[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                    LOWER DRUG COSTS NOW: EXPANDING
                    ACCESS TO AFFORDABLE HEALTH CARE

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                          HEALTH, EMPLOYMENT,
                          LABOR, AND PENSIONS

                                 OF THE

                    COMMITTEE ON EDUCATION AND LABOR
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION
                               __________

              HEARING HELD IN WASHINGTON, DC, MAY 5, 2021
                               __________

                           Serial No. 117-11
                               __________

      Printed for the use of the Committee on Education and Labor

                                     
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                     

          Available via: edlabor.house.gov or www.govinfo.gov
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
44-534 PDF                WASHINGTON : 2022  




                    COMMITTEE ON EDUCATION AND LABOR

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

RAUL M. GRIJALVA, Arizona            VIRGINIA FOXX, North Carolina,
JOE COURTNEY, Connecticut              Ranking Member
GREGORIO KILILI CAMACHO SABLAN,      JOE WILSON, South Carolina
  Northern Mariana Islands           GLENN THOMPSON, Pennsylvania
FREDERICA S. WILSON, Florida         TIM WALBERG, Michigan
SUZANNE BONAMICI, Oregon             GLENN GROTHMAN, Wisconsin
MARK TAKANO, California              ELISE M. STEFANIK, New York
ALMA S. ADAMS, North Carolina        RICK W. ALLEN, Georgia
MARK De SAULNIER, California         JIM BANKS, Indiana
DONALD NORCROSS, New Jersey          JAMES COMER, Kentucky
PRAMILA JAYAPAL, Washington          RUSS FULCHER, Idaho
JOSEPH D. MORELLE, New York          FRED KELLER, Pennsylvania
SUSAN WILD, Pennsylvania             GREGORY F. MURPHY, North Carolina
LUCY Mc BATH, Georgia                MARIANNETTE MILLER-MEEKS, Iowa
JAHANA HAYES, Connecticut            BURGESS OWENS, Utah
ANDY LEVIN, Michigan                 BOB GOOD, Virginia
ILHAN OMAR, Minnesota                LISA C. Mc CLAIN, Michigan
HALEY M. STEVENS, Michigan           DIANA HARSHBARGER, Tennessee
TERESA LEGER FERNANDEZ, New Mexico   MARY E. MILLER, Illinois
MONDAIRE JONES, New York             VICTORIA SPARTZ, Indiana
KATHY E. MANNING, North Carolina     SCOTT FITZGERALD, Wisconsin
FRANK J. MRVAN, Indiana              MADISON CAWTHORN, North Carolina
JAMAAL BOWMAN, New York, Vice-Chair  MICHELLE STEEL, California
MARK POCAN, Wisconsin                JULIA LETLOW, Louisiana
JOAQUIN CASTRO, Texas                Vacancy
MIKIE SHERRILL, New Jersey
JOHN A. YARMUTH, Kentucky
ADRIANO ESPAILLAT, New York
KWEISI MFUME, Maryland

                   Veronique Pluviose, Staff Director
                  Cyrus Artz, Minority Staff Director
                                 ------                                

        SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                 MARK De SAULNIER, California, Chairman

JOE COURTNEY, Connecticut            RICK W. ALLEN, Georgia
DONALD NORCROSS, New Jersey            Ranking Member
JOSEPH D. MORELLE, New York          JOE WILSON, South Carolina
SUSAN WILD, Pennsylvania             TIM WALBERG, Michigan
LUCY Mc BATH, Georgia                JIM BANKS, Indiana
ANDY LEVIN, Michigan                 DIANA HARSHBARGER, Tennessee
HALEY M. STEVENS, Michigan           MARY E. MILLER, Illinois
FRANK J. MRVAN, Indiana              SCOTT FITZGERALD, Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  VIRGINIA FOXX, North Carolina
  (ex officio)                         (ex officio)


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on May 5, 2021......................................     1

Statement of Members:
    DeSaulnier, Hon. Mark, Chairman, Subcommittee on Health, 
      Employment, Labor, and Pensions............................     1
        Prepared statement of....................................     5
    Allen, Hon. Rick, Ranking Member, Subcommittee on Health, 
      Employment, Labor, and Pensions............................     6
        Prepared statement of....................................     8

Statement of Witnesses:
    Holtz-Eakin, Douglas, President, American Action Forum.......    50
        Prepared statement of....................................    52
    Isasi, Frederick, JD, MPH, Executive Director, Families USA..    65
        Prepared statement of....................................    68
    Mitchell, David, Founder and President, Patients for 
      Affordable Drugs...........................................    38
        Prepared statement of....................................    40
    Socal, Dr. Mariana, MD, Ph.D., MS, MPP, Associate Scientist, 
      Johns Hopkins Bloomberg School of Public Health............     9
        Prepared statement of....................................    12

Additional Submissions:
    Mr. Allen:
        Prepared statement of NAHU...............................   105
        Letter dated May 4, 2021 from the US Chamber of Commerce.   110
        Letter dated May 4, 2021 from the National Association of 
          Manufacturers..........................................   111
        Prepared statement of PILMA..............................   112
    Courtney, Hon. Joe, a Representative in Congress from the 
      State of Connecticut:
        US Patent Number 10,960,070, Graham et al., March 30, 
          2021 ``Prefusion coronavirus spike proteins and their 
          use.''.................................................   113
    Questions submitted for the record by:
        Chairman DeSaulnier......................................   164
        Harshbarger, Hon. Diana, a Representative in Congress 
          from the State of Tennessee 





        Stevens, Hon. Haley M., a Representative in Congress from 
          the State of Michigan..................................   170
        Foxx, Hon. Virginia, a Representative in Congress from 
          the State of North Carolina............................   174
        Fitzgerald, Scott, a Representative in Congress from the 
          State of Wisconsin.....................................   175
        Scott, Hon. Robert C. ``Bobby'', a Representative in 
          Congress from the State of Virginia....................   180
    Responses to questions submitted for the record by:
        Dr. Socal................................................   165
        Mr. Mitchell.............................................   171
        Mr. Holtz-Eakin..........................................   176
        Mr. Isasi................................................   181

 
                    LOWER DRUG COSTS NOW: EXPANDING
                    ACCESS TO AFFORDABLE HEALTH CARE

                              ----------                              


                        Wednesday, May 05, 2021

                  House of Representatives,
                Subcommittee on Health, Employment,
                               Labor, and Pensions,
                          Committee on Education and Labor,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 12 p.m., via 
Zoom, Hon. Mark DeSaulnier (Chairman of the Subcommittee) 
presiding.
    Present: Representatives DeSaulnier, Courtney, Norcross, 
Wild, McBath, Stevens, Levin, Mrvan, Scott (ex officio), Allen, 
Wilson, Walberg, Harshbarger, Miller, Fitzgerald, Foxx (ex 
officio), and Spartz.
    Staff present: Ilana Brunner, General Counsel; David 
Dailey, Counsel to the Chairman; Ijeoma Egekeze, Professional 
Staff; Daniel Foster, Health and Labor Counsel; Rashage Green, 
Director of Education Policy; Eli Hovland, Policy Associate; 
Carrie Hughes, Director of Health and Human Services; Ariel 
Jona, Policy Associate; Max Moore, Staff Assistant; Yonatan 
Moskowitz, Oversight Counsel--Labor; Mariah Mowbray, Clerk/
Special Assistant to the Staff Director; Kayla Pennebecker, 
Staff Assistant; Veronique Pluviose, Staff Director; Banyon 
Vassar, Deputy Director of Information Technology; Everett 
Winnick, System Administrator; Cyrus Artz, Minority Staff 
Director; Courtney Butcher, Minority Director of Member 
Services and Coalitions; Rob Green, Minority Director of 
Workforce Policy; Taylor Hittle, Minority Professional Staff 
Member; Georgie Littlefair, Minority Legislative Assistant; 
John Martin, Minority, Minority Workplace Policy Counsel; 
Hannah Matesic, Minority Director of Operations; Audra 
McGeorge, Minority Communications Director; Carlton Norwood, 
Minority Press Secretary; Ben Ridder, Minority Professional 
Staff Member.
    Chairman DeSaulnier. The Subcommittee on Health, 
Employment, Labor, and Pensions will come to order. Welcome 
everyone. I note that a quorum is present. I note for the 
Subcommittee that Mrs. Spartz of Indiana is permitted to 
participate in today's hearing with the understanding that her 
questions will come only after Members of the HELP Subcommittee 
on both sides of the aisle who are present have had an 
opportunity to question the witnesses.
    The Subcommittee is meeting today to hear testimony on 
``Lower Drug Costs Now: Expanding Access to Affordable Health 
Care.'' This is an entirely remote hearing. All microphones 
will be kept muted as a general rule to avoid unnecessary 
background noise. Members and witnesses will be responsible for 
unmuting themselves when they are recognized by the Chair to 
speak, or when they wish to seek recognition.
    I also ask that Members please identify themselves before 
they speak. Members should keep their cameras on while in the 
proceeding. Members shall be considered present in the 
proceeding when they are visible on camera, and they shall be 
considered not present when they are not visible on camera.
    The only exception to this is if they are experiencing 
technical difficulty, and inform Committee staff of such 
difficulty. If any Member experiences technical difficulties 
during the hearing you should stay connected on the platform, 
make sure you are muted and use your phone to immediately call 
a Committee system administration whose number has been 
provided in advance.
    Should the Chair experience technical difficulty, Mr. 
Courtney, the distinguished gentleman from Connecticut, or 
another majority Member is hereby authorized to assume the 
gavel in the Chair's absence. Again this is an entirely remote 
hearing and as such the Committee's hearing room is officially 
closed.
    Members who choose to sit with their individual devices in 
the hearing room must wear headphones to avoid feedback, echoes 
and distortion resulting from more than one person on a 
software platform sitting in the same room.
    Members are also expected to adhere to social distancing 
and safe health care guidelines, including the use of masks, 
hand sanitizer and wiping down their areas both before and 
after their presence in the hearing room.
    In order to ensure that the Committee's five-minute rule is 
adhered to, staff will be keeping track of time using the 
Committee's field timer. The field timer will appear in its own 
thumbnail picture and will be named 001_timer. There will be no 
one-minute remaining time warning.
    The field timer will show a blinking light when your time 
is up. Members and witnesses are asked to wrap up promptly when 
their time has experience. While a roll call is not necessary 
to establish a quorum in official proceedings conducted 
remotely, or with remote participation, the Committee has made 
it a practice whenever there is an official proceeding with 
remote participants for the Clerk to call the role, and help 
make clear who is present at the start of the proceeding.
    Members should say their name before announcing they are 
present. This helps the Clerk and also helps those who are 
watching the platform and the livestream who may experience a 
few seconds delay. At this time I will ask the Clerk to call 
the role.
    The Clerk. Chair DeSaulnier?
    Chairman DeSaulnier. Here.
    The Clerk. Mr. Courtney?
    Mr. Courtney. I'm here.
    The Clerk. Mr. Norcross?
    Mr. Norcross. Here.
    The Clerk. Mr. Morelle?
    [No response]
    The Clerk. Ms. Wild?
    [No response]
    The Clerk. Mrs. McBath?
    [No response]
    The Clerk. Ms. Stevens?
    [No response]
    The Clerk. Mr. Levin?
    [No response]
    The Clerk. Mr. Mrvan?
    [No response]
    The Clerk. Mr. Scott?
    Mr. Scott. Mr. Scott is present.
    The Clerk. Ranking Member Allen?
    Mr. Allen. Allen present sorry about the mute button.
    The Clerk. Mr. Wilson?
    Mr. Wilson. Present,
    The Clerk. Mr. Walberg?
    Mr. Walberg. Walberg present.
    The Clerk. Mr. Banks?
    [No response]
    The Clerk. Mrs. Harshbarger?
    Mrs. Harshbarger. Harshbarger present.
    The Clerk. Mrs. Miller?
    [No response]
    The Clerk. Mrs. Miller could you repeat yourself? OK. Mr. 
Fitzgerald?
    Mrs. Miller. Can you hear me?
    Mr. Fitzgerald. Yes I got you, I'm here.
    Mrs. Miller. Mrs. Miller I'm present.
    The Clerk. Mrs. Miller I have you recorded thank you. And 
Mrs. Foxx?
    Mrs. Foxx. Foxx is present.
    The Clerk. Thank you. Chairman DeSaulnier that concludes 
the roll call.
    Chairman DeSaulnier. Thank you.
    Mrs. McBath. Chairman DeSaulnier I just wanted you to know 
I'm here, McBath is here, I'm present.
    Chairman DeSaulnier. Thank you Ms. McBath.
    Mrs. McBath. Thank you.
    Chairman DeSaulnier. Welcome. Pursuant to Committee Rule 
8(c) opening statements are limited to the Chair and the 
Ranking Member. This allows us to hear from witnesses sooner 
and provides all Members with adequate time to ask questions. I 
now recognize myself for the purpose of making an opening 
statement.
    Welcome everyone to this important Subcommittee hearing. 
Good morning, at least good morning on the west coast. We are 
here today to discuss the cost of prescription medication and 
how lowering drug prices would support workers and strengthen 
the American economy.
    It has been more than a year since the House first passed 
the Elijah E. Cummings Lower Drug Costs Now Act to reduce out 
of control participation in our costs. Yet on top of weathering 
the worst global health crisis in recent history, Americans are 
still paying far too much for the medication they need.
    Robert from my district reached out to my office just 
recently when his monthly cost of his HIV medication that keeps 
him alive went from $130 to $960 per month, and of course 
unfortunately Robert is not alone.
    Each year the prices of hundreds of drugs increase faster 
than the rate of inflation. Today annual per capital spending 
on prescription drugs in the United States is more than $1,200. 
And the total out of pocket costs that consumers pay for drugs 
is more than $80 billion a year.
    These unaffordable prices have significant real-world 
consequences. Even in 2008 three in 10 adults decided to forego 
their prescribed medication due to the prohibitive cost. This 
is particularly frustrating given that these are not the prices 
that consumers in the rest of the world pay.
    Americans routinely pay three to four times, sometimes a 
dozen times more than what patients in other countries pay for 
the exact same drug. In fact, the cancer drug that keeps me 
alive that I take for my chronic lymphocytic leukemia that as I 
said is chronic, but is treatable thank goodness. My drug costs 
$500 per day. Ibrutinib.
    I'm grateful obviously, for this drug, but I wonder why in 
Australia the same diagnosis provides the exact same 
prescription drug for less than $30 a month. $500 in the United 
States, less than $30 in Australia. But the high cost of drug 
prices doesn't hurt just consumers. It also costs our nations' 
businesses which sponsors the health coverage of approximately 
150 million Americans.
    These plans spent nearly $84 billion on drugs in 2016 
alone. And this price tag is only expected to grow unless we 
act. Some of my colleagues may argue that high drug prices are 
needed to cover the cost of research and developing and 
deploying new drugs, yet we know that most drug companies spend 
more on marketing, sales, and overhead than they do on research 
and development.
    No one, myself included obviously, wants to stop the 
wonderful innovation and deployment of life-saving drugs like 
the one I take. However, however we must consider an 
appropriate return on investment that incentivizes the private 
sector and continues to support the important development of 
drugs at the NIH with public tax dollars, and also with the 
Department of Defense and the Department of Defense in DARPA.
    Profits for drug companies are among the highest of any 
sector. According to the GAO the average profit margin for a 
large drug company is between 50 and 20 percent after taxes. 
Compared to the average large company's margin in other sectors 
which is somewhere between 4 and 10 percent.
    While drug companies focus on their bottom line, the vast 
majority of new life-saving drugs are developed thanks, as I 
said, to taxpayer funded medical research, like the important 
work happening today at the National Institute for Health. In 
fact, every drug that was approved by the FDA in 2010 through 
2016 was developed at least in part with NIH supported 
research.
    Investing in research is vital to developing new cures and 
technologies, but we need fair drug prices at the other end, so 
that consumers can actually realize these investments and save 
their lives and promote their health. That is why people across 
the political spectrum and across the country have made clear 
that they want Congress to reign in prescription drug prices.
    The Lower Drug Costs Now Act takes bold steps to lower the 
cost of drugs and increase transparency. First, it finally 
allows the Secretary of Health and Human Services to negotiate 
directly with drug companies to get fair prices for those in 
Medicare.
    Second, the bill makes the lower drug prices negotiated by 
Medicare available to consumers with private health coverage, 
including those covered with employer sponsored plans. This 
will not only cut costs for workers covered by employer 
provided health care it will cut costs for employees as well.
    Third, the legislation caps negotiated drug prices to align 
with prices charged in similar countries, ensuring that 
Americans are no longer price gouged at the pharmacy counter. 
Fourth, the bill sets a new limit on out of pocket drug costs 
for Medicare beneficiaries and ends unfair annual price hikes 
by prescription drug companies for 8,000 drugs.
    And, finally, the Lower Drug Costs Now Act takes advantage 
of the savings from negotiating lower drug prices by 
reinvesting that savings back into research to find new medical 
breakthroughs.
    As President Biden reminded us in his address to Congress 
last week, we've talked about lowering the cost of prescription 
drugs for long enough. Democrats and Republicans. It's time to 
finally deliver on our promise to ensure that all Americans can 
get the medication they need to stay healthy and thrive.
    I now recognize the distinguished Ranking Member for the 
purpose of making an opening statement.
    [The statement of Chairman DeSaulnier follows:]

             Statement of Hon. Mark DeSaulnier, Chairman, 
        Subcommittee on Health, Employment, Labor, and Pensions

    We are here today to discuss the cost of prescription medication 
and how lowering drug prices would support workers and strengthen the 
American economy.
    It has been more than a year since the House first passed the 
Elijah E. Cummings Lower Drug Costs Now Act to reduce out-of-control 
prescription drugs costs. Yet, on top of weathering the worst global 
health crisis in recent history, Americans are still paying far too 
much for the medication they need.
    Robert from my district reached out to my office just recently when 
the monthly cost of his HIV medication that keeps him alive went from 
$130 to $960 a month. And, unfortunately, Robert is not alone.
    Each year, the prices of hundreds of drugs increase faster than the 
rate of inflation. Today, annual per capita spending on prescription 
drugs in the United States is more than $1,200, and the total out-of-
pocket costs that consumers pay for drugs is more than $80 billion a 
year.
    These unaffordable prices have significant real-world consequences. 
Even in 2018, three in ten adults decided to forgo their prescribed 
medication due to the prohibitive cost.
    This is particularly frustrating given that these are not the 
prices that consumers in the rest of the world pay. Americans routinely 
pay three or four times--sometimes a dozen times--more than what 
patients in other countries pay for the exact same drugs.
    In fact, the cancer drug that keeps me alive, which I take for my 
chronic lymphocytic leukemia that is chronic, but is treatable--thank 
goodness--costs $500 a day. I am grateful, obviously, for this drug, 
but I wonder why, in Australia, the same diagnosis provides the exact 
same prescription drug for less than $30 a month. $500 in the United 
States; less than $30 in Australia.
    But the high cost of drug prices doesn't hurt just consumers. It 
also costs our Nation's businesses, which sponsor the health coverage 
of approximately 150 million people. These plans spent nearly $84 
billion on drugs in 2016, alone, and this price tag is only expected to 
grow unless we act.
    Some of my colleagues may argue that high drug prices are needed to 
cover the cost of researching, developing, and deploying new drugs. 
Yet, we know that most drug companies spend more on marketing, sales, 
and overhead than they do on research and development.
    No one--myself included, obviously--wants to stop the wonderful 
innovation and deployment of lifesaving drugs, like the one I take. 
However, we must consider an appropriate return on investment that 
incentivizes the
    private sector and continues to support the important development 
of drugs at the NIH with public taxpayer dollars and also in the 
Department of Defense and DARPA.
    Profits for drug companies are among the highest of any sector. 
According to the GAO, the average profit margin for a large drug 
company is between 15 and 20 percent after taxes--compared to the 
average large company's margin in other sectors, which is somewhere 
between 4 and 10 percent.
    While drug companies focus on their bottom line, the vast majority 
of new, lifesaving drugs are developed thanks--as I said--to taxpayer-
funded medical research, like the important work happening today at the 
National Institutes for Health. In fact, every drug that was approved 
by the FDA from 2010 through 2016 was developed at least in part with 
NIH-supported research.
    Investing in research is vital to developing new cures and 
technologies, but we need fair drug prices at the other end so that 
consumers can actually realize these investments and save their lives 
and promote their health.
    That is why people across the political spectrum and across the 
country have made clear that they want Congress to rein in prescription 
drug prices.
    The Lower Drug Costs Now Act takes bold steps to lower the cost of 
drugs and increase transparency.
    First, it finally allows the Secretary of Health and Human Services 
to negotiate directly with drug companies to get fair prices for those 
in Medicare.
    Second, the bill makes the lower drug prices negotiated by Medicare 
available to consumers with private health coverage, including those 
covered with an employer-sponsored plan. This will not only cut costs 
for workers covered by employer-provided health care--it will cut costs 
for employers as well.
    Third, the legislation caps the negotiated drug prices to align 
with prices charged in similar countries, ensuring that Americans are 
no longer price gouged at the pharmacy counter.
    Fourth, the bill sets a new limit on out-of-pocket drugs costs for 
Medicare beneficiaries and ends unfair annual price hikes by 
prescription drug companies for 8,000 drugs.
    Finally, the Lower Drug Costs Now Act takes advantage of the 
savings from negotiating lower drug prices by reinvesting those savings 
back into research to find new medical breakthroughs.
    As President Biden reminded us in his address to Congress last 
week, we've talked about lowering the cost of prescription drugs for 
long enough--Democrats and Republicans. It's time to finally deliver on 
our promise to ensure that all Americans can get the medication they 
need to stay healthy and thrive.
                                 ______
                                 
    Mr. Allen. Thank you Mr. Chairman. When the Trump 
administration launched Operation Warp Speed in May 2020 they 
did so with a bold mission, to develop a COVID-19 vaccine by 
the end of the year. Seven months later healthcare workers 
lined up to receive their first dose of the Pfizer vaccine.
    Today over 100 million adults are vaccinated against COVID-
19. This lifesaving scientific technological and logistical 
feat demonstrates just how powerful, innovative, and effective 
the American healthcare system can be. Unfortunately, many 
Americans are facing skyrocketing healthcare costs because of 
dramatic increases and out of pocket costs of prescription 
drugs.
    In 2018 patients paid a collective 61 billion in out of 
pocket drug costs. Fortunately, republicans are stepping up 
with solutions that work best for the people, without the heavy 
hand of government interference. H.R. 19, the Lower Cost More 
Cures Act introduced last month by republican Committee leaders 
is exact opposite of H.R. 3, Pelosi's big government power 
grab.
    The Lower Costs More Cares Act will utilize the power of 
the free market to modernize our healthcare system, increase 
choice in transparency and lower costs. These are goals that 
both sides of the aisle should be able to rally behind and 
focus on. All the provisions in H.R. 19 are bipartisan, 
workable and ready to become law. We have the power to 
stabilize and ease the minds of Americans struggling to pay for 
needed medications.
    Up until 2019 congressional efforts to lower drugs prices 
for the American people were a collaborative effort and 
bipartisan effort. That changed when Speaker Pelosi wrote the 
Democrats devastating Drug Pricing Plan H.R. 3 behind closed 
doors and without any republican input.
    This year the democrats are doubling down on H.R. 3, 
radical legislation which would have a devastating affect on 
drug development and innovation in the United States. After the 
Council of Economic Advisers found that H.R. 3 would lead to 
100 fewer drugs entering the marketplace, Republican Leader 
McCarthy said it best. ``HR 3 is a step toward nationalizing 
the drug industry, and opening the door to one size fits all 
government control rationing of prescription drugs.''
    Once again democrats are pushing far left politics over 
policy by rushing through a harmful partisan bill. According to 
the non-partisan Professional Budget Office H.R. 3 would 
significantly decrease private investment in research and 
development.
    Messenger RNA, the technology used to make the Pfizer and 
Moderna vaccines took billions of dollars of private 
investment, over three decades to develop. Had this bill been 
long before the pandemic's speed of development of Moderna and 
Pfizer vaccines, it would likely not have been possible.
    Countries around the world are benefiting from this life-
saving technology because the Senate refused to pass the 
democrat socialist healthcare scheme. You think that would give 
my democrat colleagues pause. Instead democrats are again 
trying to pass at partisan speed that would increase our 
reliance on Chinese medical manufacturing, reduce our capacity 
for innovation, and devalue people with disabilities and 
chronic illnesses.
    I would ask the democrats in the U.S. House of 
Representatives to support Medicare for All, a government run 
single payer healthcare system that would cost 32 trillion 
dollars, and eliminate private insurance, including employer 
sponsored coverage which benefits 159 million Americans and is 
the jurisdiction of this Committee.
    By contrast, 71 percent of Americans say they are satisfied 
with their employer sponsored healthcare coverage. Now 
democrats want to pass this harmful bill to move Americans in 
employer sponsored plans to Medicare, bringing us even closer 
to a socialist single payer system.
    This should be common sense, but kicking Americans off 
their healthcare plan will not increase their access to 
affordable medical care. They will do the opposite. At the end 
of the day H.R. 3 would only lead to fewer treatments and 
cures, decrease competition in the marketplace, and increase 
reliance on Communist China.
    Unfortunately, the hearing today is being held to promote 
this radical scheme, rather than promote partisan socialist 
policies such as H.R. 3, I urge my colleagues to work together 
on finding a bipartisan solution to lowering drug costs, like 
the common sense provisions in H.R. 19.
    I thank all the witnesses for joining us here today and I 
yield back the balance of my time.
    [The statement of Ranking Member Allen follows:]

           Statement of Hon. Rick W. Allen, Ranking Member, 
        Subcommittee on Health, Employment, Labor, and Pensions

    When the Trump administration launched Operation Warp Speed in May 
2020, they did so with a bold mission: develop a COVID-19 vaccine by 
the end of the year. Seven months later, health care workers lined up 
to receive their first dose of the Pfizer vaccine.
    To date, over 100 million adults are vaccinated against COVID-19. 
This lifesaving scientific, technological, and logistical feat 
demonstrates just how powerful, innovative, and effective the American 
health care system can be.
    Unfortunately, many Americans are facing skyrocketing health care 
costs because of dramatic increases in out-of-pocket costs of 
prescription drugs. In 2018, patients paid a collective $61 billion in 
out-of-pocket drug costs.
    Fortunately, Republicans are stepping up with solutions that work 
best for the people, without the heavy hand of government interference. 
H.R. 19, the Lower Cost, More Cures Act, introduced last month by 
Republican committee leaders, is the exact opposite of H.R. 3, Pelosi's 
big government power grab. The Lower Cost, More Cures Act will utilize 
the power of the free market to modernize our health care system, 
increase choice and transparency, and lower costs. These are goals that 
both sides of the aisle should be able to rally behind.
    All the provisions in H.R. 19 are bipartisan, workable, and ready 
to become law. We have the power to save lives and ease the minds of 
Americans struggling to pay for needed medications.
    Up until 2019, congressional efforts to lower drug prices for the 
American people were a collaborative and bipartisan effort. That 
changed when Speaker Pelosi wrote the Democrats' devastating drug 
pricing plan, H.R. 3, behind closed doors and without any Republican 
input.
    This year, the Democrats are doubling down on H.R. 3, radical 
legislation which would have a devastating effect on drug development 
and innovation in the United States. After the Council of Economic 
Advisors found that H.R. 3 would lead to 100 fewer drugs entering the 
marketplace, Republican Leader McCarthy said it best: H.R. 3 is 'a step 
toward nationalizing the drug industry and opening the door to a one-
size-fits-all, government-controlled rationing of prescription drugs.
    Once again, Democrats are pushing far-left politics over policy by 
rushing through a harmful, partisan bill. According to the nonpartisan 
Congressional Budget Office,
    H.R. 3 would significantly decrease private investment in research 
and development. Messenger RNA, the technology used to make the Pfizer 
and Moderna vaccines, took billions of dollars of private investment 
and over three decades to develop. Had this bill been law before the 
pandemic, the speedy development of the Moderna and Pfizer vaccines 
would likely not have been possible. Countries around the world are 
benefiting from this life-saving technology because the Senate refused 
to pass the Democrats' socialist health care scheme. You'd think that 
would give my Democrat colleagues pause.
    Instead, Democrats are again trying to pass a partisan scheme that 
would increase our reliance on Chinese medical manufacturing, reduce 
our capacity for innovation, and devalue people with disabilities and 
chronic illnesses.
    Over half of the Democrats in the U.S. House of Representatives 
support Medicare-for-All, a government-run, single-payer health care 
system that would cost $32 trillion and eliminate private insurance, 
including employer-sponsored coverage, which benefits 159 million 
Americans and is in the jurisdiction of this Committee. By contrast, 71 
percent of Americans say they are satisfied with their employer-
sponsored health care coverage. Now, Democrats want to pass this 
harmful bill to move Americans in employer-sponsored plans to Medicare, 
bringing us even closer to a socialist single-payer system.
    This should be common sense, but kicking Americans off their health 
care plans will not increase their access to affordable medical care--
it will do the opposite.
    At the end of the day, H.R. 3 would only lead to fewer treatments 
and cures, decreased competition in the marketplace, and an increased 
reliance on Communist China.
    Unfortunately, the hearing today is being held to promote this 
radical scheme. Rather than promote partisan socialist policies such as 
H.R. 3, I urge my colleagues to work together on finding a bipartisan 
solution to lowering drug costs, like the common-sense provisions 
included in H.R. 19.
                                 ______
                                 
    Chairman DeSaulnier. Thank you Mr. Allen. And I will say my 
door is always open. Without objection all of the Members who 
wish to insert written statements into the record may do so by 
submitting them to the Committee Clerk electronically in 
Microsoft Word format by 5 p.m. on May 19, 2021.
    I will now introduce the witnesses and then recognize them 
for their five minutes and then we'll go to questions. First 
Dr. Mariana Socal is an Associate Scientist at the Johns 
Hopkins University, Bloomberg School of Public Health. She is a 
medical doctor by training, and a researcher with expertise in 
prescription drug costs.
    Next will be David Mitchell, he's Founder and President of 
Patients for Affordable Drugs. He is a cancer patient and an 
advocate for lower drug costs.
    Dr. Douglas Holtz-Eakin is President of the American Action 
Forum, an economist by training. He is the former Director of 
the Congressional Budget Office.
    Frederick Isasi is Executive Director of Families USA. He 
is a leading advocate for health care consumers on a wide range 
of issues. We appreciate the witnesses for participating today 
and very much look forward to your testimony. Let us remind the 
witnesses that we have read your statements, your written 
statements, and they will appear in full in the hearing record.
    Pursuant to Committee Rule 8(d) and Committee practice, 
each of you is asked to limit your oral presentation to a five 
minute summary of your written statement. Before you begin your 
testimony please remember to unmute your microphone when you're 
recognized.
    During your testimony staff will be keeping track of time 
and the timer will show a blinking light when time is up. 
Please be attentive to the time, wrap up when your time is 
over, and remute your microphone. If any of you experience a 
technical problem during your testimony, or later in the 
hearing, you should stay connected on the platform, make sure 
you are muted, and use your phone to immediately call a 
Committee system administrator, whose number was provided to 
you in advance.
    We will let all witnesses make their presentations before 
we move to Members questions. When answering a question please 
remember to unmute your microphone. The witnesses are aware of 
their responsibility to provide accurate information to the 
Subcommittee and therefore we will proceed now with their 
testimony.
    I first recognize Dr. Socal. Dr. Socal, the floor is yours.

      STATEMENT OF DR. MARIANA SOCAL, MD, Ph.D., MS, MPP, 
 ASSOCIATE SCIENTIST, JOHNS HOPKINS BLOOMBERG SCHOOL OF PUBLIC 
                             HEALTH

    Dr. Socal. Chairman DeSaulnier, Ranking Member Allen and 
Members of the Committee it is a great honor to be speaking 
with you today. The last few years I have received funding to 
work with several large organizations that are attempting to 
control drug spending.
    These include the Purchaser Business Group of Health, PBGH, 
and ERIC--The ERISA Industry Committee. I also received funding 
from Arnold Ventures. I've done extensive research examining 
the drug benefits that self-insured employers, from school 
districts to America's largest corporations offer to their 
workers.
    Today about one-third of all Americans are covered by 
employer self-sponsored health plans. These self-insurance 
employers typically hire a pharmacy benefit manager, a PBM to 
negotiate drug prices on their behalf. The PBM negotiates with 
drug manufacturers buy offering to cover a drug more favorably 
in exchange for a lower price.
    When the PBM can pick between multiple products the one 
that it will cover, then the market works. When a drug has no 
competition because there is no alternatives, then 
manufacturers will not lower their price, and the negotiation 
will fail. For drugs without competition the U.S. face three to 
four times higher prices than other countries.
    For these drugs, a different type of negotiation is greatly 
needed in the approach adopted by H.R. 3 can offer a successful 
alternative. My colleagues and I examined the top spending 
drugs in Medicare Part D, and found that if the U.S. paid the 
average price across the countries that we studied, Medicare 
Part D alone could have saved about 73 billion dollars in 2018.
    Employers savings would be similar. The drugs with the 
largest price differential compared to other countries are not 
the new drugs, but the drugs that have been in the U.S. market 
for a long period time. While drug prices in other countries 
tend to go down over time, drug prices in the U.S. continually 
increase.
    Just this January, a record number of more than 800 drugs 
raised their U.S. prices. 99.9 percent of them were branded 
drugs, and most of them had also increased their prices in 
recent years. U.S. insurers, especially very large employers, 
like to think that they're getting the best possible deals in 
drug pricing, but it's very hard for employers to know how much 
they're actually paying for a drug.
    The net price after all rebates and discounts can only be 
known weeks or months after the drug bill has been paid. 
There's very little transparency in this process. The 
negotiation proposed in H.R. 3 would provide employer with a 
transparent maximum price. Alternatively, employers could opt 
out of this price and choose the deal that is best for them.
    Patients have no idea why drugs cost so much. For patients, 
lower and transparent prices would really reduce what they must 
pay. Patients cost share is typically based on the list price 
set by the drug company. As a result, most patients do not 
benefit from these prices that PBMs have negotiated on their 
employer's behalf when they pay their cost share.
    Having a transparent and lower drug price allows all 
patients to benefit directly from the negotiations. This is 
especially important for the 30 percent of American workers who 
are enrolled in a high-deductible health plan. These workers 
pay the drugs full cost until they meet their deductible.
    H.R. 3 allows the secretary to negotiate on behalf of all 
Americans, and the more people included in the negotiation the 
greater the negotiating power and the greater the ability to 
get lower prices. During the COVID-19 pandemic we saw an 
example of how negotiation can work when the secretary 
negotiates drug prices.
    The secretary negotiated prices for antiviral Remdesivir 
for example, and then made these prices available to private 
hospitals who would then directly purchase the drug. These 
negotiations were possible in a very extreme situation. The 
drug was urgently needed and there was absolutely no 
competition available.
    The secretary was able to guarantee the purchase of a 
second quantity of the drug even if private hospitals were the 
ones really in charge of actually purchasing the drug. This is 
a very useful model for price negotiations of drugs that don't 
have competition, but have a great public health interest. 
Thank you so much for your time and I look forward to answering 
your questions.
    [The prepared statement of Dr. Socal follows:]

                  Prepared statement of Mariana Socal

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman DeSaulnier. Thank you, Doctor. We'll now go to Mr. 
Mitchell. Mr. Mitchell the floor is yours.

 STATEMENT OF DAVID MITCHELL, FOUNDER AND PRESIDENT, PATIENTS 
                      FOR AFFORDABLE DRUGS

    Mr. Mitchell. Chairman DeSaulnier, Ranking Member Allen, 
Members of the Committee. I'm David Mitchell. I'm founder of 
Patients for Affordable Drugs. More importantly, like you Mr. 
Chairman, I have an incurable blood cancer, and prescription 
drugs are keeping me alive.
    My doctors have me on a four-drug combination right now 
with a list price of more than $900,000 per year. Just one of 
my oral drugs called POMALYST is priced at more than $20,000 
for 21 capsules. And because Medicare beneficiaries like me pay 
our costs based on list price, I spent more than $18,000 out of 
pocket last year just for POMALYST.
    For people with my cancer, multiple myeloma, drugs account 
for 60 percent of the cost of treatment. I'm a very lucky man. 
These drugs are keeping my cancer at bay, but eventually this 
combination is going to stop working, and I'll need a new 
treatment.
    So I care deeply about innovation and new drug development. 
But drugs don't work if people can't afford them. Drugs are too 
expensive in the U.S. with no justification. When drug makers 
hike prices each year they don't do it because the drug is more 
valuable, drug companies raise prices because they can. As a 
result, Americans pay almost four times what other wealthy 
nations pay for the exact same drugs.
    Nearly 40 percent of Americans say it's difficult to afford 
their medications. 90 percent of voters across both parties say 
it's extremely important that Congress take action on drug 
pricing. Now of course biopharma opposes any reforms that would 
curb its unilateral power to dictate prices.
    So it threatens that reforms will destroy innovation and 
access to new drugs. But these claims don't hold up. Here are 
four reasons why. One: Biopharma enjoys profits that are almost 
three times the average of the S&P 500. Brand name drug 
companies could lose a trillion dollars in sales over 10 years 
and remain the most profitable industry in the U.S.
    Two: A huge amount of R&D is coming from taxpayers. NIH 
funded research is associated with every new drug approved by 
the FDA from 2010 to 2019. COVID vaccines illustrate this 
point. The unprecedented speed of vaccine development was 
enabled by more than $17 billion of NIH funded research on 
vaccine technologies prior to the pandemic.
    A new method of developing vaccines was waiting to be 
tested, then the government invested another $18 billion for 
clinical trials to stand up production, spending whatever was 
necessary and eliminating financial risks.
    Three: CBO says we can prep pharma revenue by up to a 
trillion dollars over 10 years and lose only 8 of 300 new 
drugs. And many of those 8 wouldn't be losses because only 10 
to 15 percent of new drugs represent true therapeutic advances.
    Four: Big pharma threatens that patients will lose early 
access to drugs. But drug companies file for approval first in 
the U.S. because we have the highest prices and the largest 
market in the world. Given that U.S. prices for brand drugs are 
almost four times what other wealthy nations pay, we can lower 
prices and still offer the highest prices by far in the largest 
market in the world.
    Congress must act. H.R. 3 is the comprehensive reform we 
need. It will lower prices, reign in price gouging and reduce 
out of pocket costs. Now it's estimated to save the Federal 
Government over $450 billion. Big pharma complains that 
redeploying these savings to address other critical needs is 
tantamount to using the industry as a piggy bank, but in 
reality it's pharma that has treated patients and taxpayers as 
piggy banks for years, raising prices at will to hit profit 
targets and trigger executive bonuses.
    Pharma is right about one thing: America does have other 
priorities and every dollar we send to pharma in unjustified 
profits is a dollar we don't have to reduce health care 
disparities, provide health care to the uninsured, or increase 
NIH research on drugs for rare diseases, like mine.
    H.R. 3 enjoys 93 percent bipartisan support. It's time to 
pass it. Of course it's an uphill fight against powerful lobby 
let's be clear. Big pharma is not fighting for the interests of 
patients. Recently, the head of PhRMA, the trade association, 
affirmed that fact.
    He said his industry is `adept at rolling the tanks to push 
back against policy proposals adverse to the industry's 
interest.' So you must choose a side, stand with patients and 
taxpayers, or stand with pharma to protect the industry's 
interests. But let's be honest that's what this fight is about. 
It's about restoring balance to ensure we get the innovation we 
need at prices we can afford.
    You hold the power to make the changes the American people 
are demanding. We're going to do our part to make sure their 
voices are heard. Thank you.
    [The prepared statement of Mr. Mitchell follows:]

                  Prepared statement of David Mitchell

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman DeSaulnier. Thank you Mr. Mitchell. Next up is Dr. 
Holtz-Eakin. Doctor the floor is yours.

 STATEMENT OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION 
                             FORUM

    Mr. Holtz-Eakin. Well, thank you, Chairman DeSaulnier, 
Ranking Member Allen and Members of the Subcommittee. It's a 
privilege to be here today to discuss this very important 
topic. I'd like to make three brief points, and then I look 
forward to the opportunity to answer your questions.
    Point No. 1 is that there's no evidence of a broad-based 
pervasive drug pricing problem in the United States that would 
merit a sweeping one size fits all solution. As I laid out in 
my written testimony if you look at a variety of measures of 
price, list price, net price, cost out of pocket to a 
beneficiary, look across beneficiaries, and look across drugs.
    On the whole there is no real evidence of a sharp uptick in 
prices that would merit a strong policy response. There are in 
fact select individuals and drugs for which there is a severe 
financial problem, but that suggests the right response is a 
targeted solution in those circumstances, and that the 
Committee should be focused on those.
    So this data really do suggest that you focus on increasing 
the supply. Any time we have a high price you need to look at 
the supply of drugs for those targeted situations. Point No. 2 
is that the provisions in Title I of H.R. 3 are hardly a 
negotiation, and are in fact collectively a threat to the 
dynamic, innovative eco-system of the U.S. pharmaceutical 
industry.
    It's not a negotiation. The Congressional Budget Office has 
repeatedly beginning with my tenure informed the Congress that 
giving the secretary the power to negotiate would produce 
little, if any, in the way of budgetary savings for the Federal 
Government. And the reason is quite simple the secretary 
doesn't have at his or he disposal a formulary or other lever 
to negotiate effectively with funds from the manufacturers.
    The plans and PBMs that negotiate in Part D do have those 
tools and negotiate very effectively. The difference between 
those findings and those CBO findings for H.R. 3 thus lie in 
the tax provisions in H.R. 3 and the international reference 
prices the average international market price provisions of 
that legislation.
    The tax provisions are real simple. There's a draconian 95 
percent revenue tax that is simply a threat to the existence of 
the drug on the domestic market, and is tantamount to asking 
the company to withdraw that drug. This raises the fundamental 
issue of access to therapies that is so important to Americans.
    And that tax is there to ration those therapies. The 
average international market price is an arbitrary price 
ceiling being set by the Federal Government. It's not a 
negotiated or market-based price. And it also threatens access 
to drugs. If you look at the referenced countries underneath 
that averaging index market price, you do find less access to 
pharmaceuticals.
    They're on the market slower, they're on in the U.S. and in 
about 4 months they're on much slower in those other countries. 
Almost 90 percent of brand name drugs will be on the U.S. 
market. At best 60 percent will be on in referenced countries. 
Sometimes it's only a third.
    And so there's a fundamental tradeoff there whether you're 
going to pay in the form of financial costs, or in lack of 
access to important therapies.
    Point No. 3 is that if you want to do something on drug 
prices I would propose instead that you look at the reforms to 
the Medicare Part D benefit in H.R. 19. Medicare Part D has 
been enormously successful settling program as I lay out in my 
testimony.
    However, you could sharpen the incentives for better 
negotiation by making manufacturers and plans liable for more 
of the costs in the catastrophic region, and thus reduce the 
incentive to have high-priced drugs that push individuals into 
that region. You can save the taxpayer an increasing bill that 
comes with the reassurance item in the catastrophic region, and 
by capping out of pockets you can improve the benefit for 
beneficiaries in an already popular and successful benefit will 
be even more suitable for American seniors.
    So that I think is a better route to go. Part D counts for 
25 percent of drug spending in the United States. It's a very 
important lever for improving private negotiations and market 
incentives to deliver pharmaceuticals at a reasonable cost. So 
that I think is a route you ought to consider and steer away 
from Title I which I think will in the end do more damage than 
good.
    So I thank you for the chance to be here and I look forward 
to your questions.
    [The prepared statement of Mr. Holtz-Eakin follows:]

               Prepared statement of Douglas Holtz-Eakin

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman DeSaulnier. Appreciate your testimony. Finally, 
we'll hear from Mr. Isasi. The floor is yours.

  STATEMENT OF FREDERICK ISASI, JD, MPH, EXECUTIVE DIRECTOR, 
                          FAMILIES USA

    Mr. Isasi. Thank you so much Chairman DeSaulnier, Ranking 
Member Allen, Chairman Scott, Ranking Member Foxx and all the 
Members of the Committee. Thank you for the opportunity to 
testify today.
    I'm Frederick Isasi, the Executive Director of Families 
USA. We're a non-partisan, non-profit that for over 40 years 
has served as one of the leading national voices for health 
care consumers, both in Washington, DC and on the State level.
    Thank you very much for holding this hearing on lowering 
drug costs. What an incredibly important issue, and one that is 
so wildly popular with your constituents. Stopping prescription 
drug abuse is the No. 1 health care issues for voters across 
this Nation, and despite all of the division in our Nation's 
politics right now, Americans are united on this issue.
    The vast majority of Americans want action right now on 
this issue, and the majority of others in both parties want the 
government to get in there and negotiate prices. As you've 
heard millions of Americans live with the fear of not being 
able to afford their prescriptions, and one-third of Americans 
are not taking their prescriptions because they are too 
expensive.
    Of these, more than two-third are engaging the terrible 
gamble of either skipping doses, or cutting their pills in 
half. Year after year prescription drug companies launch drugs 
here in the U.S., and as you've heard charge three or four 
times more than other countries, and then in their greed these 
raise these outrageous prices much faster than either our 
paychecks or inflation.
    In fact a record setting 900 drugs have seen abusive 
increases in prices since January of this year. The American 
people need relief. This is happening in red states and blue 
states for families in Richmond, California or in Savannah, 
Georgia.
    The drug industry makes a lot of false arguments, and at 
its core the problem of out of control drug prices is very 
simple. Congress created a system that provides government 
granted monopoly to drug makers, and many within the industry 
are abusing these Federal laws.
    Let me explain what I mean. Over time so much of the 
industry's focus has shifted from creating innovative drugs 
that can save lives, to doubling down on high-powered lawyers 
to find loopholes, sue competitors, and generally abuse the 
spirit in which Federal prescription drug laws were created.
    That adds up to a crisis for families and hundreds of 
billions of dollars in waste. We at Families USA are strongly 
supportive of H.R. 3 the Elijah Cummings Lower Drug Cost Act 
which represents a critical step in addressing the crisis of 
prescription drug costs.
    It represents bold and wildly popular action that would 
allow the government to defend our families and negotiate 
directly with drug manufacturers to curb abusive prices. The 
bill uses savings and reduced drug costs to invest in research 
and development for new cures, as well as reducing out of 
pocket costs for Medicare beneficiaries.
    It also could support much needed improvements in the 
Medicare program such as dental, hearing and vision benefits, 
and support for low-income Medicare beneficiaries. So what will 
the fate of this important and wildly popular legislation be? 
On the other side of this fight is one of the most profitable 
and concentrated industries in the world with revenues in 
excess of a trillion dollars.
    And half of its profits are generated in the U.S. and 
Canada alone. An industry spending at least $133 million just 
to lobby Congress, all of you, with over 800 lobbyists in DC. 
You are all under tremendous pressure.
    Let me tell you about a remarkable woman we have met 
through our work at Families USA who perhaps can steady your 
resolve and get this legislation enacted. Her name is Maureen. 
She's 80 years old and living in a small house in the beautiful 
mountains of North Georgia.
    Her childhood dream had been to care for abused and 
neglected animals through an animal rescue. Maureen depends on 
Medicare for her health insurance and social security for her 
income, like so many millions of Americans at her stage in life 
Maureen lives check to check. She's taken care of herself over 
the years and describes herself as very healthy.
    Unfortunately, as she aged Maureen developed blood clots in 
her leg and lungs that threaten her life. To save her health 
Maureen was prescribed anti-blood clotting medication. She will 
need to be on this treatment for the rest of her life, and 
Maureen is required to pay $400 every 3 months just in cost 
sharing for this treatment.
    And at that price Maureen simply cannot make ends meet. So 
Maureen has given up all of the non-essential expenses in her 
life. She's given up almost all the driving to save on gas and 
maintenance costs. She can't afford to go to a dentist, but 
that still isn't enough. And so Maureen tells us that she's 
made the incredibly heart-wrenching decision to cut back on 
food.
    Maureen is limiting herself to eating one meal a day. And 
when hunger sets in she drinks water because it fills her up. 
These are the impossible tradeoffs people are making as a 
result of our broken system. An 80-year-old woman has made the 
decision to give up food to pay for prescriptions, it's 
unconscionable.
    Maureen is a survivor, and she's resigned. But in her own 
words `funding big pharma is not in my social security budget 
and here I am.' Congress created the problem of out of control 
drug prices and time for action is long past due. Thank you for 
holding the hearing. Thank you again for inviting Families USA 
to be here. To the Committee Members I say let's get this done, 
let's send the Lower Drug Prices Now Act to the President. It 
would be a political victory for the entire Congress and change 
the lives of Maureen and millions of others.
    [The prepared statement of Mr. Isasi follows:]

                 Prepared statement of Frederick Isasi

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman DeSaulnier. Thank you. We thank all for the 
testimony, and again please try to stay within your allotted 
time. Thank you for your articulate expressions.
    Now under Committee Rule 9(a) we will go to questions, 
witnesses under the five-minute rule. I will be recognizing 
Subcommittee Members in seniority order. Again, to ensure that 
Member's five-minute rule is adhered to staff will be keeping 
track of time and the timer will show a blinking light when 
time has expired.
    Please be attentive to the time, wrap up when your time is 
over and remute your microphone. As Chair I now recognize 
myself for five minutes.
    Mr. Mitchell you and I have a lot in common. In addition to 
the life-saving drugs that we both get, I thought my numbers 
were astronomical. Yours clearly are really even more so, and 
as you, I'm grateful for them, and grateful for the investment 
that created them and keep me alive.
    One of the things that I struggle with both as a client, a 
payer, and as a taxpayer is what's the best formula? What's the 
cost benefit? How do we attract private sector funding, but 
also recognize and continue to invest in taxpayer funding so 
that we get these life-saving drugs.
    In your view, I have two questions, you also were a small 
business person as was I. I always think it's funny when I'm 
associated with radical socialism by some of my friends. I was 
a former republican small business owner who owned a restaurant 
named after Teddy Roosevelt. My kids would be shocked to hear 
me described as a radical socialist.
    So in this bill, in H.R. 3 Mr. Mitchell, tell me how that 
would help clients like you, and I reduce the cost of our life-
savings drugs, but not inhibit these investments? And I am of 
the mind that I'm afraid that American payers and taxpayers are 
subsidizing for instance, in my drug, the $500 I pay goes to 
subsidize the lower price for Australians with the same 
diagnosis.
    And then second, as a small business, former small business 
person, describe some of the pressures that you are under to 
provide health insurance for your employees when the costs are 
so exorbitant.
    Mr. Mitchell. Mr. Chairman, first of all, I'm sorry that we 
share the experience of having cancer. I'm glad, very glad, 
that both of us have drugs that are working right now. I 
believe it's important for us to have an approach to setting 
drug prices where we incentivize the development of the most 
valuable new drugs.
    Drugs that carry high value should get a high price. A drug 
that cures my cancer should command a very high price, because 
there isn't one that will do that, or a drug that treats 
Alzheimer's effectively. So, I want a system that incentivizes 
investment in drugs that will make a difference and meet unmet 
needs.
    And we need to make sure that we're sending enough money to 
NIH to focus on drugs that are public health priorities, not 
necessarily private profit priorities. I ran a business for 
almost 30 years. It is very difficult when the cost of health 
care goes up to absorb it if you run on tight margins, and what 
you wind up doing is either you pay people less money because 
you have to send it to pay for the more expensive drugs, or you 
shift costs onto them.
    And in fact the ERISA Industry Committee issues a statement 
yesterday saying it wasn't very fond of the republican 
alternative, H.R. 19 because it includes a number of policies 
that just shift costs to employers.
    So we have to be very careful what we do as we try to 
tackle this problem.
    Chairman DeSaulnier. Thank you, Mr. Mitchell. Dr. Socal, 
let's talk a little bit about where the money is going to. So, 
the United States as I understand it, is the only country along 
with New Zealand that allows television advertising for 
prescription drugs.
    Could you talk a little bit about the amount of money that 
the pharmaceutical industry spends on marketing and sales as 
opposed to what they spend on research and development? And do 
other countries have the same formula?
    Dr. Socal. Thank you for this question. Yes. 9 out of the 
10 biggest pharmaceutical manufacturers are spending more on 
marketing and advertisement than on research and development 
for drugs. And, of course, you use the drugs that have the 
highest prices that can invest more in advertisement. And that 
is only allowed in the United States and New Zealand we are the 
only exceptions in the global market that allow manufacturers 
to advertise directly to consumers.
    Everybody else believes that physicians are the ones who 
know when a drug works, and physicians can be trusted to 
prescribe these drugs to consumers. We are really an exception 
on that side.
    Chairman DeSaulnier. Dr. Socal are you familiar with any 
research that attempts to quantify what the right formula is? 
So, what's a reasonable rate of return for private sector 
investors, and how do we identify the base level of research or 
more that taxpayers pay for that come out of the NIH?
    Dr. Socal. What we really want is real innovation, and not 
innovation about `me too' drugs. Drugs that are just copies of 
everything else that is already available.
    Chairman DeSaulnier. It would be really helpful to get 
those kind of numbers so we could have a more rational, 
constructive conversation I think across the aisle. Because I 
do think we all want the same thing. We want to make sure 
Americans get this innovation, but we want to make sure there's 
a reasonable rate of return to attract those investments, not 
an exorbitant rate of return.
    Dr. Socal. Absolutely.
    Chairman DeSaulnier. With that I will end my questioning 
and turn it over to the Ranking Member, my good friend Mr. 
Allen.
    Mr. Allen. Thank you Mr. Chairman. For the benefit of our 
Committee Members I'm going to defer to the end if I may, and 
we can go to our next most senior Member if that's OK.
    Chairman DeSaulnier. That's fine.
    Ms. Foxx. Mr. Chairman, this is Congresswoman Foxx. I 
believe I was to be recognized next.
    Chairman DeSaulnier. OK. I didn't have that information. I 
would be delighted to recognize you, Virginia.
    Ms. Foxx. Thank you Mr. Chairman. You know I feel very 
positive about you and I'm glad you're there. As I tell all our 
witnesses for being there today. Dr. Holtz-Eakin in addition to 
reporting foreign price controls and setting prices for some 
drugs and Medicare, H.R. 3 gives employer sponsored plans the 
``choice'' to participate in this government price-setting 
system.
    I put choice in quotation marks because employers are not 
presented with a choice. Not only does H.R. 3 force employers 
into the democrat drug pricing scheme, but it also punishes 
those who wish to opt out and negotiate prices on their own.
    Do you think H.R. 3 provides fair choices to employers and 
the plan participants? What are the consequences for employers 
who choose to opt out?
    Mr. Holtz-Eakin. Well thank you for the question Dr. Foxx. 
I don't think H.R. 3 represents genuine negotiation either 
between the secretary and manufacturers, or with ERISA 
employers having the opportunity to negotiate on their own. So 
this is really a very sweeping proposed legislation that 
affects every third-party payer in the United States, and 
sweeps them into a price fixing regime that I think will have 
really negative impacts on the U.S. and on its citizens.
    So I just want to emphasize some things that have been said 
that I really think don't get appreciated. No. 1, the idea that 
we should concentrate on a reasonable rate of return is a 
sensible idea, but it has to be risk adjusted. One in a 
thousand pharmaceutical formulas gets to a trial. Of those, 8 
percent get approved by the FDA.
    This is as risky a business as you can imagine, and after 
the fact some returns look high for that reason, and that 
reason alone. So it has to take into account those risks. The 
second thing is that if we're going to have the NIH pick the 
drugs, which ones are they going to do? They have to pick from 
all those too. At least the private sector is losing their own 
money when they pick a drug that doesn't work out.
    And the idea of `me too' drugs being a bad idea, that's 
what competition, that's how it's generated. When Sovaldi came 
on the market as the only cure for Hep C it immediately was 
followed by two other `me too' cures for Hep C which drove the 
price down by 50 percent.
    So the only solution for high pries is better competition, 
and the idea that somehow the NIH is going to generate 
competition whether eliminating `me too' drugs as the solution 
is really mistaken.
    Ms. Foxx. You mentioned in your opening statement that 
employers are now able to negotiate price reductions without 
the government interfering in the commercial market. I think we 
understand it, but what would you say about how these 
negotiations benefit employees?
    Mr. Holtz-Eakin. Well, if you're negotiating with a drug 
company and you have the capacity to move large amounts of 
their products at a preferable price you get a better deal. And 
that's the kind of incentives that you want in a system. Those 
are the incentives that were underneath the original design of 
Medicare Part D, and as I noted in my remarks it will be a good 
idea to sharpen those incentives even further at this point in 
time that have eroded somewhat.
    That's the route to getting prices down, provide 
competition and strong negotiations and allow increased supply 
wherever possible.
    Ms. Foxx. Great. I have two more questions and the Chairman 
has asked us to be within our time. Dr. Holtz-Eakin employer 
sponsors of group health plans are required by law to 
administer their plans in the best interest of the employees. 
However, H.R. 3 could create conditions that place employers in 
difficult conditions and expose them to unnecessary legal 
risks.
    Can you explain briefly why this could very well happen, 
and what would be the consequence to employers?
    Mr. Holtz-Eakin. Sure. The array of provisions that lead to 
the maximum fair price ``negotiated by the secretary,'' would 
be available to those employers. They could also try to go out 
and negotiate on their own, but if they can't guarantee that 
they're going to get a lower price, it might not be in their 
fiduciary interest to do so. They would have to take the 
arbitrarily set government price.
    Ms. Foxx. Fine. One more question. Health plans use a 
formula, a list of covered drugs selected by the plan to help 
manage costs, especially when it comes to specialty drugs. How 
will H.R. 3 affect the drugs included in the formulary? Will 
employees and their families still have access to new and 
innovative treatments?
    Mr. Holtz-Eakin. My deepest fear is that we will in fact 
inhibit innovation in the United States. It has happened in 
other countries. I mean Germany used to be the center of 
medical science on the globe. It's not a God-given right. They 
adopted bad policies and the United States is now that place.
    We've got bad policies. We can lose that innovative sector 
and we cannot have the next generation of therapies.
    Ms. Foxx. Thank you very much and Mr. Chairman I yield back 
within time.
    Chairman DeSaulnier. Thank you, Dr. Foxx, you get a gold 
star. Next, I'm going to recognize the gentleman from 
Connecticut, Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman and thank you to all 
the witnesses for being here today. Mr. Mitchell, I wanted to 
again thank you also for correcting the record, or just 
adjusting the record regarding the discovery of the COVID 
vaccine.
    Actually, just 3 weeks ago the U.S. Patent Office awarded 
the NIH a patent on the spike protein technology which Pfizer 
and Moderna used to basically come up with their iterations of 
a vaccine. Again, the taxpayer took a lot of the risk out of 
the research that went in, and again as you point out that 
actually proceeded the outbreak of the virus.
    I think almost every other Member on this Subcommittee with 
all the COVID relief bills that we voted on going back to the 
original or even pre-CARES Act, billions were approved on a 
bipartisan basis, which for all of us I think should you know 
feel good about in terms of you know trying to accelerate and 
create the warp speed mechanism that again was a great success.
    And the companies who were involved in that kudos to them, 
but you know it is clear that the taxpayer and NIH were 
instrumental, even to the point of having legal ownership. Mr. 
Chairman, I would ask that the patent notice be admitted to the 
record. Again, just to confirm the government and the 
taxpayer's role in terms of getting us to the vaccine.
    Chairman DeSaulnier. Without objection.
    Mr. Courtney. Thank you. And Ms. Socal you know I speak a 
lot to the Connecticut Insurance Department. We have a 
regulated insurance market where rates are approved in both the 
individual market and the business market. And last year the 
insurance commissioner reported that the share of premiums that 
employers pay for prescription drugs is now at about 23 percent 
of premium dollar.
    If you go back really even just a few years ago that was at 
15 percent. So I mean do you see that trend in employer-
sponsored plans in terms of how much prescription drugs are 
driving the increase in premium?
    Dr. Socal. Yes, we see that a lot. Not only increases in 
premiums, but really increases in the overall spending that 
patients make in their out of pocket costs as well.
    Mr. Courtney. So, again, there are obviously a lot of other 
health care costs that go into the premium dollar, you know, 
whether it's you know hospital reimbursement, physician 
reimbursement.
    So, again, it's really disproportionate in terms of again, 
the trajectory that we're seeing right now which really is why 
I think this bill which sometimes when you talk about 
prescription drug costs, it's all sort of Medicare. This bill 
is not just about Medicare, it's also about providing relief 
for employer-sponsored plans.
    Dr. Socal. Absolutely. And a lot of what's driving these 
costs is these very high, very expensive drugs that really 
don't offer any additional value as compared to all the 
alternatives that are in the market, but they are just 
increasing their prices, and that's really unbeknown to 
patients, and often to physicians as well.
    Mr. Courtney. So again, as someone who was also a small 
employer at one time, you know I wanted to sort of go back to 
this point about what the employers sort of fiduciary 
responsible, what his options are, again this bill does not 
mandate that an employer purchased a health care plan that has 
the government negotiated price right?
    I mean they still have an option to use market or PBMs or 
whatever to get their prescription drug coverage is that right?
    Dr. Socal. They do have an option, and that option would 
bring really important transparency to this market because even 
if a self-insured employer is hiring a PBM to negotiate on 
their behalf, often times the employer does not even know 
exactly how much they're paying for drugs.
    There's an important lack of transparency there, and this 
bill would bring a lot of transparency back for employers to 
know what's best for them.
    Mr. Courtney. And transparency is really what is essential 
for market economics, isn't that correct?
    Dr. Socal. It is crucial.
    Mr. Courtney. I mean that's the irony of some of the 
rhetoric here. This bill actually provides a healthier 
marketplace, not a more restricted marketplace isn't that 
correct?
    Dr. Socal. It is. And part of the lack of transparency is 
having so many intermediaries in our negotiations, and having a 
transparent benchmark will help employers to be able to even 
monitor the work of these intermediaries more effectively.
    Mr. Courtney. Well thank you for your testimony, and Mr. 
Chairman in the spirit of moving along I yield back the balance 
of my time.
    Chairman DeSaulnier. You get a gold star as well with Dr. 
Foxx Mr. Courtney. And with that the Chair will recognize Mr. 
Wilson from South Carolina for five minutes.
    Mr. Wilson. Thank you Mr. Chairman. And indeed Joe Courtney 
deserves a gold star. Additionally, I appreciate Ranking Member 
Rick Allen proceeding as we're doing today. And also I want to 
ask a question to Dr. Holtz-Eakin. The U.S. Chamber of Commerce 
has estimated sadly that in my home State of South Carolina 
4,401 jobs would be destroyed through the H.R. 3.
    The consequence of a big government power grab leading to 
delay and denial of medical care with lack of access. On top of 
that the pensions and mutual funds hold a significant amount of 
my own pharmaceutical shares on the S&P Index. How do you see 
H.R. 3 affecting pension plans and retirement accounts in the 
short and long run?
    Mr. Holtz-Eakin. Well certainly in the short run this would 
be a big negative for the market value of those holdings and 
that would hurt the funding of those pension plans. I think 
that's very straightforward. Over the longer term fully 
implemented, this is a real negative for the entire sector for 
the small startups that develop drugs and often sell them and 
always plan to sell them to larger pharmaceutical companies.
    And that value that has always been a part of the system 
would dry up and disappear. So over the long-term this would be 
negative as well. So I don't think there's any question about 
the impact of this.
    And you know I'm very sympathetic to the notion that 
especially for specialty drugs right now, and a lot of those 
are oncology drugs, that prices are very high, and that there's 
some severe financial distress for Mr. Mitchell, and Chairman, 
and people like them who are kept alive by those drugs.
    They're an enormously expensive, but valuable item. The 
irony is that although that's a very difficult situation, H.R. 
3 would do nothing to make it better. It would only make it 
worse. There would be no innovation to replace them with 
something that is a cure, or anything that is accomplished and 
lowers the price, and I think that's the real concern.
    Mr. Wilson. Well thank you for your analysis and another 
question for you Dr. Holtz-Eakin, I'm grateful that Nephron 
Pharmaceuticals, a well-known business located in Lexington 
County, South Carolina. The President, CEO and owner, Lou 
Kennedy, who's a real superstar in our community recently 
announced a 240,000 square foot expansion to include 110,000 
square foot vaccine production, chemotherapy and antibiotic 
wing.
    This expansion is estimated to create 380 new jobs in our 
community. What kind of job reduction could occur within the 
pharmaceutical industry if H.R. 3 were enacted?
    Mr. Holtz-Eakin. We would see fewer innovations. The CEO is 
on record as saying there would be fewer innovated drugs. The 
Council on Advisors estimated a larger number. Directionally 
everyone knows the answer, the only question is how big is it, 
and that means that you don't build those factories, and you 
don't hire those individuals.
    Mr. Wilson. And hey, I would invite everybody to come 
visit, Nephron Pharmaceuticals is really very close to my 
house, and it's so exciting to see the newer cars in the 
parking lot. But it also Dr. Holtz-Eakin, through operation 
Warp Speed with the leadership of former Vice President Mike 
Pence, we've seen the American ingenuity at its finest.
    As Ranking Member Rick Allen has accurately reviewed, with 
the incredible success of development. The United States should 
maintain that capability to avoid reliance on international 
competitors like China, which sadly disregard lawful practices. 
With China aggressively advancing their research and 
development capacities, and you see H.R. 3 impacting our 
capabilities and international competition.
    Mr. Holtz-Eakin. I think it's an unambiguous negative for 
innovation. I've said that several times now. To the extent 
that the Chinese are piling money into innovation and trying to 
compete on that front, it's a handicap. And I want to take this 
opportunity to thank everyone on this Committee, and in 
Congress on both sides of the aisle for Operation Warp Speed 
for the funding that you provided.
    That was an extraordinary accomplishment. The MRNA 
technology had been around for three decades. There's been a 
lot of private risk capital put in there for things that did 
not pay off, and in the end by financing trials that overlapped 
and guaranteeing markets for the vaccine that was being 
manufactured although not approved, you did something 
remarkable in conjunction with the private sector, and I think 
it was a great accomplishment.
    Mr. Wilson. Thank you very much for your insight and I 
yield back.
    Chairman DeSaulnier. Thank you, Mr. Wilson. Everybody is 
getting a gold star so far. Well now I will go to Mr. Norcross 
from New Jersey and I'm certain he will get a gold star.
    Mr. Norcross. Absolutely. Thank you, Chairman, for holding 
this hearing. Dr. Holtz-Eakin help me understand something just 
backing up. You suggested that Germany used to be the most 
innovative place in the world, and that they passed some 
regulations, and they moved to the U.S. as most innovative. 
Does that encapsulate what you were trying to get across?
    Mr. Holtz-Eakin. That's the short version of the long 
argument yes.
    Mr. Norcross. So, does that mean now that the U.S. has 
that, that Germany you're not going to give any of the 
innovative drugs to them because you're no longer there?
    Mr. Holtz-Eakin. No. I'm just saying that we have had a 
very effective system at nurturing innovation in 
pharmaceuticals.
    Mr. Norcross. Absolutely. But you suggested that Germany 
did also. They've lost it now because they passed some laws. 
So, the first question is so what did they lose? That 
innovation you won't send them any of the new drugs?
    Mr. Holtz-Eakin. It's not about where you send them, it's 
about what gets developed where.
    Mr. Norcross. Wait, well, hold it. If it's developed does 
that mean you're not going to share it with another country? 
You're not going to sell it there?
    Mr. Holtz-Eakin. I never said anything about where it was 
sold.
    Mr. Norcross. I'm asking.
    Mr. Holtz-Eakin. It will be sold.
    Mr. Norcross. I'm asking because they're not innovative, 
but they moved out and somehow they're not going to get those 
drugs. But I think you answered the question correctly, they 
will get those drugs. They might not get them the first day, 
but they're going to get them, thank you I appreciate your 
answer.
    Mr. Holtz-Eakin. Just for the record and the testimony, 
about 40 percent get them.
    Mr. Norcross. I'll claim my time.
    Chairman DeSaulnier. It's the Member's time please. Go 
ahead, Mr. Norcross.
    Mr. Norcross. Dr. Socal, I used to be part of a local union 
and we took care of our health and welfare funds trying to 
always save costs and be innovative. And then came along these 
pharmacy benefit managers, it sounded like the best thing since 
sliced bread.
    They promised us the world. And they did for a while. Now 
what we found out is that the negotiations that they're able to 
make are not transparent. We're not getting the benefit that we 
used to because that's not disclosed. Can you talk about the 
PBMs, what works well and what doesn't?
    Dr. Socal. Sure. I fully agree with you at the beginning 
they were needed, especially with so many different new drugs 
entering the market. But the problem is that PBMs not only 
negotiate, but they also make a profit off the drugs that they 
do negotiate, so they make a cut.
    And it is in their best interest oftentimes when they have 
two different options, one is lower costs and the other one is 
higher cost. It is in their best interest oftentimes to have 
the higher cost drug in the formulary, so that they can make a 
higher cut of the price of that drug.
    And that's one of the reasons why the prices set by 
manufacturers are increasing so much today where the prices 
that end up being negotiated have seemed to be often times just 
stable, or not growing as quickly. And for patients this is 
very, very harmful, because there is cost-sharing that is paid 
over those prices set by the manufacturers and the PBMs are 
simply making a cut while everybody is negotiating a lower 
price.
    Mr. Norcross. So just to understand, the PBMs came into 
existence because they could gather a larger group of 
customers, put them together and give you a better chance 
against the big pharma, so that worked.
    If we were to put transparency in there, would that go a 
long way to fixing that problem that you just suggested?
    Dr. Socal. It would fix part of the problem, especially for 
these `me too' drugs, but another part of the problem is drugs 
that do not have any competition, they're not `me too'. They 
are very important, and I just gave an example today in my 
testimony.
    And for these drugs the PBM cannot say no, they have 
nothing to compete this drug against and try to lower this drug 
price. And for these situations the PBM negotiation model is 
just not successful.
    Mr. Norcross. Thank you and Mr. Chairman I yield back with 
45 seconds left thanks.
    Chairman DeSaulnier. Oh those precious 45 seconds of your 
wisdom. We will now go to Mr. Walberg, the distinguished 
gentleman from Michigan.
    Mr. Walberg. You're a really kind Chairman and I say thank 
you for that. Thanks for the hearing. There's no question that 
healthcare costs are at the top of the minds for many 
Americans, myself included, and the cost of prescription drugs 
are a concern for workers and families.
    Sadly, instead of working on bipartisan solutions we all 
agree on, the bill we're discussing today seeks to impose 
radical price setting policies that run the risk of decimating 
biopharmaceutical research and jobs.
    In Michigan, a State that is proudly producing the COVID-19 
vaccine 86,000 jobs are supported by the biopharmaceutical 
sector. Moreover, the bill will reduce the necessary investment 
in research and development and access to breakthrough cures 
for difficult and rare diseases like Alzheimer's, childhood 
cancers, sickle cell anemia just to name a few.
    We all have met families, or know someone who have felt the 
devastation when a loved one has been diagnosed with a disease 
with no cure. So it's disappointing that we are here again, 
holding a hearing on this socialized agenda, drug pricing 
scheme that would further dash the hopes of finding 
breakthrough cures, and I believe saving many, many lives.
    But we ought to talk about it, so here we are. And Dr. 
Holtz-Eakin thank you for being here with the rest of your 
panel. You note in your testimony that it takes on average 2.9 
billion dollars and 15 years to bring a successful drug to 
market. And many drugs are never approved.
    How would putting the HHS Secretary, and Washington 
bureaucrats in charge of price setting and political risk to 
the already risky process of developing and delivering drug 
treatments to Americans?
    Mr. Holtz-Eakin. It would add an enormous amount of risk. 
You'd be exposed to the starting point, which is the average 
indexed international market price, that's something you don't 
know and when it's in the control of bureaucrats outside of the 
United States, you would then have the secretary having the 
unilateral power to declare whether negotiations were in good 
faith or not, run the risk of getting the drug essentially 
taxes out of the domestic market entirely, having no revenue.
    Those are just recipes for increased risk and less capital 
flowing to that industry. Everyone always thinks the drug 
companies somehow are going to get in the fetal position and 
stop developing drugs. No. That's what they do.
    But then no one will give them the money, and that will be 
the reality.
    Mr. Walberg. That just makes common sense, which maybe is 
not all that common. Dr. Holtz-Eakin we know that China is 
striving for a bigger footprint in biotechnology as to be 
assumed. I'm concerned that the policies put forward in H.R. 3 
would make the United States more reliant on other countries 
like China for research and development.
    Can you speak to what repercussions, greater reliance on 
China for that medical breakthroughs would have on the United 
States?
    Mr. Holtz-Eakin. I think there are two big concerns. No. 1 
has been the well-noted issue of security of supply chains for 
those drugs that are already in production, and it's a sensible 
question to ask whether you want something in China or not, and 
if not make sure that you have something that will survive some 
sort of stress test as a supply chain outside of China or in 
the U.S.
    And the second is where will you go for innovative and 
important therapies that are not produced in the United States, 
but which our citizens would like to have? And that's a 
situation that I think people are increasingly finding too 
problematic as the Chinese continue to not play by 
international rules, trade on level terms with others, and thus 
violate their international obligations.
    Mr. Walberg. We've certainly seen that over the course of 
the last year haven't we? Dr. Holtz-Eakin you note in your 
testimony that the sweeping nature of the proposed reforms in 
H.R. 3 do not just apply to Medicare, but would also apply to 
plans operating under ERISA. If H.R. 3 becomes law, how would 
employer sponsored health plans be impacted?
    Mr. Holtz-Eakin. They end up in the same pricing regime. I 
don't see any way around it. I mean the starting point is the 
average international market price, you know that becomes the 
maximum, and then an ERISA employer could try to negotiate and 
get a lower price, but they've got their employees and their 
formula. The secretary has a 95 percent I will levy this and 
you're out of business club in their hand there's no question 
the secretary is going to cut a better deal.
    It's just this is not a negotiation. This is using the fiat 
power of the government to set prices.
    Mr. Walberg. I appreciate the response, so thank you and I 
yield back 7 seconds.
    Chairman DeSaulnier. Thank you, Mr. Walberg, I appreciate 
that. We will now recognize, the Chair will recognize the 
gentlelady from Georgia, Representative McBath the floor is 
yours.
    Mrs. McBath. Thank you, Mr. Chairman. And thank you to all 
the witnesses for being here today. This is really great 
information and very insightful. As a two-time breast cancer 
survivor myself, and having been in you know the system, so to 
speak, I know all too well you know the stresses and all the 
heartache of the life changing diagnosis when you get it.
    And then when you have it a second time it's even more 
challenging. I know that my treatment was exhausting, it was 
both physically and emotionally exhausting, and I was truly you 
know, blessed to be able to afford my medications. And 
unfortunately, we know that that's not a reality for a lot of 
Americans, and in particular, under all the additional stresses 
of COVID-19, I can't even imagine what it's been like for 
persons that have pre-existing conditions and have been 
suffering so.
    And at a time when you know everyone is suffering so 
financially, lowering the cost of their prescription 
medications can really be a very vital lifeline. Time and time 
again you know, I talk to my constituents all the time, and 
they're telling me that the cost of their prescription drugs is 
you know top priority for them, and how can you blame them?
    It's a top priority for me. Just as of yesterday having 
finally, after a year, finally found a program that would 
reduce my costs. I also have an eye disease and I finally, 
finally after a year found a drug company that would actually 
reduce the cost of my eye drops, and I was just so grateful for 
that.
    You know there are life-saving medications and people are 
having to make unthinkable decisions about whether to purchase 
their medications, or put food on the table or gas in their 
car, and the American people are just sick and tired of seeing 
endless prices increase and increase every year while our 
pharmaceutical companies see record profits.
    And we just need to find a different way. Drug companies 
often argue that you know we've already had a system in which 
prices are negotiated by health plans and the pharmacy benefit 
managers, and therefore it's not needed for the Federal 
Government to negotiate directly.
    However, I can clearly see that the system as it currently 
is designed is failing millions of patients in my district, and 
throughout the country. And this legislation that we're talking 
about today takes really bold steps toward reducing the cost of 
prescription drugs, and it really will save the taxpayers 
billions of dollars over the next decade.
    So, let's be clear. It is taxpayer dollars and wages that 
go toward paying for these outrageous prescription drug prices. 
And Dr. Socal you mentioned in your testimony that you work 
with the business organizations who are looking to lower the 
cost of health care in the United States.
    And I'd like to hear about what you've learned through this 
work. What are some of the challenges that businesses face in 
affording drugs, and how does this impact workers? And this is 
a two-part question, also how would having a price negotiated 
by the Federal Government help those businesses?
    Dr. Socal. Well let me start by addressing this very 
important question about how employers are dealing with this 
problem. And employers and employees they are in the same boat, 
because it is very frequent that employers in their benefit 
design they have to charge a certain percentage of the drug 
cost when a patient needs a certain drug.
    And charging that percentage of the drug cost is what 
really is detrimental to patients because the price that is 
available to patients when they calculate this cost, is always 
the highest price, and it is different than the price that is 
negotiated at the end of the day for the employer.
    Now employers would pretty much prefer to have this revenue 
available to invest in retirement plans, better compensation, 
to keep their workforce to offer better benefits and they 
aren't you know capable to when they spend so much on 
prescription drugs.
    At the same time charging a percentage of the drug costs to 
employees it is a way to shift the drugs cost and penalize 
employees when they need a very expensive drug. Having the 
secretary negotiate these prices on behalf of everyone would 
allow patients to also reduce their drug costs.
    The GAO report has shown that other countries for the same 
drugs people pay much less, and it's not that these countries 
have more money available to cover drugs, it's really that they 
have better price controls, and price negotiations in place and 
we can match these prices around the world if we enact certain 
negotiations like in H.R. 3.
    Mrs. McBath. Well thank you so much for your answer, and 
thank you, Mr. Chairman. I yield back the balance of my time.
    Chairman DeSaulnier. Thank you Representative, and thank 
you for your personal story. The Chair now will recognize the 
gentlelady from Tennessee Representative Harshbarger. The floor 
is yours.
    Ms. Harshbarger. Yes sir. Thank you Mr. Chairman and 
Ranking Member Allen and the witnesses. There's no doubt we 
have to do something in Congress about drug pricing, and we 
know Americans, that's one of their No. 1 priorities, but they 
still want access to life saving medications, and as most of my 
colleagues know I've been a pharmacist for 34 years, so nobody 
on this call has heard more about lowering drug prices than I 
have over 34 years.
    And I could talk to you all day if you want to know about 
PBMs, I'm your woman OK, because we deal with those. And I just 
had a roundtable the other day with independent pharmacies from 
the district, myself and Betty Carter, Representative from 
Georgia.
    And did we get an earful because they are putting 2,000 
independent pharmacies out per year because they won't even 
reimburse the price of the medication. So what I really want to 
touch on is I want to talk about the pharmacy benefit managers. 
You know these managers were created as middlemen, and they 
were supposed to reduce the costs of the insurers, validate 
eligibility, administer drug benefits, negotiate costs between 
pharmacies and healthcare plans.
    But what has happened is they morphed into one of the most 
highly concentrated, least accountable profit centers in our 
healthcare industry. The vertical integration from the FTC 
should have looked at years ago that a pharmacy can buy a 
pharmacy benefit manager is ludicrous.
    They have enormous power too over drug companies. And I use 
the analogy that you have the drug company as the parent, and 
now we have a child down here called the PBM. And now this 
child has grown up and it's smacking the parents around, 
telling them what they're going to rebate, what they're going 
to give them back.
    So these PBMs do this. They choose what drugs are covered 
by insurance, they negotiate purchasing deals with drug makers, 
they determine the copays for the customers and what tiers 
they're in. They decide which pharmacies will be included in 
prescription drug plans, and they decide how much pharmacies 
are reimbursed for the drugs they sell.
    It's pathetic. And big pharma, you know, the way they price 
these drugs, it's not even AWP which is average wholesale 
pricing. They made another I don't even know what it's called. 
It's NADCS or something, it's something made up that the way 
they reimburse pharmacies, and these plant sponsors think 
they're transparent and they are not. They're the least 
transparent.
    There's things called spread that they have, and they may 
pay a hospital pharmacy one thing, and a retail pharmacy 
another. And they're at their mercy. It's a take it or leave it 
mentality when it comes to these independent pharmacies. If 
they don't take it they can't stay in business. If they do take 
it they're going to go bankrupt eventually.
    And the bottom line, they've been doing this the last 10 
years, and we're to a point where these independent pharmacies 
are screaming at us saying help us, we're not going to survive 
the year. I have a PBM accountability bill out right now that I 
want everybody to know about. It's H.R. 1829. Everybody has an 
independent pharmacy in their district, and I would implore you 
look at that.
    You know there's three big PBMs and they control 77 percent 
of the market. It's pathetic. So there is no transparency, and 
we need to fix that. But my question is for Dr. Holtz-Eakin. Do 
you believe the Centers for Medicaid and Medicare Services have 
the regulatory authority to implement some PBM reform and 
transparency policies already with additional legislation?
    Do you think we can do that?
    Mr. Holtz-Eakin. Well certainly in recent years there have 
been efforts such as the rebate rule which was an attempt to 
take the list price and the net price, which is after rebates, 
and make sure that got passed through to the retail price out 
of which people would calculate their coinsurance and thus 
their out of pocket.
    And then so one of the reasons I went through all those 
terms in my written is to emphasize that patterns look very 
different in what you use as the measure of price. So they 
attempt to do that. That rule in the end did not get finalized. 
That would have applied only however to government programs.
    Congress could do something legislatively which applied to 
the commercial market as well if it wanted to do that, but 
certainly the notion that coinsurance is calculated off the 
list price and the net price is what everyone else is operating 
on, is the real source of financial distress for a lot of 
beneficiaries and a lot of patients.
    Mrs. Harshbarger. Absolutely. Mr. Mitchell as you know 
there's a number of abusive and harmful PBM practices such as 
the spread pricing, the direct and indirect enumeration fees, 
for PBMs underpaid pharmacist and discounts to patients at the 
pharmacy counter.
    And there's just so many practices that people need to be 
aware of. Since our Subcommittee has direct jurisdiction over 
ERISA, I'm wondering what legislative recommendations you have 
or would support for the Committee to take action with?
    Mr. Mitchell. Well first of all as a patient I find it very 
disturbing that I can't know if the preferred drug on a 
formulary is the best drug for me, or the least expensive drug 
for me, or if it's just there because the PBM got a big 
kickback from the drug company.
    The headwaters of the problem are high drug prices set by 
the manufacturers, but everybody downstream is making money 
too, and PBMs among them. And there's a reason that biosimilars 
are having a hard time entering the market to compete with 
biologics, that is because the drug companies negotiate rebate 
dwells and other arrangements to block competition working with 
the PBMs.
    So I feel strongly we need to start with list prices, but 
there's work to do on this issue of transparency, and ensuring 
that PBMs are operating in the interests of the people they're 
supposed to serve.
    Mrs. Harshbarger. Thank you Mr. Chairman. I have lots of 
other questions I'll submit those. I yield back.
    Chairman DeSaulnier. Thank you. I really appreciate your 
perspective and look forward to having further discussion about 
your bill and other ideas. I've got a wonderful relationship 
with Mr. Carter. He's a co-Chair with me at the Cancer 
Survivor's Caucus so we'll look at these issues..
    Mrs. Harshbarger. Fantastic thank you sir.
    Chairman DeSaulnier. With that I will recognize the 
gentleman from Michigan Mr. Levin for five minutes.
    Mr. Levin. Thank you, Mr. Chairman. No teacher has ever 
given me a gold star, so I don't know if we're going to start 
today or not, but.
    Chairman DeSaulnier. There's always a first.
    Mr. Levin. I'm a two-time cancer survivor like the 
gentlewoman from Georgia, and I'm in your club, and don't wish 
it on anybody else, but I also have two young adult kids with 
Crohn's disease and have had it for years.
    So, you know this drug price issue has been very personal 
for my family. Mr. Isasi, you pointed out in your testimony 
that rising drug prices are having a direct impact on the kind 
of health care that patients receive. One in three Americans 
report skipping doses of their medication due to cost, and 
millions of Americans, including my constituents who tell me 
about it, are splitting pills, or taking other steps to stretch 
out their prescriptions.
    So, my question to you, and I want to get through another 
one after this is what impact does this have on patient's 
health itself, and on the costs they face if they eventually do 
seek care after they forego their medication?
    And do patients in other countries have this problem? And 
how do their health outcomes compare to patients in the U.S.?
    Mr. Isasi. Thank you very much for that lead into the 
question. I think you did a beautiful job describing in your 
own district that so many Americans live with as you mentioned, 
about a third of Americans right now cannot afford their drugs, 
and are doing things like splitting drugs.
    And as I talked about in my testimony Maureen has made the 
decision to cut back on food because she can't afford her 
drugs. So it's a very, very serious problem. When you compare 
what's happening in the rest of the world, this is a very 
uniquely American problem in comparison to the rest of the 
developed nations.
    Most families across the developed countries do not have to 
worry about whether they're going to keep the roof over their 
head, keep a savings that they worked so hard to make, and the 
health of their kids and their family. And that's a uniquely 
American problem and it's one that needs a solution.
    You know and if you think about what's happened just this 
year with the COVID vaccines, we are in a situation in which 
the entire regime around the development of these vaccines is 
what H.R. 3 would put in place. The government helped to fund 
the vaccine development, the government negotiated the price 
right, and the vaccine is here for Americans.
    We paid for 100 percent of the Moderna development, and we 
paid for almost half of all the other ones, and yet we still 
have record profits occurring, billions of dollars are going to 
Pfizer.
    Mr. Levin. And I might point out that the companies are 
resisting us getting chips waivers so that these drugs can save 
lives around the world, and we can stop a new variant from 
developing and coming back.
    Let me get to my second question. In your testimony you 
talked about also the need to ensure that all consumers are 
protected from price hikes, not just consumers covered by 
Medicare. So let me ask you to talk a little bit more about why 
that's important in your view, and why doesn't the protection 
for Medicare consumers confer protection to other consumers 
like those of employer sponsored health care?
    Mr. Isasi. Right. Really important question. And to start 
with let's recognize that. What doesn't make sense is the 
pharmaceutical industry right now is the one industry that 
isn't actually by subject to the government getting in and 
saying is this a fair price.
    Hospitals live with it. Doctors live with it. There's some 
reason that we've given the pharmaceutical industry in the past 
and that's where the abuse comes from. Second, this discussion 
about this radical idea that we should be internalizing the 
costs in Europe so that we are not substituting the drug costs 
for other countries. That is something that President Trump 
proposed and signed an executive order on in July right.
    It is not a radical idea. It's something President Trump 
himself said he was going to do. And to your point 
fundamentally about 150 million Americans are currently getting 
their health insurance coverage not through Medicare or 
Medicaid right? Those folks are getting their coverage through 
employer-sponsored insurance.
    Mr. Levin. Which is what we have jurisdiction over.
    Mr. Isasi. And that is what this Committee works on and 
fundamentally we've got to solve this problem for all 
Americans, not just for the Medicare recipients or Medicaid.
    Mr. Levin. All right. With that Mr. Chairman I will earn my 
first ever gold star. I yield.
    Chairman DeSaulnier. As they say priceless. Next the Chair 
will recognize the gentlelady from Illinois, Mrs. Miller.
    Mrs. Miller. OK, can you hear me?
    Chairman DeSaulnier. Yes I can go ahead, the floor is 
yours.
    Mrs. Miller. OK. OK thank you Dr. Holtz-Eakin again for 
your testimony, and for taking time out of your day to share 
your expertise with the Committee. I want to give you an 
opportunity to clarify your response to my colleague who asked 
about international access to drugs.
    I was interested in your response, but unfortunately you 
were cutoff before you could fully answer the question you were 
asked, so could you answer for the Committee what kind of 
access countries with policies like those in H.R. 3 have to 
innovative medicines?
    Mr. Holtz-Eakin. Far less than in the United States 
Congresswoman. The typical comparison country in H.R. 3 has at 
most 60 percent of the brand name drugs that American consumers 
enjoy, often only a third or 40 percent, Australia, places like 
that. So the answer is often no, they won't have access to that 
drug, and indeed one of the characteristics of those countries 
is they denied their citizens access to the latest therapies 
and drugs on a regular basis.
    And the United States does not do that. And we have issues 
that I acknowledge in some targeted situations for the 
financial burden of those therapies, but the advances in 
medical science I don't think is in dispute. The question is 
how we're going to effectively finance recovering the costs of 
developing them.
    Mrs. Miller. Yes, so I have another question for you Dr. 
Holtz-Eakin. Can you describe how negotiations with the Federal 
Government would work under H.R. 3? Would you describe their 
approach as a fair voluntary and market-based price 
negotiation?
    Mr. Holtz-Eakin. No I wouldn't. As I mentioned in my oral 
remarks, we looked at this issue when I was the Director of 
CBO, and it's been revisited many times in the years since. And 
if we position the secretary as we do a plan under Part D, the 
secretary couldn't do any better than that plan.
    The secretary doesn't have a tool, doesn't have a 
formulary, doesn't have a way to move market share toward the 
manufacturer and thus get rewarded by a lower price. And so for 
that reason the CBO is included on a regular basis, there would 
be little impact of providing the secretary with negotiating 
authority.
    This isn't that situation. It's not a market-based 
negotiation. This is a situation where there's a by fiat set a 
maximum price called the average international market price. 
And then ``negotiations'' begin where the secretary says I get 
to decide whether you're negotiating in good faith, or you're 
subject to a tax on 95 percent of your gross revenues, which is 
not deductible for income tax purposes, it is over 100 percent 
effective tax rate, and it would effectively close the domestic 
market to that manufacturer for that drug.
    That's an enormously powerful government tax weapon being 
brought to the table, very different than a private 
negotiation.
    Mrs. Miller. Thank you and I yield back.
    Chairman DeSaulnier. Thank you Representative. The Chair 
will recognize the gentlelady from Pennsylvania for five 
minutes, Representative Wild.
    Ms. Wild. Thank you, Mr. Chair. Susan Wild here from 
Pennsylvania 7. I hope you can hear me OK. I am in a public 
place and therefore masked. My question is for Mr. Isasi, and 
it has to do with an issue that is incredibly important to the 
people in my district, and that is the cost of insulin.
    We know that nearly a century ago the scientist who 
discovered insulin, rather than seek the profit from it, 
famously sold the patent for just one dollar as a gift to 
society. And for decades this life-saving drug was available to 
consumers at a reasonable price.
    Yet when I'm home in my district as I am now, and I'm 
talking to my constituents, I hear over and over again from 
patients who are finding that they are struggling to afford 
insulin. Mr. Isasi, first of all what is going on here? Why are 
insulin prices increasing, and what is the cause?
    And if you can comment also on how H.R. 3 would address 
these insulin prices, and ensure the consumers have access to 
this critical medication.
    Mr. Isasi. Thank you so much for the question. Such an 
important one, we hear about it at Families USA all the time as 
you mentioned. About 30 million Americans across the country 
with diabetes, this is their life and death we're talking 
about. What we know is as you've said perfectly, insulin was 
developed over 100 years ago, over 100 years ago.
    And the price is continuing to go up and up and up and up. 
Between 2002 and 2013 it tripled in price. A drug that's over 
100 years old. What we see here is the classic manipulation on 
the part of drug manufacturers to make small changes to the 
drug to extend patents, extend patents, extend patents. That's 
the first thing that happens.
    The other thing we know for sure is that drug makers like 
Sanofi and you know literally are working very hard to create 
patents that get around these drugs. They sue competitors, they 
stop the biologics from entering in. So this is a good example 
of the ways in which our system doesn't have any real 
competition period.
    This is about abusing the legal system, smart lawyers, not 
innovative drugs. And insulin is a perfect example. And we see 
examples where literally people have died because they can't 
get their insulin right.
    And so to your question about H.R. 3, this is a classic 
example where, as I've mentioned previously, our current health 
care system Medicare pays for hospital. Medicare pays for 
doctors. Medicare pays for devices. And Medicare negotiates a 
price. It sets a price every time.
    But for some reason we have decided that drug companies 
shouldn't be subject to the same thing we do for the rest of 
the industry right. H.R. 3 would let us get in there and let 
the government sit down and negotiate drug prices on behalf of 
families to make sure that these families are not being saddled 
with tripling of prices of a 100-year-old drug.
    Ms. Wild. Thank you so much. Mr. Chairman may I inquire how 
much time I have left?
    Chairman DeSaulnier. Let me check. How much time does the 
Representative have left?
    Ms. Wild. Thank you Mr. Chairman I yield back.
    Chairman DeSaulnier. Thank you very much. I'm sorry. The 
Chair would now recognize the Ranking Member Mr. Allen for five 
minutes. Oh, I'm sorry. Mr. Fitzgerald are you back? Ms. Spartz 
you are after all the Subcommittee Members, so we would go to 
Mr. Allen first, then back to Ms. Stevens and then to Ms. 
Spartz. Mr. Allen you're recognized.
    Mr. Allen. Great thank you Mr. Chairman. I agree this has 
been a great hearing and obviously, we really need to examine 
this from really all directions because you know my experience 
and Dr. Holtz-Eakin's I'm told, and I'd like you to give me 
some feedback on this.
    But for example, you know back in the early 2000's people 
were complaining about healthcare costs period. And drugs, 
everything else. And of course we know today that we actually, 
this Nation pays about 10 times what any other nation pays for 
healthcare.
    Now we also know that we have the best remedies and most 
innovative healthcare in the world, obviously by evidence of 
the development of this vaccine which nobody thought could 
possibly be done, and you can't imagine the millions of people 
who would not be with us today if that had not been done.
    But you take going back to say the Affordable Care Act, you 
know the President said we will lower your premiums and we're 
going to lower your deductibles OK. And I understand that, and 
this is just the healthcare community talking to me out in my 
district.
    I asked the question like so like for every premium dollar 
and every taxpayer dollar that goes into the Affordable Care 
Act, how much actually gets back to take care of a patient? And 
I was told maybe less than 20 percent. So this is my concern is 
when the government tries to control these things, the cost 
actually escalates, and the dollar value of healthcare goes to 
Washington, DC and not to the patient.
    I mean for crying out loud, the Health and Human Services 
is what now, 1.4 trillion dollar organization. I mean help me 
with this. I mean is the government involvement in the 
Affordable Care Act driving some of these cost increases?
    Mr. Holtz-Eakin. So a couple things on that. First the real 
reason for premiums being higher is the underlying cost of care 
has gone up. We're spending a lot more on healthcare itself. 
Insurance is a means to spread that national healthcare bill 
around, but it's the bill itself that's the problem.
    Of that bill, outpatient prescription drugs are 10 percent, 
and they've been 10 percent for a long time. It hasn't gone up 
at all. In-patient, particularly Part B has gone up somewhat in 
recent years, and these are these extremely innovative small 
market specialty drugs that I've mentioned before, and they are 
what stands out as something that Congress should think hard 
about looking at.
    I think they are phenomenal medicine, but they are the ones 
where paying coinsurance on the list price for example is 
probably causing some financial pain. The real bulk of the bill 
is elsewhere, it's in doctor, and in hospitals and other 
providers.
    That's where American spends its healthcare dollars, and 
one of the concerns that I would voice as an economist is that 
since the passage of the ACA we have seen considerable 
consolidation of the provider side of the market, and hospitals 
buying doctor groups, other consolidation.
    That inhibits competition and leads to higher healthcare 
costs. I am concerned not just Federal, but State level 
certificate of need, scope of practice and a variety of other 
regulations are in fact getting in the way of lowering our 
healthcare bill and that's a problem.
    Mr. Allen. And do you see the same thing with H.R. 3?
    Mr. Holtz-Eakin. As I think you probably gathered, I'm not 
a big fan of H.R. 3. It does nothing to improve market 
competition in the United States. It does a lot to damage the 
futures of those who are faced with catastrophic illness, and I 
cannot support it.
    Mr. Allen. Tell me about the messenger RNA and this 
innovative technology that developed the Pfizer and Moderna 
vaccines.
    Mr. Holtz-Eakin. So I think the past year is a fantastic, 
as I mentioned, a fantastic episode in public policy. But it 
was preceded by three decades of private risk capital 
attempting to develop this technology unsuccessfully, so this 
is where lots of money goes.
    Moderna raised about 5 billion dollars of private capital. 
They weren't entirely publicly financed.
    Mr. Allen. And this would not have happened had this been 
law.
    Mr. Holtz-Eakin. Right.
    Mr. Allen. 10 years ago. OK.
    Mr. Holtz-Eakin. I wouldn't want to give them the money.
    Mr. Allen. All right. Well thank you so much, and thank you 
for all of our witnesses we really appreciate this information 
and I yield back Mr. Chairman.
    Chairman DeSaulnier. Thank you, Mr. Allen. It's always a 
pleasure. The Chair will now recognize Ms. Stevens, the 
gentlelady from Michigan.
    Ms. Stevens. Well thanks to our Chair for his phenomenal 
leadership, and dedication to this issue about lowering the 
cost of prescription drugs and also staying firm on what it 
means to ensure that every American has access to good 
affordable health care, something that we achieved when we 
passed the ACA into law, and saw it prevented it from being 
overturned in 2017.
    Dr. Socal, first of all, thank you so much for your 
expertise and your wonderful testimony. As you know this past 
year has been devastating for our Nation's older adults who 
have been just clearly disproportionately impacted by COVID-19.
    We're thrilled to see great rates of vaccinations among 
older Americans here in Oakland County we are at 80 percent of 
older Americans being vaccinated, but it's also an example why 
it is more important than ever to support the well-being of 
this population who is you know, just borne the brunt of the 
drug pricing crisis in our country for far, far, too long.
    So much so that 1 in 5 older Americans report not taking 
their medication because of the cost. I have had people in my 
district, you know out at the farmer's market tell me such, 
that the costs of their prescription drugs are just too high, 
they're retired, they saved, they're living a fine retirement, 
but they can't pay $5,000 for arthritis medication.
    So it's part of why I'm pleased to support H.R. 3, which is 
going to obviously improve innovation in our Medicare program 
to lower the cost of prescription drugs, and you know a 
provision that I led to improve the auto enrollment in Part D 
plans, so Dr. Socal, I'm just wondering, just based on your 
incredible research into older Americans drug pricing 
preferences, could you speak to how provisions in H.R. 3 will 
benefit older Americans in particular?
    Dr. Socal. Absolutely, and it's such a big concern for this 
population right. So, first of all, older Americans under 
Medicare they don't have an out of pocket cap right now, and so 
when taking a drug, and I'll give an example from our research. 
Our No. 2 drug in terms of top spending in Medicare Part D was 
a drug to treat cancer.
    This drug was already in the U.S. market for 14 years when 
we did our research, and we in the U.S. we were paying 10 times 
more as Japan and three times more than the U.K. for this drug. 
This is just an example. Other drugs were similar. And the 
interesting part is that in our calculations if Medicare Part D 
were to use the average price around the country that we 
studied, just the savings from this price negotiation would 
amount to about $73 billion.
    And I mention this number because you were talking about 
vaccination. $73 billion would be enough to vaccinate the U.S. 
population you know more than two or three times with COVID 
vaccines today, so it's an incredible amount of money that we 
are spending and disproportionately more than other countries 
for this population alone.
    Ms. Stevens. And you mentioned, Dr. Socal, in your 
testimony that you work with business organizations who are 
looking to lower the cost of health care in the United States, 
and I'd love to hear what you've learned through this work, you 
know, what are some of the challenges that businesses face in 
affording drugs and how does this impact the workers?
    How would having a price negotiated by the Federal 
Government help these businesses, even though I know we kind of 
got into this a little bit already in the hearing.
    Dr. Socal. Right. But there is a lot here and a lot of 
benefits, different benefits to different stakeholders. So, 
let's just take the same example that I used Revlimid. This is 
a drug that each pill of this drug costs about $600 in terms of 
list price right? Of course it's much less in terms of final 
negotiated price, but $600 per pill.
    If we charge about 20 percent coinsurance to a patient who 
needs this drug, and this drug is used to treat cancer and it's 
a very important drug for those who need it. The coinsurance on 
each pill will amount to $120 that the person is going to be 
paying for each pill that they take.
    So bringing up a benchmark and increasing transparency 
would--increasing transparency would lower the price in the 
out-of-pocket side for patients as well.
    The other thing is in terms of `me too' drugs, often times 
employees don't know that they're spending so much money. The 
price differentials between these `me toos', and their 
corresponding generics, sometimes generics are 99.9 percent 
cheaper than the `me too'. And that transparency would increase 
the knowledge about that in making decisions more informed, 
both from patients and their prescribers.
    Ms. Stevens. Thank you. I'm overtime and I know Dr. 
Mitchell too touches on this, so we'll probably just get you 
for written, but thank you to our Chair for this, I yield back.
    Chairman DeSaulnier. Thank you, Ms. Stevens and no gold 
star, for you, but you could aspire in the future. Next speaker 
is the gentleman from Indiana Mr. Mrvan and then we'll go to 
our Chairman as of the moment and Mrs. Spartz. Representative 
Mrvan.
    Mr. Mrvan. Thank you, Chairman. I appreciate this 
opportunity and I appreciate the panel being here and Ranking 
Member also. In my previous elected position, I was responsible 
for assisting individuals who were having a hard time, or 
having an economic crisis paying for medications that were 
absolutely necessary for their health and the quality of their 
life.
    Far too often they were being forced to make decisions on 
whether or not they could pay their rent or food, like Maureen, 
and pay for their medications. It was often a new and 
innovative drug that they needed in order to perform their work 
to support their family.
    And they often needed that employment in order to have 
their health insurance. Mr. Mitchell and Dr. Socal, a recent 
study by the purchaser business group on health and the Kaiser 
Family Foundation found that more than 9 in 10 employers 
believe that the cost of providing health benefits is 
excessive. What impact does high health care costs have on the 
American businesses, and how can we move forward in a way that 
improves the ability for those most in need to have the life-
saving, and sometimes career-saving medications?
    Mr. Mitchell. So Mariana do you want to go first? OK. About 
56 percent of Americans get their health coverage through their 
employers. It's a huge amount of money that employers devote to 
health care in this country.
    It turns out there was a recent survey, 77 percent of small 
business owners support direct Medicare price negotiation, and 
just yesterday the ERISA Industry Committee, which is large 
employers, said that they don't feel that H.R. 19 goes nearly 
far enough because the way it's structured is going to just 
shift costs onto employers because it doesn't lower drug 
prices.
    So, employers around the country are hurting from the 
burden of high drug prices and trying to manage those, and H.R. 
3 would extend the benefit of low prices into the private 
sector and help all Americans. Mariana, I hope I left time for 
you.
    Dr. Socal. Let me just add one important thing. The reason 
why employers are so crucial to this conversation is not only 
because of the price of the drug. When the patient cannot 
afford the drug that they need, we already discussed this, one 
of the consequences is that they're going to increase their 
medical costs. People are going to start, you know, missing 
days at work.
    And employers are the ones who are going to foot the bill 
for these increased medical costs. So imagine a person taking 
insulin, if they cannot afford to take their insulin that 
particular month, they are going to need, frequently you know, 
a visit to the emergency department, a visit to the hospital.
    They're going to need perhaps a hospitalization. Not to 
mention the long-term consequences from the lack of access to 
their insulin. And spending on those services is going to be 
paid by the employers. So it's a very important goal to make 
sure that affordability of drugs such as insulin is met in 
these cases.
    Mr. Mrvan. And I just want to reiterate what I'm taking 
away is the non-compliance based on economical reason have a 
cost on health care. And ultimately, the next question I have 
for Dr. Socal, and I want to get my gold star, is what studies, 
or what information do you have about the choices that older 
Americans may make when it comes to pricing and medications?
    Dr. Socal. Right. Well we know that 3 out of 10 Americans 
have struggled to pay for their prescription drugs, right? And 
one in these 3 they have experienced a worsening of their 
condition because of that.
    And earlier we talked about the fact that you know so far 
we have assumed that the government not negotiating in Medicare 
was not supported, but there is very strong public support for 
the government to negotiate. And 60 percent of older Americans 
would tradeoff the option to you know, choose or change their 
drug, prescription drug plan in Medicare Part D, if they were 
to get lower drug costs.
    So there is very strong support for that.
    Mr. Mrvan. I thank you very much and I appreciate your 
testimony today and I yield back to the Chairman.
    Chairman DeSaulnier. Thank you. I'm afraid I might be 
inhibiting good questions, using gold stars as a motivator, but 
thank you for being timely. I have as the next speaker, the 
Chairman, Mr. Scott, you are recognized for five minutes, and 
then we'll go to Congresswoman Sparks.
    Mr. Scott. Thank you. Mr. Holtz-Eakin you mentioned 
increasing supply as a strategy to reduce prices. How do you 
pull that off with drugs that are protected by patents? How do 
you increase supply?
    Mr. Holtz-Eakin. Well certainly there is competition 
between on patent branded drugs. I mean the poster child for 
that would be Sovaldi and then the competitors that came on and 
forced dramatic price reductions in that drug. I think that's 
the most recent example to point to.
    In terms of ways that you do that, you certainly want to 
streamline the approval process to the extent possible. You 
want to make sure that you have an effective and regular 
process for the authorization of generics and biologics. Those 
are things that I think of that have been an extraordinarily 
valuable contribution to American medicine, and are cheaper in 
the U.S. than around the globe.
    And I think making sure that those processes are 
understood, certain, and executed the same for every drug is 
very important.
    Mr. Scott. Thank you. Mr. Mitchell we're talking about 
negotiating at a price at 120 percent the average international 
market price. At our last hearing we were told that if it's 120 
percent that would mean that the biggest market, the United 
States, would be paying the highest price, so we wouldn't have 
to worry about people pulling out of the market.
    But Mr. Holtz-Eakin did accurately cite the CBO report that 
said that there would only be a negligible affect if all we did 
was granted negotiation. We would have to do more than that. 
What more would we have to do to get meaningful reduction in 
pricing along with negotiation?
    Mr. Mitchell. Well we'd have to have an incentive for the 
drug companies to engage in negotiations because if there is 
none, then there will be no savings. You know folks today have 
talked about using international referenced pricing as fiat. 
Well this fiat is supported and was proposed by the former 
President of the United States who is still as near as I can 
tell the leader of the republican party.
    And he believes that we should use international referenced 
pricing not to lower prices, but to get the lowest price of any 
nation in the world. So I would say that international 
reference pricing is one of the things that we can use 
consistent with former President Trump in order to help set a 
boundary for negotiations.
    And then we have to have a stick to go with the carrot when 
we negotiate, both. And by the way carrots and sticks are 
frequently used in negotiations. Both of those things.
    Mr. Scott. Thank you. And Dr. Socal a lot of concern has 
been raised about the fact that if this bill passes there will 
be great savings, in the hundreds of billions of dollars, money 
that could have gone to research and therefore there will be 
fewer drugs created.
    Isn't it true that if we set aside a portion of those 
savings to research and the NIH we could offset that loss?
    Dr. Socal. Absolutely. The FDA is contributing to every 
single drug that is approved currently, to the drug 
development, and you know the most frequently prescribed drugs 
in America, 93 percent of them have had NIH funding.
    What the H.R. 3 mechanism of negotiation would possibly do 
is reduce innovation, so-called innovation for these `me too' 
drugs. But for the really effective drugs we would still have 
the NIH research pushing for these innovative routes, the 
innovating mechanisms of actions for really innovative drugs.
    Mr. Scott. Well thank you. And Mr. Isasi if this bill 
passes there's a suggestion earlier that there would be a lot 
of consolidation in the industry. Did you want to comment on 
that?
    Mr. Isasi. All right, sure. So, I think fundamentally the 
question is Dr. Holtz-Eakin mentioned that the industry's 
business model would change. It would stop abusing pricing and 
their market shares would go down.
    But somehow there would be a lot of people interested in 
merging together, but the two things don't make any sense. This 
bill does not increase consolidation in a pharmaceutical 
industry. That's already happened. You see massive 
consolidation in the pharmaceutical industry already.
    What this bill does is say in a very distorted market where 
there are no real negotiations going on, and a lot of abuse, 
the government is going to get in there and make sure that the 
American people are getting a fair price.
    Mr. Scott. To my great surprise, Mr. Chair. I yield back.
    Chairman DeSaulnier. Mr. Chairman you always get a gold 
star. All right. The Chair will now recognize the 
representative from Indiana, welcome to the Subcommittee, Mrs. 
Spartz you have the floor for five minutes.
    Ms. Spartz. Well thank you Mr. Chairman. I appreciate the 
time and appreciate the discussion. I share the frustration of 
a lot of Members of this Committee. I would probably argue that 
price and wage controls after World War II, that's what got us 
in trouble with healthcare.
    And there are some issues that in this bill probably would 
be great in informing the FDA, dealing better with substance 
abuse, better negotiation for Medicare for seniors, PBM 
transparency, you know we need to deal with hospital care, 
which was over 50 percent of spending, and have really 
inflation, hyper-inflation of price I would argue.
    We also dealt with some issue in the Subcommittee that we 
have to deal, but I have a major concern with House Bill 3. And 
I'll tell you the major concern I have and in particular 
dealing with we're given enormous power to HHS Secretary to 
have a very, you know, very powerful tax weapons to have the 
requirements to do government reporting and collecting of data, 
and also you know creating models to enforce mechanism of 
government price control for the group market.
    And if you look at the group market you know it's about 
like in the State of Indiana, 90 percent of the private payers 
market. So my question is to Dr. Holtz-Eakin. What do you think 
if we're going to have you know dominant control, and dominant 
takeover, over 90 percent of you know private payer market, 
that would be you know something like almost maybe not in its 
form, but in substance, almost like nationalization of the 
pharmaceutical market, and a little bit closer to Communist 
China in our control than being a free enterprise country.
    I mean isn't it like if you look at that, that is a 
powerful control and centralization of power of the Federal 
Government which I understand government can control price, and 
we can do very good, but it's going to be you know fatal for 
innovation.
    Mr. Holtz-Eakin. You've said my concern very succinctly, 
and this is a sweeping, sweeping proposed legislation. I mean 
it would take over an enormous swath of the pricing of 
pharmaceuticals in the United States. It would do it in a way 
that I think is at odds with providing appropriate incentives 
for innovation.
    There's always a tradeoff in a situation with patents, so 
between incentives for innovation and a rival market 
competition, I think this goes way too far in the wrong 
direction and would damage the ability of future citizens to 
have access to therapies and innovations they need.
    Mrs. Spartz. If you would just kind of put out what would 
be three key things that you think would be actually beneficial 
that would have more competition on the market, versus 
alternative big government monopoly? Because ultimately, we're 
providing alternatives to oligopoly would be created for a lot 
of reasons, and I'm not going to debate here.
    We're giving the alternative of ultimately government 
monopoly on the market. What would be a better solution if you 
could highlight maybe three issues that we could do better.
    Mr. Holtz-Eakin. Sure. I think three things that I would 
highlight are No. 1, one of the real poster child of the price 
increase of pharmaceuticals has really been sole sourced 
generics, not branded drugs.
    And to make sure that we do not get abusive market power 
with sole sourced generics I think would be something that 
we've got to make sure that the FTC and the DOJ are effectively 
dealing with. So that could be No. 1.
    No. 2: Use the levers that you can pull, and you can 
redesign the Part B benefit to protect beneficiaries from 
catastrophic costs to improve the incentives to negotiate 
effectively for lower prices between plans and manufacturers, 
and to save the taxpayers some money.
    I'd like to see that. That could spill over as a result to 
the broader pharmaceutical market because it's a quarter 
pharmaceutical spending, so that's important.
    And No. 3 one of the painful situations that arises again 
and again is this disparity between coinsurance calculated on 
list prices, and then net price that has been negotiated by a 
PBM or by a plan. And Congress could eliminate that disparity 
by passing the rebates through to the retail lever.
    It hasn't done that. That's a rifle shot compared to the 
sweeping thing you have under consideration, but would solve a 
lot of the problems that you hear about.
    Mrs. Spartz. Thank you. And I hope we can agree on some 
issues and work on some other issues that in a bipartisan way, 
but I appreciate this discussion, and I appreciate being part 
of the Subcommittee and I yield back.
    Chairman DeSaulnier. Thank you so much for joining us. That 
is the last person that we have questions for. So, I want to 
thank the panel again, really wonderful discussion. I 
appreciate the content and the tone to a very vexing problem.
    I want to remind my colleagues that pursuant to Committee 
practice materials for submission for the hearing record must 
be submitted to the Committee Clerk within 14 days following 
the last day of the hearing, so by close of business on May 19, 
2021, preferably in Microsoft Word format.
    The materials submitted must address the subject matter of 
the hearing. Only a Member of the Subcommittee or an invited 
witness may submit materials for inclusion into the hearing 
record. Documents are limited to 50 pages each. Documents 
longer than 50 pages will be incorporated into the record via 
an internet link that you must provide to the Committee Clerk 
within the required timeframe please.
    But please recognize also, that in the future that link may 
no longer work. Pursuant to House rules and regulations items 
for the record should be submitted to the Clerk electronically 
by emailing submission to [email protected].
    Again, I want to thank the witnesses, really terrific. Good 
spirited debate and information that helps inform our 
policymaking. Members of the Subcommittee may have some 
additional questions for you, and we ask the witnesses to 
please respond to those questions in writing. The hearing 
record will be held open for 14 days in order to receive those 
responses.
    I want to remind my colleagues that pursuant to Committee 
practices witness questions for the hearing record must be 
submitted to the Majority Committee Staff, or the Committee 
Clerk within 7 days. The questions submitted must address again 
the subject matter of the hearing.
    I now want to recognize the distinguished Ranking Member 
for closing statement, Mr. Allen.
    Mr. Scott. I think you're on mute.
    Chairman DeSaulnier. Mr. Allen are you there?
    Mr. Scott. He's there but he's having a technical 
difficulty. There he is.
    Mr. Allen. Thank you Mr. Chairman. I appreciate that.
    Chairman DeSaulnier. There we go. The floor is yours.
    Mr. Allen. Sorry about that.
    Chairman DeSaulnier. That's OK.
    Mr. Allen. Mr. Chairman thank you for this hearing today. 
It's shed a lot of light on this subject. I do ask the 
unanimous consent to enter into the record a statement from the 
National Association of Healthcare Underwriters raising 
concerns with H.R. 3.
    Chairman DeSaulnier. Without objection.
    Mr. Allen. Thank you Mr. Chairman. And again I want to 
thank all the witnesses for their testimony today. Me and my 
colleagues today have implied that NIH or the Federal 
Government invented the Pfizer and Moderna vaccines, or worse 
that the U.S. Government has ownership or co-ownership of 
vaccines through patents.
    These claims are blatantly false. If H.R. 3 were law before 
the pandemic, the speed and development of Moderna and Pfizer 
vaccines would likely not have been possible. Today over 100 
million adults are vaccinated against COVID-19. This is a life 
saving scientific technological and logistical feat unheard of 
in the history of medicine.
    Again I will remind my colleagues that many Americans are 
facing skyrocketing healthcare costs because of dramatic 
increases and out of pocket costs of prescription drugs. And we 
need to do something about it.
    In 2018 patients paid a collective 61 billion in out of 
pocket drug costs, and we need to come together on a bipartisan 
basis and promote legislation that will solve this problem, but 
not a war on you know the healthcare industry, like we had a 
war on fossil fuels that now the price of gasoline is almost 
doubled.
    So fortunately, republicans are stepping up with solutions 
that work best for the people without the heavy hand of 
government interference. H.R. 19, the Lower Cost More Cares Act 
introduced last month by the republican Committee leaders is 
exact opposite of H.R. 3.
    This is Speaker Pelosi's big government power grab. The 
Lower Cost More Cares Act will utilize the power of the free 
market to modernize our healthcare system, increase choice and 
transparency and lower costs. These are goals that both sides 
of the aisle should be able to rally behind, and the American 
people demand it.
    At the end of the day H.R. 3 would only lead to fewer 
treatments and cures, decreased competition in the marketplace 
and increased reliance on Communist China. Rather than promote 
partisan socialist policies such as H.R. 3, I again urge my 
colleagues to work together on finding a bipartisan solution 
for lowering drug costs like the common sense provisions 
included in H.R. 19.
    Again, what we're talking about here is a government 
takeover of the pharmaceutical industry through H.R. 3. Again I 
thank you and the witnesses for participating today, and with 
that Mr. Chairman thank you again, and I yield back.
    Chairman DeSaulnier. Thank you, Mr. Allen. I appreciate 
your comments although we do have a respectful disagreement. I 
don't see this as a government takeover. As a former small 
business person, as somebody whose met a payroll many times 
like yourself, this is the challenge of a mixed market where we 
do have a good partnership with the private sector, but 
transparency is important.
    And a reasonable rate of return that incentives investment 
from the private sector, but still acknowledges the value of 
taxpayer's investment I think is important to the 
indiscriminate bystander. So, to that, any of the witnesses, 
and thanks again to a terrific panel, to all of you. If you 
have information that helps to quantify this, where the value 
is and what the incentives are for appropriate Dr. Holtz-Eakin, 
what I was trying to get as a reasonable rate for return, is 
also an acknowledgement of what's high risk and what's high 
return.
    At a hearing we had on oversight when Chairman Cummings was 
leading this, and his memory, I constantly think of him when we 
go through this, and the personal discussions we had about our 
health conditions.
    Is it should be high risk, high reward, not low risk, high 
reward. So somewhere in there and Dr. Holtz-Eakin and other 
panelists, if you can inform me personally as one Member of 
Congress, as to knowing this isn't a perfect science, but at 
least to further quantify how we incentivize that partnership 
and get it right.
    You know and I appreciate the comment about price control 
post-World War II, but my reading of history is price control 
helped contribute to us winning World War II and liberating 
Europe. So there's a balance here that we're looking for and I 
appreciate the respectful disagreement we have, and somewhere 
in there having a meeting of the minds that helps to remedy the 
situations that people like myself and Mr. Mitchell and other 
people who have testified to this and other Members, is getting 
that right incentive. I know I had a meeting with my oncologist 
yesterday, and my cancer is fighting to find a way back to 
health, so we're looking at other treatments.
    So, this is the right, sort of the right temperature of the 
porridge if I can use that metaphor. So, I appreciate all of 
this and look forward to ongoing discussion. Again, I want to 
thank the witnesses. I want to thank my colleagues for really, 
I thought, a very helpful hearing.
    And I will go purchase some gold stars so I can get a real 
reward. Pavlov's dog applied to the Subcommittee. Today's 
hearing to me reaffirmed the urgent need for the Federal 
Government to reduce and contribute to reducing the cost of 
prescription drug prices. All this innovation is only helpful 
if people can access that innovation, and there's a reasonable 
rate of return for the investor.
    As we heard from compelling witnesses, Americans across the 
country are struggling to access prescription drugs they need 
to be healthy, while also weathering this pandemic. No better 
time to have some solutions to this problem in my view.
    Yet we know that prescription drug companies are not 
charging exorbitantly high prices because of purely natural 
market forces, or because they are investing in research and 
development, although that is true to a degree.
    Instead, drug companies are inflating prices simply because 
they can. Not all drug companies, but too many in my view. It's 
time for price gouging of America's consumers at the pharmacy 
counter to end. And a transparency for the consumer to 
flourish. As we continue to recover from the worst public 
health emergency in our history, our recent history for 
certain, we should be doing everything we can provide consumers 
with relief from the weight of unaffordable drug prices.
    Simply put, medicines are of no use if those that need them 
can't afford them. In the months ahead I look forward to 
working with my colleagues to finally pass the Elijah E. 
Cummings Lower Drug Costs Now Act, and help ensure that people 
can get the medication they need to stay healthy and thrive, 
and continue America's leadership on this issue.
    If there's no further business without objection I want to 
thank you all again, the Subcommittee stands adjourned.
    [Additional submissions by Mr. Allen follow:]

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    [Additional submission by Mr. Courtney follow:]

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    [Questions submitted for the record and the responses by 
Dr. Socal follow:]

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    [Questions submitted for the record and the responses by 
Mr. Mitchell follow:]

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    [Questions submitted for the record and the responses by 
Mr. Holtz-Eakin follow:]

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    [Questions submitted for the record and the responses by 
Mr. Isasi follow:]

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    [Whereupon, at 2:15 p.m., the Subcommittee was adjourned.]

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