[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
UNSUSTAINABLE DRUG PRICES (PART III):
TESTIMONY FROM ABBVIE CEO RICHARD GONZALEZ
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
OVERSIGHT AND REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MAY 18, 2021
__________
Serial No. 117-22
__________
Printed for the use of the Committee on Oversight and Reform
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
44-685 PDF WASHINGTON : 2021
COMMITTEE ON OVERSIGHT AND REFORM
CAROLYN B. MALONEY, New York, Chairwoman
Eleanor Holmes Norton, District of James Comer, Kentucky, Ranking
Columbia Minority Member
Stephen F. Lynch, Massachusetts Jim Jordan, Ohio
Jim Cooper, Tennessee Paul A. Gosar, Arizona
Gerald E. Connolly, Virginia Virginia Foxx, North Carolina
Raja Krishnamoorthi, Illinois Jody B. Hice, Georgia
Jamie Raskin, Maryland Glenn Grothman, Wisconsin
Ro Khanna, California Michael Cloud, Texas
Kweisi Mfume, Maryland Bob Gibbs, Ohio
Alexandria Ocasio-Cortez, New York Clay Higgins, Louisiana
Rashida Tlaib, Michigan Ralph Norman, South Carolina
Katie Porter, California Pete Sessions, Texas
Cori Bush, Missouri Fred Keller, Pennsylvania
Danny K. Davis, Illinois Andy Biggs, Arizona
Debbie Wasserman Schultz, Florida Andrew Clyde, Georgia
Peter Welch, Vermont Nancy Mace, South Carolina
Henry C. ``Hank'' Johnson, Jr., Scott Franklin, Florida
Georgia Jake LaTurner, Kansas
John P. Sarbanes, Maryland Pat Fallon, Texas
Jackie Speier, California Yvette Herrell, New Mexico
Robin L. Kelly, Illinois Byron Donalds, Florida
Brenda L. Lawrence, Michigan
Mark DeSaulnier, California
Jimmy Gomez, California
Ayanna Pressley, Massachusetts
Mike Quigley, Illinois
David Rapallo, Staff Director
Amish Shah, Ali Golden, Miles Lichtman, Team Leads
Elisa LaNier, Chief Clerk
Contact Number: 202-225-5051
Mark Marin, Minority Staff Director
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C O N T E N T S
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Page
Hearing held on May 18, 2021..................................... 1
Witnesses
Dr. Aaron Kesselheim, Associate Professor of Medicine, Harvard
Medical School
Oral Statement............................................... 4
Mr. Craig Garthwaite, Herman Smith Research Professor in Hospital
and Health Services, Kellogg School of Management at
Northwestern University
Oral Statement............................................... 6
Mr. Tahir Amin, Co-Founder and Co-Executive Director, Initiative
for Medicines, Access, and Knowledge
Oral Statement............................................... 8
Mr. Richard Gonzalez, Chairman of the Board and Chief Executive
Officer, AbbVie Inc.
Oral Statement............................................... 10
Opening statements and the prepared statements for the witnesses
are available in the U.S. House of Representatives Repository
at: docs.house.gov.
Index of Documents
----------
Documents entered during the hearing by Unanimous Consent (UC),
and other documents for this hearing are listed below.
* Committee Staff Report on AbbVie: Humira and Imbruvica;
submitted by Chairwoman Maloney.
* Report mentioned and created by Rep. Porter; submitted by
Chairwoman Maloney.
* Report by I-MAK on Keytruda's Patent Wall; submitted by
Chairwoman Maloney.
* UC: 2013 Research Study by the University of North Carolina;
submitted by Rep. Pressley.
* UC: Statement by Professor Robin Feldman at UC Hastings Law;
submitted by Chairwoman Maloney.
* UC: Statement by Protect Our Care; submitted by Chairwoman
Maloney.
* UC: Statement by Families USA; submitted by Chairwoman
Maloney.
* UC: Statement by the American Economic Liberties Project;
submitted by Chairwoman Maloney.
* UC: Statement by the Health Advocacy Summit; submitted by
Chairwoman Maloney.
* UC: Statement by the Maryland Citizens Health Initiative;
submitted by Chairwoman Maloney.
* UC: Statement by Treatment Action Group; submitted by
Chairwoman Maloney.
* UC: Statement by Knowledge Ecology International; submitted
by Chairwoman Maloney.
* UC: Statement by Michael Kades from the Washington Center for
Equitable Growth; submitted by Chairwoman Maloney.
The documents entered into the record for this hearing are
available at: docs.house.gov.
UNSUSTAINABLE DRUG PRICES (PART III):
TESTIMONY FROM ABBVIE CEO RICHARD GONZALEZ
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Tuesday, May 18, 2021
House of Representatives,
Committee on Oversight and Reform,
Washington, D.C.
The committee met, pursuant to notice, at 10:07 p.m., in
room 2154, Rayburn Office Building, Hon. Carolyn Maloney
[chairwoman of the committee] presiding.
Present: Representatives Maloney, Norton, Lynch, Cooper,
Connolly, Raskin, Khanna, Mfume, Porter, Bush, Davis, Wasserman
Schultz, Welch, Johnson, Sarbanes, Speier, Kelly, DeSaulnier,
Gomez, Pressley, Comer, Jordan, Foxx, Hice, Grothman, Cloud,
Gibbs, Higgins, Norman, Keller, Sessions, Biggs, Clyde, Mace,
Franklin, LaTurner, Fallon, Herrell, and Donalds.
Chairwoman Maloney. The committee will come to order.
Without objection, the chair is authorized to declare of
the recess of the committee at any time.
I now recognize myself for an opening statement.
For more than two years, this committee has engaged in one
of the most comprehensive and in-depth investigations of
pharmaceutical pricing practices ever conducted by Congress.
This investigation was launched by my predecessor, the late
chairman, Elijah Cummings, and I have been proud to carry
forward this critical work.
Last fall, the committee held two hearings with drug
company CEOs and released five staff reports detailing our
findings. This morning, we released a sixth staff report
describing our findings on AbbVie, which sells two blockbuster
drugs: Humira and Imbruvica. Our work has continued and
confirmed what patients in this country have known for a long
time: drug prices in the United States are unfair,
unsustainable, and just plain wrong.
This investigation also reveals something even more
distressing. Drug companies are actively targeting the U.S. for
price increases while cutting prices in the rest of the world.
They are doing this by taking advantage of flaws and loopholes
in our system, most importantly, the law that prevents Medicare
from negotiating directly with drug companies for lower prices.
Finally, our investigation has revealed that the justifications
the pharmaceutical industry offers for why they need to raise
prices simply do not hold water.
Today we will hear from Richard Gonzalez, the CEO of
AbbVie. We appreciate his attendance at today's hearing.
Unfortunately, this hearing was delayed because it took more
than a year and the threat of a subpoena before AbbVie agreed
to voluntarily comply with this committee's investigation.
AbbVie has repeatedly raised the prices of Humira, which is
used to treat rheumatoid arthritis and other autoimmune
diseases, and Imbruvica, a drug approved to treat different
forms of cancer. AbbVie charges approximately $77,000 a year
for a year's supply of Humira. That is 470 percent more than
when the drug was launched in 2003. Humira is the highest-
grossing drug in the United States due, in large part, to these
horrendous price increases. You see where it started out at
$500 for a syringe; it is now at $2,984 just for a syringe.
AbbVie and its partner, Janssen Biotech, charged even more,
over $181,000 for a year's supply of Imbruvica. That is 74
percent more than when the drug was launched in 2013. Experts
estimate that by 2026, Imbruvica will be the fourth bestselling
drug in the United States. These prices are outrageous and
unfair.
Even more outrageous is that Americans are the only ones
paying them. In 2015, a single syringe of Humira was priced
over $1,000 higher in the United States than in countries like
Canada, Japan, Korea, and the United Kingdom. Even as AbbVie
hikes its prices in the United States, it has actually been
dropping its prices in other countries. In one internal
presentation from 2016, AbbVie executives described this
disparity as, and I quote, ``positive price in the U.S. and
negative price overseas.'' AbbVie's price increases have paid
off for the company's bottom line. Last year alone, AbbVie
collected $16 billion in U.S. net revenue for Humira, and
AbbVie and Janssen collected $4.3 billion for Imbruvica. That
is more than $20 billion from American patients and taxpayers
for just two drugs. And you see the massive pricing increase up
to $16 billion from $200 million.
Our investigation also uncovered evidence that AbbVie has
exploited the U.S. patent system and engaged in anti-
competitive practices to extend its monopoly pricing. The
committee has obtained internal documents showing that AbbVie's
own executives projected its top-selling drug, Humira, would
face competition from lower-priced versions of the drug, known
as biosimilars, beginning in 2017. But AbbVie used legally
questionable tactics to block lower-priced biosimilars from
reaching America consumers until at least 2020. Those tactics
made AbbVie a fortune, but cost Americans dearly. Based on
these findings, I sent this letter to the FTC today, along with
committee chairman of the Judiciary, Chairman Nadler, and
Antitrust Subcommittee, Chairman Cicilline, asking for a formal
inquiry into whether AbbVie's anti-competitive practices
violated the law.
Finally, I want to emphasize that drug companies make
essential lifesaving products. If the last year has taught us
anything, it is that we are all indebted to the scientists who
pioneer new cures, therapies, and vaccines, so we want drug
companies to be successful. But abusive, unfair pricing and
anti-competitive practices mean these medications are out of
reach for too many Americans. And instead of investing in new
innovations, drug companies, like AbbVie, are dedicating
significant portions of their research budgets to coming up
with new ways to suppress competitive products. That means
Americans are paying more, but we are getting less innovation.
If we want to make a difference for patients and taxpayers, we
need structural reforms like H.R. 3, which would finally allow
Medicare to negotiate for lower drug prices like the rest of
the world does. Congress must pass this commonsense reform and
others so that patients and families can afford these
prescriptions.
I want to close by playing statements from patients who
want to share their experiences with us about these two drugs.
Please watch.
[Video shown.]
Chairwoman Maloney. These patients' stories show why we
need immediate reform. We need to pass H.R. 3 this year to
allow Medicare to negotiate lower drug prices for Americans
like other foreign countries do. I thank these patients for
their testimony, their very moving testimony, and I now
recognize the distinguished ranking member, Mr. Comer, for an
opening statement.
Mr. Comer. Mr. Comer. Thank you, Madam Chair. Over the past
year, we have seen the massive importance of research and
development in vaccines and treatments. Operation Warp Speed,
one of the greatest public/private partnerships in American
history, resulted in the Federal Government partnering with
private companies to invest hundreds of millions of dollars to
develop and manufacture COVID-19 vaccines. The result, despite
constant vilification by the Democrats, was the fastest vaccine
development in history with the first vaccine approved in less
than 12 months from the first discovery of COVID-19. Since
then, two more vaccines have been approved with two more
awaiting approval by the FDA. In addition, there have been
numerous pharmaceutical treatments and medical devices
innovated to treat COVID-19. As a result of these vaccines and
therapies, cases and fatalities have plummeted, and our Nation
is on the road to recovery.
The catalyst behind these innovations have been
intellectual property protections here in the United States.
America's robust patent system enables enormous investments in
the research and development of new medications, more generic
drug competition, and new technologies to promote patient
adherence. The research funded by these investments results in
treatments and cures for countless diseases, enabling Americans
to live longer and healthier lives. Yet today, the Democrats on
this committee decry our country's intellectual property
protections as the root of all evil in the pharmaceutical
space. This is simply not true. Certainly there are companies
that have abused our patent system, seeking hundreds of patents
to prolong their ability to control the market for a particular
treatment. But many seek patents simply to protect their
intellectual property so they can recoup their investments.
While seeking hundreds of patents on a medication or
vaccine is not illegal under our existing system, it can be
anti-competitive and result in higher costs for patients.
Republicans in the House and Senate have sought to right this
wrong through legislation that would stop pharmaceutical
companies that seek to abuse the patent system and extend their
control of the market, and prevent the use of settlement
agreement to pay generics to delay entry into the market.
Democrats have instead proposed H.R. 3, a massive government
takeover of the pharmaceutical market that would result in
significantly fewer treatments and vaccines from coming to
market. We should not destroy the very system that has made the
United States the world leader in medical innovation like our
Democrat colleagues propose.
Republicans want to protect innovation and consumers. This
Congress Republicans introduced H.R. 19, a collection of
bipartisan reforms to prevent anti-competitive behavior in
pharmaceutical markets, bring more generics to market,
incentivize innovation and research, and require pharmaceutical
rebates to be included at the point of sale so that patients
receive the benefits instead of pharmacy benefit managers, or
PBMs. While Democrats were impeaching this President,
Republicans were working to decrease the cost of prescription
drugs for all Americans. Now, nearly two years later, Democrats
have nothing to show for it and are attempting to try to attack
yet again another pharmaceutical company rather than help
Americans across the country.
We must address rising prescription costs because high
costs are hurting American families everywhere. Republicans
presented a real plan to lower out-of-pocket costs and protect
innovation for new treatments and cures. The American people
need relief, but Speaker Pelosi has instead sought to pass a
bipartisan plan and destroy intellectual property protection
that our founding fathers even wanted. We must put people, not
partisanship, first. I yield back the remainder of my time.
Chairwoman Maloney. The gentleman yields back. I would now
like to introduce our witnesses. Our first witness today is Dr.
Aaron Kesselheim, who is an associate professor of medicine at
Harvard Medical School. Dr. Kesselheim also testified at our
committee's very first hearing on prescription drug prices back
in January 2019. Then we will hear from Craig Garthwaite, who
is the Herman Smith research professor in hospital and health
services at the Kellogg School of Management at Northwestern
University. Next, we will hear from Tahir Amin, who is the co-
founder and co-executive director of the Initiative for
Medicines, Access, and Knowledge. Finally, we will hear from
Richard Gonzalez, who is the chairman and CEO of AbbVie.
The witnesses will be unmuted so we can swear them in.
Please raise your right hands.
Do you swear and affirm that the testimony you are about to
give is the truth, the whole truth, and nothing but the truth,
so help you God?
[A chorus of ayes.]
Chairwoman Maloney. Le the record show that the witnesses
answered in the affirmative. Thank you.
And without objection your written statements will be made
part of the record.
With that, Dr. Kesselheim, you are now recognized for your
testimony. Dr. Kesselheim?
STATEMENT OF AARON KESSELHEIM, M.D., ASSOCIATE PROFESSOR OF
MEDICINE, HARVARD MEDICAL SCHOOL
Dr. Kesselheim. Chairman Maloney, Ranking Member Comer,
members of the committee, I am honored to talk with you about
curbing abuses by drug makers that take advantage of our market
exclusivity system for prescription drugs, raising the prices
for these products and jeopardizing patient outcomes.
The idea behind our patent system, enshrined in the
Constitution, is that a period of exclusivity enables
innovators to profit from their creations, and then allows
others to compete once that period is over to prevent a
permanent monopoly. In the drug market, this dynamic is
important since medications are costly to create and test for
efficacy and safety. In the U.S., drugs are covered by patents
on their active ingredient, and other Federal laws, like the
Orphan Drug Act, provides special additional exclusivity for
rare disease drugs for seven years, for biologics for 12 years,
after approval. With all of these exclusivities, drugs
routinely get an average of about 14-and-a-half years of market
exclusivity, while biologics receive 21-and-a-half years.
During this time, brand name drug manufacturers charge high
prices. Alone in the industrialized world, the U.S. lets drug
makers set the prices they choose for patented products. U.S.
law then allows manufacturers to raise prices each year during
market exclusivity, well beyond inflation. High prices lead
patients to skip doses and worse health outcomes.
When market exclusivity ends, real competition is supposed
to begin. Generics can quickly become the default prescription
because they can be automatically interchanged, lowering prices
70, 80 percent or more. Biosimilars have been slow to enter the
U.S., and none have yet been FDA certified as interchangeable,
but we found that each biosimilar entrant reduces prices about
4 to 10 percent. This system has become subject to many abuses
as brand name manufacturers try to delay effective competition.
A common strategy is obtaining a thicket of dozens or even
hundreds of patents. So-called secondary patents cover
peripheral features of the drug, like intermediate compounds
are methods of treatment. Tertiary patents cover the delivery
mechanism, such as an injection pain or inhaler. The proportion
of tertiary patents listed with the FDA tripled from 3 percent
in 2000 to 9 percent in 2016. Some firms used this time to
introduce new versions of their product with little or no
clinical benefit for patients. For example, a firm might switch
from a capsule to a patented tablet formulation that is not
interchangeable.
Many secondary and tertiary patents are actually bad
patents that lack novelty or cover only minor obvious changes
to the drug. One analysis revealed that legal challenges
seeking to overturn the primary patent succeeded only eight
percent of the time, while challenges to secondary patents were
successful 67 percent. But litigation to overturn improperly
granted patents can take years and millions of dollars to
complete, and in recent years, many generic and biosimilar
manufacturers have settled litigation, agreeing with their
brand-name counterparts to keep potentially bad patents in
place and not introduce their FDA-approved competitors in
exchange for financial benefits.
All of these issues can be observed with adalimumab, a drug
acquired by what was then Abbott from a German company in 2000
before it reached the U.S. market in 2003. As the primary
patent was set to expire in 2016, litigation with biosimilars
over its thicket of patents led to settlements blocking U.S.
market entry until 2023, although these products entered most
U.S. countries in 2018, leading to billions of dollars in
excess spending.
So what can you do? We need to protect and reward
innovation, yet ensure timely competition after a reasonable
period of market exclusivity. First, bad patents must be
limited. Other patent offices around the world issue fewer bad
patents by spending more time on review. In addition to
granting more resources to the U.S. Patent Office, Congress
should instruct it to develop new guidance on patenting
standards so that trivial modifications would not be patented,
while patents on novel innovations would remain. Another step
would be to provide greater opportunity for administrative
review prior to litigation via the already existing Patent
Trial and Appeals Board. The PTAB should be required to review
drug patents when they are listed with the FDA or are
determined relevant to biosimilar approval.
You can also take steps to ensure that manufacturers cannot
use other market exclusivity periods to delay competition. For
example, the seven-year orphan drug exclusivity should be
curtailed for drugs used in much larger populations after
approval or that bring in substantial revenue. And the 12-year
regulatory exclusivity provided for biologic drugs should be
shortened to match small molecule drugs because biologic drugs
have similar development times. Finally, you desperately need
to pass H.R. 3 to give the government the power to evaluate the
benefits of new drugs so that we can make clear which
modifications greatly help patients and which are useless
product hopping intended to extend exclusivity. The government
should be able to negotiate prices so that we do not, as we do
now, pay exorbitant prices for so-called new drugs with minor
changes, but only pay for clinically meaningful innovation.
In conclusion, the drug exclusivity system was intended to
provide a reasonable limited period after FDA approval during
which brand-name manufacturers can earn fair, and even
generous, revenues from their products. Strategies with
adalimumab and other cases upset this balance and make it more
lucrative for a drug company to invest in fending off
competitors for decade-old products rather than coming up with
important new discoveries. Ensuring that generic and biosimilar
competition can occur in a timely fashion will have little
detrimental effect on meaningful drug innovation, but would
reduce overall healthcare spending, make medications more
affordable, and promote improved patient outcomes.
Thank you very much.
Chairwoman Maloney. Thank you. Mr. Garthwaite, you are now
recognized for your testimony. Mr. Garthwaite?
STATEMENT OF CRAIG GARTHWAITE, HERMAN SMITH RESEARCH PROFESSOR
IN HOSPITAL AND HEALTH SERVICES, KELLOGG SCHOOL OF MANAGEMENT
AT NORTHWESTERN UNIVERSITY
Mr. Garthwaite. Thank you, Chairwoman Maloney, Ranking
Member Comer, and members of the committee for inviting me to
testify today about issues related to drug pricing in the
United States.
As described in your opening statement, it is well known
that the process of developing novel pharmaceutical products is
expensive and risky. Innovative firms must make large, fixed,
and sunk investments if they are to create the knowledge
necessary to develop new drugs. The knowledge that results in
this process is largely a public good. Absent government
intervention, it would be hard for firms to protect that
intellectual property and to stop competitors from copying
their innovations and competing away any potential profits.
Rational firms understand this eventuality, and absent such
government intervention, they would be unwilling to invest in
drug development. This would cause an economic condition known
as ``hold up'' where valuable investments are simply not made.
To avoid hold up, governments provide various types of
intellectual property protection that allow innovative firms a
time-limited period of market exclusivity in which they can
enjoy enhanced market power. In this way, innovation policy
regarding prescription drugs involves a difficult tradeoff
where we accept some amount of reduced access today in order to
provide the incentive for firms to innovate and develop drugs
for tomorrow. I don't say this lightly. I fully understand that
high prices can decrease access to potentially lifesaving
medications, and we should consider policies, as I detail in my
testimony, that limit that harm. But, frankly, there are no
easy or simple answers here. Weakening existing intellectual
property protections or using government power to set
artificially low prices will decrease innovation and lead to
its own access problems.
You see, while it is clearly true that patients today
paying high prices can suffer decreased access to medication,
we must also acknowledge that those patients do enjoy a
significant benefit that should not be overlooked: there is an
existing drug that can treat their condition. For those
suffering from conditions where there are no treatments, there
is no drug available at any price. When we only focus on access
problems related to prices, we ignore this other fundamental
lack of access. Simply because these missing innovations and
their affected patients are harder to specifically identify and
not available for photo opportunities doesn't make them any
less real. That said, we must remember that everything about
the existing parameters of this tradeoff is simply a policy
choice. There is nothing magical about our current 20-year
patent length, and the very fact that this patent is constant
across products, that it is constant across markets, suggests
that it is not the result of some finely tuned calibration or
economic model.
As the market changes, it is reasonable, as this committee
is doing, to revisit our policies related to both access and
innovation. In doing so, I would argue that we should focus on
two broad areas as our goals. We should be focusing as a
government on limiting welfare losses where possible while
drugs are covered by patents, and ensuring that periods of
market exclusivity are expressly time limited and followed by
competition, and robust competition, from generic and
biosimilar entrants. Welfare losses during periods of market
exclusivity can be limited by both promoting competition
between branded products and ensuring the continued operation
of well-functioning insurance markets.
I outline several policies in my testimony that could
accomplish these goals. These includes reforms, the Reinsurance
Program in Part D, the buy and bill system for Part B, like
``boy,'' improving information disclosure on the flow of funds
in the value chain, and perhaps, most important, but most
interesting given the video at the start of the testimony, is
decreasing owners' cost-sharing for pharmaceuticals where the
conversation there is as much about the price of the drug as it
is about the insurance contract that we have, and particularly
in Part D, an exceptionally poor insurance contract for many
people buying expensive medications.
Once firms have reached the end of their period of market
exclusivity, regulations should support the rapid and vigorous
entry of competition. If market structures don't allow for
meaningful competition to emerge, there is a clear role for
regulation to either create competitors or restrict pricing.
When thinking about policies in the period of high prices being
time limited, it is easy to recognize, given the other
witnesses here today, that the committee is obviously concerned
with the use and potential open use of patents. Often, critics
of the existing intellectual property protection system will
cite the sheer number of patents sought by pharmaceutical firms
as evidence of nefarious behavior to deter entry. However, the
number of patents is, at best, an incomplete metric. Our
questions should be about the strength and the underlying
validity of the patents, and not their sheer number.
Modern products involved meaningful intellectual property
related not to just to the product, but its production, and
also its additional uses in other medical conditions, and we
should examine the process of granting these patents, up to and
including more resources for the Patent and Trademark Office.
Others have called for sweeping reforms in the form of price
regulation or in the form of limiting paths to one per product.
Those reforms are overbroad, and while I understand it is
tempting to cave to sort of the crass calculus that we can
increase access today and allow for more innovation going
forward, that is not true. We will suffer less innovation if we
lower the returns on drugs, and we should debate the nature of
that reduced innovation in our policies.
Thank you very much for your time today.
Chairwoman Maloney. Thank you. Mr. Amin, you are now
recognized for your testimony. Mr. Amin?
STATEMENT OF TAHIR AMIN, CO-FOUNDER AND CO-EXECUTIVE DIRECTOR,
INITIATIVE FOR MEDICINES, ACCESS, AND KNOWLEDGE
Mr. Amin. Chairwoman Maloney, Ranking Member Comer, and
members of the committee, it is my honor to testify before you
today.
I spent the first decade of my legal career working as an
attorney in the private sector securing and protecting IP. Many
of my clients were American companies. I learned both the legal
and business side of IP and its importance to inventors,
investors, and companies. I also learned how to use loopholes
to game the system. These loopholes enabled me to invent IP,
right, so companies could obtain and maintain a monopoly in the
market, while continuing to extract maximum profit. I speak to
you today as someone who has seen both sides of the issue. I
want to state up front this conversation is not about the death
knell of innovation. It is about bringing equity to a system
and about how well this system incentivizes genuine innovation.
Roughly 34 million American adults know at least one friend
or family who died in the past five years because they could
not afford treatment, and that figure is double for people of
color. Sadly, that is not surprising. U.S. prescription drug
spending has increased by 76 percent from 2000 to 2017. These
price hikes correspond with a dramatic increase in patenting
activity in the pharmaceutical sector. America not only has a
drug pricing crisis, but it also has a drug patenting crisis.
Last week, the USPTO issued its 11 millionth patent. It
took 155 years for the USPTO to issue its first 5 million
patents in 1991. It has taken less one than one-fifth of that
time to issue the next 6 million. Have we really become more
inventive in the last 30 years, or have we just gotten better
at inventing patents because our patent system no longer is
stringent enough? The number of pharmaceutical patents granted
in the U.S. more than doubled between 2005 and 2015.
My organization has been analyzing the top 10 bestselling
drugs in the U.S., and it found a total of 1,310 patent
applications have been filed on these top 10 drugs, and 692
patents have been granted on these drugs in total. On average,
that is 131 patent applications and nearly 70 granted patents
per drug. On average, 63 percent of these patents are filed
after the first approval for marketing, and that gives an
average duration of patent protection covering these drugs
monopoly period of 38 years. And between 2014 and 2019, on
average, we have seen a 71 percent price increase on these
drugs. Two of the best-selling drugs on this top 10 list belong
to AbbVie: Humira and Imbruvica. AbbVie has filed an
astonishing 422 patent applications on these drugs alone.
Ninety percent of the 257 patent applications filed for Humira
were filed after the drug was first approved in 2002, and it
has amassed a record 130 granted patents for Humira, and 39
years of protection.
Despite litigation by nine different companies, patents
settlement agreements have allowed AbbVie to keep competitors
out of the U.S. market until 2023. Due to a lack of immediate
competition, that means the U.S. will have spent an estimated
$77 billion before competition enters the market. Meanwhile,
across the pond, competing biosimilar versions of Humira have
already entered the European market, with prices dropping as
much as 70 percent. A similar story with Imbruvica: 165 patent
applications, and 88 have been granted so far. That is about
one patent filed every month for the last 13 years. Granted,
patents for Imbruvica give AbbVie a monopoly protection to
2030, nine years more than the usual 20-year period, and during
that extended period, Americans will spend $41 billion Humira
and Imbruvica. And, again, generic companies have made
settlement agreements.
One of the arguments you probably hear today AbbVie uses to
justify this wall of patents is that the drug treats several
different disease indications, but AbbVie has employed what I
call the drip fee patent strategy for Humira and Imbruvica. The
initial patents on these drugs are already disclosed and
protect many of the indications, setting out a strategic
roadmap for getting future patents. AbbVie recycled their
claims in their original patents on these drugs over a decade
later by making some minor changes, such as specifying the
dosing or combining them with existing drugs. They will do so
because this patent system allows it.
So how do we solve this problem? Well, before we get to the
solutions, I want to just raise the point that Keytruda is
about to trump Humira as the bestselling drug in the world in
2024. And the additional years that Keytruda potentially has
already amassed is going to cost Americans an estimated $137
billion. Today we are talking about Humira and Imbruvica, but
if Congress fails to act, tomorrow we will be talking about
Keytruda and another drug.
The solutions to the problem lie in raising the bar for
what gets patented. Too many patents are granted that are too
weak. We also need to change the incentives of the USPTO and
the culture that is there. Basically, patents are granted to
earn revenue, and we need to create a financial incentive that
actually works outside of that. And also we need to reduce the
prohibitive cost of challenging patents. American ingenuity is
rightly a source of pride, and because of that, it is tempting
to lionize the patent system. But patent activity today goes
well beyond the limited time that the Constitution intended.
Today's patent system had become less an engine for real
invention than a tool for companies and their lawyers to
exploit using legal and marketing Jedi tricks under the guise
of innovation. And just because you invested money doesn't mean
you have invented something.
Congress has the ability to return the patent system to
what it has always intended to be, not a vehicle for
unprecedented profits, but an engine for discoveries that are
truly unprecedented. Thank you.
Chairwoman Maloney. Thank you. Mr. Gonzalez, you are now
recognized for your testimony. Mr. Gonzalez?
STATEMENT OF RICHARD GONZALEZ, CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER, ABBVIE INC.
Mr. Gonzalez. Chairwoman Maloney, Ranking Member Comey, and
members of the committee, I am Richard Gonzalez. I am the Chief
Executive Officer of AbbVie, a company with approximately
48,000 employees dedicated to developing new, innovative
medicines for some of healthcare's most challenging diseases.
The global pandemic of the last year highlights the
critical role that the biopharmaceutical industry plays in
driving science and innovation to tackle the most significant
diseases facing our society. Our industry invests over $80
billion per year in research and development to meet those
challenges, and our company alone has invested approximately
$50 billion since 2013, and has produced cures for diseases,
like HCV, and therapies that are changing and prolonging the
lives of patients suffering with cancer, rheumatoid arthritis,
and other serious diseases. As we tackle the issues of drug
pricing and access, it is important that we focus on what is
working and what needs to change to make sure that patients get
the medicines they need.
The United States has the most advanced healthcare system
in the world. It doesn't ration care or restrict access to
therapies, and it is a leader in advancing science to provide
cures to deadly diseases, like cancer. The United States is the
most developed country when it comes to the use of generic
drugs where over 90 percent of prescription volume are generic
medicines with low out-of-pocket cost. Overall, most Americans
have access to affordable medicines, and pharmaceutical
companies, such as AbbVie, provide a number of forms of
assistance for those who can't afford their medicines through
co-pay support or free drug. The single largest patient group
that lacks access to affordable medicines are standard Medicare
Part D patients where the program design has put a significant
cost burden on them. For these patients, reducing drug prices
alone will not alleviate the challenge of access and
affordability.
Last fall, the House Committee on Oversight and Reform held
two days of hearings to examine the prices of prescription
drugs, and certainly drug pricing is important, and the
industry has taken steps to reduce drug pricing in recent
years. In fact, since 2017, the overall contribution of price
to AbbVie's business has been negative. In the category of what
is working well here in the U.S., the Medicare Part D Program
has been highly cost effective. The market-based structure
encourages aggressive price discounts and have yielded
significant savings to the government since the Part D Program
was established. Despite a 70 percent increase in enrollment,
the compounded annual growth rate in drug spending, adjusted
for the increase in enrollees, is 1.8 percent, or roughly in
line with inflation, and it has been basically flat since 2015.
The aggressive price rebates negotiated by Medicare Part D
plans have also kept patient monthly premiums flat at roughly
$33 since the program began in 2006. This data clearly
demonstrates the overall cost effectiveness of the Part D
Program.
So what is not working in Part D is that some patients must
bear too much of the out-of-pocket costs, and there is no cap
on drug spending. Unlike other commercial forms of insurance,
Part D enrollees cannot access co-pay support. They cannot
purchase insurance to defray these costs, and they must pay
open-ended drug expenses. The average out-of-pocket cost is
almost 100 times higher for a medicine like Humira than any
other U.S. patient group. No other prescription drug insurance
program puts so much cost burden on the patient.
We see the impact of the Part D design flaws most clearly
in AbbVie's Patient Assistance Program where almost 40 percent
of all Medicare Part D patients on Humira, or 1 out of 3, are
seeking assistance and receiving free medicine. This stands in
stark contrast to commercially insured Humira patients, where 1
out of 100 sought assistance from the AbbVie Patient Assistance
Program. Medicare Part D patients' out-of-pocket cost is the
single biggest issue when it comes to drug affordability.
Additionally, while the overall costs in Part D is well
controlled, government spending in the catastrophic phase is
increasing the overall spending, and it is another area that
needs to be addressed.
Industry, government, and healthcare plans should come
together to significantly reduce out-of-pocket costs for
patients and reapportion the cost in the catastrophic phase so
that that spending will be well-controlled. Thank you.
Chairwoman Maloney. And I now recognize myself for five
minutes for questions.
AbbVie has raised the price of Humira 27 times since
launching the drug. At the same time, AbbVie has actually
lowered the price of this drug in the rest of the world. Mr.
Gonzalez, has AbbVie been raising Humira prices in the United
States while lowering them internationally?
Mr. Gonzalez. Madam Chairwoman, the system that you
described is how it actually does work. Certainly outside the
U.S., there is always pressure on price, and prices do come
down somewhat outside the U.S. once a product is launched, and
in the U.S., we do have the ability to be able to raise prices.
I think the key point will be what is the net price that
companies like ours actually achieve, and what is done with the
difference between gross and net pricing. I think that is an
important debate that we should have.
Chairwoman Maloney. Reclaiming my time. Well, AbbVie's
internal documents prove that you did raise prices in the U.S.
even while you were lowering them internationally. I want to
put up Exhibit 23. This is an AbbVie board of directors
presentation from 2016. Mr. Gonzalez, please turn to page 3 in
the exhibit. The heading of this slide says, and I quote,
``Humira Has Been Positive Price in the U.S. and Negative Price
Overseas.'' In other words, AbbVie raised the price in the
U.S., while lowering it in the rest of the world. This document
also shows that the company had a plan to continue hiking the
price of Humira in the U.S. for several more years. Mr.
Gonzalez, please turn to page 10. This page shows that AbbVie
planned to raise the price of Humira for Americans in 2016,
2017, 2018, 2019, and 2020, while cutting international prices
each year. Mr. Gonzalez, did AbbVie actually go through with
price increases on Americans during each of those years?
Mr. Gonzalez. Madam Chairwoman, we would have had price
increases on those years. That is a forward-looking, long-range
planning document. I can't confirm for you whether or not it
was those price increases. It is also important----
Chairwoman Maloney. Well, reclaiming my time, the answer is
``yes.'' AbbVie raised the price of Humira in the U.S. by even
more than it originally planned. For example, instead of a 9.9
percent price increase for 2016, AbbVie actually raised the
price by 18 percent that year alone. Let me turn to the second
drug, Imbruvica. Mr. Gonzalez, is it true that AbbVie charges
more for Imbruvica in the U.S. than in other countries?
Mr. Gonzalez. Actually, Imbruvica is marketed through our
partner outside the U.S., so I am not familiar with the pricing
associated with Imbruvica outside the U.S.
Chairwoman Maloney. Well, we looked at the data. I want to
show you another graph comparing the list price of Imbruvica
around the world in 2018. As you can see in this chart,
Americans pay far more for this drug than people in other
countries. This is unfair. In 2018, the price of a tablet of
Imbruvica in the U.S. was roughly double the price charged in
France, Germany, and the U.K. Medicare Part D provides
prescription drug coverage to more than 45 million Americans,
yet it is prohibited by law from negotiating lower prices on
behalf of the patients it covers. Mr. Gonzalez, do you know how
much AbbVie made from Medicare in net sales of Humira and
Imbruvica between 2014 and 2018?
Mr. Gonzalez. It would have been approximately $2.3 billion
for Humira and approximately $2.9 billion for Imbruvica.
Chairwoman Maloney. Well, the documents we have, AbbVie's
internal data shows that the company collected nearly $12.5
billion, as in ``B,'' from Medicare during this five-year
period just for these two drugs alone, and this number accounts
for any rebates that AbbVie paid to Medicare. No wonder AbbVie
and the other drug makers target the U.S. for price increases.
They know that, unlike the rest of the world, our Medicare
program is prohibited from negotiating directly for lower
prices. This data demonstrates clearly why Congress must pass
H.R. 3 to grant Medicare the power to negotiate lower drug
prices for patients. We must pass this bill this year.
I now yield to the distinguished ranking member, Mr. Comer.
Voice. No, Ms. Foxx.
Chairwoman Maloney. No, Ms. Foxx? OK. Ms. Foxx, the
distinguished gentlewoman from North Carolina, is now
recognized.
Ms. Foxx. Thank you, Madam Chairman. My question is for Mr.
Garthwaite. I want to relay a story from a recent report by the
Information Technology and Innovation Foundation. ``Scientists
at Walter Reed conducted initial research and put out a request
for a private company to work with them to develop a vaccine
for the Zika virus. Sanofi was the only company to respond and
reached an agreement with U.S. Army in June 2016. Upon learning
of the agreement, Senator Bernie Sanders demanded that the Army
require reasonable pricing language, also known as price
controls, in the deal. In response, Sanofi noted, 'We can't
undermine the price of a vaccine we haven't even made yet,' and
said that it is premature to consider or predict Zika vaccine
pricing at this early stage of development.'' Sanofi also noted
the proposed license would require it to make royalty payments
to the government, and its exclusive license would not prevent
other companies from developing competing vaccines.
Following relentless media attacks, Sanofi announced it
would not continue development of or seek a license to develop
a vaccine. There is still no vaccine for the Zika virus. The
taxpayers funded the research to identify the vaccine
candidate, a private company agreed to take the risk of testing
and manufacturing it, but this whole effort failed due to these
progressive attacks. Thanks to these attacks, we may never know
how many lives could have been spared by this vaccine. Mr.
Garthwaite, if the threat of price controls on one potential
product kills that innovation, what can happen if we threaten
the entire industry with this type of socialist pricing like
the one Democrats are proposing with H.R. 3?
Mr. Garthwaite. So I think the economic evidence is clear
that if we are going to decrease the potential revenues of a
product, we will see fewer investments in research and
development. And so very large price increases, we would worry,
would lead to declines in innovation. Your question gets at
another point well. Well, how do we think about U.S. Government
research into drugs and how that should affect pricing? I know
there is a lot of concern, at times expressed by other members
of the panel today, that the NIH research shows up in the
development of many drugs. And that is true because, in the
example you gave, the NIH does a lot of basic science research,
and that is what we want the government to do.
But given we spent the money to do that, we then want
private firms to take that research up and be willing to invent
or develop new products. If you put price controls or
restrictions on it about specific returns or fair pricing
clauses, or anything like that, you will likely decrease the
take-up of government intervention or government research, and
society is no better off. And that is why we want to think
about our government investments here as complements to the
research that is done by private risk capital, and because they
are complements, we want people to use the NIH research as much
as possible. And I worry that price regulations of the nature
in H.R. 3, but also, broadly, conversation that the NIH should
restrict the prices of products using their research, are going
to decrease the returns we get on our investments in the NIH.
Ms. Foxx. Thank you very much. Mr. Gonzalez, in your
opening statement, you described the competitive nature of the
Medicare Part D program and how improvements to the program
help seniors in my district lower their out-of-pocket costs.
Now the Democrats are telling us that the only way forward on
Part D is to have the government take it over and set prices so
that the government can determine what medicines are
worthwhile. Can you please help educate us on how the current
Part D program is already a competitive market, and then how we
need to improve it so that seniors are not facing higher costs?
Mr. Gonzalez. I would tell you that in my experience, and I
have got a tremendous amount of experience in this business,
the Medicare Part D program is negotiated aggressively by the
plans, and I will give you an example. Medicare for Humira gets
a discount that is three percent higher, or a rebate that is
three percent higher than the commercial side of the business.
It gets that rebate despite the fact that it is roughly one-
sixth the volume. Normally, when you think about discounting, a
consumer that had six times the volume would get the lower
price, but in this case, it is the opposite of that. The
government is getting the lower price.
I would also tell you that if you look at the Medicare Part
D plan, it is the structure of the plan that ultimately
dictates the affordability issue for patients, and what I mean
by that is this: you can take any other kind of patient in the
United States, and, on average, they will pay for Humira around
$120 a year. A Medicare patient has to pay $5,800 a year for
Humira based on the structure of out-of-pocket costs, so, you
know, an excessive amount. And you have to remember, these
patients, on average, make $28,000 a year, and there is no
ability to be able to support or subsidize that out-of-pocket
cost because of the anti-kickback laws.
So the only thing that we are left to do for a company like
AbbVie, where we want patients to be able to get their drug, is
we have a Patient Assistance Program where we provide drug for
free, a full year of drug for free, for those patients who
can't afford it, and we subsidize essentially the Medicare
system. And think of it this way: for every 10 Medicare Humira
patients, we are providing, free of charge, Humira to four of
those patients.
Ms. Foxx. Thank you very much. Dr. Fauci has said----
Chairwoman Maloney. Your time has expired. The gentlelady's
time has expired.
Ms. Foxx. Thank you, Madam Chair.
Chairwoman Maloney. The gentlewoman from the District of
Columbia, Ms. Norton, you are now recognized for five minutes.
Ms. Norton?
Ms. Norton. Thank you, Madam Chair, for this important
hearing. In 2003, Abbott Laboratories launched Humira at a
price of $522 per 40-milligram syringe, or just over $6,200
annually. Over the course of the next decade, Abbott raised the
price of Humira 13 times. By 2013--remember we started in
2003--a single 40-milligram syringe of the drug was priced at
$1,024, started at $522. Now, that is nearly double what it was
10 years earlier. AbbVie spun off its own company in 2013,
taking Humira with it. Mr. Gonzalez, that is when you became
CEO. Isn't that correct?
Mr. Gonzalez. Yes, that is correct.
Ms. Norton. Since that time, the increases in Humira have
only accelerated. I would like to show a graph, and I hope that
that graph can be put up now, Madam Chair, showing the price of
a 40-milligram syringe of Humira, how it has grown from 2003 to
today, and there the graph is up for everyone to see. You will
notice that price increases really ramped up after 2013, the
year AbbVie spun off and the year you became CEO. AbbVie has
raised the price of Humira 14 times in just eight years, and
those price increases were not small. In just the 10 months
between March 2015 and January 2016, AbbVie increased the price
of Humira by a total of 30 percent. That is in about a year.
Today, the list price of a single 40-milligram syringe of
Humira is $2,984, 470 percent more than its price at launch.
That means that a year's supply of Humira now costs over, and
get this number, $77,000. Internal data shows that Humira's net
price, or the list price minus all rebates, discounts, and
fees, have also increased over time. In fact, the net price
increased by 110 percent, more than doubling between 2009 and
2018.
Dr. Kesselheim, what does this drastic increase in net
price say to you about the role, if any, of rebates in driving
up Humira's price over time?
Dr. Kesselheim. Well, it says to me that that drug price
increases have increased both on a gross scale, both in terms
of list prices and in terms of net prices, that rebates, while
they might have increased over that time, definitely have not
increased enough to offset the substantial price increases that
AbbVie has been allowed to get away with.
Ms. Norton. Thank you, Madam Chair. The data are clear.
AbbVie's repeated price increases of Humira have had costs to
our health system with millions of dollars, and are simply
unsustainable going forward. Madam Chair, I believe we need
structural reforms, like H.R. 3, if are going to bring any
relief to patients about the price increases I have just
offered in my questioning. I thank you, and I yield back.
Chairwoman Maloney. Thank you. The gentlelady yields back,
and I agree with her.
The gentleman from Georgia, Mr. Hice, is recognized for
five minutes.
Mr. Hice. Thank you, Madam Chair. We just saw one of the
greatest public-private partnerships in the history of our
country, and it was led by President Trump's administration.
Despite the villainization of Operation Warp Speed by
Democrats, the Federal Government and private companies
invested literally hundreds of millions of dollars to develop
and manufacture COVID-19 vaccines, and candidates thereof, not
knowing whether or not those attempts would be approved. The
results was that the first vaccine was approved in less than 12
months from the discovery of COVID-19, and three vaccines were
ultimately approved with others still waiting in line. And many
are now actually praising Operation Warp Speed, and frankly,
they are incorrectly giving the Biden administration accolades
for the brevity of the program when, in fact, this current
administration is absolutely not responsible for spearheading
this whatsoever.
This past summer, the House Select Subcommittee on
Coronavirus exhibited skepticism of Operation Warp Speed. In
fact the Democratic member who chairs that particular
subcommittee sent a letter to HHS Secretary Alex Azar regarding
Operation Warp Speed, and he made this quote: ``A lack of
transparency in the development of a coronavirus vaccine,
especially on an accelerated timeline, could contribute to the
growth of anti-vaccination sentiment,'' end quote.
This type of rhetoric, frankly, nearly--and certainly could
have, and it did, it undermined one of the greatest
achievements, medically, in our country's history. And
fortunately the Trump administration did not bow to that kind
of outrageous posturing by the Democrats. But once again, our
country demonstrated how incredible our people are, as our
greatest minds literally came together, in one of the darkest
times in recent history. But now the United States may again
not--well, let me put it this way--now we might never again be
a leader in pharmaceutical innovation like we were with
Operation Warp Speed if the Biden administration continues to
pander to some of its most progressive members, like he did in
endorsing an intelligence property waiver to the World Trade
Organization.
Listen to that. He supported and endorsed an intellectual
property waiver. That is dangerous. That is thinking that is
incomprehensible to me. Waiving intellectual property for COVID
vaccines or any other type of medicine will make the United
States and the world more reliant on countries like China and
India for pharmaceuticals, and that is frightening when you
look at and consider that their vaccines right now for COVID
are far less effective than are ours. Frankly, it puts the
future of drugs and vaccines that were created under a program
like Operation Warp Speed at tremendous risk.
Then you have countries like South Africa and India. They
would like a resolution that would force pharmaceutical
companies to share their COVID vaccines and therapy IP with
developing countries, so they fall right in line with this type
of waiver endorsement.
And look, this is supported not only by our current
administration. It is supported by other low-income countries,
progressive groups, and more than 100 congressional Democrats
right here, serving today.
Now why do these countries want to end patent protection?
That question has got to be answered. Well, they say they want
to expand access to vaccines, but access for lower-income
countries is already available. There was an article in The
Wall Street Journal in April, where Merck announced such a
thing.
Fortunately we have some European countries and friends who
are smart enough to realize the importance of intellectual
property. In fact, German Chancellor Angela Merkel rejected
this whole idea of waiving COVID vaccine patents, and she said,
in the first place, it would not make more vaccines available,
and it would weaken innovation in the future.
So, look. Madam Chair, I just think it is very important
that we protect those who are innovative inventors of
medications. Certainly those that abuse the rights we should
deal with. But we have got to protect the ability for these----
Chairwoman Maloney. The gentleman's time has expired.
Mr. Hice. I yield back.
Chairwoman Maloney. The gentleman yields back. The
gentleman from Tennessee, Mr. Cooper, is recognized for five
minutes.
Mr. Cooper. Madam Chair, I pass at this time.
Chairwoman Maloney. The gentleman passes. Hank Johnson is
now recognized. Hank Johnson.
Mr. Johnson. Thank you, Madam Chair, and I want to thank
you for holding this very important committee meeting. And Mr.
Kesselheim, I would like to begin by addressing the frequent
misconceptions that rebates provided to PBMs, or pharmacy
benefit managers, are the cause of skyrocketing drug prices.
Can you briefly explain what a rebate is?
Dr. Kesselheim. Sure. In the system we have in the U.S.,
the drug companies are free to set whatever price they want,
and the negotiating tool that the payers use in our system is
negotiating rebates that are provided, you know, as an exchange
for placement of the drug on the formulary or different
utilization management strategies being implemented or not. And
so those rebates, you know, ultimately reduce the price for
different drugs, by different amounts.
Mr. Johnson. OK. In testimony before the Senate in March,
you noted that rebates, quote, ``do not keep pace with list
price increases,'' end quote. What does that mean to the
everyday person who is just trying to afford their life-saving
medication?
Dr. Kesselheim. Sure. Well, so first of all, over the last
decade, overall drugs prices have increased by about 160
percent, at the list level, and they have increased at a net
level by about 60 percent. So, both of those are much greater
than the change in inflation over that same period of time.
But what that generally means to the individual person, a
lot of people pay out-of-pocket costs that are based on the
list prices that they experience, and that can mean a much
higher out-of-pocket cost for individual patients. Increased
net prices, though, also mean increased premiums that people
pay for insurance overall, because those prices are reflected
as well in the premiums that you pay as well as the individual
out-of-pocket costs.
Mr. Johnson. OK. So, I want to ask you about net price, or
the amount a drug company collects after subtracting the
rebates and discounts. If a drug's list price increases, and if
those increases had, in fact, outpaced rebates, would you
expect the net price of a drug to also increase over time? Yes
or no.
Dr. Kesselheim. Yes.
Mr. Johnson. Thank you.
Mr. Gonzalez, I would like to turn to you. Your company
provided data on the average net price of Humira between 2009
and 2018. I would like to display a graph created using this
data, and this graph shows the annual net price for a weekly
dose of Humira. Can we have that exhibit, please?
[Pause.]
Mr. Johnson. Well, I guess we are having some technical
difficulties.
Chairwoman Maloney. It is up. Mr. Johnson, it is up. We can
all see the Humira Annual Net Price Bi-Weekly.
Mr. Johnson. OK. Mr. Gonzalez, as you can see, the net
price of Humira increased every single year between 2009 and
2018. In fact, the net price of Humira increased by 110
percent. In the Medicare channel, Humira's net price increased
even more, by 151 percent.
Dr. Kesselheim, what do these trends depict on this graph,
or what do these trends depicted on this graph tell us about
the rebates AbbVie was providing to PBMs during this time?
Dr. Kesselheim. Those rebates, although they may have been
increasing, the list price increases were far beyond--were
increasing at a rate far beyond those list price increases, so
the net price is overall increasing.
Mr. Johnson. Mr. Gonzalez, the committee also received
rebate data for your cancer drug, Imbruvica. In the Medicare
and commercial channels, the rebates you gave to PBMs and
insurance plans averaged between 4 and 11 percent. In contrast,
you have raised the price of Imbruvica by 82 percent since it
came to market. The data is clear. PBMs are not the primary
driver of the dramatic price increases of AbbVie drugs. AbbVie
is the primary driver of dramatic price increases.
Would you agree with that, Dr. Kesselheim?
Dr. Kesselheim. Yes, I would agree with that. Drugs prices
are set by the pharmaceutical manufacturer, and, you know, PBMs
and other insurers use rebates as a negotiating tool, and that
helps reduce prices somewhat. But drug prices are generally set
by the manufacturer.
Mr. Johnson. So, we should not allow pharmaceutical
companies to distract us with the argument that PBMs are
responsible for the explosive increases in drug prices. It is
actually the pharmaceutical industry itself, correct?
Chairwoman Maloney. The gentleman's time has expired. The
gentleman's time has expired.
The gentleman from Wisconsin, Mr. Grothman, is now
recognized for five minutes. Mr. Grothman.
Mr. Grothman. Thank you. I am going to start off with Mr.
Gonzalez. I am going to ask you a little bit about insulin and
biosimilars. I have a bill that would transition to a BLA
classification and require the FDA to regulate newly approved
biologic insulin products as biosimilars, rather than brand-
name biologics, which would get more of these products to
market and presumably save people a lot of money if they need
insulin.
There are rumors out there that your company would be
opposed to that sort of thing. Could you comment on that?
Mr. Gonzalez. Congressman, we are not in the insulin
business. I would tell you it is not a market that I know a lot
about, so I do not really have a point of view on it.
Mr. Grothman. OK. I will ask Mr. Garthwaite. Do you have an
opinion as to why it seems to be difficult to getting
biosimilars to market for some competition in the insulin
arena?
Mr. Garthwaite. I think that--so I do not know the
specifics of your bill so I want to be careful about exactly
how I answer this, but I think overall, if we are worried about
getting biosimilars to market, I think we will want to think--
and I detailed this in my testimony--a bit more about the
relationship between rebates and market entry for biologic
products, and the idea that we might think of the rules around
rebating need to be different for biologic products than it is
for small molecule. And this is primarily related to the fact
that it is very hard for a new entrant to compete for the
existing stock of patients that are medically stable on their
product. And given that and given the way that exclusivity
works for some of these rebates, it might be hard for new
entrants to come in and be able to compete their way onto the
formulary.
So I think that, in particular, rebate contracts for
biologics that reference the rival, the potential new entrant,
and say they cannot be on the same tier of the formulary as us,
should be looked at by both Congress and antitrust authorities
as a way to potentially increase entry.
Mr. Grothman. Do either of our other two witnesses have
anything to comment on the possibility of getting biosimilars
to market to lower the price of insulin?
Dr. Kesselheim. Well, I would say I think it is extremely
important to get biosimilars onto the market to lower the price
of insulin, because what we really need for insulin is
competition from more manufacturers and manufacturers----
Mr. Grothman. I do not mean to cut you off, but could you
tell me why, then, we do not do it? Why do you believe we do
not do it, if it seems like such an obvious thing?
Dr. Kesselheim. Well, actually, until recently insulin had
been regulated as a small molecule product and not as a
biosimilar, although I think the FDA has switched that over in
the last year, so that now you can actually get a follow-on
insulin on the market through an abbreviated VLA. And so
hopefully we will soon start to see insulin biosimilars on the
market, and hopefully some of them will be interchangeable so
that we can actually get real, meaningful competition to try to
lower the prices of insulin biologic products.
I think, unfortunately, to this point, there have been, you
know, problems with sort of getting--there has been litigation
over insulin patents, and a lot of patents have been issued on
insulin pens and other peripheral aspects of the insulin
product, which has made it challenging for potential biosimilar
or competitor entrants to get in the market, and required a lot
of litigation. And so now at least we have a regulatory pathway
to make that happen, and so hopefully we will see that soon.
But I agree with you that the fact that we have not seen it
until now is a major flaw.
Mr. Grothman. And I will ask you, why do you think that is?
Dr. Kesselheim. I think it is, again, a multifactorial
reason. I think that, first of all, a lot of the insulin
manufacturers have obtained patents on peripheral aspects of
their products. Even though insulin itself has not changed much
in the last couple of decades, there have been patents on the
pens and delivery devices that have blocked entry of new
products and led to litigation. And I think that is one aspect
of it.
Mr. Grothman. OK. I will ask one other question, a general
question, for Garthwaite. It does alarm me that people in other
countries pay so much less for drugs than this country, and
just flat out, that should be wrong. Could you give me a quick
summary as to how you feel we can get around that problem? I
have a lot of sympathy with what, H.R. 3. I think it is kind of
an extreme bill, but it seems ridiculous on its face that
Americans have to pay so much more for drugs than other
countries. Could you kind of respond?
Mr. Garthwaite. I agree also. I find that, as an American
citizen, some combination of annoying and offensive that we pay
so much for drugs and European countries do not. I think the
real question, though, is why we would think that the European
price is the correct price that we should be thinking about.
They are choosing to free ride on the innovation caused by
American profits. I think attempting to adopt European prices
in the United States should be an abrogation of the
responsibility of policymakers. If we want to push forward to
have stronger negotiation on prices in the United States, I
think that is a debate that we should have. But I certainly do
not think that I would like us to see to simply adopt the
policies of Paris, London, and Berlin, in the United States.
I think we also have to be honest that if we want to
negotiate prices in that way we have got to be willing to say
no to both existing and future innovation. And I want to be
very clear. I am not saying we should have no conversation
about reducing prices----
Chairwoman Maloney. The gentleman's time has expired.
Please wind up. The gentleman's time has expired.
Mr. Garthwaite. I just think we should be honest about the
tradeoffs. Thank you, Chairwoman Maloney.
Chairwoman Maloney. Thank you. The gentleman from Maryland,
Mr. Raskin, is now recognized for five minutes. Mr. Raskin.
Mr. Raskin. Madam Chair, thank you. You know, Congress
passed the Orphan Drug Act in 1983 to promote the development
of treatments for rare diseases, which were defined as
conditions that affect 200,000 people or fewer than that, and
Congress understood that certain diseases could affect a
population so small in the country that Big Pharma would not
see a financial incentive to invest in the research for
developing therapies and cures for them.
The Orphan Drug Act intended to provide an incentive for
companies to get into this research, most importantly by
granting seven additional years of market exclusivity for drugs
that have received what is known as the orphan designation.
Now, Dr. Kesselheim, is Humira the type of drug that
Congress was envisioning when it passed the Orphan Drug Act?
Dr. Kesselheim. No. Humira is a blockbuster product that
makes billions, tens of billions of dollars a year, and is
extremely profitable. The Orphan Drug Act was initially
designed to try to provide an incentive for companies to take
up unprofitable products for extremely small patient
populations.
Mr. Raskin. In fact, it is the best-selling drug in the
world.
Well, Mr. Gonzalez, Humira is approved to treat a painful
skin condition called hidradenitis suppurativa, or HS for
short. Your company has obtained an orphan drug designation to
use Humira as a treatment for HS, right?
Mr. Gonzalez. That is correct.
Mr. Raskin. And would you have researched Humira as a
treatment for HS if it were not for the Orphan Drug Act?
Mr. Gonzalez. Certainly, the orphan designation, it
qualified for it because it was less than 200,000 patients, and
normally there is a faster regulatory path.
Mr. Raskin. Well, let me just short-circuit to get to the
right answer here. According to an internal memo from your
company, from October 2008, obtained by the committee, you
determined that the HS patient market would be profitable even
without Orphan Drug Act incentives. Isn't that right?
Mr. Gonzalez. That is correct.
Mr. Raskin. Yes. So, despite internal evaluations that
expanding into the HS market would already prove profitable,
corporate executives still pursued the additional market
exclusivity through the orphan drug designation. Mr. Gonzalez,
your company applied for and received two separate orphan drug
approvals for HS, one for moderate to severe HS, and another
specifically for patients 12 years and older. Did you apply for
both of these orphan approvals at the same time?
Mr. Gonzalez. I don't know the answer to that.
Mr. Raskin. Well, as I understand it, no, you did not. The
first of these applications was approved in September 2015, the
second approved in October 2018.
Dr. Kesselheim, why might AbbVie have delayed seeking the
approval to treat HS in pediatric patients?
Dr. Kesselheim. Well, this seems like actually a common
practice in the pharmaceutical industry called ``salami
slicing,'' in which companies try to slice up indications into
small, discrete segments, to try to get as many different of
these additional exclusivity protections as possible.
Mr. Raskin. So, they enjoyed a 10-year period of
exclusivity, and by spacing them out in this way they got three
years longer than the seven years intended under the act. Due
to the three-year delay, pediatric patients experiencing this
painful skin condition were also possibly denied access to
treatment due to insurance companies being less likely to
reimburse the drug without formal approval.
So the company claims the commitment to bringing the best
science and therapies to patients, but here we have a clear
case in which they were actively choosing to delay patients'
access to treatments and to block competitors, simply for the
sake of increasing their profits. Congress must act immediately
to put a stop to these anticompetitive behaviors, including
abuses of the Orphan Drug Act. Do you agree with that, Mr.
Kesselheim?
Dr. Kesselheim. I do.
Mr. Raskin. And is this a question of one or two bad-apple
companies, or are these structural problems that we are seeing
throughout the entire sector?
Dr. Kesselheim. As I said, I think that the behavior and
the tactics and strategies that you are seeing in the Humira
and Imbruvica cases around the Orphan Drug Act but also around
price increases and others, those are common practices, and I
think we have also heard about them with respect to the Orphan
Drug Act and abuses of the Orphan Drug Act in obtaining the
Orphan Drug Act protections for drugs that do not deserve it.
You know, even one of the treatments for the pandemic, you
know, transiently got orphan drug act protection at the
beginning of the pandemic situation last year. So, I mean, I
think that we see this all across the industry, and do think
that it is time to reconsider trying to make the Orphan Drug
Act apply to the drugs that it was originally intended to.
Mr. Raskin. Well, thank you very much. We need structural
change here, and I yield back to you, Madam Chair.
Chairwoman Maloney. Thank you. The gentleman yields back.
The gentleman from Ohio, Mr. Gibbs, is now recognized for five
minutes.
Mr. Gibbs. Thank you, Madam Chair. First I want to mention,
Madam Chair, I have a bipartisan bill, co-sponsored with
Senator Tonko from New York, H.R. 4629, the Star Rating for
Biosimilars Act. This bill would help amend--bipartisan, would
require HHS to evaluate Medicare Advantage plans based on
whether biosimilars are available to enrollees, and set new set
measures for the current five-star rating. So I just wanted to
bring that to your attention.
Mr. Garthwaite, you know, the other side of the aisle is
talking about H.R. 3, how it needs to be passed, and one of my
concerns I have is how they would price the drugs, and if they
did not like what the drug companies priced the drugs there
would be severe penalties. Do you think H.R. 3 would stifle
innovation and research and development in this country if it
were to pass?
Mr. Garthwaite. I think given the projections of what we
see for the reduction in revenue that would result from H.R. 3,
which, I should note, is the intended goal of the legislation,
the economic evidence is clear that we would see reduced
investments in innovation in the form of clinical trial
activity by firms, and that is something we saw the reverse of
when we founded Medicare Part D, and saw that the increase in
market size led to an increase in innovation and research and
development activities.
Mr. Gibbs. Mr. Gonzalez, would you concur that passage of
H.R. 3--well, first let me say, Madam Chair, last Congress,
former chairman Greg Walden from Oregon, introduced H.R. 19,
that the More Cures, Lower Costs Act, and I think it is going
to be soon introduced again. I think we ought to take a serious
look at that.
But Mr. Gonzalez, on H.R. 3, do you think it would stifle
innovation and research and development in this country?
Mr. Gonzalez. I think if you depress forward revenues it
will definitely depress the ability to be able to do
innovation. I think the CBO report that recently came out
reinforced that point.
Mr. Gibbs. Also, Mr. Gonzalez, when you talk about 4 out of
10 your company subsidizes or makes drugs available free to
patients that cannot afford them, is that in this country or is
that overall?
Mr. Gonzalez. No that is 4 out of 10 in the Medicare Part B
plan.
Mr. Gibbs. OK. So what is happening in, say, in Europe, in
the EU? The prices are lower, but is there subsidization not
going on, or what is happening in the foreign countries then?
Mr. Gonzalez. We donate some product, but I would say it is
relatively limited in socialized medicine systems. We donate--
--
Mr. Gibbs. So let me stop you right there because I am
using time here quickly. Is it safe to assume that a lot of our
pricing, we are paying the whole cost for all the R&D and the
rest of world isn't?
Mr. Gonzalez. That is absolutely true.
Mr. Gibbs. I am going to yield my two minutes to you, Mr.
Gonzalez, to answer any questions that maybe you did not have a
chance to answer, from previous questions. I yield my time to
you. Go ahead.
Mr. Gonzalez. Well, I think I would like to highlight a
couple of the points that were made earlier, with some specific
information. There was a lot of discussion about what impact
would the rebates really have on list price and net price. I
will use Humira as an example, because it is the one that I
think keeps coming up here.
If I look at Humira from 2017 to 2020, the gross price went
up 7.9 percent. The net in the U.S. went up 2.6 percent. The
difference between that was the increase in the rebates, so
that gives you some feel for the rebate impact.
Now, having said that, managed care and PBMs aggressively
negotiate for increased rebates, and those rebates, to my
knowledge, are returned to the government in the form of lower
costs or lower premiums back to the patient, the insurance
premiums. I think I saw a report recently that said 99.6
percent of the rebate is returned to the government.
So it is a different way of getting a discount. When you
negotiate for formulary position, as a company like ours, you
are obviously trying to get that formulary position. You are
negotiating what rebate you have to give in order to be able to
get that. You are trying to capture a little bit of net
positive impact to offset inflationary costs and increases in
R&D.
And the other statistic that will give the committee, which
I think is relevant, if you look at AbbVie since 2013, when we
were formed, our net price impact was about 0.3 percent, on a
compounded basis, or roughly $62 million a year in net price.
To give you a flavor for where does that go, we have increased
R&D, on average, $652 million per year.
So the short answer is, yes, to get that price we invest
more than that in increases in R&D.
Mr. Gibbs. Thank you. I yield back.
Chairwoman Maloney. Thank you. The gentleman from Virginia,
Mr. Connolly, is now recognized for five minutes.
Mr. Connolly. I thank the chairwoman. I thank you for this
hearing.
Mr. Gonzalez, there are six companies with FDA approval to
sell biosimilar versions of Humira. Is that correct?
Mr. Gonzalez. I believe so.
Mr. Connolly. Are there any of those biosimilars besides
yours on the market here in the United States currently?
Mr. Gonzalez. Congressman, we are not biosimilar, but I
don't believe any of them are on the market.
Mr. Connolly. Right. None. That is a little surprising,
because in your own internal documents, obtained by the
committee, your company anticipated lower priced biosimilars to
enter the U.S. market no later than 2017, four years ago, as is
demonstrated in page 9, Exhibit 14, in your materials.
According to that slide, AbbVie expected three to five
biosimilar competitors by 2017. In fact, the bottom of the
slide identifies a few of those potential competitors by name--
Amgen, for example. Amgen's biosimilar received FDA approval in
2016, five years ago. Rather than allowing Amgen's biosimilar
to enter the market, however, AbbVie sued Amgen for patent
infringement.
On September 28, 2017, AbbVie and Amgen entered into a
settlement agreement, under which Amgen agreed not to enter the
U.S. market until 2023.
Mr. Gonzalez, AbbVie's own assessment of the strength of
its patent portfolio determined it could only prevent
biosimilar entry until 2017, and Amgen presumably looked at the
same patent portfolio. So why would Amgen agree to wait until
2023?
Mr. Gonzalez. Congressman, I don't agree with the point of
view that the assessment of our patent portfolio said we could
only protect until 2017. This is planning document. It does an
estimate at this point in time. I believe the documented was
dated in 2014. So in 2014, the estimate was 2017. We updated
that as we continued to move forward. Obviously, our patent
portfolio played an important role in that.
Mr. Connolly. Thank you, Mr. Gonzalez. I have limited time.
Thank you. I am reminding you that you are under oath. During
settlement negotiations with Amgen, was there any discussion of
transferring any item of value, monetary or otherwise, to Amgen
in exchange for staying off the market through 2023?
Mr. Gonzalez. There was none, and they pay us royalties for
our patent, when they come to market.
Mr. Connolly. But you had other settlement agreements with
other competitors, as the next chart shows. AbbVie how entered
into a total of nine agreements with biosimilar manufacturers
to stay off the market until 2023, six years after the entry
date AbbVie projected, although you call that an internal
planning document.
Let me ask you again. During any of these settlement
agreements was there any discussion of AbbVie transferring any
item of value, including monetary value, to the competitors in
exchange for staying off the U.S. market?
Mr. Gonzalez. There was not. I think what it demonstrates
is the value of our patent portfolio, and all of those
competitors have agreed to pay royalties to access that patent
portfolio.
Mr. Connolly. So, during that same period, however, six
biosimilars entered the European market in 2018, which reduced
the price of Humira in Europe by as much as 80 percent. Why
would the European market be so radically different with
respect both to purported patent infringement and royalty
payments, compared to that of the United States, where there is
only you?
Mr. Gonzalez. These are different patent portfolios around
the world. The U.S. market has a set of patents that the U.S.
Patent Office issues, and in the European system there are
different patents.
Mr. Connolly. According to your own internal projections,
the U.S. would have saved $19 billion, and instead U.S.
patients will not have access to lower-priced biosimilars until
2023. Why would you account for the 80 percent difference in
the price of Humira between Europe and the United States, other
than lack of competition?
By the way, unlike what Ms. Foxx suggested, it clearly
isn't about recouping R&D costs. It is about lack of
competition in the market.
Mr. Gonzalez. I think it is about two things. Obviously, we
have invested $16 billion in Humira, and we want to recoup that
investment. The U.S. patent system is designed to give you a
period of exclusivity, to be able to recover that investment.
The other thing that is important to remember is, like many
industries but certain in this industry, the products that are
on the market today pay for the products of the future. We
invest roughly $7 billion a year in research and development.
It is the Humira's and the Imburvicas and these other
products----
Chairwoman Maloney. The gentleman's time has expired.
Please wrap up. Thank you.
Mr. Amin. Chairwoman Maloney, may I add something to this
conversation, please?
Mr. Connolly. With the indulgence of the chair.
Chairwoman Maloney. Yes. Absolutely.
Mr. Amin. Yes. I think it is important to recognize, I
mean, Mr. Gonzalez talks about the planning document being
2014. By our findings, a number of our patents were filed after
2014. So obviously, the planning was to try and prevent the
competition coming in, in 2017.
It is also worth noting that a number of the EU patents
were actually revoked or withdrawn because they were not
actually up to strength in order to get a patent in Europe. So
despite what Mr. Gonzalez is saying about the U.S. patent
giving a limited time of exclusivity, unfortunately I would say
the U.S. patent system actually over sort of provides
exclusivity in the sense that companies can easily get more
patents, and it can keep filing patents well into a drug's
life, and that is why we have settlement agreements. And by
some litigation statistics, some 74 patents were thrown at
competitors and they just couldn't litigate through it. It was
just impossible.
Mr. Connolly. I thank the chair for her consideration, and
I yield back.
Chairwoman Maloney. The gentleman yields back. The
gentleman from Louisiana, Mr. Higgins, is now recognized for
five minutes. Mr. Higgins?
Mr. Higgins. Thank you, Madam Chair. Let me jump into H.R.
3 and just get it out of the way. In my opinion it is massive
Federal overreach.
Professor Garthwaite, regarding development, affordability,
and access to new treatments and cures, as someone who looks at
this both from the medical and the business perspective, in
your work at Northwestern, what concerns do you see in
government overreach without private sector consideration or
input as it impacts pharmaceutical prices in America?
Mr. Garthwaite. I worry that using the power of government
to set prices and push them down--and we should be clear that
H.R. 3 which is often described as negotiation--is not a
negotiation. This is price-setting of drugs and we should call
it what it is and then debate the sort of validity of that. I
worry it is going to decrease innovation.
I do worry, as I detailed in my testimony, I worry about
access. I worry about the ability of people to get access to
drugs, today and in the future.
I think a lot of the conversation we are seeing today, in
the hearing and about drugs, is about the cost-sharing that
insurance is putting on people, much more than it is just about
the price of the drug, and in particular, Medicare Part D,
which has extremely onerous cost-sharing on patients.
Mr. Higgins. Agreed. Agreed, and thank you for your
clarification. In the interest of time I am going to move on.
Mr. Gonzalez, I find myself very much aligned with my
colleagues across the aisle, which I am hoping that my friends
will market a calendar. You have been under tremendous pressure
today, and, sir, it is about to get worse.
How can you defend American prices of pharmaceuticals
overseas versus prices on drugs in the Nation that you love?
You enjoy the protections and the benefits of America. You
benefit from the Tax Cuts and Jobs Act that I worked very hard
on and that my party pushed through. But your answers to the
chair were evasive, at best, and appeared to be obviously
written by attorneys.
Please just explain to America how the hell can you explain
the prices overseas of the drugs you manufacture in America,
develop in America, that are so much higher for American
citizens and patients than they are overseas? As briefly as you
can.
Mr. Gonzalez. Congressman, it is an excellent point. The
short answer is, outside the United States you have socialized
health care systems. They ration care or they set price.
Mr. Higgins. Oh, but wait. Socialized health care. Let's
talk about Europe. Thirty years ago, Europe was the center of
the global pharmaceutical industry. In 1986, Europe led the
United States spending on pharmaceutical research and
development by 24 percent. After the imposition of socialized
health care policies, they fell behind, and by 2015, they were
lagging United States by 40 percent. So you are right--
socialist policies don't work. But you are an American company,
making American money, and your market is global. American
citizens should benefit from your love and commitment to the
country wherein you live and work, good sir.
I am going to move on, because I am going to give you an
opportunity to explain the patent modifications--the other
gentleman referred to them as trivial modifications--and your
company. You have been accused of threatening patent
litigation. The claim basically is that your patent portfolio
and the threat of patent litigation to see favorable
settlements with biosimilar manufacturers, to delay their entry
into the market. Explain to America how you can prove the
legitimacy of your patents, please.
Mr. Gonzalez. Our patents go through a rigorous process at
the U.S. Patent Office that looks at prior obviousness. The
Patent Office narrows claims to make sure they are not overly
broad. And to the point that the other gentleman raised a few
moments ago, what I would tell you is if you thought they were
frivolous patents, we deal with patents all the time.
Mr. Higgins. Yes, they are frivolous. They are frivolous.
Making minute changes to your product to extend your protection
periods. We don't appreciate--look, I am no enemy of big
business. I support freedoms, and you have the right to make
your profit. You invest many billions to research and develop
new pharmaceuticals, most of which never come to market. My
research says that only 1 in 10 come to market. So you have the
right to earn your honest profit.
But it is the question of whether or not it is an honest
profit, sir, that I would extend. And Madam Chair, my time has
expired, but thank you. God bless you for holding these
continued hearings.
Chairwoman Maloney. Thank you. Thank you. The gentleman
yields back. The gentleman from California, Mr. Ro Khanna, is
recognized for five minutes. Mr. Ro Khanna.
Mr. Khanna. Thank you, Madam Chair, and I appreciated
Congressman Higgins' questions in a bipartisan way, and I want
to pick up there.
Mr. Gonzalez, can you tell us who invented the fully human
monoclonal antibody?
Mr. Gonzalez. It was invented as part of
[inaudible], when we acquired
[inaudible] back in two thousand and----
Mr. Khanna. Do you know who it was?
Mr. Gonzalez. No, I don't know.
Mr. Khanna. You don't know who invented your biggest drug?
It was Gregory Winter. Do you know who he is?
Mr. Gonzalez. No.
Mr. Khanna. He actually won the Nobel Prize in Chemistry
for the invention. You know what he has to say about Humira? He
said, ``I must not be a very good businessperson, because I
didn't make the billions. All the other people made the
billions.''
Now, you know, you stand here saying you are for all this
innovation and you believe in innovation, and you don't even
know who the Nobel Laureate was who invented the drug that you
are profiting on. Isn't there some disconnect there?
Mr. Gonzalez. We focus our attention on just trying to
create new innovation that helps patients.
Mr. Khanna. How can you say you are creating new
innovations when you don't even know the Nobel Laureate who
came up with the innovation for Humira? Doesn't that show that
what you are really doing is business? I mean, let's just be
honest about it, as opposed to thinking that you are doing an
innovation, when you don't know the person who invented the
drug that you are profiting on.
Let me ask you this. The patent that expired in 2016,
obviously you have talked about extensive patent law, and you
seem to understand what is needed. Can you explain two concepts
and how you understand them, in terms of a new patent, and that
is a novelty and non-obviousness? What does that mean to you?
What does it mean for something to be novel and what does it
mean for something to be non-obvious, as you understand it?
Mr. Gonzalez. What I understand for non-obvious is that the
Patent Office looks at the invention that you have, and they
ask the question, someone skilled in the art, would they have
thought of this as being obvious?
Mr. Khanna. OK. Good. And how about a novelty?
Mr. Gonzalez. Novelty I don't know that I could describe to
you in as much detail.
Mr. Khanna. Common sense, what would you think is novelty?
Mr. Gonzalez. Common sense would be it is a novel theory,
right? It is a novel approach.
Mr. Khanna. You can't define a term with a term, but
basically something new, right? Something that people haven't
thought of.
So let me ask you this. One of the examples of the new
patent you filed, that Congressman Higgins and others feel is
frivolous--I am not going to characterize it but you have
characterized it. I mean, one of the ideas was that you had
Humira, and all these doctors were prescribing it, and on your
own marketing material you had told them, ``Here is the dose
that you should prescribe it at.'' And then you file the patent
to say that the dose that is on our marketing material, that we
should have a patent on doctors prescribing that dose.
Now, by your own definition of what is non-obvious, you
said if a skilled person in the art, in the craft, knows it,
then it is obvious. It doesn't qualify as non-obvious. How
would you say, under novel and non-obvious--I would like to
give you the opportunity to explain to the country how saying a
dose for Humira, at a particular amount that is on your
marketing material that every doctor in the country is already
doing, how getting a patent on that is non-obvious or novel?
Mr. Gonzalez. Well, it is really the Patent Office that
makes that determination, and as I was trying to say before----
Mr. Khanna. No, no, I get that. I want to understand it. I
mean, you are obviously the CEO. You said, ``Let's go file a
patent.'' You know, you may not have invented it, and you may
not even know who won the Nobel Prize for the thing we're
selling, but we'd like to claim that we didn't invent the
therapy, but we want to get a patent on what we are putting on
our marketing material for the dose. And you go and you say,
``Go do it, lawyers.''
So, what are you thinking about why that is the case? I
mean, you wouldn't say, ``Let's get a patent for our brochures
and how we sell things.'' So, what made you think, oh, it would
be great idea to get the patent. It is such a novel invention,
a non-obvious invention on the dose. I just want to understand
the thinking that goes on there.
Mr. Gonzalez. We patent innovation that we believe is
meaningful and that we invested to understand why it was
meaningful innovation, and how----
Mr. Khanna. So explain--in this case, what did you think
was so meaningful and innovative about telling the Patent
Office that a dose that every doctor is prescribing already and
that is on your marketing brochure, that that should be
patented?
Mr. Gonzalez. Well, no----
Mr. Khanna. What was the innovation? What do you think you
should be up for the Nobel Prize for? I mean, what was the
innovation there?
Mr. Gonzalez. Well, I don't know that I would agree with
the premise of what you said. I am certainly not an expert on
every patent that we have in the company. I will be happy to
follow back up with you.
Mr. Khanna. Do you see, Mr. Gonzalez, what is galling, just
at an intuitive level? It is that the people who are actually
inventing this stuff--it is a brilliant invention. It is
staggering, you know, that Mr. Winter deserved the Nobel Prize.
You know, I am not smart enough. No one is that smart to come
up with it. But then you sit here claiming that you are the
fountain of innovation, that you are benefiting from billions
of dollars for innovation. You don't even know who the person
is who invented your drug, and you are unable to explain what
is so novel about what you are getting patented. That is why
there is outrage. I mean, can you understand that, just at a
human level?
Chairwoman Maloney. The gentleman's time has expired and
his point is well taken. Thank you.
The gentleman from Texas, Mr. Sessions, is now recognized
for five minutes.
Mr. Sessions. Madam Chairwoman, thank you very much. I
would like to pick up perhaps where the gentleman just left off
and further this line of questioning. Does your drug work, sir?
Mr. Gonzalez. The drug works very effectively. It is
approved across ten different indications. The only molecule of
its type to be able to achieve that.
Mr. Sessions. Did you have to go through an FDA modeling of
doing trials to get there?
Mr. Gonzalez. Yes, hundreds of trials, clinical trials,
including dosing trials which would have defined what dose
worked in what indications.
Mr. Sessions. Did this take any money? I heard it took
time, but did it take money?
Mr. Gonzalez. We invested $16 billion in Humira.
Mr. Sessions. $16 billion. And when through the idea of
this, did you have to purchase anything from the, quote,
``inventor''?
Mr. Gonzalez. We acquired the company that the inventor was
originally working with.
Mr. Sessions. OK. So you are trying to take a model, spend
$16 billion, have it work, make it available. Now our
chairwoman said earlier that the Federal Government was
prohibited from negotiating the price, prohibited. I would like
to disagree with that, but what does take place in negotiating
a price that you have already sunk $16 billion in?
Mr. Gonzalez. Actually, the Federal Government, on average,
gets the highest discount of any channel on Humira. The average
discount on Humira is 64 percent, to the Federal Government.
Mr. Sessions. So you looked at $16 billion and you put that
over a model. You had a modeling, the number of people you felt
like would be available, the number of things that would
happen, and then you had to stretch out $16 billion, and then
gave the Federal Government this discount. Did they set the
discount or did you?
Mr. Gonzalez. In different channels they do it in different
ways. But even in the Medicare Part D channel it is negotiated
aggressively by the plans, on behalf of the Federal Government.
Mr. Sessions. So it was negotiated and you said, OK, we'll
give you a 64 percent reduction.
Mr. Gonzalez. On average, that is the reduction.
Mr. Sessions. On average. OK. If you had not done this,
what would be the medical things that might be--I would call it
a cost-benefit analysis, but what would the other answer in the
marketplace be for people who would use this product if you
were not there, and what is that general cost and outcome?
Mr. Gonzalez. Well, there is a class of drugs that treats
these types of diseases, so there are some alternatives that
are available. One of the important things to remember in this
class is patients are required, through their formulary, to
fail lower-cost therapies before they get access to these
therapies.
Mr. Sessions. So really, whoever the way the thing works is
they start one, they go to the next, they go to the next.
Presumptively it would work for a certain percent. And then you
would get down to the percent that it did not work so well. You
are the last chance. You are the alternative when there is no B
option. You become the A option.
Mr. Gonzalez. When alternative, lower-cost therapies have
failed, biologics are the type of therapy those patients end up
on.
Mr. Sessions. Now we saw, in the very beginning, the
chairwoman very thoughtfully put several people up who
indicated that they did need products that seemingly made their
life better. Were they in reference to you?
Mr. Gonzalez. Those patients were referring to our
products. One of the things I would say is one of the things
that we are very committed to in AbbVie is ensuring that there
is a safety net in place to cover all patients who need our
drugs, whether they can afford it or not. And we have a very
extensive safety net in place, for uninsured, for Medicare Part
D patients, for underinsured patients. And I say, as an
example, an uninsured patient, we approve 99 percent of the
applications we get, and an uninsured patient can get Humira
for free, up to an income of $388,000. So it is quite generous.
Mr. Sessions. I appreciate your time and thank you very
much. Madam Chairman, I yield back my time.
Chairwoman Maloney. Thank you. The gentleman from Illinois,
Mr. Davidson, is recognized for five minutes.
Mr. Davidson. Thank you, Madam Chairman, and let me just
thank you for holding this very informative and important
hearing.
Mr. Gonzalez, let me appreciate the fact that AbbVie has
such a strong presence in the state of Illinois, where I live
and where I come from. And I also want to appreciate the
tremendous scientific achievements as well as the efforts
toward diversification and the work that you have done to
assist in making sure that we were able to fight the
coronavirus.
But let me ask, a moment ago I heard you talk about the
possibility of negotiating discounts, and, of course, I
understand that pharmacy benefit managers are entities that
negotiate the price of medication for insurance companies. Did
I understand you to suggest that negotiation could be
beneficial to insurance companies in terms of the prices that
they would ultimately pay?
Mr. Gonzalez. The way the system works is we compete for a
formulary position, and as part of that negotiation we
negotiate with the managed care organization, or the PBM, what
discount or rebate we will provide to get on that formulary. So
yes, there is a negotiation that occurs.
Mr. Davidson. Would it be advantageous to the beneficiaries
whose payments are made by governmental entities if
negotiations took place for those groups of individuals?
Mr. Gonzalez. I think that occurs, to a great extent,
already, if I understand the question correctly.
Mr. Davidson. It is my understanding that the government,
the U.S. Government, CMS, that we are pretty much prohibited
from negotiating drug prices. That has been my understanding.
But let me just ask you, I understand that AbbVie applied
for far more patents with countries outside the United States
than inside, or at the Patent Office in the U.S. Is there a
reason for that differential?
Mr. Gonzalez. There are countries all around the world
where you can apply for patents. They have different
approaches. And I would say the U.S. is the most rigorous and
thorough area of patents, and tends to be the area where much
of the innovation is originally created.
Mr. Davidson. Dr. Garthwaite, let me ask you, because the
case has been made for me that we are paying far too much for
pharmaceutical drugs. I would say that means me, lots of other
people, you. But we are also paying more than our counterparts
in other countries. And not to suggest that any other country
has reached a level of perfection.
Why do you think we are paying so much more than they are?
Mr. Garthwaite. Well, I think they are paying less because
we are paying more. Small European countries, I think, have a
lot more freedom to choose to not worry about how their
individual price will affect innovation incentives, because
they are fairly small. They are kind of agonistic in this
conversation. No pharmaceutical manufacturer is really thinking
about how much they can earn in England when they are deciding
to make drugs, but they think very carefully about how much
they can earn in the United States. And so one of the downsides
about being one of the largest global economies is that we have
an outsized presence in the profits of a sector.
That said, also they have different patent rules around
that, and I think, you know, what we should do is we should
think about sort of how we want think about reforming our
patent rules in the United States. I think there is a role for
government to do that. Patents are, after all, a grant from the
government to try to balance access and innovation. And so, we
should think about reforms, including sort of reforms to the
incentives, as Mr. Amin mentioned, the incentives of the patent
examiners themselves. I think that we should be focusing on the
Patent and Trademark Office in some ways more than we are on
the private firms.
Chairwoman Maloney. The gentleman's time has expired.
Mr. Amin. May I just add a comment to this?
Chairwoman Maloney. Who is speaking?
Mr. Amin. Tahir Amin.
Chairwoman Maloney. Very briefly. Very briefly.
Mr. Amin. Yes. I would just say that, you know, having
worked across 25 different countries on patent systems I would
disagree that the U.S. patent system is the most rigorous. I
think it is the easiest system to getting a patent. In fact, by
some studies, one can never get a patent rejected in the United
States, because you can keep refiling it over and over again
until you get one. So, it is a war of attrition, and just to
Craig Garthwaite's point, I agree that, you know, examiners are
under an immense amount of pressure, and because of the
incentive to keep granting we end up with more patents.
So, I kind of disagree with the contention that Mr.
Gonzalez said that the U.S. has the most rigorous patent
system.
Mr. Davidson. Thank you, Madam Chairman, and I yield back.
Chairwoman Maloney. Thank you. The gentleman from
Pennsylvania, Mr. Keller, is recognized for five minutes.
Mr. Keller. Thank you, Madam Chair. The U.S. has long been
a global leader in pharmaceutical innovation, and I thank you
for holding this hearing. Getting generic drugs to market as
quickly as possible remains a priority for this committee and
will help to bring down the cost of prescription drugs.
Professor Garthwaite, American companies have greatly
contributed to the $182 billion invested globally by the
private industry into pharmaceutical research and development
initiatives, generating roughly 30 FDA-approved drugs annually.
Can you explain the relationship between investment and
incentives in the pharmaceutical space?
Mr. Garthwaite. Yes. To develop a new product you have got
to make a large, fixed sum in a risky investment. And so you
are trying to make that investment with the idea that the
potentially you will get intellectual property that would allow
you to earn back sufficient revenues and expectation to justify
that initial investment. That is the basic business tradeoff
that we are thinking about here.
And so firms are acutely aware of the potential market
size. I would note, though, that that is firms around the
world. While the United States does have a very strong
biopharma sector, firms around the world respond to the profits
generated in the United States. And so we have great
biotechnology companies in Europe. We have an amazing emerging
biotechnology for novel products coming out of Hong Kong and
Shanghai. But all of it is driven by the same incentive, which
is again that return on investment, and most of it is driven by
the profits generated in the United States.
Mr. Keller. How would price controls or forced negotiation
as contained in H.R. 3 affect the price and availability of
prescription drugs?
Mr. Garthwaite. I mean, it would. I think the goal of H.R.
3, and if you look at the CBO model is it would meaningfully
reduce prices. The resulting knockdown above that would be a
reduction in innovation. And we should have that debate as to
what we think is going to be the acceptable level of tradeoff
between access and innovation, or are there other ways, such as
reforming our health insurance system to reduce onerous cost-
sharing that we can decrease some of the reduced access when
prices are high and still provide large innovation incentives.
I really would encourage the committee to look at this as
not just a question of the price of the drug but a lot about
the cost-sharing, particularly cost-sharing in government
programs, which simply do not match the modern pharmaceutical
market.
Mr. Keller. Thank you for that. Another question, Mr.
Garthwaite. Patents are critical for safeguarding intellectual
property. However, the patent system can also add barriers to
competition that would otherwise drive down drug prices. So do
you have a suggestion on possible reforms to the patent system
that would still incentivize innovation while also allowing for
product variation?
Mr. Garthwaite. So I think we should look directly at the
patent system. As I mentioned before, there are organizational
incentives around how we fund it. It could be that what we want
to do is think about funding it, about the number of patents
maybe that apply or some other PDUFA-like structure but applied
to the patent system.
I do think something that gets lost in the question here,
though, is that we very much do want firms to invest resources
for new uses for old drugs. These sort of secondary patents
have been much maligned in this testimony. I am happy to see
that a drug like Humira, that we have seen the number of
indications that we have, we want to make sure that we maintain
the incentives to get as much as we can out of the resources
that society has spent to develop new products.
And so I don't think we should go to some type of system
where there is one patent for every drug. That is a naive view
of modern drug development. But we should have a rigorous
review at the Patent and Trademark Office about whether things
truly represent novel and non-obvious innovations.
Mr. Keller. Thank you. As we begin to once again have
discussions about Speaker Pelosi's drug pricing reform bill,
H.R. 3, I would caution my colleagues that more price controls
and government overreach in the pharmaceutical market will only
stand to make prescription drugs more difficult for access.
I also look forward to discussing bipartisan pharmaceutical
proposals such as the provisions in H.R. 19, the Lowest Cost,
More Cures Act, to get generic drugs to market faster, improve
competition, and ensure Americans have access to affordable
medicine.
Thank you, and I yield back.
Mr. Amin. Chairwoman----
Chairwoman Maloney. The gentlelady from Florida, Ms.
Wasserman Schultz, is recognized for five minutes.
Ms. Wasserman Schultz. Thank you, Madam Chair. AbbVie
jointly markets its cancer drug, Imbruvica, with Janssen
Biotech. Though the companies share decision-making authority
and profits, AbbVie leads the drug's commercialization efforts
in the United States.
Mr. Gonzalez, yes or no. Does commercialization include
setting pricing in the U.S.
Mr. Gonzalez. It does, yes.
Ms. Wasserman Schultz. OK. Thank you. As a breast cancer
survivor, the exceptionally high cost of cancer drugs is an
issue where the policy is very personal for me. I want to put
up on the screen a graph showing how the list price of
Imbruvica has changed over time.
At its launch in 2013, Imbruvica was priced at about $91
per tablet. As you can see, since just 2013, AbbVie has raised
the price of the drug nine times. AbbVie took a 7.4 percent
increase in each of the last two years, as millions of
Americans were struggling financially because of the
coronavirus pandemic. The current list price of Imbruvica is
now at $165 per tablet, and an annual course of treatment is
priced at anywhere from $181,000 to $242,000 per patient,
depending on how many tablets a patient takes daily.
Dr. Kesselheim, I would like your help dispelling two myths
that pharmaceutical companies continually perpetuate about drug
pricing. First, they insist, that no one actually pays the so-
called list price of a drug or directly feels the impact of
that price.
Dr. Kesselheim, very briefly, is that true?
Dr. Kesselheim. That is not true. Actually, we just
published an article led by my colleague, Dr. Rome, here in my
group, showing that when list prices go up, patients who have
high deductibles or other kinds of limited insurance can feel
substantial increases in prices.
Ms. Wasserman Schultz. And isn't it true that uninsured
patients pay the list price, patients' out-of-pocket costs are
tied to the list price? I mean, my familiarity, the whole
notion of cost-shifting is that when you go to the hospital and
you are a patient that doesn't have coverage, you are charged
the full list price. That cost-shifting occurs because those
uninsured patients are unable to pay the price, and then the
costs go up for all of us, and that would include the price of
prescription drugs. Am I correct?
Dr. Kesselheim. Yes.
Ms. Wasserman Schultz. OK. So drugs companies, very
clearly, also claim that they are forced to raise prices
because pharmacy benefit managers demand bigger and bigger
rebates. They argue that while prices rise, their profits
don't. But internal data obtained by the committee shows that
the Imbruvica rebates AbbVie provided to Medicare and
commercial plans from 2013 to 2018, range from just 4 percent
to 11 percent. The data also showed that the annual net price
of Imbruvica, the price of the drug after subtracting all
rebates, discounts, and fees, rose by approximately 60 percent.
Dr. Kesselheim, what does that demonstrate about whether
rebates are driving AbbVie's price increases for Imbruvica?
Dr. Kesselheim. Right. AbbVie's price increases for
Imbruvica are being set by AbbVie itself, and the reason that
rebates are so low in this market is because we don't allow the
government to negotiate drug prices based on their value, and,
in fact, allow drug companies to set prices wherever they want.
And if a drug company is trying to meet the needs, the sort of
expectations of its shareholders or something, about its
revenues, then it is going to do what it can by increasing
prices on currently available drugs as much as it can.
Ms. Wasserman Schultz. Thank you. So, despite what Big
Pharma wants you to believe, they bear responsibility for our
current crisis of cancer drug affordability. No one should be
unable to afford life-saving medication, but 42 percent of
cancer patients deplete their entire net worth--I have talked
with countless of them--within the first two years of
treatment, in part due to high drug prices.
We can have both innovative treatments and affordable
prices, and we all deserve both. We shouldn't have to make the
false choice. Congress should reject that false choice and act
now to rein in the era of the greed of pharmaceutical
companies. We have to make sure that if you are facing a life-
or-death condition that you are not faced with having to
bankrupt yourself in order to be able to afford to stay alive.
Thank you, Madam Chair, for the privilege of participating
in this hearing, and I really commend your leadership in having
it. I yield back.
Chairwoman Maloney. The gentlelady yields back. The
gentleman from Arizona, Mr. Biggs, is recognized for five
minutes.
Mr. Biggs. I thank the Chair and I thank the witnesses for
being here today.
What we see is that many folks have observed this around
the world, but other nations are free-riding on American
consumers, particularly in the pharmaceutical area. But if we
jump from the frying pan into the fire, this is, as one writer
said this, and I am quoting from him now, ``We would be jumping
from the frying pan into the fire if we had European-type price
controls that stifled innovation by pharmaceutical companies.
Sure we would enjoy lower prices in the short run, but we would
have fewer life-saving drugs in the future,'' and I close the
quote.
This past year, we have seen the remarkable, innovative
ability of American companies. Operation Warp Speed allows for
the American people to receive three COVID-19 vaccines in less
than a year. This achievement could not have been accomplished
with world-leading American companies.
Mr. Garthwaite, what can Congress do to replicate the
success of Operation Warp Speed for other diseases and cures?
Mr. Garthwaite. So I think we should be careful not to
overgeneralize from the success of Operation Warp Speed, which
was really trying to address a very specific problem, where we
have an exact type of product we want to develop, and we are
going to allocate massive government capital to do that.
I think that there are good and bad things about Operation
Warp Speed. I do think that if we are going to give people
public dollars, all the way up through clinical trials, like we
did with Moderna, we should probably think more about some type
of pricing clause, because that firm is not putting capital at
risk, and so we should think more about those questions.
But I really caution against the idea that we would
generalize from the attempt to address one specific problem to
some type of use of government money to try and solve all drug
development. The capital markets are really good at allocation
money toward the most potential success, scientifically. Most
modern drugs companies are using those small firms to do that
early stage research, and I think how many NIH take up that
drug development mantle would really fundamentally change the
nature of that agency.
Mr. Biggs. That is a great lesson to learn. I appreciate
that, because I think I agree with everything you just said
with regard to capital formation, et cetera. Anything regarding
the regulatory side of things that we should learn?
Mr. Garthwaite. I think one thing that has been very nice
about the FDA during this process is the degree to which they
did try and stand up for rigorous review. I think there was a
lot of worry at the start of Operation Warp Speed that there
would be some type of political manipulation of the FDA or some
pressure to not take science seriously to speed things up. And
I do think the FDA has done a good job of trying to balance
sort of access with regulatory review.
We need to believe in the produces, and the FDA solves an
important asymmetric information problem where they validate
the success of these products. I know we can quibble about how
long certain reviews took, and people wanted them to be
shorter. But I do think it is very good to see the FDA
maintaining its place as a place for rigorous review.
Mr. Biggs. Mr. Gonzalez, could you explain how price
controls might prevent companies
[inaudible].
Mr. Gonzalez. I think if you institute price controls or
reference pricing you are going to drive down the amount of
revenue going forward, and that is going to reduce the return
on investment that you have in R&D. It was clearly laid out, in
the CBO document, and I think it is accurate in the way it
described it. So I think you would be trading off a short-term
benefit for a long-term problem.
Mr. Biggs. And so, Mr. Gonzalez, AbbVie has been able to
grow Humira into one of the world's best-selling drugs,
bringing in over $136 billion since it went to market in 2003.
Can you explain to us how that money has been reinvested at
AbbVie into development of additional medications?
Mr. Gonzalez. Absolutely. I mean, I think if you look at
products like Humira, as I said before, the on-market products
pay for the R&D of the future. We have invested $48 billion in
R&D since 2013, and out of that investment we have created a
highly effective cure for HCD, we have created two cancer
compounds that have improved survival rates in blood cancers
significant, and now we have now created two immunology assets
that have demonstrated superiority to Humira, and they are in
the process of being launched in the marketplace. All of those
things help patients tremendously, and it is that on-market
product revenue that pays for R&D going forward. The system
can't work without that.
Mr. Biggs. Thank you both. I appreciate the time, Madam
Chair, and I yield back.
Chairwoman Maloney. The gentleman yields back. The chair
now recognizes one of the authors of H.R. 3, the gentleman from
Vermont, Mr. Welch, who is now recognized for five minutes.
Mr. Welch. Thank you, Madam Chair. Mr. Gonzalez, you have a
business model, as does all pharma, that starts with patent
protection provided by the Federal Government. Is that correct?
Mr. Gonzalez. That is correct.
Mr. Welch. And that is supposed to be a limited time, and
you do everything in your power to extend it beyond the
original grant. Is that correct?
Mr. Gonzalez. We develop innovation, and if we believe that
innovation is meaningful and worth enough, we----
Mr. Welch. Well, the answer to that is yes, right? You did
a memo when you were Executive Vice President, that was about
10 years ago, a little less, talking about, quote, ``product
enhancements,'' and those included things like changing the
size of the needle. Correct?
Mr. Gonzalez. That is correct.
Mr. Welch. And you do constant analysis internally within
the company to anticipate competition that may result in lower
prices, or price competition. Correct?
Mr. Gonzalez. What we do is we constantly look for ways
that we can innovate a product to be able to protect and grow
its position by making it a better product for patients.
Mr. Welch. And what that means is extending patent
protection and maintaining pricing power through the monopoly
that a patent confers. Is that correct?
Mr. Gonzalez. Yes, it can result in that, yes.
Mr. Welch. All right. And when biosimilar competition was
introduced in Europe, the price of your product, Humira, went
down by 80 percent. Is that correct?
Mr. Gonzalez. The average reduction in revenue is about 50
percent--48, I believe is the last number.
Mr. Welch. So, the point here is competition works.
Correct?
Mr. Gonzalez. That is correct.
Mr. Welch. And your pay, executive pay, is related, and has
been for a period of time, to increasing revenues and hitting
revenue targets. Is that correct?
Mr. Gonzalez. We have a plan for what we believe our
revenues are going to be in the following year----
Mr. Welch. Right.
Mr. Gonzalez [continuing]. And that is
[inaudible] yes.
Mr. Welch. The revenue is affected by the amount you sell
and the price at which you sell it. Correct?
Mr. Gonzalez. It is affected by that and then the cost,
that you obviously incur in the business, such as increases in
R&D.
Mr. Welch. Well, let's just go through this. Immediately
after that incentive plan came into effect, there were three
major price increases, about 30 percent in one year for Humira.
Is that correct? That is according to the documents that you
provided to this committee.
Mr. Gonzalez. If I look at AbbVie's price from 2017
forward, our net price was negative.
Mr. Welch. 2013 is when this went into effect. The records
you provided to this committee indicate that the compensation
of the top executives increased. And, by the way, your income
last year, or your compensation, was about $24 million?
Mr. Gonzalez. That is correct.
Mr. Welch. And between 2013 and 2020, it was $170 million?
Mr. Gonzalez. I would have to add it, but let's----
Mr. Welch. Well, it is a big number. And compensation for
all of the top executives was about four hundred and, what,
about 80 million dollars? Is that correct?
Mr. Gonzalez. Probably averaged about $60 million a year
for the top five executives.
Mr. Welch. All right. So, the bottom line here is that you
had a system within AbbVie where executive compensation was
tied to hitting revenue targets. Revenue targets were enhanced
by increasing prices and sales. Correct?
Mr. Gonzalez. Congressman, I don't agree with that. If you
want to talk about a period of 2013 forward, then what I would
tell you is net price for AbbVie, 2013 forward----
Mr. Welch. Right, but let me reclaim my time. And the way
you were able to do that is, one, reaching agreements with
competitors that they didn't bring their product out; No. 2,
shadow pricing with Amgen, with respect to their product,
Enbrel; No. 3, patent thickets, filing for over 150 patents
here when you only did for six in Europe; and in so-called
enhancements, which were things that made virtually no
difference to the patient, other than that they had to pay more
to get a smaller needle.
So the business model here starts with the government
providing a patent, the government providing payers, through
Medicare and Medicaid, and then what I can see, rampant abuse
on the part of your company to essentially extend that monopoly
pricing power and abuse at the expense of patients. It has got
to end. It has got to end. I yield back.
Chairwoman Maloney. The gentleman yields back. The
gentleman from Georgia, Mr. Clyde, is now recognized for five
minutes. Mr. Clyde.
Mr. Clyde. Thank you, Madam Chairwoman, for holding this
important hearing today.
In the four-plus months that I have held office, one of the
top issues to repeatedly arise in many of my meetings with
constituents in Georgia's Ninth congressional District is the
high cost of prescription drugs, many of which are lifesaving
medicines. This is an issue that I think most all of us sitting
on the committee have the desire to address. I strongly believe
that we should be working to ensure patients have more choices
when it comes to accessing lifesaving medications.
However, in achieving this goal, we must be very wary of
any effort that looks to stifle innovation or to set prices,
such as in the Democrats' proposed bill, H.R. 3, as the
solution it puts forward would be detrimental to the efforts to
lower costs and increase choices. Not only would the woes of
H.R. 3 be felt by the big manufacturers, but I believe they
would be felt by the small businesses and startups as well, and
I am reasonably confident that would be the end result, because
as a small businessman by trade, I fully understand how
stifling it is to be strong-armed by Federal bureaucrats.
So I am determined to look for solutions that work, not
only to bring transparency to the convoluted drug pricing
space, but also to lower costs and to increase choices for
patients.
So I have got a couple of questions here. My first question
is for Mr. Gonzalez. Is AbbVie engaged in any early stage
partnerships with smaller biotech companies--and I am not
looking for names or anything like that, of the companies--and
if you are, can you please elaborate a bit on how government
price-setting, like what we see in H.R. 3, how government
price-setting might impact your investments in those companies
and those partnerships, sir?
Mr. Gonzalez. We invest significantly in small biotech
companies in partnership arrangements or other kinds of pro-
licensing arrangements. I think the fundamental issue with
something like price controls is it would take the riskiest
area and it would make you much more hesitant to invest in
those areas, but yet those are the areas that have the greatest
opportunity to improve society, areas like new treatments for
Alzheimer's, or treatments for Parkinson's disease, or better
treatments for some of the solid tumors and cancer that we
haven't been able to make significant improvements.
And so the tradeoff you are going to make is you are going
to take these very high-risk areas and you are not going to
invest as aggressively in there, because your risk is so high,
but you can't get the return going forward. I think that is the
significant tradeoff that we are going to have to deal with if
we were to implement that kind of an approach.
Mr. Clyde. OK. Thank you very much. I appreciate that. My
next question is for Mr. Garthwaite. In your submitted
testimony, you discussed the importance of, and I quote,
``inefficient value-destroying policies.'' Would you consider
the Biden administration's push to waive IP protections from
COVID vaccines as a value-destroying policy, and if yes, could
you elaborate a little bit, please?
Mr. Garthwaite. I have really strong concerns about waiving
IP, and particularly waiving IP when we believe that products
generate so much value that we need to make them more
accessible to the world.
I think we need to find ways to increase manufacturing
capacity, and I we need to find ways to give vaccines to the
rest of the world, and I think right now the incentives of
Pfizer or Moderna, given their ability to sell this vaccine to
the world, are aligned well to try and increase that
manufacturing capacity.
The thing I worry about is not the current pandemic. I
worry about the next pandemic. In particular, I worry about one
that is going to require perhaps a small molecule treatment or
therapeutic as opposed to a vaccine, where firms are going to
be very hesitant to make the investments to jump into those
markets, if what is going to ultimately happen is that they are
going to have the intellectual property that they create
transferred to other parties.
And so I really believe that instead of waiving IP, the
U.S. Government can increase the incentives to bring
vaccinations to the rest of the world, by either transferring
vaccines that we currently have in storage or committing to pay
high prices, even for vaccines throughout the developing world
coming from the United States. It would be in our financial
interest to pay for such vaccines.
Mr. Clyde. OK. Thank you very much. I like that response. I
think it is very dangerous that we would open the door to
allowing China to not only steal years of knowledge and
investments that these companies have made in mRNA technologies
and production capabilities, but then to turn around and
effectively assist them to profit off of it too.
With this concern in mind, and to add to what my good
friend, Congressman Hice, has said earlier about waiving IP
protections, I have added my name to a letter led by my good
friend and fellow colleagues from Georgia, Congressman Buddy
Carter, that expresses how waiving such IP protections is
dangerous and not an efficient means to achieving the White
House's goal of getting vaccines to those around the globe in a
timely manner. As expressed in the letter, I think that
focusing on the transportation chain would better achieve the
objective and simultaneously preserve U.S. companies'
intellectual property rights.
And with that, Madam Chair, I yield back.
Chairwoman Maloney. The gentleman yields back, and the
gentlewoman from California, Ms. Porter, is recognized for five
minutes.
Ms. Porter. Thank you. Mr. Gonzalez, you are the CEO of
AbbVie, which makes the cancer drug Imbruvica. Do you know what
the annual price of Imbruvica was for a patient taking the
standard three pills per day in 2013?
Mr. Gonzalez. One-hundred-thirty thousand dollars.
Ms. Porter. OK. We had $99,766. What about today for those
same three pills?
Mr. Gonzalez. I think it is $169,000.
Ms. Porter. We have $181,000, but we can agree that there
was a significant increase. Roughly, in a matter of eight
years, AbbVie more than doubled the price.
Now, Mr. Gonzalez, how much money did AbbVie put directly
into the research and development costs of Imbruvica before it
hit the market in 2013?
Mr. Gonzalez. We acquired Imbruvica when it was launched,
so it would have been the company that we acquired----
Ms. Porter. So, AbbVie--reclaiming my time--so AbbVie
itself didn't spend any money to create Imbruvica. It was
invented by a smaller company, Pharmacyclics, which you later
acquired. Correct?
Mr. Gonzalez. We paid $21 billion for the company, correct.
Ms. Porter. It was expensive to acquire them. So, you paid
fair market value for Pharmacyclics, but AbbVie then doubled
the price, presumably justified by its $2.45 billion investment
in R&D. Are there fewer side effects for patients now than
there were in 2013?
Mr. Gonzalez. Well, we developed significant indications
and expansions and other disease states----
Ms. Porter. Are there fewer side effects, sir?
Mr. Gonzalez. No. It has the same side effect profile.
Ms. Porter. OK. Mr. Gonzalez, do people need less of this
medicine, Imbruvica, to treat lymphoma now?
Mr. Gonzalez. No.
Ms. Porter. So, AbbVie took zero risk to develop this drug.
You bought it approved for the market, knowing it would be
profitable. You hiked the price to pay for R&D, but you haven't
made the drug any better, even as you doubled the cost.
I wrote an entire report on what is essentially the
Imbruvica story--Big Pharma gobbles up a small, innovative
company, does nothing to improve the drug, but jacks up the
price.
Now you told us that you spent $2.54 billion for R&D for
Imbruvica, even though the drug didn't get any better. Really,
it was all for these innovations and indications, which are
designed to keep competitors off the market and find new sales
opportunities. So, I want to look at what other money AbbVie
spent doing its business. You filed 165 patents for Imbruvica.
You filed patents for Humira, other drugs, to keep competitors
off the market. How much did you spend on litigation and
settlements from 2013 to 2018?
Mr. Gonzalez. Congresswoman, let me correct one thing that
I think you just said. It is not true that we didn't invest in
additional indications and additional diseases. As an example,
we received approval after the development work of graph versus
host disease. We also----
Ms. Porter. Reclaiming my time. Mr. Gonzalez, how much did
AbbVie spend on litigation and settlements from 2013 to 2018?
Mr. Gonzalez. I don't have that number offhand. I will be
happy to give it to you.
Ms. Porter. OK. $1.6 billion. $2.45 billion on R&D, $1.6
billion in litigation and settlements. What about marketing and
advertising? How much does AbbVie spend on that?
Mr. Gonzalez. Marketing and advertising, we spend about $4
billion a year.
Ms. Porter. Yep, $4.71 billion. How about executive
compensation, 2013 to 2018?
Mr. Gonzalez. 2013 to 2018, it is probably, on average,
about $60 million a year.
Ms. Porter. Try $334 million on for size. Now how much did
AbbVie spend on stock buybacks and dividends to enrich your
shareholders from 2013 to 2018?
Mr. Gonzalez. Stock buybacks, if you actually look at just
pure stock buybacks it would be about $13 billion.
Ms. Porter. Stock buybacks and dividends is the question,
sir.
Mr. Gonzalez. Dividends, I would have to come back with a
number for that over that period of time.
Ms. Porter. $50 billion. So, Mr. Gonzalez, you are spending
all this money to make sure you make money, rather than
spending money to invest in, develop drugs, and help patients
with affordable, life-saving drugs. You lie to patients when
you charge them twice as much for an unimproved drug, and then
you lie to policymakers when you tell us that R&D justifies
those price increases.
The Big Pharma fairy tale is one of groundbreaking R&D that
justifies astronomical prices, but the pharma reality is that
you spend most of your company's money, making money, for
yourself and your shareholders. And the fact that you are not
honest about this, with patients and with policymakers, that
you are feeding us lies that we must pay astronomical prices to
get innovative treatments is false. The American people, the
patients, deserve so much better.
I yield back.
Chairwoman Maloney. The gentlelady's time has expired. The
gentleman from Kansas, Mr. LaTurner, is recognized for five
minutes.
Mr. LaTurner. Madam Chairwoman, I thank you for holding
this hearing which affords this committee the opportunity to
help the American people understand why the U.S. is the world
leader in medical innovation, why that leadership position in
the world helps save countless lives during this pandemic, and
continues to save lives every single day, and what advances the
Trump administration and House Republicans have made in recent
years to help bring down the high price of prescription drugs,
speed generics to market, and reduce out-of-pocket costs.
While everyone on this committee can agree that Americans
pay too much on certain prescription drugs, and they do,
Democrats have been unwilling to work with Republicans on
bipartisan solutions to help both bring down the high cost of
drugs while simultaneously preserving U.S. medical innovation,
the benefits of which have been on full display this past year
like never before.
I hope this year will be different, with both Republicans
and Democrats willing to work across the aisle and to do what
is achievable--lowering the cost of some high-priced drugs
while maintaining choice for Americans, and not harming robust
R&D funding, which has spurred groundbreaking innovation in
both vaccines and therapies for COVID-19.
Just like our national defense, the only safe place is
first place, when it comes to our Nation's health care,
especially as it pertains to the creation of vaccines and
medical therapies. And this has never been truer than during
this pandemic. In 2018, it is estimated that pharmaceutical
companies spent $169 billion globally on R&D, and an estimated
$182 billion in 2019. CBO has noted that R&D has increased
among pharma firms just as it has to the industry as a whole,
reaching 25 percent in 2017.
It is important to point out that the average spending on
R&D across all industries is less than three percent, compared
to 25 percent for the pharmaceutical industry. Why is this
important? With less investment comes less innovation, which,
in turn, leads to fewer new drugs. Europe used to lead the
world in drug innovation, over 30 years ago, but government-
imposed price controls led to less foreign R&D investment,
which, in turn, led to U.S. worldwide leadership in the
development of innovative life-saving treatments and cures,
including three current COVID vaccines, with more on the way.
According to a White House Council of Economic Advisors
report, under the Democratic legislative approach, H.R. 3, to
price controls and a punishing excise tax on American
medicines, Americans would be denied access to dozens of life-
saving medicines over a 10-year period. But the result would be
fewer saved lives and a reduction in the life expectancy for
the average American. Unlike developed nations and Europe, such
as the UK, where the citizens had access to only 60 percent of
new medicines, Americans currently enjoy access to almost all
new medical innovations and cures. This isn't by accident. And
while I believe there is more than can and must be done in our
effort to lower drug prices, I am confident that my
constituents back home in Kansas are not interested in reducing
choice and giving up access to life-saving drugs and therapies,
especially for diseases such as cancer and hepatitis C.
I encourage Congress to focus on legislation that is both
doable and helpful to the American people, and not jeopardize
our free market system, which preserves innovation while
ensuring access to the world's largest choice of affordable
medications.
Now to questions. Mr. Gonzalez, I can't think of a time
when the value of public-private partnerships in drug
development has more evident to the general public. Even Dr.
Fauci has said he can't think of a vaccine, even one in which
the Federal Government has provided substantial resources, that
was brought to the goal line without private industry. Yet some
of the proposals being discussed today would substantially
change the parameters of current IP protections in the U.S.
Is it wise to send innovators the clear message that the
larger the health crisis, the less we will protect your IP?
Mr. Gonzalez. No, it is not. IP is fundamental to this
industry.
Mr. LaTurner. I appreciate that very much. Some of my
Democrat friends, again for Mr. Gonzalez, believe the Federal
Government should take over the pharmaceutical sector. While I
strongly agree the price of drugs are too high in some
instances and that Congress must do more in this area, can you
speak to the role of the private capital and U.S. drug
innovations, just more broadly?
Mr. Gonzalez. Well, obviously we put a tremendous amount of
capital at risk to be able to develop new, innovative medicines
going forward, and that is built around the premise that you
will have an opportunity to recoup that investment and continue
to invest further in R&D to create additional cures as time
goes on. That is fundamental to this industry, and I think we
have seen the benefit of it. We have made tremendous progress
in treating cancer, in curing HCV, with COVID vaccines. I mean,
we see tremendous progress in this area, and I think if we put
price controls in place that will damage the R&D in this
industry.
Mr. LaTurner. Thank you. I appreciate it, Mr. Gonzalez, and
all the conferees. I yield back, Madam Chairwoman.
Chairwoman Maloney. The gentleman yields back. The
gentlelady from California, Ms. Speier, is recognized for five
minutes.
Ms. Speier. Thank you, Madam Chair. Let me, at the outset,
make note of the fact that our colleagues on the Republican
side have talked about this phenomenon of getting three
vaccines in less than a year. It is a phenomenon, but it has
everything to do with the fact that the Federal Government
negotiated the price of these drugs. So, let's not forget that
in the course of this discussion.
I want to say, at the outset, that AbbVie is a
[inaudible] my district, but I also feel a responsibility
for their practices. And I want to make sure we continue to
have innovation and medical advancement, but I also want to
protect the consumers.
Humira has been on the market for 18 years, but it is still
under patent protection. Mr. Gonzalez, I want to understand how
AbbVie has managed to avoid competition for so long. First I
would like to put up Exhibit 19, a presentation you delivered
to investors in October 2015. As you look there, it shows that
the actual ingredient for Humira expired on December 31, 2016.
Am I reading that correctly?
Mr. Gonzalez. That is correct in the U.S.
Ms. Speier. Had that been your only Humira patent, U.S.
patients could have accessed lower-priced versions of Humira in
2017. As this slide shows, however, AbbVie filed for scores of
additional patents on Humira, 22 patents on method or
treatment, 14 patents on formulation, 24 patents on
manufacturing, and 15 ``other'' patents. AbbVie successfully
created what the title of the slide suggests, an entire estate
of patent protection.
Now I understand your obligations is to your shareholders
and not to the consumers, Mr. Gonzalez. But tell me, how much
did you pay in taxes last year?
Mr. Gonzalez. We paid about $1 billion or $6.4 billion
since tax reform.
Ms. Speier. So $1 billion in taxes last year. And your
revenues that you generated last year were how much?
Mr. Gonzalez. Approximately--well, taxable revenues over
that same period of time, an easy way to think about it would
be the $6.4 billion, we had about $21 billion of taxable
revenues over that period of time.
Ms. Speier. $21 billion. So that suggests you paid maybe 10
percent in taxes, if that.
But going back to your patent situation, you have now 256
patents for Humira, and they will not expire for a total 34
years since the launch. My question to Mr. Amin, you are the
patent expert. Did AbbVie really need 256 separate and new
patents? Did they have 256 new inventions related to Humira?
Mr. Amin. Thank you, Congresswoman. Well, it is actually
257 applications of which, by our count, is 130 that have been
granted. I believe there are probably more out there, but
obfuscated in trying to actually find them. If you look at the
initial patents, this roadmap
[inaudible], the new indications that are subsequently
being patented later on in the lifecycle of the drug were
already highlighted and protected in the initial patents that
went off, expiring in 2016.
So, what we see is this system that the U.S. patent system
encourages, is to these middle increments that the companies
do. And this is not just AbbVie. This is every company, in
order to extend their life and protection so that they can have
another 8, 9, 10 years. We see it with Imbruvica, and we will
probably see more patents that are being filed as Imbruvica is
actually entering its sort of eighth year on the market.
So, they don't need all these patents, but it is a great
strategy to keep competition at bay.
Ms. Speier. So if you were to advise us on how we could
just focus, narrowly, on patent abuse, could you just give me,
in 39 seconds, what kinds of recommendations you would make to
us?
Mr. Amin. I would raise the bar for what it means to get a
patent, so that we can actually really incentivize real
discoveries and treatment. Because companies also get FDA
exclusivity just for these little tweaks, an indication. But
they are already getting awarded for that. The idea that they
are going to stifle innovation is wrong.
So, my main call is that we should actually raise the bar
in what would take to get a patent, and we have to improve
examination
[inaudible].
Ms. Speier. All right. Thank you very much. Madam Chair in
my two seconds, just in my calculation, I guess what AbbVie
paid was five percent in taxes last year, when most of us were
paying 37 or 38 percent. I yield back.
Chairwoman Maloney. The gentlelady yields back. I now
recognize the gentlewoman from New Mexico, Ms. Herrell. She is
now recognized for five minutes.
Ms. Herrell. Thank you, Madam Chair, and thank you for
having this hearing as well, and thank you to our panel. I just
have a couple of questions for clarifying, and I will start
with Mr. Gonzalez. I just wanted to ask you; how much
involvement has the government had currently in price setting
for your prescription drugs?
Mr. Gonzalez. On behalf of the Medicare Part D plan that is
negotiated by the plans, the insurance plans or managed care
plans, on behalf of the government. Then the government
obviously negotiates directly in areas like VA, DoD, TRICARE.
Ms. Herrell. So, Mr. Gonzalez, then would that have a
direct impact on what the consumers are paying for their
prescriptions?
Mr. Gonzalez. I am sorry. I didn't understand the question,
Congresswoman.
Ms. Herrell. Would that have a direct impact on what
consumers are paying for their prescription drugs?
Mr. Gonzalez. Negotiation is your question?
Ms. Herrell. Yes. Would those have a direct impact on what
we are paying for our prescriptions?
Mr. Gonzalez. As I indicated, the government today does
negotiate, and if you look at it, as an example, for Humira,
the average discount for Humira across all the government
channels is 64 percent. It is the highest discount by a
significant margin, compared to any other part of the channel.
Ms. Herrell. Right. So once the negotiations are done, that
does impact the consumers' prices.
Mr. Gonzalez. No, I think that is one of the challenges of
the discussion today. The Medicare Part D system is relatively
insensitive to the price of the drug.
Ms. Herrell. So, Mr. Gonzalez, let me put it this way.
Would it be better or worse for the consumer if there was less
government involved in the price negotiation?
Mr. Gonzalez. What I would say is it would be better for
the Medicare Part D consumer or patient, in this case, if we
work together to be able to restructure the out-of-pocket costs
for those patients, because lowering the price alone will not
allow you to get to a point where these patients can afford
their medicines.
Ms. Herrell. OK. Thank you. And Mr. Garthwaite, I just
wanted to ask you a question. The Congressional Budget Office
estimates that 38 fewer cures would be developed in the next 20
years if H.R. 3 became law. How does H.R. 3 stifle innovation?
Mr. Garthwaite. So the CBO modeling, we could spend a long
time if you wanted, but you probably don't, talking about sort
of positives and benefits of that model. But they are relating
the fact that when you see this decrease in revenue, and
expectation, firms like Mr. Gonzalez's and AbbVie are going to
optimally reduce their investment in R&D to match the size of
the potential market that is going to exist. We have lots of
economic evidence that suggest the direction and the magnitude
of that effect. A really big decrease in prices, like those
proposed by H.R. 3, could have a fundamental effect on
innovation, really depending upon how much prices are going to
go down from that.
I know earlier that Representative Wasserman Schultz wanted
to say that, you know, we have this ability to both, you know,
cut prices and keep innovation at the same level, and I think
that is really more hope than science. I think that the
evidence is clear we will see a decrease in innovation, and
instead of promising to people we will get the same of
innovation, we should have an honest debate about how many
drugs we are willing to give up if we are going to see prices
go down. That would be a much more productive and a much more
honest cost than these simple political promises.
Ms. Herrell. Right. So then do you feel that under the
Trump administration, headway was being made to lower
prescription drug costs and help the availability or
accessibility?
Mr. Garthwaite. I can't think of meaningful efforts that
actually the Trump administration put into place that would
have done that.
Ms. Herrell. And so at the end of the day, with free
markets, with collaboration, with both industry, government,
and consumers, we can find a way to maybe revisit the standard
Medicaid and Medicare Part D and help push the price down to
consumers?
Mr. Garthwaite. I certainly think--I mean Medicaid, the
price for consumers is not an issue, but Medicare Part D is
certainly an insurance program that is crying out for reform.
It creates the incentives to raise prices. It creates the
incentives to generate more rebates so you can lower premiums
for healthy customers, and it really takes advantage of its
customers that require expensive medications. And I strongly
encourage Congress to look at reforms in that sector.
Ms. Herrell. OK. Just very quickly, Mr. Gonzalez, earlier
you were asked about the 30 percent increases in that 10-month
time period from March 2019 to January 2020. Can you help us
understand why the significant increase?
Mr. Gonzalez. Well, over that specific timeframe, I can't
specifically talk about that, but what I would tell you is
there are two drivers to this. And as I said a moment ago, if I
look at the overall impact of net price on AbbVie's business
since 2013, it is very, very modest. It is 0.3 percent. If I
look at even shorter periods of time, just in the U.S., as an
example, the net price since 2017, in the U.S. only, it was 1.8
percent. So price is not contributing significantly to the
overall performance of the company.
Now, many different factors drive the price. I would say
increasing rebates plays a significant role. Rebates have
increased significantly over that period of time.
Ms. Herrell. Thank you. I yield back. Thank you, Madam
Chair.
Chairwoman Maloney. The gentlelady yields back. The
gentlewoman from Missouri, Ms. Bush, is now recognized for five
minutes.
Ms. Bush. Thank you, Madam Chair, for convening this
important hearing.
As a nurse, I repeatedly saw the devastating harms that
outrageously high prescription drug prices had on my patients.
I saw our health care system prioritize their profits over my
patients. I saw drug manufacturers, like AbbVie, line their
pockets with cash while my patients suffered. We can't continue
to let Big Pharma keep getting rich on life-saving medicines
that people need to survive. And we are talking about survival
of humans.
Humira is currently the top-selling drug in the United
States and the world. In 2020, Humira's U.S. net revenues were
roughly double that of the second-highest-selling drug in the
United States, which is Merck's cancer drug, Keytruda.
Mr. Gonzalez, what share of your company's overall sales
revenues comes from Humira?
Mr. Gonzalez. About 40 percent now.
Ms. Bush. 40 percent now. OK. Thank you. According to an
article published earlier year in the journal Nature, Humira
accounts for nearly 60 percent of AbbVie's sales, what is
documented there. Humira has delivered your company over $170
billion in worldwide net revenue since launching in 2003. Two-
thirds of that revenue, or $107 billion, have come from the
U.S. market alone, even though Humira is the top-selling drug
in the world, due in large part to AbbVie's price increases for
Humira. A study of prices from 2017, found that in the U.S.
Humira is three times more expensive than the drug in Germany,
and four times more expensive than in Switzerland.
Mr. Gonzalez, is there any difference between the brand
drug here versus in different countries?
Mr. Gonzalez. There is not a significant difference. They
are manufactured in different kinds of facilities. A U.S. drug
would be manufactured in an FDA-regulated facility, and a
European drug may have been manufactured in a different
facility that was not FDA regulated. But the general drug is
the same.
Ms. Bush. The general drug is the same. So the difference,
if it matters, is what facility manufactured it that changes
the price up three, four times.
Mr. Gonzalez. No. I am sorry. I didn't mean for you to
conclude that.
Ms. Bush. OK.
Mr. Gonzalez. What causes the differences in price is
essentially socialized health care systems mandate what price
you are allowed to sell the drug at, and as a manufacturer, you
only have two choices. You either accept that price or you deny
the population of that country the benefits of your medicine.
And that is an impossible choice. Can you imagine a cancer
drug, not providing the population of a country, that drug,
because you don't like the price?
But that is the fundamental challenge with socialized
medicine systems. And that does force the U.S. to pay far more
of the innovation costs of our industry. That is a reality.
Ms. Bush. So that is what it is. We are picking up the
slack. I just feel like if you can sell the same exact drug
elsewhere for a fraction of the price there is no reason that
people should be forced to pay high prices here, such high
prices.
But, you know, let me put up a graph on the screen, using
data from AbbVie's SEC filing. This graph shows Humira's annual
U.S. net revenue from 2003 to today. As the graph shows, each
year AbbVie set a new record--each year, a new record for
Humira revenue in the United States. The prices are staggering.
On my own staff we have someone who used Humira for 6 years.
His medications would have cost nearly $1 million--for six
years--if not for his insurance plan, and his family would have
repeatedly gone bankrupt trying to keep them stable, because of
your predatory pricing scheme, had he not been insured. The
story is the same for AbbVie's other blockbusting drug,
Imbruvica, which is jointly markets with Janssen Biotech.
I would like to show another graph, showing the U.S. net
revenue for Imbruvica. Since 2013, AbbVie and Janssen have
together generated $16 billion in net revenue from Imbruvica.
More than one-quarter of this amount, or $4.3 billion, came
from sales in 2020 alone. During that period, AbbVie raised the
price of the drug nine times--one, two, three, four, five, six,
seven, eight, nine times.
Mr. Gonzalez, has the drug's efficacy dramatically improved
nine times? If you could just yes or no answer that question
for me.
Mr. Gonzalez. The drug is basically the same drug.
Ms. Bush. Thank you. We all want to incentivize the
development of new medicines, we do, but there is a difference
between turning a profit and profiteering off of patients and
families all over the world.
Mr. Gonzalez, last question. Will you commit to lowering
the price of Humira and Imbruvica in the United States? This is
just a yes or no.
Mr. Gonzalez. No, I can't commit to that. But if you will
allow me one more minute. I think we were aligned in that we
want to be part of the solution to lower costs, out-of-pocket
costs, for patients. And what I would tell you is when I look
at Medicare Part D, I will use Imbruvica as an example. To make
Imbruvica affordable to patients on Medicare Part D, it is
literally 50 times more out-of-pocket cost on Medicare Part D
than any other insurance vehicle. To make it affordable under
the current structure of Part D you would have to lower the
price of Imbruvica by 98 percent--98 percent to make the out-
of-pocket affordable for a patient.
What that tells you is the structure of Part D's out-of-
pocket is not built for these kinds of medicines.
Chairwoman Maloney. The gentlelady's time has expired. The
gentleman from South Carolina, Mr. Norman, is now recognized
for five minutes.
Mr. Norman. Thank you, Madam Chairman. Mr. Garthwaite, you
know, pharmaceutical companies are paid based on a percentage
of the list price. That means your middleman, your
distributors, all of them make more money at the patient's
expense. You know, insurance is supposed to help existing
patients who are buying drugs, such as insulin, which has been
around since the 1950's.
What common-sense solutions should we, as Members of
Congress, do to try to bring down this cost?
Mr. Garthwaite. So I would encourage you to look at
regulations around cost-sharing that require that it is based
more on the net or the post-rebate price as opposed to just the
list price.
I do think you are right that what we end up having is that
when individuals purchase expensive medicines, which is again
in the Part D program, it appears that part of the motivation
of the plans is to generate high cost-sharing payments that
they then don't necessarily capture as profits themselves or as
the PBMs, but they use the lower premiums for the rest of the
market, and that is effectively transferring resources from
sick to healthy patients, and really unwinding some of the
benefit of insurance, and certainly unwinding the idea of
community rating that was very popular among policymakers and
consumers, where you don't pay more for a pre-existing
condition. And so I think we should look at things around not
having cost-sharing tied to list prices.
I also think that you should look at improving the flow of
information between plan sponsors and PBMs. I think the Senate
Finance Committee report on insulin pricing was very
interesting to read through on issues related to administrative
fees and other non-rebate funds that are flowing between
manufacturers and PBMs, and I think it would be important for
everyone in the value chain to have a bit more information
about the flow of funds so they can negotiate an effective set
of prices, rebates, and formulary placements.
Mr. Norman. Would you agree that the first step would be
getting the actual contracts that the PBMs have, getting the
actual language so you could delve into it? Would you agree
with that?
Mr. Garthwaite. I am concerned about the fact that there
are such strong auditing requirements for plan sponsors, if
they want to be able to look at the revenues that they are
generating for the PBM. While there are obviously concerns
about confidentiality, regulations around sort of who can be an
auditor, how many contracts they can see, that the contracts
are only allowed to be reviewed in paper, at the PBM facility,
these are all things I think Congress could look into, in the
spirit of improving information, because the market works best
when information is common among the negotiating parties.
Mr. Norman. Well, I would like any solutions that you could
get to help us do this. All of us, whether you are a Democrat
or Republican, the price of drugs, particularly those that have
been around for 70 years, that have not changed as far as
improvements, we need to know and take action. I am really
tired of just talking about it. The government is good at, you
know, forming a committee to get another committee to talk
about it, but anybody that, you know, has any kind of empathy
really needs some direct things that we can do. So anything you
can do, I would appreciate it.
Mr. Gonzalez, PBMs exclude certain drugs from the
formularies in favor of other, you know, drugs that may be
inferior, at best. What kind of actions like this have driven
up drug prices, I guess, in the market as a whole, that you
could cite?
Mr. Gonzalez. Congressman, I mean, generally speaking, my
experience with PBMs and managed care on formularies is that
they try to design the plan in a way, the formulary in a way to
be able to cover a broad set of patients. Humira is an example.
We compete on formularies. Probably average number of
competitive products on that formulary is nine or ten, and that
gives enough flexibility to physicians to be able to alternate
between different drugs to find the right drug for the patient,
and in some cases maybe different delivery vehicles. Some are
injectables. Some are orals.
So there is typically a fairly broad set of products that
are available.
Mr. Norman. But you would agree, as far as trying to get a
handle on PBMs and their formularies for pricing, we need to
actually see the contracts that they are going by, to make the
companies abide by. Would you agree?
Mr. Gonzalez. Yes, I would agree with that.
Mr. Norman. OK. Madam Chairman, I yield back.
Chairwoman Maloney. The gentleman yields back. The
gentlewoman from Illinois, Ms. Kelly, you are now recognized
for five minutes.
Ms. Kelly. Thank you, Madam Chair. One of Humira's
competitors is Enbrel, an expensive brand name sold by Amgen.
In a functional competitive market, you would expect companies
to price their products below their competitors in order to
gain market share. So in the case of AbbVie and Amgen, they
would be expected to compete with each, and the result would be
lower prices for Humira and Enbrel. Dr. Kesselheim, is that
what we see in the pharmaceutical sector?
Dr. Kesselheim. Definitely not. The U.S. pharmaceutical
sector, especially for brand name drugs, I mean, the idea
behind patents and other regulatory exclusivities is to avoid a
competitive market, you know, to allow these companies to price
drugs at a very high level. So what we see, particularly with
brand name competition, there is not substantial price lowering
when new products hit the market in the U.S.
Ms. Kelly. Thank you. On the screen, I would like to put a
graph prepared by committee staff, which shows AbbVie and
Amgen's pricing for a year's course of Humira and Enbrel from
2003 to 2021. The lines are so close together, it is a little
difficult to tell which is which. That is what shadow pricing
looks like. For almost two decades, AbbVie and Amgen
consistently followed each other's price increases. In that
time, the price of Humira has increased 470 percent, and the
price of Enbrel has increased 457 percent. According to
internal company documents obtained by the committee, AbbVie
viewed Amgen's price increases as cover for its own price
increases.
Mr. Gonzalez, in 2012, you received an email from another
company executive saying it was a ``great weekend.'' This email
is Exhibit 9 in your packet, as I hope everyone can see. Mr.
Gonzalez, did you view that as a good development when Amgen
would raise the price of Enbrel, just out of curiosity?
Mr. Gonzalez. Just give me one moment to read it.
Ms. Kelly. OK.
Mr. Gonzalez. I essentially view this as someone sending me
an email that just alerted me to the Enbrel price increase, and
then saying, ``have a great weekend.'' I don't tie those two
together.
Ms. Kelly. OK. Do you believe Amgen's price increases give
AbbVie license to further increase the list of Humira?
Mr. Gonzalez. No, but I think, Congresswoman, one of the
things that does happen in this industry that is somewhat
unique because of the way rebate pools work, is when a
competitor raises their price, you don't know what the rebate
is that the competitor has. But what you do know is if you
don't raise your price, you will be at a disadvantage of how
much rebate dollars you will be able to contribute. So you have
seen that there has been some correlation between companies,
but I think it is driven more by this phenomenon of how rebate
pools work where you don't want to put yourself at a
competitive disadvantage because, you know----
Ms. Kelly. It does seem like increasing the price of Humira
is exactly what happened. In July, you raised Humira's price to
$26,632. Less than thee weeks later, Amgen raised the price of
Enbrel again. And AbbVie says, you know, they price their drugs
are, ``based on the value that those medicines bring to
patients in the competitive environment.'' But emails like this
one uncovered by the committee's investigation seem to
demonstrate that that is not true.
And I just want to go back to my prior colleague. I am not
trying to do things like that, but we need to come to some type
of solution. This is ridiculous. As you have heard over and
over, people have to choose, you know, between sometimes death,
you know, if they can eat or not eat. You know, we all care,
you know, about making sure that our citizens, people in the
United States, you know, know can afford drugs, and we do have
a problem, and I would think you think we have a problem, too,
despite, you know, innovation and research and development. I
mean, you have to believe there is a problem.
Mr. Gonzalez. Congresswoman, I absolutely believe,
especially in Medicare Part D, that there is a significant
problem with the out-of-pocket cost approach for those
patients. What I would tell you is we have tried to set up a
broad safety net that ensures that any patient who needs our
drug, regardless of their ability to pay, regardless of their
ability to have insurance, can get our drug. And that doesn't
mean we don't miss people, but I can tell you we cover the vast
majority. We give away $4.3 billion worth of drug every year.
As I mentioned a few moments ago, 99 percent of uninsured
people who come to us, we approve and give them free drug. And
in the case of Humira, you can have an income as high as
$388,000 and still qualify for free Humira. We are subsidized--
--
Ms. Kelly. And with all the things that you guys are doing,
there is still a problem, so we are still not doing something
right, which I will let other people ask about that because I
am out of time. Thank you.
Ms. Porter. [Presiding.] Thank you. The gentleman from
Kentucky, Mr. Comer, is recognized for five minutes.
Mr. Comer. Thank you. My questions are for Professor
Garthwaite. Despite the villainization of Operation Warp Speed
by committee Democrats, the Federal Government and private
companies invested hundreds of millions of dollars to develop
and manufacture COVID-19 vaccine candidates, with no guarantee
those vaccines would be approved. The result was the first
vaccine was approved in less than 12 months from this discovery
of COVID-19 and three vaccines approved to date. Would this
have been done without private company investment and
expertise?
Mr. Garthwaite. I think it is quite simple to say that we
would not have gotten the vaccine as fast as we did without
private company expertise, but I also think it is important and
fair to note, and, honestly, since we also wouldn't have gotten
it without strong involvement of the government money, both in
terms of direct financing for some of the clinical trials in
the case of Moderna, but also the advanced market commitments
the Federal Government had that they would buy any product they
did approve. That eliminated some of what we refer to as the
market risk of developing a drug. And then the subsidizing of
clinical trials eliminated some of the scientific risk of
developing a drug.
Mr. Comer. But what could Congress do to build on the
momentum of Operation Warp Speed to continue investing in
treatments and vaccines for other diseases?
Mr. Garthwaite. This is a really great question actually.
You know, a lot of us want to put the pandemic behind us. We
have the vaccine. We are trying to move forward, I think, both
in the United States and globally. We want to come to a
solution for this. I think it would be a real shame if we
squandered the sort of momentum and information we had about
the importance of investing in vaccines, but also in other
therapeutics related to anti-infectives. I think, in
particular, if Congress wants to really work in this area, we
need to come up with a solution for developing next generation
antibiotics and how we want to fund the development of them and
pay for their marketability.
We knew that prior to the pandemic, but I also want to note
that the next global disease burden might not be a virus,
right? It might be antibiotic-resistant bacteria. And I think
we need to focus on really developing treatments for the next
pandemic, but realize the next pandemic might look very
different from COVID.
Mr. Comer. In today's innovation cycle, I believe less than
10 percent of drugs get approved. How much investment goes into
each drug prior to seeking FDA approval?
Mr. Garthwaite. There is a wide range of estimates on sort
of the cost of bringing a drug to market. I think the important
thing to think about here is how we get drugs in the
pharmaceutical market, and here I will disagree vehemently with
Representative Porter on sort of how we think about the cycle
of innovation here. We want, and I think there are lots of you,
if we were at the Kellogg School and we were in a strategy
class, I would be teaching companies to pay attention to what
they are good at and do that.
Early stage companies are very good at developing
innovative drugs. Later-stage companies are good at clinical
trials, dealing with the FDA, sales and marketing. They all
occupy a very valuable place in the supply chain along with the
early stage research investments from the NIH. We need all of
that to bring to market, and we have seen an increasing
specialization in the pharmaceutical market, not because of
some worry about anti-competitive practices, but really because
we want those early stage companies to invest. That said, those
early stage companies are often going to fail. They are going
to go out of business. And so when you start to add up sort of
what do we spend on R&D and you only look at the winners, the
people whose drugs work, you are doing a disservice to this
conversation. You also have to look at the losers.
Mr. Comer. OK. Thank you. My last question is for Mr.
Gonzalez. AbbVie has received 130 patents on Humira and 88
patents on Imbruvica. These patterns include intellectual
property related to the discovery, uses, improvements in
manufacturing processes of these medications. Can you explain
why so many patents are necessary for these drugs?
Mr. Gonzalez. If you look at Humira, it is a classic
example. We were approved for the first indication, rheumatoid
arthritis, in 2013. Over the course of the next 14 years, we
developed additional disease states and indications along the
way. All of that took research and development, clinical trial,
working out dosing, and all kinds of technical challenges, and
we learned and invested in innovation along the way. We applied
for patents. Whenever we have meaningful innovation, we apply
for patents.
The other thing is, I think everyone gets somewhat hung up
on the number of patents, and I would say that is partially a
function of the Patent Office in the U.S. that tries to narrow
patents so that they are not overly broad. So sometimes you
will have an innovation, and they will say to you, that is five
different things, go back and break them up into five different
patents, so that is one of the things that causes a larger
number of patents. But the more important thing is this: I can
have one patent, and if no one can work around that patent,
that is all it would take to extend the exclusivity of the
product.
Real innovation is what ultimately gives you the ability to
have value in a patent. If you have meaningless patents or they
are frivolous patents, I can file an IPR at the Patent Office
and have them re-review the patent, and they take down a large
number of patents. It is not expensive. It is not hard to do.
And ultimately, competitors did that with our portfolio, and we
prevailed the vast majority of the times. You can litigate.
We work around patents all the time. If they are not
foundational patents, you try to work around them. If you
believe they are invalid, you invalidate them. You only pay
royalties and license patents that you believe are fundamental
to your ability to create the product. And what is very evident
here is we have highly sophisticated companies, like Amgen,
like Pfizer. They are just like AbbVie. They made a decision
that it was worth licensing our patent portfolio and paying us
a royalty. I can tell you, companies don't do that unless they
believe those patents are valid and meaningful. We don't do it.
And so I think that is the best validation to the level of
innovation and the importance of the portfolio. And in the U.S.
system, if you create something that is inventive, you deserve
the right to get protection. And remember one other thing. We
licensed all biosimilar players 11 years before the last patent
expired. We thought that----
Ms. Porter. The gentleman's time has expired.
Mr. Amin. Congresswoman, may I just intervene there?
Ms. Porter. The gentleman from Maryland, Mr. Sarbanes, is
recognized for five minutes.
Mr. Sarbanes. Thank you, Madam Chair. I appreciate the
opportunity. I want to take a moment to address an argument I
keep hearing from the other side, that H.R. 3 and these other
structural reforms that we are seeking would hurt future
innovation. We all know that drug companies produce lifesaving
therapies and vital medications. That is critical. But we also
know that the current situation is untenable. That is what so
much of the testimony we receive, the stories we hear from our
constituents and families across the country, indicates.
Nearly 1 in 3 Americans say they are unable to take their
medications as prescribed because of the cost. One out of 3.
Innovative medications are worthless if people can't afford
them. I mean, we have to keep that in mind. And drug
manufacturers like AbbVie argue that current prices are
necessary to drive innovation and discover new treatments, but
that is not true. As the committee's investigation revealed,
much of the research these companies are investing in isn't
innovative. It is simply meant to preserve their pricing
monopolies.
According to a 2017 report by the GAO, novel drugs, meaning
those recognized by the FDA as meeting a previously unmet need
or significantly advancing patient care or public health, only
counted for 18 percent of all drug approvals between 2005 and
2016. It is important to note that after H.R. 3 passes, and it
will pass, drug companies will still make a healthy profit. So,
Dr. Kesselheim, help me out here. Do drug manufacturers still
make money on their drugs abroad, despite the fact that these
countries negotiate for lower prices?
Dr. Kesselheim. They absolutely do, and I agree with you. I
think this is one of the big misperceptions I have heard
throughout the day around H.R. 3. H.R. 3 is about trying to
negotiate prices with respect to brand-name drugs better and to
sort of more efficiently make the market in the United States
work, try to ensure that if a drug is not a new or important
drug, then we won't pay a high price for it. Right now, drug
companies set prices at whatever level they want, and Medicare
and Medicaid is required at some levels to pay those prices and
don't have a good way of pushing back and negotiating prices.
For really important, useful new drugs for treating
Alzheimer's disease, I think that under H.R. 3, we would still
expect to pay a very high price that would make those drugs
very profitable to the companies that bring them forward. I
think what H.R. 3 will do is it will give the U.S., just like
other countries do, the ability to negotiate up front and say,
well, this drug is worth us paying a high price, and this drug
is not worth us paying a high price. That is what other
countries do, and it is how they are able to lower prices on
the drugs that they pay for, and that is not what we do.
Mr. Sarbanes. Thanks. That is excellent. I mean, you are
basically describing a value proposition here. If the value of
that drug is worth paying for, the market is going to reflect
that when Medicare goes into the market, the almighty market,
to negotiate. That is all we are trying to accomplish here,
what has been done in other places around the world. The other
thing I will just mention, and you know this for sure, is that
government research plays a huge role in drug development, so
taxpayers are investors here. So taxpayers are investing on the
front end a lot of the times when it comes to the trajectory of
these medications and drugs, but then having to pay again on
the back end exorbitantly because of all these maneuvers that
the industry has managed to embrace.
So, I will just close with this, Madam Chair. I don't
really expect Mr. Gonzalez or other pharmaceutical executives
to behave any differently than they are. There is a profit-
making incentive here that is guiding them. Sadly, the
executive compensation is, as was, I think, laid bare by
Congresswoman Porter, and Congressman Welch, and others, is
operating to drive a lot of this behavior and conduct. There
isn't a whole lot we can do about that. So, Mr. Gonzalez and
others are going to behave the way they are. What we can do is
what we are trying to do, which is to allow the Medicare
program to negotiate on the price of drugs. It is the American
thing to do, we ought to do. We ought to pass this bill. Thank
you for the opportunity and for this hearing, and I yield back
my time.
Chairwoman Maloney. [Presiding.] The gentleman yields back.
The gentleman from California, Mr. DeSaulnier, is recognized
for five minutes.
Mr. DeSaulnier. Thank you, Madam Chairwoman, and thank you
so much for this hearing. I feel your predecessor, Mr.
Cummings', spirit in the room today. Mr. Gonzalez, I am a
survivor of CLL. I have some of your product here. This product
cost about $15,000. My treatment for one pill a day costs about
$500. In Australia, it costs $30. When I asked my oncology team
why that was, they said it is because they can. It is upsetting
to know in your business model that Americans subsidize people
in other countries. I am obviously grateful for the research
and development that kept me alive with this drug, but I would
like to know how it came about and how sustainable it is.
And the No. 1 increase in bankruptcies for American
citizens are because of medical bills. So, in addition to
having to struggle with the co-pays on this product, people
have to worry about losing their home or going into bankruptcy.
And if the tradeoff there is for you and your executives to
make more money, I think that is a question that the American
public should be aware of, in addition to the fact of why are
they subsidizing Australians in this instance.
But I want to ask you a few questions about Humira. In
2018, AbbVie began selling a high-concentration, citrate-free
formulation of Humira, which you marketed as a reduced pain
version of the drug in 2018. Is that correct? Yes or no,
please.
Mr. Gonzalez. That is correct.
Mr. DeSaulnier. Mr. Gonzalez, I want to put up a 2011
strategy presentation obtained by the committee. This is
Exhibit 8 in your materials, and if you turn to page 11, you
will see it. This chart identifies the benefits of various
research projects AbbVie was engaged in in the left column and
benefits in the top one. For Humira's high-concentration
formulation, the presentation identifies ``biosimilar defense''
as one of the benefits. Biosimilar defense, Mr. Gonzalez, is
another way of saying you are protecting from competition, from
biosimilars, getting into the marketplace. Is that an unfair
characterization?
Mr. Gonzalez. I am actually trying to read the page. You
said page 8, correct?
Mr. DeSaulnier. No, I said Exhibit 8, page 11.
Mr. Gonzalez. OK.
Mr. DeSaulnier. While you are looking for that, I am going
to continue because I want to use all my five minutes.
Mr. Gonzalez. I have it now.
Mr. DeSaulnier. And so that one, the question was
biosimilar defense. That means, and I understand you have got
an obligation to your shareholders in your investments. You are
trying to defend against biosimilars getting into the market
sooner than taking away profit share, correct?
Mr. Gonzalez. I don't believe that that is what that means.
What it means is we were working on a formulation which would
reduce pain upon injection. There were multiple aspects of
that, a smaller needle, high concentration, and removing the
citrate buffer.
Mr. DeSaulnier. OK.
Mr. Gonzalez. We believed that would be a differentiated
product for patients.
Mr. DeSaulnier. I apologize for interrupting. It is the
five-minute rule. I would love to take more time. Let's put up
another slide, this time from a presentation to the board of
directors in 2015. This is Exhibit 17, and it is the first
slide and that is up. The presentation states, ``Our defense
strategy remains the same,'' and the second bullet below
defending intellectual property says, ``Gain approval, EU/US,
of Humira high-concentration formulation.'' In both of these
slides, there is no designation for reducing patients' pain.
Now, earlier you confirmed that AbbVie introduced high-
concentration formulation in 2018, correct?
Mr. Gonzalez. Correct.
Mr. DeSaulnier. FDA approved it in 2015. Why did you wait
three years to bring the product up after the FDA approved it?
Mr. Gonzalez. Yes. I mean, we had to buildup the
manufacturing capacity because it required a different
manufacturing capacity. So we actually introduced it first in
just pediatric patients because that is where the need was the
greatest to reduce pains, and then we moved forward from that
to be able to offer it in a more broad-scale market.
Mr. DeSaulnier. Some skeptics would say that the reason for
the delay was to wait until biosimilar manufacturers had
already invested significant resources in developing biosimilar
versions of the original formulation, so you shifted patients
to high-concentration formulation. This anti-competitive
strategy is commonly referred to as product topping. Mr.
Gonzalez, is that an unfair description of what was happening
here?
Mr. Gonzalez. I think it is an unfair description of what
was happening here. To your point a moment ago, Congressman,
when we launched in Europe, the majority of biosimilars had
citrate-free, high-concentration products, so it is not like
this did anything to inhibit their ability to do that. The
second thing I would say is both products are still on the
market in the United States, so that won't change any ability
for a biosimilar to come to the marketplace. And ultimately we
license, through our settlement agreements, all of the IP we
have around high concentration and citrate free. So there is no
difficulty for biosimilars to come forward in the marketplace
with a prior license.
Mr. DeSaulnier. Mr. Gonzalez, I am going to interrupt you
there, and, again, I apologize. Madam Chair, just before I
yield back----
Mr. Higgins. Time.
Mr. DeSaulnier. Arbutimine, which I have spent a lot of
time on, and I am happy that I was the founder of the Cancer
Survivors Caucus, is----
Mr. Higgins. Time.
Mr. DeSaulnier [continuing]. We would just like to see your
books to see how much money goes into innovation for research
and development and how much of it goes into financial
innovation. I yield back.
Chairwoman Maloney. The gentleman's time has expired. The
gentlelady from Massachusetts, Ms. Presley, is recognized for
five minutes.
Ms. Pressley. Thank you, Madam Chair. Patients taking
AbbVie's No. 1 drug, Humira, are battling chronic joint
inflammation, fatigue, and other painful symptoms of rheumatoid
arthritis. Now, the ironic thing here is this medication is
meant to help people, to alleviate their hurt and pain, but due
to steady price increases, AbbVie is causing greater physical
pain, mental hurt, and financial hardship as well. The cost of
prescription drugs is causing strife and suffering for families
across the Nation, and as fatigued as you may be by hearing
these sobering, gut-wrenching accounts, people are even more
fatigued by living them and experiencing them daily.
I have heard from people throughout my district who are
forced to cut pills in half to make them last, people who are
paying medication costs that are the equivalent of a college
tuition, state college, and, at times, even exceeding that,
heart-wrenching, unjust choices people are making simply to
survive, and these individuals are not outliers. According to a
2013 research study from the University of North Carolina, 22
percent of individuals with arthritis were forced to spend less
on basic necessities as a result of high drug prices, and 1 in
5 reported taking fewer medications than prescribed due to
cost. Madam Chair, I would like to enter that 2013 research
study from U of NC into the record.
Chairwoman Maloney. Without objection.
Ms. Pressley. Dr. Kesselheim, from your experience serving
families in my district, the Massachusetts 7th, how can
tradeoffs like these impact the patient's overall health?
Dr. Kesselheim. Oh, very substantially. I mean, I think a
lot of patients struggle with high drug prices and, you know,
come looking for, you know, ways of trying to address those,
you know, when they come into my office. And, you know, there
are sometimes that I can send them to, you know, patient
support groups, but a lot of times, unfortunately, they may not
qualify or there may be a lot of hoops that they have to jump
through, or those kind of, you know, charity, but charity only
lasts for a certain amount of time and then it ends. So, you
know, I think that this is a major issue, and it leads people
to stop taking their medications or to, you know, have to make
difficult decisions about other spending in their lives as
well.
Ms. Pressley. Thank you. Mr. Gonzalez, you know your
company's pricing decisions have very real impacts on patients'
lives. The committee reviewed approximately 400 complaints from
patients and caregivers begging you to lower the price of
Humira, yet your company repeatedly does the opposite and
denies desperately needed relief for these patients. Although
your primary patent expired in 2016, there is still no
competition in the U.S. market. Now, according to documents the
committee received as a part of our investigation, on page 9 of
Exhibit 14, AbbVie executives predicted that Humira would have
three to five biosimilar competitors in the U.S. by the first
quarter of 2017. Mr. Gonzalez, did that prediction come to
pass? Yes or no.
Mr. Gonzalez. No.
Ms. Pressley. It did not, that is right. Using a variety of
anti-competitive practices, AbbVie has suppressed alternative
drug options in the U.S. market until 2023. That will allow
your company to continue to exploit patients and to rake in
astronomical profits. Mr. Gonzalez, will you admit the lack of
competition means that government has to pay more, and patients
have to make greater sacrifices? Yes or no.
Mr. Gonzalez. Congresswoman, I would like to address the
comment you made earlier.
Ms. Pressley. Yes or no, Mr. Gonzalez.
Mr. Gonzalez. Yes.
Ms. Pressley. Are patients having to pay more and make
greater sacrifices? AbbVie's own documents estimate that the
delay will cost the U.S. healthcare system at least an
additional $19 billion, and for patients, it will cost them
their physical, psychological, and financial health. We live in
the richest country on the planet, yet drug prices are so high
that people can't afford to live happy, healthy, longer lives.
People demand deserve and require better from AbbVie and all
other price gouging drug companies. Thank you, and I yield
back.
Chairwoman Maloney. The gentlelady yields back. The
gentleman from California, Vice Chair Gomez, is recognized for
five minutes.
Mr. Gomez. Thank you, Madam Chair. I wanted to focus in on
a part of Mr. Gonzalez's testimony. He mentioned AbbVie's use
of a Patient Assistance Program, which we examined last fall.
But before I go on to Mr. Gonzalez, Dr. Kesselheim, is it
correct to say manufacturers like AbbVie benefit from third-
party patient assistance foundations? Yes or no.
Dr. Kesselheim. Yes, they do.
Mr. Gomez. Thank you. And one of those third-party
foundations is the Patient Access Network, or PAN Foundation.
Mr. Gonzalez, your company makes donations to the PAN
Foundation, correct?
Mr. Gonzalez. Correct.
Mr. Gomez. I would like to display a November 2017 email
from Mr. Dan Klein, the president of the PAN Foundation, to
AbbVie's director of the Patient Access Program. This is
Exhibit 27 in your packet. In this email, Mr. Klein is seeking
a donation from your company to help offset the cost of the
drug, Humira. He wrote, ``We also know these patients would be
much more likely to start and stay on treatment if they were
not stymied by high, out-of-pocket cost.'' Mr. Klein is
essentially saying that by making a donation to his foundation,
AbbVie will be able to attract and retain more Humira patients.
Mr. Gonzalez, are donations to patient assistance foundations
part of AbbVie's strategy to maximize sales or the use of your
product?
Mr. Gonzalez. No, they are not. We do it as a donation
because we feel that it is appropriate. We do it by disease
state. The foundation is not required to use our drug. They can
provide----
Mr. Gomez. Thank you so much. Let me reclaim my time. Mr.
Gonzalez, I would like to switch gears. I understand that
AbbVie co-promotes your cancer drug, Imbruvica, with Janssen
Pharmaceuticals, so that means your company jointly developed
the sales and marketing strategy for this drug, right?
Mr. Gonzalez. That is correct.
Mr. Gomez. But AbbVie's subsidiary, Pharmacyclics, leads
U.S. commercialization and sales, correct?
Mr. Gonzalez. That is correct.
Mr. Gomez. In 2017, AbbVie and Janssen executives met to
evaluate ``optimal spend to maximize Imbruvica sales growth in
existing and new indications.'' This is Exhibit 24 in your
packet. A chart on page 22 of the presentation breaks down the
proposed spending for the next fiscal year. The chart includes
a line item for foundations with the proposed, ``collaboration
spend of $55 million in Fiscal Year 2017.'' This is the largest
single proposed increase of any spending amount two companies
would spend together, correct?
Mr. Gonzalez. I am not familiar with this document, but I
would assume so, yes.
Mr. Gomez. So let me ask you again. Are donations to the
Patient Assistance Foundations part of AbbVie's strategy to
maximize sales? Yes or no.
Mr. Gomez. No.
Mr. Gomez. Mr. Gonzalez, you also said that your patient
assistance programs provide one year free drug costs, right?
Correct?
Mr. Gonzalez. That is correct.
Mr. Gomez. What happens to the patient after that one year?
Mr. Gonzalez. They reapply and we refund it.
Mr. Gomez. And the reason why I am asking this is that, you
know, we understand that a lot of the investment, everything
from research to marketing, also the donations to these
foundations, is all taken on into the price of the drug. It
might appear that it is something that is altruistic, but you
also get tax write-offs. You also get other benefits. I am one
of the few members of this committee who also serves on the
Ways and Means Committee, which is the tax committee. A lot of
the programs that you are talking about is just a way to get
people hooked on these drugs that are high cost in the long
term. It subsidizes the patient, but that is not who you are
going after. Really, these drug companies are going after the
spin from the insurance companies, increasing the number of
people that are on the drug, but also increasing the amount of
money that you are receiving.
One of the things that we need to do is we understand that
the system is broken, everything from the drug companies, to
the insurance companies, to now the patient assistance
programs, that all jack up the price of pharmaceutical drug
prices in this country. With that, I yield back.
Chairwoman Maloney. The gentleman yields back. I thank him
for his statement. But before we close, I would like to offer
the ranking member an opportunity for any closing remarks.
Ranking Member Comer, you are now recognized.
Mr. Comer. Thank you, Madam Chair, and I just want to be
very clear what the Republican position is. We strongly support
a patent system that encourages innovation. However, we
certainly don't want to see a patent system that is abused, and
there are always going to be bad actors, and those bad actors
need to be held accountable. But to be completely candid about
this conversation and the Democrat proposal that has been
mentioned several times today, the Biden Administration and the
House Democrats have lost a lot of credibility when we talk
about the patent system when the Biden Administration announced
its effort to give our pharmaceutical intellectual property,
with respect to the COVID vaccine, to China, a country that
still has a lot of questions to answer about the origination of
the COVID-19 virus. So we have got some credibility issues on
the other side of the aisle with respect to the patent system.
Nobody wants to see price gouging. Nobody wants to see
excessive CEO pay on the backs of hardworking Americans that
have to make a decision on whether to pay for their medicine or
put food on the table. We all know the horror stories, and we
all know people that have had terrible experiences in trying to
buy medication. I think there is a way that we can come to
terms and protect our patent system because it takes
investment, private sector investment, to come up with the
cures for all the diseases that we want cured in America. But
at the same time, we have to make sure that the patent system
is not abused.
So I look forward to working with Members of Congress that
feel this way and that will respect our patent system, but hold
those accountable who choose to abuse the patent system. With
that, Madam Chair, I yield back.
Chairwoman Maloney. Thank you. The gentleman yields back.
Before I close, I would like to enter into the record
several letters and statements for the record the committee
received leading up to today's hearing. These statements
include: Professor Robin Feldman at UC Hastings Law, Protect
Our Care, Families USA, the American Economic Liberties
Project, the Health Advocacy Summit, the Maryland Citizens
Health Initiative, Treatment Action Group, and many more. I ask
unanimous consent that these materials be entered into the
official hearing record.
So ordered.
Chairwoman Maloney. At the beginning of today's hearing, we
heard patient stories of how they struggled to afford AbbVie's
products, including Humira and Imbruvica. AbbVie's CEO, Mr.
Gonzalez, thought to cast blame on others for AbbVie's high
prices, but the facts show that AbbVie raised prices on
Americans for one simple reason: greed. This morning, we
released a staff report based on our review of over 170,000
pages of AbbVie's own documents and data. These documents show
AbbVie intentionally targeted the U.S. for higher prices as it
cut prices in the rest of the world. And Mr. Gonzalez admitted
today that his company charges higher drug prices in the United
States because other countries are doing such a good job of
negotiating lower prices for their citizens. Every American
should be outraged.
AbbVie's internal data show that Medicare would have saved
billions of dollars had it been able to negotiate directly with
the company. The documents also show that the financial
assistance for patients that AbbVie provides are not actually
charity. They make AbbVie more money by keep using their
products. AbbVie has also claimed that it needs to charge high
prices to stimulate innovation, but the company's own internal
documents show that much of its research budget is actually
dedicated to suppressing competition. AbbVie also employed
potentially illegal anti-competitive tactics to delay lower
price biosimilars from coming to market. Those tactics led to
higher prices and less innovation for Americans, but more
profits for the executives at AbbVie.
Enough is enough. Congress has an opportunity, and I would
say a responsibility, to ensure that Americans no longer have
to choose between taking their lifesaving medication or paying
their rent and putting food on their table. We must pass H.R.
3, which would finally empower Medicare to negotiate lower
prices, just like the Defense Department and the VA-HUD already
do, and that foreign countries, they do. And we must pass
legislation to crack down on AbbVie's anti-competitive abuse so
market competition can drive down prices.
I urge my colleagues on both sides of the aisle, especially
those on the other side of the aisle who have acknowledged the
harm caused by skyrocketing drug prices, to join me in pushing
for these reforms. This should be a bipartisan issue. I hope we
can all agree that no person should go without potentially
lifesaving treatment in this country. Let's act together. Let's
do something about it. Let's help the American people.
I thank everyone who participated, and I particularly want
to thank our panelists for their remarks, and I want to commend
my colleagues for their important contributions, their
questions, for participating in this important conversation.
With that, and without objection, all members have five
legislative days within which to submit extraneous materials
and to submit additional written questions for the witnesses to
the chair, which will be forwarded to the witnesses for their
response. I ask our witnesses to please respond as promptly as
they are able to.
Chairwoman Maloney. I also want to thank the staff of the
Oversight Committee for what I would call a labor of love and
deep commitment, and you can see that in reading their report.
I particularly thank the team leaders, Ali Golden and Amish
Shah, for an extraordinary effort and an extraordinary hearing
today.
This hearing is adjourned.
[Whereupon, at 1:44 p.m., the committee was adjourned.]