[Senate Hearing 118-190]
[From the U.S. Government Publishing Office]


                                                          S. Hrg. 118-190

                    TAXPAYERS PAID BILLIONS FOR IT:
                          SO WHY WOULD MODERNA
                     CONSIDER QUADRUPLING THE PRICE
                         OF THE COVID VACCINE?

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

                                 HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                                   ON

              EXAMINING THE MODERNA CONSIDERING QUADRUPLING THE PRICE 
                           OF THE COVID VACCINE

                               __________

                             MARCH 22, 2023

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions
                                
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        Available via the World Wide Web: http://www.govinfo.gov        
        
                              __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                 BERNIE SANDERS (I), Vermont, Chairman
PATTY MURRAY, Washington
ROBERT P. CASEY, JR., Pennsylvania   BILL CASSIDY, M.D., Louisiana, 
TAMMY BALDWIN, Wisconsin                 Ranking Member
CHRISTOPHER S. MURPHY, Connecticut   RAND PAUL, Kentucky
TIM KAINE, Virginia                  SUSAN M. COLLINS, Maine
MAGGIE HASSAN, New Hampshire         LISA MURKOWSKI, Alaska
TINA SMITH, Minnesota                MIKE BRAUN, Indiana
BEN RAY LUJAN, New Mexico            ROGER MARSHALL, M.D., Kansas
JOHN HICKENLOOPER, Colorado          MITT ROMNEY, Utah
ED MARKEY, Massachusetts             TOMMY TUBERVILLE, Alabama
                                     MARKWAYNE MULLIN, Oklahoma
                                     TED BUDD, North Carolina

                Warren Gunnels, Majority Staff Director
              Bill Dauster, Majority Deputy Staff Director
                Amanda Lincoln, Minority Staff Director
           Danielle Janowski, Minority Deputy Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                       WEDNESDAY, MARCH 22, 2023

                                                                   Page

                           Committee Members

Sanders, Hon. Bernie, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening statement.........................     1
Cassidy, Hon. Bill, Ranking Member, U.S. Senator from the State 
  of Louisiana, Opening statement................................     3

                            Witness--Panel I

Bancel, Stephane, M.B.A., M.Eng., M.S.c., Chief Executive Officer 
  and Director, Moderna, Inc., Cambridge, MA.....................     6
    Prepared statement...........................................     8

                          Witnesses--Panel II

Morten, Christopher J., Ph.D., J.D., Associate Clinical Professor 
  of Law, Columbia Law School, New York, NY......................    47
    Prepared statement...........................................    50
    Summary statement............................................    98
Sarpatwari, Ameet, Ph.D., J.D., Assistant Professor of Medicine, 
  Harvard Medical School, Boston, MA.............................    99
    Prepared statement...........................................   101
    Summary statement............................................   110
Garthwaite, Craig, Ph.D., M.P.P., Herman Smith Research Professor 
  in Hospital and Health Services Management, Kellogg School of 
  Management, Northwestern University, Evanston, IL..............   110
    Prepared statement...........................................   112

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
Sanders, Hon. Bernie:
    Kaiser Permanente, Prepared Statement........................   135
    NIH Letter...................................................   137
Cassidy, Hon. Bill:
    Submitting on behalf of Sen. Rand Paul, links to six Peer 
      Reviewed Papers From the Journal of Vaccine, and the Annals 
      of Medicine................................................   138
Marshall, Hon. Roger:
    Bayh Dole op-ed, Our Law Helps Patients Get New Drugs Sooner.   139
    Democrats proposed price controls for prescription drugs 
      could mean postponing a cure for Alzheimer's disease by 
      decades....................................................   140

 
                    TAXPAYERS PAID BILLIONS FOR IT:
                          SO WHY WOULD MODERNA
                     CONSIDER QUADRUPLING THE PRICE
                         OF THE COVID VACCINE?

                              ----------                              


                       Wednesday, March 22, 2023

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
216, Hart Senate Office Building, Hon. Bernard Sanders, 
Chairman of the Committee, presiding.

    Present: Senators Sanders [presiding], Murray, Casey, 
Baldwin, Murphy, Kaine, Hassan, Smith, Lujan, Hickenlooper, 
Cassidy, Paul, Collins, Braun, Marshall, Romney, Tuberville, 
and Mullin.

                  OPENING STATEMENT OF SENATOR SANDERS

    The Chair. The Senate Committee on Health, Education, 
Labor, and Pensions will come to order. Let me begin by 
thanking Mr. Bancel, the CEO of the Moderna, for being with us 
today, and all the other panelists who will be joining us. Mr. 
Bancel very early on agreed to be here voluntarily, and I 
appreciate that very much.

    I also want to take this opportunity, so there is no 
confusion, to congratulate Moderna, Pfizer, other companies, 
and the great scientists at the National Institute of Health, 
and other Federal agencies for their extraordinary work in 
rapidly producing COVID vaccines that have saved millions of 
lives.

    We should be grateful to all those in Government and in the 
private sector who worked so hard to save lives. This hearing, 
to my mind, is about several enormously important and 
interrelated issues that are on the minds of the American 
people. In the pharmaceutical industry today, we are looking at 
an unprecedented level of corporate greed, and that is 
certainly true with Moderna.

    Today, according to a recent survey, 37 percent of the 
American people could not afford the prescription drugs their 
doctors prescribe. Got that? Over one-third of the American 
people can't fill their prescription drugs that the doctors 
prescribe.

    Meanwhile, 10 major pharmaceutical companies made over $100 
billion in profit in 2021, 137 percent increase from the 
previous year. In these same corporations, the 50 top 
executives made over $1.9 billion in total compensation in 2021 
and are in line to receive billions more in golden parachutes 
once they leave their companies.

    In other words, all over this country, in Vermont and in 
every state represented here, people are getting sicker and, in 
some cases, dying because they cannot afford the outrageous 
cost of prescription drugs while these companies make huge 
profits and their executives become billionaires.

    Furthermore, and many Americans don't know this, the 
taxpayers of our Country have spent many tens of billions of 
dollars over the past decade to research and to develop 
lifesaving medicine. And in my view, that is a good investment. 
Yet, despite that huge amounts of money and the vitally 
important work done by the National Institute of Health 
scientists, the citizens of the United States pay far more for 
prescription drugs than do the people of any other country on 
Earth, in some cases, 10 times more for the same exact drug.

    Unbelievably, there are important lifesaving drugs on the 
market today that literally cost hundreds of thousands of 
dollars, cancer drugs and other types of drugs. And my simple 
question is, what does a lifesaving drug mean for a person who 
cannot afford that drug? You have all the great drugs out there 
in the world, but if you can't afford it, what does it mean?

    Now, in terms of Moderna, the focus of our attention this 
morning, let us be clear, the NIH and other Federal agencies 
worked with Moderna to research, develop, and distribute the 
COVID vaccine that so many of our people have effectively used. 
While Moderna may wish to rewrite history, it is widely 
acknowledged that both Moderna and the NIH created this vaccine 
together.

    According to a letter I received from the NIH on March 
17th, and which has been distributed to all Members of the 
Committee, three scientists at the NIH, ``are co-inventors'' 
and ``of this vaccine'' who are ``integral members of a 
collaborative team of scientists working to design and produce 
the vaccine.''

    In other words, this vaccine would not exist without NIH's 
partnership and expertise, and the substantial investment of 
the taxpayers of this country. As a matter of public record, 
U.S. taxpayers spent $12 billion on the research, development, 
and procurement of the NIH, Moderna COVID vaccine.

    Here is the thank you that the taxpayers of this country 
received from Moderna for that huge investment. They are 
thanking the taxpayers of the United States by proposing to 
quadruple the price of the COVID vaccine to as much as $130 
once the Government's stockpile runs out, at a time when it 
costs less than $3 to manufacture the vaccine--$3 to 
manufacture it, $130 on the market.

    What this means is that Moderna will be charging Medicare, 
Medicaid, the VA, the Department of Defense, the Indian Health 
Service, and insurance plans, private insurance plans on the 
Affordable Care Act, billions of dollars more for the COVID 
vaccine. So, all of us who are concerned about the deficit, the 
national debt, billions more goes to Moderna.

    Meanwhile, Moderna has already made $21 billion in profits 
off the COVID vaccine during the pandemic, and four of 
Moderna's executives and investors collectively became more 
than $10 billion wealthier as a result of the massive taxpayer 
investment into that corporation. As soon as Moderna started to 
receive billions of dollars from the Federal Government, Mr. 
Bancel literally became a billionaire overnight and is now 
worth over $4 billion.

    He was also able to secure a golden parachute for himself, 
worth another $926 million after he leaves the company. But 
let's be clear, Mr. Bancel is not alone. One of Moderna's co-
founders, Noubar Afeyan, is now worth $1.8 billion. And another 
co-founder, Mr. Langer is now worth $1.7 billion.

    One of the founding investors in Moderna, Tim Springer, is 
now worth $2.2 billion. None of these four individuals were 
billionaires before the taxpayers of our Country funded the 
COVID-19 vaccine. This type of profiteering and excessive CEO 
compensation is exactly what the American people, whether they 
are Republicans, Democrats, or Independents, are sick and tired 
of.

    That is why this morning I will be asking Moderna and Mr. 
Bancel to reconsider their decision to quadruple the price of 
this vaccine and not raise the price at all. Let me mention 
that after this hearing was announced, Moderna pledge that its, 
``vaccines and boosters will continue to be available at no 
cost for the vast majority of people in the United States'' 
through the creation of a patient assistance program.

    That is good news. The bad news is that most patient 
assistance programs are poorly designed and extremely 
difficult. And I will be asking. Mr. Bancel to make certain 
that this patient assistance program is simple, non-
bureaucratic, and in fact gets out to the people who need it.

    Let me pose, if I might, a moral question that we ask to 
rarely, but that I hope that this Committee will address in the 
months in front of us, and that is above and beyond the COVID 
vaccine, should people in our Country and around the world get 
sicker and sometimes die because they cannot afford the 
outrageous prices that the drug companies are charging?

    Is it morally acceptable to say, I have a drug here that 
can cure you, save your life, but I am sorry, you can't afford 
the $50,000 that it costs. Is that the moral values of the 
United States of America? And I would contrast that attitude 
that we see today from Moderna and virtually all the other drug 
companies with what Jonas Salk said when he invented the polio 
vaccine that had such a profound impact--and you know what he 
got for inventing the polio vaccine?

    He got nothing and he was proud of it. He gave a gift to 
the world that saved God knows how many lives. So, I think we 
need to do some moral thinking about the role of the drug 
companies in our society, and I hope this Committee will get 
into that.

    With that, let me give the mic over to Senator Cassidy.

                  OPENING STATEMENT OF SENATOR CASSIDY

    Senator Cassidy. Thank you, Chair Sanders. You know, I am a 
physician. I worked for over two decades in a hospital for the 
uninsured and those poorly insured on Medicaid, so I am very 
familiar with this issue.

    We share the concerns, Americans pay too much for 
prescription drugs and the medicines we depend upon. So today 
we are asking questions of Mr. Bancel, what price does Moderna 
plan to charge when the vaccine goes to the commercial market, 
and how did the company arrive at that price?

    Why is it different than the price that the Government 
charged--that the Government was charged? Now Moderna announced 
recently it will provide the vaccine at no cost to patients. 
How will the company implement this? They are fair questions 
and hopefully at the end of this hearing we will have a better 
understanding of these issues.

    But I am also--let's just kind of think about the process 
here. The title is, taxpayers paid billions for it, so why 
would Moderna consider quadrupling the price of the COVID 
vaccine. Now, frankly, this presumes guilt in its title before 
we have learned. I am a physician.

    I don't leap to a diagnosis before I take a careful history 
and physical. This is more like a show trial and a public 
shaming than a fact-finding mission. And it should be the goal 
of this Committee to first fact find before we attempt to hold 
someone guilty.

    The Chair speaks of corporate greed in the context of over 
1 million Americans who tragically died during the pandemic. I 
don't see the link. I just don't. The vaccine was available. As 
soon as it was available, it was implemented and lives began to 
be saved. It is hard to say that corporate greed was implicated 
before the vaccine was actually passed.

    It is important for us not to allow rhetoric to distort our 
analysis of the situation. This should be a fact-finding 
hearing. I do see a link between millions of lives saved 
because of the quick development of a vaccine made here in the 
United States. COVID-19 cost the U.S. economy an estimated $26 
billion dollars a day between 2020 and 2021.

    In this light, a study by the International Monetary Fund 
shows that Operation Warp Speed and the taxpayer dollars spent 
to support the vaccines would have paid for itself had it cut 
the duration of the pandemic by 12 hours. By 12 hours. We got a 
bargain here. An expensive bargain?

    No, a cheap bargain relative to that which it costs us 
every day. And considering that the initial estimates for the 
development of a vaccine were 3 to 10 years, thanks to 
Operation Warp Speed, private industry, American capitalism, 
things that we had done as a Committee on a bipartisan basis to 
give tools to FDA and BARDA, the world leading COVID vaccines 
were developed and distributed in less than 1 year, and 
taxpayer returns on investment were incalculable.

    Now, it is easy to criticize and decry capitalism, but it 
is the reason that we developed multiple world leading vaccines 
in 10 months and is a reason that hundreds of thousands, if not 
millions of Americans are still alive today. This would not be 
had it not been for this process and for these vaccines. But 
cost is an issue.

    Let's just not paper over that. I can criticize the 
process, but I agree, cost is an issue. And during my decades 
treating the uninsured, I had patients who could not afford the 
drugs prescribed. And my nurse and I would sit on the phone for 
sometimes hours with insurance companies trying to get the 
authorization so that they could get their drugs.

    But I have also seen when a drug has not been invented, so 
to speak, where there are no other options. When there was a 
death sentence or a life of chronic disease, because a medicine 
to treat the chronic illness or condition did not exist.

    Then, maybe a few years later, maybe many years later, I 
would be with a different patient in a different exam room with 
the same diagnosis, but now that drug had been invented and a 
formerly fatal disease was now treatable and a relic of the 
past. Why? Because in the interim, treatment was developed for 
their condition.

    Now, it is easy to put the COVID vaccine as one of the 
success stories, but it happened over 10 months. At first, we 
had no way to prevent, 10 months later, there it was. It seems 
like we in this Committee need to keep the bigger picture in 
mind. We have got an ecosystem of innovation that is leading to 
lives being saved.

    There are people in this room who would not be alive today 
were it not for capitalism interfacing with the pharmaceutical 
and medical device industry that allows you to be alive today. 
And a crowd this size, that is absolutely the case.

    Now we can disturb that ecosystem and assume there is no 
harm, but there are literally lives, future lives at stake. And 
so, for decades, this Committee has passed legislation knowing 
that at one point we would have to ask companies to step up and 
do something quickly and put everything aside.

    Moderna was one of those companies. We authorized grant 
funding. We set the groundwork for public, private 
partnerships. We stood up new institutions, all with the 
purpose that if something like a pandemic happened, something 
would be quickly developed. Well, when we did it in 2020, 
Moderna responded to their credit.

    I am not defending any salaries, I am not defending any 
profit. What I am defending and pointing out is the great 
benefit our Country and the world received from this technology 
that was translated out of the lab into clinical practice.

    Now, others did not make the same choice as Moderna, and I 
will say, it is important that through this hearing and 
otherwise that we do not send a hostile signal to future 
prospective partners that if you do something and you do it 
well and you profit after it happens, we may come right back at 
you.

    You saved a million lives, but hey, buddy, we don't like 
your management decisions. We are coming back at you. That 
would mean a future company would not work closely with the 
Government. They would run away from that quick response. Now 
there are legitimate policy questions to ask how Moderna will 
price their vaccine post-commercialization. We are interested 
in that.

    We have never been in this situation before where a company 
has taken the reins back from the Federal Government after the 
Federal Government controlled distribution of the product. But 
this is not the time to discuss eliminating intellectual 
property rights or destroying business models of those whom our 
Country will need to respond to the next pandemic and to 
develop the next life changing cure.

    We can't live in a fantasy world and pretend that what we 
do in this Committee will not affect those future decisions. I 
want people to know that this Committee is doing whatever it 
can to encourage cures for cancer, Alzheimer's, ALS, and other 
devastating disease. And if they do, and if a private company 
does it, they shall be rewarded.

    Lives depend upon it. Senator Sanders, we have pledged to 
work together, but I will say that if the purpose of the 
hearing is to demonize capitalism, we should not hate the 
thought of a person or a company making a profit, that we lose 
sight of the ideas and accomplishments that their profit is 
rewarded.

    We can't be a country that encourages citizens and 
companies to succeed and step up and make a difference and then 
shames them when they do. If we want to consider real policies 
that work to lower the cost Americans pay for medicines. Let's 
work together. Thanks, and I look forward to hearing from our 
witness.

    The Chair. Thank you very much, Senator Cassidy. We will 
now turn to our witness. Mr. Stephane Bancel is the Chief 
Executive Officer of Moderna. Mr. Bancel, thank you very much 
for being with us. You may proceed with your testimony.

  STATEMENT OF STEPHANE BANCEL, M.B.A., M.ENG., M.S.C., CHIEF 
  EXECUTIVE OFFICER AND DIRECTOR, MODERNA, INC., CAMBRIDGE, MA

    Mr. Bancel. Chairman Sanders, Ranking Member Cassidy, 
distinguished Members of the Committee, good morning. My name 
is Stephane Bancel, and I am the CEO of Moderna. While I speak 
with an accent, I lead a company that is an American success 
story.

    After losing money for 10 years, Moderna created a vaccine 
that helped end the pandemic. We were able to move quickly 
because of a decade of private investment in our mRNA platform 
and because of a decision in 2016 to build a manufacturing 
plant in Massachusetts.

    We made these investments before most people had heard of 
mRNA. Over Christmas break 2019, I read about an outbreak of 
pneumonia like illness in Wuhan, China. I immediately reached 
out to the U.S. Government because I believed our mRNA 
technology could make a difference. Two days after Chinese 
scientists put the genetic sequence online, our team created 
mRNA 1273 of COVID vaccine.

    As we were shut down in March, we moved faster. Every day 
brought new pressure as case counts and deaths rose in the 
country and around the world. I am so grateful for all teams 
who worked relentlessly, including Saturdays and Sundays, 
locked down from home, and from our lab and our factory.

    In the spring of 2020, we worked through Operation Warp 
Speed to develop a vaccine faster than we could have done 
alone. The U.S. Government gave us and four other vaccine 
companies funding to accelerate clinical trials. We thank our 
partners in the Federal Government for their support.

    We built our mRNA platform before the pandemic with $3.8 
billion of private investments. In mid-2020, we raised an 
additional $1.3 billion from shareholders for manufacturing 
scale up for the pandemic.

    In November, I received the long-awaited news, the results 
of our phase 3 study showed that our vaccine was 94 percent 
effective at preventing COVID. I literally cried tears of joy 
and relief. We had that complete in 10 months what would 
normally take 10 years. After a decade of building our mRNA 
platform, we are changing the future of medicine.

    Vaccine brought relief in our hospital system, put children 
and teachers back in classrooms, reopened our economy, and made 
it safe to reconnect in-person. We are under no obligation to 
do so, but recognizing the U.S. Government's investments, our 
company decided to provide the Government a discount versus the 
other mRNA vaccine.

    While the Government provided $1.7 billion in grant 
funding, Moderna returned at $2.9 billion. The U.S. vaccination 
program is responsible for an estimated $5 trillion of economic 
value, prevention of 18 million hospitalization in this 
country, and 3 million American lives saved.

    Innovations like our vaccine can only happen in America. 
The public private, partnership of Operation Warp Speed enabled 
a world leading response to a crippling pandemic. We at 
Moderna, along with the people of this country and the people 
of the world, owe the U.S. Government a debt of gratitude.

    Let me now address the transition from pandemic to endemic. 
First, we are committed to ensuring anyone who wants a vaccine 
can get one without the price being a barrier. Until now, the 
U.S. Government has purchased and distributed the vaccine.

    Now, Moderna, a small company, must ensure that anyone who 
wants a vaccine can get one at a location convenient to them. 
With this role comes increased complexity and increased risk. 
In the pandemic market with one customer, the U.S. Government.

    In the endemic market, we are going to have 10,000 
customers. In the pandemic markets, the U.S. Government took 
the risk for wasted doses. In the endemic market, Moderna will 
take that risk and that cost. In the pandemic markets, we only 
had to deliver to three CDC warehouses.

    In the endemic market, we are going to have to manage 
logistic to deliver to 60,000 pharmacies, doctors' office, and 
hospitals. In a pandemic market, we had 1 vial with 10 doses in 
there. In the endemic market, where the market requires a 
single dose vial, or even better prefilled syringe.

    On top of all this, we are expecting 90, 9-0, reduction in 
demand. As you can see, we are losing economies of scale. We 
must deal with supply chain complexity. And we must assume the 
wasted risk and costs that the U.S. Government used to assume. 
So, what's next for Moderna?

    This year, we are investing $4.5 billion in R&D. We are 
working hard on developing medicines to treat cancer, cystic 
fibrosis, multiple sclerosis, and very--all very important 
diseases. Thank you for your opportunity to share our story and 
perspective.

    [The prepared statement of Mr. Bancel follows:]

                 prepared statement of stephane bancel
    Chairman Sanders, Ranking Member Cassidy, and distinguished Members 
of the Committee, thank you for the opportunity to appear before you 
today. My name is Stephane Bancel, and I am CEO of Moderna, Inc. 
(``Moderna'').

    I was born and raised in Marseilles, France, where my formative 
years were shaped by Jesuit teachings. Jesuit values--the continuous 
pursuit of excellence, service of the greater good, and social 
responsibility--have informed my life and leadership of Moderna. I grew 
up with a keen interest in math, science, and computers, and dreamed of 
a career in STEM. I first moved to the U.S. in 1994 when I received a 
need-based scholarship that allowed me to study biochemical engineering 
in graduate school at the University of Minnesota. I returned to the 
U.S. in 1998 to go to business school. My experiences as an immigrant 
and an entrepreneur have taught me the importance of diversity of 
people and ideas. These values are central at Moderna, where our 
mission is to deliver the greatest possible impact to people through 
mRNA medicines.

    Moderna is built around the promise of medicines (vaccines or 
therapeutics) that leverage mRNA technology. Unlike DNA, mRNA molecules 
move out of a cell's nucleus. Each mRNA molecule contains instructions 
to produce a specific protein with a distinct function in the body. 
mRNA thus plays a central role in all biological processes, including 
in human health and diseases. Our approach fundamentally differs from 
traditional approaches to medicine; we are a platform company, not a 
traditional biopharmaceutical company. Rather than introduce a protein 
or chemical into the body, we send tailored mRNA into cells to instruct 
them to produce specific proteins. Our mRNA technology is highly 
adaptable; our platform is uniquely suited to tackle global health's 
biggest challenges with speed, scale, and flexibility.

    We are not a big pharmaceutical company, but we are growing based 
on these scientific ideas. Since our founding in 2010, we have grown to 
approximately 4,000 employees globally, including around 3,200 in the 
U.S. This year alone, we plan to hire 2,000 new employees, around 1,600 
of whom will be based in the U.S. To deliver the greatest possible 
impact to people through mRNA medicines, we are rapidly expanding and 
investing in people, science, and manufacturing.
            Moderna's Beginnings: An American Success Story
    While I speak with an accent, I lead a company that is a true 
American success story.

    In 2011, a Moderna co-founder shared preliminary data that showed 
how mRNA technology could work and asked my opinion. I told him that 
what he was showing me was not possible, that mRNA could never make 
human medicines. He then asked what it would mean for medicine if the 
technology could work. I told him that, if we could get medicinal mRNA 
technology to work, we could make medicines that had previously been 
unimaginable. In other words, it would transform the future of 
healthcare.

    I spent weeks debating whether to take the role of Moderna's CEO. 
My wife asked me what the chances were that Moderna would receive Food 
and Drug Administration (``FDA'') approval for a product. I told her 
the chance of success was around 5 percent. But the more I thought 
about it, the more I became convinced that I had to do it. The 
technology could, on paper at the time, change medicine forever. It 
could help treat children with rare genetic diseases for which there 
was no hope of treatment with traditional pharmaceutical and 
biotechnology approaches. It could help the millions of people with 
heart disease and could produce vaccines for infectious diseases. And 
over time, it could work on many other diseases, maybe even cancer, an 
illness that has touched my life as it has so many others, perhaps even 
yours.

    In 2011, I resigned from my job as CEO of a well-established global 
company with 6,000 employees and took a significant pay cut to become 
Moderna's CEO and its second team member. I took a risk on an untested 
medical technology when the rate of failure in the pharmaceutical 
industry is around 90 percent. I knew I had to give the company and the 
technology my best shot because the consequences for the health of so 
many people were on the line.

    When we started operations in 2011, we only had about $2 million in 
funding--enough to get us through our first 6 months. I hired the first 
few scientists, secured lab and office space, bought machines from a 
company that had gone bankrupt to save money, and moved us into our 
office and lab over a weekend. I watched Moderna double in size 
repeatedly during my first several years on the job. Over the next 
decade, there were many encouraging signs around the potential of our 
mRNA platform. But there were many setbacks as well; while we tested 
several mRNA applications in clinical trials, we were unable to bring a 
commercial product to market. We lost money every year from our 
founding until 2021.

    Year after year, even when we were losing money, I bought Moderna 
stock with money my wife and I had saved because I believed in the 
company. About half of my Moderna shares I purchased as an investor, 
separate from my CEO compensation. I traveled the world raising money 
in exchange for shares to keep the dream of mRNA medicines alive.

    With support from investors and strategic collaborators, we 
invested heavily in research and development for our mRNA platform. We 
built our mRNA platform and funded it through private investment. We 
took risks and made large investments to develop our corporate 
infrastructure, including over $100 million beginning in 2016 to 
construct our Norwood, MA manufacturing facility. Norwood, an 
integrated plant capable of full-scale development production, was 
operational by summer 2018, well before the COVID-19 pandemic.

    The early investments we made in our manufacturing capabilities 
prepared us to rapidly scale our production when the COVID-19 pandemic 
hit. We did this without support from the Federal Government and before 
turning a profit. Over the years, we have partnered with the U.S. 
Government when pressing global health crises have emerged--like Zika 
and COVID-19--to develop specific medicines enabled by our privately 
funded mRNA platform.
              Clinical Development of our COVID-19 Vaccine
    Over Christmas break 2019, I read about an outbreak of pneumonia-
like illness in Wuhan, China. I reached out to the U.S. Government 
because I believed our mRNA technology could make a positive impact. In 
parallel, I directed my team to begin leveraging our proprietary mRNA 
platform that we had invested in for 10 years.

    We started working on our vaccine as soon as Chinese scientists 
posted the virus' genetic sequence online. Our mRNA platform and prior 
work on coronaviruses enabled us to develop our COVID-19 vaccine in a 
matter of days. We did all this work before the first case was reported 
in the U.S. and months before the World Health Organization (``WHO'') 
declared a global pandemic. We did this because we felt a 
responsibility to do what we could to address the human suffering. 
Through my prior work on infectious disease outbreaks, I saw how 
viruses can grow exponentially. I knew every day and every hour 
mattered in the fight against COVID-19.

    On March 11, 2020, the WHO declared COVID-19 a global pandemic. As 
the world shut down, we continued our work. Each day brought new 
pressures as we saw case counts and death tolls rise. Our team worked 
tirelessly, in our homes, lab, and wherever we could. We worked long 
hours every day, including weekends. My executive team and I worried a 
lot about how we were going to keep such a pace for a year.

    We started Phase 1 clinical trials in March 2020. The first patient 
received our vaccine in Seattle just 2 months after COVID-19's genetic 
sequence became available. By way of comparison, this process took 20 
months for the SARS vaccine. We were able to move 10 times faster 
because of our decade of investments in our mRNA platform and our 
decision years ago to invest in our Norwood manufacturing plant. We 
received emergency use authorization from the FDA on December 15, 2020. 
At each step in the process, we were proud to partner with the Federal 
Government, through Operation Warp Speed, to answer the call and 
deliver an effective vaccine.

    We worked at an extraordinary pace to bring our vaccine to people 
as quickly as possible. However, we made sure to slow down when 
circumstances required. For example, recognizing COVID-19's 
disproportionate impact on people of color, we slowed enrollment in our 
Phase 3 clinical trial to ensure diverse representation following 
discussions with the U.S. Government. This effort enrolled 11,000 
people of color in our trial, or 37 percent of our study population. 
This was a tremendous outcome when you consider that historically, only 
6 percent of all clinical trial participants in the U.S. are people of 
color. We built a diverse study population to ensure that the outcomes 
reflected the country's population and to help build public trust in 
our vaccine.

    As our team continued our round-the-clock work on our vaccine, 
COVID-19 was taking its toll on society. Our hospitals were overrun 
with sick patients, people were dying alone, and essential workers 
risked their lives every day to stock food on store shelves and keep us 
safe. The experiences of our team in those dark days of the pandemic 
mirrored the rest of the world. We were separated from our families, 
our children went to school on Zoom, and we suffered the loss of loved 
ones without being able to say goodbye. Feeling the pain of our fellow 
citizens gave us the energy and motivation to keep working at an 
accelerated pace; we knew every hour we worked would get us closer to 
saving lives. The U.S. Government teams also did a remarkable job in 
those difficult times, and we at Moderna are grateful for their 
efforts.

    Finally, on a Sunday in November 2020 while I was working from 
home, I received long-awaited news: the results of our Phase 3 clinical 
trials showed that our vaccine was 94.1 percent effective at preventing 
symptomatic COVID-19. When I finished the video conference, I called to 
my wife and daughters, and we hugged and cried tears of joy and relief. 
Our accomplishment started to sink in: we had achieved in 10 months 
what would normally take 10 years. After 10 years of building our mRNA 
platform, we had developed a tool that would save lives today and 
change medicine for the future.
                        Collaboration with BARDA
    As outlined in previous sections, we built our mRNA platform and 
funded it through private investment, including $3.8 billion before the 
pandemic. We have partnered with the U.S. Government when pressing 
global health crises have emerged--like Zika and COVID-19--to develop 
specific medicines built from our mRNA technology platform.

    The U.S. Government gave us $1.7 billion in funding to accelerate 
clinical trials for our COVID-19 vaccine at the scale and speed it 
required through grants from the Biomedical Advanced Research and 
Development Authority (``BARDA''). This was particularly important for 
us because we are a small company and, unlike big pharmaceutical 
companies, could not self-fund robust clinical trials.

    Grant funding and advance purchase orders from the U.S. Government 
allowed us to accelerate development of our COVID-19 vaccine and 
enabled us to deliver our vaccine to the public at a speed we could not 
have accomplished on our own. We at Moderna, along with the people of 
this country and the world more broadly, owe the U.S. Government a debt 
of gratitude for its important investment.

    We were under no obligation to do so but, recognizing the U.S. 
government's investment in the later stages, we provided the government 
a discount versus the other mRNA vaccine. While the government provided 
$1.7 billion in funding, we returned $2.9 billion.

    Innovations like our vaccine can only happen in America. We thank 
our partners in the Federal Government for their support and the vote 
of confidence they cast for our mRNA technology.
         Scaling up the Manufacturing of the COVID-19 Vaccines
    At the same time, while working through all of the challenges of 
the clinical trials, we were preparing for manufacturing so that we 
would be ready to supply quickly in the event that our vaccine was 
successful in clinical trials. We needed to scale up our manufacturing 
capacity exponentially. In our 10 years of business before the 
pandemic, we had never produced more than 100,000 product doses per 
year across our entire pipeline portfolio. By late January 2020, I 
became convinced that COVID-19 would be a pandemic like the 1918 
Spanish Flu. I challenged Moderna's head of manufacturing to come up 
with a plan to produce a billion doses for distribution in 2021, a 
daunting 10,000 times more doses than we had produced ever before.

    Given the magnitude of the required manufacturing scale-up and the 
risk of doing so before we knew if our vaccine worked, we solicited 
outside funding. In May 2020, when our positive Phase 1 clinical trial 
data went public, our board approved raising $1.3 billion through the 
capital market (NASDAQ). These private funds raised through the sale of 
new shares enabled us to hire new employees, buy new equipment and raw 
materials, set up facilities that met rigorous FDA standards, and 
establish protocols and processes to keep our employees safe while 
producing our vaccine in the midst of a global pandemic.

    Facilitated by the early investments in our mRNA platform and 
manufacturing facility, we delivered 300 million doses of our vaccine 
to the U.S. Government in 2021. Our team knew that each dose we 
produced represented an additional life protected. Vaccines brought 
relief to our overwhelmed hospital system, put children and teachers 
back in classrooms, reopened our economy, and made it safe to re-build 
in-person social networks.

    While much progress has been made, it remains a top priority for us 
to continue supporting efforts to fight COVID-19 and advancing the most 
efficacious vaccine. To date, our COVID-19 vaccine has been distributed 
to more than 70 countries and has helped protect the lives of hundreds 
of millions of people around the world. We partnered with Gavi's 
Vaccine Alliance to distribute more than 170 million doses to low-and 
middle-income countries. However, as demand shifted, Gavi asked to be 
released from its purchase commitment, which we did. When doses were 
declined, we recognized write-downs of approximately $1 billion in non-
standard costs. \1\ Notwithstanding this loss, we have offered Gavi up 
to 100 million more doses in 2023 at our lowest-tier price. \2\

    \1\  See Moderna 2023 Proxy Statement (March 15, 2023), https://
d18rn0p25nwr6d.cloudfront.net/CIK-0001682852/a3589eb3-e49a-4135-a05c-
746fe30f466a.pdf.

    \2\  See Moderna Announces Update to 2022 Supply Agreement with 
Gavi that Secures Access to Updated Variant-Specific COVID-19 Vaccines 
for Low-and Middle-Income Countries (Oct. 17, 2022), http://
investors.modernatx.com/news/news-details/2022/Moderna-Announces-
Update-to-2022-Supply-Agreement-with-Gavi-that-Secures-Access-to-
Updated-Variant-Specific-COVID-19-Vaccines-for-Low-and-Middle-Income-
Countries/.

                    Our Commitment to Vaccine Access
    A lot will change for our company as we step into the shoes of the 
U.S. Government to ensure that everyone who wants a vaccine has access 
in a convenient location. One thing that will not change is our 
commitment to delivering the greatest possible impact to people through 
our mRNA medicines.

    We are committed to ensuring anyone who wants a vaccine can get 
one, without price posing a barrier. Our vaccine will continue to be 
available at no out-of-pocket cost to insured people. For the uninsured 
(or underinsured), our free drug program will ensure access by 
providing COVID-19 vaccines at no cost.

    We remain steadfast in our commitment to protecting as many people 
as possible across the world. To that end, we are building a 
manufacturing facility in Kenya capable of producing up to 500 million 
vaccine doses per year. Through this facility we hope to ensure 
sustainable access to transformative mRNA medicines in Africa and 
positively impact public health.
                        Our Approach to Pricing
    We are committed to pricing that reflects the impact our vaccine 
has on patients and healthcare systems. This impact includes lives 
saved and hospitalizations avoided. The U.S. vaccination program is 
responsible for an estimated $5 trillion in societal economic value. 
\3\ The Commonwealth Fund estimates that the U.S. vaccination program 
prevented 18.5 million additional hospitalizations and 3.2 million 
COVID-19 deaths. \4\
---------------------------------------------------------------------------
    \3\  Noam Kirson et al., The Societal Economic Value of COVID-19 
Vaccines in the United States, Journal of Medical Economics (Jan. 20, 
2022), https://www.tandfonline.com/doi/pdf/10.1080/
13696998.2022.2026118.
    \4\  Meagan C. Fitzpatrick et al., Two Years of U.S. COVID-19 
Vaccine Have Prevented Millions of Hospitalizations and Deaths (Dec. 
13, 2022), http://www.commonwealthfund.org/blog/2022/two-years-covid-
vaccines-prevented-millions-deaths-hospitalizations.

    In addition to helping protect the lives of millions of people 
around the world, our COVID-19 vaccine has also dramatically lessened 
the pandemic's economic burdens. For example, according to a study 
published at the end of 2021, COVID-19 vaccines had already saved the 
U.S. economy approximately $438 billion. \5\
---------------------------------------------------------------------------
    \5\  Anusuya Chatterjee et al., Economic Savings in America: A 
Story of Public-Private Partnership in Rapid COVID-19 Vaccine 
Development and Deployment, Heartland Forward (Dec. 18, 2021), https://
heartlandforward.org/wp-content/uploads/2021/12/Economic-Savings-in-
America-7.pdf.

    As the pandemic has ended and we move to an endemic phase, the U.S. 
Government will wind down its role as the sole purchaser and 
distributor of COVID-19 vaccines. We will be offering our vaccine as a 
commercial product for the first time. Some people may be asking--why 
does this matter? During the pandemic, we had guaranteed sales to one 
customer (the U.S. government); moving forward, we are expecting to 
work with about 10,000 customers. Challenges of endemic distribution 
---------------------------------------------------------------------------
include:

          Assuming the cost of producing vaccines that we may 
        not be able to sell given uncertainty in demand for fall of 
        2023, both in the U.S. and globally;

          Distributing to approximately 60,000 pharmacies, 
        doctors' offices, and hospitals throughout the country, rather 
        than three warehouses;

          Transitioning from 10 dose vials to single dose vials 
        or pre-filled syringes;

          Providing some customers with a ``right of return'' 
        in which we give them back their money for some purchased 
        product if they can't sell it; and

          Moving from a single 500 million dose contract with 
        the government to a commercial market with demand for perhaps 
        30-50 million doses, creating more than a 90 percent volume 
        decrease.

    Notwithstanding these challenges, we are committed to a fair price, 
which will be similar to other vaccines. Notably, our price will be 
less than two times the cost of enhanced flu vaccines, \6\ whereas 
COVID-19 causes three times as many deaths as the flu. \7\
---------------------------------------------------------------------------
    \6\  The CVS list price for enhanced flu vaccines is $95. See CVS 
Minute Clinic Price List, available at https://www.cvs.com/
minuteclinic/services/price-lists.
    \7\  Sarah Zhang, The `End' of COVID Is Still Far Worse Than We 
Imagined, The Atlantic (Sept. 22, 2022), https://www.theatlantic.com/
health/archive/2022/09/covid-pandemic-end-worse-than-flu/671514/.
---------------------------------------------------------------------------
              Looking Ahead to the Next Decade and Beyond
    We have worked tirelessly to build the industry's leading mRNA 
platform. We did this while losing money for over 10 years so we could 
make mRNA medicines a reality for the world. This work allowed us to 
play a leading role in the fight against COVID-19. The success of our 
COVID-19 vaccine is funding more research to continue transforming the 
future of medicine, including for cancer and cystic fibrosis.

    In 2023, we will invest $4.5 billion in research and development. 
We are committed to this investment even though analysts expect Moderna 
to report a loss in 2023. And last year our research and development 
investment was $3.3 billion--almost 40 percent of our net revenues, 
which is about twice the pharmaceutical industry standard. \8\ We 
continue to make these significant research and development investments 
even as we face declining profits.
---------------------------------------------------------------------------
    \8\  The U.S. government's twenty-year average shows that 
pharmaceutical companies have invested 19 percent of their net revenue 
into research and development. Congressional Budget Office, Research 
and Development in the Pharmaceutical Industry, at 5 (Apr. 2021), 
https://www.cbo.gov/system/files/2021-04/57025-Rx-RnD.pdf.

    Our commitment to broad research and development is illustrated by 
our development pipeline. We are working to address a wide range of 
diseases and conditions, including infectious diseases, immuno-
oncology, rare diseases, autoimmune diseases, and cardiovascular 
diseases. We have 48 therapeutic and vaccine candidates in development. 
We are in dialog with the WHO and the Coalition for Epidemic 
Preparedness Innovations (``CEPI'') to develop 15 vaccines against 
priority pathogens that pose a threat to public health. Moderna's 
clinical portfolio already includes vaccines targeting COVID-19, HIV, 
Nipah, and Zika. Moderna's expanded global health strategy will advance 
---------------------------------------------------------------------------
programs against the remaining pathogens by 2025.

    We are working on personalized cancer vaccines, treatments for 
cystic fibrosis, and a cytomegalovirus (``CMV'') vaccine, in addition 
to the tools to fight future pandemics. Our personalized vaccine for 
melanoma, a cancer that is expected to kill 8,000 people in the U.S. 
this year, has the potential to transform outcomes for high-risk 
resected melanoma patients. Results from a recent Phase 2 clinical 
trial show that when combined with Merck's KEYTRUDA cancer drug, our 
vaccine reduced the risk of cancer recurrence and death by 44 percent. 
In partnership with Vertex, we are developing an mRNA therapeutic to 
treat the underlying cause of cystic fibrosis, a rare genetic disease 
that causes degeneration of lung function and often death, for which 
there is no cure. Addressing the root cause of cystic fibrosis with an 
mRNA medicine could profoundly improve quality of life for the 
approximately 5,000 people who live with the disease and do not respond 
to existing treatments.

    For ultra rare diseases--those that impact fewer than 100 people 
globally--we understand that the cost of therapeutics can put treatment 
out of reach for many patients. We are committed to considering patient 
access in our pricing decisions. In the case of Crigler-Najjar Syndrome 
Type 1 (``CN-1''), rather than commercialize the product, in September 
2021, we committed to making the intellectual property available for 
free through a partnership with the Institute for Life changing 
Medicines at the University of Pennsylvania. Through this partnership, 
we have committed to providing the medicine for free for pre-clinical 
and clinical testing. If the medicine receives regulatory approval, we 
will supply the medicine to families for free forever.
                      Commitment to Our Community
    At Moderna we care deeply--about our patients, our employees, the 
environment, and our communities. We recognize that we have an 
opportunity to change medicine for all, and we will continue to make 
corporate responsibility a critical part of who we are and what we do.

    Last year we launched the Moderna Charitable Foundation (``Moderna 
Foundation'' or ``the Foundation''). We are proud to extend our social 
impact and support the causes our employees care most about as we work 
relentlessly to improve human health with our mRNA technology.

    The Moderna Foundation's work reflects our continued commitment to 
communities impacted by COVID-19. The Foundation provides grants to 
local and global organizations, makes event-driven philanthropic gifts, 
and matches employee gifts to certain organizations. Our grant program 
provides financial support to organizations that focus on healthcare 
quality and access, mental health, STEM education, food insecurity, and 
child development.
                               Conclusion
    We at Moderna are grateful for the actions you and your colleagues 
have taken to support and fund efforts to combat the COVID-19 pandemic. 
Thank you, and I look forward to your questions.
                                 ______
                                 

    The Chair. Mr. Bancel, thank you very much for your 
testimony. You sent us a, I think it is a nine-page, single 
spaced document longer than your testimony. We appreciate that. 
But in these nine pages, as I read it, you do not mention the 
National Institute of Health, the NIH once, nor the research 
that they did.

    As I mentioned earlier, according to a letter I recently 
received from the NIH, distributed to all Members, what the NIH 
says is that three scientists at the NIH, ``are co-inventors 
and were integral members of a collaborative team of scientists 
working to design and produce it.''

    That is the scientists at the NIH, not to mention the many 
billions of dollars the Federal Government that came to Moderna 
in order to produce the vaccine and do the clinical trials. How 
come--in your judgment, what role did the NIH play in co-
authoring and developing this vaccine?

    Mr. Bancel. Thank you, Mr. Chairman. Let me start by saying 
that we have a lot of respect, great respect for the NIH team. 
And we believe what the NIH was for this country and for the 
world is really important within science that industry might 
not fund.

    What happened when the sequence came online is our team at 
Moderna, were working on the technology, but the way one needs 
to think about Moderna is like an operating system. What we 
spent 10 years doing is developing all the tools to make 
products----

    The Chair. I don't mean to be rude, but isn't it absolutely 
true that the NIH was also doing that, had done research for 
many years on that same area?

    Mr. Bancel. What is correct, sir, Mr. Chairman, is that the 
NIH has worked on the virus and on the protein. So, what our 
team did is develop the mRNA molecule. What the NIH did, which 
was a great confirmation, is they designed the same protein, 
then our team did, in parallel, but the design of the mRNA 
vaccine was done by our team. This is our technology.

    The Chair. The NIH considers themselves to be co-authors of 
the vaccine. Do you disagree?

    Mr. Bancel. Our team have been working through that 
discussion for quite a while. We have agreed to disagree. The 
team is following U.S. IP law, which is very important. And 
what we have done to close the matter is we actually have 
decided to abandon that patent. We have abandoned that patent.

    The NIH is aware of it and we are moving on because we 
cannot agree on what happened. The mRNA molecule was designed 
by the Moderna team. That is our technology.

    The Chair. Mr. Bancel, in terms of the role that the U.S. 
Government and taxpayers of this country had in terms of the 
success of Moderna, let me read to you a quote from Boston 
Magazine, June 4th, 2020.

    The quote says, ``the U.S. Government announced that it was 
funding Moderna with nearly half a billion dollars. The news 
sent Moderna's stock price so high that Bancel became a 
billionaire overnight.'' Comment?

    Mr. Bancel. What the Government has done through Operation 
Warp Speed was a moment that can only happen in America. We 
were facing a virus. This was the common enemy. This did not 
come out of Europe or other Governments.

    What the U.S. Government did was say, we need to fund six 
different companies, six different technologies to be able to 
get at least one or two vaccine working. That was really what 
the Government did----

    The Chair. I don't mean to interrupt you. I just don't have 
a lot of time. Everybody else is going to want to ask the 
question. But here's the point, it was announced that the 
Federal Government would put money into Moderna and you 
became--the stock market soared. You became a multi-billionaire 
overnight.

    It is hard for me not to believe that the Federal 
Government played a major role in the development of this drug. 
But here is the main point. I don't want to talk about what 
happened 3 years ago. We are here today.

    You are a multi-billionaire. Other people, top executives 
in your company are multibillionaires, all developed as a 
result of the vaccine. And now we have a situation where you 
are proposing to quadruple the price of the new--of the vaccine 
once the Government stockpile runs out.

    That will mean that not only, and we will talk about later 
on the patient assistance program, but in terms of Government, 
in terms of Medicare and Medicaid, other Government agencies, 
taxpayers are going to have to spend substantially more money.

    My question to you is, given the fact that you have made 
billions of dollars, that your company has made huge profits on 
behalf of the taxpayers of this country, will you reconsider 
your decision to quadruple the price of the vaccine?

    Mr. Bancel. Chairman Sanders, what we have to do is to deal 
with a complexity I described, and I am happy to go into more 
detail for this hearing. This is not the same product. We used 
to have ten doses in each vial. Now we are going to have--every 
vial will have a different dose. This is not the same----

    The Chair. I understand it, but quadrupling the price is 
huge, and I will hope--I would hope very much that you will 
reconsider that decision. It is going to cost the taxpayers of 
this country billions of dollars. That is something you can do.

    Mr. Bancel. The volume we had during the pandemic gave us 
the economies of scale we won't have anymore. That is what is 
different.

    The Chair. Okay.

    Senator Cassidy.

    Senator Cassidy. I defer to Senator Paul.

    Senator Paul. Mr. Bancel, Moderna recently paid NIH $400 
million. Do you believe it creates a conflict of interest for 
the Government employees who are making money now off of the 
vaccine to also be dictating the policy about how many times we 
have to take the vaccine?

    Mr. Bancel. Good morning, Senator. Indeed, we recently 
made, before Christmas last year, a $400 million payment to the 
NIH for an old patent that they had developed not related to 
COVID, but useful in the development of a COVID vaccine, to pay 
them for their work. It is for the U.S. Government to assess 
how that money should be----

    Senator Paul. Do you think it creates a conflict of 
interest for the same people deciding the policy of how often 
we have to take the vaccine to also be making money the more 
times we take the vaccine, yes or no?

    Mr. Bancel. This is for the Government to decide, Senator.

    Senator Paul. You have no opinion on whether or not it 
creates a conflict of interest. Is there a higher interest or a 
higher incidence of myocarditis among adolescent males 16 to 24 
after taking your vaccine?

    Mr. Bancel. Thank you for the question, Senator. First, let 
me say we care deeply about safety and we are working closely 
with the CDC and the FDA----

    Senator Paul. It is pretty much a yes or no. Is there a 
higher incidence of myocarditis among boys, 16 to 24, after 
they take your vaccine?

    Mr. Bancel. Data have shown actually--I have seen sorry 
from the CDC actually showing that there is less myocarditis 
for people to get the vaccine versus who get COVID infection.

    Senator Paul. You are saying that for ages 16 to 24, among 
males who take the COVID vaccine, their risk of myocarditis is 
less than people who get the disease.

    Mr. Bancel. That is my understanding, Senator.

    Senator Paul. That is not true. And I would like to enter 
into the record six peer reviewed papers from the Journal of 
Vaccine, the Annals of Medicine that say the complete opposite 
of what you say.

    I also spoke with your President just last week, and he 
readily acknowledged in private that, yes, there is an 
increased risk of myocarditis. The fact that you can't say it 
in public is quite disturbing. Do you think it is 
scientifically sound to mandate three vaccines for adolescent 
boys?

    Mr. Bancel. This is for the public health leaders to 
decide.

    Senator Paul. You have been advocating for it. You have 
been interviewed and you have been advocating for boosters. Do 
you know when the myocarditis is most common among these 
adolescent boys?

    After the second dose. When I spoke with the President, he 
readily acknowledged in private, yes, that maybe there ought to 
be a discussion whether we ought to have one vaccine versus two 
versus three.

    If 90 percent of the myocarditis comes after the second 
dose, why don't we have a rational discussion about one? Marty 
Makary, a physician from Johns Hopkins, has said exactly the 
same thing. It has been discussed. And yet we have this 
ridiculous notion from the CDC. So, the CDC says, and I will 
ask you this question, let's start it as a question.

    Your 16-year-old has had COVID. Your 16-year-old gets 
better and now has recovered from COVID. You vaccinate them and 
they get myocarditis. Are you going to give them two more 
vaccines, your child, give them two more vaccines?

    Mr. Bancel. I am not a clinician. I would have to discuss--
--

    Senator Paul. You have children.

    Mr. Bancel. I do.

    Senator Paul. Have you vaccinated your children?

    Mr. Bancel. I have.

    Senator Paul. How many times?

    Mr. Bancel. Three or four times.

    Senator Paul. Three or four times. So, the CDC recommends 
this, and you are obviously someone who is self-interested in 
the outcome here--but the CDC says that if you are a 15, 16-
year-old, gets COVID, recovers, takes a vaccine and gets 
myocarditis, is hospitalized with elevated heart enzymes, and 
is very sick.

    The CDC says, as soon as he gets better, vaccinate him 
again. Do you know how many American parents think that is a 
rational, reasonable thing to do? Do you know how many 
countries don't do this for children?

    Sweden doesn't offer the vaccine for kids under 12 unless 
they are at risk for severe disease. And I agree with that. I 
am not saying never on any of this. I think it is a very 
reasonable position to say kids at risk or have some diseases, 
that there may be a reason for vaccinating some children.

    Finland doesn't recommend it for under 12 months and Norway 
also. England as well. France, Poland, Germany, Switzerland all 
vaccinate 12 and up. So, we have got half the world who have 
looked at these studies.

    There is a study in Israel of thousands of patients, and 
yet you sit here and act as if you have never heard of 
myocarditis and you don't think it is an increased risk for 
young adolescent males when all of the studies who isolate out 
people by age have found that, yes, there is an increased risk 
after taking your vaccine. Pfizer, too, but worse with Moderna.

    Mr. Bancel. There is an increased risk, and that is always 
comparing it to somebody who gets COVID.

    Senator Paul. Well, that is also not true either, but there 
is an increased risk of getting it. But even when they compare 
it to the disease, there are many papers out there who do show 
that there is more of a risk of mercados after vaccination. So, 
you have to weigh the risk and balances.

    You are right, you are going to make less money, because 
you are going to try--they are already trying. The CDC has got 
it on their schedules. They are going to try to force all the 
kids in America to do this through school. But guess what, 
parents aren't going to do it. They have seen that COVID is not 
deadly in children. And you are right, it has become less 
deadly over time.

    Your market is going down, so you aren't going to make as 
much money. I am all for you making money in an honest way, but 
I don't like the idea that the people making the decisions in 
Government are also receiving money and are now conflicted in 
their interest.

    The Chair. Thank you, Senator Paul.

    Senator Casey.

    Senator Casey. Mr. Chairman, thanks very much. Mr. Bancel, 
great to be with you and thanks for your testimony. I wanted to 
get right to the heart of the matter that we are exploring 
today, among other issues, and that is the question of price.

    But I wanted to start with, by way of a predicate, that we 
are certainly grateful for the work of Moderna and the other 
companies working in concert with the Federal Government, both 
Federal appropriations, as well as agencies like NIH and others 
to develop these vaccines in short order and to be able to 
provide the benefit, as you outlined in your testimony, to save 
millions of lives.

    We are grateful for that. We are also grateful for the 
ongoing work that is done every day to save lives. I wanted to 
explore, though, this question of this partnership between not 
only Modena, but other entities in the Federal Government that 
you might call it a public, private partnership. I would argue 
that partnership, which yielded such great benefits for our 
Country and the world, should not be extinguished because the 
pandemic is over.

    I would argue there are ongoing obligations, and I think 
even practical reasons to continue that kind of partnership, 
maybe in a different form, maybe with different outcomes and 
different dynamics, as you have outlined on page nine of your 
testimony, when you go from the earlier version of a 
partnership to commercial application of the vaccine.

    But I would ask you this, and I noted in your testimony on 
page one, you said in the second paragraph about the Jesuit 
teachings. I went to a Jesuit high school in college. I am 
somewhat familiar with these teachings.

    You said, ``Jesuit values, a continuous pursuit of 
excellence. Service of the greater good, No. 2. And third, 
social responsibility, you say have informed my life and 
leadership of Moderna.''

    I want to juxtapose those values, which I think are 
commendable, and I think they are--we hope they are American 
values as well. Next to this, what I would argue is an ongoing 
obligation to have this partnership.

    Shouldn't there be an ongoing obligation with regard to a 
product that was developed in partnership with the Federal 
Government to ensure that it remains both inexpensive and 
accessible? Don't you believe that is your obligation and 
Moderna's obligation?

    Mr. Bancel. Thank you, Senator, and good morning. So first, 
thank you for the kind words that you shared about our teams 
and all the other companies, and the Government personnel was--
helped fight this pandemic.

    First, on access. As I shared in my testimony and in a 
written one, we care deeply about access and we are working 
hard with our team and IP to spend more time on that topic, I 
know it is important for the Chairman as well, to make sure 
that people that are uninsured or underinsured have access to 
the vaccine.

    We want to make sure that cost and out of pocket cash is 
not a barrier to access to vaccine. And on the topic of price, 
it is important, as we move into the endemic market, that we 
price to value of a vaccine. What value does it bring in terms 
of healthcare dollars? As you know, vaccines are one of the 
best investments we can make with healthcare dollars in terms 
of a return.

    This has been documented for many, many years because it is 
better to prevent disease than to have to pay the cost of 
somebody being hospitalized, and that is a very expensive cost, 
without even adding the economic burden, obviously. So that is 
very important. If you look at the interesting comparator is 
flu.

    The CVS price of a high dose flu vaccine use for the 
elderly is around $95 in this country. If you look at the 
COVID, they are 2 to 3 times more hospitalization right now of 
COVID. So, when you look at the price in that range seems to 
make sense, because it is a value that has been assigned 
already to flu over years. And you can look at the other 
vaccine, pneumonia, the CVS price of the vaccine is around 
$250.

    Senator Casey. I would ask you this, just by way of follow-
up, and I realize that you are making that comparison with flu 
vaccine, but for a lot of my constituents, most of my 
constituents, no matter what their insurance status is, the 
cost of prescription drugs is like a bag of rocks on their 
shoulder every single day.

    What may not seem like a lot of money to you or a lot of 
other people, $130, $150, or whatever the number ends up, is a 
lot of money. And I would ask you, and I will ask you for the 
record in writing, to ensure that anyone can get a vaccine, 
they won't have to apply through some tedious process and then 
wait for approval, or apply for some kind of reimbursement, or 
have to drive a long distance.

    That, I believe, is your obligation as a company. And I 
know I am out of time, but we will ask that in writing. Thank 
you.

    The Chair. You can answer that, Mr. Bancel, if you would 
like.

    Mr. Bancel. Yes, Senator. And I am happy to spend time 
later on the topic, on the access program. We want to make sure 
we have a simple program that is in multi-language. We are also 
trying to learn from what is not working from current programs 
done by larger companies.

    For example, we want to make sure we can partner with rural 
of community hospitals, potentially homeless shelters, to make 
it much easier. So, I am happy to spend more time on that 
topic. It is very important.

    The Chair. Thank you.

    Senator Cassidy.

    Senator Cassidy. Yes, I will allow Senator Romney to go 
next.

    Senator Romney. Thank you. Senator Cassidy. Thank you, Mr. 
Chairman. I am one of those Americans who is concerned about 
the fact that Americans tend to pay a lot more for drugs than 
do people in other countries, and have looked for ways to see 
if we couldn't have some kind of global recognition of the 
prices that are available in other countries and limiting our 
drug prices to those that may be consistent with a basket of 
other countries that purchase and honor our patents.

    That being said, I reject the idea of a, if you will, an ex 
post facto effort on the part of some to say, oh, we provided 
some money in research, a lot of money in research to Moderna, 
and therefore we want to take the ownership of this product. 
That would simply be unfair and contrary to our system of law.

    I would also note that the U.S. investment in Moderna's 
effort, I would comprise a portion that went to research and 
fast tracking the vaccine versus actually purchasing vaccine 
that was being manufactured by Moderna.

    The latter was the great bulk of what the U.S. Government 
invested, if you will--and actually the wrong word is invested. 
We purchased a lot of product from Moderna. I am glad we did. I 
would also note this, which is this is a global demonstration 
that the world can look at as to the comparison between 
socialism and capitalism.

    Free enterprise created vaccines that saved millions of 
lives. And the history of Moderna, I think, is pretty 
interesting. You indicated the company started 10 years before 
COVID, 10 years. It had no products during that time, no 
revenues at all. The investment you said, if I get it right, 
was $3.8 billion.

    That meant individuals responsible for investing money put 
$3.8 billion into a new technology that might or might not 
work. I recall--understand that at one point you indicated to 
your family that you thought there was a 5 percent chance it 
would work, this technology would work.

    If I am an investor putting $3.8 billion in an enterprise 
that has a 5 percent chance of working, I got to expect that if 
it does work, I am going to make an awful lot of money. Now, I 
have heard people say, well, that is corporate greed.

    Yes, that is kind of how the free enterprise system works, 
which is people who start enterprises say, I am going to take a 
huge risk, invest my life savings, my career, and if it works, 
I get a huge return. If it doesn't, I lose it all. There are 
right now in our Country, hundreds of startup businesses with--
trying to develop drugs that will cure diseases.

    I happen to know that because I invested in some in my 
prior life. I lost my money in every single one. Studied them 
as well as we could, we lost our money. That is the nature of 
it. But we thought if it works, we are going to really get a 
huge return for ourselves and for our investors.

    I don't know how much money is the right amount of money, 
but the idea that somehow corporate greed has just been 
invented in America is absurd. It has been there for the 
beginning of free enterprise individuals investing, hoping that 
if it succeeds, they will do very well financially, 
extraordinarily well.

    I want to applaud the example we have--by the way, the 
socialist countries, China, and Russia and Northern Europe, did 
they come up with a vaccine that saved lives? No, no, they 
didn't. Pfizer got technology from a German company, free 
enterprise company, Moderna, and saved lives.

    It is a stark demonstration of the comparison between free 
enterprise and socialism. And free enterprise works, and 
socialism doesn't, when it comes to saving our lives. Now, I 
look at the technology which you are proposing to continue to 
develop in other areas, and I guess I want to ask, what are the 
kinds of things that you are working on now? What are the 
prospects that you believe for some of these to make a real 
difference in saving lives or improving lives? Is this a one-
off technology man?
    mRNA, which is something which is really just effective for 
vaccines or does it have broader application? And what will you 
do with the money that the company is making? By the way, I 
noted that you are a billionaire now. Did the company pay you a 
salary of billions of dollars?

    Mr. Bancel. No, Senator.

    Senator Romney. You are a billionaire because the stock 
that you got when you started the company, you kept some of it 
I presume, that stock is now worth a lot of money because your 
technology has been proven to actually work. Is it going to 
work beyond vaccines, and what kinds of things are you working 
on?

    Mr. Bancel. Thank you, Senator. So, we are very excited 
because this is a platform that we have worked on for 10 years. 
We shared just before Christmas exciting data in cancer, which 
we are very excited because of course, all of us have been 
touched or are being touched right now by cancer.

    We show a 44 percent reduction in recurrence of disease for 
melanoma cancer or deaths. We are working very quickly to get 
this with the FDA, in a phase 3 study this year.

    We are also working with our partners at Merck to try 
this--and we are going to want to explore as many tumor type as 
we can to see where can we help people, because if we--if that 
results translate to have a tumor type, which we believe should 
happen--we have to be careful and of course, wait for the 
clinical data.

    That could be helpful to a lot of people. We are still 
working on rare genetic disease. One of the reasons I got 
excited about Moderna in the early days is, I have children----

    The Chair. I am sorry. Senator Romney's speech on socialism 
took up the bulk of the time. We have to go to Senator Murray 
right now.

    Senator Romney. As did our Chairman.

    Senator Murray. Thank you very much, Mr. Chairman, for 
holding this hearing. Mr. Bancel, welcome to the Committee. I 
understand that shifting from a single Federal contract to a 
multilayered payer market is adding complexity to distribution 
claims.

    But we are talking about a vaccine that taxpayers invested 
$12 billion in, a vaccine that was once $15, and now you are 
planning, of course, to price it at $130, despite the fact that 
it just costs about $3 to make.

    That, as we know, that cost is going to get passed on to 
consumers, whether it is through higher premiums or higher 
administration fees. So, I want to know, what is your answer to 
this Committee and really to the public about the need for such 
a drastic quadrupling of the cost?

    Mr. Bancel. Thank you, Senator, for the question. So first, 
just to be precise some numbers. The U.S. Government invested 
$1.7 billion in the vaccine development. The rest of the amount 
that you mentioned was actually purchase of products, not 
investment in the development.

    As I said in my oral testimony, we decided, and this was 
because of us--this was not asked of us by the Government. We 
in the letter I wrote to the Government when we started 
discussing about procuring the vaccine in September 2020, we 
proposed with the discount. It was not asked of us.

    We discussed we were bold and we said if the vaccine 
works--in September 2020, we had no idea. The phase 3 came in 
November, the data. So, if the vaccine works, we think it is 
our responsibility to return the capital to taxpayers.

    We returned, as I mentioned, $2.9 billion in discount 
versus the other vaccine that the Government procured. So, 
despite the vaccine having three times more mRNA in it out of 
microgram, versus the other one was 30 microgram, we discounted 
our product to return $2.9 billion to the U.S. taxpayer.

    We felt that was the right thing to do to say thank you for 
Government. In addition, the Government got $5 trillion of 
economic value, $18 million hospitalizations less, the impact 
on humans and the cost of it, and three millions lives saved.

    In the endemic setting, the challenge that we have is, as I 
mentioned in my opening testimony, the wastage we are going to 
have to take care of. So first we have to make more product 
than we think we will sell because we cannot have patients 
going to pharmacies and having no supply.

    This is a very hard business, very complex because it is a 
seasonal product. The FDA currently plans to tell us they think 
late May, early June, what they want in a vial. We are going to 
spend the whole summer making as much as we can. And what we 
know is the forecast is going to be wrong.

    The forecasts are always wrong. And so, the question, to 
protect people, we need to make more than we think is going to 
be needed. That is waste. We are going to have to pay for it. 
What happened in the fall of 2022, which I think is an 
important way to think about it. The U.S. Government purchased 
160 million doses.

    To the last number I got from CDC, around 50 million doses 
got in the arms. But the Government bought everything. So, the 
difference, 110 million doses might go to waste in the garbage.

    Saying that the cost of a vaccine before was $20, I don't 
think is the right way to do because it is not a cost to the 
U.S. taxpayer. The U.S. taxpayer pays for everything. If you do 
the math, it is around $80 the cost in the fall of 2022, still 
with five products in the vial----

    Senator Murray. Okay. Well, I understand that. And I just 
have a minute here left. I want to ask some questions. You are 
talking about having a vaccine accessible to the uninsured. 
What I am concerned about is people hear $130, and they just 
don't get it because they think it is expensive. How are you 
going to make sure people know that you do have this program to 
help the uninsured?

    Mr. Bancel. Thank you for the question. And I care deeply 
about access and protecting people. That is why we started the 
company, is to help protect people. We will advertise it and 
communicate about it as we get into the fall.

    As you know, as of today, the Government is still in charge 
of vaccine distribution, so we don't want to confuse things for 
the U.S. consumer. But as we get closer to the fall, we will 
make sure we get the word out.

    As I mentioned, we want to work with rural hospitals, 
community hospital, homeless shelters because I really believe 
there is a better way to give access to people that are 
uninsured. We have heard loud and clear that the system set up 
by big companies is too complicated. Too much paperwork, takes 
too much time----

    Senator Murray. Okay, I just want a commitment that you are 
going to make sure the public understands that there is a way 
to get this if you are uninsured, correct?

    Mr. Bancel. Senator, we are going to work really hard to 
make sure that the public understand the process.

    Senator Murray. Okay. And my final question really is about 
the COVID-19 vaccine trials that excluded pregnant populations, 
which left moms and their doctors with very little information 
to guide them. It caused a lot of confusion. And we know that 
pregnant patients with COVID are at greater risk if they are 
infected.

    Last week, actually, the CDC released some new data showing 
that 40 percent increase in maternal deaths compared with 2020. 
And a recent GAO report found that COVID-19 related deaths 
accounted for this increase.

    Can you just talk to us about your decision to exclude 
pregnant patients from trials?

    Mr. Bancel. Yes. Thank you. That is a very important 
question that I care deeply about having children. The 
challenge really in 2020, and the guidelines from the FDA, is 
to be very careful, which you understand that in clinical 
trials the safety of a participant is the No. 1 priority.

    There was a lot we didn't know about the safety of a 
vaccine until November 2020. Except for the pediatric setting. 
We did those studies much later, which was parents having the 
ability to have a vaccine for children because we wanted the 
FDA to go slow to understand the safety.

    Senator Murray. I am getting gaveled. Can you just tell me 
that you will include a pregnant patient in continuing trials?

    Mr. Bancel. Yes, Senator, we want to include pregnant 
women, and also pediatric for the children.

    The Chair. Senator Cassidy

    Senator Cassidy. I will defer to Senator Tuberville.

    Senator Tuberville. Thank you, Senator Cassidy, Chairman. 
Mr. Bancel, thanks for being here today. Thank you for what you 
did for my State of Alabama, our Country, and the world. And to 
your employees. Sometimes we overlook the people who actually 
do the big work. But thanks for being here today and answering 
these questions. I hope my Alabama accent and your French 
accent get along here pretty well.

    Mr. Bancel. I am sure it would.

    Senator Tuberville. Yes. I understand that Moderna was 
founded in 2010 in Cambridge, Massachusetts, and you have been 
the CEO since October 2011. And I also understand that you are 
from France originally. Could you speak about why Moderna was 
founded in the U.S. instead of somewhere else in the EU?

    Mr. Bancel. That is a great question, Senator. There is no 
better country than this country for science and 
entrepreneurship. People are willing to take a risk. As Senator 
Romney mentioned, much more capital is available to take risk. 
We started in the U.S. because the core technology was 
initially from Harvard Labs and then MIT labs, like you have 
seen a lot of those stories.

    A great VC firm from Boston where only those health care 
work. Very innovative, very risky type of work, but that could 
change the world. And that is one reason I decided to join the 
team that was being formed to start this enterprise. You need 
to know, when I was--talked about the idea of using mRNA to 
treat people, I first looked at them and say, are you kidding 
me?

    This will never work. But the more I spent time thinking 
about it, looking at the data, talking to experts--as Senator 
Romney said, I had to tell my wife, it was a 5 percent chance 
of working. She is not a scientist and she was asking, how 
risky is it?

    But because if it was going to work, it was going to be a 
new platform, it was going to be a new way to make medicine. 
And that is why I took that risk with my career, is to say, it 
might fail me. I will have to find another job.

    It is going to be Okay. But I have to try to make this work 
because it could save so many people. Of course, we never 
thought there would be a pandemic in our lifetime. But while 
working on infectious disease vaccine--we are running 13 
clinical trials right now, which is one of the largest number 
in the industry, as I mentioned, working with cancer, genetic 
disease, heart disease, the team is working on an autoimmune 
disease. It is still in a lab but is coming soon.

    This is a really--it is a platform. For 100 plus years of 
the pharma industry has been an analog industry where every 
drug is different, we have to agree on everything. This is a 
platform that is going to enable so many medicines in helping 
people. And as we saw during the pandemic, because it is a 
platform, we can go much faster to the clinic, much faster to 
approval, so we can help save lives.

    Senator Tuberville. Thank you. Kind of reminds me of my 
former profession which was a coach, and I used to tell my 
players, this country owes you nothing but an opportunity, and 
you came here, took the opportunity, and made a success out of 
it, so I want to thank you for that.

    Again, a lot of people I want to thank for that. We are 
hearing a lot today about how much the Government spent on 
vaccine development and how much risk pharmaceutical companies 
took themselves.

    I wasn't here in the Senate when Operation Warp Speed was 
getting started, but I do recall hearing a lot of criticism on 
the other side of the aisle about whether partnering with 
pharmaceutical companies like this was a good idea and whether 
we would get any successful vaccines.

    Seems like it worked out pretty well for all of us. Can you 
speak about Operation Warp Speed and how it brought the 
vaccines to patients, and what the overall impact of our health 
care system and overall deaths would have been without this 
investment?

    Mr. Bancel. Thank you, Senator. I think the world owes so 
much gratitude to the U.S. Government and to Operation Warp 
Speed.

    I think the idea to say, we have no idea which technology 
is going to work, we are fighting this enemy, the virus, but we 
don't know which technology is going to work, so let's bet on 
three technologies.

    Protein technology, very mature, but much slower. 
Adenovirus technology. And the mRNA technology. And to do it 
even better, the Government said, let's not bet on one company. 
Let's bet on two companies per technology versus the six-
company portfolio, two in the portfolio to hedge for risk.

    Then Congress, and I want to really thank Members of 
Congress for the budget that was appropriated to bother to be 
able to fund this work, allowed this. This did not happen in 
Europe.

    This did not happen in Asia or anywhere else. This country 
helped change the course of this pandemic through the public, 
private partnership, which is why when the Government called 
for help, we raised our hand.

    We made the 10 years' worth of investments in science and 
technology platform available. Say, we are going to make the 
technology available. We make the plant available. We delayed 
products. We have commercial products, including for--cancer, 
that have been delayed because we prioritize our resources to 
the pandemic because it was the right thing to do for the 
country.

    Senator Tuberville. Thank you. And I would just like to 
make this statement, we did a lot of research on this, and the 
U.S. taxpayer paid $30 billion for the successful vaccines and 
received $1.15 trillion in direct benefit back from that $38 
billion. Pretty good investment to me. Thank you very much.

    The Chair. Thank you, Senator.

    Senator Smith.

    Senator Smith. Thank you, Mr. Chairman. And thank you, Mr. 
Bancel, for being with us today. So, I want to start by just 
saying that the COVID-19 vaccine is safe and effective in 
preventing hospitalizations and deaths from COVID-19, and the 
process for developing and distributing this vaccine is a 
tribute to the innovation in the technology and the 
perseverance of the scientists and researchers and 
manufacturers, and also the Federal, state, tribal, and local 
agencies that delivered shots into arms.

    I include Moderna in that group. I mean, it is also 
critical that Americans continue to have access to these 
vaccines. Now, we are not talking economic theory today, but I 
want to say I am a capitalist. I went to business school. I 
started my own business, though I did not make as much money as 
you have made, Mr. Bancel.

    I understand the concepts of return on investment and risk 
reward. But it is difficult for me to accept that the profits 
that you are reaping on the backs of American taxpayers are 
necessary or reasonable.

    It feels like a bonanza to me. So, I want to just 
understand a little bit about what is going to happen next. You 
tell us that you expect the Moderna--expect Moderna to offer 
its vaccine at a list price of about $130, up from $26.23.

    Yet it is extremely confusing for Americans to understand 
what the price is that they will actually pay. It feels a 
little bit like a lottery and too often we lose rather than 
win. So, if a Minnesotan gets their insurance through Medicare, 
their vaccine will be free thanks to the Inflation Reduction 
Act.

    Will Moderna negotiate with Medicare on the price, or will 
you demand $130 sort of take it or leave it?

    Mr. Bancel. Good morning. Thank you, Senator, for the 
question. So indeed, and maybe I should start there, regardless 
of insurability status of people in this country, where you are 
insured by a company, insured for Government program, or 
uninsured, we want that this is a no out-of-pocket costs for 
the American people.

    That is really, really important to us, which is why, as I 
shared, that we already set up that program for the uninsured. 
For people that are insured, it is through the law, because it 
is a vaccine, there would be no co-pay. And we will make sure 
for the summer that the American people are aware, if you are 
insured or uninsured, there would be no co-pay. We can work----

    Senator Smith. But some--I am sorry, but somebody will be 
paying. And what I am trying to understand with Medicare or 
Indian Health or veterans, the Veterans Administration, will 
you negotiate with the Federal Government of those agencies 
beyond $130, or is that the price sort of take it or leave it?

    Mr. Bancel. Like it is usually traditionally in the 
industry or teams, and those discussions are happening as we 
speak. We will be discussing with all those agencies following 
the law----

    Senator Smith. Okay. So, you will be negotiating----

    Mr. Bancel [continuing]. And the process--yes.

    Senator Smith. Then thanks to the Affordable Care Act, 
Americans who receive their health insurance through private 
insurance or through the exchanges will also get a vaccine for 
free. Do you expect that you will be negotiating with those 
insurance companies or the PBMs or others on the ultimate 
price?

    Because, again, even though it is free to--it might be free 
to those folks based on their insurance, somebody is going to 
pay. And that could, of course, contribute to increased rates 
for everybody.

    Mr. Bancel. That is a very important question, Senator. So 
first, one piece that is important for the vaccine is if you 
look at the vaccine in that price range, and that is why we 
looked at it very carefully, the cost savings in some 
hospitalization costs that year for people who will not get the 
vaccine ending up in hospital is a tremendous return.

    The cost is estimated to be in several hundreds of dollar 
for the direct cost of hospitalization and medical costs, not 
even talking economic impact and things like that. And so, the 
benefit to the health care system is going to be in the 
reduction of health care spend in hospitals.

    Senator Smith. Yes, that is--I, of course, understand that. 
The question, though, is still whether or not there is--I am 
hearing you say that you expect to be negotiating on what the 
ultimate price is. And I want to just note, Mr. Chairman, that 
thanks to the Affordable Care Act and the Inflation Reduction 
Act, Americans will be not paying a cost for this, but there 
still is a cost to the system, to taxpayers.

    Now, let me ask you one last question just the minute I 
have left. So, if I am uninsured and I go to my local pharmacy, 
and I need--I want to get the vaccine, I hear you saying that 
you don't have all the details worked out yet on what that will 
be like, but what would that be like for that American?

    I mean, are they going to be asked to pay something upfront 
and then try to figure out the paperwork for reimbursement 
later, for example.

    Mr. Bancel. Thank you for our question, Senator. We want to 
make it as easy as possible. What would be really bad, I think 
we can agree on this point, if somebody walks into a pharmacy 
and decide they don't want the vaccine.

    We want those people who want to be vaccinated to have 
access to the vaccine. So, where we are trying to work with a 
team is on all the learnings of the other programs that 
sometimes don't work so well. Which is why I am a big proponent 
with our teams of having those discussions as we speak, to 
think about those people, what are they associated to. Is it a 
rural community hospital?

    Then, is there a way for Moderna to do a partnership with a 
hospital so that people will go to that hospital. If the 
hospital is certified, they are uninsured, those individuals 
don't have to do the paperwork.

    We are trying to work on things like these because we want 
people who want to be vaccinated to get access to vaccine. We 
care deeply about that.

    Senator Smith. Thank you, Mr. Chairman. Thank you.

    The Chair. Point of privilege, if I might. Do I understand, 
in response to Senator Smith, that you are in fact prepared to 
negotiate a $130 price with Medicare, Medicaid, and other 
Federal agencies?

    Mr. Bancel. Senator, our teams are going and having 
discussions with all the different customers. As I said, we 
used to have one customer, the U.S. Government. We have ten 
thousands now. So, our teams, as we speak----

    The Chair. But you have a Federal Government, which is 
basically one. Are you prepared to negotiate that price with 
the Federal Government?

    Mr. Bancel. Yes, different agencies work differently, so we 
are working with all of those.

    The Chair. Senator Cassidy.

    Senator Cassidy. I will defer to Senator Braun.

    Senator Braun. Thank you, Mr. Chairman. Thank you, Ranking 
Member. This is indicative of a much bigger problem facing 
health care. You are one small part of it which looms huge 
because everyone sooner or later ends up with a prescription, 
even a vaccination now and then.

    The issue that most of us are confronted with, if you don't 
own a health care business, is that--I listened carefully to 
Senator Sanders' opening remarks. You can probably take those 
as being representative of anyone that wrestles with the health 
care system that does not own a business in the system.

    It has gotten to be such a huge part of our GDP, unlike 
anywhere else in the world. So, you get into something extra 
normal like we have just gone through, it raises all kinds of 
issues. And I have been the Senator most outspoken on I think 
you run like an unregulated utility across the board. You don't 
embrace competition.

    You don't embrace transparency. And you are a small part of 
it. Hospitals now have gotten up to where they are close to 35 
to 40 percent of the health care dollar, and that is even 
harder to find out how much things cost, how it is working.

    If you are in the business of free enterprise, which I 
think many on our side make excuses for, and that means no 
barriers to entry, that means full transparency, full 
competition, and don't try to business with the Federal 
Government and then want more from it when you are not 
performing well in the first place.

    Let's look at a narrow issue here. You are claiming that 
you need more because of the cost of distribution. Well, in any 
other field, and I did it for 37 years, it is very simple. You 
have a network of distributors, dealers.

    You don't have PBMs in there that make it confusing. You 
need an MBA to look at that flow chart. When are you going to 
start making it easy for all of us to see what things cost, and 
then not look to Government when they were part of this 
formulation in terms of how we got the vaccination, and then 
want more from it.

    You are involved in a taxpayer--you are involved in a 
lawsuit where you have got two smaller companies, Abutus and 
Genevant, that are making a claim that you had a patent 
infringement.

    I am hearing that not only here, but patent tweaking, 
patent infringements when it comes to where we spend even more 
money on biologics and biosimilars. Point being, whether it is 
the Government paying for it or the private sector, it is a 
broken system and you need to get better at it or you are going 
to get solutions in the long run that you don't like.

    Your distribution system, why is it something that you 
sound like you have got to recreate it? Where has it been up to 
this point? How do you describe your flu vaccines? Why do you 
need this much money? A 400 percent price increase is 
preposterous, especially when you have been given all this 
Government largesse that is even going to protect you from 
these lawsuits.

    What is the nature of your current distribution system to 
where you can't just put this into it, and why is this that 
much different from what you have done for years in 
distributing a flu vaccine? Because it looks like we are headed 
more to where this is going to be like the flu than it is going 
to be something extra normal.

    Mr. Bancel. Thank you, Senator, for your question. So just 
to clarify, we do not have a flu vaccine on the market yet. We 
have one in clinical study. We should have a phase 3 data soon 
and hopefully----

    Senator Braun. You may not have one on the market, but 
there is a distribution network for them from your competitors, 
why wouldn't you be able to get into that? Why do you have to 
justify creating a new distribution network? No one would ever 
do that.

    Mr. Bancel. Indeed, Senator. We are going to use--but we 
have to set up a distribution network. I am not saying that we 
are going to be the only warehouses like other companies do.

    We are going to work with companies, but we have to set up 
those contracts. During the pandemic, we only shipped trucks to 
three warehouses in the U.S., when the CDC was taking the 
responsibility and the cost of getting the vaccine to 
hospitals, pharmacies----

    Senator Braun. Is the Government requiring you to do 
something different here that would cause you to use a 
different network--what do McKesson and Cardinal and the others 
do? There is a network to get this stuff to pharmacies already 
in the places they need to go. Why can't you blend it into 
that? Keep the costs down. Be a little entrepreneurial in what 
you are doing.

    Mr. Bancel. It is part of a solution we are going to be 
doing, Senator, as we are going to use existing networks. But 
we have to set up everything because we never had a commercial 
product before. We just have to go, which we are doing right 
now, through all the contracting and negotiating of all those 
rights and so on, to set up the distribution capability so that 
we can get the vaccines to pharmacies----

    Senator Braun. I ran out of time. You cannot, as well as 
the rest of the industry, including hospitals, have the best of 
both worlds where you want Government to be in there helping 
you when it is tough, and to where for the private side, most 
of us are not happy with the fact that we are lucky if your 
health insurance plan only goes up 5 to 10 percent, which 
incorporates hospitals, pharma, and maybe the Darth Vader of it 
all, the insurance business. Something has got to give or you 
are going to get more Government involved in health care. Thank 
you.

    The Chair. Senator Hickenlooper.

    Senator Hickenlooper. Thank you, Mr. Chairman. Mr. Bancel, 
thank you for coming in and testifying before us. It really is 
a remarkable, if you look at the arc of what happened, and you 
look at it, actually take it all the way back to when Moderna 
was founded in 2010 and you came on board in 2011.

    I look at so many moments of risk and how many times, I 
don't want to alarm anyone, but the company could be at risk. 
Your margins were so thin you didn't have sufficient money to 
invest.

    I think the notion of what the Federal Government did 
during a time of crisis, where we made, I think a decision 
baked in wisdom to pursue six different solutions. Talk about 
multiple working hypotheses.

    In your case, the Federal Government, BARDA provided, I 
think it was $1.7 billion, in your statement, you said. And 
that was money that really was, after the earlier investments, 
which were largely in research and those are public, private 
partnerships that have--that money is invested.

    We do that. The Government does that in all different 
levels. In this case, the $1.7 billion, you actually returned 
$2.9 billion, $2.8 billion?--$2.9 billion. What was part of 
your motivation in that?

    Mr. Bancel. Thank you, Senator, for the comments and for 
the question. It is actually quite simple. As we were 
starting--so there is really two moments during the pandemic, 
in the partnership with the Government. First, focus on the 
vaccine development and accelerate it. That is what the BARDA 
funding provided.

    Then we started to discuss with the Government toward the 
end of the summer of 2020 about purchasing vaccine in case the 
FDA would approve them. And as we sat to have those 
discussions, we had to discuss with a board.

    It became very clear, like family discussion at the board 
meeting, that we had to find a way to give the money back to 
the U.S. Government because we all felt very grateful that 
thanks to that funding, we were able to accelerate the vaccine. 
I believe more that I would have got the vaccine approved 
without the funding, but it would not have been by the end of a 
year.

    Americans' life would have been impacted by that delay 
without the support. And so, when we looked at, we were like, 
if we are going to get the vaccine to work, we should provide a 
discount.

    The board said in 5 minutes, and that is what I put in my 
letter that I sent to the Government in our first discussions 
for procurement.

    Senator Hickenlooper. Well, it would be an interesting 
calculation, look at how many lives were saved by accelerating 
that process with that $1.7 billion, and was paid back, almost 
not quite doubled, but certainly more than just paying it back.

    I am sympathetic to some of the issues as you look at 
pricing going forward, that this is something that needs to be 
kept at a cold temperature. You are going from one customer to 
thousands of customers.

    You are looking at a 90 percent or 95 percent reduction in 
what you are producing, so all your manufacturing is going to 
have to be reconfigured. I am not an expert in pharmaceutical, 
so I can't address that, but I think it is a complex issue that 
we need to spend more time looking at.

    In these kinds of public, private partnerships, we want to 
get to the alignment of interests. And I guess my question is, 
you can comment on that, but I also--what do you think, going 
forward, how can we do a better job of creating these public, 
private partnerships so that both sides feel they know exactly 
what they are getting and what is--there is an alignment of 
that self-interest.

    Mr. Bancel. Thank you, Senator. Actually, the way we think 
about the price during the pandemic was actually a discount. We 
are talking here today about an increase in price. But if you 
think about what happens in any of our industry, when you get 
to a very large volume, you get a very big discount.

    That is actually what we do. With $500 million, all there 
from the U.S. Government. This year if we get 30, 50, that 
would be great. Actually, this year, if you look at any 
consensus, the company might be at a loss this year.

    Senator Hickenlooper. I know, and then you made the--I get 
it and I am sympathetic to that. I am not sure all the other 
Senators are sympathetic as I am, but we will have the 
discussions. But I do want to get, because I have only got 40 
seconds left and maybe we will get an extra 20 seconds, what 
would be--what would you suggest in terms of going forward, in 
terms of improving public, private partnerships?

    Mr. Bancel. Thank you, Senator. I think making sure that 
the terms are clear. As you know, in enterprise, we are making 
decisions every day. And what we are trying to do is to 
allocate our resources to the best projects that we can do.

    I think being clear about what are the rules and making 
sure that the rules don't change later, that is what is really 
important. And when we discussed about the BARDA funding, there 
was no discussion about commercial pricing.

    The focus was, accelerate the study, get the vaccine to 
American people to save lives. And as you said, this was a 
great return for U.S. taxpayers.

    Senator Hickenlooper. No, again, I think it is--you can't 
measure the success and the savings. I haven't added it up to 
figure out that discount, how much savings that was and the 
benefit to the economy, you do mention--you did mention in your 
remarks, it is just, it is a remarkable story. So anyway, I 
feel gratitude that you were there and able to step up and play 
such an important role in addressing really the worst medical 
crisis of certainly my lifetime.

    The Chair. Senator Cassidy.

    Senator Cassidy. Well first, I want to pass my Ranking 
Member seat right now to Senator Mullin, while I walk across 
and ask in another Committee, and then I will defer to Senator 
Marshall for questions.

    Senator Marshall. All right. Thank you, Senator Cassidy. 
Thank you, Chairman. I want to, first of all, submit for the 
record a couple of Op-Eds, the first one written by a Senator 
from Democrat--Democrat from Indiana, and my hero, Bob Dole 
from Kansas.

    This is an editorial just talking about Bayh-Dole law, 
which encourages and has been so successful, encourages Federal 
Government to work with the private sector.

    Also, an Op-Ed that I wrote, goodness mine was in 2022, 
about how fixing prices kills innovation. So, we will submit 
both of those for the record if it is Okay, Mr. Chairman.

    [The following information can be found on page 139 in 
Additional Material:]

    Senator Marshall. Well, Mr. Chairman, let the record show 
that you and I agree on something again. This is my goal. Every 
one of these hearings is for you and me to agree on something. 
And I agree that charging Americans $130 for this vaccine is 
outrageous. But where we always disagree is the cure. How do we 
get there?

    I know one of your biggest concerns is the cost of insulin, 
as it has been mine. And I presented this graph that shows what 
the cost of insulin has done as competition is being introduced 
in the market.

    With two biosimilars coming on board now, the cost, and I 
checked with one of my pharmacies back home, the amount supply 
of insulin, $400 6 months ago, now a biosimilar for $120. And I 
am not satisfied. And I also want to point out, though, this 
big difference between the gross cost, the list price versus 
the net cost and how pharmacy benefit managers work in that 
margin for their rebates is something we need to tackle yet as 
well.

    Okay, let's go to the next graph here, Charlotte. Again, 
this is what happens in America when we have innovation and 
competition that the U.S. leads the world in access to miracle 
drugs. And we will go to this last one as well, just showing 
how certainly the Americans paying too much for medicines, but 
at least we have access to these miracle drugs.

    I would ask everybody, which miracle drugs do you want to 
give up? Which one of these would you give up? Would you give 
up Car T-cell therapy, the miracle cures we have in cancer, 
which ones would we give up?

    We got to be careful we don't throw the baby out with the 
bathwater, if you will. Mr. Bancel you guys have been working 
on mRNA technology, I think, since at least 2010, 2011, and you 
had a lot of patents you issued. Were most of those patents in 
that era around mRNA development, vaccine development?

    Mr. Bancel. Good morning, Senator. Thanks for the question. 
Yes, the company only works on mRNA because we believe if we 
invest in the platform and improve it, we can do more 
application of more medicine across therapeutic areas. So, it 
is mRNA focused.

    Senator Marshall. Right. I bet you expected when you 
invented this vaccine, you would come to Congress and get a 
hero's welcome, that you get a Nobel Prize even for this. You 
had no idea that you were going to be castigated because of 
your success as well. So that is--the two sides of this coin 
that we are concerned about. I want to back up to your time 
with your previous company, Biomerieux.

    Mr. Bancel. Yes, Biomerieux.

    Senator Marshall. At that time, the Wuhan laboratory, the 
BSL-4, biosafety level 4 lab was being made, and your 
predecessor had something to do with that. Did you keep track 
of the Wuhan lab being--going up? And were you concerned about 
it?

    Mr. Bancel. That is all--Biomerieux had no involvement with 
the Wuhan lab. I was aware, of course, because Biomerieux is 
the leading company in infectious disease diagnostic. I was 
aware there was a new high security lab being built in China, 
but I had zero involvement. My company had zero involvement.

    Senator Marshall. Okay. This is a pretty complex question. 
Is Moderna or did Moderna executives have agreements with 
organizations in China, including the Wuhan Institute of 
Virology or with Eco Health? And if so, what are the terms and 
does Moderna owe any of those people any moneys?

    Mr. Bancel. We never had any agreements with Chinese labs 
or Wuhan labs, Senator.

    Senator Marshall. Or Eco Health?

    Mr. Bancel. I am not aware of that lab.

    Senator Marshall. Okay. Were you aware in September 2019 
when the Wuhan lab and the Chinese took down their DNA lab 
bank, were you aware of that pretty much in sequence when that 
occurred?

    Mr. Bancel. I was not, Senator.

    Senator Marshall. Okay. In September 2019 is when that 
occurred. In December 2019, you took your mRNA corona vaccine 
candidates to the University of North Carolina at Chapel Hill 
to work with Senator Ralph--not Senator--Dr. Ralph Baric as 
well. What was the impetus to do that?

    Mr. Bancel. Thank you for the question, Senator. It was 
actually a vaccine for candidates against MERS, the Middle East 
Respiratory Syndrome, which is of the corona family, but of 
course, not SARS-CoV-2. It is a different one.

    Senator Marshall. You had no idea that what was exploding 
in China already, probably since September?

    Mr. Bancel. No, I was made aware of a first time, as I said 
during my testimony, at the Christmas break by reading the 
newspaper. There was a little article saying there was 
pneumonia like symptom cases that were really in Wuhan, which 
is why I directly contacted the NIH at that time to say, are 
you aware about this?

    Because we had been working together on the coronavirus, as 
you mentioned, because we believe that the highest risk of 
pandemic----

    Senator Marshall. You never worked with China, never worked 
with WV.

    Mr. Bancel. At Moderna? No, sir.

    Senator Marshall. What about not in Moderna?

    Mr. Bancel. When I was running Biomerieux, we had a team in 
China. The company was in 40 plus countries. So, we were 
selling product in China, yes, sir.

    Senator Marshall. Okay. Thank you so much.

    The Chair. Thank you.

    Senator Baldwin.

    Senator Baldwin. Thank you, Mr. Chairman. This week, I am 
proud to once again introduce my bipartisan Fair Drug Pricing 
Act with my colleague, Senator Braun. This would require drug 
companies to provide transparency and justification report when 
they increase the price of a drug above a certain threshold, or 
when the drug costs more than the median household income in 
the U.S.

    Today's hearing demonstrates exactly why we need more 
transparency. While big drug companies have taken in record 
profits, more than one-quarter of Americans struggle to pay for 
their prescription medications.

    These same Americans are the taxpayers who are footing the 
bill for research and drug development that companies like 
Moderna are benefiting from. Researchers have estimated that 
prior to the pandemic, the Federal Government and taxpayers 
invested more than $337 million in mRNA vaccine technology and 
development.

    Mr. Bancel, I didn't read your mention of those numbers in 
your written testimony. I believe that when drug manufacturers 
significantly increase the price of their drugs, that they 
should have to provide information to the public that justifies 
these increases, including research and development 
expenditures derived from Federal funds.

    My bill, the Fair Drug Pricing Act, also requires that 
companies provide information on all stock-based performance 
metrics used to determine executive compensation associated 
with price increases or high initial launch prices.

    Mr. Bancel, your stock compensation is, I understand, based 
on performance metrics set by your board. And last year it's 
reported that you earned salary and stock compensation worth 
nearly $400 million.

    This is despite the fact that your board apparently found 
that you actually underperformed the company's target for sales 
income generated by the COVID-19 vaccine. So, I want to ask, 
the decision to increase the price of the vaccine is--it 
appears tied to the impact of your personal performance 
assessment on your bonus and how much you would stand to gain 
personally from increasing the price of the COVID vaccine.

    Can you talk about how much of that decision to increase 
the price is related, as I just suggested.

    Mr. Bancel. Thank you, Senator, for the question. It is not 
related. When we look at price, we look at value for any 
product. We look at what is the value of a product to the 
health care system, how much money can be saved.

    That is how the price is determined. And that is why, as I 
mentioned initially, if you look at the price, the cost of a 
flu vaccine at CVS, it's on $95 for a high dose flu vaccine 
used for the elderly.

    Given there is 2 to 3 times more hospitalization of COVID 
versus flu, that was one of the metrics we looked at as looking 
at price. The other one, as you might be aware of, the cost of 
a pneumonia vaccine is around $250. So that is kind of how we 
looked at that price.

    Senator Baldwin. Well, let me ask you another question. 
Moderna's most recent annual report stated that the company 
repurchased $3.3 billion worth of stock in 2022 and over $800 
million in 2021 to, ``return capital to shareholders.'' Mr. 
Bancel, you are one of, if not the largest shareholder in 
Moderna.

    Yet despite spending significantly to buy back stock over 
the last 2 years, Moderna's share price has actually declined. 
If you had not spent nearly $5 billion on buybacks when your 
stock was at the highest price it has ever been, do you think 
you would be under less pressure to raise the price of the 
COVID vaccine now?

    Mr. Bancel. Thank you, sir. So, the price is not linked to 
the company's performance. The price is linked to the value of 
a product, to the patient, and to the impact on the patient. 
That's how we set the price. I yield back.

    Senator Baldwin. Thank you. I yield back.

    The Chair. Senator Mullin.

    Senator Mullin. Thank you, Chairman. The Government 
overshot the number of vaccines needed in 2022 by over 100 
doses. What were the challenges of estimating the number of 
doses needed for 2023, and how does that impact your cost?

    Mr. Bancel. Thank you, Senator, for the question. That is 
sort of a very complex issue with this transition from the 
pandemic to endemic. I have never managed a company going from 
pandemic to pandemic, and it has not happened since, of course, 
the pandemic flu of 1918. And so, we are trying to guess how 
much volume is needed, which is a manufacturing challenge we 
have, especially as a small company. We do not do with filling 
in the vials ourselves.

    We have to contract out to outside companies. And what we 
are trying to do is to not undershoot it, because as I said 
earlier, we care deeply about having enough products available 
for patients when somebody walks into a pharmacy.

    We know by design we are going to have to over make 
products and we are going to have to take the returns and 
destroy them at the end of a season. But that is part of a cost 
of running a seasonal respiratory vaccine franchise, which is 
why it is necessary for us to increase the cost versus the 
discount that we had during the pandemic, where the Government 
took all of our risk, managed the waste.

    Senator Mullin. Buying the unused doses, you have to factor 
that back into the cost because you had to repurchase them and 
then dispose of them correctly. Is that correct?

    Mr. Bancel. We have to do two things, and that is correct. 
One is we have to pack more than we need to make sure it is 
available across the country when needed.

    If you think about just the supply chain and distribution, 
we need much more to make sure you have everywhere at any time.

    Then there is the returns, which is if a pharmacy gets more 
than they thought they needed, they will return it to us and 
then we have to, of course, incur that cost obviously.

    Senator Mullin. What will need to change within your 
company to accommodate the demand for single bottle versus 
prefilled syringes rather than ten those files that were 
purchased by the Federal Government?

    Mr. Bancel. We have to move to single dose vial because 
that is what the pharmacists and the doctors want. And we 
understand that. That is what the commercial market needs, 
because it is simpler, there is less wastage. Somebody walks 
in----

    Senator Mullin. You have to factor that into the cost too? 
Is that cheaper to do ten at a time versus one at a time?

    Mr. Bancel. Exactly. It is much more expensive to do ten 
because just if you look at the cost of a glass of vial--you 
need ten vials versus just one right, and then you use a lot of 
capacity and----

    Senator Mullin. I am talking about per dose though.

    Mr. Bancel. Yes. And then you use a lot of capacity as the 
manufacturer. So, while the number of doses go down, the number 
of vials goes up.

    Senator Mullin. Right. Pfizer has also noted that they are 
going to intend to increase the price of their vaccine to $130 
per dose. How does the market competition factor into changing 
cost?

    Mr. Bancel. We look at value and price. And of course, like 
in any market, we want to be competitive as an enterprise and 
so we look at that as well.

    But the key driver, as I was sharing with Senator a minute 
ago, is really value, which is what is the value of a vaccine 
in terms of health care costs, and then how can we create a 
product to extract some value for the company but leave some 
value in the health care system?

    We want to make sure that there is a lot of value left for 
Medicare and the payers.

    Senator Mullin. Your company decided to take funding as 
part of the Operation Warp Speed. Can you discuss how Moderna 
chose to take the loan from HHS and the difference in business 
structure between you and other manufacturers?

    Mr. Bancel. Thank you, Senator. So, we decided to take the 
loan from BARDA, because it will accelerate the vaccine 
development. If you go back in time, those discussions were 
happening in January--end of January, February, March, until 
April grant, and whether the company we wanted to insure is a 
vaccine going to clinical trial as fast as possible.

    At the time, Moderna was losing money, and so if we had 
developed the vaccine without Government funding, the 
development would have been much slower because we would not 
have been able to take a similar financial risk that we took 
thanks to the Government money like making product ahead of a 
study. And so that is why we decided to take the money because 
we felt it was going to save lives.

    Senator Mullin. Thank you. With that, I yield back.

    The Chair. Senator Cassidy.

    Senator Cassidy. Thank you, sir. I am going to lead into my 
first question, kind of repeating some of the things I said in 
my opening statement. For decades, this Committee has passed 
legislation knowing that we would have to ask companies to step 
up at perhaps a pandemic time and do exactly what Moderna did 
during this time.

    Others didn't make the same choices of Moderna to 
collaborate with the Government. So, the question is, if we 
send a hostile signal to future and prospective partners that 
Moderna is now being singled out for its decision to work more 
closely with the Government, what signal would that send to 
that future prospective partner?

    Now related to that, there are folks who have spoken of 
marched-in, where the intellectual property which has been 
developed by Moderna or Pfizer or another, would be, if you 
will, marched in by the Federal Government and shared worldwide 
to those who had no role in its development.

    What would that do to the willingness of a future 
prospective partner to work in a public, private partnership 
with the Federal Government to find a solution as hastily as it 
had to be found?

    Mr. Bancel. Thank you, Senator. So first, let me say, we 
were very proud to partner with the U.S. Government. And when 
the call came, we raised our hand and we said, of course we 
will help and do our best work.

    I think what is key for any enterprise, not only in the 
pharmaceutical industry but across different fields, is to know 
what is going to happen. Companies needs to plan based on what 
our hypothesis or how we are going to work together during the 
crisis and also after the crises.

    I think what we need as industry is clear rules that do not 
change. So, for example, during the BARDA discussions, there 
was no discussion on commercial price. It was assumed, never 
discussed, to the best of my knowledge----

    Senator Cassidy. I have limited time. So, the question is, 
if the Government were to exercise its march-in rights and take 
the IP from the company and distribute it worldwide without 
compensation for the company, what would that do to--what can 
you imagine it would do to a company, a future company's 
willingness to work with the Federal Government in a public, 
private partnership?

    Mr. Bancel. I always say that it will really impact the 
willingness of those companies to partner with the Government. 
And I think patients will suffer.

    Senator Cassidy. Okay. Now, let me ask you in your--it is a 
different question, different set. In your patient assistance 
program, while I assume that will also apply to the short-term 
limited duration programs, because to be clear, under current 
U.S. law, if you are commercially insured, if you are federally 
or state insured through Medicaid, Medicare, etcetera, you 
don't have to pay for this vaccine, at least as the patient.

    You are paying indirectly through premiums, but you are not 
paying directly. And you are going to make through your patient 
assistance program available for the uninsured. Two questions 
about that.

    Will that also include limited--a limited, short term, 
limited duration policies which do not--are not under the 
Federal mandate to provide vaccines at no cost? That is a 
question. I don't know if you know that.

    Mr. Bancel. I don't know the answer, but I would make a 
note to follow-up with my team and make sure we follow back 
with you after.

    Senator Cassidy. Please. And I would ask that those folks 
be afforded the same as the uninsured, because effectively for 
vaccine, they are uninsured. Second, as regards the vaccine 
itself, will your patient assistance program also include the 
administration fee?

    Mr. Bancel. This is something we have to look into----

    Senator Cassidy. I will say for the uninsured, just as a 
doc who treated the uninsured, it is not just the cost of the 
vaccine, it is the administration fee. And obviously, that is 
something you can limit. You can make it an x amount of 
dollars. It doesn't have to be astronomical. But we--but I 
agree with Senator Sanders.

    We want that PAP to be something that works for patients 
and is not just kind of like, oh, yes, we have it, but no one 
can use it. Now, I also want to clarify a couple other things. 
It was suggested that the IRA is what has resulted in the 
coverage of the COVID vaccine, but indeed that was the CARES 
Act, just to make that clear.

    I also want to make something else clear, that there has 
been a lot of discussion about pharmaceutical costs, but this 
has nothing to do with the cost of a drug. The cost of a drug 
is related to pharmacy benefit managers. It is related to the 
initial price of the of drugs. It is related to scarcity, you 
name it.

    But that is a separate topic from this. And I look forward, 
Mr. Chairman, to that future discussion in which we do discuss 
the high cost of pharmaceuticals, but that is a separate issue 
from this vaccine. And I think I wanted to make that clear 
because it was not perhaps not as clear as it could be. And 
with that, I yield.

    The Chair. Thank you, Senator Cassidy.

    Senator Hassan.

    Senator Hassan. Thank you very much, Mr. Chairman and 
Ranking Member Cassidy, for this hearing. Mr. Bancel, thank you 
for being here. I want to follow-up a little bit on what 
Senator Cassidy was just trying to get at.

    Moderna has said that his patient assistance program will 
provide low cost and no cost COVID-19 vaccines to the uninsured 
and underinsured. This program cannot simply be a public 
relations exercise that provides cover for the company to hike 
prices on families seeking COVID-19 vaccines.

    How quickly, after the launch of its patient assistance 
program, will Moderna start providing publicly available data 
on the number of individuals it has covered and typical out-of-
pocket costs under the program?

    Mr. Bancel. Thank you, Senator, for that question. We care 
deeply about patient access, and so I will work with a team to 
figure out what is the right frequency for sharing that data. 
But we want to find ways for people to get access to a vaccine. 
We still have 250 people dying every day of COVID in this 
country. And we have a tool, so we want to make them available.

    Senator Hassan. I understand that. Congress and the public 
are going to need information so that as you all proceed, if 
you are still planning to hike the price, that we can make sure 
that really the uninsured and underinsured are getting 
meaningful access to this in a timely way.

    Another piece of this is that uninsured individuals seeking 
COVID-19 vaccines are going to need to be able to access this 
program that you have, and they shouldn't have to fill out 
pages of forms with fine print in order to get access to your 
patient assistance program. So how long will the application 
for your program be, and how much documentation will you 
require from applicants?

    Mr. Bancel. Thank you, Senator. We have heard that feedback 
as we have talked to patients, to doctors, to Members of 
Congress.

    The team is working diligently to figure out how do we use 
technology to make it simpler, how do we make sure we have 
access to enough languages so it's easy for people who are not 
English as a first language. And also, we are trying to be 
creative, as we have done over the history of a company.

    For example, of our partnerships we can do directly between 
Moderna and the rural hospital or community hospital in your 
state, and of course, across the country. Whereas we do a 
partnership, the doctors agree that they will certify that the 
people will get a vaccine that we send to them for free, will 
be uninsured so that individuals don't have to all do the form.

    We are trying to figure out all those mechanisms to make it 
easier for people, including we are also working, for example, 
with homeless shelters for the same thing.

    Senator Hassan. I think that is really important. I think 
it is also going to be important that you all release the 
application for your patient assistance program before its 
launch so that the public can see what you are requiring from 
uninsured families. And just a note on the rural issue, one of 
the other things to be aware of, of course, is that a lot of 
rural communities don't have uniform access to high-speed 
internet, right.

    We need to have processes that are meaningful for people 
who don't have that kind of access. I also just want to talk 
about the impact of the price increase on vaccine uptake. The 
fact remains that hiking prices and requiring families to fill 
out forms will likely decrease vaccine uptake and set back the 
public health effort to combat COVID-19.

    What are your plans to quantify and publicly disclose the 
consequences of your price hike for vaccine uptake among the 
uninsured and underinsured?

    Mr. Bancel. Thank you, Senator, for the question. So, I 
will work with my team and we are very happy to follow-up with 
your office in terms of what would be all disclosure moving 
forward. The plan is still being work on.

    What we want to make sure is that the plan is set up and 
announced way ahead of a vaccine availability in the fall so 
that somebody was uninsured has access at the same time as 
somebody who was insured.

    Senator Hassan. Well, I understand that. But I also think 
it is going to be really important for us to see what the 
uptake looks like in light of these increases, because I think 
all of us who have constituents, family and friends who deal 
with access to lifesaving medications, every time there is some 
sort of bureaucratic hurdle, as well as every time there is a 
cost hurdle, there is an impact on uptake.

    Moderna needs to kind of own its public health 
responsibility and disclose the effects of its price hikes so 
that the public and Congress can hold the company accountable, 
if the price hike discourages millions of Americans from 
getting vaccines.

    I know you want to work on that, too, but this--we really 
are going to need data here, and I am looking forward to seeing 
the company produce it. Thank you.

    Mr. Bancel. Thank you, Senator.

    The Chair. Thank you.

    Senator Markey.

    Senator Markey. Thank you, Mr. Chairman, very much. 
Welcome, sir. In the dark days of 2020, it was the partnership 
between the Federal Government and state Government research 
centers and companies like Moderna that made it possible for us 
to make a huge medical breakthrough.

    It was places like the National Institutes of Health and 
health systems, and companies, communities, and getting people 
vaccinated, that was the real triumph. People young and old at 
every income got their shots for free. We helped to lift the 
weight off of hospitals and brought the innovation of Cambridge 
to community health centers in communities around the world.

    But now the list price of COVID vaccines may more than 
quadruple, and the cost of high drug prices is that families 
may need to pay higher health care premiums, health care 
providers may struggle to afford doses for their patients, and 
uninsured people may not get vaccinated at all. And even one 
person not getting vaccinated because they can't afford is a 
health system failure.

    Biopharmaceutical innovation can cure disease, extend 
lives, and epidemics, and they should be praised for that. But 
the real power of that innovation comes from guaranteeing that 
every community, no matter of their income or zip code, has 
access. So, during the height of the crisis, it cost about $26 
per patient for the Federal Government to vaccinate an 
individual.

    For a family of four, that is $104. The price you are now 
talking about of $130 times four for a family of four brings 
that price out to $520 for a family of four, up from $104. So, 
you can see why we are so concerned. That is a huge price 
increase. It is clearly going to be limiting access for many 
people in our society. And so, my question to you is, do you 
have a way of lowering that price even further?

    Have you finished all of your calculations? Because just by 
pricing it at that level, our Country is going to see millions 
of people unable to be able to afford it. And if they can 
afford it, it is only because insurance premiums are going to 
be going up for them and for Americans across the country. Can 
you lower it any further?

    Mr. Bancel. Thank you, Senator, for your question. So let 
me start with access. Because of how things are set up in the 
country, people that are insured, will have no out of pocket. 
People that are not insured, we are currently working on the 
program and want to make sure it is as easy as possible to 
access it so that people who are not insured also have access 
to a vaccine at no cost.

    That is very, very important to us. The big unknown for us 
as we move forward is the unknown and the complexity. We do not 
know what volume will be required in the fall of 2023. We do 
not know how much wastage there will be in the country. If you 
look at the fall of 2022, I think this is interesting data to 
think about and reflect upon.

    U.S. Government bought 160 million doses, 50 only million 
went into arms. So, the true cost to the U.S. taxpayer was way 
above $26 because they paid for all the doses that ended up 
going to waste.

    This does not include the costs of distribution, which now 
we are going to have to bear. So over time we would have to see 
where things stabilize in terms of volume----

    Senator Markey. I appreciate that. It is only that as time 
goes on, identifying where the waste is becomes easier and 
easier because of experience. So obviously that was an absolute 
rush that we were in.

    But as time goes on, you get better in terms of 
efficiencies in logistics and making sure that the number of 
people who we think are going to be wanted are matched up 
within a logistical system that gets it to them.

    I guess what I would say to you is that it is important to 
be looking at additional efficiencies, additional ways you can 
lower this price, because it is going to be critical to making 
Americans feel they can afford it. And following on that, 
Moderna announced that you have develop a potential cancer 
treatment for melanoma using mRNA technology, which is an 
exciting development in cancer treatment.

    But Merck's cancer drug list price is $175,000, $175,000. 
And it generated $21 billion in revenue while patients skip 
treatment or take on significant medical debt. So, Mr. Bancel, 
how can you use your role to ensure that the cancer drugs you 
are developing are affordable for people who are going to need 
them?

    Mr. Bancel. Thank you, Senator, for your question. That is 
something we will look into it as time goes by, closer to 
launch. At this time, our focus is to start the phase 3 study 
as fast as we can, because we believe, as you said, the data is 
very encouraging. 44 percent reduction of recurrence of disease 
or melanoma or deaths.

    It is a big impact on patients. And as we get closer to 
launch, we will have to figure out--we have to even invent how 
to manufacture those drugs. Because unlike the vaccine which we 
make in larger batches, this is an individualized medicine.

    We make a different one for you or for me if we have 
cancer, because we have to adapt to the general disease. So, we 
will have to figure all those things out.

    Senator Markey. A drug that is unaffordable is a 
hallucination to ordinary people in our Country. So, it has to 
be made more affordable. Thank you, Mr. Chairman.

    The Chair. Senator Lujan.

    Senator Lujan. Thank you, Mr. Chairman. And Mr. Bancel, 
thank you for being with us today. We have heard a lot of 
numbers thrown around today. So, my goal here is to try to shed 
some light on that one and see if we can clear some things up. 
I have a series of yes or no questions for you, sir. Before the 
COVID vaccine, Moderna had never had a vaccine approved. Is 
that correct?

    Mr. Bancel. That is correct, Senator.

    Senator Lujan. Yes or no, BARDA provided Moderna $1.7 
million to support clinical trials related to COVID vaccine?

    Mr. Bancel. That is correct, Senator.

    Senator Lujan. Yes or no, the Federal Government promised 
and provided $10 billion in guaranteed advance purchase orders 
if Moderna successfully developed a vaccine?

    Mr. Bancel. That discussion happened later, Senator. It was 
different from the BARDA discussion.

    Senator Lujan. That sounds like a long way of saying yes. 
Is the answer to that question, yes, or no?

    Mr. Bancel. Can you repeat the question, please, sir?

    Senator Lujan. Yes or no, the Federal Government promised 
and provided $10 billion in guaranteed advance purchase orders 
if Moderna successfully developed a vaccine?

    Mr. Bancel. It was actually in tranche, Senator. It was not 
$10 billion at the beginning. The Government started by 
ordering 100 million and had the rights to----

    Senator Lujan. We can have a disagreement there. I think if 
I go back and look at the facts here, the Federal Government 
guaranteed $10 billion. We can--if you would like some time to 
clear that up, I can submit a question to the record. Yes or 
no, that deal allowed Moderna to secure early supplies of 
component parts to speed up production.

    Mr. Bancel. Actually no, Senator. We had to raise capital 
in the public market in May 2020, $1.3 billion----

    Senator Lujan. Will getting a $10 billion guarantee help 
you raise more money from the market?

    Mr. Bancel. We do not have that guarantee--the purchase 
agreement----

    Senator Lujan. Okay. I am going to move on. I appreciate 
that. So, you disagree with the question that I asked?

    Mr. Bancel. Yes.

    Senator Lujan. Okay. Despite the Federal Government 
investing early and heavily in Moderna, the Federal Government 
has been repeatedly asked to increase its payment per dose. Yes 
or no, the Federal Government most recently bought boosters 
from Moderna at about $26?

    Mr. Bancel. I think that is correct, sir.

    Senator Lujan. For the record, the $26 price represents a 
73 percent increase in the price per dose compared to the last 
purchase the general Government made in June 2021 when it was 
$16.52 per dose.

    Mr. Bancel. This is because of a discount. As I mentioned, 
we provided a discount for the initial purchase, equivalent to 
$2.9 billion that of discount to reimburse BARDA. It is why the 
initial price in 2020 was much lower.

    Senator Lujan. I appreciate you sharing that response, Mr. 
Bancel. I have heard it a few times today. Pharmaceutical 
companies set the price. There has been a whole conversation 
about this. There is a low price and there is a lowest price, 
and then there is a broken price, and then there is a discount 
price.

    But you still make money. So, I would like to have another 
hearing maybe on that, Mr. Chairman, so that we understand 
indeed what the lowest price is, because if there is a low 
price and then there is a discount offered, the company agrees 
to negotiation to offer the discounted price, and I am certain 
you are still making money on that.

    Now, that may be my bias and my very elementary 
understanding of a very complex, industrial complex here. But 
nonetheless, I would like to move on there and very much 
appreciate your explanation of the discount and pointed that to 
the $26 and $16.52.

    While the huge purchaser, like the Federal Government, 
likely received a discount for bulk, what you just described, 
smaller purchasers were still paying a higher price. Is that 
correct?

    Mr. Bancel. That is correct, sir.

    Senator Lujan. They were paying $37 per dose or $32 to $37 
per dose. Does that sound correct?

    Mr. Bancel. Which customer, Senator?

    Senator Lujan. The volume purchasers.

    Mr. Bancel. Outside the U.S. you mean? Because in the U.S., 
we had only one customer, the U.S. Outside the U.S. It depends 
on volume, yes.

    Senator Lujan. Yet Moderna announced that it plans to sell 
the vaccine in commercial market from $110 to $130, which is a 
400 percent increase. Is that correct?

    Mr. Bancel. That is a price where we tend to sell it at.

    Senator Lujan. There is still about 30 percent of Americans 
that Moderna estimates will still need a shot. That is a lot of 
people. And in 2002, yes or no, Mr. Bancel, Moderna matched the 
$3.3 billion it spent on research and development with $3.3 
billion in stock buyback.

    Mr. Bancel. In 2022. Yes, it is correct, Senator.

    Senator Lujan. Now, Jamie Dimon, who is the CEO of Chase, 
some of you may know who he is. He once described stock 
buybacks as one of the last uses of excess capital, 
particularly after investing in growth. I am trying to 
understand the statements that have been put forth by Moderna 
here.

    According to your last call earning, you have $18 billion 
cash on hand and you plan to only spend $4.5 billion on 
additional R&D over the next year. For a company that has never 
had a commercial drug product before the COVID vaccine, that is 
a lot of profit.

    Where I will conclude here, Mr. Chairman, is I support 
people doing well and profits in this regard. This was a 
national pandemic, and I am sorry, people are still getting 
sick and dying from COVID. That is real. Whether people want to 
admit that or not, that is a real. This just seems--it is hard 
for me to understand here.

    The cash you are sitting on, your projections, looking at 
what the U.S. Government did, not just with investment, but 
accelerated treatment when it came to attention to approving a 
drug that was going to save people's lives. And I appreciate 
every one that was responsible for this. I am just having a 
hard time with this. Thank you, Mr. Chairman.

    The Chair. Thank you, Senator Lujan. I am going to ask some 
additional questions, then give the mic over to Senator 
Cassidy.

    The issue we are really discussing today, and Senator Lujan 
raised it, I think significantly, is some of us have a hard 
time understanding how a company that made $21 billion in 
profit, a company that enabled you and your associates to 
become multi-billionaires, a company that would not have 
developed this vaccine without the help of the taxpayers of 
this country, now comes before the public and says, oh, by the 
way, we want to quadruple prices, which will mean that the 
deficit goes up, the taxes go up because of the increased 
expense that Medicare and Medicaid and VA have to pay.

    I concur with Senator Lujan about that issue. I want to ask 
you, earlier, in response to Senator Smith, you talked about 
negotiating prices. Am I hearing from you that in fact you are 
prepared not to charge $130 for a vaccine to the U.S. 
Government, but less than that? Is that what I hear?

    Mr. Bancel. What I am saying, Mr. Chairman, is there is a 
list price. It depends if it is a single dose product or 
prefilled syringe product. There is a list price are on the 
$130. And then with the different customers, they are going to 
be discussions.

    The Chair. But that is an issue that many have raised. We 
have no transparency in pricing. It is a totally insane 
situation. Everybody pays a different price. The U.S. 
Government helped you develop that vaccine. It is a huge 
consumer. Are you prepared to substantially charge less for the 
vaccine to the U.S. Government and our agencies?

    Mr. Bancel. Given the situation at hand, Mr. Chairman, we 
have no idea of a volume that will be needed this year. We have 
very increased complexity.

    The Chair. You have complexity, but you have money for 
stock buybacks by the billions and you guys became 
billionaires. That doesn't seem too complex to me. Let me ask 
you this question at least. The United States pays, the people 
in our Country pay the highest prices in the world for 
prescription drugs in general, something this Committee will 
work on. Will you at least tell us today that the price you are 
charging for the vaccine will be lower than what other 
countries around the world are paying? Or once again, we are 
going to pay the highest prices?

    Mr. Bancel. Mr. Chairman, the price will depend on the 
value in each country. The cost of health care is different in 
each country.

    The Chair. That is not the answer. That is a whole, all 
right--I am asking you a simple question. Your vaccine was 
developed with the help of the U.S. Government. I am asking you 
whether or not we are going to continue to pay the highest 
prices in the world for that vaccine.

    I understand everything is complex, but I also understand 
you have money for stock buybacks and exorbitant compensation 
packages for yourself. Will you at least tell the taxpayers of 
this country that the price we pay for the vaccine will be less 
than other countries?

    Mr. Bancel. I cannot say that the price would be lower than 
in other countries.

    The Chair. All right. Let me ask you this. When you talk 
about value, it is an interesting philosophical concept. In 
your judgment, what does value mean to a woman who lost her 
husband because the family cannot afford the price, the 
outrageous price of a prescription drug? Is that a value that 
we should consider or is it only--is that a value that we 
should consider?

    Mr. Bancel. We believe in access, Mr. Chairman. And as I 
said, our products, we are going to work really hard for the 
uninsured, that they are available for no cost.

    The Chair. I understand. I may be asking you a broader 
question than just Moderna. Senator Markey mentioned Pfizer 
having a cancer drug for $175,000, I believe is what he said. 
All right, what do you----

    Mr. Bancel. That is another company.

    The Chair. That is another company, of course, I know that. 
But I am asking you, your statement, is--you talk about value 
and the value is, well, we have helped the economy and we have 
done all these things. True enough. But what about the value of 
the human lives that are lost or the suffering while companies 
make billions and people can't afford the price? Is that not a 
value to be considered?

    Mr. Bancel. Of course, Mr. Chairman. We need to work 
together, industry and the Governments, and all the players in 
the health care system to figure out how do we make sure the 
products are available. I completely agree with you. We work 
hard to make medicine and to do science to help people, so I 
agree with you.

    The Chair. Well, you raise an interesting question. Okay, 
that is--and Senator Cassidy and Senator Romney kind of talked 
about it. Now, tell me this, and this is kind of a value issue 
that I think we should really get into as a nation. Jonas 
Salk--you are familiar with Jonas Salk.

    Invented the polio vaccine. Did not make billions for his 
invention. In fact, he gave it away. And he said, I am so proud 
to have created this vaccine just to save lives. Alexander 
Fleming developed penicillin. A huge advance for medicine, 
saved millions of lives. Frederick Banting sold his 
intellectual property for $1 for insulin.

    What do you think about those guys and those scientists who 
say what, our function in life is to create wonderful drugs 
that will ease human suffering and save lives, not to become 
excessively rich. Do you think they were crazy?

    Mr. Bancel. I think what they did was very noble. I think 
what we have to do is to invest in new technology. If we do not 
have a technology when the pandemic happened, there would have 
been no Moderna vaccine, Mr. Chairman.

    The Chair. Look, we all agree that we need the technology. 
But what I am asking you and some of my friends here are 
saying, is that the only thing that motivates you is to become 
a billionaire.

    Mr. Bancel. That is not true.

    The Chair. All right. But then can we have a science where 
people get paid well? I have no problem with Moderna making 
money. What you are hearing here, massive cash paybacks.

    You are becoming a multi-billionaire. Do we--should we 
develop a counterculture, perhaps, which says your motive is 
not just making billions, but developing all of the drugs we 
need for the terrible diseases that this world faces?

    Mr. Bancel. That is what we are doing, Mr. Chairman. That 
is why Moderna is a different company. Our No. 1 investment 
this year in R&D. As I mentioned, the $4.5 billion.

    The Chair. How much do you put in stock buybacks?

    Mr. Bancel. Sorry?

    The Chair. How much do you provide in stock buybacks?

    Mr. Bancel. We have not decided yet as well. The number of 
a stock buyback that is still open is $2.8 billion, I think. 
Our No. 1 priority is R&D. If we could invest more in R&D, we 
would. The challenge we have is phase 3 studies takes time to 
happen, Mr. Chairman.

    The Chair. Let me ask you this. And again, I am not--I am 
directing it to you, but it really applies to the whole 
industry. If we were to say to you, if the Government were to 
say to you, look, we are interested in cures in cancer, 
obviously, diabetes, all the other--Alzheimer's, all the other 
terrible illnesses we face.

    We are prepared to make sure that your company makes a good 
profit. Maybe you don't become a multi-billionaire, but you 
make a good profit. And if you develop a cure for that 
particular disease, you are going to make money on it, but we 
are going to take the intellectual property and make it 
available to the whole world so that people all over the world 
at a very reasonable price will be able to benefit from that 
discovery.

    You make money, the world benefits. Everybody affords it. 
What do you think about that concept?

    Mr. Bancel. What is really hard in this industry, Mr. 
Chairman, is the very risk of failure. Most drugs fail. 90 
percent of drugs in clinical trial fail, as you are aware. And 
that is what makes it really, really hard. What we want to do 
is to get access. Let me share a couple examples.

    We are working on having a plant in Kenya to help a low-
income country. There is an example of a rare disease called 
Crigler-Najjar. It is a very small, 100, 200 kids. We couldn't 
find a way to do it or it will be too expensive.

    The Chair. But if we said to you, we are going to cover, 
you are not going to fail, you will be compensated. We are 
willing to pay you good money. You are going to get rich. Maybe 
not a multi-billionaire.

    You will do very, very well. We will cover the risk. But if 
you succeed, that formulation is going to be available to 
people all over the world so that they can get that drug. We 
cover the risk. What do you think about that?

    Mr. Bancel. I will have to look into the details, Mr. 
Chairman, because, again, the risk is--I don't know how you 
manage the risk. I mean, are you suggesting in that thought 
process that the Government will pay all of R&D--?

    The Chair. That is exactly what I am suggesting.

    Mr. Bancel. Okay.

    The Chair. That is the deal. We are going to cover the R&D. 
You succeed, you are going to make profit, but the product goes 
all over to the world so that people can afford it.

    Mr. Bancel. I think we have to understand the details to 
have an opinion.

    The Chair. Senator Markey made the point that I think 
millions of people appreciate, you can come up with all the 
great drugs in the world, we appreciate that, but if people 
can't access them, they go broke or they go bankrupt hoping to 
buy them, it doesn't mean anything to those people.

    Certainly, by the way, we are talking about America, the 
wealthiest country on earth. What about Africa and poor people 
around the world? Should they die because they cannot afford 
that prescription drug?

    Senator Cassidy.

    Senator Cassidy. I will be very short. One, I applaud those 
like Banting, and Best, and others like Maurice Hilleman, who 
developed vaccine and made them generally available. But I also 
want to quote in 1962 on a Senate hearing on drug development 
and the role of patents, Dr. Vannevar Bush, who is kind of 
famous for his role in the development of science in the United 
States.

    At the time, he was the former head of the U.S. Office of 
Scientific Research and Development. He also led the first 
National Research and Development Council and contributed to 
the Manhattan Project. And he lamented that Fleming, when he 
discovered penicillin, didn't seek a patent, saying that if he 
had, we would have had penicillin 10 years earlier than we 
finally got it.

    I say that because I learned, having emerged from a 
hospital for the uninsured, that there is an ecosystem of 
investors. And when you are a startup with really no assets, 
there are investors who invested in your company, as Senator 
Romney said, maybe taking a loss, but maybe winning big.

    They could have invested in anything else, but they 
invested in you. And they did it because they anticipated a 
return. Some of them got it. Some of them did not. That they 
invested in a startup that failed, they lost their money. So, I 
say that because it isn't just so much the company that is 
established.

    They may be a legitimate beast. But we are speaking about a 
company starting. I have learned that there is an ecosystem and 
they cannot get money unless that investor can see a return on 
that which he has put forward. No need to comment. With that, I 
yield.

    The Chair. Thank you very much. And Mr. Bancel, thank you 
very much for being with us this morning. We appreciate it.

    Mr. Bancel. Thank you, Mr. Chairman.

    The Chair. Now we are going to call our next panel. Our 
first witness will be Dr. Christopher Morten. Our next witness 
will be Dr. Ameet Sarpatwari. And our third witness will be Dr. 
Craig Garthwaite.

    Let me thank all of our witnesses for being with us and for 
your patience. We appreciate your being here. Let's begin with 
Dr. Christopher Morten, who is an Associate Clinical Professor 
of Law at Columbia Law School.

    Dr. Morten is trained as an Organic Chemist and Lawyer. He 
is a leading expert on equitable access to medicine. Dr. 
Morten, thanks for being here.

  STATEMENT OF CHRISTOPHER J. MORTEN, PH.D., J.D., ASSOCIATE 
  CLINICAL PROFESSOR OF LAW, COLUMBIA LAW SCHOOL, NEW YORK, NY

    Dr. Morten. Chairman Sanders, Ranking Member Cassidy, and 
distinguished Members, thank you for this hearing and for 
inviting me to testify. mRNA based COVID vaccines are among the 
most important inventions of my lifetime.

    They have saved millions of lives. For 2 years, we, the 
people of the United States, had free access to these vaccines 
because our Government purchased large quantities at affordable 
prices and distributed them for free. But that, sadly is 
changing. The U.S. Government will leave Americans on our own 
to foot the bill.

    Moderna has proposed massive price increases, from $20 or 
$30 a dose to $110 or even $130, though each dose costs less 
than $3 to make. Moderna's proposed price increases will mean 
that people who need boosters won't get them. More people will 
get sick and die. Higher vaccine prices hurt us all. Higher 
prices mean higher insurance costs, including higher Medicare 
premiums.

    Mr. Bancel claims the value of these vaccines justifies 
Moderna's proposed price increases. But his testimony ignored a 
key question, who created that value? It was the U.S. 
Government, the American taxpayer, that spent billions. It was 
Government scientists that toiled alongside Moderna's.

    To quote Moncef Slaoui, former head of Operation Warp Speed 
and a Moderna board member, the U.S. Government, ``held Moderna 
by the hand on a daily basis Moderna is not the primary 
inventor of any of the three key scientific features of the NIH 
Moderna vaccine that Moderna itself has identified as critical 
to its value.

    We gave Moderna the specific mRNA sequence used in the 
vaccine. We designed and ran Moderna's early clinical trials. 
We gave Moderna money and resources to expand its 
manufacturing.

    The National Institutes of Health was so integral that it 
aptly named the vaccine, the NIH-Moderna vaccine, built on over 
a decade of pioneering research into coronaviruses at NIH. Yet 
Moderna has repeatedly exaggerated its own contributions and 
downplayed or even erased essential Government support at 
almost every stage.

    For example, Moderna's lawyers intentionally omitted NIH 
scientists as inventors of a key patent application, the same 
NIH scientists who sent Moderna the vaccine's precise mRNA 
sequence. To quote NIH, ``omitting NIH inventors from the 
principal patent application deprives nature of a co-ownership 
interest.''

    Mr. Bancel just confirmed a moment ago that Moderna 
abandoned that patent application rather than share control 
with NIH. To be clear, Moderna's scientists and engineers made 
many contributions of their own, as did many academic 
scientists. These people and their work deserve credit and 
celebration, too.

    But Moderna cannot claim the vaccine's value for itself. 
And the American people, the most important creators of the 
value of this vaccine, deserve a voice in the debate over the 
company's prices. To quote Senator Casey, ``our partnership 
should not be extinguished just because we think the pandemic 
is over.''

    To justify price increases, Moderna also points to $4.5 
billion in R&D commitments this year. But $4.5 billion is 
easily doable for this company. In 2021 and 2022, Moderna made 
over $20 billion in profits. The company has been so 
spectacularly successful that many of its executives and early 
investors became billionaires, including Mr. Bancel.

    As I speak right now, Mr. Bancel's net worth is reportedly 
about $4.7 billion, meaning he might be rich enough to fund 
Moderna's entire 2023 R&D expenditure out of his own pocket. In 
2022, Moderna spent $3.3 billion on stock buybacks to enrich 
Mr. Bancel and other shareholders.

    That is as much as the company spent on R&D last year. 
Moderna's price increases are unjustifiable. If we let them 
happen, we set a terrible policy precedent. Other companies 
will double down on Moderna's playbook, extract billions in 
private profits from public science and public money, leave 
Americans with higher costs, inaccessible technologies, and 
poorer health.

    I urge Moderna, do not raise your prices. Your vaccine is 
clearly profitable at $20 a dose. And if Moderna insists on 
higher prices, our leaders should act. I will make two 
recommendations now, and I present more in my written 
testimony.

    First, Congress and the White House should work together to 
resume bulk purchases of COVID vaccines. Continue to use the 
buying power of the American people and provide vaccines free 
of charge to everyone.

    Second, NIH and other scientific agencies must cut harder 
bargains with their industry partners so that we the people get 
access to the next generation of medical products that our 
money creates and that we need to survive and thrive. Thank 
you.

    [The prepared statement of Dr. Morten follows:]

                prepared statement of christopher morten
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	

                                 ______
                                 
               [summary statement of christopher morten]
    The NIH-Moderna vaccine is in many ways an incredible success 
story: A public-private partnership developed and deployed an 
innovative new vaccine in record time. Millions of deaths and 
hospitalizations were averted. Moderna and its investors made tens of 
billions of dollars.

    For 2 years, we, the people of the United States, had free access 
to this vaccine, because our government purchased large quantities at 
affordable prices and distributed them for free. That, sadly, is 
changing--and the story of the NIH-Moderna vaccine may turn to failure.

    The U.S. Government plans to leave Americans on their own to figure 
out how to pay for booster shots. Moderna proposes massive price 
increases, from $20-$30 per dose to $110 or even $130, though each 
costs less than $3 to make. Moderna's proposed increases would likely 
cause some people who need boosters to forego them. More Americans 
would get sick and die.

    Moderna pledges a patient assistance program, but these programs 
are complicated and inevitably miss people--especially those most 
likely to need assistance. Even with a patient assistance program, 
higher vaccine prices would hurt us all through higher systemic costs.

    Moderna has given us reason to take its pledges skeptically. As I 
show in my testimony, Moderna broke its past pledge not to enforce 
patents while the pandemic continues, and, just this month, Mr. Bancel 
made false statements when defending Moderna's proposed price 
increases.

    Moderna's proposed price increases are indefensible. Moderna cannot 
reasonably claim the value of the NIH-Moderna vaccine for itself. Much, 
and arguably most, of the vaccine's value is traceable to the American 
public and our tax dollars. Americans should be deeply proud of our 
collective contributions, which included not just enormous and 
unprecedented direct financial support of Moderna but also innovative, 
prescient scientific research conducted by NIH and NIH-funded 
university researchers years before COVID-19 emerged.

    My testimony summarizes the scientific history of three key 
features of the NIH-Moderna vaccine--three features that Moderna's own 
scientists have identified as essential to the vaccine's success. U.S. 
Government and government-funded academic researchers can proudly claim 
to have invented two of these three features. Moderna lacks a strong 
claim to have invented any of these three features--though that has not 
stopped Moderna from exaggerating its own role or omitting NIH 
scientists from an important patent application.

    To be sure, Moderna's scientists and engineers have made many other 
meaningful contributions to other features of the vaccine. They deserve 
celebration, even as the company's executives deserve criticism.

    The U.S. Government and Moderna were once close partners. Moncef 
Slaoui, former head of Operation Warp Speed, said the government ``held 
Moderna by the hand on a daily basis.'' We had a bargain--perhaps 
unwritten, but a bargain nonetheless. In my view, Moderna's new plan to 
quadruple prices for the American public breaks that partnership and 
that bargain. It sets a troubling precedent. Other powerful companies 
will double down on Moderna's playbook: Exploit public science and 
public money to extract billions in private profit; leave us all with 
higher costs, inaccessible technologies, poorer health.

    If Moderna insists on higher prices, I urge our leaders to act, 
including the Members of this Committee. I'll make two recommendations 
here. (I present more in my written testimony.)

    1. Congress and the White House should work together to resume bulk 
purchases of COVID vaccines. Leverage the buying power of the American 
people. Provide affordable vaccines to all.

    2. NIH and other scientific agencies must cut harder bargains with 
pharma industry partners--with explicit, legally binding commitments to 
shared control--so that the public gets access to the next generation 
of medical products that our money creates and that we need to survive 
and thrive.
                                 ______
                                 
    The Chair. Thank you very much. Our next witness is Dr. 
Ameet Sarpatwari, who is an Assistant Professor of Medicine at 
Harvard Medical School. He is an Epidemiologist and a Lawyer. 
He is an expert on the role of public investment in driving new 
medical breakthroughs. Doctor, thanks very much for being with 
us.

STATEMENT OF AMEET SARPATWARI, PH.D., J.D., ASSISTANT PROFESSOR 
        OF MEDICINE, HARVARD MEDICAL SCHOOL, BOSTON, MA

    Dr. Sarpatwari. Chairman Sanders, Ranking Member Cassidy, 
and distinguished Members of the Senate HELP Committee, thank 
you for the opportunity to testify. I urge you today to 
strongly condemn and swiftly act to prevent Moderna's attempt 
to quadruple the price of the NIH Moderna vaccine, which would 
fill the company's coffers with unmerited public funds and 
severely threaten public health.

    The reasons why, centered on the extraordinary role the 
Federal Government played in Moderna's success, and the 
substantial barrier to access that this price increase would 
have. Building on $337 million in pre-pandemic funding of 
research directly contributing to key investments in mRNA 
vaccines, the Federal Government made a series of unprecedented 
investments in multiple pharmaceutical companies to develop a 
vaccine under Operation Warp Speed.

    Moderna was one of the largest beneficiaries, receiving 
over $2 billion to support clinical trials of the NIH Moderna 
vaccine, $1.5 billion in an advanced market purchase for a then 
unapproved product, and over $50 million to scale up 
manufacturing. In this respect, the Federal Government turned 
traditional therapeutic development on its head.

    The brunt of the risk, for which we reward pharmaceutical 
companies the ability to charge monopoly like pricing, was 
borne by taxpayers. Moderna's benefits from the Federal 
Government didn't end there.

    NIH scientists co-developed the mRNA sequence encoding the 
vaccines immunogen and independently developed the vaccine 
spike protein. Moderna was also granted broad immunity against 
patent infringement for use of other patented technologies, 
which the company has cited as a defense in ongoing litigation.

    Through these Federal Government contributions, Moderna, a 
company that had never brought a product to market, was able to 
secure emergency use authorization of the NIH Moderna vaccine, 
benefiting handsomely from its use.

    Moderna earned $37 billion in revenue in 2021 and 2022, $20 
billion of which was profit. Despite these riches, Moderna has 
at every turn sought to enrich itself further at the expense of 
Americans and the global South.

    In the U.S., Moderna has already denied the pivotal 
contributions of the Federal Government in the development of 
the NIH Moderna vaccine and broken its pledge not to enforce 
its patents during the pandemic.

    In October 2021, as the pandemic raged globally, Moderna 
was supplying its doses almost exclusively to wealthy nations, 
more so than any other manufacturer. Moderna's price increase 
is an escalation in this troubling pattern of behavior and a 
step too far.

    It cannot be justified based on the value of the vaccine 
which was created on the backs of taxpayers and with the 
central contributions of NIH scientists. It also cannot be 
justified on the need for research and development.

    Moderna had ample funds for this. Flush with money, it 
maximized short term profit. In 2022, Moderna spent more on 
stock buybacks than it did on research and development. 
Moderna's offer of a patient assistance program is no solution.

    These programs are often complicated with applications that 
take considerable time to complete and frequent changes in 
eligibility, as well as onerous income documentation 
requirements.

    We have received no details of this patient assistance 
program to date. Given these barriers, it is likely that many 
Americans will miss booster shots and this will result in more 
infections and more deaths, particularly among vulnerable 
populations. The public will also still bear the full cost of 
an unconscionable price increase.

    Now is the time to say enough. The Federal Government 
should resume purchasing doses for all Americans, leveraging 
its purchasing power to obtain a fair price. Such an act would 
not threaten innovation or the willingness of companies to race 
for a cure in a subsequent pandemic.

    Instead, it would demonstrate a dual commitment to allow 
pharmaceutical companies to profit handsomely for their efforts 
under reduced risk, and to ensure reasonable access to 
Americans in a time of crisis. Thank you.

    [The prepared statement of Dr. Sarpatwari follows:]

                 prepared statement of ameet sarpatwari
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]	

                                 ______
                                 
                [summary statement of ameet sarpatwari]
    Moderna's proposed 400 percent price increase of the NIH-Moderna 
vaccine, from $26 to $110-130 per dose, is unjustified. Although the 
vaccine has saved countless lives, Moderna is not entitled to extract 
its full value, which was created on the backs of taxpayers. Public 
funding, research and development, and knowledge played a large role in 
the vaccine's commercialization. In addition to $337 million in pre-
pandemic funding of research development that directly contributed to 
key inventions in mRNA vaccines, the Federal Government provided 
Moderna with over $2 billion to support clinical trials, $1.5 billion 
in an advanced market commitment to purchase a still unapproved 
vaccine, and protection to use others' patents critical for vaccine 
development. For this unprecedented ``de-risking,'' Moderna owes 
Americans affordable access to the NIH-Moderna vaccine.

    The argument that the revenue derived from the proposed price 
increase is needed to support research and development is also weak. 
Moderna had ample funds for this purpose. Over the last 2 years, 
Moderna reported $37 billion in revenue, a staggering $20 billion of 
which was profit. Yet, in 2022, Moderna spent more on stock buy backs 
than on research and development.

    Despite record profits, Moderna has repeatedly sought further 
enrichment at the expense of not only Americans but also low-income 
countries. In the U.S., Moderna has already implemented price 
increases, denied critical contributions of the Federal Government in 
the development of the NIH-Moderna vaccine, and broke its pledge not to 
enforce its patents during the pandemic. Globally, as the pandemic 
raged in the global south, Moderna was supplying its doses almost 
exclusively to wealthy nations, more so than any other vaccine 
manufacturer. Moderna's proposed price increase is an escalation in 
this troubling pattern of behavior.

    Were it to be implemented, the four fold price increase of the NIH-
Moderna vaccine would severely harm public health and financially 
strain payers. Even with Moderna's still non-detailed patient 
assistance plan for under-and uninsured people, there would be far 
fewer vaccinations. This would increase the number of infections and 
deaths from SARScoV-2 and provide more opportunities for the virus to 
mutate. Additionally, if just 50 percent of American adults receive 
done dose of a booster under the new price, payers would spend more 
than the total cost of the U.S. purchasing vaccines for everyone at its 
current price.

    Now is the time to say enough. The Federal government should 
continue placing public pressure on Moderna and resume purchasing doses 
for all Americans, leveraging its purchasing power to obtain a fair 
price. Such an act would not threaten innovation or the willingness of 
companies to race for a cure in a subsequent pandemic. Instead, it 
would demonstrate a dual commitment to allow pharmaceutical companies 
to profit handsomely from their efforts under reduced risk and to 
ensure reasonable access to Americans in times of crisis.
                                 ______
                                 
    The Chair. Thank you very much. Our next panelist was 
invited by Senator Cassidy, who is now voting, but I am happy 
to introduce him.

    Dr. Craig Garthwaite is the Herman Smith Research Professor 
in Hospital and Health Services at Northwestern University. Is 
an applied Economist whose research examines the business of 
health care? Dr. Garthwaite, thanks a lot for being with us.

  STATEMENT OF CRAIG GARTHWAITE, PH.D., M.P.P., HERMAN SMITH 
RESEARCH PROFESSOR IN HOSPITAL AND HEALTH SERVICES MANAGEMENT, 
    KELLOGG SCHOOL OF MANAGEMENT, NORTHWESTERN UNIVERSITY, 
                          EVANSTON, IL

    Dr. Garthwaite. Thank you, Chairman Sanders, Ranking Member 
Cassidy, and Members of the Committee for inviting me to 
testify today. Today's hearing is about Moderna's decision to 
raise prices for its COVID vaccine and some Members of the 
Committee's desire to push back on that increase.

    While potentially well-intentioned, the Government's 
attempts to stop this price increase could impact drug 
development well beyond both Moderna and the COVID-19 pandemic. 
When the Government provided what is undisputedly a large 
amount of funding to member Moderna, it did so without 
regulatory conditions on future pricing.

    It is inappropriate to now attempt to relitigate that 
question after refusing to accept the funding. To put it quite 
simply, the correct time for Government officials to discuss 
price restrictions with Moderna was before they finalized the 
funding agreement.

    Facing such potential restrictions on future profits, 
Moderna could have weighed its options and made the optimal 
choice for its investors, who we will note, already provided $3 
billion in private capital at that point.

    We chose not to walk down that road, likely because we knew 
it would delay the process of getting the lifesaving vaccine, 
we so desired. That was a policy choice and one we should abide 
by.

    Moderna, perhaps ultimately naively, trusted the Government 
would honor its commitments and not try to enact ex-post 
modifications to the funding agreements. Notably, Pfizer had a 
different view, and Pfizer CEO, I would also note, was not in 
attendance today.

    Trust of that nature, trust in the Government is critical 
to our overall system for drug development. And for that 
reason, why we gather today to ostensibly discuss vaccine 
pricing, we are actually having a far broader conversation 
about how economic markets can continue to provide new 
innovations for patients.

    Such markets are essential to discovering novel 
pharmaceutical products. In those markets, we provide firms 
making large investments in drug development with a time 
limited period where they can profit from these successful 
innovations. In this way, we tradeoff some reduction in access 
today from higher prices for the incentives for firms to invest 
in future products.

    These incentives are critical drivers of innovation that 
provide access to patients who might otherwise be left without 
any treatments for horrendous medical conditions. Over the past 
several decades, the world has enjoyed tremendous benefits from 
this free market system of drug development.

    Patients with diagnoses that previously amounted to death 
sentences have been completely cured or now have entirely 
manageable chronic conditions. Despite this progress, many 
other patients struggle with serious unmet medical conditions, 
and many others die every year because treatments simply do not 
exist for their condition yet.

    In debates about pharmaceutical pricing, access to 
medications for these individuals is all too often left 
unmentioned when we discuss the morality of drug pricing and 
access. These patients depend on firms being willing to 
continue to invest in future innovations.

    After all, few of our existing treatments came to market 
without meaningful private investment. Firms make such 
investments when they believe there are clear and identifiable 
rules that govern how they will earn potential returns with 
successful innovations and a trustworthy regulatory state to 
enforce those rules.

    Historically, the U.S. Government has admirably served in 
this trustworthy role, but I fear private firms watching these 
hearings, along with other recent policy actions and statements 
regarding Government price regulations and margin rates, are 
beginning to doubt the future wisdom of this trust.

    Understanding the potentially broader ramifications of a 
loss in trust in Government does require acknowledging the 
incontrovertible fact that new pharmaceutical products are 
developed in an expensive ecosystem where private firms invest 
large amounts of fixed and sunk capital with little certainty 
of a profitable return.

    While there may be some limited anecdotal evidence of 
altruistic individuals giving up profits solely to benefit 
society, these examples are unfortunately exceedingly rare. 
Hoping such altruistic funding will emerge from the ether is 
simply not a strategy for drug development.

    Instead, we must accept the reality that the private firms 
crucial to drug development can only attract the capital they 
need if they can generate a risk adjusted return for their 
investors that is sufficiently attractive compared to other 
non-pharmaceutical investments. And most of these investments 
ultimately fail.

    Firms can withstand these failures because a small number 
of large successful investments support a larger number of 
failed projects. If firms believe that policymakers will 
ultimately expropriate the gains from investments that are 
deemed too successful, they will not invest in the first place 
and we will get fewer products.

    As much as we may not like it, this is true even when it 
means allowing firms to capture large windfalls from products 
that generate massive amounts of value for society. And if we 
choose to ignore this fact in favor of specious arguments and 
grandstanding about pharmaceutical greed, we will clearly 
forfeit access to future medical innovations.

    That said, our goal is not to provide firms with unlimited 
returns on their investment. We must aim to balance the 
incentives necessary to attract private capital with the 
ability of patients to access the resulting medical 
innovations, and I provide numerous suggestions to that end in 
my written testimony.

    Regardless of the choices that we make, it is critical that 
we understand that if we decrease spending on health care--on 
pharmaceuticals, we will get fewer products. That might be 
acceptable. We might want less innovation and lower prices. But 
that is the debate we should have.

    We should be debating how much innovation are we willing to 
give up, not falling for promises that we will have lower 
spending and the same level or more prices. Thank you, Senator 
Sanders and Senator Cassidy.

    [The prepared statement of Dr. Garthwaite follows:]

                 prepared statement of craig garthwaite
    In contrast to all other developed countries, the United States 
relies more heavily on private markets to finance and provide 
healthcare goods and services. While this is a source of consternation 
for some, using economic markets for healthcare is not a policy 
accident and instead represents the many advantages provided by market-
based healthcare. A large and diverse country such as the United States 
reflects a wide variety of preferences and meaningful differences in 
the willingness to pay for quality. In this setting, the central 
planning inherent to regulated prices is unlikely to maximize health 
and welfare, and an economic market is the superior method of 
allocating goods and services. This is even more true once we consider 
the wide variety of economic actors that take part in the development 
of innovative new healthcare products and services. It is hard to 
imagine that the Federal Government, or frankly any other plausible 
actor, would have enough omniscience to balance these forces more 
efficiently than a market. Therefore, despite many contentions to the 
contrary, a market-based system remains the best available mechanism 
for providing the appropriate incentives for long term welfare 
maximization.

    Nowhere is the benefit of economic markets for healthcare clearer 
than in the development of novel pharmaceutical products. Over the past 
several decades, the world has benefited from remarkable progress in 
the ability to address a wide range of medical conditions using 
pharmaceutical innovations. Patients with medical conditions that 
previously amounted to death sentences have either been completely 
cured or now live with manageable chronic conditions, those suffering 
from a multitude of cancers have seen their lives meaningfully 
extended, and cardiovascular mortality has remarkable declined.

    Few, if any, of these advancements came to market without the 
involvement of private firms investing capital in a market-based 
setting. This demonstrates the centrality of private markets and 
capital to our system of drug development. Given this fact, our 
policies should focus on how best to support and organize efficient 
markets for drug development and commercialization. Such markets 
require, among other features, a clear and identifiable set of rules 
governing how firms will earn potential returns from successful 
innovations and a trustworthy regulatory state to enforce those rules.

    Today's hearing focuses on the question of whether Moderna, a 
private firm that received unconditional government funding, should be 
able to charge a market price for its product. While this topic is 
important, it is imperative we also understand that such discussions 
have the potential to impact more meaningful questions about optimal 
drug development. In particular, we must be aware that private firms 
and their investors are watching hearings such as these to better 
understand the degree to which they can continue to place their trust 
in the explicit and implicit contracts that have historically served as 
the foundation of their investments in drug development. Therefore, 
attempts by the government to change the rules of the game mid-stream 
for Moderna (or other firms) will likely have far reaching consequences 
that impact health and welfare long into the future.

    Understanding the potentially broader ramifications of today's 
hearing requires acknowledging the basic and incontrovertible fact that 
new pharmaceutical products are developed in an expensive and risky 
ecosystem that involves a variety of institutions and firms. Each type 
of firm plays a different role along the complex path from early stage 
research to proof of concept to clinical trials and ultimately, if 
successful, to commercialization. The variety of organizations at each 
step of this process are motivated by different goals and each provides 
their own unique contribution to this development process. Therefore, 
optimal policies must carefully understand and respect the incentives 
of these firms.

    While early-stage research is more often funded by public actors 
(i.e. governments or nonprofit organizations), this is only the first 
step in the long path from bench to bedside. Navigating the rest of 
this path requires private firms to invest large amounts of fixed and 
sunk capital with little certainty of a profitable return. Firms are 
willing to make these investments based on risk adjusted models of the 
profitability of their investments--models that require making strong 
predictions and assumptions about market conditions many years in the 
future.

    These private firms can only attract the capital required for drug 
development if they can generate a return for their investors that is 
sufficiently attractive compared to other non-pharmaceutical investment 
options. This is the fundamental economic reality at the center of the 
drug development process. If we choose to ignore this fact in favor 
specious arguments and grandstanding about pharmaceutical greed, it is 
incontrovertible that we will forfeit access to some future medical 
innovations--which will likely decrease health and welfare.

    While uncertainty around the scientific and commercial prospects of 
potential products makes all pharmaceutical investments inherently 
risky, we should strive to reduce additional uncertainty stemming from 
the policy environment. This is particularly true for policies that 
alter the rules of the game only after firms make their large, fixed, 
and sunk investments to develop new products. Sunk investments are 
expenditures that cannot be recouped by firms after they are made. For 
example, once a firm spends money to run a clinical trial it is unable 
to get that money back if the trial fails or the product is not 
commercially successful. To avoid being stuck in unprofitable 
situations, before making such an investment firms must be careful and 
diligent in attempting to predict how the market might subsequently 
evolve.

    If firms believe policymakers will expropriate the gains from 
investments that are deemed ``too successful,'' they will almost 
certainly be less willing to make the same portfolio of investments as 
they make today. We must always remember that it is this portfolio 
approach, where a small number of large successful investments support 
a larger number of failed projects, that serves as the foundation of 
drug development. If we desire to have firms to continue to willingly 
make the large capital investments necessary to promote health and 
economic welfare, we must sustain a system where firms trust that the 
government will be a reliable counter party that establishes the rules 
of the game and then abides by those rules. This is true even when it 
means allowing firms to capture large windfalls from products that 
generate massive amounts of value and health for society.

    The potential for sowing distrust in the process exists across a 
wide variety of dimensions. Consider the question of whether or not 
Moderna should be constrained from raising the price of SPIKEVAX (i.e. 
its vaccine for Covid-19). It is clear and undisputed that Moderna 
benefited from extensive government financial support in the 
development of this vaccine through Operation Warp Speed (OWS). It is 
also clear that this was part of an agreement our government made with 
this private firm where we provided zero cost of capital funds. In 
return, Moderna was expected to work as quickly as possible to develop 
a vaccine that would address the negative health and economic effects 
from the pandemic. It was a proverbial win-win situation. Moderna would 
only earn large profits for its investors if they could develop a 
workable vaccine. Society would get such a vaccine more quickly than if 
we relied solely on the provision of private capital in remarkably 
uncertain times.

    We provided these public funds to decrease a private firm's risk of 
product development and increase the speed of these products to 
patients. Absent government support, it is unclear whether private 
capital markets would have provided a similar amount of investment on a 
similarly short timeframe. When these transfers occurred in early 2020, 
private firms faced risks from developing vaccines along two 
dimensions. First, they faced commercial risk, i.e. the possibility 
that by the time a vaccine was developed and manufactured in sufficient 
quantities the pandemic would be ``over'' and demand for the product 
would be quite low (or at least lower than would have been necessary to 
justify investing in the vaccine in the first place). This is a common 
concern of firms reacting to a novel pandemic with an uncertain 
duration. To address this first type of risk, the U.S. Government (and 
other governments around the world) offered firms funding in the form 
of advanced market commitments (AMCs). These commitments guaranteed 
purchases of specific amounts of vaccine if the product was proven to 
be successful--purchases that would occur even if the pandemic ``burned 
itself out'' and demand for the vaccines was low.

    The second form of funding was for clinical trials. This type of 
funding was intended to shield firms such as Moderna from scientific 
risk about whether its product would actually succeed in clinical 
trials. In this case there was meaningful scientific risk because mRNA 
vaccines had never been developed. As a result, Moderna faced risk 
related to both this entire scientific approach to vaccine development 
as well as to their specific approach to this vaccine. In this 
particular case, this scientific risk was compounded by additional 
manufacturing risk related to a desire to have large amounts of product 
available as soon as possible--which required expending resources on 
manufacturing assets before it was even known whether mRNA would prove 
successful as a means of developing a vaccine of this nature.

    Moderna accepted such funds to quickly move forward and develop a 
vaccine. \1\ Absent such funding it is unlikely Moderna would have been 
willing to move as quickly as they ultimately did. For example, it 
likely would have followed the more traditional and deliberate 
development path of waiting until each trial was over before initiating 
the next stage of development. It is certainly unlikely it would have 
built the manufacturing scale necessary to quickly serve the entire 
market before it knew whether its product actually worked.
---------------------------------------------------------------------------
    \1\  Notably, Pfizer (the other firm successful at developing an 
mRNA based Covid-19 vaccine) did not accept funding to shield it from 
scientific risk. Perhaps they feared that there were unstated strings 
attached to such funding--a belief that might seem prescient given 
their CEO is not testifying today despite announcing a similarly large 
price increase.

    This swift approach was exactly our goal as a nation. It is my 
understanding from publicly available documents and news coverage that 
there were no constraints placed on Moderna about the future pricing of 
its product if it accepted these funds. \2\ If the government did not 
desire for this to be the case, then they had the opportunity to 
address this issue at the time. Of course, that likely would have 
slowed down the process of vaccine development, which was our priority 
and appears to have been deemed an unacceptable cost in 2020.
---------------------------------------------------------------------------
    \2\  It is possible that such constraints exist in parts of the 
contract that have not been disclosed, but I have not seen any evidence 
of this fact.

    Therefore, Moderna entered into an agreement with the U.S. 
Government to accept the funds and develop the project with the 
reasonable expectation that at some point they would be able to charge 
a higher market price for the product than what they would initially 
charge the government. In understanding the decision facing Moderna's 
leadership at this time, it is important to consider that while the 
government paid for much of the scientific activity related to 
SPIKEVAX, this product would never have been possible without the 
meaningful private capital used to develop all of Moderna's existing 
infrastructure, including, but not limited to, its platform for 
developing mRNA vaccines. Moderna had previously raised over $2 billion 
dollars in private capital from investors who were, in 2020, still 
seeking a profitable return on these investments. \3\, \4\ Moderna was 
also a publicly traded firm with a responsibility to maximize long term 
shareholder value. If faced with a future constraint on pricing as a 
condition for receiving government funds, Moderna's leadership would 
have evaluated that option against raising additional private capital 
that would have initially been costlier but would not have included 
such restrictions on future prices (and the resulting profits). 
Moderna's leadership accepted the government funding with the belief 
they could trust the government to be a reliable counter party that 
would not try and impose ex post conditions that were not present in 
the original funding agreement. \5\
---------------------------------------------------------------------------
    \3\  https://news.crunchbase.com/startups/with-flagship-behind-it-
moderna-quickly-scaled-from-startup-to-world-changing-biotech/.
    \4\  https://www.science.org/content/article/mysterious-2-billion-
biotech-revealing-secrets-behind-its-new-drugs-and-vaccines.
    \5\  It is my understanding that this initial funding agreement did 
contain a large number of restrictions on how funds could be used, so 
it seems even more reasonable that firm believed it would represent a 
complete set of future constraints.

    Moderna lived up to its end of the deal by providing a vaccine in a 
timeline that beat most expectations. \6\ As a result, we were able to 
limit the negative health effects for individuals who became infected 
with SARS-COV-2 and governments felt comfortable reopening the economy. 
The question is whether the government will now live up to its end of 
the bargain or will instead attempt to change the terms of the deal 
they offered by instituting ex post controls on the pricing of 
SPIKEVAX. This includes attempts to shame Moderna for undertaking the 
actions that we should have rationally expected from a for-profit 
publicly traded firm. It would be unfortunate if Moderna's trust in the 
government ultimately proved to be niave. However, this hearing and the 
broader commentary around Moderna's actions since developing a world-
saving vaccine casts reasonable doubt on the U.S. Government as a 
reliable counter party for drug development--a reliability that has 
always served as a fundamental building block of innovation. This could 
have direct impacts on the willingness of firms to engage with the 
government in the case of another pandemic and broader indirect effects 
if firms lose more general trust in the government.
---------------------------------------------------------------------------
    \6\  https://www.wsj.com/articles/moderna-says-its-covid-19-
vaccine-was-94-5-effective-in-latest-trial-11605528008.

    The potential broader loss of trust is only exacerbated by recent 
commentary and policy proposals regarding expansions to price setting 
power for pharmaceuticals granted to the Center for Medicare and 
Medicaid Services (CMS) as part of the Inflation Reduction Act (IRA). 
The already passed legislation will decrease investments in particular 
types of products likely to be affected by government mandated prices 
in the future. Perhaps more concerning, President Biden and other 
policymakers are already attempting to expand the scope of the IRA 
before it has been implemented or its impacts have been evaluated. 
Suggesting a desire to shrink the time period before negotiation to 
only 5 years would further chill investments. \7\ Even the suggestion 
of meaningful uncertainty of this nature around the value of potential 
investments will likely cause firms to pull back capital they might 
otherwise have invested.
---------------------------------------------------------------------------
    \7\  https://www.biopharmadive.com/news/biden-2024-budget-proposal-
drug-prices/644674/.

    A degradation of trust in government institutions is not an 
abstract concern. A fundamental tenet of investments in new 
pharmaceutical products is that a robust, fair, and trustworthy 
regulatory state will enforce existing market rules and regulations. 
Beyond the methods of determining market prices, these regulations 
include those surrounding valuable institutions such as patents and 
other forms of intellectual property protection. Firms require these 
government provided protections because the very heart of the 
innovative process for new drugs represents a market failure that must 
be addressed. The failure results from the fact that the scientific 
advancements generated by firms in the development of innovative 
pharmaceutical products are essentially a public good, i.e. the 
knowledge generated by these investments is effectively non-rival and 
non-excludable protection. Firms require these government provided 
protections because the very heart of the innovative process for new 
drugs represents a market failure that must be addressed. The failure 
results from the fact that the scientific advancements generated by 
firms in the development of innovative pharmaceutical products are 
essentially a public good, i.e. the knowledge generated by these 
investments is effectively non-rival and non-excludable. \8\ Rational 
firms realize that, absent some form of government intervention, they 
will be unlikely to capture the value generated by the large 
investments necessary to bring a product to market. This results in an 
economic phenomenon known as ``hold up'' whereby firms, absent some 
form of intellectual property protection to protect their eventual 
returns are unwilling to make value-creating investments in the first 
place.
---------------------------------------------------------------------------
    \8\  The degree to which this is fully a public good depends on how 
much information can be gleaned from the actual product, the regulatory 
filings, and the published research. For example, small molecule 
products can be more easily reverse-engineered and therefore absent 
intellectual property protections are relatively easier to copy. 
Biologic products, however, have a more complex production process and 
therefore copying the technology is easier than making the product de 
novo but harder than for a small molecule product.

    To address this initial market failure, governments offer various 
forms of intellectual property protection. Through patents or other 
forms of market exclusivity, governments arm firms with time-limited 
periods of enhanced market power that allow them to capture the value 
created by their innovative products. During this time period, the high 
prices curtail some access to valuable medicines. \9\ However, this 
reduced access today is deliberately traded off against the development 
of new products in the future. These new products provide access to 
patients for whom there would otherwise be no treatment--a situation 
could be seen as a more severe access problem than patient access 
restrictions due to higher prices. After all, prices can always be 
negotiated downward while there is no amount of negotiation that will 
grant access to treatments that don't currently exist. Such treatments 
will only come from new investments in technologies that will improve 
patient health.
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    \9\  The amount of reduced access is complicated by the presence of 
health insurance which mitigates the output restrictions by lower 
prices (Lakdawalla and Sood, 2013).

    In this way, policies governing drug development exemplify the old 
adage that there is no proverbial ``free lunch.'' Instead, policies 
governing the development of pharmaceutical products involve trading 
off the static inefficiency of reduced access to products today in 
order to create the dynamic efficiency of the increased development of 
new products in the future. The goal is in balancing the magnitudes of 
these two effects. To the extent the value created by the new products 
exceeds the welfare losses created by the high prices (and resulting 
decreased quantity sold), the periods of market exclusivity are 
welfare-enhancing. Importantly, this could be true even if the prices 
today are quite high. \10\ In fact, for some products treating small 
patient populations the only thing that will induce an optimal level of 
private investment may in fact be very high prices per patient.
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    \10\  This is particularly true because the impact of high prices 
on quantity is far more complicated in a world of widely available 
health insurance. Those who are insured may not suffer as much 
decreased access as they would in a market without third party payment. 
However, those for whom drugs do not exist certainly will not access a 
treatment at any price.

    This tradeoff is a root cause of much of the controversy for 
prescription drugs because the reduced access today involves some 
number of readily identifiable individuals who are unable to access 
existing and potentially life-saving medications because of price. \11\ 
Unsurprisingly, this particular form of a lack of access garners large 
amounts of press and political attention. However, it is always 
critical to remember a perhaps far greater access problem for patients 
suffering from conditions for which no treatment options exist at all. 
For these individuals, there is no price at which a treatment is 
available. These patients will gain access in the future only as a 
result of the dynamic incentives created by intellectual property 
protection. As we consider the optimality of policies governing the 
pharmaceutical market, we must balance the oft-discussed need for 
access to existing products with the less-discussed lack of access from 
the absence of effective treatments.
---------------------------------------------------------------------------
    \11\  Garthwaite, Craig, and Benedic Ippolito. 2019. ``Drug pricing 
conversations must take the cost of innovation into consideration.'' 
STAT. January 11.

    To be clear, it is perfectly acceptable to make reasoned and 
considered alterations to our existing regulatory frameworks. However, 
we should do so with careful deliberation and respect for the 
underlying economic facts. We must be honest and recognize that such 
changes will result in a lower level of investment in innovation, 
however, we may be willing to forgo such innovation in return for lower 
---------------------------------------------------------------------------
prices. That is the a debate that we should be having.

    Regardless of the policy we pick, it is critical that we make large 
changes before firms sink capital at risk into drug development. If 
instead, we attempt to expropriate the value of successful products 
from the firms that invested to create them we will ultimately chill 
some amount of future investment.

    Making changes to the explicit and implicit contracts that 
currently govern the drug development process will have long run 
impacts on future innovations. For example, some activists and 
policymakers have put forward theories that the government, by virtue 
of its investments in basic scientific research, have broad abilities 
to seize intellectual property. Putting aside whether such ``march-in'' 
rights actually exist in response to high prices (which is a legal 
question beyond my expertise) it is clear that such rights have never 
been exercised in that way in the modern biopharmaceutical market. 
Therefore, this would represent a fundamental shift in the beliefs of 
firms about the value of intellectual property--beliefs that serve as 
the foundation of modern drug development. This would have widespread 
ramifications on how people and firms engage with government-funded 
science and the ability of such public investments in basic science to 
improve the availability of treatments in the market. It is hard to 
imagine that firms making decisions about commercializing products 
using NIH-funded basic science will not look at commentary by 
policymakers about Moderna's pricing as further increasing the 
potential risk to their future profits from tools such as march-in 
rights.

    That said, the time period where firms are granted market power 
over their innovations must be time-limited. Our goal is not to provide 
firms with unending returns on their investments but to balance the 
incentives necessary to attract private capital to these markets with 
access to medical innovations. Striking this balance requires the 
government to establish clear and firm rules about how long such a time 
period will last and then ensure we have strong and robust competition 
when periods of market exclusivity expire.

    In my testimony below I provide details on policy solutions that 
will facilitate competition for products as their intellectual property 
expires--an area that is a critical component of our system. When 
considering optimal policies to promote competition and generic (or 
biosimilar) entry, it is important to remember that our goal is to 
decide on the preferred degree of intellectual property protection 
required to encourage the desired level and type of future innovation. 
After setting these parameters, it is incumbent on regulators to 
monitor and enforce these systems. This includes providing the 
necessary structures for strong competition between therapeutic 
substitutes during periods of exclusivity and the development of robust 
generic competition beginning immediately at the end of the exclusivity 
period.

    Ultimately, firms will attempt to optimally respond to any 
incentives governments create--and therefore a well-functioning 
healthcare market requires policies that embrace economic reality 
rather than hope for a preferred outcome. In particular, we must ensure 
that our policy infrastructure matches the existing economic conditions 
created by the more complex and expensive medications we are currently 
developing. Much of the successful infrastructure that we have built 
over time for post-exclusivity competition was designed for the small 
molecule generic market. Small molecule generic products are exact 
bioequivalent copies of approved innovative medicines. As a result, we 
as a society are often more comfortable with competition promoting 
regulations such as automatic substitution that swiftly and effectively 
move almost the entire market to generic products after patent 
expiration. Large molecule (or biologic) products, however, are too 
complicated to create exact copies and therefore ``generic'' 
competitors come to market as ``biosimilars''--a designation that means 
they are not automatically substituted. \12\ This introduces important 
nuance for how we think about competition and entry after patent 
expiration. It also leads to an inherently more complex patenting 
environment that makes questions about entry timing more difficult.
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    \12\  While there is a pathway for biosimilars to be labeled as 
interchangeable, this greatly increases the costs of development and to 
date has been rarely used by new entrants.

    For example, biologic products are more often used to treat a wider 
variety of conditions and indications than many historical small 
molecule products. These broader uses for a product are socially 
valuable and are developed based on meaningful investments by firms in 
clinical trial evidence. As a society we must support the use of 
existing products for as many conditions as is appropriate. However, we 
must also develop and enforce policies that promote competition at the 
indication level which balances incentives for developing new uses for 
existing drugs with the need for time limitations for market power over 
---------------------------------------------------------------------------
a firm's initial innovations.

    Firms should be rewarded for making the investments necessary to 
prove their products would be clinically effective against additional 
indications. However, as a society we must balance these additional 
financial rewards for firms with our desire to support competition in 
the market. Specifically, we must be wary that new indications could be 
exploited to thwart potential entry into the market by new firms 
attempting to market a generic version to treat only the original 
indications. If this were to occur, an innovative firm could capture an 
inappropriately large amount of the economic surplus created by the 
ability of their product to treat the original medical condition (as 
opposed to value created by the new indication).

    To address this concern, one area where we require greater clarity, 
guidance, and potentially legislation is around the ability of new 
entrants to implement a so-called ``skinny label'' strategy. Under such 
a strategy, firms could introduce generic or biosimilar competitors to 
the market for single indications that are not protected by patents or 
FDA exclusivity. However, the new entrant would be prohibited from 
marketing this product for any indications that were still protected by 
a patent. As I discuss below, it is imperative we create a clear and 
appropriate pathway for competitors to enter at the indication level 
even if patents exist for other indications.

    Emerging questions around skinny labels and market entry are 
examples of the inherent complexities created by the more sophisticated 
products and processes involved in modern drug development. These 
complexities also result in a wide array of patents for the same 
product. While many cite the existence of such a large number of 
patents as prima facie evidence of ``gaming'' and anti-competitive 
behavior by firms, the story is actually more complicated. Increasingly 
complex pharmaceutical products likely give rise to a far more 
complicated patenting environment. Given the sophistication of 
production methods and the increasing ability of products to be used 
for a variety of indications, successful products are now surrounded by 
meaningfully large patent estates. There is no question that this makes 
it harder for potential competitors to enter. There is, however, an 
open question as to whether large numbers of patents represent the 
large amount of intellectual property required to develop these types 
of products or a deliberate strategy by firms to deter entry. Of 
course, there is no single broad answer to this question and any policy 
solutions must respect the nuance of intellectual property protection 
and the resulting incentives in this area. That said, I outline several 
policy solutions below intended to both increase the rigor of patent 
review (and therefore the strength of the resulting patents) and better 
regulate the process of generic and biosimilar entry.

    Beyond questions around patents and labeling strategies, it is also 
clear that the lack of bioequivalent ``generic'' products for biologics 
creates difficulties for market entry. In particular, the lack of an 
exact, substitutable copy (an interchangeable biologic) creates some 
hesitancy for physicians to move patients off of existing reference 
products on which the patient is medically stable. This hesitancy 
likely results from the fact that achieving medical stability is often 
a process that can take many months or years of identifying the correct 
medication and dose for the patient. As a result, biosimilar entrants 
are often competing for only a portion of the existing market (either 
patients who are not medically stable or newly diagnosed patients who 
have not yet started a treatment regime). As I discuss below, this 
inability to rapidly access the entire market, combined with features 
of our existing pricing and rebate system can make it difficult (or 
impossible) for biosimilar firms to enter and gain meaningful market 
share. In particular, an existing system where firms often make rebates 
contingent (all or in part) on competitors not being ``on formulary'' 
can meaningfully benefit incumbents at the expense of new market 
entrants. \13\ Such formulary contracts that ``reference a rival 
product'' could dissuade entry and artificially extend the incumbent's 
market position for particular types of biologic products. In the same 
way that rules around generic entry differ for small and large molecule 
products, it may be necessary to create different regulations for how 
formularies are constructed for biologic products.
---------------------------------------------------------------------------
    \13\  It is important to note that the source of such exclusionary 
contracts is unclear. It is quite possible, and even likely, that firms 
are encouraged by PBMs to make an offer that would grant them the 
entire market. This could be optimal for each PBM even if it is not 
optimal for the entire market.

    In addition to concerns about formulary placement, our existing 
system of physician reimbursement for many biologic products creates 
incentives for physicians to continue to use more expensive products. 
This is particularly true under Medicare Part B but also pervades 
portions of the commercial market--where reimbursements often follow 
the structure (but not the absolute level) of Medicare payments. 
Reforms to Medicare Part B reimbursements could both promote entry and 
decrease artificial incentives to increase prices in the private 
---------------------------------------------------------------------------
market--both of which should be policy goals.

    Finally, the difficulties for competitive markets created by more 
complex products are not limited to biologics. While we traditionally 
believe the small molecule generic market works well, this is primarily 
true with the more common large markets with numerous patients 
available to multiple firms. The success of the system supporting 
generic entry is far less clear when the size of the market is small 
and therefore struggles to support multiple competitors. In such cases, 
single firms can acquire all existing rights to market a drug, raise 
prices, and still face little entry because there are insufficient 
incentives for new firms to enter. In this way, the generic market 
would function as if a firm continued to enjoy some form of 
intellectual property protection. While this problem is limited to a 
relatively small number of products today, an increase in ``precision 
medicine'' where even small molecule products can be targeted at very 
small populations means this concern will only grow in prominence over 
time. Therefore, it is important to address these questions today 
before they become a dominant market feature with powerful political 
supporters.

    As you can see, my testimony today focuses on promoting competition 
in pharmaceutical markets--with a particular focus on competition after 
regulatory exclusivity. That said, it is always important to remember 
that the goal of government policy in this area is to balance the 
incentives for innovation with a patient's access to value-creating 
products. Others have proposed more drastic exercises of government 
power in order to simply reduce prices today. This is often driven by 
inappropriate promises that these price decreases will come without 
cost. However, that is not the case. When considering the potential 
patient access benefits of such proposals to artificially reduce 
prices, we must be comprehensive in our analysis and consider both the 
degree of improved access today and the ability of the market to 
continue to provide access in the future to patients who currently lack 
existing treatments.

    I understand it is tempting to cave to the crass political calculus 
that purports to increase access in a visible way today and obscures 
the potential long-term costs of such decisions. After all, once we 
observe the magnitude of those costs most elected officials making 
these decisions will have moved on to other careers. But the goal of 
policy is to carefully weigh those future costs and not believe snake 
oil promises that expropriating value from firms today can cure all of 
our ills with no side effects. In the testimony below I provide more 
details about policies that will balance these various forces to 
ideally enhance health and economic welfare.
      I. The Tradeoff Between Access and Innovation in the Modern 
                         Pharmaceutical Market

    It is not surprising that attention to high healthcare prices has 
focused so heavily on the pharmaceutical sector. \14\ Patented 
prescription drugs are sold for many multiples of the marginal cost of 
production and, as a result, firms appear to simply be profiteering at 
the expense of patients. Complaints that high prices are primarily 
about corporate greed ignore that they are the result of deliberate 
government policies intended to provide the necessary incentives for 
the continued development of innovative products. By granting 
intellectual property protection, governments allow innovative firms to 
earn positive economic profits for a period of time without facing the 
threat of competition that would result from the immediate entry of a 
firm making an identical product. Economic research suggests this 
profit incentive matters and consistently documents that pharmaceutical 
R&D responds to expected market size. Pretending this is not the case 
ignores reality and will only lead to inefficient, value-destroying 
policies.
---------------------------------------------------------------------------
    \14\  In thinking about this attention, we should note that 
pharmaceuticals make up at most 20 percent of healthcare spending.

    While the logic of trading off some amount of access today in order 
to gain access tomorrow is clear, the parameters of the length and 
breadth of this tradeoff are policy decisions for which there is no 
definitive economic answer. These policy parameters reflect the 
relative value society places on lost access today and potential 
welfare gains from future innovation. They also reflect the degree to 
which high prices today may not lead to a correspondingly large 
reduction in access because of the market-expanding features of health 
insurance. \15\
---------------------------------------------------------------------------
    \15\  It should be noted that these high drug costs could impact 
premiums and the ability to buy insurance. Heavily insured markets can 
create an incentive for higher drug prices and could result in 
decreasing welfare in situations where insurance is sold for generic 
and branded products as a bundle.

    Understanding the nature of the tradeoff and determining the 
appropriate policy parameters in the contemporary market requires 
understanding a bit more about the modern pharmaceutical development 
process. New products come to market through the partnership of a 
variety of actors in the value chain. This includes basic science done 
for understanding the nature of disease, early stage pre-clinical 
research to develop a proof of concept, and then an arduous process of 
navigating the regulatory process to prove that a product is ultimately 
safe and efficacious. Each stage of this process represents meaningful 
risk and firms will only undertake each successive step in the 
development process if the expected net returns are sufficiently 
---------------------------------------------------------------------------
attractive compared to the next best use of the invested funds.

   I.A. Basic Science Research and the National Institutes of Health

    Certainly, the development process begins with basic science 
research--a meaningful portion of which is financed by government 
entities such as the National Institutes of Health (NIH) as well a 
variety of other non-profit organizations. This means many expensive 
products on the market rely to some degree on knowledge generated as a 
result of government funding. For example, one study found that all of 
the 210 products approved from 2010-2016 relied to some degree on 
research funded by an NIH grant. \16\ This fact has led many activists 
and policymakers to contend that the NIH is ``responsible'' for 
bringing these products to market and therefore should be required to 
demand price concessions as part of their patenting activity. \17\ Some 
have gone as far as to say that the NIH should exercise its ``march-in 
rights'' and seize the patents of products which are deemed to have 
prices that are too high. \18\. While such policies might lend 
themselves to attractive slogans and sound bites, the reality is far 
more complicated than is often discussed.
---------------------------------------------------------------------------
    \16\  E. Galkina Cleary, J. Beierlein, N. Surjit Khanuja, L. 
McNamee, F. D. Ledley, ``Contribution of NIH funding to new drug 
approvals 2010-2016,'' Procedures of the National Academy of Sciences, 
March 2018, 115(10).
    \17\  L. Zhou, ``The new bipartisan Senate bill aimed at making Big 
Pharma lower drug prices, explained,'' VOX, July 31, 2019.
    \18\  M. Mezher, ``Lawmakers Urge HHS to Exercise 'March-in' Rights 
to Fight Higher Drug Costs,'' RAPS.org, January 11, 2016.

    Understanding the pitfalls of proposals to strengthen the role of 
the NIH in pricing requires thinking more carefully about the 
government's role in drug development in the first place. At a broad 
level, advances in basic science that improve the understanding of how 
diseases work or the mechanisms of action driving the efficacy of 
potential products are relatively hard to successfully protect with our 
existing intellectual property tools. As a result, firms worry they 
will be unable to appropriate the value of investments in developing 
novel advances in basic science. In effect, despite various 
intellectual property protection regimes, investments in basic science 
still suffer from many of the public good-related market failures that 
would plague an entirely unrestricted pharmaceutical market. Firms that 
do not reasonably believe they can profit from investments will not 
make them, and as a result there is a fear that basic science research 
will be under-provided. Given its lack of profit incentives, the NIH is 
ideally situated to solve this public goods problem by stepping into 
the market and funding the basic science that otherwise would not 
---------------------------------------------------------------------------
occur.

    That said, without significant additional investments in drug 
development, this government-funded basic science research would not 
result in treatments that address unmet needs in the market and 
increase economic welfare. In the current market, these additional 
investments are provided by private firms that undertake additional 
research and development to commercialize the NIH-funded basic science. 
The appropriate economic framework for understanding these government 
investments in basic science is one where this research is a complement 
to rather than a substitute for research funded by private risk 
capital. When you consider government funding as a complement to 
private research, it becomes clear that our goal should be to attract 
as many private firms as possible to leverage these NIH investments in 
basic science. This would provide the most ``bang for the buck'' for 
our government dollars. Currently, this is accomplished by placing 
relatively few constraints on partnerships between the NIH and private 
firms. Given the benefits to society from moving basic science from the 
bench to the bedside--this policy of few constraints should remain.
       I.B. The Decentralization of Early Stage Drug Development
    Proponents of strict price regulation point to the fact that the 
savings from such efforts could be redirected back to the NIH and 
offset any expected decline in innovation. This belief, however, 
ignores the current assets and activities of the NIH--which is to 
evaluate and fund basic science and not undertake drug development and 
commercialization activities. While there are a small number of 
examples of the NIH taking part in more advanced stages of drug 
development, these are certainly the exception rather than the rule--as 
would be expected given the purpose of the NIH is to solve the public 
goods problem for basic science research. To move into a primary drug 
development role, the NIH would need to transform into something that 
more closely resembles a private firm. It is not simply a question of 
providing more funding for the NIH's current system, but transforming 
in many ways the purpose and activities of the current NIH.

    While it is possible the NIH could complete this transformation, 
this would mean it is no longer primarily solving the public goods 
problem of basic science and instead would attempt to determine which 
potential opportunities to commercialize this science should come to 
market. This effectively involves introducing more central planning to 
the development of new products where a single firm is undertaking both 
basic science and drug development activities. In considering the 
wisdom of such a strategic shift, we should consider that it would run 
counter to the recent decisions of the major players in the private 
market. In recent years, large pharmaceutical firms are decreasing the 
degree to which they singularly dictate the path of research through 
internally funded R&D programs. Instead, the world of biotech drug 
development involves large numbers of small startups that are 
increasingly funded by venture capital firms. The most promising and 
successful of these firms are generally acquired by the larger market 
participants that then guide the product through the FDA approval 
process and handle the post approval sales and marketing strategies.

    The fact that so much early stage innovation is done by small 
private firms that do not ultimately commercialize the product has led 
many to claim that regulators have the freedom to decrease prices 
without harming innovation. After all, since the firms currently 
selling the product didn't actually undertake the costly investments in 
early stage R&D, those early innovative activities are not driven by 
the eventual profits of these more established firms. This couldn't be 
further from the truth. The ultimate goal of the providers of private 
risk capital for early stage firms (e.g. venture capital investors) is 
a profitable ``exit'' for their funds. This traditionally happens in 
the form of an acquisition, though increasingly we are also seeing 
early stage biotechnology firms going public through an initial public 
offering (although this trend has reversed in recent years given 
existing market conditions). The financial terms of these eventual 
exits are dictated by the potential revenues of the product in the 
market and thus would be affected by regulated prices that decrease 
average returns.

    In this way, the access and innovation tradeoff is perhaps even 
greater in the modern world of venture capital backed early stage drug 
development. This private funding is inherently mercenary in nature and 
in search of the highest returns. If potential returns from biotech 
investments fall, investors will simply redirect their funds from the 
pharmaceutical sector toward the next best option. \19\ In this way, 
policies which decrease the potential profits will lower investments in 
early stage investments and the resulting increase in profits. While we 
might think that the NIH could step into the role of venture capital 
firms and provide funding to early stage biotech firms, there is little 
evidence they would be effective at this role. At a minimum, we must 
acknowledge that it is a vastly different enterprise than they are 
currently engaged in and therefore requires more than simply additional 
funding for their current activities.
---------------------------------------------------------------------------
    \19\  While it is true that there are a number of venture capital 
firms that focus entirely on the biopharmaceutical sector, they are 
primarily investing other people's funds and those investors are 
targeting areas of the economy that provide the greatest returns.

    Again, we may find it optimal to limit the flow of innovation in 
exchange for greater access to the smaller number of products. However, 
this must be a reasoned calculation and not one based on the false 
belief that the efforts of even a better-funded NIH or the better 
angels of a scientist's nature will somehow fill the void vacated by 
the venture capitalists. This reasoned choice must consider the overall 
value created by innovation over the long term compared to the 
relatively short period of exclusivity where access is diminished 
because of high prices but is certainly not reduced to zero.
II. The Role of Government in Limiting Welfare Losses During Period of 
                           Market Exclusivity
    For the reasons discussed above, determining the parameters of the 
access and innovation tradeoff is difficult. That said, there is 
clearly a role for the government in attempting to limit (to the extent 
possible) the loss of welfare that occurs during periods of market 
exclusivity. This can be done both by ensuring the existence of robust 
competition among therapeutic substitutes and supporting the operation 
of well-functioning insurance markets. There are four areas where the 
government could do more in these areas: (1) promoting competition at 
the indication level when products can treat multiple conditions; (2) 
supporting a robust system for evaluating patents; (3) creating a 
modern infrastructure for regulating competition between biosimilars 
and reference products; and (4) developing strong incentives for price 
competition between products in government insurance programs.
   II.A. Promoting Competition at the Indication Level when Multiple 
                        Indications are Present
    When products are able to treat multiple conditions the time period 
for the market entry of competing generic or biosimilar products can 
become muddled. Innovative products often contain various types of 
patents and exclusivity related to the underlying molecule, its 
production, and its method of use. Even in the situation where all of 
these are valid, it can be difficult for firms to navigate this large 
set of patents (a concern that I also discuss in the following 
section).

    We want to provide the incentives for firms to find multiple uses 
for existing products. After all, society has already invested 
meaningful resources to show that such products are safe and provide 
efficacy in at least one condition. This includes both clinical trial 
evidence but also valuable real world evidence about safety from 
patient populations that are often much larger than those in the 
original trials.

    That said, we also do not want these additional indications to 
shield firms from appropriate generic competition for the original uses 
of these drugs. For this reason, existing regulations allow generic 
firms to enter with a ``skinny label'' that only allows them to market 
the product for indications that no longer have patent protection or 
other forms of exclusivity. However, existing regulations also require 
that the label for a generic product matches the existing reference 
product's label. Recently, a Federal court ruled that certain 
information that is required to be on the label could be viewed as an 
inducement to infringe on the reference products method of use patents. 
\20\
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    \20\  https://www.supremecourt.gov/DocketPDF/22/22-37/222237/
20220429174452402-Scanned%20Application.pdf.

    This ruling creates an untenable tension in current law where we 
want generic firms to enter with a skinny label, but existing 
regulatory requirements could apparently require such firms to include 
information on their label that would result in them infringing on some 
of the patents held by the manufacturers of the reference products. 
Regardless of future court decisions in this area, it is imperative 
that Congress consider future legislation that offers a clear path to 
market for generic firms at the indication level.
              II.B. Negotiations Over Patent Infringement
    Market exclusivity is governed by a variety of governmental 
institutions. Central to this system are the intellectual property 
protections provided by patents. Patents offer protection for firms 
developing novel products. During the time period of patent protection, 
firms are safe from competition arising from a new entrant selling an 
exact copy of their innovative product. After patents expire, the 
intention is for other firms to swiftly enter the market and sell 
copies of the patented product, with the resulting competition lowering 
prices and increasing access.

    Obviously, there is a clear role for government involvement in this 
area. After all, the initial granting of patents and other forms of 
intellectual property protection is solely a government action. 
Governments also regulate the challenges to such patents and the 
process by which competitors enter the market as exclusivity expires.

    Potential entrants observe the rules created by governments and 
weigh the potential costs and benefits of attempting to enter into 
competition with a branded product. Increasingly, this includes 
navigating a myriad of patents related to the underlying pharmaceutical 
product, the various uses of the product, and its production process. 
Given the requirement that patents be narrow and specific to a 
particular invention, modern complex products are often covered by a 
wide range of patents. Critics claim this large number of patents 
reflects an attempt by innovative firms to create a ``patent thicket'' 
that raises the costs of entry. These critics believe that rather than 
reflecting intellectual property, the large number of patents is solely 
intended to create a costly entry barrier that decreases the number of 
potential entrants and extends the length of market exclusivity. Given 
this concern, some critics have gone as far as to suggest that each 
branded product should be limited to a single patent. \21\
---------------------------------------------------------------------------
    \21\  R. Feldman, ``One-and-done' for new drugs could cut patent 
thickets and boost generic competition,'' STAT News, Feb 11, 2019.

    While it is surely true that some firms engage in such a 
``thicketing'' strategy to deter entry, the mere existence of even a 
very large number of patents is not, on its own, evidence of a 
nefarious strategy. As the complexity of the production process 
increases, it is reasonable to assume that these processes will also 
involve the creation of important and necessary intellectual property. 
All else held equal, this would result in a greater number of patents 
---------------------------------------------------------------------------
per product.

    Beyond the complexity of production, pharmaceutical products are 
increasingly used to treat multiple conditions. Discovering potential 
new uses for these existing drugs requires additional expenditures on 
scientific discovery and clinical trials. The incentives to invest in 
those activities stems from the ability to appropriate some of the 
value created. Given there are great benefits to society from firms 
developing new uses for existing products, we should encourage firms to 
investigate whether products which have already been determined to be 
safe could be used for additional indications. A system that limits the 
number of patents that can exist for a product would diminish the 
financial incentives for firms to invest resources to determine these 
new uses.

    That said, the existence of large numbers of patents creates a more 
difficult path for generic and biosimilar entry. The heart of this 
concern, however, should not be about the number of patents pertaining 
to a particular product but instead about the underlying validity of 
those patents. Ultimately, this is a question about the efficacy and 
rigor of the patent approval process undertaken by the Patent and 
Trademark Office (PTO). If the PTO is granting a large number of 
relatively weak patents to firms that are deterring entry, this is 
something that should be addressed directly. It could be that this is 
the result of the growth in demand for patents on potential new 
innovations outstripping the resources available to the PTO. Academic 
research has shown that resource constraints affect the accuracy of 
patent examiners, with more time-constrained examiners issuing patents 
that were more likely to be later invalidated. \22\ Rather than making 
sweeping rules about the number of patents, policymakers should more 
directly examine increased resources in an efficiently run PTO.
---------------------------------------------------------------------------
    \22\  Frakes MD, Wasserman MF. Investing in Ex Ante Regulation: 
Evidence from Pharmaceutical Patent Examination. National Bureau of 
Economic Research; 2020.

    One potential model to provide greater resources for the PTO is a 
process similar to the Prescription Drug User Fee Act (PDUFA) which 
provides vital additional resources to the FDA that flex with the level 
of regulatory demand. It is possible that pharmaceutical patents could 
be assessed additional fees that could be used to increase resources in 
---------------------------------------------------------------------------
this area.

    The large number of patents creates a further concern about 
negotiations between branded firms and potential entrants about the 
timing and manner of entry. Under our existing system, an economically 
meaningful fraction of generic entrants come to the market by 
challenging some of the underlying patents of the branded product. 
Given the potential cost and complexity of these lawsuits, these firms 
often settle on a negotiated date of entry. These negotiated dates are 
invariably before the formal end of every related patent but after the 
date indicated by the earliest patent affecting the product in 
question. There are valid concerns that such negotiations are a ruse to 
extend the exclusivity period for branded firms. Effectively, the 
concern is that the brand and potential entrant are colluding to split 
the surplus resulting from the lack of competition. Such concerns are 
correctly heightened when branded firms transfer something of value to 
the potential entrant. While the oft-discussed Actavis decision stops 
firms from transferring money in exchange for delayed entry, that has 
not eliminated concerns that settlements detailing entry could be a 
source of concern.

    That said, such settlements are an expected result of a system 
where we rely on potential entrants to use ``Paragraph IV'' challenges 
to effectively police the validity of patents granted by the PTO. 
Litigation is costly, uncertain, and distracting to the main business 
activities of firms. For this reason, firms in all markets often 
attempt to settle lawsuits out of court rather than taking them to 
trial. Rather than attempt to cast all settlements as attempts to 
manipulate the market, I would encourage policymakers to revisit the 
policies that govern such challenges. Over time, Paragraph IV 
challenges under Hatch-Waxman have become a very common feature of the 
entry of new products. Even unmeritorious challenges are expensive for 
the system. It is possible that various features of the market, 
including but not limited to the 180 day exclusivity for the first-to-
file generic firm and the 30 month stay for patent challenges, may be 
an inefficient means of policing and operating an intellectual property 
protection system.

    One potential avenue to consider is the Reforming Evergreening and 
Manipulation that Extends Drug Years (REMEDY) Act of 2019. This 
proposed act would eliminate the 30-month delay for generic entry that 
is automatically triggered when a patent is challenged. Importantly, 
this would only apply to patents that are not the main product patent. 
Without the automatic 30 day stay, a generic firm would be free to 
enter ``at risk,'' i.e. if they are later found to be infringing on a 
valid patent they would owe damages to the patent holder. The economic 
incentives here would result in firms only entering when they believe 
that the patent is truly weak, i.e. firms would be unlikely to enter at 
risk against strong patents because they would be afraid of having to 
pay damages. In that way this would eliminate the protections for weak 
patents that are currently created by automatic 30 month stay.

                 II.C. Biosimilar Adoption and Rebates

    While rebates serve a vital function in drug price negotiations, 
there are also situations where the structure of the rebate contract 
can potentially create a barrier to entry for new competing products. 
For example, rebate contracts sometimes reference rival products, 
particularly with respect to a rival's placement on the formulary. 
Depending on the economic context, such rival-referencing contracts 
could be either anti-competitive or pro-competitive. For example, a 
manufacturer may offer larger rebates if its product is the only one in 
a therapeutic area on the preferred tiers of the formulary. If there 
are many potential products that are competitors for the entire market, 
such a contract could be efficient. In fact, these types of contracts 
are at the heart of the PBM strategy. In describing his strategy, the 
Chief Medical Officer of Express Scripts said, ``So we went to the 
companies, and we told them, we're going to be pitting you all against 
each other. Who is going to give use the best price? If you give us the 
best price, we will move the market share to you. We will move it 
effectively. We'll exclude the other products.'' \23\ Since 2012, there 
has been marked growth in the use of these exclusion lists.
---------------------------------------------------------------------------
    \23\  Wehrwein, Peter. 2015. ``A Conversation with Steve Miller, 
MD: Come in and Talk With Us, Pharma.'' Managed Care. April 5.

    In situations where manufacturers are competing for access to the 
PBM's entire patient population, these types of contracts can be pro-
competitive, leading to large discounts and increased welfare. However, 
for some types of products, large portions of the market are not truly 
contestable, i.e., the PBM will not be able to effectively move a 
fraction of the patients to the low-price product. For example, 
patients who are currently using a biologic product may be unlikely to 
be willing to switch to a competing biosimilar at almost any price. In 
addition, PBMs might find that payers would not be happy with 
strategies that forced their patients to move across biologic products 
in this manner. \24\
---------------------------------------------------------------------------
    \24\  Plan sponsors are not simply looking for the lowest cost 
plan, but instead the plan that best balances costs and benefits for 
their customers or employees.

    In a situation where a new entrant cannot effectively compete 
rapidly for a large fraction of patients, a rebate contract for the 
incumbent product that is contingent on the absence of the rival 
entrant on the formulary can serve as an almost impenetrable barrier to 
entry. This situation is sometimes referred to as a rebate ``wall'' or 
``trap.'' Effectively, the new entrant finds that it cannot offer the 
PBM a large enough rebate on its products (which represent a relatively 
small share of sales) to overcome the lost rebate dollars from the 
incumbent (which represents a majority of the market). In such a 
situation, the new entrant would find it quite hard to ever gain 
meaningful market share. Perhaps more concerning, realizing the 
existence of these rival-referencing contracts, potential biosimilar 
manufacturers may never choose to attempt to create products in the 
first place. Concerns about the use of rebates in this manner have been 
raised by many individuals, including FDA Chairman Scott Gottleib and 
the CEO of Novartis Vas Narasimhan. \25\, \26\ They are also the 
subject of antitrust litigation between reference products and 
biosimilar firms, which is winding its way through the court system and 
should provide additional guidance about the legality of these 
---------------------------------------------------------------------------
practices. \27\, \28\

    \25\  Liu, Yanchun. 2018. ``FDA chief says pharmas use rebates to 
block biosimilar competition.'' MarketWatch. July 19.
    \26\  Narasimhan, Vas. 2018. ``Novartis CEO: How To Create Cheaper 
Alternatives To The Most Expensive Drugs.'' Forbes. April 12.
    \27\  Biosimilars Council. 2018. ``Brief Of The Biosimilars Council 
As Amicus Curiae In Opposition To Defendants' Motion To Dismiss.'' 
Civil Action No. 2:17-cv-04180-JCJ. United States District Court For 
The Eastern District Of Pennsylvania, January 26. Accessed March 4, 
2019. https://www.accessiblemeds.org/sites/default/files/2018-01/AAM-
Amicus-Brief-Pfizer-vs-J%26J-1-26-18.pdf.
    \28\  United States District Court for the Eastern District of 
Pennsylvania. 2017. ``Complaint, Case 2:17-cv-04180-JCJ.'' September 
20. Accessed March 4, 2019. https://www.courtlistener.com/recap/
gov.uscourts.paed.534730.1.0.pdf.

    Given the potential for the rebates contingent on rival products to 
block potential entrants, regulators should consider more careful 
oversight and monitoring of rebate contracts that reference rivals. In 
situations where a large portion of the market is not contestable by 
the new entrant--for example, in the case of the first biosimilar 
entering against a reference product--it may be advisable for 
regulators to create additional restrictions on the ability of rebate 
contracts to reference the position of rival products on the formulary. 
In particular it may be necessary to consider separate rules or tests 
for contracts and rebates based on whether patients are treatment-niave 
or medically stable on a particular biologic product or biologic 
---------------------------------------------------------------------------
products.

    In considering why government intervention may be necessary to 
address these contract structures, it is important to note that even if 
exclusive contracts limit entry and raise market wide prices, each PBM 
may have an incentive to demand a bid from a manufacturer for exclusive 
formulary placement. This could maximize the rebate for the PBM and 
allow for a more competitive PBM and/or health insurance product. Any 
individual PBM would benefit from such a contract and may not be able 
to influence the individual entry decision for any particular product. 
This could result in a ``tragedy of the commons'' problem that might be 
best solved by government action.

   II.D. Creating Stronger Incentives for Negotiation in Government 
                                Programs

    Supporting a competitive market for prescription drugs is made even 
more complicated by the heavy role of government in the procurement of 
healthcare for vulnerable populations such as the indigent, elderly, 
and disabled. Given the fact that healthcare is a unique product for 
which society places particular value on an individual's ability to 
access services regardless of their ability to pay, the U.S. has 
developed a series of social insurance and transfer programs to help 
vulnerable populations access care. Over time these programs have 
grown, and public spending now accounts for just over half of all 
healthcare spending in the United States--a fact that makes healthcare 
markets distinct from the rest of the economy.

    Given the economically meaningful role of the public sector in the 
healthcare market, the ability to maintain a competitive market 
inherently relies, at least in part, on government policies and 
regulations. Ultimately, healthcare is our Nation's most meaningful 
public-private partnership. This has become even more apparent as the 
United States increasingly relies on private firms for the provision of 
publicly funded social insurance benefits. This includes the Medicare 
Advantage program, Medicaid Managed Care, and the Affordable Care Act--
which I've previously noted is perhaps the most conservative, market-
based approach to the provision of health insurance for such a large 
number of low-income individuals. \29\ Private firms are being used to 
provide these services because, at their core, they have the strong 
incentive to respond to consumer demand in a quest to maximize profits. 
These incentives allocate resources in ways that increase welfare. It 
is unlikely that a government entity could achieve a similar result, 
and therefore optimal healthcare policy harnesses market forces while 
maintaining no illusions about the motivations of the firms it employs 
to efficiently provide goods and services.

    \29\  Garthwaite, Craig. 2017. ``Why replacing Obamacare is so 
hard: It's fundamentally conservative.'' The Washington Post. July 10.

    However, successfully managing these public-private partnerships 
requires establishing rules that enhance rather than inhibit 
competition. While the existing Medicare Part D program involves a 
large amount of price negotiation, there are still many drugs paid for 
by Medicare that effectively involve no direct price negotiation by a 
payer and instead attempt indirectly benefit from private market 
negotiations. These drugs are administered by providers and covered 
under the Medicare Part B benefit. Rather than use private firms to 
directly negotiate prices for these products, Medicare operates under a 
``buy and bill'' system. Physicians purchase these drugs and then are 
reimbursed a fixed percentage above the average sales price (ASP) of 
the product--a price measure intended to account for rebates paid by 
manufacturers to payers. The purpose of this reimbursement system is to 
provide doctors with simplicity and predictability of reimbursement. 
These attractive features, however, come at a meaningful cost for the 
entire system, as the Part B procurement rules increase prices for the 
public and private markets while also shifting share at the margin to 
---------------------------------------------------------------------------
more expensive treatment options.

    In order to understand the widespread effects of Part B, consider 
the motivations of a pharmaceutical manufacturer negotiating with PBMs 
and payers to determine its optimal price. Given that these firms are 
attempting to maximize profits, they set prices that are expected to 
earn the greatest profits. Once those profit-maximizing prices are set, 
higher prices will, by definition, decrease the firm's total profits. 
This occurs because the increased margin will not make up for the lost 
quantity (and related profits) that comes from a greater use of prior 
authorization, step therapy, increased cost sharing, or other 
utilization management tools.

    By linking public and private prices, the Part B purchasing rule 
distorts the optimal pricing decision in the private market. Firms are 
willing to increase private prices, and suffer declining profits in the 
private market, because they know they can make up those lost profits 
and more from the public market. In addition, because they know that 
physicians earn more money from administering a higher-priced drug, 
they have an additional incentive related to Part B for raising prices.

    The combination of these factors means that the Part B procurement 
rules create the incentives for firms to offer fewer discounts in the 
private market, resulting in a higher ASP and greater profits from the 
public market. As a result, the current Part B rules for purchasing 
physician-administered drugs result in higher prices in both the public 
and the private markets. These incentives increase with Medicare's 
market share in each drug--a larger Medicare market means the 
potentially higher reimbursement from the public payers is more 
important for determining profits than the lost sales in the private 
market. Given the age and disease profile of Part B enrollees, there 
are a large number of high-cost drugs for which Medicare has a 
meaningfully large market.

    As we look for policy solutions to address the lack of competition 
created by the Part B reimbursement rules, we must confront two areas 
of concern. Part B can cause higher prices both because physicians have 
an incentive to prescribe higher priced drugs (because they earn more 
for administering such products) and because manufacturers have an 
incentive to raise private prices to influence the public market. In 
attempting to address physician incentives, we must be careful not to 
create perverse incentives to inappropriately prescribe lower-cost 
drugs. We also must be careful about creating a situation where it is 
no longer economically viable for physicians to practice in particular 
areas or in particular organizational forms. For example, attempts to 
reform the Part B procurement rules that switch to simply paying 
physicians a flat fee for each administered drug ignore the fact that 
physicians can face meaningful inventory costs for stocking and 
maintaining a large volume of high-cost drugs. Many of these costs are 
likely a function of the acquisition cost of the product. These costs 
could be particularly acute for small practices, which may lack 
sufficient liquidity to maintain sufficient stock of medications and 
may make prescription choices to limit these costs. At the extreme, 
this could push further consolidation of the provider market.

    Congress should consider policies that adopt a vendor model for the 
distribution of physician-administered drugs that would transform that 
market from the existing ``buy and bill'' system to one where 
physicians have little financial incentive to prescribe particular 
medications. The details of such a fundamental shift in the market are 
important and must be worked out. In doing so, Congress should 
investigate why previous attempts to establish a similar model under 
the Competitive Acquisition Program (CAP) did not successfully attract 
vendors and providers. Certainly, part of this failure results from the 
fact that many providers are currently dependent on the revenues they 
earn from the buy-and-bill system. Thus, any successful reform must 
figure out a way to attract those physicians and other providers into 
the system. In addition, such a program would need to be sufficiently 
attractive to vendors to attract entrants to the market. This would 
likely require empowering vendors with the ability to walk away from 
particular drugs in order to secure greater discounts. This may limit 
the access of Medicare patients to some products, but we must be honest 
and adamant that some degree of reduced access is a necessary part of 
any true price negotiation process.

    While there are many details to work out in this area, I would 
strongly encourage policymakers to follow the policy lead of Part D and 
find ways to utilize private-sector vendors to negotiate lower prices 
for Part B, rather than accepting this portion of Medicare as being a 
price taker. Failing to do so will continue to perpetuate a policy that 
increases spending across the system.

   III. The Role of Government in Supporting a Robust Small Molecule 
                             Generic Market

    As discussed above, the access-innovation tradeoff involves 
granting firms a time-limited period of market exclusivity. At the 
conclusion of this period, it is in the best interest of society for 
products to be sold in a robust and competitive market. Our existing 
system of follow-on competition has largely worked well since the 
passage of the Hatch-Waxman Act in 1984. However, the complexity of the 
modern drug market has created a new set of challenges for this 
previously well-functioning process.

    Markets for generic small molecule products are intended to have 
fierce price competition facilitated by the automatic substitution of 
prescriptions toward less-expensive generic products. In a well-
functioning generic market, firms compete primarily on price and 
therefore profits are determined by a firm's ability to manufacture 
products at the lowest marginal cost. This fierce price competition 
means that successful entrants must be able to produce enough to reach 
the minimum efficient scale (MES) of their production process. Absent 
sufficient quantity, entrants realize they will find themselves at a 
perpetual cost disadvantage to incumbent firms and therefore will 
rationally decline to enter the market. For sufficiently small markets, 
there is only enough demand for a single manufacturer to reach MES--and 
the incumbent firm is a natural monopolist that maintains meaningful 
pricing power.

    In recent years, several firms appear to have recognized the 
pricing power available to ANDA holders for generic products with 
sufficiently small potential markets. This was perhaps best personified 
by the pricing strategies of Turing Pharmaceuticals, but aspects of 
this strategy have been implemented by other firms and thoroughly 
documented in several media outlets. \30\ The ability for these firms 
to charge monopoly prices for generic products is not the result of the 
above-discussed tradeoff between access today and innovation tomorrow - 
society has long since paid for the innovation from any of these 
products. Instead, the high prices represent firms taking advantage of 
a market failure created by the small patient population. While large 
pharmaceutical firms were historically either unwilling to exploit this 
pricing power or unaware of this financial strategy, the practice of 
firms charging high prices without fear of entry in small generic 
markets is now widespread throughout the industry (albeit the strategy 
is typically employed by smaller firms with fewer invested assets in 
the industry). If Congress hopes that for-profit firms will simply 
avoid this pricing strategy going forward, they will be sorely 
mistaken. Instead, solutions to market failures for small-market 
generics will need to come either from firms being harmed by this 
practice or through government action.
---------------------------------------------------------------------------
    \30\  Hopkins, Jared S., and Andrew Martin. 2018. ``These New 
Pharma Bros Are Wreaking Havoc on Prescription Drug Prices.'' 
Bloomberg. April 6. Pollack, Andrew. 2015. ``Drug Goes From $13.50 a 
Tablet to $750, Overnight.'' The New York Times. September 20. Rockoff, 
Jonathan D., and Ed Silverman. 2015. ``Pharmaceutical Companies Buy 
Rivals' Drugs, Then Jack Up the Prices.'' The Wall Street Journal. 
April 26.

    For some of these products, private firms are stepping forward with 
market-based solutions. Specifically, a consortium of hospitals led by 
Intermountain Healthcare has created CivicaRx--a joint venture designed 
to address the high prices charged for many generics that are 
administered in a hospital setting. \31\ For products administered in 
the inpatient hospital setting, providers are unable to pass the 
increased costs along to patients or payers and have therefore decided 
to vertically integrate and manufacture the products themselves.
---------------------------------------------------------------------------
    \31\  Abelson, Reed, and Katie Thomas. 2018. ``Fed Up With Drug 
Companies, Hospitals Decide to Start Their Own.'' The New York Times. 
January 18.

    While vertical integration in this setting is an efficient response 
by hospitals in response to a market failure in their supplier market, 
CivicaRx will likely not find it valuable to undertake the 
manufacturing of products that are sold directly to patients through 
retail or specialty pharmacies or administered in an outpatient 
setting. Those products do not impact the financial health of the 
hospitals involved in the joint venture. Therefore, solutions for these 
other products must come from new government policies that either 
reduce the number of natural monopoly markets or use economic tools to 
---------------------------------------------------------------------------
more directly intervene in the natural monopoly markets that remain.

    If high fixed entry costs make it difficult for multiple firms to 
profitably produce small-market generics, one potential policy solution 
is to lower these fixed costs. This would decrease the quantity 
required for a new entrant to reach MES and compete with the incumbent 
manufacturer. In recent years, the FDA has been focused on programs to 
accomplish this goal. For example, there have been efforts to 
streamline and harmonize the generic application process across 
developed countries. \32\ There have also been attempts to increase the 
speed and efficiency of the ANDA process, which would decrease barriers 
to entry and potentially increase the number of markets that could 
support multiple firms. \33\
---------------------------------------------------------------------------
    \32\  Gottlieb, Scott. 2018. ``Advancing Toward the Goal of Global 
Approval for Generic Drugs: FDA Proposes Critical First Steps to 
Harmonize the Global Scientific and Technical Standards for Generic 
Drugs.'' FDA. October 18.
    \33\  Elvidge, Suzanne. 2018. ``FDA sets another record in 2018 for 
generic drug approvals.'' BioPharma Dive. October 12.

    I would encourage the FDA to continue to evaluate the approval 
process to look for additional efficiencies that would decrease entry 
costs. However, even the most efficient process for entering a generic 
market will require some expenditures to demonstrate the safety and 
bioequivalence of the product--and this will always represent a 
meaningful fixed-cost investment. Therefore, another potential solution 
to promote entry is to attempt to increase the size of some generic 
markets. While this can't be accomplished within any geographic 
boundary (i.e., we are unlikely to uncover more patients with these 
types of conditions), I would encourage Congress and regulators to 
consider a broader system of importation across developed countries 
with similar safety and regulatory systems (i.e., the countries the FDA 
is currently empowered to turn to in the case of drug shortages). 
Aggregating demand across these markets would increase total quantity 
and the number of products that could successfully be produced by 
multiple manufacturers. Some have argued the FDA could implement this 
strategy today by considering generic products with large price hikes 
to be a situation of shortage. \34\ However, it is likely that 
congressional investigation and debate are needed before we implement 
such an important change to the sourcing of generic medications.
---------------------------------------------------------------------------
    \34\  Greene, Jeremy A., Gerard Anderson, and Joshua M. Sharfstein. 
2016. ``Role of the FDA in Affordability of Off-Patent 
Pharmaceuticals.'' JAMA 315 (5): 461-462. doi:10.1001/jama.2015.18720.

    Even after efforts to decrease costs and increase market sizes, 
there likely will remain some markets that still cannot support 
multiple firms. In this case, further regulations are likely necessary 
to reach an efficient outcome. Senator Elizabeth Warren has previously 
proposed that the government step in to manufacture generic drugs when 
products have small market sizes and large drug price increases. \35\ I 
understand and appreciate the motivation for Senator Warren's proposal 
and think that it is a potentially viable policy option for addressing 
this particular market failure, i.e., the lack of competition in 
markets for generic products without sufficient size to support 
multiple firms.
---------------------------------------------------------------------------
    \35\  Warren, Elizabeth. 2018. ``It's time to let the government 
manufacture generic drugs.'' The Washington Post. December 17.

    However, I fear that a government entity will likely fail at being 
an efficient producer of these products--after all, this is not an 
enterprise in which they specialize. As a result, the marginal costs of 
a government producer would likely be higher than for a private firm 
with experience in drug production. Before the government undertakes 
such a new and complicated economic activity, I would propose a 
private-sector solution in which Congress empowers the FDA to provide a 
new form of market exclusivity for generic products with market sizes 
---------------------------------------------------------------------------
that do not support multiple competitors.

    The exact specifics of such an exclusivity would need to be worked 
out, but a first step would be for Congress to ask the FTC to examine 
how many potential patients are necessary for a market to support 
multiple generic firms. While most generic prescriptions are likely for 
molecules that can support multiple competitors, there are potentially 
a large number of molecules with small patient populations that can't 
support multiple manufacturers. For example, there has been an increase 
in the number of exits by ANDA holders in recent years, with many firms 
citing a lack of profitability. The median generic market currently has 
only two manufacturers, and approximately 40 percent have a single 
manufacturer--which likely is the result of limited market potential 
for these molecules. \36\ That said, the current number of firms 
participating in the market in equilibrium does not provide sufficient 
information to understand whether the market could ultimately support 
multiple firms. After all, it is the threat of entry and not actual 
entry that disciplines profits. Inferring the number of firms that a 
particular generic market could support based on the number of current 
firms could be particularly problematic given the ongoing allegation of 
collusion in this market. \37\ Therefore, it is important for 
economists at the FTC to determine the exact market size and structure 
that would indicate that the market for the generic product is a 
natural monopoly where the incumbent firms possesses significant 
pricing power. Ideally this investigation would incorporate the 
potential market-expanding policies of decreasing entry costs and 
potentially increasing the market size to include some limited foreign 
markets.

    \36\  Berndt, Ernst R., Rena M. Conti, and Stephen J. Murphy. 2017. 
``The Landscape of U.S. Generic Prescription Drug Markets, 2004-2016.'' 
NBER Working Paper No. 23640.

    \37\  Silverman, Ed. 2019. ``Here's how prosecutors say generic 
drug makers schemed to fix prices.'' STAT. February 19.

    After establishing the market characteristics likely to lead to 
natural monopolies, I would propose the FDA be required to undertake a 
request for proposal (RFP) process for those markets. Under this RFP 
process, any private firm could apply for the rights to be the 
exclusive manufacturer of a natural monopoly generic medicine at a 
certain fixed percentage above manufacturing costs. As part of this RFP 
process, firms would compete on the amount of margin they would require 
to serve the market. The winning firm would possess the exclusive 
rights to sell the drug at this regulated price for a time period 
sufficient to recover the fixed costs of entry. At that time, the FDA 
would have the option of re-auctioning off the market exclusivity. In 
order to ensure the efficient operation of this process, it may also be 
necessary for the FDA to set a maximum percentage that they will accept 
before they will turn to a non-profit or government supplier for the 
product. This will limit any ability of firms to collude to divide up 
---------------------------------------------------------------------------
the markets they choose to enter.

    I would encourage Congress to immediately investigate solutions in 
the area of small-market generics, as this problem will only grow in 
importance. Recent scientific advances have allowed for an increasing 
personalization of medicine. Along with co-authors, I have documented 
the rising share of clinical trials involving a patient-specific 
biomarker to determine either efficacy or safety. \38\ Almost by 
definition, personalized medicine will involve products with limited 
patient populations, and for many of these products we should be 
worried about whether robust generic or biosimilar competition will 
ever emerge. \39\ Therefore, while the problem of small-market generics 
is not a dominant feature of today's market, it will only grow in 
importance. It will likely be far easier to address the problem now 
than it will be when the number of powerful interests manufacturing 
such products increases.
---------------------------------------------------------------------------
    \38\  Chandra, Amitabh, Craig Garthwaite, and Ariel Dora Stern. 
2018. ``Characterizing the Drug Development Pipeline for Precision 
Medicines.'' NBER Working Paper No. 24026.
    \39\  The problem of competition for precision medicine will be 
further complicated in situations where the patented product is a 
biologic product.

                                 ______
                                 
    The Chair. Thank you very much. Let me begin by asking Dr. 
Morten and Dr. Sarpatwari their assessment of Mr. Bancel's 
remarks. Dr. Morten.

    Dr. Morten. Thank you, Senator. There is a lot in Mr. 
Bancel's remarks. I might start with his claim that the U.S. 
Government has already been repaid somehow by Moderna for its 
contributions to the NIH Moderna vaccine.

    I think I heard Mr. Bancel say that we have already 
received something like $2.9 billion in benefit from the 
company. He describes it as a discount that was granted to the 
American public back in 2020 and 2021 when we were purchasing 
hundreds of millions of doses. This is revisionist history.

    This is sort of a new telling that Moderna has come up 
with, I think since this Committee called this hearing. At the 
time that we cut these deals, these were negotiated prices 
between a buyer and a seller.

    Moderna sold its doses for about $20 a dose similar to what 
Pfizer sold its doses for similar to what Moderna sold its own 
product for overseas. And so, to view it as a discount I think 
is artificial and very much post-hoc----

    The Chair. Thank you. Let me go to Dr. Sarpatwari. Mic----

    Dr. Sarpatwari. Thank you. I would also like to touch upon 
the issue of the discount. I don't believe it was a discount in 
return for the Government's contribution to drug development.

    Moderna was a smaller company. It was a company in which if 
invested in, then there was more risk. The actual guarantee 
that Moderna got was a guaranteed purchase, even if the product 
was unapproved. That differs from other purchases under 
Operation Warp Speed.

    Mr. Bancel has at times attempted to justify the price 
increase on the grounds of increased costs. It seems to me a 
little bit improbable that 100-fold increase cost would be 
there with distribution systems that already exist.

    But that is not really what irks me so much. What irks me 
is that at times he justifies it on the basis of cost. At times 
he justifies it on the basis of value. He can't have his cake 
and eat it, too. I think that what we are seeing here is the 
privatization of gain and the socialization of risk, which is 
not a sustainable way to operate.

    The Chair. I want to ask both of you, pick up on a point 
that Dr. Garthwaite and many others have made. In the world 
right now and in our Country, there are people who are 
suffering and dying because they cannot afford the high cost of 
prescription drugs.

    That is true in the United States. It is certainly true in 
poor countries around the world. Correct me if I am wrong, but 
there are probably millions of people dying of preventable, 
curable diseases simply because the price of medicine is too 
high. In your judgment, is there another model out there?

    That addresses the issue of making sure that when a drug is 
developed, a lifesaving drug, its goal is not just to make huge 
profits for the drug company, but to make it accessible to 
people all over the world.

    What am I missing in saying that there is something cruel 
and immoral of people dying and suffering in America and all 
over the world who cannot afford medicine, which often costs, 
as in the case of this vaccine, a few dollars to produce, 
really cheap.

    What do you think about the morality, and give me 
alternatives to saying, hey, I got to make billions, I don't 
care if you die. Is there another model that will create the 
drugs--Dr. Garthwaite talked about the need to create new 
drugs.

    We all want to do that. It is not the only model to say, 
the only way to do it is to make millions of people die. Is 
there another model out there? Who wants to take a response--
Dr. Morten?

    Dr. Morten. Sure, I will start. Senator, that is a truly 
essential question I think in this moment. I will respectfully 
disagree with my colleague, Professor Garthwaite. I think he 
said something like, if we decrease spending, we will get fewer 
products. It suggests a kind of a zero-sum game.

    I think that is a false tradeoff. I think there are 
genuinely transformative options available. The NIH Moderna 
vaccine proves this. The NIH Moderna vaccine is not a story of 
the triumph of the free market, is the story of the triumph of 
public science and public, private partnership.

    We have incredible resources at the NIH and other 
scientific agencies. We can unleash these. We can do public 
sector, pharmaceutical R&D, development, manufacturing, and we 
can cut better deals with industry when they come to NIH and 
other agencies to take some of our great technology to market.

    The Chair. Dr. Sarpatwari. What is your thought?

    Dr. Sarpatwari. There definitely are other models the rest 
of the world use them. So, one model that I am thinking about 
is just to actually gauge the value of the product and base the 
price off of that.

    Two-thirds of drugs that have been approved in one past 
year that we took a look at were actually rated by health 
technology assessment committees as offering no greater value 
than what exists today. So, what we need to do is not treat 
innovation as a blank word. Innovation needs to mean clinically 
meaningful.

    In that case, when something is clinically meaningful, I 
think we do owe--we do owe manufacturers a good profit on their 
development. And I think that in those cases, we need to make 
sure that insurance is there to make sure that millions of 
Americans can afford these therapies.

    I do see it as a moral failure, and I think that we do have 
an obligation that we are failing the American people.

    The Chair. Dr. Garthwaite, I used your name. You can 
respond. Do you see any other model, any other choice other 
than saying you are going to become a billionaire but people 
can't afford your product? Is there another model to get this 
science and innovation to people who need it all over the 
world?

    Dr. Garthwaite. We could certainly have the NIH increase 
its funding of drugs. I know right now the NIH doesn't actually 
bring drugs to market. They do early stage development. As my 
colleague Dr. Morten pointed out, the NIH did partner with 
Moderna. But they did however much we want to sort of downplay 
Moderna's role here, there was $3 billion spent on getting a 
platform up and running for them.

    There is a role for the private market to work together. I 
will note, though, that the NIH currently spends a mere 
fraction of what the private capital markets supply to drug 
developers, something in the order of like one-fourth of what 
the private market has.

    You would have to have the Government step in and then the 
Government be--able to allocate that capital in a way 
Government has never shown it is able to do.

    The Chair. But if the result was, taking your point, if the 
result was that we took that product after the companies made 
their fair share of profits and provided it to the world, 
everybody in this country at an affordable rate, don't you 
think from a social and moral perspective, that would be a huge 
step forward.

    Dr. Garthwaite. I believe I was pretty clear in my 
testimony that we could have had that conversation with Moderna 
before we gave----

    The Chair. I am not talking about Moderna.

    Dr. Garthwaite. We can have a conversation with anyone 
beforehand, Senator, but you want to come back now after you 
give people money with no restrictions and then relitigate the 
deal, and that means people won't trust the Government anymore.

    The Chair. Okay.

    Dr. Garthwaite. That matters. And I think it should matter 
to you.

    The Chair. Okay.

    Senator Cassidy.

    Senator Cassidy. Yes. Before I start, Senator Paul asked I 
submit these documents for the record. I ask unanimous consent 
that these documents related to myocarditis associated with the 
COVID-19 vaccine be entered into the record.

    The Chair. Without objection.

    [The following information can be found on page 138 in 
Additional Material:]

    Senator Cassidy. Okay, gentlemen, I have now learned in 
academia, you better have a beard.

    [Laughter.]

    Senator Cassidy. That is the one thing that seems to unite 
you all. It is interesting--I will start with you, Mr. 
Garthwaite. I actually think that the Federal Government 
actually copied best practices from the private sector in the 
development of the vaccine. I spoke to some people once 
involved with angel investing in venture capital, etcetera.

    They find a clinical problem. They find the researcher that 
has done the best work. They work backward and fund that 
researcher, and that researcher on that problem identified as 
essential, think ALS, which they are currently doing, then 
develops a product from which the investors make a return, 
which is essentially what we did with the COVID vaccine.

    We got an issue, who can do the work? We are going to fund 
you. Then we are going to bring it forward. Is that a fair 
statement?

    Dr. Garthwaite. Yes, I think--in many ways you can think of 
it operating like a venture capital or an angel investing firm 
where we had like a very specific target we needed to hit, and 
the Government could be the venture capitalist for that.

    As the world gets more complicated, as we think about 
different pathways for treating diseases and different 
diseases, I just question whether the Government is going to be 
a good venture capitalist, given all of the other----

    Senator Cassidy. I accept that. You don't have to argue 
that with me, brother.

    Dr. Garthwaite. I was worried for a second but----

    Senator Cassidy. Not at all. Dr. Morten, Dr. Sarpatwari, 
you are--when I read your testimony, you are trying to build a 
case that the Government has a right to march in or to dictate 
a price.

    Did they or did they not collaborate effectively or 
efficiently or whatever on the development of the science, 
etcetera? But that really goes beyond passes, if you will, the 
point that Dr. Garthwaite makes and what the CEO of Moderna 
made.

    If you are going to negotiate some limitation on the price 
when we commercialize, then do it beforehand. Don't come back 
afterwards and ask to negotiate. Do it beforehand. That is just 
really the crux of the matter.

    When I read your testimonies, it seems as if you are 
building a rationale to circumvent that crux. Dr. Morten, I 
will start with you. And your thoughts--be brief because I have 
got limited time.

    Dr. Morten. Yes, thanks, Senator. I think it is regrettably 
true that in 2020, the U.S. Government, the Trump 
administration, did not extract from Moderna a clear 
contractual obligation to share control with NIH or to set 
affordable prices. But it is clear from the record that NIH and 
Moderna were partners. They had an understanding----

    Senator Cassidy. But that is beside the point. Well, that 
is--so sorry, and I don't mean because your testimony is all 
about that, but that is really beside the point. They did not 
negotiate before. And so--I have limited time. I am sorry. Dr. 
Sarpatwari--I am sorry if I am not getting your name correct. I 
apologize.

    Dr. Sarpatwari. Sarpatwari----

    Senator Cassidy. Sarpatwari.

    Dr. Sarpatwari. Thanks for the question, Senator. I agree 
that we need to do a better job upstream in negotiating 
contracts that would have avoided difficulty in this case. But 
I think there was an understood agreement here that in turn, 
for all the late-stage de-risking that was done, that a more--
Americans would have affordable access to this.

    Senator Cassidy. No, you can't say that it is not 
affordable if there is going to be no out-of-pocket exposure 
for someone despite their coverage.

    Dr. Sarpatwari. Affordable in two ways, I think is slightly 
what I mean. So first of all, we know----

    Senator Cassidy. By the way, I am sorry to interrupt--that 
unspoken agreement, probably should have been put on paper. I 
am not going to argue with that we need to have affordable 
drugs, but to come back and say it was unspoken is really a 
wish. It is not something which you can take to a court.

    By the way, we can also argue whether the Trump 
administration failed. I was there and feces were hitting the 
fan and we were trying to get things done as rapidly as 
possible. And it is very easy to 2020 retrospectively look at 
things. But anyway, go back to your point. I am sorry.

    Dr. Sarpatwari. Sure. And so, in terms of affordable, we 
need to look at the patients who are going to fall through the 
cracks through the patient assistance programs, which happen.

    Senator Cassidy. Now you are presuming, because it has 
happened with other PAPs, it is going to happen with this one.

    Dr. Sarpatwari. Yes, I am.

    Senator Cassidy. But the testimony is that they are already 
working with advocates for the homeless in order to make sure 
the homeless who are often drug addled and cannot fill out 
paperwork, can get it completed, that sort of thing. So, you 
are prejudging guilt, if you will.

    Dr. Sarpatwari. No, I don't think so. I am making an 
educated assessment based on a vast amount of evidence about 
these programs. I think second, when we talk about affordable, 
we need to think about what public payers are paying for these 
products because that will limit, in the case of Medicaid, what 
it can spend in other places. And in the case of Medicare, that 
is going to result in higher premiums.

    Senator Cassidy. Well, there is two things about that. And 
by the way, if we want to talk about capping block granting, 
the states are doing a per capita cap on state Medicaid 
program. Right now, they have kind of an unlimited budget.

    Obviously that is a problem for the FISC. Dr. Garthwaite, 
there has been kind of a sense of, is there a new paradigm by 
which we could bring things to market? By the way, I hope I got 
your name correctly, too.

    Senator Cassidy. Can we bring things to market with a new 
paradigm? But I am told that prior to 2019--prior to the 
passage of Bayh-Dole, only 5 percent of basic research was 
being translated to clinical practice.

    By Bayh-Dole, which basically said to universities, NIH has 
funded your research, but the university is going to now own 
the license to the patent. And you can work with private 
industry if you wish.

    That was catalytic to dramatically increase the 
translational research of the basic science that NIH was 
funding. Is that a fair interpretation of history?

    Dr. Garthwaite. Yes. I mean, I think we have a pretty clear 
sense that we are now able to commercialize things from what we 
often refer to as the bench to the bedside.

    That basic science done sort of at universities, of which a 
lot of my colleagues who are much smarter than me do, is great, 
but it is only great when it comes to patient welfare to the 
extent it turns into a drug you can take. And so, Bayh-Dole 
provides a mechanism by which we can commercialize that 
science, yes.

    Senator Cassidy. Basically, at that point, we waived the 
white flag and we said to depend upon a Federal Government 
basic science researcher, and that is not what she or he is 
interested in, to commercialize or translate the science is not 
going to happen.

    Dr. Garthwaite. Well, it is just a capital question, right. 
All of this is about, like who is going to pay for those next 
steps and who is going to make the choices about what we select 
to move forward.

    Where there is this difference in what is good science and 
what could be a good product. Venture capital is a really good 
job of taking things out of universities and figuring out what 
we should commercialize going forward.

    Senator Cassidy. In which case they get to set a price, 
which we may not like, but nonetheless, that is part of the 
deal.

    Dr. Garthwaite. Yes, I would rather they set price on a 
drug that exists than have people like my mother-in-law and 
others who have died of cancer because there is no treatment 
that exists for them.

    Senator Cassidy. With that, I yield.

    The Chair. Okay. Let me thank our witnesses. Good 
discussion. Would like to go on further. I got to vote. Senator 
Cassidy has another engagement. So, this is the end of our 
hearing today. And thank you again. And we thank Dr. Bancel--
Mr. Bancel, once more.

    For any Senators who wish to ask additional questions, 
questions for the record will be due in 10 business days, April 
5th by 5.00 p.m.

    I ask unanimous consent to enter the record a statement 
from a stakeholder group about the cost of COVID vaccines, as 
well as a letter from the NIH about its inventorship of the 
COVID vaccine and evidence about public funding of Moderna.

    [The following information can be found on page 135 in 
Additional Material:]

    The Chair. The Committee stands adjourned.
                                ------                                


                          ADDITIONAL MATERIAL

                prepared statement of kaiser permanente
    Chairman Sanders, Ranking Member Cassidy, and distinguished Members 
of the Committee, thank you for the opportunity to provide a statement 
for the record on behalf of Kaiser Permanente. \1\ As the largest 
private, integrated health care system in the United States, Kaiser 
Permanente provides pharmacy services and coverage to over 12.6 million 
people. \2\ Our integrated model of care combines both a health plan 
and a care delivery system. Because payer, direct purchasing, pharmacy, 
and provider operations are all part of the Kaiser Permanente system, 
we have a unique perspective on drug prices and pharmacy benefits. Our 
mission for pharmacy, and all the services we provide, is to deliver 
high-quality, affordable care and to improve the health of our members 
and the communities we serve.
---------------------------------------------------------------------------
    \1\  Kaiser Permanente comprises Kaiser Foundation Health Plan, 
Inc., one of the Nation's largest not-for-profit health plans, and its 
health plan subsidiaries outside California and Hawaii; the not-for-
profit Kaiser Foundation Hospitals, which operates 39 hospitals and 
over 700 other clinical facilities; and Permanente the Medical Groups, 
self-governed physician group practices that exclusively contract with 
Kaiser Foundation Health Plan and its health plan subsidiaries to meet 
the health needs of Kaiser Permanente's members. As the largest private 
integrated health care delivery system in the United States, Kaiser 
Permanente delivers care to more than 12.6 million members in eight 
states and the District of Columbia. We are committed to providing 
high-quality, affordable care and improving the health of our members 
and the communities we serve. https://www.wsj.com/articles/moderna-
considers-price-of-110-130-for-covid-19-vaccine-11673289609.
    \2\  Within our footprint, we maintain a primarily internalized 
pharmacy system, including over 550 outpatient, hospital, infusion, 
specialty, and mail order pharmacy sites, staffed by over 14,000 
pharmacy personnel. Kaiser Permanente spends approximately $10 billion 
annually on pharmaceuticals. Our Permanente Medical Group (PMG) 
physicians and other authorized practitioners prescribe, and our 
pharmacies, dispense over 90 million prescriptions annually. https://
apnews.com/article/science-health-business-covid-medicare-
1a5d65356ebc7b5bc76524ae99deb55e.

    Kaiser Permanente greatly appreciates the Committee's attention to 
drug prices--and particularly troubling reports that drug manufacturers 
plan to increase the price of their COVID-19 vaccines nearly 400 
percent as the country transitions these products to commercial 
markets. We have long been deeply concerned about the crippling burden 
high drug prices impose on our members and our ability to carry out our 
mission as a nonprofit organization. As the country emerges from a 
pandemic, manufacturers are proposing significant unjustified increases 
to the price of these COVID-19 vaccines, placing further pressure on 
---------------------------------------------------------------------------
health care costs and affordability.

    As COVID-19 variants continue to emerge, vaccines will likely 
continue to play a crucial role in curbing deaths and serious illness. 
Therefore, these vaccines must be affordable and accessible for 
everyone. Kaiser Permanente understands that commercialization of 
COVID-19 vaccines is appropriate, but it must be done thoughtfully and 
methodically, with enough lead time to transition all necessary 
arrangements, including contracting with manufacturers and making 
distribution arrangements. However, given manufacturers' recent pricing 
announcements, we are concerned that commercialization is simply 
becoming a process for those manufacturers to extract excessive profits 
at the expense of the rest of the health care system.

    Reports indicate manufacturers intend to charge up to $130 per 
dose, which is 5 times the current price paid by the Federal 
Government. These vaccines received substantial financial investment 
and other support from the Federal Government, including initial 
investments of $10 billion in taxpayer dollars to accelerate the 
development, manufacturing, and distribution of COVID-19 vaccines, 
therapeutics, and diagnostics. In the summer of 2020 alone, $1.95 
billion went to Pfizer for the government to purchase and deliver 100 
million doses, \3\ and $2.4 billion went to Moderna for research, 
manufacturing, and the government purchase of 100 million doses. \4\, 
\5\, \6\ Since then, billions more have been spent on advance-purchase 
agreements. By making up-front investments, the Federal Government took 
on the risk of vaccine development, thereby removing the bulk of 
financial risk from manufacturers as they developed their products.
---------------------------------------------------------------------------
    \3\  https://www.pfizer.com/news/press-release/press-release-
detail/pfizer-and-biontech-announce-agreement-us-government-600.
    \4\  https://investors.modernatx.com/news/news-details/2020/
Moderna-Announces-Award-from-U.S.-Government-Agency-BARDA-for-up-to-
483-Million-to-Accelerate-Development-of-mRNA-Vaccine-mRNA-1273-
Against-Novel-Coronavirus/default.aspx.
    \5\  https://endpts.com/moderna-begins-first-us-pivotal-covid-19-
vaccine-study-lands-472m-more-from-barda/.
    \6\  https://www.reuters.com/article/us-moderna-stocks/moderna-
shares-jump-on-1-5-billion-u-s-contract-for-covid-19-vaccine-
idUSKCN2581SW.

    Manufacturers have already recouped their investments in bringing 
these vaccines to market; in fact, they have made billions of dollars 
on their COVID-19 vaccines. In 2021, Pfizer's COVID-19 vaccine, known 
as Comirnaty, became the highest revenue-generating drug ever in a 
single year, generating $36.8 billion in sales. \7\ In 2022, their 
vaccine generated $37.8 billion in sales. \8\ Moderna, the other 
leading COVID-19 vaccine manufacturer in the United States, generated 
approximately $18.4 billion in revenue for their vaccine, known as 
Spikevax, in 2022. \9\
---------------------------------------------------------------------------
    \7\  https://www.fiercepharma.com/special-reports/top-20-drugs-
worldwide-sales-2021#c9635227-c325-40d3-8595-efd3a8db5181.
    \8\  https://billion.html.
    \9\  https://www.fiercepharma.com/pharma/moderna-covid-vax-scarfed-
sales-184b-2022-company-says.

    Given the significant taxpayer investment and profitability already 
experienced by these companies, it is unreasonable to accept price 
increases up to 400 percent over the price paid by the Federal 
Government during the pandemic. According to analysts, Pfizer's 
proposed price hikes could add around $2.5-$3 billion in annual 
revenue. \10\ Moderna expects to reach at least $5 billion in sales in 
2023. \11\
---------------------------------------------------------------------------
    \10\  https://www.reuters.com/business/healthcare-pharmaceuticals/
pfizer-covid-vaccine-price-hike-seen-giving-revenue-boost-years-2022-
10-921/.
    \11\  https://www.fiercepharma.com/pharma/moderna-covid-vax-
scarfed-sales-184b-2022-company-says.

    Windfall pricing such as this will negatively impact consumers and 
add costs to the already strained health care system. Public and 
private payers will continue to cover the price of the vaccine with no 
cost-sharing for most patients with coverage, but the cost will still 
be borne by those payers. Manufacturers should not abuse policies that 
require $0 cost-sharing by shifting the substantial financial 
liabilities to the health system, taxpayers, and employers and 
individuals who pay the cost of health coverage. When a drug or vaccine 
that received substantial taxpayer funding for development is priced 
egregiously high, the government should use every tool it has to recoup 
its investment and ensure the health system and public directly benefit 
---------------------------------------------------------------------------
and don't have to pay for the same innovation twice.

    It is inevitable that these price gouging practices will 
disproportionately impact uninsured individuals. Pharmaceutical 
manufacturers may announce patient assistance programs promising 
uninsured individuals access to ``no-cost'' vaccines. However, these 
programs will not result in sufficient vaccine uptake if individuals 
are required to navigate a complex application or reimbursement 
process. Uninsured individuals need easy access to vaccines without 
navigating bureaucratic obstacles. Moreover, while patient assistance 
programs may appear to be a step in the right direction, they will be 
nothing more than a fig leaf attempting to hide a gross injustice if 
nothing is done to address the unacceptably high list price.

    When the government and industry partner to develop critical public 
health products, with substantial research support and financial risk 
mitigation by the government, it is fundamentally inappropriate for 
manufacturers to price their products to simply maximize profits, just 
as it is inappropriate for retailers to freely raise prices on basic 
necessities during a period of emergency. The prices paid directly by 
the government clearly demonstrate adequate profitability at much lower 
prices, even as demand has waned. At Kaiser Permanente, we are 
committed to ensuring everyone has affordable access to life-saving 
vaccines; however, we cannot ignore the significant burden astronomical 
list prices place on the health system, taxpayers, and patients. We 
call on manufacturers to do their part and reconsider their egregious 
prices.

    Thank you for considering our perspective on these important 
issues. We look forward to working with you to advance meaningful 
solutions.
                                 ______
                                 
                     National Institutes of Health,
                                              Bethesda, MD.
                                                     March 17, 2023
Hon. Bernie Sanders, Chairman,
U.S. Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.

    Dear Chairman Sanders:

    I am writing to provide additional information regarding the 
scientific contributions of the National Institutes of Health (NIH), 
and specifically scientists at the National Institute of Allergy and 
Infectious Diseases (NIAID) Vaccine Research Center (VRC), that were 
made to the development of Moderna's mRNA-1273 vaccine against COVID-
19. Below are several facts relevant to NIH's determination that Drs. 
Barney Graham, Kizzmekia Corbett, and John Mascola (VRC scientists at 
the time this work was done) are co-inventors of certain disputed 
patent applications. NIH has communicated these and additional details 
of NIH's contributions to Moderna on multiple occasions.

    VRC and Moderna had collaborated since 2016 on a variety of 
projects including HIV, RSV, HMPV, HPIV3, Zika, MERS-CoV, and Nipah 
vaccines. This collaboration was formalized under agreements focused on 
prototype pathogen vaccine development for coronaviruses and 
paramyxoviruses using MERS-CoV and Nipah as the prototypes for those 
pathogens. The parties regularly meet to discuss collaborative 
projects.

    Longstanding NIAID support for intramural and extramural research 
enabled the development of versatile vaccine platforms and the use of 
structural biology tools including cryo-electron microscopy to design 
specific proteins--called immunogens--that powerfully stimulate the 
immune system. Prior to the COVID-19 pandemic, scientists at the NIAID 
VRC and their academic collaborators made the critical scientific 
discovery of how to mutationally stabilize--in a highly immunogenic 
form--viral proteins that coronaviruses use to infect human cells. This 
strategy facilitated the design of vaccine candidates that generate 
robust protective immune responses. As soon as the sequence of SARS-
CoV-2 was made available in early January 2020, NIAID VRC researchers 
rapidly generated a stabilized SARS-CoV-2 spike protein for use in 
COVID-19 vaccine development. This crucial breakthrough in structure-
based vaccine design led to the development of safe and effective 
COVID-19 vaccine candidates, several of which are now authorized or 
approved by the FDA, and built across a range of vaccine platforms 
including the highly successful mRNA platform.

    Moderna has publicly discussed the collaboration between the NIAID 
VRC and Moderna on COVID-19 vaccine development. On January 23, 2020, 
Moderna issued a press release announcing a ``new collaboration to 
develop an mRNA vaccine against the novel coronavirus'' and stating 
that ``The Vaccine Research Center (VRC) of the National Institute of 
Allergy and Infectious Diseases (NIAID), part of NIH, collaborated with 
Moderna to design the vaccine.'' \1\ On June 15, 2020, Mr. Bancel noted 
in an interview with Bloomberg Business that VRC and Moderna had co-
developed mRNA-1273. \2\ In the interview Mr. Bancel states ``so what 
we did is we. the NIAID team, they spent a few days looking at the 
genetic sequence of a virus online, they read some 3-D modeling to 
understand the structure of the protein of the virus and then we 
jointly decided with NIAID what vaccine we were going to design, that 
took three days. And we never had access to a virus, physically. It was 
all information on computers.''

    \1\  Press Release: Moderna Announces Funding Award from CEPI to 
Accelerate Development of Messenger RNA (mRNA) Vaccine Against Novel 
Coronavirus (Jan. 23, 2020), https://s29.q4cdn.com/435878511/files/
doc--news/2020/01/23/moderna-announces-funding-award-cepi-accelerate-
development.pdf.
    \2\  Leadership Live With David Rubenstein: Moderna CEO Stephane 
Bancel, BLOOMBERG (June 15, 2020, 8:42 PM), https://www.bloomberg.com/
news/videos/2020-06-16/leadership-live-with-david-rubenstein-moderna-
ceo-stephane-bancel-video. See video beginning at the 9:30 time point.

    Based on this and other information, NIH and VRC scientists 
emphatically believe that they were integral members of a collaborative 
team of scientists working to design and produce the mRNA-based SARS-
---------------------------------------------------------------------------
CoV-2 vaccine now known as mRNA-1273.

    Further, through sustained support for fundamental research 
underlying the vaccine concepts and the establishment and utilization 
of an extensive clinical trials network, NIAID helped advance the 
development of six candidate COVID-19 vaccines. In addition to making 
available the technology that enabled the development of COVID-19 
vaccines, NIAID supported the Phase 3 clinical trials for three 
vaccines that were made available for use in the United States, 
including the mRNA-1273 vaccine that was developed through a 
collaboration between the NIAID VRC and Moderna, Inc. This support 
included provision of U.S. Government funds to clinical trial sites; 
contribution of clinical trial design, harmonization, infrastructure, 
and management; and delivery of in-kind resources to support the rapid 
assessment of these vaccine candidates.

    Sustained research investments by NIH over decades prior to the 
emergence of SARS-CoV-2 up until today have allowed, and continue to 
allow, for the unprecedented pace of COVID-19 vaccine development.

            Sincerely,
                                     Tara A. Schwetz, Ph.D.
                          Acting Principal Deputy Director,
                                      National Institutes of Health
                                 ______
                                 
             links to information submitted by senator paul
    Vaccine Safety Datalink, October 2022: https://www.acpjournals.org/
doi/full/10.7326/M22-2274.

    Vaccine Safety Datalink, January 2023:https://
www.sciencedirect.com/science/article/pii/S0264410X22015419.

    Review article: Knudsen and Prasad, December 2022:https://
onlinelibrary.wiley.com/doi/10.1111/eci.13947.

    Israeli study, May 2021: https://www.sciencedirect.com/science/
article/pii/S0264410X21006824.

    Vaccine Safety Datalink, August 2021: https://stacks.cdc.gov/view/
cdc/109493.

    Vaccine Safety Datalink, October 2021: https://stacks.cdc.gov/view/
cdc/110921.
                                 ______
                                 
                          The Washington Post
              Our Law Helps Patients Get New Drugs Sooner
                      by: birch bayh and bob dole
    April 11, 2002

    As co-authors of the Bayh-Dole Act of 1980, we must comment on the 
March 27 op-ed article by Peter Arno and Michael Davis about this law.

    Government alone has never developed the new advances in medicines 
and technology that become commercial products. For that, our country 
relies on the private sector. The purpose of our act was to spur the 
interaction between public and private research so that patients would 
receive the benefits of innovative science sooner.

    For every $1 spent in government research on a project, at least 
$10 of industry development will be needed to bring a product to 
market. Moreover, the rare government-funded inventions that become 
products are typically five to 7 years away from being commercial 
products when private industry gets involved. This is because almost 
all universities and government labs are conducting early stage 
research.

    Bayh-Dole did not intend that government set prices on resulting 
products. The law makes no reference to a reasonable price that should 
be dictated by the government. This omission was intentional; the 
primary purpose of the act was to entice the private sector to seek 
public-private research collaboration rather than focusing on its own 
proprietary research.

    The article also mischaracterized the rights retained by the 
government under Bayh-Dole. The ability of the government to revoke a 
license granted under the act is not contingent on the pricing of a 
resulting product or tied to the profitability of a company that has 
commercialized a product that results in part from government-funded 
research. The law instructs the government to revoke such licenses only 
when the private industry collaborator has not successfully 
commercialized the invention as a product.

    The law we passed is about encouraging a partnership that spurs 
advances to help Americans. We are proud to say it's working.

    The writers are, respectively, a former Democratic Senator from 
Indiana and a former Republican Senator from Kansas.
                                 ______
                                 
 Democrat's Proposed Price Controls for Prescription Drugs Could Mean 
          Postponing a Cure for Alzheimer's Disease by Decades
                 by: u.s. senator roger marshall, m.d.
    FOX News

    August 6, 2022

    We are entering the most exciting time of biomedical innovation and 
advancement in American history. Our growing understanding of human 
genetics and the promise of personalized medicine will advance the race 
to cure cancer and treat or prevent Alzheimer's disease. However, this 
progress will be erased if Congress passes government drug price 
controls, which will end the promise of innovation and prevent patients 
from seeing the benefits of the next generation of cures.

    Americans enjoy unprecedented access to new, novel treatments. Of 
the 460 new medicines approved globally since 2012, 85 percent are 
available to Americans compared to just 59 percent in U.K. and 44 
percent in Canada. Of the 123 new life-saving cancer drugs, 93 percent 
are available in the U.S. compared to just 69 percent in the U.K. and 
59 percent in Canada. It's baked in that, in order for government price 
controls to work, these countries must deny and ration care to their 
citizens.

    Our system thrives on access and innovation. Government bureaucrats 
don't get to decide whether we have access to medicine. The market 
provides solutions, and Americans freely utilize them.

    Of course, no system is perfect. Our health system needs real 
reforms, not feel-good gestures that create more long-term problems, 
and net no true savings on drug prices.

    Democrat proposals typically just shift costs around so that they 
can mask who pays for what. For example, the Affordable Care Act hasn't 
reduced health spending, it just shifted more costs of health care to 
taxpayers and raised the cost of insurance for people who are insured 
through their employer. Moreover, the latest reconciliation bill raids 
Medicare ``savings'' from the price control provision to pay for ACA 
subsidies for wealthy individuals.

    Under this same proposal, we would see at least 15 percent fewer 
drugs developed and brought to market in the next 17 years. Do you want 
to accept delaying the cure for Alzheimer's disease by a decade or 
more? In a few days, Democrats are going to force us to accept, that 
instead of breakthrough medicines, we'll just have to settle for end-
of-life care.

    There are more than 6 million Americans living with Alzheimer's. We 
all know and love someone impacted by this relentless disease. It's 
estimated to cost our health system $321 billion this year, and by 
2050, it will exceed $1 trillion. Of the total costs spent for seniors 
with Alzheimer's, barely 10 percent is spent on prescription drugs. 
Everything else is hospital and long-term care. Without many of these 
medicines, we would be spending much more on hospitalizations, and be 
living shorter, worse quality lives. So what is the human value, let 
alone the monetary value of such a cure?

    While it's politically easy to demonize pharmaceutical companies, 
Democrats need to remember that this industry bailed us out of the 
pandemic, developed miracle gene therapies that put terminal cancers in 
complete remission, and cured Hepatitis C. This industry did all of 
this and more because we allow them to fail and try again. None of the 
above happened overnight. It was decades in the making.

    There are basic economics on why we're first and best in this 
industry. First, this industry spends more on R&D--it totaled $120 
billion just last year. It's a long game though, often taking 15 years 
to see that investment make it to the pharmacy counter. But 90 percent 
ultimately fail.

    All of that money is spent at great risk--investors don't know what 
will work and what won't. If the Federal Government eliminates 
incentives to make a risky investment, R&D spending will dwindle.

    Look at the EU: once that governing body took control of the 
pharmaceutical industry, venture capital, patent registrations, and 
other key factors that demonstrate a strong industry, declined 
significantly. Meanwhile, the U.S. continues to grow with proof by the 
numbers and at our local pharmacy.

    The pain for us is at the pharmacy with increasing out-of-pocket 
costs. Unlike other health care categories, retail prescription drugs 
account for only 8 percent of our Nation's health spending. While list 
prices have grown less than inflation, drug price negotiators have 
pocketed more discounts, but are forcing patients to pay more out-of-
pocket. In fact, these kickbacks for the middlemen have exceeded 50 
percent of the list price for many prescription drugs. Those kickbacks 
must go to patients and we need a solution to this shortcoming in our 
system.

    Republicans have solutions. I joined Senator Michael Crapo, R-Idaho 
and my colleagues in introducing the Lower Costs, More Cures Act, which 
includes more than 20 policies to address shortcomings in drug pricing. 
Just like the new laws the Ensuring Innovation Act and the ACT for ALS, 
which we helped author and support, which helped drive down drug 
prices, this legislation promotes competition, innovation, and safe 
more efficient paths toward approval for novel treatments.

    There is common ground on making medicines more affordable for 
Americans, on preserving our R&D pipeline for future cures, and on the 
president's goal of curing cancer. However, progress will never be made 
if the will and the incentive to innovate is decimated.

    Republican Roger Marshall, M.D., represents Kansas in the U.S. 
Senate. Previously he was the Congressman for Kansas' 1st District. 
Prior to Congress, Dr. Marshall was a practicing obstetrician and 
gynecologist in Great Bend, Kansas. He received his M.D. at the 
University of Kansas School Of Medicine in 1987.
                                 ______
                                 
    [Whereupon, at 12:54 p.m., the hearing was adjourned.]

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