[Senate Hearing 117-822]
[From the U.S. Government Publishing Office]
S. Hrg. 117-822
A PRESCRIPTION FOR CHANGE:
CRACKING DOWN ON ANTICOMPETITIVE
CONDUCT IN PRESCRIPTION DRUG MARKETS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON COMPETITION POLICY,
ANTITRUST AND CONSUMER RIGHTS
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
JULY 13, 2021
__________
Serial No. J-117-27
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.judiciary.senate.gov
www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
54-645 WASHINGTON : 2026
COMMITTEE ON THE JUDICIARY
RICHARD J. DURBIN, Illinois, Chair
PATRICK J. LEAHY, Vermont CHARLES E. GRASSLEY, Iowa, Ranking
DIANNE FEINSTEIN, California Member
SHELDON WHITEHOUSE, Rhode Island LINDSEY O. GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota JOHN CORNYN, Texas
CHRISTOPHER A. COONS, Delaware MICHAEL S. LEE, Utah
RICHARD BLUMENTHAL, Connecticut TED CRUZ, Texas
MAZIE K. HIRONO, Hawaii BEN SASSE, Nebraska
CORY A. BOOKER, New Jersey JOSH HAWLEY, Missouri
ALEX PADILLA, California TOM COTTON, Arkansas
JON OSSOFF, Georgia JOHN KENNEDY, Louisiana
THOM TILLIS, North Carolina
MARSHA BLACKBURN, Tennessee
Joseph Zogby, Chief Counsel and Staff Director
Kolan L. Davis, Republican Chief Counsel and Staff Director
SUBCOMMITTEE ON COMPETITION POLICY,
ANTITRUST AND CONSUMER RIGHTS
AMY KLOBUCHAR, Minnesota, Chair
PATRICK J. LEAHY, Vermont MICHAEL S. LEE, Utah, Ranking
RICHARD BLUMENTHAL, Connecticut Member
CORY A. BOOKER, New Jersey JOSH HAWLEY, Missouri
JON OSSOFF, Georgia TOM COTTON, Arkansas
THOM TILLIS, North Carolina
MARSHA BLACKBURN, Tennessee
Keagan Buchanan, Democratic Staff Director
Wendy Baig, Republican Staff Director
C O N T E N T S
----------
OPENING STATEMENTS
Page
Klobuchar, Hon. Amy.............................................. 1
Lee, Hon. Michael S.............................................. 3
WITNESSES
Abbott, Alden.................................................... 7
Prepared statement........................................... 42
Kades, Michael................................................... 5
Prepared statement........................................... 65
Levitt, Geoffrey................................................. 8
Prepared statement........................................... 81
Mitchell, David.................................................. 12
Prepared statement........................................... 47
Moodie, Rachel................................................... 10
Prepared statement........................................... 77
Responses to written questions............................... 99
APPENDIX
Items submitted for the record................................... 41
A PRESCRIPTION FOR CHANGE:
CRACKING DOWN ON ANTICOMPETITIVE
CONDUCT IN PRESCRIPTION DRUG MARKETS
----------
TUESDAY, JULY 13, 2021
United States Senate,
Subcommittee on Competition Policy,
Antitrust, and Consumer Rights,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:30 p.m., in
Room 226, Dirksen Senate Office Building, Hon. Amy Klobuchar,
Chair of the Subcommittee, presiding.
Present: Senators Klobuchar [presiding], Blumenthal,
Ossoff, Lee, Hawley, Cotton, and Blackburn.
Also present: Senators Durbin and Grassley.
OPENING STATEMENT OF HON. AMY KLOBUCHAR,
A U.S. SENATOR FROM THE STATE OF MINNESOTA
Chair Klobuchar. I want to thank my colleague, Senator Lee,
and our staff, and his staff who work very well together, as
well as Senator Grassley is with us, who has been such a leader
when it comes to these competition issues way before it was
cool. Thank you for being here, Senator Grassley.
This is the latest in the Competition Policy's Subcommittee
series of hearings examining America's monopoly problem. Today,
we're going to focus on the lack of competition in our
prescription drug markets.
The stakes could not be higher. According to the Centers
for Medicare & Medicaid Services, healthcare spending accounted
for 17.7 percent of U.S. gross domestic product in 2019. That
is more than one-sixth of the American economy. That is
projected to rise to 19.7 percent by 2028. Rising prescription
drug prices is a key driver in those numbers.
But it isn't just about GDP. It's also about the all too
real human costs that we will hear about today. For some, the
ability to access prescription drugs is what enables them to
work, to care for their families and loved ones, preserve their
mental health, or just get through the day without excruciating
pain. For others, access to safe and affordable prescription
drugs is nothing less than matter of life or death.
Nearly 20 percent--just remember this figure if you forget
all of the other ones--nearly 20 percent of older adults report
not taking their medicines as prescribed because of cost. That
means, and I have met some of these seniors at home, they're
cutting pills in half, they are saving little drops of insulin
for the next day.
Even drugs that have been available for decades, like
insulin, are out of reach for some. In my State, one of my most
memorable families that I've gotten to know is the mom and dad
of Alec. He was a restaurant manager, had a pretty good job in
the suburbs of the Twin Cities, and when he aged off his
parents' healthcare at age 26, he had to start paying for his
own insulin. He was trying to cut the doses and do it himself,
and he didn't do it right one day, and he died. His mother has
made it her life's work to make sure that never happens to
anyone again.
Americans should not have to choose between risking their
lives and risking financial ruin because of the cost of
prescription drugs. I actually got involved in the area of
antitrust, not just because I drew the good luck of working
with Mike Lee on the Subcommittee, but when I was actually a
brand new Senator, and pharmacists from my State and doctors
started calling me about an infant heart drug called
indomethacin. The price of the drug, the cost of the drug, had
suddenly gone up from $78 per treatment to $1,614, more than 20
times its original price and 44 times the price in Canada.
What had happened was one company called Ovation--they
later sold it to another company--they had cornered the market.
They bought the other competitive drug. There is absolutely no
doubt. There were two drugs that were able to be used for this
condition, and then, once they had done that and reached the
monopoly jackpot, they basically raised the prices that much.
It took years and years, suit by the FTC that failed because of
conservative precedent that was out there when it comes to
antitrust or consumer issues.
Other States, red States, blue States joined in the
lawsuits, but that just didn't work. And so what happened was
it took years and years for another competitor to come in, but
all during that time, they reaped the benefit of a monopoly.
So, ideas for solutions. We have the work that Senator
Grassley and I have done on pay-for-delay. One court case
helped with that, but there is a lot more work that can be
done, and I believe that if we put that bill up for a vote on
the Senate floor in any which way, we would get that done. As
you know, that's when brand names pay off generics to keep
their products off the market.
We've got problems of product hopping, in which branded
pharmaceutical companies force patients with an established
drug with an expiring patent to a new drug with a new patent,
often with little or no therapeutic difference, just to avoid
competition from generics. That's a bill that our friends
Senator Cornyn and Senator Blumenthal have that could get at
that.
Sham petitions. Just before a generic is going to come on
the market, the brand, it files a petition, says it's not safe,
slows it down. That's another bill that Senator Grassley and I
have to do something about that.
Other solutions. Senator Lee and I have worked together on
a bill to allow the importation of drugs in certain
circumstances when there are issues with pricing. Senator
Grassley and I have another bill to do that more permanently of
reimportation.
We have got the work that we could do on sweeping reform,
which is contained in the bill that a number of us has put
forward.
Then, finally, making sure that we are funding the agencies
who go after these problems. We're proud that we got our bill
through, Senator Grassley and I did, on that issue.
We also can empower our seniors to negotiate drug prices. I
think seniors can get a pretty good deal through Medicare if
negotiation was allowed, something that the President of the
United States directly addressed in the State of the Union.
Those are just a few of my ideas. I know there are others,
and I want to thank our witnesses for coming today, and with
that, I will turn it over to Senator Lee.
OPENING STATEMENT OF HON. MICHAEL S. LEE,
A U.S. SENATOR FROM THE STATE OF UTAH
Senator Lee. Thank you, Chair Klobuchar, and thanks to all
of you for being here today. Drug competition in pharmaceutical
markets, as well as drug pricing, are frequent and recurring
topics of congressional oversight, and with good reason. Access
to prescription drugs is an issue that inevitably affects every
life at one point or another.
If a lack of competition leads to higher prices, as it
tends to do, because one thing we know about competition--when
it increases, prices tend to go down, quality tends to go up.
The opposite happens when there's diminished competition. So if
the lack of competition leads to higher prices, we can live
without some things. You can live without the latest smartphone
or free shipping for gadgets made in China. But a lot of people
can't do without prescription drugs. My wife, Sharon, for
example, is one of 7 million Americans who can't live without
insulin.
Innovation competition and affordable prices are arguably
more important to prescription drug markets than almost any
other consumer market we can think of. And it's a consumer
market that happens to be particularly important to the
sustaining of human life.
This makes the continuing rise in drug prices all the more
concerning. When we look at the data from 2007 to 2018, the
cost of prescription drugs during that period rose 3 times
faster than inflation. That's after we take into account
manufacturing discounts.
Last month, AARP released findings that drug price
increases outpaced inflation, had cost taxpayers $38 billion
just between 2015 and 2019 alone.
I expect this will only worsen in the wake of the
inflationary economic policies that our Government has put in
place over the last year and a half, regardless of any
Executive order, and regardless of which administration is in
power. When our Government expands its role, it tends,
inevitably, to inflate, and that has an effect here.
Make no mistake. This is a multifaceted problem, and it's
one that requires a multifaceted solution. Antitrust
enforcement is not a panacea for drug prices, but it can
certainly help. Failure to enforce them can, of course, lead to
catastrophic consequences. In fact, our antitrust enforcers
have developed an impressive track record thus far in stopping
anticompetitive patent litigation settlements and attempts to
game the FDA regulatory process to their unfair advantage.
Since the 2013 Actavis decision, pay-for-delay settlements
have slowed to barely a trickle. The task is now to remain
vigilant until that trickle is no longer even a trickle, but
it's gone.
The benefit of antitrust enforcement is that it takes
matters on a case-by-case basis rather than attempting to
impose a one-size-fits-all approach on the entire market. This
allows us to stop--stop harmful conduct without needlessly,
unnecessarily burdening pro-competitive and innovative conduct,
something that usually proves elusive in comprehensive
rulemaking in legislation.
In situations that are more straightforward, like getting
access to brand samples in order to develop a generic
alternative, it's easier for Congress to step in and remove the
need for lengthy investigations and lengthy litigation. This is
what we did with the CREATES Act, a bill that I was honored to
Co-Sponsor along with Senators Grassley, Leahy, and Klobuchar.
My understanding is this that since it became law back in
2019, at the end of that year, the CREATES Act has already made
it much easier for generic competitors to gain access to the
samples that they need for FDA-mandated testing. At the time,
CBO estimated that the CREATES Act would save taxpayers nearly
$4 billion over 10 years.
Today's hearing may also help shed light on other areas
where Congress could step in to reform regulations and policies
that create anticompetitive and anticonsumer incentives. I'll
be interested to hear the witnesses' thoughts on potential PBM
reforms and whether reform to our patent laws might help remove
the impetus behind practices like product hopping and patent
thickets, saving money for consumers, and freeing up antitrust
enforcement resources to address other harms.
I look forward to each of our witnesses testifying today
and look forward to our conversation. Thank you.
Chair Klobuchar. Very good. Okay. Excellent. Senator
Grassley is going to come back, so we look forward to that, and
his name was mentioned enough that he doesn't need to do an
opening. But we're very pleased he was here.
I'm going to introduce our witnesses, and thank you,
Senator Lee, for mentioning the CREATES Act, which I failed to
do, and you did excellent work on that bill.
Our first witness today is Michael Kades. Mr. Kades is the
director for markets and competition policy at the Washington
Center for Equitable Growth. His research focuses on
competition and antitrust enforcement. Prior to joining
Equitable Growth, he worked as antitrust counsel for me on this
Subcommittee as a detailee from the FTC, so he knows this
Committee well.
Before that, he spent nearly 20 years as an attorney at the
FTC, including working on a number of healthcare cases. It's
good to have him back.
Our second witness is Alden Abbott. Mr. Abbott is currently
a senior research fellow at George Mason University, Mercatus
Center, where he focuses on antitrust issues. He is the former
general counsel of the Federal Trade Commission. Prior to his
tenure as FTC general counsel, he worked at the Heritage
Foundation, and BlackBerry, and held several senior positions
in the Federal Government.
Look, there are so many of them, I'm not going to say all
of them. But it's very--okay, I will, because it's--Deputy
Director of the Office of International Affairs, Associate
Director of the Bureau of Competition at the FTC, Acting
General Counsel, Assistant General Counsel, and Chief Counsel
of the National Telecommunications and Information
Administration, and Special Assistant to the Assistant Attorney
General for Antitrust. That's quite a resume.
Our third witness is Geoffrey Levitt, and Mr. Levitt is co-
chair of DLA Piper's life sciences policy and regulatory group.
He is testifying today on behalf of the Pharmaceutical Research
and Manufacturers of America, a trade group representing many
of the country's leading biopharmaceutical companies. He
previously served as senior vice president and chief counsel
for Pfizer's Upjohn division in China and as chief regulatory
counsel for Pfizer and Wyeth Pharmaceuticals.
He also previously served as chair of the Pharmaceutical
Research and Manufacturers of America's Law Section Executive
Committee.
Next up will be Rachel Moodie. Dr. Moodie is vice president
and head of Legal and Intellectual Properties, Biosimilars at
Fresenius Kabi, a global--did I say that right? Very good--a
global healthcare company that specializes in lifesaving
medicines and technologies for infusion, transfusion, and
clinical innovation. Previously, she served as a patent
attorney for biosimilars at a major pharmaceutical company, and
director and patent attorney as well at Merck. She has a Ph.D.
in biochemistry and molecular biology.
Our final witness is David Mitchell. Mr. Mitchell is the
founder and president of Patients for Affordable Drugs. He is a
patient advocate focused on promoting policies to lower the
cost of prescription drugs. He's also a patient who relies on
prescription drugs and expects to be in continuous treatment
for the rest of his life. He has 40 years of experience working
on healthcare and public health policy, and has worked to
reduce teen smoking, increase use of seat belts, fight drunk
driving, and improve child health and safety.
I want to thank the witnesses for being here today. I guess
we'll swear in the witnesses. Okay. You want to stand and--
thank you.
[Witnesses are sworn in.]
Thank you. You can be seated, and I'll now recognize the
witnesses for 5 minutes of testimony each, starting with Mr.
Kades, then we'll go through in that order, so. Thank you.
STATEMENT OF MICHAEL KADES, DIRECTOR FOR
MARKETS AND COMPETITION POLICY, WASHINGTON
CENTER FOR EQUITABLE GROWTH, WASHINGTON, DC
Mr. Kades. Thank you, Chairwoman Klobuchar and Ranking
Member Lee, for the opportunity to testify about prescription
drugs markets and competition, a critical issue. It's also an
honor to be back with the Subcommittee, although it's a little
more stressful from this side of the dais.
Prescription drugs cost America nearly $370 billion a year,
forcing too many to choose between their health and other
necessities, like rent or food, or to ration among different
medicines. Protecting competition in these markets both reduces
the financial burden on Americans and improves their
healthcare.
Unfortunately, that is not what we are doing. Prescription
drug markets are rife with persistent anticompetitive conduct.
Current antitrust law as interpreted and applied encourages
this activity instead of deterring it. Over the past 4 years,
the Federal courts have shown an almost neurotic fear of
overenforcement, have increased burdens on plaintiffs, and
narrowed the scope of antitrust law.
Courts have raised inappropriate and unnecessary hurdles to
antitrust enforcement, which allows anticompetitive activity to
escape condemnation. For example, courts are discounting direct
evidence of anticompetitive effects, ingenuously accepting
business justifications without sufficient evidence,
discounting the value of potential competition, and dismissing
the likelihood that exclusionary conduct can be successful.
Both economic research and empirical results discredit that
approach. As misguided as that approach is, it has opened the
door to anticompetitive conduct, particularly in prescription
drug markets. By their nature, these markets are susceptible to
abusive and anticompetitive conduct. Compared to other
industries, harming competition is easy to accomplish and
extremely profitable. Preventing or just delaying, generic or
biosimilar competition increases the dominant firms' revenues
and profits substantially.
So, not surprisingly, within the pharmaceutical industry,
some companies have taken advantage of more lenient antitrust
rules to adopt increasingly problematic strategies that
increase drug costs.
It would take more than 5 minutes to catalog every
anticompetitive tactic in these markets. I focus on three in my
testimony.
Rebate traps, which are really a penalty provision that
allow a dominant firm to punish buyers who seek to purchase a
lower cost alternative.
Product hopping, in which a dominant firm tweaks its
product to deaden the impact of generic competition. In one
case, this amounted to literally putting a tablet inside a
capsule and selling it as a new product.
Pay-for-delay patent settlements, in which a branded
company pays its generic competitor to stay out of the market.
Even in this area, where there has been significant, important
enforcement success, that success is both incomplete and
tenuous.
It would be wrong, however, to think anticompetitive
conduct and market power are uniquely a prescription drug
market phenomenon. We are seeing this kind of conduct growing
across the economy, in markets as different as digital,
agriculture, and labor.
There are two types of broad reforms we can look at.
Updating the antitrust laws would go a long way to preventing
harmful conduct, while promoting aggressive competition in
prescription drug markets and across the economy. The
Competition in Antitrust Law Enforcement Reform Act would
significantly address most of the problems I discussed in my
testimony.
Second, certain problems that are unique to pharmaceutical
markets may require special legislation. Senator Lee, you
talked about the CREATES Act, which was a bipartisan bill that
followed precisely this approach.
Without reform, attacking competition--I'm sorry. Without
reform, attacking anticompetitive conduct in prescription drug
markets, and across the economy, will be unnecessarily
difficult. Consumers, small business, and workers will suffer.
I urge Congress to stem the tide of anticompetitive conduct by
restoring the vitality of the antitrust laws, which will
substantially improve competition in prescription drug markets.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Kades appear as a submission
for the record.]
Chair Klobuchar. Very good. Thank you very much. Mr.
Abbott.
STATEMENT OF ALDEN ABBOTT, SENIOR
RESEARCH FELLOW, GEORGE MASON UNIVERSITY,
MERCATUS CENTER, FAIRFAX, VIRGINIA
Mr. Abbott. Thank you, Chair Klobuchar, Ranking Member Lee,
distinguished Members of the Subcommittee. I'm Alden Abbott,
senior research fellow at Mercatus Center at George Mason
University. My research focuses primarily on antitrust and
competition policy. I will focus on three key points.
One: Federal antitrust enforcement has been robust and
effective in promoting prescription drug market competition.
Not perfect, but effective. New enforcement tools are not
needed, but additional resources to support FTC and DOJ
enforcement are warranted.
Two: Antitrust enforcement directed at prescription drug
markets should remain attentive to potential efficiencies
associated with the practices under review. Specialized
legislation, generally, is not appropriate in this area. There
are exceptions. As already mentioned, the CREATES Act is one,
which I testified in favor of a few years ago.
Three: Antitrust enforcement alone will not eliminate all
competitive problems in prescription drug markets or in
healthcare in general. Indeed, I would argue most of the
serious competitive problems will remain because of the nature
of a regulatory and legal system in healthcare. Fundamental
regulatory reform would be needed.
First, antitrust enforcement. The FTC and DOJ have many
decades of experience in studying and bringing appropriate
antitrust enforcement actions concerning healthcare markets in
general, and the pharma sector in particular. FTC has also
carried out public hearings, undertaken sectoral
investigations, and issued numerous reports on competition
policy in these areas.
An April 2021 Bureau of Competition staff report summarizes
the many recent FTC initiatives in pharma. These include
actions directed at monopolization and agreements not to
compete involving pharma products, mergers involving pharma
products, mergers involving distribution, agreements involving
monopolization, price and price-related terms, and schemes to
obstruct innovative methods of delivering and financing pharma
products. In addition, the report describes a variety of FTC
friend of the court briefs concerning pharma competition.
DOJ's Antitrust Division has been very busy lately in
bringing prosecutions against hardcore cartel conduct by
generic drug manufacturers. A March 2021 division update
explains seven firms have been prosecuted, five have already
agreed to deferred prosecution agreements. Those firms have
agreed to pay over $426 million in criminal penalties for
collusion that affected over $1 billion of generic drug sales.
And that investigation continues.
The two recent Government reports tell a success story. The
FTC and DOJ would, however, benefit from additional resources
to carry out their enforcement duties, given a great economic
significance and complexity of pharma market issues.
Second, enforcement should continue to focus on
efficiencies. Apart from per se illegal cartel conduct, Federal
antitrust enforcers apply the antitrust rule of reason in
assessing potentially anticompetitive pharma market practices.
They ask whether particular conduct under scrutiny yields
consumer welfare-enhancing efficiencies that would offset
potential anticompetitive effects. Efficiencies might include,
for example, practices that reduce manufacturing or
distribution costs to the benefit of consumers. They might also
involve enhanced product innovation facilitated by patents and
other intellectual property.
In the pharma sector, issues of anticompetitive harm and
pro-competitive efficiencies often are associated with patents.
Harm may arise from the strategic use of patents to delay or
deter entry from potential competitors. At the same time,
however, patents may facilitate efficient and innovation-
enhancing distribution of new technologies. There is a good
reason why the U.S. is a leading country in production of new
pharmaceuticals, and that has been our robust patent system.
Patents can be abused, but they can be very important
incentive devices as well. I would argue Congress should not
likely legislate in this area, except in cases of clear abuses,
as in the CREATES Act.
Finally, as I indicated earlier, antitrust is not enough.
Broader U.S. healthcare reform itself is important. That's been
pointed to by this administration, the prior ones, in open
reports. I thank you for your time. I look forward to your
questions.
[The prepared statement of Mr. Abbott appears as a
submission for the record.]
Chair Klobuchar. Thank you very much, Mr. Abbott. Mr.
Levitt.
STATEMENT OF GEOFFREY LEVITT, OF COUNSEL
DLA PIPER APPEARING ON BEHALF OF PHARMACEUTICAL
RESEARCH AND MANUFACTURERS OF AMERICA,
WASHINGTON, DC
Mr. Levitt. Good afternoon, and thank you, Chairwoman
Klobuchar, Ranking Member Lee, Chairman Durbin, and Members of
the Subcommittee for the invitation to testify.
I've worked for innovative pharmaceutical companies for
most of my career, and I appreciate the Subcommittee's focus on
ensuring robust competition. While I am currently with a law
firm, I spent many years as in-house counsel in the
biopharmaceutical industry, as Chairwoman Klobuchar noted, and
I bring that perspective to my testimony today on behalf of the
Pharmaceutical Research and Manufacturers of America, or PhRMA.
PhRMA represents the Nation's leading biopharmaceutical
research companies, which are dedicated to developing new
treatments and cures to enable patients to live longer,
healthier lives. PhRMA's activities on behalf of its members
are limited by the antitrust laws and PhRMA's antitrust
compliance policy. As I am here on behalf of the trade
association, I won't be able to comment on individual
companies' current or future strategies relating to drug
pricing, R&D, marketing, relationships with customers, or how
member companies might or might not individually respond in the
marketplace to a change in law or regulation.
The highly competitive structure of the U.S.
biopharmaceutical market has made it possible to bring new
medical advances to patients, while holding medicine's share of
health spending nearly constant. This competition has been
facilitated by regulatory frameworks that provide abbreviated
approval pathways for generic and biosimilar competition, while
maintaining incentives for innovative medicines. These
frameworks have shifted utilization from brand medicines to
generics and biosimilars so successfully that 91 percent of all
prescriptions for drugs in the U.S. are filled with generic
medicines, saving the healthcare system hundreds of billions of
dollars.
Brand medicine prices after discounts and rebates have
grown in line with or below inflation for the past 5 years.
Last year, these net prices actually declined by 2.9 percent,
and this trend is expected to continue. Net prices for brand
drugs are projected to remain flat or drop by up to 3 percent
annually through 2025. This is due, in large part, to robust
competition in the drug pricing market.
However, on the pharmacy benefit manager, or PBM side,
negotiating power has become increasingly concentrated, with
just three PBMs now controlling more than three-quarters of the
market. We know that the rebates and discounts negotiated
between drug manufacturers and PBMs are not consistently shared
with patients filling their prescriptions.
So, while the overall U.S. biopharma market has seen price
growth at or below inflation, the patient experience is often
different. Given that nearly half of spending on brand
medicines today goes to entities other than the manufacturers,
an initial step in any drug pricing discussion, in our view,
should be to ensure that these price concessions are shared
with patients.
As to innovation, the U.S. is the global leader in this
space. Of the nearly 8,000 medicines in development globally,
more than half are being developed in the U.S. This is
precisely because we reject government price setting and
protect intellectual property. This strong intellectual
property framework has enabled biopharmaceutical companies over
the past several decades to develop new medicines that have
saved lives and alleviated the burden of disease in many areas,
from cancer to cardiovascular disease to COVID-19.
Undermining IP protections or adopting policies that would
chill industry's ability to innovate would unduly restrict--
could seriously threaten these dynamics--excuse me. This
concern applies equally to any measure that would unduly
restrict companies' ability to obtain patent protection for
improvements to existing products that contribute to disease
treatment and patient care.
In closing, I want to say that the way biopharmaceutical
companies have been frequently mischaracterized by the media
and critics bears little resemblance to the industry that I
spent decades working in. The reality I experienced was of
teams of professionals dedicated to making medicines to cure
disease and save lives, with an unwavering focus on ethics and
compliance. While we have all observed publicized examples of
questionable behavior, we are aware of these examples precisely
because we have a system that provides remedies for
anticompetitive behavior. Isolated cases that have been the
subject of enforcement actions are not evidence of an entire
industry run amok, but rather of a healthy, functioning system.
The U.S. biopharmaceutical market is the most innovative in
the world precisely because it is highly competitive. We urge
caution and respect for the strong IP protections and market-
based policies that have been the foundation of American
innovation. Thank you, and I look forward to your questions.
[The prepared statement of Mr. Levitt appears as a
submission for the record.]
Chair Klobuchar. Thank you very much, Mr. Levitt. Dr.
Moodie.
STATEMENT OF RACHEL MOODIE, VICE PRESIDENT
AND HEAD OF LEGAL AND INTELLECTUAL PROPERTIES,
BIOSIMILARS, FRESENIUS KABI, WASHINGTON, DC
Dr. Moodie. Chairwoman Klobuchar, Ranking Member Lee, and
Chairman Durbin, thank you for the opportunity to talk today on
this important issue.
Fresenius Kabi is a healthcare company that specializes in
bringing affordable, off-patent medicines to patients. We
employ over 4,000 people in the U.S. and have key domestic
manufacturing, research and development, and distribution
centers across the country.
During the pandemic, our injectable medicines were
routinely used to treat patients in the ICUs, and several of
our medicines and devices are currently held in the U.S.
Strategic National Stockpile. One of our products is also used
in the COVID-19 vaccine.
A balanced and fair patent and rebate system is essential
to be able to continue this lifesaving work, as well as
providing branded companies with the time that they need to
recoup their investments and fund the next generation of
innovative drugs before our more affordable products come to
market.
However, Fresenius Kabi has experienced a system shift
whereby branded pharmaceutical companies are now able to hold
on to monopolies for old drugs for much more than 20 years,
long after they've aged out of being thought of as being
considered innovative. This hurts access for patients to
affordable medicines and stresses payment systems that need to
be kept solvent to pay for true innovation.
Prolonged monopolies exacerbate rebate practicing and
intensify the already misaligned incentives for health plans
and pharmacy benefit managers, the PBMs. By extending the
number of years that a rebate and a list price can grow, it
exacerbates and grows the patient out-of-pocket costs, and it
also puts pressure on the PBMs--the PBM to prefer the more
expensive branded products compared to the more affordable
alternatives in order to secure the rebate revenue. Of course,
these benefits to the PBMs are not passed on to the patients.
So far, the current policy debates around drug prices have
failed to address the root cause of the problem, which is an
excessive number of patents around drugs, many of which are low
quality and do not provide true benefits to patients. Because
of the misuse of patent thickets and rebates as marketing
tools, and product hopping as another tool to thwart
competition, the U.S. branded pharmaceutical industry is not
currently operating as a true free market system with downward
pressure at an appropriate time.
I'd like to explain how it's possible to grow a patent
thicket around a single drug. But to be clear, of course,
Fresenius Kabi is in favor of high-quality patents. Our
industry cannot exist without it.
Patent thickets comprise mostly of secondary patents, which
are those patents that are filed after the core patents on the
product are filed. Not all secondary patents are bad. However,
the key to forming a patent thicket is you take each secondary
patent, let's say, for example, a patent that covers a weekly
dosing regimen for a drug, and then you multiply it into child
patents, or they're called continuation patents, each having
incrementally different words. For example, patent one, if I'm
using the same example, might claim dosing every 5 to 7 days.
Patent two might claim dosing every 6 to 8 days, and you keep
going. This forms a family around a secondary invention.
Let's say you have a drug that has 10 such families, and
each family contains, say, 15 continuation patents. That
results in a thicket of 150 patents, all derived from just 10
original patent filings. Most of the patents in that thicket
are those incremental continuation patents that don't bring new
benefits to patients.
I'm not suggesting that all secondary patents are bad. The
problem is the sheer volume of patents strategically thicketed
around a drug which shields most of the patents from scrutiny.
Biosimilar companies do not have the funds and resources to
litigate scores, and certainly not hundreds, of patents. Courts
can't even litigate scores of patents effectively in a single
lawsuit. So how do we know that many of these patents that are
shielded and protected are low quality? The Patent Office
offers a procedure called an IPR, an inter partes review or a
post-grant review, IPR or PGR, to challenge the validity of a
patent.
Statistics from the USPTO show that in 2020, third parties
were successful in having their IPRs instituted against 56
percent of all the patents that they challenged, which
suggested over half of the patents that were challenged were at
least of questionable quality. However, patent thickets can be
created at a cost that's easily affordable to branded
companies. It costs approximately $25,000 to obtain and
maintain just one patent. Conversely, it costs third parties
approximately $1 million to file a single IPR against a single
patent.
Biosimilar applicants cannot economically use IPRs and PGRs
to clear a path through hundreds of patents. This is why
building a patent thicket is a numbers games, designed to
shield patents, side-step the scrutiny of IPRs and PGRs, and
create an inappropriate monopoly.
Among the root causes of patent thickets are the
examination procedures and incentives at the U.S. Patent
Office. This patent thicket trend is particular to the United
States. It's true that the U.S. is the innovation capital of
the world, and so we must have a strong patent system. But the
pendulum of encouraging innovation should not swing so far as
it goes into an anticompetitive direction.
As well as exacerbating rebate pricing, inappropriate
monopolies also allow branded drugs the time to develop more
and more sophisticated life cycle management strategies so that
by the time biosimilars come to the market, they're irrelevant.
Furthermore, patent thickets in the U.S. are now discouraging
development and launch of biosimilars, and while biosimilars of
these drugs will eventually reach the U.S., we expect that they
will be delayed several years after they come on market in
Canada and Europe.
In sum, we urge Congress to address the root cause of the
drug pricing problem. Look beyond the policies in the
jurisdiction of traditional healthcare entities. Instead, we
urge Congress to put an end to the inappropriately long patent
monopolies and rebate schemes that reward prescribing the
higher-cost branded drugs when the lower-cost drugs are
available.
Thank you again for the opportunity to speak on behalf of
my company and patients who would benefit from availability of
affordable and essential medicines.
[The prepared statement of Dr. Moodie appears as a
submission for the record.]
Chair Klobuchar. Thank you very much. Last, but not least,
Mr. Mitchell. Then I'm going to concede my time of questioning
to our Chair of our Judiciary Committee, who is in charge of
getting us out of all kinds of thickets.
[Laughter.]
Chair Klobuchar. I thought that would be a good segue. Mr.
Mitchell.
STATEMENT OF DAVID MITCHELL,
PRESIDENT AND FOUNDER, PATIENTS
FOR AFFORDABLE DRUGS, WASHINGTON, DC
Mr. Mitchell. Chair Klobuchar, Ranking Member Lee, Chairman
Durbin, Members of the Committee, I'm David Mitchell. I'm
founder for Patients for Affordable Drugs. More importantly for
today, I have an incurable blood cancer, and prescription drugs
are keeping me alive. My doctors have me on a four-drug
combination right now with a list price of more than $900,000
per year. Just one of my oral drugs [holds up bottle] that
comes in this little bottle is called Pomalyst. It's priced at
almost $21,000 for 21 capsules that I have to buy every 28
days.
Because Medicare beneficiaries like me pay our cost based
on list price, I spent more than $18,000 out of pocket last
year just for Pomalyst. For people with my cancer, multiple
myeloma, drugs account for 60 percent of the cost of treatment.
I'm a very lucky man. These drugs are keeping my cancer at
bay right now, but eventually, this combination will stop
working, and I'll need a new treatment. So, I care deeply about
innovation and new drug development, but drugs don't work if
people can't afford them. That's why today's hearing is so
important. Examining anticompetitive industry practices that
both inhibit innovation and drive up prices.
When a drug company makes a truly inventive discovery, it
should be rewarded with a patent and receive a fair return. But
the drug industry would have you believe that every patent is
deserved, and that the volume of patents granted is an
indicator of innovative achievements. That could not be further
from the truth, as you just heard. Neither new patents nor new
drugs necessarily equal real innovation. Worse, in too many
cases, manufacturers are abusing America's patent system to
prevent competition and block affordable generic and biosimilar
drugs from coming to market.
There are a variety of strategies. They've been outlined by
everybody up here. Product hopping, patent thicketing, pay-for-
delay deals, abuse of the FDA's citizen petition process. More
importantly than the problems is that there are solutions.
There are bipartisan bills that address these abuses, including
legislation led by Members of this Committee, and Chair
Klobuchar went through them: Senator Blumenthal's bill with
Senator Cornyn, addressing product hopping and patent thickets;
Senator Durbin and Cassidy's Remedy Act is another terrific
solution for further cracking down on evergreening behaviors;
Chairwoman Klobuchar, we hope this year is the year that we see
your bills with Senator Grassley, that stop pay-for-delay and
citizen petition abuses, be acted into law.
Of course, Biopharma opposes reforms that would constrain
its monopolies or curb its unilateral power to dictate prices.
It threatens me that any reforms will destroy innovation and
access to new drugs. But in fact, it's these anticompetitive
practice that actually inhibit innovation. Why? Because if drug
companies can block competition, and raise prices on old drugs
to drive profits and trigger executive bonuses, they have far
less incentive to take risk and invest in R&D to find the
innovative new drugs that could command high prices and extend
my life.
The headwaters of the drug price problem is high list
prices set by manufacturers. There are other anticompetitive
practices downstream in the supply chain that should be
addressed this year, including those by pharmacy benefit
managers. PBMs are black boxes that cut secret, mutually
beneficial rebate deals with manufacturers, and none of it is
transparent. Drug companies and PBMs enter into rebate
arrangements that are specifically designed to thwart lower-
cost competition. Rebate walls, rebate traps, and other
exclusionary contracting practices should simply be outlawed.
Let's be clear. These deals are not designed to help
patients like me by lowering prices or increasing patient
choice. No. They are emblematic of our drug pricing system that
is built to benefit those who profit from it at the expense of
those it is supposed to serve.
We're pleased that the FTC recently decided to tackle these
issues. We hope Congress will ensure that the FTC's ability to
seek damages and monetary penalties in consumer protection and
competition cases.
Of course, the President's Executive order on competition
includes many welcome steps to lower drug prices. But when all
is said and done on everything I've just mentioned, we could
still wind up paying four times what other wealthy nations pay
for the exact same brand drugs. That's why we need
comprehensive reforms, including Medicare, to negotiate lower
prices. Medicare negotiation is supported by 90 percent of
Americans, and it's time to pass it.
In the end, all of the work on drug pricing that's being
done up here is about restoring balance to ensure we get the
innovation we need at prices we can afford. You hold the power
to make the changes the American people are demanding. We're
going to try and do our part to make sure their voices are
heard. Thank you.
[The prepared statement of Mr. Mitchell appears as a
submission for the record.]
Chair Klobuchar. Thank you very much, Mr. Mitchell.
Chairman Durbin.
Chair Durbin. Thank you, Chairman and Senator Lee. This is
an important hearing. I think the American people, when given a
choice of topics that we might discuss in Congress, would put
this at the top of the list. At least, they tell us that when
we take polls.
It's interesting to me that we live in a country where so
many people can spell the word Xarelto. You just wonder how in
the world did that happen? Could it be that the pharmaceutical
industry is spending $6 billion a year? Is it possible
advertising? Is it possible that the fact that we see their ads
nine times a day on average is educating the Americans on these
drugs?
Senator Grassley and I decided to ask the General
Accounting Office for some information on this, and they did a
study. They found that between 2016 and 2018, advertised drugs
on television and other places accounted for 58 percent of
Medicare's budget for medications. Coincidence? These ads
ballooned Medicare spending to the tune of 320 billion over 3
years. When I asked Blue Cross and Blue Shield in Chicago,
``Why are premiums going up?'' they said, ``Number one reason:
the high cost of prescription drugs.''
They advertise them on television so consumers will ask for
them at the doctor's office. The doctor then has a choice:
explain to them why they may not need it, maybe even lose the
patient, or just prescribe it. Most times, they just prescribe
it, and it ends up being added to the cost of healthcare in
America. And it just keeps going up. Unless you're lucky enough
to live in Canada, instead, you're going to be stuck with these
prices.
Mr. Mitchell, when it comes to this advertising on
television, since the United States and New Zealand are the
only two countries in the world that allow it, what value is it
to the consumer?
Mr. Mitchell. I think the more information you give to
consumers, the better to help them understand the choices they
are being called upon to make. I'm not sure that including
prices in ads will lower prices, but I do believe that it will
help consumers understand better the--what's happening to them.
We also support, frankly, eliminating the tax deduction for
consumer advertising by drug companies in order to discourage
their use because they really are used only to sell more drugs
at higher prices.
Chair Durbin. I might just say that the fact that a drug as
common as Lantus insulin, approved in 2000, with 45 follow-on
patents that helped to block competition for 37 years, during
that time, the price of Lantus insulin was hiked 25 times, from
$35 to more than $300, and that's not an unusual situation.
Unfortunately, it's a common situation.
Perhaps if the consumer finally catches on that these drugs
are just going wildly high, there might be a second thought
about the heavily advertised Humira as to what it might cost on
a monthly basis. I'm glad your drugs are saving your life. I'm
glad you're here to tell us about it. But there comes a point
where you say it's your money or your life when it gets right
down to it.
Let me ask you this if I can, Mr. Levitt. In your
testimony, you cite the $83 billion investment in research and
development by pharma companies in 2019. You state, quote,
``Due to uncertainty around R&D endeavors, investors require
higher returns to compensate for higher risk.'' This
pharmaceutical industry responds to every single policy
proposal in drug pricing, claiming it will chill innovation,
and that a single penny in reduced profits could mean a freeze
on lifesaving innovation.
How do you square the colossal amount spent on spending--
how do you square the fact that 14 largest drug makers spent
more on stock buybacks than on research and development during
the past 5 years?
Mr. Levitt. Thank you, Chairman Durbin. These are
individual, obviously, economic decisions by pharmaceutical
companies. I would say--let me step back and start out by
saying I can assure you that biopharmaceutical companies do not
invent lifesaving medicines in order to make them inaccessible
to patients. There is a balance between innovation and access,
and innovation is critical. R&D spend is very high and has
increased significantly over the past several years. It's at a
peak now, and the U.S. accounts for the vast majority of that
spending.
Companies also put their money into making patients aware
of the benefits and potential uses of their products through
direct-to-consumer advertising, which is an important means of
conveying information to patients about drugs. As you said,
prescribers then have the choice of whether to prescribe the
drug.
Chair Durbin. It doesn't work that way. Unfortunately, it
just doesn't work that way, and you know it. If you get the
consumer remembering the name of the drug, and remembering the
person who skipped across the field of flowers, that go into
their doctor's and say, ``I think I need this,'' you know that
most doctors, instead of getting into a debate, are going to
prescribe it. That's why you win on consumer advertising.
People are partially educated, and doctors neither have the
inclination nor time to debate with those patients.
Mr. Levitt. Mr. Chairman, I would rather not posit that
doctors are making irresponsible prescribing decisions because
of their patients coming in to them, but it may be that we have
to agree to disagree on that one.
Chair Durbin. Well, we do disagree on that one. I do want
to tell you, there has been a massive investment in innovation
in pharmaceuticals. It's been done in Washington with the
National Institutes of Health. The numbers are pretty amazing.
Funding for the NIH contributed to the published research
associated with every single new drug approved by FDA between
2010 and 2019. Three hundred fifty-six new medications.
We're putting billions each year into the NIH. We want to
make sure the consumers can afford the products that these
pharmaceutical companies generate from that research. Do you
think we're getting that kind of return?
Mr. Levitt. Senator Durbin, I would say that the research
ecosystem is a complete whole of which basic research, funded
by the Government, by NIH, is an important part. But NIH does
not bring drugs into clinical development and marketing
approval. That can only be done by pharmaceutical companies. I
think if we look at the statements of the NIH itself, they will
acknowledge that without the efforts of the pharma industry to
develop and bring drugs to market, their basic research would
not produce patient-accessible innovation.
Chair Durbin. If you listen to Dr. Moodie, and she's pretty
convincing, the thickets that we've created in patent law
cannot serve the purpose of research or innovation or the
benefits to the consumers. It's all about monopoly control of
some of these drugs so that you can have profits for a longer
period of time, isn't that right?
Mr. Levitt. Mr. Chairman, I guess I would take issue with a
couple of comments made by my learned colleague here, Dr.
Moodie. First of all, it's not that easy to get a patent in the
first place. To get a patent, you have to show that the
invention is patentable. It has to have novelty, utility, and
other features that entitle it to get a patent.
I would also point out that innovation does not stop upon
approval of a product. There are many very important
innovations in product development post-approval that benefit
patients tremendously. Things like even changing the dosage
form of a product from an injectable to an oral, even reducing
dosage frequency or allowing for a fixed drug combination
instead of having the patient take multi-drugs for HIV or other
conditions.
I could go on. There's many, many, many innovations.
Improving stability profile--that's something that's been in
the news recently. It's obviously a key----
Chair Durbin. I'm sorry. I'm out of time. I'm sorry. I'll--
--
Chair Klobuchar. You can--I mean, if you want--Senator
Durbin, please----
Chair Durbin. I just wanted Dr. Moodie----
Chair Klobuchar [continuing]. If you want to allow him to
finish, and then Dr. Moodie to respond, and then we'll turn it
over to Senator Lee.
Chair Durbin. That's what I'm looking for. I'd like to ask
Dr. Moodie to respond to that.
Chair Klobuchar. Okay. Dr. Moodie.
Dr. Moodie. Sure. We see the U.S. patent system as being an
outlier now compared to other systems around the world. In the
U.S., there are, of course, rules for examining patents that
are working well, but it's also easy to circumvent those rules
in order to do this numbers gaming, where you can build up
incrementally different patents of having claims of
incrementally different wording to make an army of continuation
patents, all derived from just one original patent filing.
This ends up building a patent thicket that's both
protracted and multilayered. Overall, we do believe that the
root cause of the problem is the examination procedures and the
rules that the USPTO is using, and that by tightening up those
rules, it can help provide a more balanced patent system that
can provide the benefits to both incentivizing innovation as
well as allowing affordable medicines to come onto the market
in a more appropriate time.
Chair Durbin. Madam Chairman, if I could just read one
sentence into the record and thank you for your patience.
Chair Klobuchar. Of course.
Chair Durbin. The top 12 best-selling drugs in America each
have an average of 71 patents, and 78 percent of all new
patents are for drugs that are already on the market. Thank
you.
Chair Klobuchar. Excellent. Not excellent fact. Excellent
job, Senator Durbin. Next up, Senator Lee.
Senator Lee. Thank you, Chair Klobuchar. In the last few
hours as we've been talking about the CREATES Act, we've seen
the filing of what may well be the first complaint. It was a
complaint filed in the U.S. District Court for the Eastern
District of Pennsylvania, asserting claims under the CREATES
Act. I've gone through the complaint. It looks like it's well-
written. I can't speak to the merits of it beyond what I've
seen, other than to point--this was a complaint filed by Teva
Pharmaceuticals against Amicus Therapeutics.
In reading the complaint, it was confusing, mildly, because
the fact that one of the real parties in interest, the
defendant, is named Amicus, and I think that might throw off
the court from time to time.
[Laughter.]
Senator Lee. Mr. Levitt, let's start with you. In 2019, the
Office of Inspector General for the Department of Health and
Human Services found that the rebate model used by PBMs was at
least a significant contributor to high drug prices. What
reforms do you think we ought to consider in order to address
this? I ask that keeping in mind that some experts believe that
PBMs should be required to have a fiduciary obligation to their
beneficiaries. Would this help solve the problem?
Mr. Levitt. Thank you, Senator Lee. We believe that the
major need and necessity in this area in terms of reform is
greater transparency in pricing and the ability to pass rebates
and discounts through to the patients at the point of filling
their prescriptions because what's going on here is that we
have a growing disparity between list prices, which are then
subject to rebates and discounts that are negotiated between a
manufacturer and a PBM, and those rebates and discounts then do
not reliably find their way to the patient.
We strongly believe in greater transparency, and your point
about fiduciary duty on the part of PBMs is interesting. I
don't think we have a position on that yet, but we certainly
will look at that very closely.
Senator Lee. Dr. Moodie, do you have any opinion on that?
Dr. Moodie. When it comes to rebates and patent monopolies,
the problem with these inappropriately extended monopolies is
that the rebates can then increase for a longer period of time,
and so this grows the patient out-of-pocket costs. But--well, I
mean, I'm not the expert here on the mechanics of rebates, so
I'm happy to hand over to other witnesses on that.
Senator Lee. While we're with you, do you think our patent
system encourages or enables some of the anticompetitive
conduct by branded pharmaceuticals, and if so, what can we do
to change that?
Dr. Moodie. The way that the patent system's working right
now is that it's easy to circumvent certain rules that allow
you to repetitively claim a similar invention over and over
again. Then this means by building up the numbers of patents by
similar applicants, we can't economically clear a path through
that many patents.
Then you can create an inappropriate monopoly, because
you're shielding your patents from being scrutinized by the
checks and balances that were built into the system.
Also, the processes that we use to challenge patents, IPRs
and PGRs, have been weakened over the years. And so, what would
be very beneficial for third parties, such as ourselves, to be
able to really scrutinize the patents and put the checks and
balances back into the system would be to strengthen the IPRs
tools, as well.
Senator Lee. Yes, I've believed that for some time. One of
the things that I've struggled with there is knowing how we do
that and trying to figure out where that problem stems from. Do
you think the PTO is sort of rubber-stamping weak patent
applications? Is that how we're getting there?
Dr. Moodie. I would say that there are, of course, good
secondary patents. When I pointed to those statistics earlier,
evidence shows that over half of the patents that are granted
are at least of questionable quality. Yes, that is one side of
it. We do need to raise the bar with patentability at the
USPTO. We also need to tighten up the rules that make it
possible to game the system to create lots of patents.
We also need to give third parties better tools to
challenge the patents to put back that checks and balances into
the system.
Senator Lee. What about within the generic marketplace?
I've lost track of the number of drugs that I've followed over
the years, where once a drug goes off patent, you'll see some
generic competition. You'll see prices go down. Then, in many,
many instances, you'll see the price for the same molecule,
that's now off-patent skyrocket, sometimes to levels or even
above levels where it was selling while it was still on-patent.
Do you have any theory as to why that's happening?
Dr. Moodie. It could be that the generics are dropping out
of the market. For various reasons, they just can't make any
profit whatsoever. Yes, I mean that's not only a patent issue.
That goes beyond that.
Senator Lee. You have some attrition there if they think
they can't make money, and then--okay.
Mr. Abbott, we often hear calls for Government-mandated
price controls, sometimes as a response to the rising costs of
prescription drugs. Do you think that approach would work?
Mr. Abbott. I don't think so, Senator. As a general matter,
and history shows price controls distort markets, and they
create shortages, reduce investment and innovation. The classic
example is Federal oil and gas price controls in the 1970s. You
had less investment in oil and gas, major shortages.
In the case of pharma, that would mean fewer drug
improvements and new drugs, with many patients being denied
opportunities for cures or improvements in the cures in
treatment of diseases. The U.S. leads the world in pharma
innovation and R&D and would surrender it if it adopted price
controls. Canada directly regulates drug prices, which has led
to widespread drug shortages according to a University of
British Columbia study, and those shortages are getting worse.
Also, consider that pharma R&D fell in Canada between 2001
and 2017 significantly, while U.S. pharma R&D more than doubled
from $24 billion to $56 billion during that period. Importing
drugs from Canada with the aim of reducing prices could also
import the problems of reduced availability and investment.
Senator Lee. What's cross-subsidization, and what role do
you think it might be playing here?
Mr. Abbott. The cross-subsidization problem is you have, in
many countries, these one-buyer national systems, where drug
companies face a monopsonist, like a monopoly buyer, and they
are threatened in some situations with lack of protection for
intellectual property, or lack of access to markets. That is
one of the reasons why prices are a lot lower. In fact, you
have anticompetitive buyer activity going on.
Of course, two wrongs don't make a right. The fact that you
have price controls there doesn't mean that, well, you're going
to solve a problem in the U.S. if you have price controls. If
you then have price controls in the U.S., you're just going to
get less investment, and the people will be harmed, and the
future patients who would have had cures or better health
results but won't because there will be a slow rate of
introduction of new and improved drugs.
Senator Lee. I see my time is expired. Thank you.
Chair Klobuchar. Thank you very much, Senator Lee. Senator
Blumenthal has joined us, so I'll have him go ahead. I have
noted, Senator Blumenthal, your work that you and I are doing
on rebate traps, as well as the work you are doing with Senator
Cornyn on product hopping. Senator Blumenthal.
Senator Blumenthal. Thank you. Thank you, Senator
Klobuchar, and I really appreciate all the great work that
you're doing and the work that we're doing together, and thank
you to you and the Ranking Member for having this hearing. I
can't think of a hearing that's more important. Today, I should
just note that I'm also a Member of the Armed Services
Committee, and we are having a joint hearing with the
Intelligence Committee on reports of unidentified aerial
whatever you want to call them.
Chair Klobuchar. You still joined us? That's impressive.
[Laughter.]
Senator Blumenthal. Yes. I feel like I have returned to the
real world.
[Laughter.]
Senator Blumenthal. It is a real world that bedevil us
every time we go home. Literally. I can't think of a better
time to have this hearing because we're all back here from
visiting our States, where we hear, every one of us, doesn't
matter whether we're Republican or Democrat, about a woman, or
a family, or a man who is foregoing whatever--clothes, food on
the table, or maybe even the medicine itself because of the
skyrocketing prices of drugs.
They've increased 40 percent over the last decade and
they're continuing to climb, and I want to come right to the
point. At least some of this price increase is due to abuse of
our patent system. I say with no great pride that the engineers
and designers here are many of my own profession, lawyers, who
advise how to game that system, and one of the particularly
harmful ways to do it is known as product hopping.
All of you know what product hopping is. It's a process by
which branded pharmaceutical manufacturers make small,
incidental, often irrelevant changes to drug formulas to extend
their patent exclusivity and keep competition out. Let me give
you an example, which happens to be very timely, as well.
Alzheimer's disease is treated by a branded medicine known as
Actavis. Knowing that the market exclusivity for this drug was
running out, Actavis sought to replace its twice-daily dosage
of Alzheimer's treatment with a new extended-release, a once-
daily version, without changing the medical benefits, the
essential ingredients of the drug.
After the FDA approved the new drug, Actavis was able,
strategically to wait for 3 years, 3 whole years, to introduce
the new extended-release version, in order to extend its
exclusivity in the U.S. market. Once introduced, Actavis used
the patent system to hop patients, pushing all of its customers
onto the new drug, while pulling the old drug from the market.
As a result, it was able to continue charging monopoly prices
long after its market exclusivity had run out.
This product hopping practice enables drug companies to
stop generics, biosimilars, and other essentially innovations
at lower prices, which is kind of the definition of abusing
market power.
I want to ask Dr. Moodie, how are biosimilar alternatives
hindered by the practice of product hopping?
Dr. Moodie. Yes, that's very true. Product hopping is a
tactic used by branded drug companies to shift market just
before biosimilars come to market in order to thwart the
competition. This tactic can also be used to increase the
price. We feel like advertisements for the new presentations of
these product-hops, they often minimize the risks and
exaggerate the effectiveness, as well as including
unsubstantiated claims of superiority over the biosimilars.
Product hops can be addressed by limiting the promotional
material, including the direct-to-consumer advertising that
would influence patients and providers to switch to the product
hop, unless the product--unless the branded drug company has
conducted a clinical trial that proves evidence of clinical
superiority.
Another mechanism to address product hopping is to
strengthen the Department of Justice and/or Federal Trades
Commission's ability to bring cases against branded drug
companies who are engaging in product hopping.
Senator Blumenthal. Thank you. I can tell you also, Senator
Cornyn and I have introduced--actually, we've reintroduced the
Affordable Prescriptions for Patients Act, which would put an
end to this anticompetitive practice. It was approved
unanimously in the last session of Congress, unanimously by the
Judiciary Committee. It never received a vote on the floor, and
I'm hoping that we'll get bipartisan support to do it again.
It would also prohibit some other abusive practices, like
patent thicketing, but product hopping, in a way, epitomizes
the worst of the present system. I recognize the importance of
patents in encouraging innovation. We can all talk about it
fairly well, but when it's abused, it actually impedes
innovation and prevents it.
Mr. Mitchell, I'm hoping you, perhaps, can shed light on
the human costs of this anticompetitive practice. How are
patients affected by product hopping by branded pharmaceutical
companies?
Mr. Mitchell. When a drug is about to come off-patent, as
Dr. Moodie just mentioned, and small changes are made that are
incremental to try and move people to this new and more
expensive drug, usually, they're stuck in many cases. If it's a
hard switch, it's a problem. Courts have begun to get that. If
it's a soft switch, sometimes they can be misled into thinking
that, without evidence, this is better, a superior drug.
Sometimes the drug--brand drug companies actually disparage
their old version of the drug, and so patients are often misled
into taking the hopped product, the new product, when the old
product would do just fine. Or, say they change the dose from
160 milligrams to 80 milligrams, or 80 milligrams twice a day
to 160 milligrams and charge--once a day, and charge a lot
more, when they could go on taking the other drug, and it would
work just fine.
The fact is, the product hops reduce choice and kind of
push people toward more expensive drugs that they don't
necessarily need.
Senator Blumenthal. Thank you. My time has expired. This
topic is a big and important one, and I thank all of you for
helping us shed light on it. The American people, although they
already know, in their pocketbooks and their hearts and, all
too often, their bodies, how devastating it can be. Thanks,
Senator.
Chair Klobuchar. Thank you very much, Senator Blumenthal.
Just to show how big and important this is, we've not only had
the Chair of the Judiciary Committee at much of this hearing,
but also the Ranking Member, who's been such a leader on these
issues, and so Senator Lee and I welcome Senator Grassley.
Senator Grassley. I was going to open with some comments
about you and I cooperating on a lot of legislation, but----
Chair Klobuchar. You can go ahead.
[Laughter.]
Senator Grassley [continuing]. I'll just put those two
pages in the record----
Chair Klobuchar. Okay, excellent.
Senator Grassley [continuing]. So I don't take time for
that.
[The information appears as a submission for the record.]
Senator Grassley. I'd like to have the witnesses comment on
the issue of pharmacy benefit managers, or PBMs and the
possible negative effects their actions have on prescription
drug prices for consumers. PBMs operate with little to no
transparency, making it very difficult, if not impossible to
understand the price of prescription drugs. Instead, we have a
complex web of prices, rebates, and formularies that make it
near impossible to understand drug prices.
This problem is made worse by consolidation and
concentration within the PBM marketplace. Three companies
control 75 percent of the market and are vertically integrated
and owned by other players in the healthcare industry. This is
a high level of concentration and control over a projected $358
billion spent on prescription drugs in 2020.
Has there been too much concentration leading to very few
companies with too much power, would be one of my questions.
The second one would be, should PBMs be required to provide
more transparency on how prescription drugs are priced? Anybody
can take a crack at it on either side of the issue.
Mr. Levitt. I'm happy to jump in there, Senator Grassley,
if you don't mind.
Senator Grassley. Please.
Mr. Levitt. We completely agree with you that the current
situations with respect to pharmacy benefit managers and the
market power and negotiating power that they have, needs to be
scrutinized very carefully.
What is often perceived as an increase in prescription drug
costs on the part of patients is actually the result of the
failure of these PBMs, who, as you said, control three-quarters
of the market for prescription drug benefits, the failure of
these PBMs to be transparent, or to share or pass through the
rebates and discounts that are being negotiated between
themselves and manufacturers to the patients at the point of
prescription.
This is why, although when you look at net prices, that is
the price of pharmaceuticals after rebates and discounts, those
prices are stable or declining. But patients are perceiving an
increase in costs, and that is because the costs are being
shifted onto the patients. We believe that's a problem that
really needs to be examined closely.
Senator Grassley. Anybody to add to it, or anybody want to
express an opposite position?
Mr. Kades. Senator, I don't know that I want to express an
opposite position. I think there clearly has been substantial
consolidation in the PBM market, and you would expect that that
consolidation leads to market power that----
[Voice heard off microphone.]
Mr. Kades. Sorry about that--that that consolidation, if it
leads to market power, you would see that in the PBMs taking a
larger and larger share of the rebates. I think that's a really
important question, and I think this Committee and those of you
who have asked the agencies to focus on it are quite right.
I do want to say that one of the things that can be
problematic in this debate is that various actors like to
finger-point, and so we should be looking at all actors, but we
should also remember that the rebates are a tool used by
branded pharmaceutical companies to prevent generic entry, or
to limit competition, which is something your Finance Committee
report found--made a finding about on insulin.
Yes, let's look at PBMs, but let's make sure we look at all
actors in this marketplace.
Mr. Mitchell. Senator Grassley, if I may----
Senator Grassley. Yes.
Mr. Mitchell [continuing]. I think it is wrong that a
patient like myself cannot know if the preferred drug on a
formulary is there because it's the best drug for me, it's the
least expensive drug among equally effective options, or if
it's just there because the PBM got a big kickback, a legal
kickback that we call a rebate.
We believe that there must be more transparency in the way
the PBMs operate. We need to know how much of the rebate is
going to lower my premium, lower my out-of-pocket, is going to
the profit of the PBM and/or the insurer, and now, they're one
and the same for the big three. So, we believe that
transparency is key.
The headwaters of the problem of high drug prices is list
prices set by drug companies, but these downstream
anticompetitive practices by PBMs need to addressed, and we
need to make sure that they're working on behalf of patients.
Senator Lee mentioned maybe they should have a fiduciary
responsibility to me. That would be just fine. Thank you.
Senator Grassley. I want to go on to another issue. I'm
concerned about the effect of so-called rebate traps, rebate
walls on patients' access to quality low-cost medicine. These
are practices where drug manufacturers bundle together rebates
over multiple products so that if a payer decides to purchase
or cover a competitor's alternative cheaper drug, they forfeit
the rebates and discount on the entire bundle of a
manufacturer's product.
For any of you that want to tackle this, do you believe
that companies engage in--bundling rebates over multiple
products can be harmful to patients' access to quality, lower-
cost drugs? If you believe this kind of action is
anticompetitive, what kind of action would you think would help
address the issue? Then that will have to be my last question.
Mr. Mitchell. I'll go again if you don't mind, Senator. I
do believe that these things are hurting patients. I think it's
very important to recognize, however, that these rebate traps
and rebate walls are deals entered into voluntarily, to the
benefit of both the drug maker and the PBM, but they are not
increasing my choice or lowering my price.
That's why we need you to take a closer look, and to have
the ability, through transparency, to examine how these deals
are working, and how PBMs are doing their business, but always
remembering that there is a mutuality there going on between
the drug company and the PBM.
Mr. Levitt. If I could, Senator. Sorry.
Senator Grassley. Yes.
Mr. Levitt. To answer your question directly, Senator
Grassley, this--if a company uses its market power coercively
in such a way as to exert anticompetitive effects and bar
competitors from the market, then that is anticompetitive
behavior, and it should be scrutinized.
You'll, however, have to realize at the same time, that not
all exclusive contracts are necessarily anticompetitive. It
really does depend on the terms and conditions, the duration,
the market power of the parties. They can be used in such a way
as to reduce prices in principle. But again, when they are used
in a coercive and anticompetitive way, they're definitely
wrong.
Senator Grassley. I think one other person wanted to
comment, and then I'll be done. Go ahead.
Mr. Kades. Yes. Senator, that's a great question, and it's
absolutely true that dominant companies in this marketplace use
rebate traps to forestall entry. That inures mostly, if not
entirely, to the benefit of the dominant company. While, in
theory, that action should be anticompet--illegal under the
antitrust laws, we know it's pervasive, it's part of the reason
why costs are high in insulin markets, it's why costs are high
in the EpiPen market, it's why the drug Remicade, biosimilar
competition has not developed.
Part of that reason is because when courts look at this,
they're getting it wrong. They're defining markets too broadly.
Or, as just recently happened, court looks at a case at summary
judgment, before you go to trial, and says, yes, the plaintiff
can prove the defendant is a monopolist. They can prove both
parties expect a generic entry to take 30 percent of the
market. The brand didn't lower price. The brand didn't improve
its product, and yet the entry was an absolute failure, and the
court says, ``Oh, but the rebate increased, so there can't be
an antitrust problem.''
That's why, when you have laws that are so deferential to
dominant firm conduct, then you get this kind of activity that
we are all paying for.
Chair Klobuchar. Very good. Thank you. I just thought I
would ask each of you the same question, if you could just keep
it to 30 seconds. It pertains to the fact that U.S.
prescription drug prices are the highest in the world. It's
been estimated that our drugs here cost between 4 and 2.5 times
more in the United States than they do in other developed
countries.
We can argue about what the right number is, but it is
clear we are paying far too much, and it's not getting better.
According to one study, prescription drug costs in the U.S.
rose 76 percent between 2000 and 2017. We are the largest drug
market, with so many of the companies located here. And we are
grateful for the work that was done to develop the vaccine, but
yet, we continue to pay these high prices, so I just want this
30-second answer.
Why are U.S. drug costs so much higher than they are
anywhere else in the world, when it's so much of our research
money that went into this, and does a lack of competition play
a role? Mr. Kades.
Mr. Kades. Thank you, Senator. Yes, competition,
absolutely--the lack of competition plays a significant role,
but there are other causes which might be addressed by your
bill to improve negotiations allowing Medicare to negotiate
under Part D or other payment processes that could help control
drug prices. The patent system reform would also help. Sorry.
Chair Klobuchar. Thank you. Mr. Abbott.
Mr. Abbott. Yes, Senator, prices are high, but there are
also institutional factors. For example, a 2018 HHS report
indicated that the expansion of rebates that was actually
facilitated, supported by the ACA in some areas, may have
actually contributed to the raising of list prices.
But also, recall pharmaceutical companies have to cover the
90 percent plus of efforts that fail to bring forth a new drug.
A heart of those efforts are in the United States. We, in
effect, are cross-subsidizing other parts of the world as
mentioned to Senator Lee.
Chair Klobuchar. Mr. Levitt.
Mr. Levitt. Senator Klobuchar, other developed countries
tend to have very different healthcare systems, with a much
greater degree of government involvement and price control
than, I think, Americans would be willing to tolerate, and they
pay for that degree of government control with less access,
less innovation for patients.
Yes, we do spend somewhat more on prescription drugs in
this country. We can debate the exact number. Our figures would
be lower than yours, but yes, but we also spend more on all
aspects of healthcare in this country. I saw a study recently,
administrative costs in our healthcare system are 4 times what
they are in Canada, so we have to put this in context.
Prescription drug costs have remained flat, at around 15
percent of the overall healthcare expenditure in this country,
for the past several years.
Chair Klobuchar. All right. I have some responses, but I'm
going to keep going down the line. Next, Dr. Moodie.
Dr. Moodie. We're seeing biosimilars hit foreign markets
years before they hit the U.S. That trend is going to continue
and get worse because with patent thickets that we're seeing
growing up around the newer biological drugs are growing so
much faster and bigger than the famous thickets that people are
talking about today. The branded drug companies are getting
better at this gaming of the numbers game of patent thickets.
Just getting biosimilars to the market at a more appropriate
time is the best way to bring down those prices, and then you
don't need reference pricing, either.
Chair Klobuchar. Okay. Mr. Mitchell.
Mr. Mitchell. Thank you, Senator. We're paying almost 4
times what other wealthy nations pay for the exact same brand
drugs. We--no other country allows brand drug makers to dictate
the prices of drugs as we do in this country, and that's why
our prices are so high. They negotiate, we don't, and the
outcome is prices that range as high as everyone here knows.
Chair Klobuchar. Okay. Thank you. We turn to solutions
here. Mr. Kades, in your written testimony, you compared the
competition problems in prescription drug markets to the canary
in the coal mine for the failure of U.S. competition law. Are
you saying these problems in our drug market should have been
an early warning sign? Then, I think most importantly, do you
think broad-based reforms, as we look at these markets that
we've looked at in this Committee, yes, tech and there can be
some specific tech laws. What we're going to be doing next
month on the agriculture markets and something Senator
Grassley's very interested in, as well as what we've seen from
online travel on.
Do you think a broad-based support--this is called a
softball, leading question--would be most helpful?
Mr. Kades. Absolutely I do, Senator. You talked about the
Ovation case. All right, and it's a perfect example of where
antitrust has gone off the rails. It should be very easy to
figure out. If there are only two products that can treat a
disease, that--they're in the same market. They have to be, and
getting rid of that competition has to be bad. Somehow, the
court got that wrong.
Time and again, the Government is spending massive
resources, proving essentially what is obvious, and proving--
and essentially having to prove water makes things wet.
And so, when we look at the antitrust enforcement in
pharmaceutical industries, my good friend, Mr. Abbott says,
it's a sign that things are working. But we need to look at
what is the conduct that is occurring? And this conduct is so
egregious. We've heard about it today. Literally companies
bringing products to market where they put a tablet inside a
capsule just to prevent generic competition. It's not
innovation. The fact that the system allows that tells us the
antitrust laws are too weak.
Chair Klobuchar. You would suggest a broad-based support,
as well as doing some of these specific things, like pay-for-
delay and some of the other things we've been talking about
with rebates, patent thickets--the best words that we will all
take away from this hearing. Dr. Moodie, thank you. So that's--
--
Mr. Kades. Yes, I think it is a combined approach.
Chair Klobuchar. I think you also are concerned about the
loss of disgorgement and restitution authority at the FTC, is
that right?
Mr. Kades. Yes.
Chair Klobuchar. You think that needs to be fixed?
Mr. Kades. Absolutely. Just a very quick example. Back when
I was a young attorney and had more hair, the FTC brought a
case against a generic company for cornering the market and had
claimed $100 million in disgorgement. That was roughly 80
percent of what the company made by violating the law. As a
result of that decision, a strong signal and a strong
deterrent, that type of conduct disappeared from the
marketplace for the next 40 years.
Taking away that the--the Commission's ability to deprive
people of the illegal profits just says, go ahead and violate
the antitrust laws because the Federal enforcers, the most they
can do is tell you to go forth and sin no more.
Chair Klobuchar. Mr. Levitt, in your testimony, you wrote
that for both generics and biosimilars, our laws are intended
to, quote, ``strike a balance between providing access to
medicines and preserving incentives for innovation.'' But we
are not seeing that balance when it comes, as Dr. Moodie has
pointed out. What we are seeing is these deep patent thickets
with sometimes more than 100 patents, as she pointed out, filed
for a single drug, many of which are filed after the drugs are
approved.
Aren't these practices throwing off what you call the
delicate balance between patient access and development
incentives? I know there have been a lot of questions about the
thickets, but I'm getting to that. That will be my last one.
I'll ask you, Dr. Moodie for a quick response.
Mr. Levitt. Thank you, Senator Klobuchar. To begin with,
again, as I said earlier, product innovation does not stop upon
approval of a product. Particularly with complex products like
biologics, there can be many different kinds of inventions that
can take place after approval that can improve the profile of
the product in ways that matter to patients: to make it easier
to administer, to extend the shelf life or improve the
stability, and many, many other characteristics.
Each of these potentially qualifies for a patent, and
patents, contrary to what some have said, are not so easy to
get. You have to, as I said earlier, show the requisite
requirements to get a patent in the first place. Once you get
the patent, it is absolutely subject to challenge through
either the inter partes review process, or in court, or the PGR
process.
In a way, one could take the figure cited by Dr. Moodie
that 56 percent of the IPRs succeed as evidence that that
process works, that if a patent is weak and it's subject to
challenge, then it's going to go down. I can assure you that
innovator companies are not in the business of getting weak
patents so that they can be struck down. They're getting
patents for innovations that improve the product.
We--am I?
Chair Klobuchar. Yes. One more sentence here.
Mr. Levitt. Okay. I just wanted to say we don't oppose
properly targeted legislation on product hopping, and I'm happy
to discuss, you know, the specifics of that with the Committee.
Chair Klobuchar. Okay. Dr. Moodie, quickly. We have two
Senators here that have been waiting for a while. So----
Dr. Moodie. Sure. Due to the numbers gaming of the patent
system, we can't economically use IPRs and PGRs to clear a path
through hundreds of patents. It would be--the system would work
better if you would get one patent per secondary or follow-on
invention, but now they're creating these families of patents
around each invention, to circumvent and shield the patents
just through economic means.
Chair Klobuchar. Okay. Very good. Thank you. I don't know
who's next, Senator Hawley or Cotton. I'm not going to decide
between them. Senator Lee----
Senator Lee. It's your call.
Chair Klobuchar [continuing]. No, you decide, it's your--
who is--was Senator Hawley here--are you--what are your rules
here?
Senator Lee. Josh was here first, but then left, and Tom
came, so----
Chair Klobuchar. Okay, you go for it. Okay. Senator Cotton.
Senator Cotton. Thank you. Thank you all for appearing
today. We've heard a lot about patent rights and
anticompetitive drug company actions that harm consumers, and I
share my concerns on that front.
But I also want to discuss a concern I have about a Biden
administration decision that will also jeopardize our ability
to deal with any pandemics in the future.
In May, the Biden administration announced its support for
a waiver of intellectual property rights at the World Trade
Organization. This waiver would mean that American companies
that develop lifesaving vaccines and treatments to address the
pandemic will lose that intellectual property, and the property
will be turned over to the rest of the world, including
adversaries like China.
Now waiver may be the technical term for what the Biden
administration has decided. A more accurate description would
be confiscation. The American companies that spent billions of
dollars developing this technology don't exactly have a choice
to participate in a waiver of their property rights, of course.
We are used to countries like Russia, and China, and Cuba
expropriating the property of not only their own citizens, but
Americans, as well. But it is unprecedented for an American
administration to help our adversaries steal such intellectual
property.
I won't put aside the question of whether this is morally
right or wrong, because it is clearly wrong to steal the
property of an American company and its American shareholders.
It is also an incredibly dangerous precedent to set.
However, I want to focus more directly on the practical
implications of the Biden administration's decision to steal
the property of American companies.
Mr. Levitt, if the Biden administration succeeds in pushing
through this expropriation of American companies' property,
will this increase the production of vaccines worldwide?
Mr. Levitt. Thank you, Senator Cotton. The short answer is
no. Biopharmaceutical companies share the goal of vaccinating
as many people as possible as quickly as possible around the
world. But punitive transfers of patents will not help increase
production capacity, nor will they accelerate access to COVID-
19 vaccines, and, in fact, they also risk putting production in
the hands of parties who lack the technical and quality know-
how to accomplish this.
The concern that apparently lies behind this move, this
unfortunate move of transferring patent rights--patent rights
and seizing patent rights is misdirected. If there are any
issues about getting product and vaccine out, it's in the
supply chain, not in the IP rights that, as you said, have
enabled companies to develop these vaccines in an incredibly
short amount of time.
Senator Cotton. This supply chain and manufacturing process
for the coronavirus vaccines is incredibly complicated, is that
correct?
Mr. Levitt. It absolutely is, Senator.
Senator Cotton. It depends on very customized equipment, as
well has highly specialized knowledge, is that correct?
Mr. Levitt. Vaccine production is among the most
complicated manufacturing processes in the world. There are
many, many dozens of separate steps, each of which has to be
very carefully controlled and under stringent quality
requirements. It's absolutely correct.
Senator Cotton. It is not, in fact, the patent rights that
these companies have that is the bottleneck for vaccine
production around the world, but rather the supply chain and
the manufacturing process itself?
Mr. Levitt. Absolutely correct, in our view. Yes, Senator.
Senator Cotton. If that is the case, who will benefit from
this so-called waiver, or what you might better call an
expropriation, of American companies' property?
Mr. Levitt. In our view, it certainly won't be patients. In
fact, if anyone, as you said, it's going to be the foreign
economic competitors who really don't play by the rules in the
first place, and that's very unfortunate.
Senator Cotton. To put names to those competitors, would
most of them, or at least many of them be located in China?
Mr. Levitt. It has been said that that is one of the
countries that is in that category, yes, Senator.
Senator Cotton. Mr. Levitt, these technical terms, like a
TRIPS waiver, or WTO protections are not exactly things that
roll off the tongues of most Arkansans when I visit with them.
Can you explain why it matters to them? Why it matters to all
Americans that we protect the intellectual property rights of
companies to include the patent rights of these vaccine
manufacturers?
Mr. Levitt. Senator, it matters because taking this kind of
drastic action to seize intellectual property and violate
intellectual property rights is going to endanger future
production and innovation by creating confusion and uncertainty
among vaccine manufacturers at a time when they are working
around the clock to bring needed vaccines to patients.
In short, the damage will be less access to needed
medicines, and economic harm, as well, to a vibrant industry
that provides high-quality jobs for hundreds of thousands of
Americans.
Senator Cotton. All in return for which we don't get any
acceleration in the effective production of coronavirus
vaccines, is that correct?
Mr. Levitt. Precisely.
Senator Cotton. Thank you.
Chair Klobuchar. Senator Hawley.
Senator Hawley. Thank you, Madam Chair, and thanks to all
the witnesses for being here. I want to come back, if I could,
to the question of these pharmacy benefit managers and some of
the techniques, mechanisms that they use that are causing so
much pain to independent pharmacists in particular.
Mr. Kades, if I could just come to you. I know this has
been a subject of much discussion throughout today's hearing,
but I want to ask you about something I don't think has come
up, and that is DIR fees. Could I ask you about the DIR fees
that PBMs apply, often retroactively, and ask you to comment on
why we wouldn't want to limit the ability of PBMs to apply
these fees retroactively?
In other words should--let me state that in the affirmative
rather than the sort of double negative there. Shouldn't we
limit the ability of PBMs to apply these fees retroactively?
Mr. Kades. In a moment of being humble, I'm going to say
that's actually not an issue I'm aware of, and so I don't think
I could provide you an answer that would be useful.
Senator Hawley. Does anybody else have a view on this down
the panel?
Mr. Levitt. Senator, my apologies, but if you could define
the DIR, please. I'm so sorry, I don't recognize that term.
Senator Hawley. A DIR--it's a direct or indirect
renumeration fee----
[Audio malfunction occurs.]
Senator Hawley [continuing]. that is charged, often levied
by PBMs as part of the Medicare Part D program. This is
something that independent pharmacists are very, very concerned
about, certainly in my State. Many of them look to these DIR
fees as a prime driver in their own, frankly, insolvency.
As I talk to pharmacists around the State of Missouri, and
we have a long tradition in my State of having a lot of
independent pharmacists, this practice--PBMs in general, as you
may imagine, they're not fans of, but the practice of DIR fees
is something that is particularly, particularly harmful in
their view. Their view, and I have to say I tend to agree with
them, is that the application of DIR fees retroactively is
particularly harmful, it's nontransparent, and it's often
devastating to independent pharmacies.
If anybody has a comment on that, I'll gladly take it.
Otherwise, I want to ask----
Chair Klobuchar. We can also ask them to--if a few of the
witnesses want to put it in writing after they have a chance--
okay?
Senator Hawley. That would great. That would be great.
We'll give it to you as a QFR. Yes, thank for that, Madam
Chair. That's a good suggestion.
Senator Hawley. Mr. Levitt, let me just change subject and
ask you about your client trade groups' view about what is----
Senator Blackburn. Make sure they know I'm on virtually.
Senator Hawley [continuing]. What is a reasonable time to
profit from a single drug before a generic version can hit the
market. Do you have a sense of what that time period, what a
reasonable time period should look like?
Mr. Levitt. Yes, Senator, so I think we can take as a
starting point the term of a patent, which, as you know, is 20
years from the date of application. Of course, we also know
that a considerable amount of that patent life is consumed in
the development and approval process, which is subject to some
extension under the Hatch-Waxman law, but certainly not what
makes up for the entire time of that process.
At the end of the day, many, many estimates have stated
that the effective patent life of a pharmaceutical product on
the market averages around 12 to 13 years. That is the figure
that pharmaceutical manufacturers take into account in
calculating their exclusivity in order to get the return on the
pharmaceutical product that will enable them to make a
reasonable profit and continue to invest in innovation.
Senator Hawley. Does that number take into account the
filing of the child patents, or the patents that don't deal
with drug structure, such as dosing combination treatments?
Mr. Levitt. Right. Yes, it does, and I do have to point out
one clarification here, which is that these continuation
patents, as I understand it, do not extend patent life. They
may broaden the scope of an originally granted patent in ways
that are presumably justified by the inventions that they
cover, but they don't extend the life of a patent, and so I
would say that this is factored in to the 12-to 13-year
estimate. It's sort of an aggregate global estimate that
factors in all of the different inputs into the exclusivity
life of a product on the market.
[Audio resumes.]
Senator Hawley. That's helpful. Here is where I'm going
with this. If we can agree that the life of a patent should be
limited, and 12 to 13 years, you've pointed out, but if in
principle, as a matter of policy, we can agree on that, I'm
trying to figure out why it is that some of the member
companies in the organization you represent have gone to such
great lengths to stretch things out in a way that seems almost
indefinite. Can you help me with that?
Mr. Levitt. Senator, I guess I would respectfully take
issue with the characterization of stretching out. As I've said
before, innovations continue after the approval of a product,
and those innovations can come in many, many different areas. I
won't take up more of the Committee's time. I've already listed
a number of examples, which can be then subject to patenting.
If those innovations are truly beneficial to patients, they
will get out onto the market and they will have uptake in the
market. If they're not, then they won't.
Senator Hawley. Let me ask you something about to--to
comment on something that former FDA Commissioner Scott
Gottlieb said a few years ago, that patent thickets are purely
designed to deter the entry of approved biosimilars. His view
was that there's no real business need here. It's about
profits.
My question would be, if your clients aren't trying to
behave in an anticompetitive way, then why aren't all the
relevant patent applications for a particular drug filed at
once? Up front, so to speak, when the product first comes to
market, as opposed to staggered over time in a way, again, that
tends to lengthen and lengthen and lengthen the protections?
Mr. Levitt. Senator, that is because as the manufacturer
gains further experience with the product and continues to
examine the product for ways that it can be improved upon,
that's a process that naturally takes place over time. When you
get the initial approval of a product is when it is ready for
approval on the basis of safety and efficacy. That doesn't mean
the product is perfected at that time, or that it cannot be
improved upon in a whole variety of ways that can be beneficial
to patient care, to the quality of the product, and to other
important attributes.
It's naturally a process that takes place over time, as
providers and manufacturers gain more experience with the
product and continue to perform scientific research on the
characteristics of the product. That doesn't--it just doesn't
happen all at once. It's not the way science works.
Senator Hawley. I'll leave it at that. My time is nearly
expired. I just want to point out that I think that there is
agreement that I'm sensing here, at least on this side of the
dais, that we've got to do something about the ability of the
manipulation of the patent system in order to prevent
biosimilars from coming to market in a way that's really
harmful to consumers. Thank you, Madam Chair.
Chair Klobuchar. I think you'll see, Senator Hawley, there
was a lot of discussion on this side of the aisle, as well,
about the patent thicket issues, and the concern, which was one
of the reasons we agreed to have Dr. Moodie here as a witness.
We thought it was important to hear that perspective. Senator
Blackburn, you're next. Thank you.
Senator Blackburn. Thank you, Madam Chairman. I really
appreciate the hearing on this, and I thank all of you for
being here today. I think that it is going to be important that
we look at the entire prescription drug chain when we're
talking about possible anticompetitive behavior.
The middlemen, the pharmacy benefit managers, as we have
talked about more than once today, control nearly 4 out of 5
prescriptions written in the U.S. That is astounding. This is a
vast, a vast arena of influence that they have over issues that
end up being life and death issues. Especially concerning to me
is the fact that they are controlling the access to so many of
these pharmaceuticals. Mr. Mitchell, as you mentioned in your
comments, this is something that is really opaque. There is a
need for transparency.
In addition to this, these healthcare middlemen have
undergone vertical transformation that combine the PBM with
insurers, specialty pharmacies, and healthcare providers.
Vertical integration can result in increased inefficiencies and
consumer benefits. However, such integration can also lead to
higher barriers for competition in each individual market.
Onerous audits, clawback provisions, and patient steering
are anticompetitive behaviors by the PBMs, and as some of you
have referenced today, you know that that is taking place. They
have caused small pharmacy business owners to struggle to
survive.
In recent years, 40 States, including my home State of
Tennessee, have enacted legislation to actually curb some of
these PBM practices. States have also taken action against the
spread pricing activities of PBMs, which have cost taxpayers
hundreds of millions in the Medicaid program.
I do believe it's time for Congress to understand the
impact of potentially anticompetitive PBM practices on
patients, small pharmacy businesses, and taxpayers. Senator
Braun and I have introduced S. 298, the Pharmacy Benefit
Manager Accountability Act. I do encourage all of my colleagues
on supporting this legislation. Madam Chair, I have a letter
for the record, which is a statement from the National
Community Pharmacists Association that I'd like to submit.
[The information appears as a submission for the record.]
Chair Klobuchar. It will be entered in.
Senator Blackburn. Thank you. Mr. Levitt, if I could come
to you, please. I know that Senator Grassley talked a little
bit about the Senate Finance report on insulin, and you all had
an exchange on that.
Let's look at the incentives in the pharmaceutical supply
chain, and let me ask you how you think these incentives are
aligned. If they are there to drive costs lower and out-of-
pocket costs lower, which by--that is one of the things that I
hear from so many individuals. They never see the discount that
is there, and there is a lack of appropriate alignment in
actually lowering the cost of out-of-pocket expenses. I know
Mr. Mitchell had referenced this earlier, also.
If you would, for the record, talk a little bit about that
alignment.
Mr. Levitt. Thank you, Senator. Yes, in our view, that is
one of the fundamental problems in the entire drug pricing
system today is that the incentives are misaligned, and that
savings that may exist upfront in the system between the
manufacturers and the pharmacy benefit managers, in the form of
rebates or discounts, there's no incentive to pass those on to
consumers.
What we've seen is a growing trend for other entities in
the healthcare system, other than manufacturers and consumers,
to basically realize those savings for themselves, so that,
today, manufacturers, for example, only get a little bit over
half of the actual cost of the drugs that they're providing.
The rest is going to a variety of stakeholders, including PBMs,
Government entities, payers, and others.
But the patients, the problem is, as you pointed out, is
that the patients are not seeing those savings at the pharmacy
counter. We really believe that that is an issue that needs
urgent attention.
Senator Blackburn. When we're talking to Tennesseans, that
is one of the things that comes up most often. If it is a
cardiovascular disease, and they have a certain pharmaceutical
or certain cancers, what they have to actually stay alive, what
they need every month, and the cost for that and that discount
not going to the customers, so I appreciate that.
Mr. Kades, I want to come to you, if I may. Commissioner
Chopra from the FTC recently made a statement that I thought
was significant. The FTC largely stood by as the PBM industry
consolidated to three main giants, and even took steps to
undermine State legislation. This would indicate that there is
an intentionality to what the PBMs have done, as you now have
the three main ones, as I said earlier.
They are there at the juggernaut, if you will, for four out
of every five prescriptions that are being made in this
country. Can the FTC or should the FTC do more to evaluate the
anticompetitive behavior of the PBMs, or should this be given
to someone else?
Mr. Kades. Thank you, Senator. The FTC absolutely should be
looking at PBMs and considering whether there is
anticompetitive conduct and bringing cases where they can. I do
think it's important to remember that at the time those--that
consolidation occurred, when we look at where merger law is,
where the case that Senator Klobuchar talked about, which was a
merger monopoly and the Court said, not a problem. We look at
other mergers that the Government is losing, it's not at all
clear that FTC trying to stop those consolidation, based on
what was before them, would have been successful, given how
lenient the merger laws have become.
That's not an excuse for them not to try or to look at it
now, but I think it's important to understand that part of the
problems we're seeing, whether it be PBMs or with branded
companies gaming the system is directly related to how we have
abandoned antitrust law as a true regulator and promoter of
competition.
Senator Blackburn. Hindsight is always 20/20, correct? Let
me ask each of you this, and I'll ask just for a show of hands.
How many of you think that PBMs should be eliminated from the
marketplace? There is no one who would eliminate them.
How many of you think that PBMs should be reformed, and
that their power should be diminished? Okay, we've got one hand
that is there. All right, thank you, Madam Chairman.
Chair Klobuchar. Okay, very good. Thank you. A few things.
I misunderstood Senator Hawley when he said on this side of the
dais, we have support for doing something about patent
thickets. He meant on this side, like all of us together, as
opposed to on the party side. I really appreciate that
bipartisan moment, and so that's good.
Then, I thought I'd start out just with something
clarifying something that Senator Cotton was asking about. Just
a little bit of a different perspective.
Mr. Mitchell, there is a different look at why President
Biden was interested in sharing vaccines with other countries
in this pandemic like we have never seen, with very difficult
vaccines to develop. Could you talk about how from a public
health perspective, not to mention a humanitarian perspective,
it's beneficial to America to get other people vaccinated in
other countries as soon as possible?
Mr. Mitchell. I'll say for Patients for Affordable Drugs,
we don't have a position on international issues like the TRIPS
waiver, but I can speak for myself. A pandemic, by definition,
is global, and until we defeat the pandemic globally, we are
all going to continue to be at risk from emerging variants like
the Delta variant that has popped up and is now killing people
disproportionately in this country who haven't been vaccinated,
for example.
That didn't come from here, it came from elsewhere. From a
public health perspective and trying to look after ourselves in
America, but also to be good citizens of the world, making sure
people can get vaccines all over the globe is in our best
interest, both as people who want to have good health, but also
be good citizens.
Chair Klobuchar. Okay. Mr. Kades, are you aware of what
happened--I don't know what happened, when President Biden made
this announcement, to the stock ratings of the pharmaceutical
companies. Did they plummet when this went out there?
Mr. Kades. My understanding, although not an expert in the
stock market, that they did not take a substantial hit.
Chair Klobuchar. Okay. All right. Sham FDA petitions. There
was a moment of asking questions you didn't know the answer to,
but I figured you would have some impression of it.
Mr. Kades, the practice of filing sham petitions risks
delaying the approval of generic drugs and biosimilars and
imposes unnecessary burdens on limited FDA resources. Senator
Grassley and I introduced a bill, the Stop Stalling Act, to
give the FTC enhanced authority to crack down on abuses of this
process, while allowing petitions submitted in good faith to
raise legitimate health and safety concerns. Can you elaborate
on the harms to patients and competition caused by the filing
of sham FDA petitions?
Mr. Kades. Yes, and it's a tragic story, right? The
Government comes up with this idea that when the FDA makes
decisions, average citizens and people involved should be able
to petition the FTC--I mean, I'm sorry, the FDA and so this
improves participation. Nobody in their wildest dreams thought
that virtually all the citizens' petitions dealing with generic
approvals would be filed by their competitors and the branded
companies saying, ``Oh, no, this generic product, you know,
either you have to put special restrictions on it, or don't
approve it, or require more testing.''
Even if the petition isn't successful, it can take the
time--the FDA has to look at it, has to review it, and even
though they're supposed to decide within 180 days, they have a
million things to do.
Simply by using, in ways similar to the CREATES Act, the
problem the CREATES Act addressed, using the process of the
FDA, a process that was supposed to improve participation,
branded companies can delay competition and force all of us to
pay more for drug costs without any innovation, without any
additional advantage.
I think legislation here to correct that problem would be
excellent. I would note that Congress has already tried to fix
it once. The branded industry found ways to nullify that, and
so I think Congress should take another crack at it.
Chair Klobuchar. Okay. Mr. Abbott, you talked about in your
written testimony, is that the need for greater resources for
enforcers, these are your words, ``is particularly acute with
regard to pharmaceutical enforcement given the great economic
significance and complexity of pharmaceutical market issues.''
We don't agree on everything in this hearing, but, given that
you see this acute need, would you recommend that we get some
additional resources for enforcement of the laws to the
Agencies?
Mr. Abbott. Thank you for that question, Senator. Yes.
Chair Klobuchar. Very good. Thank you, and you know, we
have this bill that Senator Grassley and I did, that actually
has passed the Senate now, to change the merger fee statute
that would add over $100 million to the two Agencies, and we
haven't gotten a lot of objections to it because including the
Trump administration did support this when we tried to get it
done at the end of the year, so. All right. Thank you.
Mr. Mitchell, our Medicare program is limited by law in its
ability to negotiate drug prices. Removing the noninterference
clause--you, I think, mentioned this--so we can allow 43
million patients on Medicare Part D to lower the cost of their
medication would be a critical way. I think it would help
everyone, not just the seniors who benefit from this.
Do you think that removing the noninterference clause is a
good idea, and what additional reforms do you think would be
required for Medicare to get better price terms for the
enormous quantity of drugs that it purchases?
Mr. Mitchell. Yes, we believe the noninterference clause
should never have been inserted in 2003, and that it needs to
be removed. It needs to be removed not only for Part D drugs,
but for Part B drugs, as well. You know, the specialty drugs,
many of which are Part B drugs, account for 0.4 percent of all
prescriptions, but 46 percent of all spending on drugs in this
country.
We would love to see the noninterference clause eliminated,
negotiations extended to D and B, and the prices negotiated by
Medicare extended to the private sector to help employers who
provide healthcare for 156 million Americans.
Chair Klobuchar. Very good. Thank you. Just a few last
questions here. It has been a long hearing. Mr. Kades, as we
look to merger, I mean, there's a lot of predictions, and we're
seeing them now. We're seeing this merger bonanza, not just in
pharma, across the way. What can the FTC do to better police
pharmaceutical mergers under current law? Another softball.
Would reforming the laws, as suggested in my bill, would that
enable the Agencies to do more to police anticompetitive
mergers--changing the burden for big mergers, other ideas that
we have out there?
Mr. Kades. Yes. Merger enforcement is going to be critical
for the Agencies. I think it's fair to say that they need to be
more risk-seeking, but under the current standards, the law is
too lenient.
I absolutely agree that it's time for Congress to reset
that balance. Because what we see now is that the average
litigated merger case, it's not a complicated case, but it
still goes to trial. The Government has to go--even when it
wins, has to prove that a merger monopoly is problematic.
I think ideas of adopting new presumptions makes sense, and
we have 20 years of economic research that actually identifies
better situations where mergers are likely to be harmful. That
should be incorporated into the law.
I think changing the standard to make it clear that
potential competition matters, and rejiggering the balance
between competition and consolidation, and finally, obviously,
just giving the Agencies more resources.
Chair Klobuchar. Okay. Last thing, because it's good to end
with something Senator Lee and I have been working on together.
Way back, Senator Collins and I worked on, when there were drug
shortages, and there still are, obviously, from time to time,
using that as a reason to bring in drugs from other countries
when they didn't have kids' cancer drugs and things like that,
which was actually happening.
This is looking at it a different way, of allowing the
Secretary of Health and Human Services to respond when sellers
of older off-patent drugs are in a position to drastically
raise prices due to a lack of competition. We would put
together the Short on Competition Act, along with Senator
Durbin and Grassley, to address the problem by allowing
temporary importation of the same product from other countries
that have strong drug safety standards. Then, of course,
Senator Grassley and I have a more permanent bill.
Would allowing the safe importation of drugs inject some
competition into our system because maybe, you know, I think
our argument here is if you do have the competition, or you
have the lower prices, then you wouldn't have to go to this.
But if you don't, why not allow some competition from safe
countries?
Mr. Kades. Particularly from safe countries, I think that's
an excellent idea and would improve competition. What we find
particularly in older----
Chair Klobuchar. Do you think maybe even if it was just out
there as a threat that that might keep some prices down
sometimes? You know, the Ovation case? Other things?
Mr. Kades. It very well could. But one of the problems on
older drugs is to get approval, a company--they tend to be
smaller markets, and a company has to go through 18 months,
spend money for that, and so when the price went sky high with
Daraprim, there were all sorts of products on the market in
Europe that had been on the market for 20 years. Let's find a
way to inject that competition back into the United States, and
maybe you're right, the price increase wouldn't have happened,
or it wouldn't have lasted as long.
Chair Klobuchar. Okay. Senator Lee.
Senator Lee. Mr. Kades, there's a bill called the TEAM Act
that I introduced along with Senator Grassley, and one of its
provisions would require courts to find that conduct is
anticompetitive where there is direct evidence of clear intent
to harm competition. In your view, would this make it easier
for antitrust enforcers to stop anticompetitive conduct in the
pharmaceutical industry?
Mr. Kades. Yes, I think it would help improve antitrust
enforcement. The number of times when I was litigating, where I
felt like it was a triangle litigation, was the FTC versus what
the company said in its documents versus what they were saying
on the stand, you know, you would think fact finders would say
the stuff you put in your documents that said, we were doing
this to harm competition matters, but you know, they see the
person on the stand and they're like, ``Okay, well, I guess I
don't believe that, so.'' You know, I do think it would help.
I would say that you know, one thing to think about is once
you make that law, companies will be more careful about what
they put in their documents, but that's just a minor comment.
I----
Senator Lee. Right. Yes, and that's our hope and our
intent, and certainly our expectation is that that would help,
as would the fact that it roughly doubles the total amount that
we would spend on the enforcement of our antitrust laws.
In your written testimony, you allude to the way that
courts have come to treat economic evidence in antitrust cases.
One of the provisions of the TEAM Act would limit the ability
of courts to give credit to defendants for justifications that
are speculative, out of market, or that don't benefit
consumers. Would this help some of those same problems based in
protecting competition in healthcare markets?
Mr. Kade. Absolutely. It's sort of the same dynamic as your
last question. Once you get to litigation, magically, companies
have all sorts of justifications that aren't in the record.
Senator Lee. Right.
Mr. Kade. And so tightening up those requirements would be
very helpful.
Senator Lee. Thank you. Mr. Abbott, as I alluded in my
opening remarks, I have reason to be concerned about the cost
and availability of insulin. I was excited to see recently that
Walmart has broken into the insulin market and has launched two
new low-cost products. What can you tell me about why it's
taken so long for this kind of disruption to occur, and why
haven't we seen this kind of innovation from a traditional
pharmaceutical company?
Mr. Abbott. I'm not an expert, Senator, on the traditional
pharmaceutical companies, but I will notice that it's
interesting that discount retailers, and Walmart, obviously, is
a prime example, have been very important figures in
healthcare. In fact, there was some recent study that Medicare
Part D, that some costs for generic, some Medicare Part D
bargaining was actually higher than the prices negotiated by
Walmart, so this suggests, again, that perhaps there should
have been more companies doing this.
The private sector is very good at bargaining, and if you
lift regulatory barriers to the ability of companies to enter
into these markets, that's all to the good.
I think one of the big problems here is all the discussion
with the PBMs and of other big actors is you have so many
large, entrenched actors, and regulatory structure, and I don't
have an exact answer here, but it may be that regulatory
structure made a lot of large companies reluctant to enter. But
that's my thought.
Senator Lee. Yes. Dr. Moodie, what I was talking to Mr.
Abbott about relates, in many ways, to restrictions on entry.
Anytime you have a viable market, in order to have actual
competition, you sort of need to have the ability of new
entrants to enter a marketplace. So, I'm always worried about
restrictions on entry that make it more difficult for people to
enter into a marketplace.
Many times, we see drug manufacturers imposing really high
prices just, well, because they can. I mean, that is sometimes
what will happen if someone has the ability to do that without
facing competition. In a normal market, this would prompt entry
into the marketplace by a would-be competitor, and thus spawn
competition. Competition would, in turn, bring about
corrections in price. It certainly wouldn't reward someone for
continuing to escalate the price of their own product. It would
end up punishing them.
But in the drug space, entry can take many years, and can
cost millions or tens of millions, or hundreds of millions, or
billions of dollars of investment to break into it. What do you
think we could do to make it easier so that patients benefit
from competitive markets? Is there anything we can do to limit
the effect of restrictions on entry?
Dr. Moodie. Sure. I mean, there has been a lot of talk
about price controls. We don't think that's the solution. The
solution is more competition. Of course, it does take you know,
up to 10 years to develop a biosimilar. It takes a long time.
By the time those biosimilars are ready to launch, we're then
seeing the thickets that I described earlier, which contain
large families of patents around the same inventions.
What we should also do is preserve pro-competitive
settlements. It's important that we don't assume that all
patent settlements are anticompetitive, because pro-competitive
settlements, which are those settlements that do not include
pay-for-delay, those settlements are one of the few tools that
we have to address a patent thicket as a whole because, as I
mentioned before, it's not economically possible to litigate
scores and hundreds of patents.
Those pro-competitive settlements act as a compromise that
strike a right balance. Because we can't litigate so many
patents, if we were to not have any settlements, you would
often see the biosimilars coming to market much later at the
end of the expiry of the last patents in the thicket, including
the lower quality ones, which are shielded from scrutiny.
And so, a pro-competitive settlement brings the launch date
earlier as a kind of a compromise of, yes, the overall
settlements. It strikes that right balance of bringing the
products to market earlier. We just have to be careful that any
legislative proposals of course have to target those
anticompetitive settlements, but carve out the pro-competitive
settlements, as well.
Senator Lee. Yes, that's a fair point. I mean, if we were
to discourage or even prohibit settlements generally in this
area, one can imagine ways in which that could harm consumers.
It would harm basically everyone except perhaps lawyers, who
could benefit from the ability to generate revenues to fund
indefinite generations of their posterity in their private
college tuition expenses.
But other than lawyers, it probably would benefit no one
and hurt everyone. Thank you.
Chair Klobuchar. Thank you very much, Senator Lee. Thank
you to our witnesses. It has been a long hearing, and I think a
good one. I was talking to some reporters yesterday about this,
and I think that they said, ``But we've heard these hearings
before, and is anything actually going to happen?'' I came out
of this more hopeful than I was before. I think you have a
number of Senators very interested in your patent thicket
issue, Dr. Moodie.
I think that there has been long-term interest in funding
the Agencies, even from our conservative witness here, in
making sure that we have ample enforcement authority and we
have, I should say, ample resources to do the work, and I think
there also are some things that we can do specific to the
pharmaceutical issues, as we talked about product hopping and
the pay-for-delay and the sham petitions, all of which are of
bipartisan interest.
But then, I also think that there are some bigger things
that we need to do if we really want to get this done. Some in
the pharma area with negotiation of prices, Mr. Mitchell, but
then also, as Mr. Kades has so well pointed out, beyond pharma,
to look at our antitrust bills as laws, as we have done so
often in this country's history, where we see a problem and we
adjust, and we make some changes to them so that they can be
actually used in an effective way.
I think we know that somehow the pendulum has swung too far
one way, and that's part of why we've been having these tech
issues, and other things because we just don't have the tools
to match the sophistication of our economy. When that has
happened in the past, actually people who sat in these chairs--
well, maybe not right in this room. It probably didn't exist
100 years ago. I know it didn't. But they adjusted. They made
changes to the laws, and I truly believe that's what we need to
do again.
I want to thank the witnesses, and we're going to leave the
record open for a week.
Do you want to add anything, Senator Lee? You're in your
own thicket over there? Oh, good.
[Laughter.]
Senator Lee. Thank you.
[Laughter.]
Chair Klobuchar. Okay. All right. The hearing is adjourned.
Thank you everyone.
[Whereupon, at 4:58 p.m., the hearing was adjourned.]
[Attitonal material submitted for the record follows.]
A P P E N D I X
Miscellaneous submissions:
AHIP, Statement, July 13, 2021................................... 125
Association for Accessible Medicines (AAM), Statement, July 13,
2021.......................................................... 109
American Economic Liberties Project (AELP), Statement............ 117
American Pharmacists Association (APhA), Statement, July 13, 2021 130
Various Unions, Consumer and Public Interest Groups, Letter, July
12, 2021...................................................... 142
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]