries.
    I think I can speak for other Members of this committee and 
the American people in saying that we should work together to 
fix drug prices. Thank you, Madame Chair. I yield back.

    Mr. Burgess. Thank you, Madam Chair, and I will not take 
the additional minute and a half.
    Ms. Eshoo. I thank the gentleman.
    Dr. Burgess, my door is always open. We will honor regular 
order here, and I think that it's now time to recognize----
    Mr. Burgess. Just a----
    Ms. Eshoo. Certainly.
    Mr. Burgess [continuing]. Parliamentary--then can we 
anticipate a subcommittee markup before going to full committee 
markup?
    Ms. Eshoo. I believe so, yes.
    Mr. Burgess. All right. I'll take that as an assurance.
    Ms. Eshoo. I just want to add that H.R. 3 doesn't limit 
access of any drugs. There's no formulary. It's just a fair 
price.
    With that, I now would like to recognize the gentleman from 
New Jersey, the chairman of the full committee, Mr. Pallone, 
for his 5 minutes for an opening statement.

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

    Mr. Pallone. Thank you, Madam Chair.
    Today, we are beginning the process of finally giving the 
Federal Government the ability to negotiate lower prescription 
drugs prices for the American people.
    For years, Americans have been subsidizing prescription 
drugs for the rest of the world. Americans pay three, four, or 
10 times the amount what people in other countries pay for the 
exact same drug, and that's not fair.
    And today we are beginning the process of leveling the 
playing field by discussing four bills, including bills 
introduced by Representatives Doggett, Welch, and Cummings, who 
have sought to tackle prescription drug negotiation over the 
years.
    We will also discuss H.R. 3, the Lower Drug Costs Now Act, 
which I introduced last week with several other committee 
chairs. The legislation gives the Secretary of Health and Human 
Services the authority and the tools to negotiate the price of 
prescription drugs for all Americans.
    It ends the gouging of American consumers by establishing a 
maximum fair price on what we are willing to pay for 
prescription drugs based on what other countries are paying for 
the same drugs.
    It incentivizes manufacturers to stop unfair price hikes on 
Medicare beneficiaries by requiring them to pay a rebate back 
to Medicare if they increase prices faster than inflation, and 
it caps out-of-pocket costs of the Medicare prescription drug 
benefit, giving American seniors the peace of mind of knowing 
that their prescription drug costs will not bankrupt them or 
empty their retirement accounts.
    Now, I know Dr. Burgess said we are pushing this but, you 
know, Dr. Burgess, we are having a hearing today, and if the 
Republicans want to work with us on this proposal, they can.
    I mean, my concern--I have to be honest--is that when we 
passed Medicare Part D, and I was here, they insisted on 
putting this prohibition on the Secretary negotiating 
prescription drugs.
    That has to come out. There has to be a process of 
negotiating. Otherwise, I don't know how we are going to 
effectively bring prices down.
    So if you want to work with us, it's fine. But I think that 
this--getting rid of this clause that says you can't negotiate 
and having that as a basis of the legislation I think is 
crucial.
    And I remind them that the President recently indicated via 
Twitter that he welcomes what we put forth as Democrats.
    So let's get this done because it's time that we negotiate 
a better deal for the American people.
    [The prepared statement of Mr. Pallone follows:]

             Prepared Statement of Hon. Frank Pallone, Jr.

    Today, we are beginning the process of finally giving the 
Federal Government the ability to negotiate lower prescription 
drug prices for the American people. For years, Americans have 
been subsidizing prescription drugs for the rest of the world. 
Americans pay three, four or ten times the amount what people 
in other countries pay for the exact same drug. That's not 
fair, and today we are beginning the process of leveling the 
playing field by discussing four bills, including bills 
introduced by Representatives Doggett, Welch and Cummings, who 
have sought to tackle prescription drug negotiation over the 
years.
    We will also discuss H.R. 3, the Lower Drug Costs Now Act, 
which I introduced last week with several other committee 
chairs. This legislation gives the Secretary of Health and 
Human Services the authority and the tools to negotiate the 
price of prescription drugs for all Americans. It ends the 
gouging of American consumers by establishing a maximum fair 
price on what we are willing to pay for prescription drugs, 
based on what other countries are paying for the same drugs. It 
incentivizes manufacturers to stop unfair price hikes on 
Medicare beneficiaries by requiring them to pay a rebate back 
to Medicare if they increase prices faster than inflation. And 
it caps out-of-pocket costs in the Medicare prescription drug 
benefit, giving America's seniors the peace of mind of knowing 
that their prescription drug costs will not bankrupt them or 
empty their retirement accounts.
    It is time for Congress to take bold and decisive action to 
reduce prescription drug prices for all Americans. As President 
Trump himself said in his State of the Union address this past 
February, ``I am asking Congress to pass legislation that 
finally takes on the problem of global freeloading and delivers 
fairness and price transparency for American patients.'' That's 
the President earlier this year.
    I invite my Republican colleagues to work with us on this 
proposal and remind them that the President recently indicated 
via Twitter that he welcomes our ideas.
    Let's get this done because it is time that we negotiate a 
better deal for the American people.
    Thank you, I yield back.

    Mr. Pallone. And now I'd like to yield 45 seconds each to 
three of our Members. First, Mr. Welch, then Mr. Lujan, and 
then Ms. Schakowsky.
    So I'll yield 45 minutes to Mr. Welch, who's one of the----
    Mr. Welch. I'll take the minutes.
    Mr. Pallone. What? No, I mean, 45 seconds, because he's one 
of the sponsors of one of the bills.
    Mr. Welch. Thank you very much.
    This committee has to make a very simple decision: Will our 
Government be an advocate on behalf of consumers and taxpayers?
    Every other government in the world does it. Here, there is 
price setting. Opponents of this bill fear price setting. We 
have got price setting. It's by the pharmaceutical industry.
    This bill does four good things. Number one, it sets a cap, 
1.2 times. We are not going to be suckers, like the President--
President Trump said.
    Number two, it spreads the benefits across the entire 
marketplace. So private, employer-sponsored healthcare plans 
will benefit.
    Third, it'll save hundreds of billions of dollars, and it's 
about time.
    Number four, the savings go back into the Medicare plan so 
that folks who are paying high copays and deductibles are going 
to get some overdue relief.
    Let's pass this bill. Let's work together to make it 
happen. I yield back.
    Mr. Pallone. Thank you, and I yield 45 seconds to the 
gentleman from New Mexico.
    Mr. Lujan. Thank you, Mr. Chairman. I want to echo the 
words of my colleague, Mr. Welch. It's about time that we come 
together to get this done. Democrats and Republicans have been 
talking about lowering prescription drug prices for some time.
    During the last 2 years, you heard from everyone running 
for office that they were going to do something meaningful to 
require negotiation of prescription drugs to lower the costs, 
to make a difference for our constituents.
    After Speaker Pelosi rolled out this particular piece of 
legislation, one of the bills that's before us today, even 
President Trump found time to tweet, ``Good work, Nancy. Let's 
get this done.''
    Let's move this forward. There's a chance for us to work 
together. Let's require negotiated drug prices and lower costs 
for the American people.
    Plain and simple, let's get it to the President, get it 
signed into law, and make a difference for the people that 
entrusted us to get this done.
    I yield back.
    Mr. Pallone. I've got 30 seconds left for Ms. Schakowsky.
    Ms. Schakowsky. Thank you.
    I am so proud of this committee for leading the charge to 
finally allow for negotiation of prescription drug prices, 
which we have been trying to do since 2005 when Big Pharma 
tucked into that Part D bill a prohibition.
    Negotiation is the most effective way, and as we move 
forward, though, I have three suggestions. I'll do it as fast 
as I can.
    One, that we must ensure that this legislation addresses 
the issue of the typically skyrocketing prices of new drugs 
that are launched on the market.
    Second, we must ensure that the limited number of drugs 
that are eligible for negotiations--that we don't use that to 
be able to raise prices on other drugs.
    And third, I believe that we have to include other things 
like transparency in this legislation. I have a bill to do that 
so the drug companies have to explain their increases.
    And let me just also thank you for not including 
arbitration in this legislation.
    Mr. Pallone. And I yield back.
    Ms. Eshoo. The gentleman yields back.
    And now it's a pleasure to recognize the ranking member of 
the full committee, Mr. Walden, for his 5 minutes for opening 
statement.
    Mr. Walden. Good morning, Madam Chair.
    Ms. Eshoo. Good morning.

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

    Mr. Walden. There is no debate about the fact that 
Republicans and Democrats want to work together to lower drug 
costs for consumers.
    We also believe in innovation, and we believe in stopping 
bad actors.
    Madam Chair, I have to strongly express my great 
frustration about the decision to sabotage both the traditions 
of this committee and the bipartisan work that you know was 
well underway to tackle high-cost drugs.
    Our teams were working well together to find solutions that 
become law. They were negotiating, modernizing Medicare Part D, 
and then we went into radio silence.
    Under Chairman Upton's leadership and mine, we wrote 
durable laws together to increase innovation, to find cures to 
diseases, to stop scams by some companies that kept competition 
out of the marketplace.
    We all knew there was more work to do. We have worked in a 
bipartisan way, up until now, on those efforts. We did it on 
CREATES. We did it on pay-for-delay. We did it on blocking, and 
we were doing it on these other issues.
    I thought we were headed in good faith down that same path 
until the Speaker's office dropped this partisan plan on our 
process. We were not privy to any of this, and I am not sure 
you all were.
    Congress needs to work together with President Trump. I've 
never seen a President lean forward more on an issue like this 
than him, and we can agree and disagree with different points.
    But he wants to sign a bill that will work. Unfortunately, 
that's not what we are doing this morning. It's hard words for 
me to say because you are my friend. But this is partisan 
politics at its worst, and it's an avoidable failure--the 
failure to build on our bipartisan progress to lower 
prescription drugs for consumers.
    With a bipartisan, inclusive process, Republicans have 
worked with Democrats to push for legislation that promotes 
competition, that lowers out-of-pocket costs for consumers, and 
establishes transparency and accountability in drug pricing.
    We worked together to pass the 21st Century Cures 
legislation that's been referenced, and the FDA 
reauthorizations in 2017 that opened the door to more generics 
being approved in 1 year than in the history of the FDA, and we 
did that in a bipartisan way.
    In this committee we passed CREATES to stop bad behavior, 
and then the Speaker's office shoved in a poison pill to make 
Republicans vote no on the floor and did the same thing on the 
other legislation.
    Our work last Congress resulted in the FDA, as I said, 
approving a record number of generics, including the first 
generic competitor to EpiPen.
    My friend from Oregon, Mr. Schrader, helped lead that 
effort, so if you got a medical device where there's no 
competitor, we will put you at the front of the approval list.
    If you look over the past year and a half, the legislation 
that has become law and passed the House, our bipartisan 
policies have added up to $24 billion in savings to the Federal 
Government and lowered prices for consumers. And there's more 
we can do together if you'll come back to the table.
    Many may not know this but, before Speaker Pelosi began to 
write her partisan plan behind closed doors, Republicans and 
Democrats on this committee had been working together drafting 
policies in good faith, and we believed and the majority 
indicated we'd receive unanimous support in the committee.
    These policies essentially mirror about 90 percent of the 
legislation our colleagues in the Senate have been working on 
and about 92 percent of what the HELP Committee in the Senate 
was working on.
    We were very close. Some of these policies included immense 
benefit to our Nation's seniors in the form of modernizing 
Medicare Part D program, provide an out-of-pocket spending cap 
for seniors so you'd never--you'd always know what the limit 
was.
    But those bipartisan negotiations came to an abrupt halt. 
Why were you forced to walk away from the table? We wanted and 
still want to work with you in addressing this issue for the 
American people.
    But now we have before us a partisan plan that puts 
politics over progress. Are you even able to negotiate from 
here, or is it ``This is it, take it or leave it''? Are you 
willing to make substantive changes so we can reach bipartisan 
agreement, or is this the end? Check the box, score a point, 
move on?
    We don't know because you haven't told us, and frankly I am 
not sure you know yourselves. I think it's unfortunate you were 
forced to pursue the Speaker's strategy and not let our 
productive and bipartisan discussions continue. They stopped. 
They halted, and we all know it.
    When it comes to setting prices, I was on the committee 
when we passed Medicare Part D. It was a huge fight, it's true. 
And there was a decision made to establish the program the way 
it is, and Democrats did want to set prices. In fact, they 
wanted to put in statute--they wanted to put in statute the 
Part D premium and index it to inflation.
    Thirty-five dollars in '06. Had they done that, it'd be $46 
today. This week, Medicare announced the premium in 2020 will 
be $30 a month, not $35, and certainly not $46. About a third 
lower for seniors than if you'd followed the Democrats' plan to 
lock it in statute.
    There's a way to make the free market work for consumers. 
There's a way to save for seniors. We remain committed to doing 
that once this process plays itself out.
    I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared Statement of Hon. Greg Walden

    There is no debate about the fact that Republicans and 
Democrats want to work together to lower drug costs for 
consumers. We also believe in innovation, and we believe in 
stopping bad actors.
    Madame Chair, I have to strongly express my great 
frustration about the decision to sabotage both the great 
traditions of this committee and the bipartisan work that--you 
know--was well underway to tackle the high cost of drugs. Our 
teams were working well together to find solutions that could 
become law. They were negotiating modernizing Medicare Part D, 
and then we went into radio silence.
    Under Chairman Upton's leadership and mine, we wrote 
durable laws together to increase innovation, to find cures to 
diseases and stop the scams by some companies that kept 
competition out of the marketplace. We all know there is more 
work to do. We've worked in a bipartisan way, up until now, on 
those efforts. We did it on CREATES. We did it on pay-for-
delay. We did it on blocking, and we were doing it on these 
other issues.
    I thought we were heading in good faith down that same 
path, until the Speaker's office dropped this partisan plan on 
our process. We were not privy to any of this and I'm not sure 
you all were.
    Congress needs to work together with President Trump--I've 
never seen a President lean forward more on an issue like this 
than him. We can agree and disagree on different points, but he 
wants to sign a bill that will work.
    Unfortunately, that's not what we're doing this morning. 
These are hard words for me to say because you are my friends, 
but this is partisan politics at its worst and it's an 
avoidable failure. A failure to build on our bipartisan 
progress to lower prescription drug prices for consumers.
    With a bipartisan and inclusive process, Republicans have 
previously worked with Democrats to push for legislation that 
promotes competition, lowers out-of-pocket costs for consumers, 
and establishes transparency and accountability in drug 
pricing. We worked together to pass the 21st Century Cures Act 
in 2016 and the FDA Reauthorization Act in 2017 that opened the 
door to more generics being approved in 1 year than in the 
history of the FDA and we did that in a bipartisan way.
    In this committee, we passed CREATES to stop bad behavior 
and then the Speaker's office shoved in a poison pill to make 
Republicans vote no on the floor, and the same thing with other 
legislation. Our work last Congress, as I said, resulted in the 
FDA approving a record number of affordable generic drugs last 
year, including the first generic competitor to the EpiPen.
    My friend from Oregon, Mr. Schrader, helped lead that 
effort to say that if you have a medical device and there's no 
competitor, we'll put you at the front of the approval list.
    If you look over the past year and a half at the 
legislation that has become law and what has passed the House, 
our bipartisan policies have added up to $24 billion in savings 
to the Federal Government and lower prices for consumers. And 
there is more we can do, together, if you will come back to the 
table.
    Many may not know this, but before Speaker Pelosi began to 
write her partisan plan behind closed doors, the Republicans 
and Democrats on this committee have been working together, 
drafting policies in good faith that we believed, and the 
majority indicated, could receive unanimous support in the 
committee.
    These polices essentially mirror about 90% of the 
legislation that our colleagues in Senate Finance have been 
working on, and about 92% of what the HELP Committee in the 
Senate have been working on. We were very close. Some of those 
policies included immense benefit to our Nation's seniors in 
the form of modernizing the Medicare Part D program and 
providing an out-of-pocket-spending cap for seniors so you 
would always know what the limit was. But those bipartisan 
negotiations came to an abrupt halt.
    Why were you forced to walk away from the table? We wanted 
and still want to work with you on addressing this issue for 
the American people. But now we have before us a partisan plan 
that puts politics over progress.
    Are you even able to negotiate from here? Or is this it? 
Take it or leave it? Are you willing to make substantive 
changes so we can reach bipartisan agreement? Or is this the 
end? Check a box. Score a political point. Move on.
    We don't know because you haven't told us. Frankly, I'm not 
sure you know yourselves. I think it is unfortunate that you 
were forced to pursue the Speaker's strategy and not let our 
productive, bipartisan discussions continue. They stopped; 
they've halted. We all know it.
    Now, when it comes to setting prices, I was on the 
committee when we passed Medicare Part D. It was a huge fight, 
it's true. And there was a decision made to establish the 
program the way it is, and Democrats did want to set prices. In 
fact, they wanted to put in statute the Part D premium and 
index it to inflation--$35 in 2006. Had they done that, it'd be 
$46 today. This week, Medicare announced the premium in 2020 
will be $30 per month, not $35, and certainly not $46. That's 
about a third lower for seniors than if you had followed the 
Democrats' plan to lock it in statute.
    There's a way to make the free market work for consumers. 
There's a way to save for seniors. We remain committed to doing 
that, once this process plays itself out.
    I yield back.

    Ms. Eshoo. I thank my friend for his 5 minutes and 27 
seconds for his opening statement.
    I think that we all need to take a deep breath and really 
roll our sleeves up and look for the opportunities to work 
together.
    Mr. Walden. If the gentlelady will yield.
    Ms. Eshoo. No, let me finish what I want to say. I 
understand people wanting to characterize things the way they 
view them. You have every right to do that. This is regular 
order. This is a hearing. We have witnesses. We can question 
them.
    All ideas can be placed on the table. As I said in my 
opening statement, there are portions of H.R. 3 that include 
ideas from the White House, ideas from Senator Grassley, and we 
are going through regular order.
    So my door is open. I think all the Members know that. You 
know that, certainly, and there is a big difference between 
capping out-of-pocket costs and the actual price of 
prescription drugs.
    Mr. Walden. I am very well aware of that, and I agree with 
you.
    Ms. Eshoo. And we need to work together on that. So----
    Mr. Walden. Would the gentlelady yield?
    Ms. Eshoo. Yes, I guess--I don't have--I guess I can, 
right?
    Mr. Walden. Yes. I am glad--I know you, we have worked 
together on things. We have fought over things.
    Ms. Eshoo. Right.
    Mr. Walden. We have worked on things, and we have done it 
in good faith always, and I take you at your word. We will come 
through your door.
    Ms. Eshoo. Good. I welcome that.
    Mr. Walden. Because we were on a path--our teams were--and 
this got dropped. We had no notice. I mean, the hearing got 
noticed. We were told it was going to be on Thursday. It got 
moved to Wednesday. It got noticed late in the day before a 
draft of the legislation was even available. I hope you 
appreciate our frustration.
    Ms. Eshoo. You know what I don't want to do? I do----
    Mr. Walden. I yield back.
    Ms. Eshoo [continuing]. But I don't want us to get lost in 
the weeds of the yin and the yang. When we were in the 
minority, we would complain about what time and who filed and 
what we didn't know and who didn't tell us.
    Now the shoe is on the other foot. I am not saying that I 
prefer being in the minority. Trust me.
    Mr. Walden. But----
    Ms. Eshoo. But it is--you know----
    Mr. Walden. But I would--I would just----
    Ms. Eshoo [continuing]. We do get into that, but I think 
the main point----
    Mr. Walden. I would just--I know. Our teams were talking 
and meeting and working on language----
    Ms. Eshoo. And we will. And we will.
    Mr. Walden. And then it stopped.
    Ms. Eshoo. And I don't think--let me just say something 
about the Speaker's role in this.
    The Speaker is second in line in the Constitution to the 
presidency, whomever that individual is. This is such a top 
priority for us that it came from there. It came from there.
    Mr. Walden. My point.
    Ms. Eshoo. Now, that this is not--this is not to say that 
for the last two Congresses or three--five, six, seven years--
that Democrats haven't had a caucus on this, working on all of 
the ideas and bringing them forward.
    So parts of this bill are not brand new to us. It is a 
compilation, but I think that it's a serious undertaking for 
the people of our country. We want our economy to work. We want 
innovation to flourish. But we want people to be able to afford 
the drugs that they need. Some people can't live without them. 
So a price should not be a death sentence.
    All right. Now we are going to get back to----
    Mr. Bucshon. Madame Chairwoman?
    Ms. Eshoo. Yes.
    Mr. Bucshon. Can I ask a question?
    Ms. Eshoo. Sure. Who is seeking to be recognized? Sure.
    Mr. Bucshon. Since it appears that the chairwoman had extra 
time for her opening statement should the ranking member also 
get extra time----
    Ms. Eshoo. If he----
    Mr. Bucshon [continuing]. To clarify their comments?
    Ms. Eshoo. He did. He did. I recognized him.
    Mr. Bucshon. Right. But then you just now went on about a 
five-minute talk without----
    Ms. Eshoo. Well, let me ask you----
    Mr. Bucshon. At the discretion of the Chair, which you can 
do. But in fairness then the ranking member----
    Ms. Eshoo. Well, why don't you stop talking and I'll ask 
the----
    Mr. Bucshon. The ranking member should have time also.
    Ms. Eshoo. Would you like to say something else, Greg?
    Mr. Walden. I think I know how this plays out, and I think 
it's time we heard from our witnesses and moved on.
    Ms. Eshoo. OK.
    So now we will move to our witnesses, and we want to thank 
each one of you for being here today. I'll introduce all three 
now.
    Dr. Robert Fowler, thank you for being with us. He's 
professor emeritus at Baldwin Wallace University. Dr. Gerard 
Anderson, professor at Johns Hopkins Bloomberg School of Public 
Health--thank you for being here. And Dr. Benedic Ippolito, 
research fellow in economic policy studies at the American 
Enterprise Institute.
    Thank you to each of you for joining us today. We look 
forward to your testimony, and at this time the Chair will 
recognize each witness for your 5 minutes.
    I think you know the system with the lights. Green, 
obviously--we drive through green, right? Yellow, caution. Red, 
stop.
    So with that, I'll recognize Dr. Fowler for your 5 minutes 
of testimony, sir, and thank you again.

STATEMENTS OF ROBERT FOWLER, Ph.D., PROFESSOR EMERITUS, BALDWIN 
 WALLACE UNIVERSITY; BENEDIC IPPOLITO, Ph.D., RESEARCH FELLOW, 
 AMERICAN ENTERPRISE INSTITUTE; AND GERARD F. ANDERSON, Ph.D., 
PROFESSOR, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC HEALTH, AND 
    DIRECTOR, JOHNS HOPKINS CENTER FOR HOSPITAL FINANCE AND 
                           MANAGEMENT

             MDNM/STATEMENT OF ROBERT FOWLER, Ph.D.

    Dr. Fowler. Chairwoman Eshoo, Ranking Member Burgess, and 
members of the committee, I am honored to be here today.
    My name is Robert Fowler. I am here as an Ohioan, a 
religious studies professor, a husband, and a father. Most 
importantly for today, I am here as a cancer patient.
    In 2006 I was diagnosed with an incurable blood cancer 
called multiple myeloma. For the last decade, I have taken a 
chemo drug called Revlimid. The list price of that drug is 
almost $200,000 per year.
    My experience being a cancer patient has taught me two 
important lessons. First, since myeloma treatments inevitably 
stop working for patients, causing them to relapse, we 
literally need new drugs to stay alive.
    The importance of innovation is crucial to me.
    The second is that drugs don't work if people can't afford 
them. As a new Medicare beneficiary, I will pay, roughly, 
$12,500 a year out of pocket for my drug, Revlimid.
    There is one big reason my drug costs me and the system so 
much. Under current law, Medicare is prohibited from 
negotiating directly with my drug manufacturer. As a result, 
Americans pay two to three times more than other nations for 
the same drugs.
    Now, drug companies will tell you that they need high drug 
prices in order to fuel innovation. The brutal message implied 
in their ever-increasing drug prices is this: If you don't want 
to die, you must pay whatever we demand. That's simply not 
true.
    Here is why. According to the Washington Post, nine out of 
10 big drug companies spend more on marketing than research. 
Drug corporations' profit margins are almost three times the 
average of S&P 500 corporations, and we could go on.
    There is plenty of money to lower drug prices and fuel the 
innovation I need to stay alive. Generic competitors were 
supposed to lower the price of my Revlimid by now. But Celgene, 
the manufacturer of the drug, has stopped at nothing to extend 
its monopoly, blocking generic competition and suffocating its 
product in a pile of patents.
    And Revlimid could cost taxpayers an estimated $45 billion 
through 2028. I bring up this history to make the case that we, 
as taxpayers, must have a mechanism to push back.
    Patients like me need immediate congressional action. As 
you work to fix our broken system, I urge you to take three 
concrete actions.
    First, repeal the ban on Medicare negotiating directly with 
drug companies. According to the Kaiser Family Foundation, 86 
percent of all Americans--majorities of Democrats, Republicans, 
and independents--support allowing Medicare to negotiate for 
lower prescription drug prices.
    Second, ensure that Americans, regardless of insurance 
type, have access to lower priced drugs. Drug companies like 
Celgene should have to offer a better deal to people like me on 
a government health insurance plan as well as Americans who use 
private insurance.
    Finally, cap seniors' out-of-pocket costs for prescription 
drugs. Paying over $12,000 per year out of pocket isn't 
sustainable for seniors.
    It is not easy to live with an incurable disease. But I 
have no choice. The physical and mental toll of living with 
cancer is something I have to endure.
    You do not have the power to take away my cancer, nor do 
you have the power to make my personal struggles with this 
disease any easier.
    But you do have the power to make my prescriptions more 
affordable. I want to live many more years in spite of my blood 
cancer. To have a shot at that, I need two things: lifesaving 
drugs and an affordable price.
    Drug companies would have you believe that we must pick 
between innovation and affordability. I disagree. We can 
absolutely have both, and I am hopeful that after actions of 
this committee we will.
    Thank you for your time.
    [The prepared statement of Mr. Fowler follows:]
    
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Eshoo. Thank you, Dr. Fowler.
    What you said you wish for, we want to make your wishes 
come true. Thank you very much.
    I now would like to call on Dr. Ippolito and thank you for 
being here as a witness. You have 5 minutes to make your 
presentation to us.

              STATEMENT OF BENEDIC IPPOLITO, Ph.D.

    Dr. Ippolito. Well, Chairman Eshoo, Ranking Member Burgess, 
members of the subcommittee--Chairman Pallone and Ranking 
Member Walden as well--my name is Benedic Ippolito. I am an 
economist and research fellow at the American Enterprise 
Institute.
    Prescription drugs can offer tremendous benefit to 
patients. But they can also represent a major financial burden. 
So I am glad that the committee is considering this issue so 
seriously.
    Today, I am going to focus on two elements of recent 
proposals, namely, redesigning the Medicare prescription drug 
benefit, known as Medicare Part D, and allowing for direct drug 
negotiation.
    First, the design of the Medicare Part D benefit has 
attracted criticism for justifiable reasons. Its current 
structure both raises program costs, mainly to taxpayers, and 
exposes beneficiaries to the kinds of financial risks that 
insurance is supposed to mitigate--the kinds of financial risks 
that we literally just heard about.
    Proposed redesigns to Part D would reduce open-ended 
Federal spending, improve incentives to control overall costs, 
and place a cap on the maximum out-of-pocket spending of 
enrollees.
    I know there are some differences across the proposals 
we've seen in H.R. 3, what's come out of the Senate Finance 
Committee. But suffice it to say that there are enough 
similarities across them that I believe these are exactly the 
kind of policy changes that should be encouraged.
    I am, however, less enthusiastic about proposals to allow 
the secretary of HHS to negotiate drug prices.
    First, the penalties associated with walking away from 
negotiations are so severe, be it losing nearly all revenue or, 
literally, your intellectual property rights, that they are 
negotiations in name only.
    Practically, the Secretary of HHS is given power to dictate 
prices as they see fit. Regardless of what one thinks, this 
kind of centralized rate regulation is both challenging and 
highly consequential.
    Indeed, the economics literature has repeatedly shown what 
likely seems obvious. Financial returns for successful drugs 
has a direct influence on the research and development 
decisions of firms.
    Indeed, we've talked a lot about the introduction to 
Medicare Part D. There are, literally, studies that show the 
very introduction of the senior prescription drug benefit 
altered the kinds of drugs that manufacturers decided to invest 
in. Namely, they steered more investments to that particular 
market.
    I am particularly concerned because these kinds of pricing 
decisions are going to be made under intense political 
pressure.
    So, for example, in cases where administrations emphasize, 
shall we say, 4- or 8-year time horizons, there will be 
substantial pressure to sharply reduce current prices and enjoy 
the absolute benefit of lower drug spending while discounting 
the cost of reduced innovation that it's only realized beyond 
that kind of time horizon.
    This is not optimal for society. Moreover, consider the 
incentives associated with H.R. 3's negotiation process or 
rate-setting process.
    Drugs that have no competitors would be subject to 
aggressive rate regulation. However, the same is not true of 
drugs that have at least one competitor.
    Being second to market could prove substantially more 
profitable than creating a path-breaking therapy, particularly 
if we are thinking about rare diseases where it takes a 
relatively long time before we tend to see competitors come 
into the market. The markets just aren't that big.
    In addition, I worry about the unpredictability of such a 
system. Changes in the policy preferences of future 
administrations will likely manifest in highly variable rate 
regulation over time.
    One might, for example, predict considerably different use 
of this broad pricing power under an administration led by 
Senator Bernie Sanders than, say, by the Bush administration.
    This kind of uncertainty is very costly when we think about 
the kind of time horizons that somebody who's entering into 
either early-stage investment or even at the Big Pharma stage 
of investment is thinking about.
    You have to think about a decade-plus in advance. You're 
not going to know who's going to be President, who's going to 
be the head of HHS, what kind of policy priorities they're 
going to have, and so much more. That kind of uncertainty 
really is costly. That is a real cost that you have to think 
about.
    Altogether, I worry that the system will lead to outcomes 
that stray far from what is best for Americans. However, none 
of this is to say that drug prices must remain where they are. 
Indeed, they shouldn't.
    I applaud reforms to the Part B benefit design, and I 
encourage Congress to continue working to make our current 
regulatory environment work better.
    Examples of policy options include reforming the protected 
classes in Part D, removing incentives to prescribe higher 
costs in Medicare Part B, addressing REMS abuse that we talked 
about, the CREATES Act, reducing patent thickets or other 
generic delaying tactics, improving access to lower cost 
biosimilars, and so much more.
    Overall, this is a very important issue, and I thank you 
for the opportunity be here today, and I look forward to your 
questions.
    [The prepared statement of Mr. Ippolito follows:]
    
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Eshoo. Thank you very much, Dr. Ippolito.
    Our next witness is Dr. Gerard Anderson, and when I 
introduced him, you'll recall, he's a professor at Johns 
Hopkins Bloomberg School of Public Health. Welcome to you. You 
have 5 minutes to enlighten us. And that's quite a necktie 
there.
    Dr. Anderson. Well, this is my Johns Hopkins necktie.
    Ms. Eshoo. Oh, I see. See, I didn't see the bottom of it.
    Dr. Anderson. It's got a shape on it, too.
    Ms. Eshoo. I couldn't figure it out but it's----
    Dr. Anderson. So, you know, men don't have very much, so we 
only have ties.
    Ms. Eshoo. This is true. This is true. Yes, this is true. 
Welcome.

             STATEMENT OF GERARD F. ANDERSON, Ph.D.

    Dr. Anderson. Well, thank you for the opportunity to 
testify this morning, and thank you to Ranking Member Burgess 
for the opportunity 2 years ago to testify on the drug supply 
chains hearing.
    Rather than try to summarize my testimony today, I just 
want to focus on a couple of topics.
    Beginning economics tells you that, when there is 
competition, the market attains a reasonable price, and for 
many drugs there is reasonable competition and the market 
appears to work.
    However, for drugs, when there's no real competition, the 
prices are very high because the drug companies have all the 
power. In economics, we call this market failure.
    We did a study of 79 drugs in the United States without any 
generic competitions. These drugs represent about half of all 
Medicare spending, and they cost three to four times what other 
countries are paying.
    There was also significant variation across these drugs. 
Some of these drugs only cost 30 percent more than what other 
countries were paying. Some of them cost 7,000 percent more 
than what other countries were paying.
    We need to focus on where the market failure is greatest.
    We also found that drug prices go up in the United States 
after the drug launch and they go down in other countries after 
the drug launch. So some control over prices is absolutely 
necessary.
    Without a therapeutic alternative, drug plans in the 
Medicare program cannot bargain effectively. H.R. 3 focuses on 
these drugs without competition and where the spending is 
greatest.
    I also understand why it's so difficult for us to rely on 
prices set in other countries. We don't do this for other goods 
and services.
    However, it just doesn't make sense for us to pay three to 
four times what other countries are paying for the same drugs.
    I know that many of you are concerned that if we use 
international reference prices that the prices are going to 
increase in other countries. I am not concerned about that for 
a number of reasons.
    First, it assumes that the drug companies have the power to 
raise prices in other countries whenever they want. I doubt 
they have this power.
    Second of all, it assumes that drug companies are not 
already attempting to maximize their revenues in other 
countries. I just wouldn't want to be the French 
representatives for a drug company and say to my boss, ``Oh, we 
could have gotten higher prices on France but we are getting so 
much money in the United States that I won't bother.''
    That just won't happen.
    Third, many industrialized countries already use external 
reference prices, so that whole system is already baked into 
the system.
    And finally, and probably the most important, these 
countries already have mechanisms in place to obtain lower drug 
prices. These mechanisms are not going to change if the United 
States pays lower prices.
    I outline these things in the U.K., Japan, Germany in my 
testimony.
    I know that many of you are concerned about H.R. 3--about 
innovation. I've spent 37 years as a professor at Johns 
Hopkins, and I am totally in support of innovation.
    My expectation is that drug companies will continue to 
support research because, without research, drug companies 
don't have anything to sell. They must invest in research in 
order to have a product.
    Currently, the largest drug companies allocate more 
resources to marketing than they do to research. They spend 
less than 20 percent of their total revenues on research. This 
may need to change, and they may have to reallocate some money.
    Unfortunately, we may have to see fewer television 
commercials about drugs on television.
    It's unlikely that U.S. researchers will suffer if lower 
prices are paid for drugs. While drug companies may reward 
certain companies that pay higher prices for a drug on the 
margin, drug innovation occurs where the best scientists are 
located. The U.S. has some of the best universities in the 
world, and this is where the drug companies start.
    Increasingly, drug research is done first in academic 
medical centers, and then the drug companies purchase this 
research.
    A recent example of this pattern is the first hepatitis C 
drug. The initial research was done in Emory, funded by the 
NIH, and then Gilead purchased it.
    Most of the research that we see in the drug companies 
started at the NIH and at universities. The product--the 
funding for Januvia, one of the big drugs, was $277 million by 
the NIH, and they funded 93 different projects. Remicade, 
another one, $218 million, and NIH funded 454 different 
projects.
    If there are savings from H.R. 3, Congress will have an 
opportunity to improve the Medicare benefit. It's most 
important to limit the out-of-pocket liability of Medicare 
beneficiaries. Most private corporations have out-of-pocket 
limits. Medicare should.
    [The prepared statement of Mr. Anderson follows:]
    
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Eshoo. Thank you very much, Dr. Anderson.
    And now that our witnesses have all offered their 
testimony, the Chair recognizes herself for 5 minutes of 
questioning.
    Let me start with you, Dr. Fowler. You were the first one 
up, and besides being a doctor you're a patient and you spoke 
quite eloquently about your status as a patient.
    So remind us, what drug do you take?
    Dr. Fowler. I take Revlimid made by the Celgene 
Corporation.
    Ms. Eshoo. And does that drug have any competition?
    Dr. Fowler. No.
    Ms. Eshoo. No competition. I think it's important to note 
that H.R. 3 has 250 of the most expensive drugs in the United 
States that do not have any competition to be negotiated.
    Now, that's a very, very important point.
    So, Dr. Fowler, you can't go out and shop for what you need 
to stay alive any other place?
    Dr. Fowler. That drug is keeping me alive. I've taken it 
for 10 years, and it has worked wonderfully for me. I am 
reluctant to put that aside and go try something else when what 
I am taking is working so well. But the day will probably come, 
statistics would say, where I will fall off the cliff. My 
disease--I will relapse and I will need some other expensive 
treatment, so--but for the time being, Revlimid is doing 
wonderfully well for me. It's just a pity that I have to pay 
the price that I do for it.
    Ms. Eshoo. And how much did you say it was a year?
    Dr. Fowler. Golly, I took it for 10 years, paid for by my 
university's medical coverage, and now I am newly into the 
world of Medicare.
    Very quickly, for the 10 years that I took it under the 
university's health plan, it started out that my insurance 
company was paying $70,000 a year to cover the prescription.
    At the end of July, this summer, when I retired, my 
insurance company was paying $190,000 a year----
    Ms. Eshoo. Wow.
    Dr. Fowler [continuing]. To pay the cost of the drug.
    And, oh, by the way, that means over the 10-year period I 
calculate--this is a rough calculation, but I think it's fair--
I calculate that my insurance company paid, roughly, $1.4 
million to pay for my Revlimid.
    But that really----
    Ms. Eshoo. And I think that what needs to be built into 
this is the appreciation of what those costs mean when they're 
built in to other premiums for whomever is in that insurance 
pool. That is all part of it.
    Dr. Fowler. Exactly.
    Ms. Eshoo. Dr. Ippolito, what's your definition of a 
monopoly?
    I mean, I've looked it up. It's the definition is, the 
dictionary says, a commodity controlled by one party.
    Dr. Ippolito. That sounds right to me.
    Ms. Eshoo. Pardon me?
    Dr. Ippolito. Sounds right to me.
    Ms. Eshoo. It sounds right to you?
    Dr. Ippolito. Yes.
    Ms. Eshoo. Do you see any likeness of monopoly in terms of 
what we are talking about when you have the most expensive 
drugs in the country, and they have no competition?
    Dr. Ippolito. They have no competition because that's 
been--that's the policy. I mean, to be clear, one of the 
important things we want to ask----
    Ms. Eshoo. Well, we don't want that to be the policy, 
though. That's the point, isn't it? You don't want it to be the 
policy, do you?
    Dr. Ippolito. Well, but what we are proposing is to keep 
them ----
    Ms. Eshoo. No, but you want competition, do you not?
    Dr. Ippolito. I would eventually like competition.
    Ms. Eshoo. Eventually?
    Dr. Ippolito. There's a variety of ways--yes, that's right.
    Ms. Eshoo. When?
    Dr. Ippolito. Well, so just to back up, briefly----
    Ms. Eshoo. By when?
    Dr. Ippolito [continuing]. Dr. Anderson made the point 
that, you know, we are talking about a market failure here. To 
be clear, some of these are legislative monopolies. We give you 
a monopoly in order to incentivize you to make a product, and 
then the hope is, eventually, we'll have generic entry to 
reduce the long-run costs.
    And so part of the question that's really important for 
this discussion and H.R. 3 is, Why are these monopolies? Is 
this just a drug that's in the stage where we literally set up 
a monopoly for them, or is it that this a drug where, for 
example, they're using delaying tactics, patent thickets, and 
so on.
    Ms. Eshoo. Well, we have done legislation to clear out the 
underbrush on that. But I think that you're evading a larger 
point, and that is that, when you have one drug on the market, 
it's one of the most expensive, one of the top 250 drugs that 
do not have any competition, that we want to do something about 
that because when you have a monopoly people don't have 
choices, and Dr. Fowler is one of them.
    And it's very costly not only to him, to his insurance 
plan--his private insurance plan that he had through the 
university--and now through Medicare, which is a public 
insurance program.
    So we are talking about--this is a program to bring down 
the cost of drugs for patients, and in doing so it is to save 
money across the board because the legislation moves across the 
board.
    So I think we are both in sync on the issue of monopoly.
    My time is expired, and I will recognize Dr. Burgess for 
his 5 minutes of questioning.
    Mr. Burgess. Thank you, Madam Chair. And again, just to 
reiterate, the CREATES bill that we worked on last Congress and 
did pass this Congress still has not become law, but it does 
address the issue of getting samples, and the reason in the 
Revlimid instance, the reason the samples are difficult is 
because that medicine used to be known by another name, right? 
Revlimid was known by another name, and that name carried a 
connotation that people thought----
    Dr. Fowler. Oh, you mean the predecessor?
    Mr. Burgess. Yes.
    Dr. Fowler. Yes. It was preceded decades ago by 
thalidomide.
    Mr. Burgess. Right. So there was a----
    Dr. Fowler. It's a derivative of thalidomide.
    Mr. Burgess. There was a barrier and that had to be 
overcome, and we are grateful that someone did figure that out 
and overcome it, and you have it available.
    And now I think samples have been made available so at some 
point we will see some relief on this. But CREATES was designed 
to help that and move that process along.
    Dr. Ippolito, let me ask you a question. So America is 
known for innovation. We are all grateful for that. You know, 
we sat--well, actually, it wasn't a hearing. It was a briefing 
during the time leading up to the passage of the Affordable 
Care Act.
    And Doug Elmendorf came and sat in the big room downstairs. 
All the lights were off. There were no television cameras. 
There was no one transcribing the notes, and Dr. Elmendorf was 
asked how--and he's the director of the Congressional Budget 
Office--how much money are we going to get to spend now on 
other things that we are going to be saving so much money with 
this negotiation that we are doing.
    And I think his answer surprised some people. Since it 
wasn't on the record and no one could read about it, his answer 
was, it doesn't move the needle. And can you speak to that a 
bit? Is the situation different now, where the needle is now 
just freely to move up or down with----
    Dr. Ippolito. Yes. I think it's important to--based on, at 
least, the CBO numbers that I think you're referring to, it is 
the case that CBO generally has scored it that, if you just let 
Medicare kind of negotiate and say go get them, then you 
basically get no budgetary savings, and the reason is they 
don't really have any leverage to get anything unless you can 
actually exclude a drug, say, from a formulary, for example.
    But it's important to keep in mind that that's--that's a 
very different idea than what we are talking about in the kind 
of bills that we are considering today. I mean, the kind of 
bills we are considering today are, if you don't agree to the 
HHS Secretary's price, then either we confiscate your 
intellectual property or we fine you at 95 percent of your 
gross revenue, which is going to exceed 100 percent of your net 
revenue, basically, for all firms.
    I mean, you know, we are talking about two ends of a 
spectrum. One is sort of a toothless negotiation. One is just 
price setting. Like, you know, I don't want to get into 
semantics but it's just the HHS Secretary's price setting. And 
so, you know, the score you're talking about I would think of 
as being a totally end of the spectrum, other end of the 
spectrum than what we are discussing today.
    Mr. Burgess. And because this is more coercive, do you have 
an opinion as to how this could affect innovation?
    Dr. Ippolito. Well, I mean, I think the question about what 
happens with returns and investment behavior isn't really one 
that's up for debate, certainly directionally.
    We know--we've seen--when Medicare Part D was introduced, 
we saw drug makers change the kind of drugs that they invested 
in because there was this new big market of seniors who were 
going to be consuming more drugs.
    And so I don't think there's a lot of people that argue 
with that, right. We've seen--if you think about malaria, 
malaria kills half a million people a year, and compare that to 
gout, which is an uncomfortable kind of arthritic condition 
that you have in your joints, right?
    If we were thinking about just investing for pure social 
gains and for the good of the science, we've be investing like 
crazy in malaria. But yet, between 2004 and 2016, we saw about 
nine publicly registered trials for malaria and 239 for gout.
    And so this idea that there's no relationship between 
returns and what you invest in is kind of hard to believe. Rich 
people have gout. Rich people with insurance get gout. People 
who have malaria are poor, and they don't have coverage.
    So I think the direction is clear. The question and one of 
the big pieces of uncertainty is, Just how much is any given 
administration really going to put their foot down with this 
broad pricing power?
    Mr. Burgess. Well, let me just ask you a question on the--
because one of the course of aspects of H.R. 3 is the excise 
tax, and it's very complicated as you read through the 
language. I am still not sure that I understand it, how it's 
calculated.
    But is that--that excise tax does not get returned to the 
consumer, does it?
    Dr. Ippolito. Well, I mean, again, it's sort of--it's 
almost weird to think about this excise tax in the sense of a 
normal kind of a--a normal magnitude tax because you're 
literally talking about a tax that in this would very quickly 
escalate to about 95 percent of gross revenues. That's going to 
exceed 100 percent of the net revenues flowing to a firm for 
any given line of business.
    And so whatever passed through looks like or doesn't look 
like is almost irrelevant because you're really talking about a 
firm that just isn't going to be viable in that kind of 
environment.
    Mr. Burgess. Because of the confiscatory nature of the 
excise tax?
    Dr. Ippolito. Yes. It's just so large. Yes.
    Mr. Burgess. Thank you. And if the Chair needs the time, I 
will yield back.
    Ms. Eshoo. The gentleman yields back.
    Dr. Ippolito, just a factoid. NIH has invested zero in 
gout. NIH has invested $260 million for malaria.
    Now, who is next to be recognized? The chairman of the full 
committee, Mr. Pallone, is recognized for his 5 minutes of 
questions.
    Mr. Pallone. Thank you, Madam Chair.
    I wanted to ask Dr. Anderson--oh, he's over here--Dr. 
Anderson, single-source, brand-name drugs that lack generic 
competition represent one of the largest categories of drug 
spending growth in the Medicare Part D program.
    For example, in 2017, single-source, brand-name drugs 
accounted for almost three-quarters of total Part D spending, 
and these drugs are not only highly expensive, they also lack 
competition that helps drive down costs.
    Now, the Ways and Means Committee released a report earlier 
this week--dare I mention the name of the other committee--but 
they did release a report earlier this week that found that 
Humira, an anti-inflammatory therapy without a generic on the 
market and the best-selling prescription drug in the world, has 
doubled in price in the U.S. since 2012 and is currently priced 
at $2,436 per dose, or about 500 percent of the international 
average price.
    So, Dr. Anderson, you have also done extensive work 
comparing these sole-source, brand-name drug prices in the U.S. 
with the prices in other major economies.
    On average, how much more do consumers in the U.S. pay for 
these sole-source drugs than consumers in other large 
countries?
    Dr. Anderson. So they pay about three to four times as 
much, on average. There are some drugs that only are 30 percent 
more. There are some drugs that are 7,000 percent more.
    So it really depends on the drug and the market.
    Mr. Pallone. Now, can you give us an example of a brand-
name, sole-source drug that lacks any price constraints in the 
U.S. and what the same drugs cost in a country like Japan?
    Dr. Anderson. So sure. So the number-one-selling drug in 
2017 was Harvoni, which is a drug that takes care of hepatitis 
C. It was $1,100 per dose in the United States. It was $438 in 
Japan.
    Mr. Pallone. You know, I was in Japan a couples times in 
the last two years to see my son, who was teaching there, and I 
tried to, you know, do a little survey once at one of the drug 
stores, and I couldn't believe how much cheaper things were.
    So what is the reason why it's cheaper in Japan?
    Dr. Anderson. Well, Japan is very clever. What Japan does 
is there's a price, and then it goes around and asks the 
pharmacies, ``How much did you pay for the drug?,'' which is 
always less than the price that's set by the government.
    And so then they find that they bought it for 20 percent 
less or 10 percent less. And so then they say, ``Oh, we are 
going to set the price next year at that much lower price.''
    So every year in Japan the price goes down after the 
launch, and every year in the United States the price keeps 
going up. As your example with Humira says, the price doubles. 
In the United States, you can double the price. In Japan, you 
have to lower the price in order to sell your drug.
    Mr. Pallone. So, from your perspective, does using an 
average price across a certain subset of international 
countries, as proposed in my bill, does that provide an 
appropriate reference by which to compare U.S. prices?
    Dr. Anderson. Absolutely. I mean, I don't see any reason 
why we in the United States, which are funding most of the 
research and development, should be paying three to four times 
what other countries are paying for exactly that same drug.
    Mr. Pallone. Well, H.R. 3 contemplates the use of, and I 
quote, ``average international market price, or AIM price, to 
serve as a negotiation boundary for the Secretary.''
    Is the use of the AIM price similar to the international 
pricing index proposed by President Trump for Part B drugs, and 
is that an appropriate mechanism by which the Secretary should 
negotiate?
    Dr. Anderson. So President Trump did propose that. He uses 
it, and he uses about 120 percent of the price. So it's 
effectively the same idea applied to Part D as he applied to 
Part B, and almost every other industrialized country uses some 
form of external reference prices to set their prices. It might 
not be the only factor, but it's one of the most important 
factors they use to set their prices.
    Mr. Pallone. All right. Let me ask you this. It may be the 
last thing I get a chance to ask you. But can you respond to 
Mr. Ippolito's claims in his testimony that it would be too 
complicated to determine transaction prices in foreign 
countries as compared with the U.S. prices for this purpose?
    Dr. Anderson. Well, we were able to do it and publish them 
in the Journal of Health Affairs, so it's a peer-reviewed 
publication. We worked with the Ways and Means Committee to 
help them understand it. They were able to do it. Every single 
country that uses external reference prices is able to do it.
    I really do hope the United States is as smart as these 
other countries and as smart as I am.
    Mr. Pallone. All right.
    [Laughter.]
    Mr. Pallone. Of course--of course, you mentioned Ways and 
Means, too. I hesitate to mention the committee but, you know, 
that's my problem, not yours.
    Ms. Eshoo. Well, I think this is the sound of a very 
confident person----
    Mr. Pallone. Thank you. Thank you, Madam Chair.
    Ms. Eshoo [continuing]. To say that. Yes. Thank you.
    Now we'll recognize the ranking member of the full 
committee, Mr. Walden, for his 5 minutes of questioning.
    Mr. Walden. Thank you, Madam Chair. I appreciate that.
    Dr. Ippolito, as you know--as we all know--Medicare statute 
currently prohibits the Secretary from using cost-effectiveness 
thresholds to deny patients access to medical care.
    Is it correct that several of the countries referenced in 
H.R. 3 used cost effectiveness standards in their government-
run systems?
    Dr. Ippolito. Sure. Yes. Probably most famously the U.K.
    Mr. Walden. And is it also fair to say that fewer new 
medicines are available in those countries compared to the 
United States?
    Dr. Ippolito. In general, the United States gets drugs 
faster than other countries, and then there's a second way in 
which, you know, so the NHS or what is called NICE in England 
can decide whether or not to recommend covering a drug or not 
indefinitely. So the answer is yes.
    Mr. Walden. And what does this mean for patients in a 
country with hard-to-treat conditions for which new therapies 
are being developed every day?
    Dr. Ippolito. It means what it sounds like. You get the 
drugs slower, and sometimes you don't get the drug if it's up 
to a clinical effectiveness--effectively, an agency to 
determine whether that they think the drug is worth covering 
for the National Health Service in England. I am just using 
U.K. as an example here.
    Mr. Walden. Sure.
    Dr. Ippolito. And if they recommend against covering the 
drug--which last I checked is, I don't know, 10, 15 percent of 
the time--then unless they lower the price that the drug is 
just not covered.
    Mr. Walden. Just not covered. So, therefore, not available.
    Dr. Ippolito. Yes. In general, yes. Unless they lower the 
price.
    Mr. Walden. Yes. And in the U.K., do they ever deny parents 
the opportunity to take an ailing child out of the system to 
get treatment?
    Dr. Ippolito. I've read things about this.
    Mr. Walden. Have you read about Charlie Gard?
    Dr. Ippolito. I don't know enough about it to speak 
confidently on the matter.
    Mr. Walden. Yes. All right. Well, it happened.
    Walk me through on H.R. 3, the negotiation and how that 
works with the up to 95 percent confiscation of revenue if the 
company doesn't agree to what the government says the price is 
going to be.
    Dr. Ippolito. Sure. So there's a nominal negotiation, at 
least as I read it, where the HHS Secretary can propose a price 
to cover the drug. He----
    Mr. Walden. Any price?
    Dr. Ippolito. As long as it is lower than a maximum amount 
allowed international.
    Mr. Walden. Which is 120 percent of the IPI?
    Dr. Ippolito. Yes. That's exactly right.
    Mr. Walden. So the Secretary--if a drug was $100 under the 
International Pricing Index, could the Secretary of HHS say, 
``I am going to pay you $20''?
    Dr. Ippolito. I have not read anything that would preclude 
them from doing that.
    Mr. Walden. And if you're the drug company and you say, 
``Well, that doesn't even cost my operations--I don't know that 
I can do that''--what happens then?
    Dr. Ippolito. If you initially refuse the price, then you 
get fined 65 percent of your gross revenues and that----
    Mr. Walden. Gross revenues of the drug?
    Dr. Ippolito. Gross revenues I believe of the drug, at 
least in my reading and that's--yes.
    Mr. Walden. And that's the first year, right?
    Dr. Ippolito. And then escalates to 95 percent.
    Mr. Walden. Ninety-five percent----
    Dr. Ippolito. Yes.
    Mr. Walden [continuing]. Of the revenues. And you cannot 
sell that drug to anybody else at a price higher than what the 
government negotiates, correct?
    Dr. Ippolito. It is my understanding that you at least have 
to offer the HHS Secretary's price to everyone in the market.
    Mr. Walden. All right. Do you do economics?
    Dr. Ippolito. I do.
    Mr. Walden. Can you imagine a buyer being offered that 
price saying, ``No, I think I will take a higher price''?
    Dr. Ippolito. Generally, we do not believe that people----
    Mr. Walden. Generally?
    Dr. Ippolito [continuing]. Leave that much money on the 
table.
    Mr. Walden. Yes, I don't either. All right. All right.
    Look, we all want to get these prices down, but none of us 
wants to stifle innovation or access. For me, innovation and 
access is key, but so it price.
    To Dr. Fowler's comment, the drug you can't afford is a 
drug that you might as well not even have. That's why we were 
working on the out-of-pocket cap in Part D, and we were very 
close in our negotiations, and I think we can get there. I 
think we may still have the opportunity to get there.
    And we were trying to stop the bad behavior--the gaming of 
the systems, the REMS issue that, I think, all of you have 
mentioned at one time or another. We passed that out of here 
unanimously. There's so much we could do here.
    I was on the committee when we passed Medicare Part D and 
we had virtually an all-night markup, and it was a fight back 
and forth just over different philosophies.
    And as I mentioned earlier, Democrats had an amendment that 
Mr. Strickland offered that they unanimously passed to lock in 
the premium rate--$35 in statute plus--in statute and 
inflationary increase, which would have put it at $46 a month. 
Now--and now we know it's actually going to be below $35, which 
is what was said in '06.
    The other thing we had was CBO--the Congressional Budget 
Office--projected what they thought drug costs would be to the 
program, and I am told as of now it's about 33 percent lower 
than what CBO estimated. And so there are ways to get at this 
that would skin this cat--that would allow us to prevent the 
kind of out-of-pocket, extraordinary expenditures you're 
facing, Dr. Fowler, especially on Medicare.
    There are ways to increase innovation and put market forces 
in the right direction, and I stand ready to work with my 
colleagues to get that done, given the opportunity.
    And I yield back.
    Ms. Eshoo. The gentleman yields back.
    And now I would like to recognize the gentlewoman from 
California, our birthday person, Congresswoman Matsui.
    [Laughter.]
    Ms. Matsui. OK. Thank you. Enough about that.
    [Laughter.]
    Ms. Matsui. I want to thank all you witnesses for being 
here today. This is very, very important regarding the 
pharmaceutical prices.
    I want to ask a question about low-income Medicare 
beneficiaries because I believe they deserve special attention 
as we consider legislation to make prescription drugs more 
affordable.
    LIS enrollees--low-income subsidy enrollees--who take 
specialty tier drugs and receive Part D's low-income subsidy do 
not face the same financial hurdles associated with cost 
sharing.
    Nonetheless, many of these low-income seniors and persons 
with disabilities struggle to pay their health bills.
    Further, LIS beneficiaries continue to account for the 
majority of beneficiaries who reach the catastrophic phase of 
the benefit, and taxpayers bear much of the cost of treatment 
on premium and cost-sharing subsidies.
    Dr. Anderson, I know you can be very succinct, too. But 
with the savings generated from drug-pricing legislation, what 
steps should Congress take to reinvest savings in ways that 
improve the LIS program and allow the subsidy to reach more 
people?
    Dr. Anderson. Well, thank you, and happy birthday.
    Ms. Matsui. Oh, thank you.
    Dr. Anderson. So about a third of all Medicare 
beneficiaries right now qualify for LIS, and what that means is 
that they have, in many cases, not a very high burden to pay 
when they use their prescription drugs.
    But people who don't qualify for LIS are like Dr. Fowler, 
and they do. And so if there is money and drugs are so 
important to people so they can have them, and if you have a 
$2,000 out-of-pocket bill, that's probably 1 month of your 
Social Security income.
    Ms. Matsui. Mm-hmm. Right.
    Dr. Anderson. And so you're making a lot of very difficult 
choices. So if there is the possibility to do something, 
increasing the number of people that are eligible for LIS is 
very important. At the same time, the prices have to come down 
so that the Federal Government can afford to do that.
    Ms. Matsui. All right. Absolutely.
    I know we talked a little bit about list prices before. But 
as a committee we've been examining the market dynamics of the 
drug supply chain and how each part of the chain contributes to 
the end price the consumer pays.
    While price concessions in a supply chain ultimately 
distort the net price paid for a drug, a stark fact of the 
matter remains. Out-of-pocket costs are often based on a drug's 
list price, leaving beneficiaries directly exposed to price 
increases.
    Dr. Fowler, can you expand on why your out-of-pocket costs 
for Revlimid has increased dramatically now that you enrolled 
in Medicare? How does a Part D benefit differ from your 
employer plan when it comes to paying for high-cost specialty 
drugs?
    Dr. Fowler. How long do I have?
    [Laughter.]
    Ms. Matsui. Just, you know----
    Dr. Fowler. Ten years of experience on the private plan and 
almost 2 months under Medicare. So the differences that I am 
beginning to comprehend between the two systems are quite 
bewildering.
    My insurance company was paying a huge amount back when I 
was employed at the university.
    Ms. Matsui. Yes.
    Dr. Fowler. And I think I misstated earlier. They were 
paying $90,000 total when I started and $190,000 when I ended. 
What was my expense? My copay was almost negligible.
    In the end, my copay each time the prescription was filled 
was $45. So I was paying out pennies, and the insurance 
company--but, really, my colleagues at the university who were 
picking up the premiums----
    Ms. Matsui. Right.
    Dr. Fowler [continuing]. That's really who was paying the 
freight.
    Ms. Matsui. Well, is it the----
    Dr. Fowler. So I was paying almost nothing, and the 
insurance company, or, in fact, my colleagues, were paying a 
monstrous amount.
    But now I am in the world of Medicare. All of a sudden, my 
out-of-pocket expenses, $12,500 it looks like. I've had the 
prescription filled twice since I started the plan--the Part D 
plan. So----
    Ms. Matsui. OK. So your out-of-pocket costs are greater is 
what you're saying, right now? That's the difference?
    Dr. Fowler. Oh, considerably. I estimate it'll be $12,500 a 
year.
    Ms. Matsui. OK. OK.
    Dr. Anderson, drug companies have complete unilateral 
discretion to set their list price. Compared to the status quo, 
how will reassigning liability in Part D shift pricing 
incentives for manufacturers and impact overall cost to 
beneficiaries? I have about 25 seconds.
    [Laughter.]
    Dr. Anderson. Thank you. So Part B is one where, you know, 
you need to control the prices because the Medicare beneficiary 
pays some of that cost, and so right now there is--the drug 
companies can set whatever price they want for it.
    They're mostly biologics. They're mostly very expensive 
drugs. And so the Medicare beneficiaries are having to pay 
those costs. So setting some way to control the prices for 
those drugs is very important.
    Ms. Matsui. OK. Thank you, and I yield back.
    Ms. Eshoo. The gentlewoman yields back.
    It's a pleasure to recognize the former chairman of the 
full committee, Mr. Upton from Michigan, for 5 minutes of his 
questions.
    Mr. Upton. Well, thank you, my friend, and I just--I guess 
we could have made an opening statement written, but I am going 
to just say a few things.
    This is a really important issue. You know, drug prices 
impact every family. Everyone is concerned about it. We've seen 
all the stories. It has been for a while.
    And with a divided government, you have to work together to 
get things done, and this committee has had a long reputation, 
no matter who has been chair, to getting things done.
    And if you look back, when I was chairman one of the things 
that every one of us here worked on was 21st Century Cures, and 
I would say then that every Member on both sides of the aisle, 
in fact, had a piece of that bill. They could take credit for 
it.
    We all knew people in our districts, different associations 
that were involved in it, and it really made a difference and 
will continue to make a difference for a long, long time. And I 
think some of us know that Diana DeGette, who was my partner on 
this, we were working on a 2.0 bill. We are in the listening 
stage now to really look back and see where we can make it even 
work better for the different groups that are out there and, 
ultimately, do great things for our country.
    But the point I want to make is it was bipartisan. In fact, 
I actually stopped a markup--I think it was a full committee 
markup--just so that we could spend another day to make sure 
that everybody was on board, and of which they were when it 
passed 51 to nothing.
    So this is a big issue. We want to get something to the 
President's desk. We need to take regular order to make sure 
that we do that with more than just one hearing but make sure 
that we really do the process.
    So one of the things that helped drive me to lead the 
charge was this awful disease which, frankly, I had never heard 
of before or at least didn't know any victims of this disease 
called SMA--two beautiful little girls.
    We now have a drug that is going to, I think, work, and 
that drug--I saw a story--I am going to put this in the 
record--this is a story in the U.K. where this new drug for SMA 
in fact is being denied, which is really unfortunate.
    And I would like to think that as time moves on it will be. 
They'll allow it and one of the concerns that we have perhaps 
with H.R. 30, if this was put in, is that you would have 
drugs--you would restrict research and deny lifesaving drugs to 
whoever and really end up with something that none of us would 
want.
    So I guess my first question would be, Are there 
considerations in this bill to ensure that HHS would evaluate 
patient need in determining the cost value of the treatment? 
And maybe, Dr. Ippolito, if you might answer that.
    And then I have just another quick question before my time 
expires.
    Dr. Ippolito. In terms of what the HHS Secretary would 
evaluate it, based on my reading it was the cost of developing 
the drug, cost of making the drug, and then I believe it was 
therapeutic value relative to the other option. I don't think I 
read anything to your specific concern.
    Mr. Upton. OK. One of the issues that both Dr. Fowler and 
Dr. Anderson raised was the amount of money being spent on 
advertising and marketing versus research.
    I've got some different numbers than that. Again, I will 
put this in the record, but let me just share some of those 
numbers.
    PhRMA tells us that R&D--their companies spend $90.5 
billion on research and development, and the amount of money 
spent on marketing and promotion is $28.1 billion. So, in 
essence, a 3 to 1 margin of which that $28.1 billion only $6 
billion--only--but that goes to advertising, compared to the 
$90 billion, I will confess that.
    And there was a study that was done--again, I will put 
this--ask to put this in the record--with a good number of 
companies. I mean, they started with--at the top with Bristol-
Myers and Merck and Celgene and they go down the whole--you 
know, we have Boeing and Raytheon, AT&T, and it is--based on 
this table, the pharmaceutical industry spends considerably 
more not only in--well, at least in percentage of the revenue 
Celgene is 45 percent R&D versus Procter & Gamble just is 3 
percent. And I just--for your comments to say that they spend 
less than 20 percent of their revenues on research with more 
spent on advertising, where do you get those numbers?
    Knowing that my time has expired, I will let you answer.
    Dr. Anderson. So I can send you the information. I don't 
have it in front of me. But we took a look at their 
statements--their financial statements for the drug companies, 
and so we get just different numbers than they do.
    I will show you the numbers that we got and how we got 
them.
    Mr. Upton. Great. Yield back.
    Mr. Burgess. Did the gentleman have a unanimous consent 
request?
    Mr. Upton. I do, and I will----
    Ms. Eshoo. Placed in the record. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Upton. Thanks. Thank you.
    Ms. Eshoo. Happy to.
    For the record, in terms of the information that the 
Secretary makes a determination on, it is a list. It's relative 
to the direct negotiations, research and development costs, 
prior NIH funding support for discovery and development of the 
drugs, market, manufacturing, and distribution costs, patent 
exclusivity data, domestic and international sales information, 
FDA approval information on alternative drugs on market, 
clinical effectiveness analysis and data on alternatives, and 
other advancements in treatments. So that fills out the record 
on the question that the ranking member of the full committee 
posed.
    Now I would like to recognize the gentleman from North 
Carolina, Mr. Butterfield, for his 5 minutes of questions.
    Mr. Butterfield. Thank you very much, Madam Chair. Thank 
you to the three witnesses for your testimony today.
    Dr. Fowler, thank you for your story. My staff has been 
talking with me about your story, and just thank you so very 
much.
    Over the past years that I've been here in Congress--I 
believe it's about 15 years that I've been here and 12 years on 
this committee--I've heard so many people say that they cannot 
afford their prescription medication, both in Medicare and in 
private insurance, and that's just not acceptable.
    I have a lot of industry in my district, and I believe that 
innovation should absolutely be encouraged and rewarded. But, 
clearly, the American people need some relief.
    It's time for Congress to act in order to ensure the 
American people have access to and can afford the treatments 
that they need.
    And so, Dr. Fowler, I understand that in your testimony you 
say that under Medicare Part D you will spend over $12,000 a 
year on your medication. Is that correct, or is it $1,200? 
Twelve thousand dollars?
    Dr. Fowler. That's correct. Twelve thousand five hundred.
    Mr. Butterfield. OK. Can you discuss how capping out-of-
pocket expenses for prescription drugs will help individuals 
like you?
    Dr. Fowler. It would help all of us to sleep easier at 
night knowing that our financial situation is going to be 
manageable. This brand new world of retirement and living off 
of Social Security, Medicare, retirement savings is--I find it 
very precarious. I wish there were less anxiety and more 
confidence for the future.
    Mr. Butterfield. Well, thank you for that. It's what I 
wanted to hear, and thank you for putting that into the record.
    The legislation that we are discussing today will help 
lower the price of prescription drugs for millions of Americans 
and help ensure that we are getting the best deal on 
prescription drugs for our seniors, and so I sincerely thank 
you very much.
    Dr. Anderson, if I may please go to you. Thank you also for 
being here. It is unacceptable that Americans are paying on 
average three to four times more for their drugs than patients 
and our neighbors to the north, Canada, Germany, the U.K., and 
Japan, among others.
    I wanted to ask you about a particular drug that is vital 
to the health of my constituents in North Carolina and across 
the country, and that is insulin.
    Ten percent of North Carolinians have diabetes. In some 
counties in my district, almost 20 percent of adults have 
diabetes. The price of insulin has increased by 197 percent 
from 2002 to 2013.
    According to a study by Kaiser, total Medicare Part D 
spending on insulin has increased 840 percent from between '07 
and '17. These figures are shocking.
    Dr. Anderson, can you discuss why drugs such as insulin 
cost so much in our country? It's my understanding that six of 
the seven noninsulin medications used to treat type 2 diabetes 
are priced 600 to 1,100 percent higher in the U.S. than other 
nations. Help me get my hands around this.
    Dr. Anderson. Certainly. So the first thing to recognize is 
that there are only three manufacturers in the country for 
insulin drugs. So there's not a lot of competition.
    Second of all, the competition is in a very strange way. 
It's much like my iPhone. Essentially, I have an iPhone 10. We 
are about to be able to get an IPhone 11. It's going to add 
another $1,000 if I wanted to buy it.
    What happens with insulin is they keep changing the product 
a little bit, either the way it gets distributed or it's a 
faster release or something like that, and then they can charge 
even more than they did yesterday.
    And so what they are doing is slightly changing the product 
or the distribution in order to raise the price, and since 
there's only three of them selling it, that's the system that 
they're using.
    Mr. Butterfield. Is it correct then to say that insulin 
medications contribute significantly to Medicare spending on 
prescription drugs?
    Dr. Anderson. Well, I mean, so many people have diabetes 
that, of course, it has a huge impact on the spending in the 
Medicare program, and the Medicare program is the one that's 
paying most of those bills.
    Mr. Butterfield. Which contributes to the deficit, which 
contributes to the debt.
    Dr. Anderson, can you discuss why requiring the Secretary 
to negotiate on a small number of drugs including insulin would 
help lower prescription drugs costs?
    Dr. Anderson. Well, it would be simple because there's a 
number of drugs, somewhere less than a hundred, where the 
prices are three to four times what other countries are paying, 
and the PBMs that are trying to negotiate these prices don't 
have any negotiating power. They have negotiating power when 
there's two drugs available and they can play one off against 
the other. When there's only one drug, there's no ability to 
play one off against the other.
    Mr. Butterfield. Thank you very much.
    Madam Chair, I yield back.
    Ms. Eshoo. The gentleman yields back.
    Pleasure to recognize the gentleman from Illinois, Mr. 
Shimkus, for his 5 minutes of questioning.
    Mr. Shimkus. Thank you, Madam Chair.
    Ms. Eshoo. And we are really sorry about this announcement 
that you made.
    Mr. Shimkus. All right. It's a long way off. You guys are 
stuck with me for months.
    Ms. Eshoo. I don't know what got into you, but anyway----
    Mr. Shimkus. Freedom. Freedom.
    [Laughter.]
    Mr. Shimkus. Thank you, Madam----
    Ms. Eshoo. We are going to come to Illinois and have lunch 
with you.
    Mr. Shimkus. Thank you, Madam Chair.
    A couple things. Great hearing. This is a debate that I've 
been involved with now 23 years, and I am sure we'll continue 
to have this debate for 23 more as everything evolves.
    Dr. Ippolito, let me first go in response to another series 
of questions that you already received. What are your thoughts 
on the feasibility of HHS being able to correctly come up with 
a reference price for countries named in H.R. 3?
    Dr. Ippolito. So yes, I am considerably more pessimistic 
than Dr. Anderson just because there's a few things to keep in 
mind. First off, yes, some other countries use reference 
prices, but nobody matters nearly as much as the United States 
with the global market for pharmaceuticals.
    According to IQVIA, we spend something on the order of the 
same amount as the rest of the top 10 spending countries in the 
world. That's not something to celebrate, but that's something 
that you have to acknowledge, which means that when it comes to 
behavior of sovereign nations, as it were, that what we do 
really matters in a different way. And so what's going to 
happen is that drug makers are going to take all sorts of 
strategic actions. They're going to try and get into deals with 
countries to engage with these off invoice-type pricing 
discounting behavior. We are going to see efforts to offer 
special package size, dose size, administration route 
combinations in certain reference countries, and not offer them 
in the United States.
    Mr. Shimkus. So you're telling me it's going to be 
difficult to do, from your perspective?
    Dr. Ippolito. There's a reason that, the Speaker wrote, we 
are going to use the net price of a country ``if practicable.'' 
It's because it's not easy.
    Mr. Shimkus. OK. Thank you.
    Dr. Fowler, welcome. I think we all deal with cases like 
yours. Prior to Medicare Part D, what would our out-of-pocket 
costs be today?
    Dr. Fowler. When I was back on the private----
    Mr. Shimkus. No. No. No. Just, say, if you're in the same--
if you were in the same position you are today and we didn't 
have--you know, there was a time we didn't have Medicare D. I 
don't know if you knew that. What would be your burden?
    Dr. Fowler. I don't know.
    Mr. Shimkus. Well, what's the--what's the cost--the basic 
cost of the drug?
    Dr. Fowler. What's the market----
    Mr. Shimkus. What's the market value of the drug without 
any negotiation?
    Dr. Fowler. The retail price is about $200,000 a year.
    Mr. Shimkus. So that would be your out-of-pocket cost?
    Dr. Fowler. I suppose.
    Mr. Shimkus. Yes. So, I mean, it's good to have experience 
and be around here a little bit because, prior to Medicare D, 
there was no help for prescription drugs for seniors under 
Medicare. Nothing.
    AARP is here. They were there. They were part of the 
negotiations and, in the end, they supported the Medicare D 
proposal.
    But pharmaceuticalogically or whatever, the world has 
changed too. In those days, we had basic chemical formulations. 
Now we have biologics. Now we have this--these massive costs.
    So in that language, when you get outside of the protected 
area it's 5 percent of the cost of the drug, and I think if 
anyone's talking to their constituents--I remember going to 
Olney, Illinois, which is the home of the white squirrels, and 
before a dinner--it's in the beautiful 15th Congressional 
District. We have white squirrels there. And I met with a 
constituent who was outside paying similar costs to you, Dr. 
Fowler, on a lifesaving drug. And I think part of our debate 
and concern is that we want to have those drugs available. So 
we've got to fix this. And so I think there's places where we 
can go on, you know, capping out-of-pocket costs in the 
extension to this new world of biologics. So I think there's 
a--I just think there's a lot of things to do. We are--I think 
I can talk for Republicans, basically--are really concerned 
about Government creating a formulary in prices. I remember 
small drug companies coming in. Raised $10 million to find a 
cure. Going back to their investors and say, ``We are almost 
there, we need $10 million more.'' Under this new H.R. 3 
proposal, Dr. Ippolito, would you see any venture capitalists 
or anybody really doing that anymore?
    Dr. Ippolito. So this is actually one of the biggest 
misconceptions about how R&D works in the pharmaceutical space.
    I think there's this idea that this is the purview of Big 
Pharma. You make a drug. You go back to the chemist and you 
say, ``OK, mix something up again.'' That's really not how this 
works. What you really have is early-stage investment is, 
largely, funded by venture capital firms and is done by small 
biotechs, and those venture capital firms don't have any 
allegiance to the drug market. They're just as happy to invest 
in a new scooter, you know, rental app or whatever.
    So, you know, we do have to keep in mind----
    Ms. Eshoo. Well, I think my VCs are going to have a problem 
with what you just said, but go ahead.
    [Laughter.]
    Dr. Ippolito. No, there's too many scooter rental companies 
already. But the point is that the capital is very mobile, and 
that is the thing to keep in mind.
    Mr. Shimkus. My time has expired. So with that, I will 
yield back. Thank you, Madam Chairman.
    Ms. Eshoo. The gentleman yields back. It's important to 
note that there are no formularies in H.R. 3, and the issue of 
whether patients will have access to the medications that they 
need in Medicare--Medicare is going to continue to cover all of 
the drugs that it does today. The bill does not stop Medicare 
from covering prescription drugs or limit patient choices, and 
I think that that is--that's front and center for seniors. So 
that's why I am adding it to the record.
    I now would like to recognize the gentlewoman from Florida, 
Congresswoman Castor, for 5 minutes of questioning.
    Ms. Castor. Thank you, Chairwoman Eshoo, for holding this 
very important hearing on how we make prescription drugs more 
affordable.
    There is a celebrity here in the audience. Probably the 
most famous, the top consumer advocate from the State of 
Florida, Jack McCray, who works for the AARP, is in the 
audience. Jack, thank you very much for being here. He's worked 
on these issues for years and years, and I am grateful that 
this committee is--finally, we have in our sights some terrific 
legislation to finally take on Big Pharma and to do everything 
we can to lower prescription drug prices.
    Dr. Fowler, your written remarks where you say what the 
drug companies really think is, ``Pay us or you will die.'' 
Well, hopefully, we pass these bills out and those days will be 
over.
    And I also want to compliment my colleague and friend, 
Peter Welch, who has worked for many, many years on negotiating 
drug prices through Medicare. I have been allied with 
Representative Welch for many years, and, Peter, I appreciate 
your leadership on this.
    Let's get into the details a little bit on this. Under 
current law, the Secretary of HHS is prohibited from 
interfering with the negotiations between drug manufacturers 
and pharmacies and prescription drug plan sponsors. That's kind 
of un-American, isn't it? We just say you can't negotiate.
    This clause is often referred to as the noninterference 
clause of the Medicare Part D statute. It was enacted in 2003 
at the time that Medicare Part D was approved.
    Since the implementation of the Medicare Part D program, 
Medicare spending for Part D has increased from $46 billion in 
2007 to about $80 billion in 2017, for an average annual growth 
of 5.6 percent.
    Additionally, the Congressional Budget Office has 
determined that, for Part D beneficiaries, our neighbors who 
take brand-name specialty drugs, the average annual net 
spending on such drugs tripled from 2010 to 2015.
    All of the four bills before us here would address this in 
different ways.
    Dr. Anderson, can you explain what this noninterference 
clause is? Is that a fair name anyway, and what implications do 
this provision in law currently have on the Secretary?
    Dr. Anderson. So the noninterference clause means that you 
can't interfere between the negotiations between the PDP and 
the drug company. So that's the negotiation that can take place 
between the PDP and the drug company, but Medicare can't do it.
    You mentioned all those increases. Where the increases are 
occurring is in high-cost specialty drugs, and that's where the 
Medicare program, which is paying right now 80 percent of the 
cost, has no ability to negotiate, no seat at the table to do 
anything about those prices.
    So where we are seeing most of the increases is where 
Medicare cannot negotiate.
    Ms. Castor. Why was that even included back then?
    Dr. Anderson. Well, in the past they thought that the drug 
companies and the pharmacy benefit managers would be able to 
negotiate prices, and they were.
    And as I said in my testimony, for many drugs they are able 
to negotiate prices. But what's happened over the last 16 years 
since the legislation has passed is we've seen a growth in the 
number of these very expensive, high-cost drugs.
    Ms. Castor. And that's not helping beneficiaries, is it?
    Dr. Anderson. Well, some of the drugs are very beneficial. 
They cure diseases. They treat diseases. They are, in fact, 
very important. But if you can't afford them, then you can't 
take them.
    And what's interesting about Dr. Fowler's example is, if 
he's insured privately, he's probably got very good insurance. 
Unfortunately, if he has Medicare, he doesn't have an out-of-
pocket cap and, as he says, he's going to pay $12,000, whereas 
when he was insured by his university, he paid virtually 
nothing.
    Ms. Castor. So are you saying that we shouldn't tie the 
hands of the Federal Government to negotiate prices. If we 
really want to put beneficiaries and our neighbors front and 
center, you would address this noninterference clause and allow 
negotiation?
    Dr. Anderson. You would need to do it because this is where 
it's for a small subset of drugs where there's no competition, 
and Medicare right now is paying 80 percent of the cost. That's 
where the growth is occurring.
    Ms. Castor. And would you agree that negotiation is a 
market-based tool?
    Dr. Anderson. You can make it a market-based tool. Correct.
     Ms. Castor. OK. I agree, and what impact do you think this 
would have on the average Medicare beneficiary's pocketbook?
    Dr. Anderson. So----
    Ms. Castor. Oh, excuse me. My time has expired. I am very 
passionate about this, and I thank you for your testimony.
    Ms. Eshoo. We appreciate your passion, and Members are 
going to have the opportunity to submit questions to the 
witnesses, and we ask that you respond to those questions 
forthwith so that--because it's very hard to get everything in 
in 5 minutes, as you can tell.
    It's now my pleasure to recognize the gentleman from 
Virginia, Mr. Griffith, for his 5 minutes of questions.
    Mr. Griffith. Thank you very much, Madam Chair, for this 
hearing and, as you know, we need to continue to work through 
this as this issue is complicated and needs further analysis 
and additional input, and I am going to have some questions 
later that I think will raise some issues that show that we are 
going to have to do some additional work.
    But am I correct that you're willing to commit to regular 
order after this hearing with a subcommittee hearing and a full 
markup hearing, Madam Chair?
    Ms. Eshoo. Can you repeat the question, please?
    Mr. Griffith. Yes, ma'am.
    Ms. Eshoo. I am guilty of looking at my phone.
    Mr. Griffith. I understand. And the question was is that, 
you know, as we work through some of these questions, they're 
complicated and so forth, and I am just confirming that you are 
committed to regular order----
    Ms. Eshoo. Yes, and it was another one of our colleagues 
asked me that.
    Mr. Griffith. OK.
    Ms. Eshoo. This is regular order. We are having this 
hearing. We'll have a markup in the full committee. I believe 
we will have a markup on the subcommittee.
    Mr. Griffith. All right. I appreciate that very much----
    Ms. Eshoo. Sure.
    Mr. Griffith [continuing]. Because I do think it's 
important.
    Ms. Eshoo. It is.
    Mr. Griffith. And that brings me to my first question, 
which is to you, Dr. Ippolito. I hope I said that close to 
right. I was not here earlier because we had two hearings going 
on, and I was downstairs asking questions.
    The idea of intellectual property is so important to our 
country that it is enshrined in the Constitution, Article 1 
Section 8 Clause 8--grants to Congress the powers to promote, 
quote, ``the progress of science and useful arts,'' end quote, 
by providing inventors the limited but exclusive right to their 
discoveries--and authors, they're included as well.
    This applies to copyrights, patents, and trademarks 
similarly protected by Congress under the commerce clause, 
Article 1 Section 8 Clause 3. Together, they are all protected 
under the umbrella of intellectual property.
    Can you speak to the bills before us today and how they 
would undermine this important constitutional right, either 
through excessive taxation or seizure?
    Dr. Ippolito. Right. So I think the key here is to 
understand what the kind of penalties are if you do not accept 
the HHS Secretary's price, and we are talking about either, 
effectively, all of your net revenue or, literally, the seizure 
of your intellectual property.
    And in terms of--you know, I really do want to emphasize we 
are talking about early-stage investment and the uncertainty. 
It's long-term investments, and so on.
    The fact that if you do not agree to some price that is 
very hard to predict--10 years from now it's going to be a 
function of who's the President, who's the HHS Secretary, what 
kind of political dynamics are, and so on, plus you know that 
they can also just take your intellectual property if you don't 
like the answer. Well, that's one heck of a disincentive to get 
into that business.
    And so in terms of--you know, if you want to lower prices, 
fine. Just come out and say what the price is going to be for 
something. But don't tell me that the answer is, oh, we'll come 
up with a price 12 years from now and see if you like it and, 
you know, we'll go from there, and if you don't like it we'll 
take your intellectual property.
    Come up and say what the price is you want to pay. 
Otherwise, this kind of thing is so much uncertainty, it's 
going to be hugely detrimental to the firms that want to get 
into this kind of business.
    Mr. Griffith. Well, and you say it's detrimental to the 
firms getting in. Wouldn't it be natural for one of those 
companies perhaps to look for a different venue in which to 
place their company and maybe offshore it to someplace in Asia 
or some other location where they wouldn't have these 
restrictions?
    Dr. Ippolito. I mean, I think the first order that you 
would expect is, and I will use a different example than the 
scooter sharing. But, you know, venture capital firms don't 
need to invest in pharmaceuticals. They can invest in anything 
they want to invest in, and that capital is mobile.
    And so my first-order expectation would be that, if you 
make it too unattractive to get into this business, well, then 
fine, we'll invest in something else. We are not beholden to 
this market.
    Mr. Griffith. One of my other concerns that I hope will get 
worked out in subcommittee is that--as we go forward with the 
markup is that I am not sure we aren't violating on parts of 
this bill where they do a look back prior to the passage of the 
bill and start charging people--I am not sure we are not 
violating both the civil aspects of ex post facto and possibly 
even bills of attainder. What say you?
    Dr. Ippolito. I mean, it is true that if you're talking 
about the inflation caps I think we would be retroactively 
taking back--price increases back to I think as far as 2016. I 
am not--I don't know enough about the legal environment to know 
but----
    Mr. Griffith. But it looks punitive to me. I will have to 
do some more study on it before we get to subcommittee. This is 
our first hearing on this particular bill. So I look forward to 
that.
    I will say in the short time I have remaining that the 
whole system is complicated. We need more transparency.
    Dr. Anderson has said the drug companies are raising the 
prices and the PBMs can negotiate if there's more than one. 
He's right about that. On the other side of that coin, we heard 
drug manufacturers in a hearing last year or the year before 
say that, when there is more than one, the PBMs hold them 
hostage and ask them to raise their list price so they can then 
give a bigger discount. The problem is, when Dr. Fowler goes to 
pay his copay, he's paying it on the list price and not on the 
discount price that the PBMs have gotten after they ask the 
drug company to raise it. It's outrageous. There's a lot more 
work we could do together. Working together in a bipartisan 
fashion, I think we can. This committee has always had a 
history of doing that, and I yield.
    Dr. Ippolito. And I want to emphasize one thing just on 
that point. The Part D benefit redesign does that. Part of 
what's encouraging that is the terrible incentive structure in 
Part D. This idea of high list to net spreads is what it's 
called. It's because you can use this benefit design to offload 
all these costs onto the Federal Government and then just stick 
it with the patient out of their pocket. It's a bad benefit 
design. So, you know, I know negotiations will be part of this, 
but don't lose sight of the fact that there is a really good 
idea on the Part D benefit redesign here and incentive finance, 
too.
    Ms. Eshoo. The gentleman yields back, and I thank him for 
his questions.
    I now recognize the gentleman from Maryland, Mr. Sarbanes, 
for his 5 minutes of questions.
    Mr. Sarbanes. Yes, thank you, Madam Chair.
    There's a statistic which I always find incredible, that 
there are three Big Pharma lobbyists for every Member of 
Congress, and so, you know, we are constantly having to fend 
them off.
    But I want to remind us that there are 750,000 Americans 
for every Member of Congress. So if you do some math there, you 
have to give those pharma lobbyists credit, and I know a lot of 
them are watching so I want to salute them for this. That means 
each pharma lobbyist is holding back 250,000 Americans. That's 
what's been happening over the last however many decades it is, 
because all those Americans want to see these prices lower, and 
somehow the lobbyists have managed to keep that from happening. 
So that's pretty impressive. But it's changing. It's changing.
    And I think what happened is that the demand--the desire, 
the thirst for something real that could help families across 
the country--is beginning to overwhelm the inside game that's 
been played for so many years, and maybe those lobbyists are 
going to step to the side a little bit so they don't get 
trampled by Americans who want to see a change.
    So I think that's why we are at this point, finally, 
because so many families out there are affected, and they've 
just had enough and they want to see a change. We got a lot of 
good proposals here that really do something real to address 
drug pricing in America.
    So let me ask you, Dr. Anderson. I am very interested in 
this cap that is contained within H.R. 3 with respect to the 
out-of-pocket costs that seniors would face with respect to 
prescription drugs under Medicare Part D, and it's a $2,000 
cap.
    So talk to me about that in a number of different ways. 
First of all, in addition to that I gather the manufacturers 
will now also be partly on the hook with respect to weighing in 
and alleviating some of the impact of the drug costs. So that, 
obviously, creates some interesting incentives in terms of the 
price that they set on the front end.
    But also with respect to that $2,000 number, that wasn't, I 
assume, just kind of pulled out of thin air. There must be some 
rationale behind it. Why is that the number that makes sense? 
What does it represent in terms of significant benefit for 
patients? How will it help affect behavior on the part of the 
industry in ways that make a positive difference for families 
out there who are facing these high drug prices?
    Dr. Anderson. So everybody seems to agree that we need to 
have an out-of-pocket cap in the Medicare program, much like 
most private insurance companies. Most self-insured companies 
have an out-of-pocket cap.
    So there's agreement that it should be--there should be an 
out-of-pocket cap. It's just where it should be set. So the 
Trump administration originally said almost $5,000. The Senate 
Finance Committee said $3,100, and H.R. 3 says $2,000.
    And so what we took a look at is who's affected at $5,000, 
$3,000, and $2,000, and less than 1 percent of Medicare 
beneficiaries were affected by the $3,000 or $5,000 cap. About 
4.5 percent of Medicare beneficiaries are affected by the 
$2,000 cap.
    However, it really doesn't cost very much to help so many 
more seniors by lowering the cap from $3,000 to $2,000, and 
especially if you changed the way it's financed through having 
the corporations pay more, the drug companies pay more, and the 
PDPs pay more instead of right now Medicare paying 80 percent 
of that cost.
    Mr. Sarbanes. Thanks very much.
    And as my time closes here, I just want to emphasize, Madam 
Chair, that the design elements of the proposal that is 
contained in H.R. 3 for sure, and I know there's been careful 
attention to designing the other proposals as well, but I 
really want to emphasize that these have been carefully put 
together. They are--the various provisions are complementary in 
terms of the positive impact that it can have with respect to 
drug prices. So it's a very good product--legislative product 
that will make a difference.
    And with that, I will yield back my time.
    Ms. Eshoo. The gentleman yields back.
    Pleasure to recognize the gentleman from Missouri, Mr. 
Long, for his 5 minutes of questions.
    Mr. Long. Thank you, Madam Chairwoman.
    And, Dr. Fowler, on the medication that you take, it is a 
chemotherapy regimen. Is that correct?
    Dr. Fowler. Yes, chemotherapy.
    Mr. Long. And how often are you required to undergo 
chemotherapy?
    Dr. Fowler. Excuse me?
    Mr. Long. How often are you required to undergo 
chemotherapy for this?
    Dr. Fowler. Well, it comes in capsule form.
    Mr. Long. Oh, OK. OK.
    Dr. Fowler. Little capsules. I take 21 days of capsules and 
then 7 days off. I don't understand the medical science behind 
it, but that's----
    Mr. Long. OK. So you don't have to go somewhere and take 
chemo in a traditional chemo----
    Dr. Fowler. No. It's a simple----
    Mr. Long. OK. OK. We had a very dear friend that succumbed 
to that disease. She had to travel to Little Rock to take her 
treatment and did that for years and years and years, and like 
I said----
    Dr. Fowler. Right.
    Mr. Long [continuing]. So God bless you and----
    Dr. Fowler. Thankfully, I don't have to do that.
    Mr. Long [continuing]. Keep up the fight. You bet. Yes.
    Dr. Ippolito, in your testimony regarding price setting, 
you question the ability of regulators to know all relevant 
information distilled via markets where they can be subject to 
pressures.
    Can you talk about the more--talk about that more and why 
the Pelosi plan takes numbers from these referenced countries 
on their face and why that is not well thought out?
    Dr. Ippolito. Well, so there's two points. The first is 
that you have to remember that other countries are solving a 
different problem than we are. Other countries are relatively 
small. So Canada is a very small part of the pharmaceutical 
market. They can make what economists would call a partial 
equilibrium decision. That is, they can basically assume that 
we are going to set a price and it's not going to matter that 
much for how anybody else behaves. The United States, that's 
just different, for better or for worse. We spend so much that 
we are the straw that stirs the drink. We are what matters in 
the pharmaceutical market. So what was right for one other 
country may not be right for us, not to mention we may have 
different preferences and different willingness to pay and all 
that kind of thing.
    So there's a lot going on here that's different between the 
countries.
    The second point, the more broad point is, look, whether 
you love rate setting or hate it, it's not easy. Like, we've 
seen this. Almost, you know, about half of States plus did some 
version of hospital rate setting back in the day. We had five 
States that had long-lived rate-setting regimes, and they all 
succumbed to various different forms of political pressure, 
misuse of the system, just literal complexity, and all sorts of 
other reasons.
    So it's not like we haven't seen this type of thing tried 
before. Even if you like it, it's very hard. These are 
complicated markets.
    Mr. Long. And you're surely not old enough to remember when 
Reggie Jackson said, ``I am the straw that stirs the drink.''
    Dr. Ippolito. No. Somebody told me to say that. I have to--
--
    [Laughter.]
    Mr. Long. Busted.
    Can you explain where the Pelosi plan fails in 
understanding the tradeoffs between spending and future drug 
development, and why the effort under H.R. 3 to treat tradeoffs 
other countries face as identical to the U.S. is incorrect?
    Dr. Ippolito. So I worry a lot about that. I think that 
what we have is a system where the HHS Secretary gets to set a 
price. There's no real negotiation happening and there's going 
to be tremendous pressure to value the near-term gains that 
come from a real benefit, which is paying less for drugs. 
That's great. I want to pay less for everything that I have. 
But I also care about another kind of access, not just access 
today, but I care about access to some, you know, treatment for 
ALS or Alzheimer's or whatever it might be.
    And so the question is not, you know, How do we hammer the 
cost down as much as humanly possible? The question is, How do 
we solve this joint problem of maintaining access today and 
making sure we have some long-term vision? And I worry that the 
way this is set up is, we are really going to give short shrift 
to that long-term vision.
    Mr. Long. OK. And can you talk about the lack of certainty 
that will be created under H.R. 3 as different administrations 
may maximize the Federal rate setting allowed under H.R. 3?
    Dr. Ippolito. I mean, you know, this is one of these things 
where you have to sort of guess how this would evolve. I think 
it's--you know, what we know is that there's some maximum 
price, and it's this reference price.
    But you can go anywhere below that you want. And so the 
question is, what is any given administration going to do with 
that power? And, you know, frankly, if you just listen to the 
rhetoric--for example, I use Senator Sanders, is obviously 
running for President right now. Based on my observations and 
listening to the rhetoric that I hear come out of his campaign, 
I would expect quite different things than if I were to 
imagine, you know, Tom Price for HHS Secretary or whatever. And 
I don't even--I don't even want to assign a value judgment to 
which is better. But the point is, literally, that regardless 
of what you think is better, the sheer existence of uncertainty 
is costly. So, you know, firms are not what we call risk 
loving. They are risk averse. They do not like uncertainty, and 
what we have is uncertainty over decades-long projections for 
investments.
    And so that's really what I worry about, even independent 
of whether you think the price is going to be too high on 
average or too low on average or whatever.
    Mr. Long. OK. And Madam Chairwoman, just to correct the 
record, I would like to state that Marionville, Missouri, is 
the home of the white squirrel, not 10 miles from Anywhere, 
Illinois, that Shimkus tried to claim it was.
    I yield back.
    [Laughter.]
    Ms. Eshoo. Well, thank God you made that distinction. We 
are really grateful to you, Mr. Long.
    The gentleman yields back.
    Pleasure to recognize the gentleman from Massachusetts, Mr. 
Kennedy, for his 5 minutes of questioning.
    Mr. Kennedy. Thank you, Madam Chair. Thank you for holding 
this extremely important hearing. Thank you for your witnesses 
for being here and your testimony.
    Dr. Fowler, thank you for your moving words, sir. This 
committee has heard you loud and clear, has heard an awful lot 
of additional witnesses in very similar circumstances.
    As Members of Congress, every day we hear stories about 
patients and families who are draining savings accounts and 
falling into deep debt just to afford medication that can keep 
them alive.
    We listen as terrified, exhausted patients tell us about 
drugs that could treat their treatable disease if they could 
afford it. We watch parents, including some back in my home 
State, who marched into headquarters--in front of headquarters 
of a pharmaceutical company--carrying the ashes of their 
children because the treatment that could have saved their 
lives was too expensive.
    And I understand that this is a big, hard problem. I 
understand the complexity around it. Dr. Ippolito, I appreciate 
your testimony and your candor on this and the challenges that 
exist and the choices that have to be made in a piece of 
legislation.
    I would say there's choices being made in the status quo at 
the moment that is an absolute abject failure to an awful lot 
of people that need care and that care exists.
    And so I don't dismiss any of the concerns that you raise. 
I also think that we also have to recognize there's a cost of 
not doing anything. We have had so many hearings here over the 
course of even my tenure where we've had executives from a 
number of pharmaceutical companies, PBMs, et cetera, up at that 
dais right where you are that literally just did this, over and 
over and over again.
    And so at a certain point, what else are we supposed to do 
than make a choice? What else are we supposed to do other than 
force an issue? What else are we supposed to do than say, ``You 
know what? Fine, here it is. And you want to push back, you 
want to debate it, fine.'' But you can't keep waiting for 
somebody else to solve this problem. I literally asked a 
question of an executive at that table, What else we should do? 
And the response was, ``Call a hearing in Congress, invite us 
to testify, and solicit advice.'' At that dais, in front of 
Congress at a hearing to solicit advice. That was the response 
I got.
    So at a certain point, what else are we supposed to do when 
every other witness keeps doing this, from pharmaceutical 
industries and from the industry writ large?
    And so my patience, and I think an awful lot of us, are 
wearing thin. Again, understanding the complexity, but to point 
out a couple of obvious shortfalls in the system. Dr. Fowler, 
you indicated that you are on a medication made by Celgene. You 
indicated that the--I believe the market price for that was 
over $200,000 per year. Is that right?
    Dr. Fowler. Yes, that's my understanding.
    Mr. Kennedy. And do you know what your out-of-pocket 
expenses were, roughly, in 2017 or 2018?
    Dr. Fowler. Well, back when I was still employed, my out-
of-pocket expenses for the year were about $600.
    Mr. Kennedy. And do you know how much the drug costs 
annually to produce?
    Dr. Fowler. Excuse me?
    Mr. Kennedy. How much it costs to produce that drug?
    Dr. Fowler. To produce? My understanding is that it costs 
Celgene about $240 a year to produce the drug.
    Mr. Kennedy. That's my understanding. Do you have any idea 
how much Celgene spent on stock buybacks those 2 years?
    Dr. Fowler. I don't possess that information.
    Mr. Kennedy. I will help you out. It's about--it's $5.7 
billion.
    Dr. Fowler. Yes.
    Mr. Kennedy. Do you know if Celgene during that period of 
time increased or decreased the price of your drug during that 
period?
    Dr. Fowler. Excuse me? The----
    Mr. Kennedy. Do you know if Celgene increased or decreased 
the price of your drug?
    Dr. Fowler. Oh, it went up and up and up year by--I took it 
under my university's plan from 2009 to 2019, for 10 years, and 
it went up and up and up. It more than doubled over the course 
of 10 years, constantly inching its way up.
    Mr. Kennedy. So we've got a company that takes $5.7 billion 
in a stock buyback for a drug that costs--in profits, right? In 
profits. The drug in your circumstance is $240 to manufacture. 
And did you get any benefit about of the stock buyback?
    Dr. Fowler. I am sorry. I am not hearing that clearly.
    Mr. Kennedy. I am sorry. A company that took $5.7 billion 
stock buybacks----
    Dr. Fowler. Ahh.
    Mr. Kennedy [continuing]. In profits, right?
    Dr. Fowler. OK.
    Mr. Kennedy. For--across their portfolio. Did you get any 
benefit from a stock buyback that they----
    Dr. Fowler. [Laughs.] Not that I am aware.
    Mr. Kennedy. Not that I am aware of either.
    At a certain point, I understand the challenges and 
complexities here. At a certain point, I do think we have to 
say enough is enough and we will force this issue. If this is 
what it takes in order to get some of our companies at the 
table to help us solve this problem, then this is what it's 
going to take, because I think a lot of us have been sitting 
around these tables for long enough getting the runaround 
without anybody actually wanting to solve this problem.
    And I yield back.
    Ms. Eshoo. The gentleman yields back.
    And I now recognize the gentleman, and that he is, Mr. 
Bucshon from Indiana, for his 5 minutes of questioning.
    Mr. Bucshon. Thank you, Madam Chairwoman.
    I was happy to hear right at the beginning of this hearing 
a commitment to a subcommittee markup and regular order, and in 
that vein, I think you mentioned recently we may have 
additional questions for the record and that may be critical 
for the witnesses to respond quickly, and I agree with that. 
These answers could prove critical to helping us understand all 
the issues, and I would like to know if you can commit to 
receiving the answers to the written questions before we 
proceed to a subcommittee markup.
    Ms. Eshoo. Well, I think it makes sense that we organize 
this so that the witnesses can respond in time and that you can 
make use of what they respond for what comes next.
    Mr. Bucshon. Thank you.
    Ms. Eshoo. So we'll do our best to coordinate it.
    Mr. Bucshon. I appreciate that commitment because it is 
important. A lot of times in 5 minutes, as you pointed out, we 
can't get all our questions in, and sometimes there's more to 
that story.
    And also I would just like to say that the comparison of 
private insurance and Medicare Part D is totally legit, and 
that's why I think in a bipartisan way we need to proceed with 
Medicare Part D reform that does limit out-of-pocket costs and 
make other changes that make it more effective and efficient 
for the patients, and I think we can do that in a bipartisan 
way. I think that is important.
    I want to talk about access. I was a heart surgeon before I 
was in Congress, and for me the key is patient access to 
affordable healthcare. I want to talk about what a recent 
report from the U.K., and this is--and I will read this--about 
a father who was 38 and he--it says who can't get cancer drug 
on NHS--the National Health Service. He was heartbroken as his 
son, age 7, asked him, ``When are you going to get better?'' 
And it turns out he was diagnosed with blood cancer--I think 
the same condition that you have, Dr. Fowler--at age 38. But he 
knew he couldn't--he knew a drug that could prolong his life 
and that was Revlimid, which is, I think, what you're on. 
That's a coincidence. That wasn't--I didn't plan that. Didn't 
know that you were on that. But he didn't qualify for the 
treatment under the NHS because, at the National Health 
Service, you have to have--it says here you have to have a 
failure of therapy three times--you have to have a recurrence 
before you qualify for this new, innovative drug.
    And so I just wanted to point that out that one of the 
risks of doing the wrong thing in the U.S. on drug pricing can, 
in my view, severely limit potential access to medication that 
we would otherwise have available.
    And I agree, we need to get the out-of-pocket costs down, 
but there are other ways to do that. So with that, Dr. 
Ippolito, quickly, in my last 2 minutes, several of the 
countries referenced in H.R. 3 governments frequently denied 
patient access to drugs using standards that determined the 
value of a person's life.
    This is a situation we are in here. Under the standards, 
the value of some people's lives, such as a disabled person or 
an elderly person, gets a lower score than the value of a 
younger, healthier person.
    For example, a child with a neuromuscular disorder may be 
worth half as much as a healthy child. That's not my words. 
That's what's been reported that countries do. This can result 
in fewer vulnerable individuals having access to treatments 
that they need.
    Do you feel it's ethical to place a value on a life of a 
human being?
    Dr. Ippolito. I don't know if I am best suited to answer 
the ethical element, and maybe it's a bioethicist or something. 
But it's certainly--I mean, the general point I think you're 
making is it speaks to the fact that, if you want to do cost-
effectiveness-based coverage decisions and pricing decisions, 
you do need to make some fairly explicit decisions.
    Mr. Bucshon. Correct.
    Dr. Ippolito. What are you willing to pay for as a country, 
how much is that worth? And this does vary by a variety of 
characteristics.
    Mr. Bucshon. Right. So my point as a provider would be, is 
that the U.S. Federal Government, potentially, in the 
negotiations could make policy decisions that are essentially 
medical decisions on who gets access and who doesn't based on 
cost.
    Dr. Ippolito. There is some question, in my view, about how 
exactly the HHS Secretary would consider how good a drug is 
relative to previous therapies and a few of those other 
considerations.
    But that is at least nominally part of the calculus they're 
supposed to consider.
    Mr. Bucshon. Yes. So, I mean, again, as a provider I 
don't--I think it's up to the medical professionals and the 
families and the patients to work through these situations. It 
is up to us to figure out how to improve Medicare Part D--no 
doubt about that.
    But one of my big concerns is, if the Federal Government 
gets more into this space, which is being proposed in H.R. 3, 
is that you will indeed have financial decisions being made by 
different administrations that may very well limit access based 
on the Government's perceived value of your individual life and 
the lives of the American people as a whole.
    I yield back.
    Ms. Eshoo. Doctor yields back, and now I would like to 
recognize Mr. Schrader from the State of Oregon for 5 minutes 
for his questions.
    Mr. Schrader. Thank you, Madam--thank you very much, Madam 
Chair.
    Dr. Fowler, you talked eloquently about your situation and 
Medicare--going from private care to Medicare. It gives me 
pause when I hear all this call for Medicare for all, and I see 
Medicare does not provide quite the same benefit that your 
private care did, which is something we should all consider.
    But more to the point, you also talked about some of the 
other problems we have in the prescription drug space. You have 
talked about the CREATES Act and the issue that it tries to 
address.
    This committee worked on a very bipartisan basis to push 
out a number of bills--my BLOCKING Act. We talked about the 
patent reform the Chair and others worked on.
    Do you feel those types of bills would be of much benefit 
to beneficiaries in Medicare, or just the population writ 
large?
    Dr. Fowler. So you're asking in particular about the 
CREATES?
    Mr. Schrader. Yes. Use that. That's the one you're familiar 
with.
    Dr. Fowler. What I know of that--when I first learned that 
that was being discussed, it really intrigued me because it 
seemed to make a great deal of sense for my situation with 
Celgene, who apparently has written the textbook on how to 
avoid the production of a generic. They've been stupendously 
successfully in avoiding a generic, and so I would be delighted 
to see action finally taken on something like that.
    Mr. Schrader. Well, I wouldn't pick on any one company 
personally, but there's a lot of, you know, unfortunate 
loopholes I would call them in the current legal construct that 
allow companies to game the system a little bit to their 
advantage. That's the nature of business, to some degree.
    But we passed a bunch of bills along those lines that I 
would hope we have a chance to get passed out of the House of 
Representatives as a bloc of bills that would have wide 
bipartisan support because we worked really, really hard on 
those.
    Taking a little different tack, Dr. Anderson, you know, the 
bill before us is a good, solid attempt to lower costs, 
frankly, for every American, not just those that are seniors.
    We have some negotiation that goes on already in the VA and 
DOD. Why not adopt that? Why not adopt a VA price, for goodness 
sakes? I know they've got a formulary. But I think you could 
get past the formulary issue with Medicare by just supplying 
the Medicare reduction from commercial rates to the class of 
drugs that a drug that's not on the formulary would be in and 
get some huge savings.
    We'd save a lot more money. Wouldn't have to create a 
second bureaucracy. If it's good enough for the VA, should be 
good enough for seniors, for goodness sakes. Seems like a 
smart, commonsense way to go that we can implement pretty 
rapidly.
    Dr. Anderson. So the VA pays, and so does DOD, about 30 to 
40 percent less than what Medicare does. So yes, you could 
adopt that.
    The problem, of course, is, you know, can you do that for 
all Americans or can you do that just for the VA? And, you 
know, that's the uncertainty of this thing.
    But I think you should definitely be taking a look at the 
VA approach to setting rates because they do negotiation and 
they've been doing it for many years and you, the Congress, 
authorized them to do it very successfully.
    Mr. Schrader. Yes, bipartisan would keep us from getting--
it would help--some of my folks on the far left are very 
concerned we are not including enough drugs, and on the far 
right, you know, we are taking some other countries' standards 
for our own. We've been doing this for a long time. It's 
bipartisan, and I think there's a way to actually get that--get 
it done.
    Dr. Ippolito, you're concerned about the Secretary being 
kind of the judge of all things, having total discretion. I 
share some of that concern.
    In Oregon, where I am from, we have a list of prioritized 
services that medical experts, not politicians like me, get to 
talk about what's the most cost effective, what's the best 
value, how we should go about things.
    We have MedPAC here that we use, another group of medical 
experts, not politicians and not appointees, to decide, you 
know, what could be best practices that, you know, they provide 
us information.
    What do you think of the Senate bill's approach where they 
actually have this advisory P&T committee that would be a more 
technical, a more science-based group of folks than just one 
person deciding how these drugs negotiations go on?
    Dr. Ippolito. It's probably a step in the right direction. 
I think you're going to run into some of the same challenges. 
Scaling up a real--if you really want to get into something 
like a cost-effectiveness-style recommendation, that's a fairly 
advanced undertaking.
    The man to my left probably would be a good choice to lead 
that, though, if you wanted to do it. But I think adding some 
expertise would help. I don't know outside of giving some 
formal guidance that it would solve one of the big concerns I 
have, which is the uncertainty element. That's one element I 
would keep in mind.
    Mr. Schrader. Fair enough.
    With that, I yield back. Thank you, Madam Chair.
    Ms. Eshoo. The gentleman yields back.
    Pleasure to recognize the gentleman from Georgia, the only 
pharmacist in the United States House of Representatives.
    Mr. Carter?
    Mr. Carter. Thank you, Madam Chair. And in the Senate as 
well, so thank you. In Congress, we'll say.
    Madam Chair, seriously, I want to just take just a second 
and thank you because I will tell you the truth, we just 
finished a five-week break during August, and in my district I 
went around the whole district telling them that I serve on the 
oldest, most diverse, most bipartisan committee in Congress, 
and that is the Energy and Commerce Committee, and I truly 
believe that.
    And what we've been working on here and what we--and I told 
them about what we were working--robocalls, surprise billing--
that we've worked on in a bipartisan fashion.
    We've also worked on prescription drug pricing in a 
bipartisan fashion. We passed at least nine bills out of here 
in a bipartisan fashion, three of which I was the cosponsor on 
that I am very proud of. I have to tell you that I was 
extremely disappointed whenever I saw the Speaker's plan here.
    And we knew it was coming, we never saw it--but when we saw 
it. But I want to thank you for your commitment that we will 
have a markup in subcommittee on this because it is extremely 
important for us to engage in regular order, and that's very 
important.
    Why is this issue so personal to me, and it is so personal 
to me? Because listen, I was the one on the other side of the 
counter for so many years. I was the one who had to tell the 
patient how much this medication was. I was the one who 
witnessed the mother crying because she couldn't afford the 
medication for her daughter. I was the one who watched the 
senior citizens try to make a decision on whether they were 
going to buy medicine or whether they were going to buy 
groceries.
    That's why it's so personal to me, and that's why I want to 
do something about it and I am going to do something about it, 
and we are doing something about it.
    Let's not sell ourselves short. We've passed some good 
legislation in this committee that we need to continue to work 
on.
    I am concerned because, I will be quite honest with you, my 
years of practice in pharmacy I've seen nothing short of 
miracles as a result of research and development, and I applaud 
the pharmaceutical manufacturers for that.
    However, it does you no good whatsoever if you can't afford 
it. I understand that, and I get that. But I am extremely 
concerned--and I want to ask you, Dr, Ippolito--about the 
impact on research and development, about this proposal 
specifically about what I consider to be the price controls, 
because the price controls, I feel like, are going to inhibit 
research and development, and I cannot adhere to that. I cannot 
go along with that.
    Dr. Ippolito. Yes. I mean, I think I share some of your 
core concern, which is, you know, it would be great if we 
could, you know, get every drug under the sun. But if nobody 
can afford it, well, then it doesn't do anybody any good, 
right.
    So I don't want to spend the entire country's GDP on 
pharmaceuticals. But the question is, How do we make sure that 
we keep making progress while actually having folks get access 
to these drugs?
    And when I look at--I mean, when I look at the Part D--I 
know you want to talk about the pricing, but the Part D 
redesign I think is a good example of that.
    Mr. Carter. And if I could mention, we have actually in 
this committee--we have actually sought input. What you see 
here are 83 different comments that we've had about how we can 
revamp our Part D system. We can make it better.
    Dr. Ippolito. Yes. And so I think--I do want to keep 
emphasizing that. I really do think there's a lot to like 
there, and it does get at, I think, this balance that you're 
trying to strike.
    With the price setting, you know, like I've said, we know 
the direction of the effect. If you reduce the prices a lot, 
you're going to see some reduced innovation. The question is 
exactly how much, and that's hard for anybody to predict.
    Mr. Carter. It is hard to predict, but--and listen, as 
abrasive as we find it to be, you're absolutely right. Venture 
capitalist are--this is going to make them look elsewhere.
    I mean, I would like to think that, yes, they're in it for 
the good of man and I am sure some of them are, but they're 
also in it to make money. And I am not opposed to anybody 
making money, but at the same time we have to be realistic 
here.
    And I've looked and I see what we've done. I am cochair, 
along with my good friend Representative Mark DeSaulnier from 
California, of the Cancer Survivor Caucus here in Congress. 
What we've seen--we've seen a 22 percent decrease in cancer and 
deaths due to cancer since 1991. And HIV and AIDS--we've seen 
an 85 percent decrease since 1995 as a result of research and 
development. This is phenomenal.
    And when I hear this, I think about the dreaded disease 
Alzheimer's, what kind of impact. By 2050, it's estimated that 
14 million people will have this disease, and it will cost this 
country $1.1 trillion. If we don't have research and 
development into this, we are going to lose. We are going to 
lose that battle. That's why we've got to make sure that that 
incentive remains there.
    Dr. Ippolito. Yes, and I think that's exactly the kind of 
thing that I think about. There are access today--there are 
concerns about access today. But we've got to keep in mind 
access tomorrow, and access tomorrow means access to something 
that we don't actually know what it's going to be, and that's 
kind of the hard part of it. But when you put it in terms of 
things like Alzheimer's, I think it's a good way of 
understanding just the kind of rewards that are out there if we 
do this right.
    Mr. Carter. I realize I am out of time. But I will say 
there are plenty of things that we can do outside of drug price 
controls.
    Thank you, and I yield back.
    Ms. Eshoo. The gentleman yields back. I think any company 
would be interested in the market--very interested in a market 
of 14 million people.
    I now would like to recognize the gentleman from Vermont, 
who has spent a considerable amount of his legislative time in 
the Congress working on the very issue that we've called the 
hearing on today, Mr. Welch, for 5 minutes of his questioning.
    Mr. Welch. Thank you very much, and thank you for the 
hearing.
    First, I would like to put in the record three letters. Mr. 
Carter and I have been working on DIR fees, and I would like to 
introduce a letter from the National Community Pharmacists 
Association and also one from the American Pharmacists 
Association, and third, a statement from our good colleague, 
Elijah Cummings, chair of our Oversight and Government Reform--
Oversight Committee, who's been a champion on trying to bring 
down drug prices.
    Ms. Eshoo. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Welch. A couple of things. We have done a lot together 
in this committee. But we are now facing a very clear question, 
and it's--let's be candid. We have a disagreement, and the 
question is, Do we need to have our Government play a role to 
protect consumers or maintain the status quo where we don't? 
That's it, and there's an honest difference of opinion on that. 
There are arguments that I am hearing from some of my 
colleagues who oppose this, that they're worried about 
innovation. Totally valid concern. We have to have innovation. 
There are concerns that this is, quote, ``price setting'' 
because it's unusual for government to be involved in 
negotiating.
    Now, my view, the price setting is being done by the pharma 
industry, because here is what's happened: We are here, in my 
view, because of egregious overreach by the pharmaceutical 
industry.
    You know, we went with an industry that started out with 
scientists and pharmacists trying to come up with cures, and 
that was a good day's work for them when they came up with 
something, to these pharma companies essentially being Wall 
Street entities.
    And, bottom line, many of the patents that they have are 
not a result of them inventing the drug. They bought the drug. 
NIH--taxpayers paid for it and then smart Wall Street folks 
bought it, and with the benefit of the patent they used that 
pricing power to overreach.
    And secondly, they're in a situation where they've got a 
market because people like Dr. Fowler have to have it. Your 
family wants you to have it. Your employer wanted to have it.
    Think about how much it costs your employer to provide that 
insurance. But our employers around this country want to help 
their workers, so they buy employer-sponsored healthcare, and 
that includes pharma coverage, in many cases.
    So that's a guaranteed market for the drug companies. And 
then, of course, you have legislators passing the Medicare 
program, the Part D program, and the Medicaid program. Drugs 
are included, and that's a market. So you have got pharma that 
benefits from taxpayer research, buys the product--doesn't 
invent it in many cases--spends more on advertising than it 
does on research, spends more on price--stock buybacks than it 
does on research, and then they're called to account for some 
of these other maneuvers like selling their drug to an Indian 
nation as a way of trying to extend their patent--or 
evergreening--their constant defense is, if you do that it'll 
stifle innovation.
    You know, I've had it. It's not true. It's bogus. And this 
is the hard question for us because this is a bipartisan 
committee. But we really do have a disagreement on this 
question of whether the Government should be involved. There's 
a lot of folks that think if Government gets involved it's 
automatically bad. Sometimes that's true, but this is a case I 
believe where if Government isn't involved the status quo 
continues. It's going to crush everyone.
    I just want to ask you, Dr. Anderson, on this question of 
innovation--when I was in a meeting with Secretary Azar, he 
expressed with clarity, and he's got significant experience as 
a leading executive in one of our best pharmaceutical 
companies, that it is not true.
    Your view on that? How can we avoid stifling innovation if 
we have some type of price negotiation?
    Dr. Anderson. So, essentially, what you got to recognize is 
where innovation is really starting, and it's starting at the 
NIH and going to academic medical centers. That's where all the 
basic science and the first drug development typically occurs.
    It's not occurring in the big drug companies. And so the 
key question is, Are you going to continue to fund NIH, and I 
assume you will. And so we will continue to get drug 
development.
    Mr. Welch. OK. Dr. Ippolito, I mean, I share your concern. 
I mean, certainty--there is certainty right now whatever price 
you want to charge, we'll pay. That's the certainty we have.
    On the proposed bill, money that is saved, some of it will 
go back into scientific research at NIH. Is that a good thing, 
in your view?
    Dr. Ippolito. Yes. The NIH does a lot of really good basic 
research.
    Mr. Welch. Appreciate that. Thank you.
    I yield back.
    Ms. Eshoo. The gentleman yields back, and we are all 
grateful to you for the work that you have done for--over a 
long period of time.
    Pleasure to recognize the gentlewoman from Indiana, Mrs. 
Brooks, for 5 minutes.
    Mrs. Brooks. Thank you, Madam Chairwoman, and I apologize. 
We've been going between a couple different hearings this 
morning. But thank you all so very much for being here today.
    I think there's no question that Americans pay too much for 
healthcare, including the cost of prescription drugs. In this 
committee we've held many hearings to try to work through 
solutions, and we actually even came to some bipartisan 
agreements in the process, which I think demonstrated, I think, 
contrary to what my dear friend and colleague across the aisle 
just said, we aren't trying to protect the status quo. We 
actually had been doing some pretty important things in this 
committee, and we were making progress.
    However, I think there are some very serious concerns with 
H.R. 3. The bill does require companies to, quote, 
``negotiate'' prices with the Federal Government for up to 250 
drugs that don't have the generic or biosimilar competition. We 
were working on that in some bills also. We were working on 
access to generics before H.R. 3 was dropped, and if companies 
would refuse they'd face a huge penalty tax on gross sales of 
each drug. And for Medicare drug programs, if a drug price 
rises faster than inflation going back to 2016, the 
manufacturer would face another huge tax on those revenues 
above inflation.
    And I do think we really do need to think about the 
dramatic chilling effect of innovation and breakthrough 
medicines coming to market. I've learned through all of this 
that some of our peer nations--Germany, United Kingdom, 
Australia, Canada, France, and Japan--often have access to 
fewer of the new drugs than we are able to get here in the 
United States, meaning that despite the cost, patients can't 
get their hands on new, lifesaving drugs in many of these 
countries. And if we share that same drug pricing model of our 
peer nations, I worry this could become a reality in our 
country.
    So I want to share a story of one patient, Krystal Hekau. 
Krystal lives in New Zealand. She has aggressive breast cancer. 
While she inched her way up the waiting list required for 
radiation treatment--the waiting list for radiation treatment--
she learned the cancer had spread to her spine. Now her doctor 
tells her that a new medication could prolong her life. But the 
government's drug-buying entity, PHARMAC, has not approved it. 
She has two children at home. The oldest is 5. And so while--
and so she may not get this drug--will probably not get this 
livesaving drug.
    Lower drug prices are a goal this entire committee shares. 
But I think if we push forward this particular piece of 
legislation it will reduce access to drugs, and lower prices 
aren't going to matter because many people aren't going to get 
access to drugs that they need.
    Dr. Ippolito, is it possible that the economic incentives 
under H.R. 3 would lead to manufacturers denying their 
lifesaving products to patients in our country or in other 
countries?
    Dr. Ippolito. It is unlikely, in my view, that at least as 
it's currently written, that a drug manufacturer would decide 
not to offer a drug that currently exists or that they've 
already made in the United States.
    In part, the reason is that simply they'd be fined more 
than they would even make if they sold the drug in the first 
place, regardless of what the price they got was.
    So that I have less concern about. I think I have more 
concern about--well, depending on how this evolves, which is 
hard to predict, but depending on how low the prices are, the 
question is who's going to want to enter and to discover new 
drugs and who's going to want to market new drugs. That's the 
bigger question to me.
    Mrs. Brooks. And so let me ask you about that, because my 
home State of Indiana is a top life sciences hub. A lot of 
medical innovation, public-private partnerships happening 
between industry and academia all the time. It's really created 
tremendous growth and innovation to patients and to the 
companies in Indiana, not just--but, more importantly, to the 
benefit of the patients from this innovation.
    How would--what is your concern about how this, the drug 
pricing plan, will impact U.S. jobs and workers, and the 
companies that are bringing these drugs to market?
    Dr. Ippolito. You know, I think the biggest concern would 
be on not on the basic science side, where it's more the 
academic medical centers and NIH-funded work. You would be more 
concerned about the people who are currently being funded by 
venture capital firms or who are currently recouping lots of 
money when a large pharmaceutical company buys their compound 
or whatever it may be. It's hard for me to put any sort of firm 
number on that kind of thing. But yes, sure, I think 
directionally we know which direction that would go.
    Mrs. Brooks. And that would go in a negative direction when 
it comes to innovation. Is that correct?
    Dr. Ippolito. Yes, I think that's correct.
    Mrs. Brooks. OK. I yield back. Thank you.
    Ms. Eshoo. The gentlewoman yields back.
    Who is next? Recognize Dr. Ruiz from California for his 5 
minutes of questioning.
    Mr. Ruiz. Thank you, Madam Chair. Seeing firsthand the 
devastating effects of skyrocketing drug prices in my practice 
in the emergency department and speaking with a lot of 
patients, and I have treated patients who never got their 
prescription filled because they couldn't afford it or patients 
who rationed their medication to make it last longer.
    And I know I've told this story in this committee before, 
but it's an important example for folks in the room who haven't 
heard it.
    I had just finished a community forum prior to even 
thinking about running for Congress on healthcare access, and 
as I was leaving the church where we held the forum, I noticed 
an elderly woman who was digging in the trash--a big trash bin.
    I went over there and I asked her, you know, what are you 
doing. She said, ``Well, I am digging for aluminum cans to get 
some extra money so I can pay for my insulin.'' I said, 
``Really, you're having to do this?''
    She said, ``Yes.'' Then she said, ``But don't worry, 
Doctor. Don't worry. I am only taking half of my dose so that I 
can make it last longer.''
    And as you know, it's almost like not taking anything at 
all, and a lot of patients are doing that. In fact, according 
to a Kaiser Family Foundation poll, close to 30 percent of 
adults have either not filled their prescription, rationed 
their medication, or skipped medication in 2019. Thirty percent 
of adults, one out of--nearly one out of three.
    So, in other words, the sick are not getting the care or 
the treatment that they need. And that same poll showed that 
one in 10 adults reported a decline in health. So it's not just 
that they're not getting the medication. Their health is 
getting worse because they couldn't afford to take their 
medications prescribed by their doctor.
    So I just want to remind everybody here that this isn't 
about a cost savings to the Government or some pay-fors for 
other things. This isn't a cost savings to drug makers or to 
health insurance companies. This isn't even about saving costs 
to hospitals.
    The primary goal here is to save patients' out-of-pocket 
costs. That should be the number-one metric in which we 
evaluate any policy that comes out of this committee and this 
House of Representatives, to make sure that patients don't pay 
more out of their own pocket.
    So when we talk about the importance of reducing the cost 
of medications, we need to talk about the out-of-pocket costs 
to the patient and how we ensure that the policies that we are 
considering here result in savings to the patient.
    So H.R. 3, the Lower Prescription Drug Costs Now Act, does 
just that by capping out-of-pocket costs for our seniors. 
Additionally, it is imperative that we require HHS to negotiate 
drug prices and that those negotiated prices will apply to 
Medicare and commercial plans.
    So, Dr. Fowler, I was very intrigued by your story and your 
experience, and stories like yours are not uncommon, which is 
why we are here discussing these important issues today.
    So can you amplify your history and what--on a personal 
level, how has the cost of your medication impacted your life?
    Dr. Fowler. Thank you. I guess I would return to what I 
said earlier about the double anxiety over my medical 
condition--I have to do lab work every 3 months to check on my 
numbers, and I will do that as long as I live because I have an 
incurable disease.
    So there's that constant thought in the back of my mind 
that I am living with such a disease. But I keep my wristband 
on from the International Myeloma Foundation so I am constantly 
remembering that I have that to deal with, even though the day 
is going well.
    But then there's the financial--the financial uncertainty 
that we may run out of money, God knows what expenses might pop 
up on down the road.
    Mr. Ruiz. And we know the importance of mental health and 
stressors have on ultimate outcome of illness and treatment. So 
the additional stress of having to figure out if you're going 
to be able to afford the medication, in your case for multiple 
myeloma--is that correct?----
    Dr. Fowler. Yes.
    Mr. Ruiz [continuing]. Is adding to the burden of disease 
for you. Was there anything that you had to postpone or 
decisions you made that you couldn't do for yourself or your 
family because of the cost or the worry for the cost of 
medication?
    Dr. Fowler. No, thankfully. I had excellent coverage 
through my employment, and that worked wonderfully well, and I 
am very, very grateful for that.
    Mr. Ruiz. And what kind of doctor are you?
    Dr. Fowler. I am a Ph.D.
    Mr. Ruiz. Ph.D. kind of doctor. Great.
    Dr. Fowler. A religion scholar.
    Mr. Ruiz. Wonderful. I love that. Thank you so much for 
your service.
    Ms. Eshoo. The gentleman yields back.
    I now have the pleasure of recognizing Mr. Hudson from 
North Carolina for his 5 minutes of questioning.
    Mr. Hudson. Thank you, Chairwoman Eshoo, for holding this 
important hearing.
    I know we all agree that drug prices are too high and that 
Congress must take action to help our constituents. Since I 
first came to Congress, I've followed two guiding principles: 
Any legislation I work on should benefit the people of North 
Carolina's 8th District, and second, I will work with anyone, 
Republican or Democrat, to get a good policy across the finish 
line.
    The legislation we are considering today is extremely 
partisan, though, and it holds no chance of becoming law. It 
threatens the golden age of innovation and the access to new 
breakthrough therapies we've seen in the last 20 years.
    Our constituents don't care which party had which idea. 
They just want relief at the pharmacy counter. When there are 
serious bipartisan options on the table that would save our 
constituents money and preserve the overwhelming greater access 
we enjoy in our healthcare system, why are we considering 
legislation that threatens to undo the very real positive in 
our healthcare system?
    My main focus in this debate is to save constituents money, 
to protect access to lifesaving cures, and to promote 
innovation in the rare disease space.
    So, Dr. Ippolito, I have a few questions for you, if you 
don't mind. I recently read reports in the Mirror and Black 
Pool Gazette about the U.K. denying coverage of a drug for 
Batten disease, a rare childhood illness.
    According to the reports, two children with the disease 
died waiting for treatment while the drug was undergoing a 
quote, unquote, ``cost effectiveness review'' by the 
government.
    Is the U.K. one of the countries that would be referenced 
under H.R. 3?
    Dr. Ippolito. Yes, it is directly referenced, and then it's 
also--secondarily it's referenced by a bunch of the other 
countries in the basket as well.
    Mr. Hudson. I appreciate that. In Medicare Part D, most 
beneficiaries with trouble affording their medications are on 
complex drugs with big price tags. Would you agree it would be 
less disruptive to our unmatched access in the U.S. to 
institute out-of-pocket caps, which many Medicaid Advantage 
plans use to save beneficiaries money?
    Dr. Ippolito. Yes. I mean, I think that's one of the things 
that there's been a lot of agreement on, especially when you 
think about the whole point of insurance.
    I mean, the whole point is that you're supposed to avoid 
these catastrophic financial hits. And so, when you look at the 
Medicare Part D benefit design right now, aside from--there's 
all sorts of incentive problems the Part D benefit redesign 
that's in this bill helps to improve, but there's this other 
just completely unforgivable element, which is it's not really 
insurance if there's no cap on what you can spend.
    And so I think it makes total sense as a future as a 
redesign of the program.
    Mr. Hudson. Thank you. Do you believe H.R. 3 will push 
manufacturers to address diseases with unmet needs or, rather, 
towards lower-cost follow-on products?
    Dr. Ippolito. See, this is one of the interesting 
questions, I think--what kind of compensation of drugs would we 
get under this system.
    And so the way I think about it anyway is, well, what drugs 
would be liable or which ones would be eligible for negotiation 
and which wouldn't, and the answer is single-source drugs.
    And so, in general, that's kind of an interesting decision 
because we have a policy that literally makes drugs single 
source by, you know, legislation. And so it's a little bit odd 
to sort of focus on those.
    But it's particularly concerning if you're a--you treat a 
smaller population because you are going to face fewer 
competitors in the near to mid-term. And so what that means is 
you're going to be eligible for rate regulation for a long 
time. And so it's entirely possible that a second-to-market 
drug could be more profitable than a first-to-market drug. It's 
something to really, really consider, and you've also got to 
consider things like, you know, the kind of gamesmanship that 
you may get when you launch a drug but then you also launch an 
authorized generic so that you're not the only sole source.
    So it's a long way of saying that the answer is yes, I 
worry about that space, but I worry about a lot of this.
    Mr. Hudson. Thank you for that.
    Some view the biopharmaceutical industry as just taking and 
marketing innovations developed by NIH. However, the NIH has 
noted it is the private sector that makes the investments to 
translate basic science discoveries into potential new drugs.
    Clinical trials were the most expensive aspect of the 
research and development pipeline, and just over one in 10 
drugs actually make it from clinical trials to patients.
    The private sector spent an estimated $97 billion in R&D, 
three times the total NIH budget. Can we afford to lose or cut 
that investment, as is likely under this legislation?
    Dr. Ippolito. I would prefer not. But it's also important 
to me--you bring up the NIH. The NIH does good work. I mean, 
they fund real science that matters.
    But it's important to understand what problem they're 
solving, which is they're solving a public goods problem in 
sort of economic parlance, which is there's a bunch of facts 
about, like, the human body that you cannot patent. You can't 
have intellectual property protection over those.
    And so we worry that, if we just left it up to the market, 
we'd get too little innovation in the basic science, and so 
that's what the NIH is really good at. It's filling in that 
basic science first level about things that we need to know 
about the human body, and then it's private sector that comes 
in and some academics and things where they come in and say, 
``OK, well, what can we use that information to actually do 
now?'' And that's the key.
    Mr. Hudson. Thank you, Madam Chair. My time has expired. I 
yield back.
    Ms. Eshoo. The gentleman yields back.
    It is a pleasure to recognize the gentlewoman from 
Delaware, Ms. Blunt Rochester, for her 5 minutes of questions.
    Ms. Blunt Rochester. Thank you, Madam Chairwoman and 
Ranking Member Burgess, for the recognition and for the 
hearing, and also to the witnesses for joining us today.
    Whether it's shopping in the grocery store or taking a tour 
of a small business in Delaware or even a constituent who 
approached me, like you, Dr. Fowler, who was in need of 
lifesaving cancer drugs but she can't afford them, this is the 
number-one issue that I hear about in my state.
    It is just the number-one, whether it is the cost of 
healthcare in addition or more specifically the cost of 
prescription drugs.
    And so today, we really have an opportunity to take 
critical steps towards lowering drug costs in a way that 
patients will feel directly. I mean, they will feel it in their 
pocketbooks.
    And I would like to start by focusing on a concerning trend 
that's impacting low- to middle-income seniors who don't 
qualify for Federal subsidies that help with drug costs.
    According to USC's Schaeffer Center for Health Policy and 
Economics, from 2007 to 2015 the share of beneficiaries with 
high drug spending who do not qualify for low-income subsidy, 
or LIS, assistance and reach the catastrophic phase of their 
prescription coverage increased from 18 to 28 percent.
    Dr. Anderson, what beneficiaries typically have reached the 
catastrophic phase of their drug coverage and are faced with 
continued costs?
    Dr. Anderson. So when the legislation passed back in 2003, 
it was people that had multiple chronic conditions who were 
taking a lot of drugs. What's changed over the last 10 or 15 
years is it's now one drug that costs $30,000, $50,000, 
$500,000. That puts you immediately into the catastrophic cap.
    So we have a new set of drugs that we didn't have when the 
legislation was passed.
    Ms. Blunt Rochester. You anticipated my next question, 
which is why do you think that number has increased from 18 
percent to 28 percent, and I don't know if there's more that 
you want to share about the why.
    Dr. Anderson. No. I mean, it is essentially that we now 
have new drugs that we didn't have before, which is a very good 
thing.
    But when Medicare pays 80 percent of the cost and they 
can't negotiate, then it doesn't matter how much of the cost 
that you can charge--$300,000, $400,000, $500,000, and Medicare 
is going to pay for it.
    Ms. Blunt Rochester. And according to the Kaiser Family 
Foundation, in 2017, 1 million Medicare Part D enrollees had 
out-of-pocket spending above the catastrophic threshold, with 
average annual out-of-pocket costs exceeding $3,200, over six 
times the average for all non-LIS enrollees.
    Furthermore, Part D enrollees with high out-of-pocket costs 
but no LIS assistance would have saved a collective $1.4 
billion if Medicare Part D had a hard cap on out-of-pocket 
spending.
    Dr. Anderson, there are disagreements about where to place 
the out-of-pocket cap. Do you think a $2,000 cap would be a 
significant help to many beneficiaries, and why?
    Dr. Anderson. So if I am on--just on Social Security, I am 
going to get about $20,000, maybe $22,000. So $3,000 versus 
$2,000, that's really money to me. That's 1 month of Social 
Security. I care that I get an extra $1,000 and have it to 
spend on other things that I want to do.
    So I think going from $3,000 to $2,000 is very important.
    Ms. Blunt Rochester. Thank you.
    And USC also found that the average total per-person 
spending has grown more rapidly for non-LIS beneficiaries who 
reach catastrophic coverage compared to beneficiaries who 
received LIS subsidies.
    This spending growth was primarily because of the 
difference in the price and utilization of cancer and mental 
health drugs.
    Dr. Anderson, how can this multipronged approach taken in 
H.R. 3 address the cost of prescription drugs in a way that 
just capping out-of-pocket costs can't do alone?
    Dr. Anderson. So the first thing you've got to recognize is 
that many of these drugs are more expensive because they keep 
raising the price.
    So putting something into the legislation that says you're 
going to cap the price increase at inflation or something like 
that is absolutely important because many of these very 
expensive drugs were not very expensive 5 or 10 years ago, and 
they've become expensive because of increasing prices.
    So that is a very critical thing that we haven't talked 
about very much today.
    Ms. Blunt Rochester. Thank you. My time is about to expire. 
But I did, again, want to thank you so much for your testimony. 
I, too, come from a State that believes in innovation and know 
that innovation is important.
    But I also know that we can't price these drugs like we do 
a car. This is about people's lives. And so I thank you so much 
for your testimony. I thank you for this important hearing, 
Madam Chairwoman.
    Ms. Eshoo. The gentlewoman completes her questioning.
    We are going to recess now. We have, what, two votes? Two 
votes on the floor, and we will return on the heels of our 
voting on those two votes and continue with the Members that 
haven't questioned yet as well as those that are waiving onto 
the committee and would like to ask questions.
    So we'll stand in recess.
    [Recess.]
    Ms. Eshoo. The committee is now back in session, and we 
will now recognize the gentleman from Montana, Mr. Gianforte, 
for 5 minutes of his questions. Thank you for your patience, 
too.
    Mr. Gianforte. Thank you, Madam Chair. Thank you to the 
panel for being here today.
    The costs of prescription drugs are too high, and Montanans 
are struggling to pay for the medications that they need. 
Republicans and Democrats on this committee have been working 
together across party lines to bring down the cost of 
prescription drugs with increased transparency, better access 
to generics, increased permitting of biosimilars.
    We've worked on and passed these bills that will save 
billions of dollars in drugs for patients. We've voted to 
remove barriers to generic drugs and stop pharmaceutical 
companies from gaming the system and preventing competition.
    Unfortunately, our bipartisan work on drug prices is too 
often hijacked and politicized by House leadership. The Pelosi 
drug plan is no different. It was written behind closed doors. 
It's an end run around our bipartisan work.
    Speaker Pelosi continues to put politics above bipartisan 
progress to bring down prescription drug prices. Her plan would 
have devastating consequences for patients. It would lead to 
rationing of lifesaving medication, big government price 
fixing, and Government bureaucrats between you and your 
medication.
    Speaker Pelosi could have joined our bipartisan efforts to 
bring down prices for patients and create more transparency in 
the system. Instead, she bypassed this committee, ignored our 
bipartisan work, and chose to put out a socialist plan that 
won't even get a vote in the Senate.
    This is not a pragmatic approach, and the American people 
deserve better than this.
    Dr. Ippolito, Montana is a graying State. In fact, a 
quarter of our State's population will be older than 65 by 
2030. This is far faster than the national average. It's also 
estimated that in Montana rates of Alzheimer's will increase by 
35 percent by 2030, and nationwide the disease will cost more 
than $1 trillion by 2050 if we don't get a new treatment.
    We have all known or loved someone with this devastating 
disease and seen its impacts firsthand. Cures for Alzheimer's 
and other diseases will be critical for our seniors and for 
health of my State's economy.
    The Pelosi plan establishes an exorbitant excise tax, or 
rather price control, of up to 95 percent of the gross sales of 
a drug if a manufacturer does not negotiate or fails to reach 
an agreement on price.
    Could you explain what is the economic signal that this 
bill sends about the seriousness of our Nation in dealing with 
these devastating costs that are going to be coming as our 
population ages?
    Dr. Ippolito. Sure. So, I mean, the decision that any drug 
investment--somebody making a drug investment is going to have 
to make is a simple one. You're going to have to make a 
prediction of what are my expected profits, right.
    As much as I would like to think that everyone's doing 
things just for the good of other people, we have to be a 
little bit more realistic. And so you have to make some 
prediction about how much am I going to be able to sell this 
drug for and what are my costs going to be.
    And as I look at this particular plan, I see a very 
challenging calculus, in particular, because when you make that 
prediction you're going to know that, well, we certainly know 
the maximum the price can be, at least in concept. But we need 
to then say, ``Well, geez, how much lower is it really going to 
be?'' And as I've tried to emphasize with my written testimony 
and oral, there's a lot of uncertainty that goes into that, and 
I feel there's going to be a tremendous amount of political 
pressure to really emphasize short-term gains, which are good. 
You know, everyone likes paying less. But they do come at the 
expense of long-term benefits as well--long-term costs, I 
should say. You know, you can almost make an analogy to we 
often have trouble with the national debt because there's an 
emphasis everybody wants to spend now and nobody ever wants to 
be the person really putting a cap on spending.
    Mr. Gianforte. It has been said that capital is a coward 
and it tends to flee risk. I think that's part of the problem 
with this approach to price controls.
    The Pelosi plan would also mirror a socialized foreign 
healthcare system with price controls for the U.S. Despite 
research that shows that price controls suppress innovation and 
impede patient access to new medicines, are you worried like I 
am that only one in 10 drugs ever get approved by the FDA and 
that we've seen more and more companies getting out of the 
Alzheimer's space after high-profile costly clinical trial 
failures? Shouldn't we be concerned that we are going to tax 
this industry out of existence?
    Dr. Ippolito. Yes. I mean, I think this is the number-one 
long-term question that we have to think through. How much are 
we willing to incentivize? I think, you know, I don't want to 
spend the entire GDP on drugs, and I doubt anybody else does. I 
like schools and roads and things of that nature, too.
    But as you note, there's tremendous value to some of these 
cures, and that's part of what I worry when I look at this 
bill, is we are identifying drugs that are really successful.
    You can be successful for a lot of reasons. It could be 
that you're totally taking advantage of loopholes in the 
system, and I--you know, I think I am with anybody there where 
I say, yes, let's close those down. Let's get rid of these 
delaying tactics, you know, when we should be having generics 
and so on.
    But, boy, do we really want to signal these really valuable 
drugs and make them the most exposed--that is, these brand-name 
drugs that are really successful? You know, I worry a little 
bit, and the Alzheimer's example is exactly the kind of example 
that I would worry about.
    Mr. Gianforte. OK. Well, I just--Madam Chair, I would just 
submit to you that we agree on the objective. We need lower 
drug prices. I would like to see American ingenuity continue to 
be plied against these diseases that are going to be so costly 
and so detrimental to families.
    And with that, I yield back.
    Ms. Eshoo. The gentleman yields back.
    Now I am pleased to recognize the gentleman from 
California, Mr. Cardenas, for 5 minutes of his questions.
    Mr. Cardenas. Thank you very much. It's unfortunate that we 
are discussing such an important topic and I think I just heard 
the Fox News description of the legislation we are 
contemplating today, ``the Pelosi plan,'' just like what 
happened with the Affordable Care Act. All of a sudden, it 
became Obamacare.
    And even though many Americans have benefited tremendously 
from it, they actually polled people and said, ``Are you for 
Obamacare?'' and they said no. Then they said, ``Are you for 
the Affordable Care Act''--same person, different question--
``Are you for the Affordable Care Act?'' and they said yes, 
once they started receiving that care.
    So, hopefully, we can get through this legislation with the 
least amount of politics and focus on the issue at hand. The 
issue at hand is that I don't think there's a person who has 
run for Congress, successful or not--I think the people up here 
have been successful, I assume--who hasn't told their American 
constituents, ``Would you like me to lower drug pricing? Would 
you like to see that happen?,'' and everybody probably cheers 
them on and says yes and then, ultimately, we get voted for and 
here we are with the opportunity to actually discuss and, 
hopefully, pass legislation that hits the mark and does it 
well.
    Thank you, Doctor, Doctor, Doctor. for being here and 
giving us your expertise and your perspectives on what we are 
trying to do here.
    First, I would like to ask a question of Dr. Fowler. You 
transitioned from private insurance to Medicare, correct?
    Dr. Fowler. Yes.
    Mr. Cardenas. Can you give me either something you choose, 
positive or negative, that you have experienced in that 
transition that you either continue to benefit from slightly or 
maybe in a more positive way and maybe something that perhaps 
you haven't when it comes to prescription drug pricing?
    Dr. Fowler. Oh, my. Just very briefly, being under the 
insurance policy of my university was so simple and easy, 
transparent. When my wife and I realized we needed to take the 
plunge into Medicare, it was--the complications of the whole 
system were just so incredibly baffling.
    We have a wonderful person who walked us through 
everything. In Ohio, we call it the OSHIIP program, the State--
housed in Columbus--and this wonderful person walked us through 
all the Medicare options in two three-hour sessions, and we 
finally made our decisions.
    And, of course, everything was complicated because I had 
this super drug at a super cost. So there's that. But and then 
the shift in the cost. Once upon a time, I paid almost nothing 
for copays for this super drug, and now it looks like it's 
going to cost me $12,500 a year for my Revlimid. So----
    Mr. Cardenas. But the drug itself, did it cost Medicare 
and/or your private insurer a similar amount, I mean, on the 
same day?
    Dr. Fowler. I am not sure I understand the question.
    Mr. Cardenas. What I am getting at is, we are talking about 
prescription drug pricing and they only give me so many minutes 
and I just wanted to know if, when it comes to the price of the 
drug that somebody was paying for that price, whether it was 
the insurance and then passing a portion of that onto you or 
not. You had the benefit of that drug coming to your ability to 
use it. At the end of the day, Medicare is still providing you 
that opportunity to take that drug.
    Dr. Fowler. Yes. Yes.
    Mr. Cardenas. OK. In the interests of time, I would like to 
reiterate what the chairwoman pointed out earlier.
    Mr. Ippolito, you mentioned something about gout, which is 
an interesting example, and then the chairwoman pulled out what 
seems to be a fact--I don't doubt her--that NIH has not 
provided funding for research for gout. Yet, when you mentioned 
malaria, Mr. Ippolito, she mentioned that NIH is in fact--has, 
in fact--provided funding for research on malaria, thank God, 
which I think was an excellent example of should we as an 
incredible nation, should we be in the business of trying to be 
assistive with solutions to make lives better, healthier, and 
provide opportunities for innovation?
    And I think that one of the things that's interesting that 
actually has been criticized already in this committee is that 
some of the money actually goes to NIH instead of going back 
into the ecosystem, perhaps back into the insurers' pockets for 
having paid that original price for those prescription drugs 
and/or perhaps a portion of that going back to the consumer. I 
think that I have tremendous confidence that, by the time this 
is done, this legislation, hopefully, will have shaped it in a 
way that people have the confidence that they should have that 
we do need to reduce prescription drug pricing in America and 
we do need to pay attention to the fact that sometimes the 
United States can learn from other countries and actually do 
something a little bit better than we have.
    I am sorry, I am out of time. I yield back.
    Ms. Eshoo. The gentleman yields back.
    A pleasure to recognize the gentleman from Florida, Mr. 
Bilirakis, for his 5 minutes of questioning.
    Mr. Bilirakis. Thank you, Madam Chair, and thank you for 
holding this hearing. I really thank the witnesses for being 
here and their patience.
    But, Madam Chair, what I want to do, first of all, I am the 
cochair of the Rare Disease Caucus, and lowering prescription 
drug prices and increasing patient choice without impeding 
research and development of breakthrough cures and treatments 
is very important to me. Obviously, it's important to everyone. 
We all agree on that.
    Mr. Ippolito, I have some prepared questions. But let me 
ask you this: What is your position--I know what your position 
is on H.R. 3, but how can we lower prescription drug prices? Is 
it through competition? If you can give me a statement on that, 
I would appreciate it. How would you do it if you were in our 
position?
    Dr. Ippolito. Well, I think I would focus primarily on the 
incentives that people making the drugs have, namely, what kind 
of pricing incentives do they have and then what kind of 
research and development incentives do they have.
    And so, when I look at exactly what you guys are talking 
about in terms of reforming the Part D benefit design, I see a 
very good combination, at least in concept--there's details to 
be hashed out--in concept there's a really good reform there, 
where we say we are no longer going to engage in this behavior 
where we have this terrible benefit design where these really 
high list price that Gerry was talking about in large part or 
at least in part can betraced back to this incentive that's in 
this benefit, which is jack up your list price as high as you 
possibly can so that you can offload all this cost onto the 
Federal Government, and patients are stuck there paying these 
massive out-of-pocket costs.
    And so, when I look at that benefit redesign, I see a 
really nice shift towards a much more sustainable program. I 
see much better incentives facing insurers who have to care a 
lot more about the costs of the drugs that they're providing, 
and we are now knocking down this idea that we are just going 
to get away with high prices not because we have some great 
value that we are proposing but because it's a way to take 
advantage of a benefit design.
    So I think I would look at the incentives that are facing 
the market actors here, and I think the Part D redesign is a 
really good example of that.
    Mr. Bilirakis. Very good. Thank you.
    OK. Now to H.R. 3, and I know that the--I am just following 
up on what some of the Members have asked, and I will give you 
some more time.
    Do the economic incentives in H.R. 3 signal to 
manufacturers to invest in rare diseases or lower-cost follow-
on products?
    Dr. Ippolito. Yes. So this is a very--this is a good 
question. The composition of drugs--we don't just care about 
how many drugs or how much money was spent on research. We care 
about what we get out of it.
    So we care about the composition of drugs and what kind of 
treatments are we getting. And so one of the things that you do 
need to think about is how are different drugs going to be 
affected differently under this proposal.
    And so one of the things that I would certainly emphasize 
is that this price-setting arrangement would only apply to 
single-source drugs--only apply to drugs that do not have 
competition.
    Drugs that are less likely to have competition tend to be 
drugs with smaller market share--excuse me, market sizes. And 
so if you are particularly concerned about rare diseases, that 
is something that I would emphasize that it's--if you expect 
it's going to be a longer time before you get that second 
entrant, well, then you're going to be eligible for this rate 
restriction for a very long time. So it may actually depress 
the incentives there particularly.
    Mr. Bilirakis. Thank you for your input.
    Again, the Commerce Department found that the price 
controls in foreign countries already suppress worldwide 
private research and development investment by 11 to 16 percent 
annually, leading to fewer new medicines launched each year.
    Under this price-control plan--H.R. 3--would the U.S. 
remain the leader in biomedical R&D? If not, which countries 
would take the lead in biopharmaceutical research, in your 
opinion?
    Dr. Ippolito. So there's two things: There's where is this 
kind of research and investment taking place, and then there is 
which market is it aimed at.
    So right now, there is a good and bad thing, which is that 
we are the biggest market for pharmaceuticals in the world, 
period. I believe IQVIA puts us at spending about the same 
amount as the rest of the top 10 spending countries in total.
    So we are likely going to still be a large spender in terms 
of pharmaceuticals. But it is entirely possible, as we have 
other large countries like China and India becoming wealthier 
and so on, that they become more of the target markets for 
these kinds of things, or perhaps the EU as their policies 
evolve.
    Mr. Bilirakis. Thank you very much.
    And Madam Chair, under your leadership--your capable 
leadership--you know, we've already proven it this year, early 
this year, we can come up with a good bill and we can all agree 
on it and, of course, it must pass the Senate. Otherwise, it's 
not going to do any good.
    So, you know, I hope that we make some progress and get 
something out by the end of the year. So I really appreciate 
your holding this hearing, and I yield back.
    Ms. Eshoo. The gentleman yields back. I share your wish, 
and we'll work hard. This needs to be resolved for the American 
people. Every single Member here knows that.
    And now it's a pleasure to recognize the gentleman from 
Kentucky, Mr. Guthrie, his 5 minutes.
    Mr. Guthrie. Thank you very much. It is great to be here, 
and thanks to the chair for holding this hearing.
    Getting on this subcommittee has been one of the blessings 
of my time in Washington, DC. It's amazing. I had a person in 
my office about 3 days ago or last week who was talking about 
that they're on the verge of curing sickle cell anemia--that 
they can actually reprogram a gene to go in and replace 
through--not a transfusion but a bone marrow transplant in 
sickle cell anemia, and just an artificial pancreas. We can 
cure hepatitis C with a pill now. It used to be a liver 
transplant. I mean, all the things that's coming out of the 
United States, and it's both NIH and it's private research.
    And I know one of my friends here was talking earlier about 
NIH and our support for NIH. That's one thing people ask me in 
town halls or things--well, can you all agree on anything in 
DC. I say, ``Well, yes, the stuff you don't see on 
television.'' There's a Cures bill with NIH. It's been 
bipartisan. I think we can all look--not that we did it, but 
hopefully we created a platform that very smart people focusing 
on very strong diseases can move forward.
    And at the beginning of this Congress, I met with the 
ranking member of the O&I of this subcommittee--so Oversight 
and Investigations--of this stuff within our jurisdiction, and 
we wanted to make drug pricing our number-one issue. And we 
talked about it and we said, well, you got really kind of three 
buckets. One is the EpiPen situation, which Judiciary Committee 
needs to handle. It is--I mean, all of us agree that that's bad 
competition, and it should be handled that way.
    The second one that we focused on was insulin. It's not a 
blockbuster drug. It's been around for a hundred years at most, 
but it's gone up from $100 to $300. We've had hearings. We've 
tried to move forward on legislation with that. That stalled, 
and it's kind of gone to this direction.
    And the third thing I said, but as we focus on that, what 
we don't want to do is get in the way of the precision medicine 
that's coming forward.
    Because when you look at--and it's simple for me, and it's 
simple for a lot of people--when you talk about drug price and 
we think of we are going to figure out what--make a tablet and 
we'll make a million tablets and sell them. And so we want to 
figure out what that price should be, and we can--that's what 
we need to focus on.
    But that's not exactly what's going on today in the 
research world. It's making that pharmaceutical for that person 
based on that genome.
    And so, Dr. Ippolito, I am really concerned that, if we 
pull the private research out of that, and even though we give 
it to the National Institutes of Health, do you think the 
National Institutes of Health alone is going to be a good 
substitute for what's happening in our world today?
    Dr. Ippolito. So I can only speak to sort of the current 
iteration of NIH. I don't know what you might have in mind--if 
you gave them a ton more money.
    But, in general, it's worth thinking about kind of the role 
that the NIH fills in this research and development process, 
which is quite long.
    The NIH really helps us overcome what is called the public 
goods problem, namely, there are a bunch of things that are 
really, really important for drug development and all sorts of 
other----
    Mr. Guthrie. Like mapping the genome.
    Dr. Ippolito. Right, like mapping the genome----
    Mr. Guthrie. The brain research that----
    Dr. Ippolito [continuing]. Which you can't--you don't get 
intellectual property protection. That's a fact about the human 
body, you know.
    And so what we worry about is, if we just left that up to 
the private market, well, any given firm is going to be just 
disincentivized to learn about these things because they can't 
hold onto it. As soon as they learn it, anybody can try and 
steal it from them and use it make their own drug.
    So what we do is we give the NIH money to try and help us 
overcome that public goods problem, namely, let's learn some 
things about the human body, for example, and then let's let a 
bunch of firms use that.
    So it's the reason why hepatitis C we have a cure and 
within a couple years the price came down from $90,000 to 
$20,000 to cure hepatitis C. It's not because it went generic. 
It's because we learned something about hepatitis C, and a 
bunch of firms went after and tackled the same problem.
    And so the NIH is an important part of the current R&D 
investment infrastructure. It really helps us do something that 
is hard to do without Government intervention.
    But it's not really equipped to do the whole process. So 
unless you have something really drastic in mind for changing 
what the NIH does, then it seems like there's still half of 
this puzzle that we still need to have a market for.
    Mr. Guthrie. So, and I understand some of the things I 
described are more procedures than pharmaceuticals. But 
chemotherapy was a procedure. Now it's become a pharmaceutical.
    So and it leads to--matter of fact, I am on a bill trying 
to figure out how do we treat the oral tablet like a--like the 
procedure because of the way the copays and things work for 
people that are going through chemotherapy. And so I don't 
think we can sell too much short. As we look at this, as we 
look at price controls in healthcare and we are all here trying 
to get the prices down and try to make them more marketable, 
and one of the problems is we are the research arm for the 
world. We pay for the research the world gets, and I know I've 
got a statement here. There's a lady from England, Louise 
Moorhouse, who has PKU. That has been part of a study, but now 
the National Health Service isn't going to cover her. She went 
through a study. She changed her life. Now she can't get the 
study in England because of the limits of price controls in 
their system.
    So that's why, hopefully, a longer legislative process and 
we need to do it--can't delay it. We got to do it--I mean, we 
can't go on forever. But we need to try to solve the problems. 
But if we don't do this right, we are going to have some 
unintended consequences and hopefully not lose the miracle 
research, a lot of it coming out of my good friend's district--
matter of fact, a lot of it coming right out of there, and it's 
just fantastic. And you see it every day what's happening, and 
I appreciate it.
    And I yield back.
    Ms. Eshoo. The gentleman yields back.
    It's a pleasure to recognize Mr. Flores from Texas for his 
5 minutes of questions, and thank you for your patience.
    Mr. Flores. Yes, ma'am. Thank you, Chairman, and thank the 
panel for putting up with us. I mean, you have been here for an 
incredibly long session. I would like to continue the 
discussion that Mr. Gianforte and Mr. Bilirakis started about 
what happens with our ability to continue being the most 
innovative pharmaceutical market in the world.
    Because under the Pelosi plan--it is the Pelosi plan, it's 
not this committee's plan, it's the Pelosi plan--under that, 
there is a provision to negotiate prices. I think some of us 
maybe could find a way to get comfortable with negotiating 
prices. But it's got to be done in a way that's fair. Not the 
way the VA does where veterans don't have access to 48 percent 
of the pharmaceuticals that the rest of the country has. Not in 
an environment where you have a 65 percent to 95 percent excise 
tax.
    So, Dr. Ippolito, what would a 65--I think you have already 
answered the question. A 65 to 95 percent excise tax would 
drive innovation to other markets? Is that still your position?
    Dr. Ippolito. Yes. I think there's no question. If the 
penalty is 65 to 95 percent of your gross revenue, which is 
going to be more than in the--once you get to 95 percent, it's 
going to be more than all of your net revenue.
    Mr. Flores. Right. So if you're--whether you're a large 
pharmaceutical company or you're a couple of folks in a garage 
that found a new way to treat a serious disease, and you have 
gone to--you go either to your investment committee and the big 
pharmaceutical company or you go to your venture capital or 
private equity community as the small folks who are funding, 
they're going to say, ``Yes, fine, we'll do it, but don't 
develop the IP in the United States. Develop it somewhere 
else.''
    And I think that, if you look at the countries that really 
made a focused effort to try to develop IP when it comes to 
pharmaceuticals, it's China and India. And so that raises a 
whole new issue.
    I mean, would you support that thesis, that the IP is going 
to be developed somewhere else?
    Dr. Ippolito. So I guess I don't know as much about 
literally the legal ramifications of where exactly it's 
developed. But there's no question that, you know, you 
emphasized the small biotechs. That's really where this kind of 
uncertainty over pricing----
    Mr. Flores. Exactly.
    Dr. Ippolito [continuing]. And what is going to happen is 
going to really be felt.
    Mr. Flores. Because their funding source is going to demand 
that they go somewhere else.
    Dr. Ippolito. Their funding sources are quite mobile.
    Mr. Flores. And as a person who used to be funded by 
private equity, I know that they always go to the place that's 
going to provide the least risk and the highest return.
    And so, since we are talking about the fact that it could 
wind up in China or India, let's talk about China and drug 
safety there for a minute.
    Eighty percent of the ingredients in U.S.-branded 
pharmaceuticals come from China today because they've made an 
overt effort to invest in this space and to drive U.S. 
manufacturers out of business.
    And so I've got several examples, two of which affect me 
personally. The first example is Heparin, which doesn't affect 
me personally, but we know that we had 81 deaths from that in 
2007-2008.
    Then a couple that affected me personally and for 
hypertension, losartan, it was recalled because it had NMBA in 
it, which is a carcinogen. And I think that one of the things 
that that's used in is rocket fuel.
    Then so the replacement drug was valsartan, and then it got 
recalled later because it was contaminated with NDMA. And so, 
if you think about the impact that we could--that bad policy on 
pricing could have in terms of the safety of healthcare for 
Americans, it's pretty profound.
    So with that, Madam Chair, I would ask unanimous consent to 
enter a few articles into the record.
    The first is from the South China Morning Post dated July 
18th of 2018. It says, ``Chinese blood pressure pills sold in 
the U.S. recalled over cancer-linked ingredient.'' The next one 
is August 14th, 2018, from NBC News, says ``FDA Recalls: A 
Reminder that China Controls Much of the World's Drug Supply.''
    And one of the lines in here about this says because they 
are toxic to the DNA, you have to control them.
    The next one is from WebMD dated November 19th, 2018, and 
it talks about the challenges American drug companies have 
because their sources--their drugs are coming from overseas.
    Another one dated January 14th, 2019, from USA Today, 
``Blood Pressure Drug Recall: FDA Investigates Foreign Plants 
that Made Drugs with Cancer-Causing Impurities.''
    Then the next one is from Bloomberg dated January 30th, 
2019, said, ``How a Tainted Heart Drug Made in China Slipped 
Past the FDA.''
    The last one--excuse me, the next one is from NBC News 
dated September 30th--excuse me, September 23rd, just a few 
days ago--``FDA Explains Blood Pressure Drug Recall Again.''
    And the last one is also dated the same day, September 
23rd, 2019, from CBS News, ``More Blood Pressure Pills Recalled 
Over Cancer-Causing Chemical.''
    Everybody on this committee needs to know that we can't do 
anything that drives innovation to another country like China 
that could cause us to have a tainted drug supply or that, as 
one of these articles talks about, pharmaceuticals from China 
could be used as the next weapon against us if it's all 
produced there.
    Thank you. I yield back.
    Ms. Eshoo. The gentleman yields back, and so ordered. All 
of those articles will be made part of the record of our 
hearing.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. And too, just very briefly to the gentleman's 
comments, I think that as we are examining this issue today, as 
large as it is, as impactful, as important, as critical as it 
is, I really think that our Health Subcommittee needs to do a 
lot more work relative to America's drug supply.
    We have shortages. We have tainted products. We have to 
bring the FDA in. I think you all saw--I sent to you the op-ed 
that Congressman Schiff and I did that the Washington Post had 
published, and I think it's a national security issue as well.
    So we are going to have a joint hearing on that. But our 
subcommittee has a lot of work to do, and I am very pleased 
that you brought those articles to place them in the record.
    We appreciate it, Mr. Flores.
    Mr. Flores. Madam Chair, if I may----
    Ms. Eshoo. Yes. Sure.
    Mr. Flores [continuing]. With your forbearance, thank you. 
I look forward to that, and thank you for letting me waive on 
today. I hope to waive on when we get into that particular 
issue.
    Ms. Eshoo. Wonderful.
    Mr. Flores. Thank you.
    Ms. Eshoo. You're always welcome here.
    Now, to recognize not the last--what do they say, the first 
shall be last? Last but not least.
    The gentleman from New York, Mr. Engel, for 5 minutes of 
questioning.
    Mr. Engel. Thank you, Madam Chair. I have a statement I am 
going to make, and I hope we can get to the questions at the 
end. If not----
    Ms. Eshoo. Why don't you--do you want to put your statement 
in the record and ask your questions?
    Mr. Engel. Well, I will----
    Ms. Eshoo. So that you have time? Because you have waited 
all day.
    Mr. Engel. Let me--yes. Let me--let me----
    Ms. Eshoo. Whatever you wish.
    Mr. Engel. Thank you. Thank you, Madam Chair, for holding 
today's important hearing on proposals to--would allow the 
Federal Government to negotiate drug prices and bring relief to 
our constituents.
    I am always shocked, and I was here at the beginning--and 
disappointed to know that other countries pay far less for the 
same medications than we do.
    A recent study of 10 other high-income countries found 
that, on average, they spend only 56 percent of what we pay for 
the exact same drugs, and unlike our broken drug-pricing 
system, these countries negotiate their drug prices.
    So I am pleased to see that we are considering the Medicare 
Prescription Drug Price Negotiation Act from Congressman Welch, 
which would repeal the noninterference clause enacted by the 
2003 Prescription Drug Improvement and Modernization Act.
    This horrendous 2003 law, which I voted against, prevents 
Medicare from using its purchasing power to lower the cost of 
lifesaving drugs such as insulin, and Congressman Welch's bill 
would go a long way in righting this wrong.
    I want to also thank Speaker Pelosi and Chairman Pallone 
for their leadership in crafting the Lower Prescription Drug 
Costs Now Act, which I am pleased to cosponsor.
    This comprehensive legislation delivers on our promise to 
the American people to lower prescription drug prices by 
allowing the Federal Government to negotiate, eliminating price 
gouging and capping out-of-pocket costs.
    I look forward to helping move this legislation to the 
House floor, and while we work on these bills we should also 
continue our work on legislation that addresses the other 
factors of rising drug prices.
    This past August, I introduced the REFUND Act, which would 
protect Medicare beneficiaries from wasteful spending on 
excessively large single-use drug vials. This commonsense 
legislation would enable seniors and the Medicare program to 
recoup money wasted on these oversized vials.
    Earlier this month, Congressman Guthrie and I led 90 of our 
House colleagues on a bipartisan letter to the FDA on drug 
shortages, which can increase the cost of vital drugs in some 
cases.
    And last week, Congressman Larry Bucshon and I introduced 
the bipartisan, bicameral Advancing Education in Biosimilars 
Act. This legislation would create Federal programs to promote 
the use of biosimilar drugs, which are generic versions of 
high-priced biologics.
    Our constituents are demanding action on high drug prices, 
and I am honored to serve on this committee, where our 
chairwoman, Anna Eshoo, does such a great job which is leading 
the effort so far to fix the epidemic of price gouging.
    So let me ask Mr. Anderson this. The 2003 Prescription Drug 
Improvement Modernization Act created Medicare Part D. Again, I 
voted against it, and it provides inadequate drug coverage for 
seniors.
    Currently, 60,000 of my constituents are enrolled in Part D 
plans, and my constituents, especially those with chronic 
conditions such as diabetes, frequently tell me that Part D 
coverage is too expensive.
    In 2019, seniors in my district will have to spend upwards 
of $5,100 before they receive some relief from a so-called 
catastrophic phase of the Part D benefit.
    As we all know, many seniors have fixed incomes, with the 
majority of seniors living with incomes below $26,200.
    But, Dr. Anderson, you note in your written testimony that 
Medicare Part D was designed on budget constraints instead of 
sound insurance principles.
    It's my understanding that H.R. 3 would reform this 
benefit. So how would the Lower Drug Costs Now Act address 
rising out-of-pocket costs for seniors with Medicare Part D 
coverage in a district like mine?
    Dr. Anderson. Well, in yours and probably everyone else's, 
basically, Dr. Fowler has talked of how the fact that his drug 
benefit was quite good when he was employed by the university 
and not very good when he was employed and he's under Medicare.
    And the reason is he didn't have to pay very much when he 
was under the university. He has to pay a significant amount. 
He says $12,000. You say $5,000 in your district, on average.
    That's a huge amount of money for somebody who's on Social 
Security and that's all their income. Five thousand dollars is 
probably 2 months out of 12 of their total income.
    They don't have that amount of money. So limiting it to 
$2,000 is still a lot of money. It's probably 1 month of their 
Social Security income. But it's way better than 2, 2 \1/2\ 
months of their Social Security income.
    So I think this is a very important change.
    Mr. Engel. Thank you.
    Dr. Fowler, I know you have talked about the financial 
hardships. Can you describe the financial hardships and 
emotional toll that Revlimid's price increases have placed on 
you and your family?
    This drug costs four times more in the U.S. than the United 
Kingdom. It's outrageous.
    Dr. Fowler. So you're asking me about the--what the trauma 
of dealing----
    Mr. Engel. What an average family goes through with this.
    Dr. Fowler. Excuse me?
    Mr. Engel. What an average family that gets these costs 
goes through.
    Dr. Fowler. I am not sure I am understanding the question. 
What would an average family--how would they have to face this? 
What kind of challenges they would deal with?
    I am not sure I am an average family so----
    Mr. Engel. OK.
    Dr. Fowler [continuing]. I am fortunate to have had good 
coverage as an employed person, and I think we are going to be 
OK on Medicare. But I am very nervous about it because the out-
of-pocket price under Medicare is so significant and that, on 
top of the medical issues of facing my disease, altogether the 
package is very daunting.
    Mr. Engel. Thank you. Thank you, Madam Chair.
    Ms. Eshoo. I thank the gentleman.
    And he--let's see, is Mr.--yes, Mr. Walberg of Michigan is 
welcome to the subcommittee and recognized for 5 minutes of 
questions.
    Mr. Walberg. Thank you, Madam Chair. I appreciate that and 
appreciate the panel for being here. It's an important subject 
that we ought to be dealing with and spending a lot of time on 
dealing with it.
    Mr. Ippolito, thank you for being here. You have made it 
clear that the risk associated with bringing a drug to market 
is rather large, and if you don't have a chance of getting your 
investment back it's really going to discourage some of that.
    Can you explain along that line that to lower costs in the 
current prescription drug market we need more of what works--
competition and market innovation--and less of what doesn't, 
meaning more bureaucracy and Washington interference?
    Dr. Ippolito. Well, I think there's a number of ways to 
lower drug prices and, indeed, there are a number of ways where 
we can harness competition.
    I think one of the things that I know this committee has 
worked on but some others have, is we have a regulatory 
framework for drugs. We give exclusivity, and then we have this 
exclusivity period end. Then we have competition come in, and 
we drive prices down.
    And one of the things that I think a lot of folks have 
mentioned in this discussion is that that might not be working 
quite as well as it's designed to work.
    And so one of the things that Congress can do is work to 
make it so that patent thickets or so-called REMS abuse, which 
is in the CREATES Act, and other sort of evergreening style 
tactics aren't as successful at delaying the competition that 
we are supposed to be getting after these exclusivity periods.
    So I do think there are ways. Even if we just look at our 
current framework, we can just focus on making it better as a 
step one and then kind of go from there.
    Mr. Walberg. OK. Take some of the impingements out of the 
way.
    It's my understanding as well that the industry provides a 
source of funding for research at universities and academic 
medical centers like those in my State, University of Michigan, 
and other places, and that these collaborative efforts are 
often focused on the Nation's most scientific and technological 
health challenges.
    Mr. Ippolito, what would be the impact of this plan on 
universities and academic research centers?
    Dr. Ippolito. Yes, there is no question. I mean, the 
industry does--it's sort of funny. I think a lot of folks think 
of there being this very hard wall between the pharmaceutical 
industry and academic research and so on.
    But there really isn't. They do fund and they do engage in 
a lot of collaborative efforts. You know, a number of my--the 
colleagues that I work with, when they were grad students or 
post-docs, were funded by industry resources.
    So there's no question that there's some benefit from that. 
It's not the only source of the way that they fund research, 
and it's not the only way that universities are funded, but 
there's no question that there is positive benefit.
    Mr. Walberg. But making it more difficult would make it 
more difficult as well to fund programs that in fact helped 
your colleagues?
    Dr. Ippolito. Sure. Yes. No, I like them having jobs, so on 
a personal level----
    [Laughter.]
    Mr. Walberg. And the impact that they had, going forward, 
for the drugs as well.
    Brand-name drugs pay numerous discounts and rebates across 
many channels. Is it fair to contrast the pricing of drugs in a 
single Federal program to that in a whole nation or basket of 
nations?
    And secondarily, would it not be more appropriate to 
consider the aggregate cost to net price for a drug?
    Mr. Ippolito?
    Dr. Ippolito. Yes. So this gets at--this is kind of in the 
weeds but, I mean, this is actually a really big deal when you 
talk about drugs: What is the price?
    That's a surprisingly hard question to answer, and yes, so 
drugs, when they leave the factory they have a price, and it's 
basically the list price and it's like the MSRP on an item of 
clothing or a car.
    The only problem is, it doesn't actually represent the 
transaction price of almost anywhere in the supply chain, 
except for sometimes a patient's out-of-pocket costs are based 
on that number.
    And so what you get is this extremely complicated pricing 
environment. So in my written testimony I included just to show 
in 2019, for example, branded drugs, the amount that the 
manufacturer actually gets paid ranges anywhere from 5 percent 
to 95 percent of the list price of the drug.
    And so, when you think about trying to do this on an 
international scale and understand what exactly they pay, I 
think that's actually going to be extremely difficult--just 
empirical challenge whether or not you think it's a great idea.
    So I do urge some caution when you go down that route.
    Mr. Walberg. OK. And finally, wouldn't an inflation penalty 
as envisioned in H.R. 3 merely incentivize manufacturers to 
charge high introductory prices?
    Dr. Ippolito. Certainly if there's no restriction on the 
launch price, there is no question that you would try to. 
Manufacturers launch at a low price, try and get a lot of 
market share, and then they increase their price over time.
    To the extent that you are not allowed to increase your 
price over time, of course, there's going to be attention to 
try and retilt the pricing schedule--that is, increase your 
launch price. Exactly how much they're going to do that is up 
for debate. But I don't think the direction there is any 
debate.
    Mr. Walberg. Thank you. I yield back.
    Ms. Eshoo. The gentleman yields back. It's called whack-a-
mole.
    [Laughter.]
    Ms. Eshoo. I remember that word.
    Now, I am pleased to recognize the gentleman from Ohio, and 
he really is a gentleman, Mr. Latta, for his 5 minutes.
    Mr. Latta. Well, thank you very much, Madam Chairman, and I 
want to thank you very much for allowing me to waive on to 
today's very important subcommittee's hearing. I really 
appreciate it.
    And I also want to thank our witnesses for being with us 
today.
    This is an issue all about the patient. It's about my 
constituent who is seeking a lifesaving medication or picking 
up a blood pressure prescription at the local pharmacy.
    I want to see prescription drug prices go down just as much 
as the rest of America, and I've repeatedly voted for measures 
that aim to do just that.
    However, H.R. 3 isn't that answer. Under the Pelosi plan, 
you know, this went against the bipartisan nature of this 
committee, which has a history of working together and 
delivering solutions.
    I encourage the same partnership to help our constituents 
by focusing on bipartisan legislation that will reduce drug 
costs in patients and ensure patient access to current and 
future medical treatments.
    If I could start with you, Mr. Ippolito. In 2018, the FDA 
approved an advanced medicine for treating migraines, saying it 
gave patients a novel option for reducing the number of days 
with migraine for this painful and also debilitating condition.
    Yet, more than a year later, this treatment still is not 
available in three of the countries that are referenced in H.R. 
3, being Australia, France, and Japan.
    And could you explain why this might be the case? And, you 
know, just talking about migraines, when I was a kid I had 
migraines. And so I understand what people go through. Back 
when I was a kid you just--you didn't have anything--you know, 
you just hoped--take an aspirin, that was it.
    However, I met someone--it hasn't been too long ago, that 
has a persistent migraine 24 hours a day. So I am not sure how 
the person functions, because I know what a migraine is.
    But could you explain why, when you look at Australia, 
France and Japan, why this might be the case that these would 
not be available in those three countries?
    Dr. Ippolito. Sure. I don't know the exact reason for the 
specific drug that you're talking about, but there are a couple 
candidates.
    So the first is that at least some of the referenced 
countries that we are talking about use various forms of 
negotiations, cost effectiveness analysis or what have you.
    That takes time. That is, they need to make a decision 
about whether a drug is worth covering or not. That doesn't 
happen instantaneously. And so it is often the case that the 
United States tends to be on the leading edge of getting access 
to medicine relative to some of our international peers.
    The second is that, even after they go through that 
process, they still have to make a decision about whether or 
not they're going to offer that drug to be covered under the 
health plan.
    And so the answer could be it's in delay or the answer 
could be that they concluded their analysis and decided that 
it's just not worth covering.
    Mr. Latta. Let me just follow up with that because, again, 
I think that's an important point.
    If they're not going to cover that drug, what is a person's 
option then? You know, let's just say it's a lifesaving--not 
just maybe a migraine-type medication but maybe a lifesaving 
cancer treatment drug. What's a person's--you know, in one of 
those countries that will not be covered, what's their option?
    Dr. Ippolito. Well, so I suspect it would depend a little 
bit on the country. But often the way this works is you would 
get denied initially or not recommended for coverage, and then 
you could go back effectively to the negotiating table and they 
say, we'll accept it if you lower the price, and go through 
some prolonged negotiation.
    You know, these are the kind of, even--I don't want to 
assign sort of a normative value to any of this--these are the 
hard decisions.
    If you're going to centralize these decisions, somebody has 
got to care about costs. Either you have to incentivize low 
cost or somebody has to draw a line somewhere, and these are 
the kind of hard decisions that you do have to make if you have 
it so that it's centralized where, you know, say, it's the 
National Health Service in the U.K., making a decision about 
what is and what isn't covered.
    Now, the question and what's a little bit different about 
H.R. 3 on this point is that it's--in theory we are saying that 
everything is going to be covered, but we are going to come 
with this, you know, negotiation that, you know, we'll either 
take your intellectual property or--not in H.R. 3--we'll take 
all your revenue if you don't accept it.
    It seems to me that that wouldn't be as much of an issue in 
H.R. 3. In H.R. 3, I would worry more about not the stuff that 
already exists. I would worry about that next wave of stuff 
that doesn't exist yet. That would be the real concern for me.
    Mr. Latta. In my last half minute, let me ask another real 
quick question, if I may.
    Isn't it true that beneficiaries still pay coinsurance on 
Part B drugs based on the ASP plus 6 percent, so an inflation 
cap does nothing to reduce beneficiary costs?
    Dr. Ippolito. That's a good question. I do need to--so the 
way this interacts with Part B I do need to go back and 
revisit, because basically the ASP calculation is a calculation 
of the average sales price to a whole bunch of payors. And then 
you have a plus 6.
    And so it depends whether or not that is really going to 
include this new mandated price from HHS or not and how that 
gets folded in.
     And so I have to plead a little bit of ignorance on the 
exact answer.
    Mr. Latta. Madam Chair, I see my time has expired, and 
thank you again for letting me waive on.
    Ms. Eshoo. The gentleman waives back. You're always welcome 
here at our subcommittee.
    And, yes, I would like to ask for unanimous consent to 
place the following in the record--the documents for the 
record: the statement of support from AARP, statement of 
support from the AFL-CIO, a statement of support from AFSCME, 
statement of support from the American Hospital Association, 
statement of support from America's Health Insurance Plans, 
sometimes known as AHIP, a statement of support from Families 
USA, statement of support from Patients for Affordable Drugs 
Now, statement of support from the Pacific Business Group on 
Health, statement of support from the Alliance for Retired 
Americans, a statement of support from the California Medical 
Association, letter of support from the American Medical 
Association, a letter of support from the United Auto Workers, 
a letter from 340B Health, statement from the National 
Association of Chain Drug Stores. We'll have to tell our 
colleague Mr. Carter that.
    A letter from the National Association of Specialty 
Pharmacy, a letter from the American Society of Health-System 
Pharmacists, a letter from the National Grange, a statement 
from the Americans for Tax Reform, a statement from the 
Partnership to Improve Patient Care, a statement from 
RetireSafe, a statement from Academy of Physicians and Clinical 
Research, a statement from the Council for Affordable Health 
Coverage, and a letter from Chairman Elijah Cummings.
    So these--hearing no dissent, those will be placed in the 
record. And how do you want me to do this, Doctor? Do want me 
to take it?
    So ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. The gentleman is recognized.
    Mr. Walden. Thank you. Thank you, Madam Chair, and thank 
you, Dr. Burgess, and I appreciate the courtesy.
    I just wanted to follow up on earlier comments and thank 
the chairwoman for hers, and I know she's genuine in this 
because we've worked together on a lot of things, her openness 
to working with us, and we will set up that appointment ASAP to 
see where we can find common ground.
    And your comments at the beginning of the hearing about 
regular order and the importance of it, including the markup in 
subcommittee, which I hope will be fulfilled because I think 
that's--I am telling you, we are all in agreement. This is a 
huge issue we need to address.
    We have some differences of opinion on how to get there. We 
have them at the witness table. We've been blessed with three 
really bright, capable people. They don't even agree.
    And so we want to get it right, Madam Chair. So thanks for 
agreeing to the subcommittee markup. Thanks for also agreeing 
to make sure we get the answers to the questions that we pose 
back before we have to begin voting, and I do hope we can go 
through a real regular order on this and get to a positive 
conclusion for consumers out there.
    And I hope as we are getting this bill evaluated as well, 
Madam Chair, that we would get more than just the number for 
savings to the taxpayers from CBO, but also I think we are all 
committed--what's it mean for the patient? What's it mean for 
the mom that's going up the counter? What's it mean to the dad 
who's going up to the drug counter? Are they going to see 
savings out of pocket? Because I think that's also our ultimate 
goal as we reform the modernized Medicare Part D.
    So, with that, Madam Chair, thanks for you indulgence, and 
look forward to working with you again, and I will yield back.
    Ms. Eshoo. I thank the gentleman, my friend.
    And I will do my utmost so that we have a process here that 
is a solid one, the way it should be done. That doesn't mean 
that everyone is going to agree with everyone. We may just end 
up having some differences, and we need to respect that with 
one another.
    But in coming out of the gate, I have--I am more than 
comfortable making these commitments because I think that 
regular order is exactly what it is. There should be a 
regularity to it and that we move in a way where we are 
respectful of one another.
    H.R. 3 is written for patients. It's written for patients. 
And I think it was Mr. Sarbanes said, you know, when you count 
the number of members of the committee, each one of us 
representing 750,000 people, they all care about this.
    So we have our work cut out for us. I can--I see where the 
different fissures are, and--but that doesn't mean that we 
can't stretch ourselves to see if we can come together on--
because we all care about it.
    So with that, I don't have anything else to add to the 
record. You have already inserted your records, and all of our 
thanks to the three of you. You have been here for a long time. 
10:30, let's see, 11, that's a long time. Three, 4, 4 \1/2\ 
hours.
    But know that your testimony has mattered to Members. I 
think there have really been probing, excellent questions from 
all of my colleagues on the subcommittee.
    And I think that you have helped us to understand things in 
a broader, deeper way today.
    So Dr. Fowler, our thanks to you. Stay healthy. We want to 
bring down your copay. Twelve thousand five hundred is too 
much.
    Dr. Ippolito, you don't look old enough to come and testify 
here. But thank you for it, and while I don't agree with some 
of the takes of your testimony, I think you have presented 
yourself in a very nonmenacing way, and I think that's very 
pleasant. I am going to remember you for that.
    Dr. Anderson, thank you for your forthright--and your 
wonderful necktie. To everyone that stayed in the hearing room, 
thank you.
    This subcommittee meeting is adjourned.
    [Whereupon, at 2:55 p.m., the committee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
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