[Senate Hearing 118-198]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 118-198

                  THE NEED TO MAKE INSULIN AFFORDABLE 
                           FOR ALL AMERICANS

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                                   ON

    EXAMINING THE NEED TO MAKE INSULIN AFFORDABLE FOR ALL AMERICANS

                               __________


                              MAY 10, 2023

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions






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                 U.S. GOVERNMENT PUBLISHING OFFICE

54-476 PDF                WASHINGTON : 2024











          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                 BERNIE SANDERS (I), Vermont, Chairman

PATTY MURRAY, Washington             BILL CASSIDY, M.D., Louisiana, 
ROBERT P. CASEY, JR., Pennsylvania       Ranking Member
TAMMY BALDWIN, Wisconsin             RAND PAUL, Kentucky
CHRISTOPHER S. MURPHY, Connecticut   SUSAN M. COLLINS, Maine
TIM KAINE, Virginia                  LISA MURKOWSKI, Alaska
MAGGIE HASSAN, New Hampshire         MIKE BRAUN, Indiana
TINA SMITH, Minnesota                ROGER MARSHALL, M.D., Kansas
BEN RAY LUJAN, New Mexico            MITT ROMNEY, Utah
JOHN HICKENLOOPER, Colorado          TOMMY TUBERVILLE, Alabama
ED MARKEY, Massachusetts             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, MAY 10, 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................................     4

                               Witnesses

Ricks, David, Chair and Chief Executive Officer, Eli Lilly and 
  Company, Indianapolis, IN......................................     6
    Prepared statement...........................................     8
Hudson, Paul, Chief Executive Officer, Sanofi, Paris, France.....    14
    Prepared statement...........................................    15
    Summary statement............................................    23
Jorgensen, Lars Fruergaard, President and Chief Executive 
  Officer, Novo Nordisk, Bagsvaerd, Denmark......................    24
    Prepared statement...........................................    26
Joyner, David, Executive Vice President and President of Pharmacy 
  Services, CVS Health, Woonsocket, RI...........................    28
    Prepared statement...........................................    30
Kautzner, Adam, President, Express Scripts, St. Louis, MO........    31
    Prepared statement...........................................    34
Cianfrocco, Heather, Chief Executive Officer, OptumRx, Eden 
  Prairie, MN....................................................    60
    Prepared statement...........................................    61
    Summary statement............................................    66

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
Sanders, Hon. Bernie:
    Civica Statement.............................................   110









 
                  THE NEED TO MAKE INSULIN AFFORDABLE 
                           FOR ALL AMERICANS

                              ----------                              


                        Wednesday, May 10, 2023

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 1:02 p.m., in 
room 216, Hart Senate Office Building, Hon. Bernard Sanders, 
Chairman of the Committee, presiding.

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

                  OPENING STATEMENT OF SENATOR SANDERS

    The Chair. The Senate Committee on Health, Education, 
Labor, and Pensions will come to order. And let me begin by 
thanking the CEOs of Eli Lilly, Sanofi, and Novo Nordisk, the 
three major manufacturers of insulin, for being with us today, 
as well as the heads of CVS Caremark, Express Scripts, and 
OptumRx, the three major pharmacy benefit managers.

    They had to juggle their schedules, and we very much 
appreciate all of them for being here. I also want to take this 
opportunity to thank Eli Lilly, Sanofi, and Novo Nordisk for in 
recent months, as I think you all know, announcing a 
substantial reduction in their list prices for some of their 
insulin products.

    This is an important step forward. For me, the bottom line 
of this hearing is not complicated. I don't care whether you 
are a Democrat, Republican, Independent, whatever you are, all 
over this country, people are saying enough is enough. They are 
sick and tired of paying outrageously high prices, not only for 
insulin, but for other products as well.

    They want action, and this Committee is going to do what we 
can to respond to their needs, and we need the help of the 
people on the panel to do that. And as we gather today--and I 
know we have some advocates in the audience who have spent a 
great deal of time fighting to lower insulin costs.

    We thank them for what they do. I think it is important 
that we acknowledge too many Americans who died because they 
rationed their insulin, 1.3 million Americans do that, and some 
of them died. Alec Smith was 24 years old, and he dreamed of 
opening a sports bar. He is dead because he could not afford 
insulin.

    Antavia Lee Worsham was 22 years old and worked two jobs to 
support herself. She is dead because she couldn't support--she 
couldn't afford insulin. Allen Rivas was 20 years old and 
already lost his home because of insulin cost.

    This young man is also dead. And these are just a few of 
many Americans who have needlessly lost their lives because of 
the outrageously high cost of insulin. Further, we must 
acknowledge the thousands of Americans who ended up in 
emergency rooms or hospital beds suffering from diabetic 
ketoacidosis, a very serious medical condition as a result of 
rationing their insulin. 1.3 million Americans in the richest 
country on Earth cannot afford insulin.

    The Committee today is convening for two major reasons, in 
my view. One of them is a little bit personal. A couple of 
years ago, I took a trip from Detroit, Michigan, to Windsor, 
Ontario, with a busload of people. You know why I went? Windsor 
is a beautiful town. That is not why I went.

    I went with those people in order to purchase insulin in 
Canada, which they were able to do for one-tenth of the price 
that they were paying in the United States of America--one-
tenth of the price for the exact same product. And I will never 
forget as long as I live the tears coming out of a mother's 
eyes because she could suddenly afford insulin.

    What I promised them is that they are not going to have to 
go to Canada or other countries to buy a lifesaving product, 
that in America we can make sure they get it here as well. And 
second, this Committee is not only going to be dealing with the 
crisis in insulin, we are going to do everything we can to end 
the outrage in which Americans, our people pay by far the 
highest prices in the world for virtually every brand name 
prescription drug on the market.

    Whether it is a drug for cancer, for heart disease, for 
asthma, or whatever the illness, we end up paying the highest 
prices in the world. And we want to know why there are 
Americans who are dying or becoming much sicker than they 
should because they can't afford the medicine they need. Those 
are the questions that the members of our panel are going to 
have to answer today and in the future.

    Today, one out of four Americans cannot afford the medicine 
that their doctors prescribe. That is beyond comprehension. And 
let's be clear, the high cost of prescription drugs not only 
impacts the health of individual Americans, but the budget of 
the United States of America.

    If we paid the same prices for prescription drugs as major 
countries around the world were paying, we could save over $1 
trillion in 10 years. I know many of my Republican friends are 
concerned about the deficit. I share that concern. Pay the same 
price as people around the world, you save $1 trillion over 10 
years. That is real money.

    Let's be clear, while Americans pay outrageously high 
prices for prescription drugs, the pharmaceutical industry and 
the PBMs make enormous profits every year. In 2021, ten major 
pharmaceutical companies in America made over $100 billion in 
profits, and their CEOs get very high compensation packages.

    Last year, the three major PBMs in America made over $27 
billion in profits. In other words, people in this country get 
sick. They can't afford the medicine. And yet the drug 
companies, the PBMs, make huge profits. In terms of insulin, 
let us not forget that a vial of insulin, and this is a vial of 
Humalog right here, costs less than $10 to manufacture, as I 
understand it.

    Somebody will correct me if I am wrong. I think it is less 
than $10 bucks. Meanwhile, Eli Lilly increased the price of 
Humalog 34 times since 1996, from $21 to $275. The same exact 
product. No changes at all. Why did they do it? Because they 
could. Because nobody here has stopped them.

    They can charge any price they want, and they did. But it 
is not just Eli Lilly. Novo Nordisk increased the price of 
Novolog 28 times from $40 in 2001, to $289. And Sanofi, a 
company that increased the price of Lantus 28 times from $35 in 
2001, to $292. In every instance, it is the exact same product 
that rose--costs rose astronomically.

    Let's be clear, this is a problem that is unique to the 
United States. In France, 20 years ago, the cost of Lantus was 
$40. Today it is $24, went down. This country, those prices 
soared. Meanwhile, as insulin manufacturers continue to 
increase prices, PBMs sign secret deals to increase their 
profits by putting insulin products on their formularies, not 
with the lowest list price, but the ones that gave PBMs the 
most generous rebates.

    The good news is that was a result of a lot of public 
pressure, we have recently seen the major drug companies 
substantially reduce their prices, and that is good news. Eli 
Lilly announced it will reduce the price of Humalog by 70 
percent.

    Novo Nordisk announced that it reduced the price of Novolog 
by 75 percent. Sanofi announced that it will reduce the price 
of Lantus by 78 percent. It seems to me our job on this 
Committee is twofold.

    First, we must make sure that these price reductions 
announced by the drug companies go into effect in a way that 
every American with diabetes gets the insulin that you need at 
an affordable price. And this Committee intends to hold a 
hearing next year to make sure that is, in fact, happening.

    In other words, we just don't want words, we want actions. 
But lowering the cost of insulin is only part of what we must 
accomplish. This Committee must do everything possible to make 
sure that the American people no longer get ripped off by drug 
companies and PBMs. And we have got to ask some hard questions.

    If Eli Lilly can lower the price of Humalog by 70 percent, 
why is it still charging the American people about $200,000 for 
Cyramza, a drug that treats stomach cancer? $200,000, but that 
same drug is sold in Germany for just $54,000. Why is that?

    If Novo Nordisk can lower the price of Novolog by 75 
percent, why is it still charging Americans with diabetes 
$12,000 for Ozempic when the exact same drug can be purchased 
for just $2,000 in Canada? If Sanofi can reduce the price of 
Lantus by 78 percent, why is it still charging cancer patients 
in America over $200,000 for Caprelsa, a drug that can be 
purchased in Japan for just $37,000?

    These are the questions that the American people are 
asking. They want to know why nearly half of all new drugs in 
America now cost over $150,000. Who can afford $150,000? What 
world are you living in?

    How does it happen that cancer drugs, which in some cases 
cost just a few dollars to manufacture, a few bucks to 
manufacture, you guys are selling for $100,000? Really? Really? 
Do we not have any consciences, any moral values?

    We got a lot of work to do in this Committee. And the 
bottom line is we want to--we appreciate the work being done on 
insulin. We thank all of the advocates out there for fighting. 
But we got to make sure that Americans can afford the price of 
prescription drugs.

    With that, let me introduce, Senator Cassidy.

                  OPENING STATEMENT OF SENATOR CASSIDY

    Senator Cassidy. Thank you, Chair Sanders. In a sense, this 
is the culmination of a portion of my life. I went to medical 
school in New Orleans, did my residency in Los Angeles, and 
then treated patients in Baton Rouge, each time in a hospital 
for the poorly insured or for the uninsured.

    Diabetes was a constant, but also the ability to afford the 
drug was a constant as well. And it has been interesting for me 
because I have seen the work that you have done, the technology 
that you, the drug companies, have put together that have made 
these medicines more convenient to take and have made it easier 
for the diabetic to manage their diabetes.

    One--tip of a hat to you. But on the other hand, the 
ability, as we all know, the ability to afford the insulin is 
equally important as to the innovation that may have occurred 
because of obviously, if you cannot afford the innovation, it 
is as if the innovation has never occurred.

    Now, 100 years ago, diabetes was a death sentence. In 1983, 
when I graduated from the medical school, a lot more difficult 
to control than now. So not only have we had the medical 
breakthrough, but we have had you come up with products that 
have made it easier for the diabetic to manage. I thank you for 
that. It goes without saying, in that time period, we have had 
a remarkable increase in the quality of life.

    That the teenager going to high school is much better and 
much more managed, and therefore, she is more likely to take 
her drug, and we all thank you for that. But one more time, you 
have got to be able to afford the innovation.

    Now we have to look at these, as Senator Sanders framed it, 
the issue is, is it the pharmaceutical manufacturers? Is it the 
pharmacy benefit manufacturers? That is the kind of discussion 
here. And that is why I am glad you are here.

    When I go to church and people are pulling on my jacket, 
they want to know about drug prices. And if they are diabetic, 
they want to know about, what about the price of prescription 
drugs? And if it is the parent of a diabetic, they are really 
pulling on my jacket. So, the PBMs, vertically integrated with 
the largest insurance companies in the world, managing about 80 
percent of the prescription drug claims.

    I have learned to say what I have been told, not what I 
know. But what I am told is that in recent years, the net price 
of insulin has actually decreased, even as the list price has 
increased. The money is going someplace. But the patient, 
particularly the patient who is in her deductible, is paying 
list price, and somehow the money is going from her pocket to 
folks who are far richer than she.

    Now, I appreciate the roles that pharmacy benefit managers 
play. We had some Zoom hearings with academics come in and the 
academics all will state that, at their best, PBMs drive down 
net price for patients. So, I will stipulate that. But it is 
clear that the savings are not always reaching the patient, and 
that at times, particularly when she is in her deductible, she 
is really paying a lot. And that is when we hear the horror 
stories of folks that cannot afford.

    To have the manufacturers, to have the PBMs here is just 
really wonderful. The goal of today's hearing is to find 
answers and to find solutions, not to point fingers, although 
there will be some finger pointing, it is Washington, DC, but 
on the other hand, to figure out what is going on and to 
address why are prescription drug costs so high, particularly 
for the issue of insulin, and what is the respective role of 
each of the players.

    I suspect that if we realign incentives, we can actually 
find a way to benefit patients. I have learned in my--since 
graduating from med school way back in 1983 that oftentimes bad 
behavior is driven more by bad incentives than by bad actors. 
So, what can we do about those incentives?

    Tomorrow, we will continue our markup on bills addressing 
PBMs and generic drugs. The goal is making sure--to try and 
make sure that everybody has access to these drugs and that 
they can afford it. But today is our opportunity to inform our 
legislation.

    I am committed to working with my colleagues to find common 
ground on solutions that fulfill our objectives, and by the 
way, the President will sign into law and that the House of 
Representatives will pass.

    This should be our goal. Once more, thank you for being 
here. I look forward to your testimony as to how you propose we 
can lower costs for American families. With that, I yield.

    The Chair. Senator Cassidy, thank you very much. Our first 
witness is Mr. David Ricks. He is the Chair and Chief Executive 
Officer of Eli Lilly. Senator Braun, as I understand it, wanted 
to introduce Mr. Ricks, because he is from Indiana, where Eli 
Lilly is located. Senator Braun.

    Senator Braun. Thank you, Mr. Chairman, Ranking Member 
Cassidy. Yes, I would like to introduce Mr. David Ricks, fellow 
Hoosier, CEO of Eli Lilly and Company. Indiana is a place of a 
lot of companies that have loomed large, not only in 
pharmaceuticals. We are the biggest manufacturing state per 
capita in the nation.

    With experience ranging from sales to drug development, Mr. 
Ricks has served in a variety of domestic and global leadership 
roles with Lilly, most recently becoming its CEO in 2017. Eli 
Lilly was the first pharmaceutical manufacturer to commercially 
produce insulin and currently markets several forms of insulin.

    Thank you so much for agreeing to be here in person to not 
only discuss your products, but you and I have had many 
discussions on what ails the industry in general, from 
hospitals to insurance companies, to pharmacies, PBMs within 
it, even practitioners.

    A big lack of transparency, inherent competition that 
drives most other industries. So, thank you for being willing 
here today and to answer some of those questions.

    The Chair. Mr. Ricks, you are recognized.

 STATEMENT OF DAVID RICKS, CHAIR AND CHIEF EXECUTIVE OFFICER, 
            ELI LILLY AND COMPANY, INDIANAPOLIS, IN

    Mr. Ricks. Thank you, Chairman Sanders. Thank you, Senator 
Braun, for that introduction, Ranking Member Cassidy and 
distinguished Members of today's Committee. I am pleased to be 
here to participate in this hearing. My name is Dave Ricks. I 
am the Chairman and CEO----

    The Chair. Mr. Ricks, can you hold that mic a little bit 
closer to your mouth, please.

    Mr. Ricks. I am the Chairman and CEO of Eli Lilly and 
Company. I joined Lilly, an American company headquartered in 
Indiana, 26 years ago because I believed in our mission. 
Innovation is at the heart of what we do, particularly for 
people with diabetes. As has been said in 1920, type I diabetes 
was essentially a death sentence.

    The first animal derived insulins, which Lilly introduced, 
extended life expectancy to a person's 30's. Today, after a 
century of innovation, life expectancy is now well into a 
person's 60's, but we are not done. Diabetes still 
significantly reduces people's life expectancies. And even with 
modern insulins and devices, two-thirds of people struggle to 
keep their disease under control.

    There is more work to do, not only on diabetes, but on 
cancer, and on Alzheimer's, and other serious conditions. That 
is why Lilly invests 25 percent of our total revenue, this year 
$8.5 billion, into R&D that enables us to introduce new 
medicines. 19 In the last decade alone, including the world's 
first monoclonal antibody for COVID, and many more medicines 
coming in the pipeline.

    In fact, just last week, we shared exciting results from a 
new study, studying out one of our medicines in Alzheimer's 
disease, which followed billions of dollars in investment, 
literally decades of work, and several failures that preceded 
it. Of course, medicines do no good if people can't afford them 
and access them.

    That is why I am proud that we have led the industry in 
making insulin more affordable. Our efforts have driven what 
people pay for a month's supply of Lilly's insulin down to 
$20.48 per month, about $0.75 a day. And that was before our 
recent announcements, which will drive those averages even 
lower. We began these efforts years ago.

    Lilly hasn't raised the list price of any Lilly insulin 
since 2017, the year I became CEO. We have only cut them. In 
2016, we launched Basaglar, the first follow on biologic 
insulin in the United States at a discount to the original 
brand. In 2019, we launched Lispro, brought a box of it here 
with me today, a non-branded copy of our leading selling 
Humalog at a 50 percent discount.

    We cut that price to 70 percent and then May 1st, it is now 
$25 a vial. And when the insurance system was not working for 
some people who need insulin, we were the first company to cap 
their out-of-pocket costs at $35 per month, now automatic where 
we are technologically possible. And I believe we are still the 
only company that will cap all of our insulins at $35 per 
month.

    These efforts have saved people with diabetes last year 
$185 million, and year to date about 100,000 people per month, 
saving about $20 million for those 100,000 people. We have led 
the way on affordability against the headwinds of a health care 
system that unfortunately can incentivize others to prefer 
higher list price medicines.

    Higher list prices, allow for higher fees and rebates, 
which can increase patients' out-of-pocket costs while 
benefiting employers, insurance companies, and people who don't 
use medicines. Lilly's Lispro is just one of many examples.

    Even though it is identical to Humalog and costs 70 percent 
less, I have brought boxes of both here, only one in three 
people today in the United States have access to the lower 
priced Lispro, and a preference for higher prices over a lower 
priced product that is identical should never happen.

    The list prices for insulin over time gets a lot of 
attention. But even before a recently announced price 
decreases, our net price of Humalog, what we take home after 
rebates and discounts was about the same as when we launched in 
1996, accounting for inflation. Last year, about 80 percent of 
our list prices went to pay ever increasing fees and rebates to 
companies who don't invent, didn't develop, nor manufacture the 
medicine.

    With the remaining 20 percent, we cover the cost of making 
and distributing the product, which also supports about 4,000 
high paying manufacturing jobs here in America with full 
benefits and pensions. We finance our patient affordability 
commitments and also contribute 25 percent of that net revenue 
back into R&D for newer and better medicines, including 
insulin.

    Reforms are needed. We need a system that supports both 
world leading innovation and lower out-of-pocket costs for 
Americans. Those reforms must help patients at the pharmacy 
counter, while also incentivizing U.S. companies to continue 
investing in world leading amounts of R&D, which results in 
Americans having access to more and newer medications than any 
other country in the world.

    We are ready to continue to do our part at Lilly, and we 
are confident policy solutions are both simple and achievable. 
Thanks for having me today.

    [The prepared statement of Mr. Ricks follows.]
                   prepared statement of david ricks
    Chairman Sanders, Ranking Member Cassidy, and distinguished Members 
of the Committee, thank you for the opportunity to participate in 
today's hearing. My name is David Ricks. I'm the Chair and CEO of Eli 
Lilly and Company.

    I joined Lilly--an American company headquartered in Indiana--26 
years ago because I believed in Lilly's life-saving and life-sustaining 
mission. Innovation is at the heart of what we do, particularly for 
people with diabetes. In the early 1920's, people with type 1 diabetes 
had a life expectancy of only a handful of years after diagnosis. With 
the first animal-derived insulin, Lilly extended life expectancy into a 
person's thirties. Now, following a century of innovation, life 
expectancy for people with type 1 diabetes is in their sixties.

    But we're not done. Diabetes still significantly reduces a person's 
life expectancy. Even with modern insulin and devices, two thirds of 
people struggle to keep their disease under control. So there's more 
work to do, not only on diabetes, but also many other diseases like 
Alzheimer's and cancer.

    That's why Lilly consistently invests 25 percent of our total 
revenue into research and development--$7.1 billion last year and $8.5 
billion budgeted this year. That enables us to introduce new 
medicines--19 in the last decade, including the first Covid antibody 
therapy, and more medicines in the pipeline. Just last week, we shared 
exciting results from a study on a promising new Alzheimer's medicine, 
which followed approximately $8.5 billion in research and development 
for Alzheimer's and other neurodegenerative afflictions and literally 
decades of work, including previous late-stage failures of three other 
potential Alzheimer's medicines.

    Of course, new medicines do no good if people can't access them. 
That's why I'm proud that we've led the industry in making insulin 
affordable. Because of our efforts, people pay an average of $20.48 for 
a month's supply of Lilly insulin--less than 75 cents per day--and that 
was before we recently announced a new series of actions that will 
drive that average even lower.

    We began this effort years ago. Lilly hasn't raised the list price 
for any of our insulins since 2017, the year I became CEO. In fact, 
we've only cut them. In 2016, we launched the first follow-on biologic 
basal insulin in the U.S., Basaglar, at a discount to the original 
brand. In 2019, we launched Lispro, a nonbranded copy of our leading 
insulin Humalog, at a 50 percent discount, then later a 70 percent 
discount, and now only $25 per vial. And when we saw the insurance 
system was not always working for people who need insulin, we were the 
first and still only company to cap what people pay at $35 per month 
for all of our insulins--which is now automatic wherever possible--even 
when patients have no insurance or when their insurance would have 
forced them to pay much more. Our efforts are making a real impact--
saving people with diabetes over $185 million last year and, so far 
this year, we're helping over 100,000 people save $20 million each 
month.

    Lilly has led the way on affordability against the headwinds of a 
healthcare system that now incentivizes others to prefer higher list-
price medicines. Higher list prices allow for higher fees and rebates, 
which can increase patients' out-of-pocket costs while benefiting 
insurance companies, employers, and people who don't need medicines.

    Lilly's Lispro is just one of many examples. Unfortunately, many 
other actors still prefer the higher-priced Humalog (with its higher 
fees and rebates) to the lower-priced Lispro (with its lower fees and 
rebates). Today, only one in three people has access to Lispro through 
their insurance despite the fact that it cost 70 percent less and is 
identical to Humalog.

    A lot of attention has been focused on increases in the list price 
for insulins over time. But even before our recently announced price 
reductions, our net price for Humalog--what Lilly receives after paying 
fees and rebates--was about the same as when we launched it in 1996, 
adjusting for inflation. List-price increases in the past went almost 
entirely to paying ever-increasing fees and rebates. Last year, about 
80 percent of our insulin list prices went to paying fees and rebates 
to companies who didn't invent, develop, manufacture, nor study the 
medicine. Lilly got the remaining 20 percent. And with that 20 percent, 
Lilly not only covered the cost of making and distributing insulins--
including supporting 4,000 high-paying manufacturing jobs with full 
benefits and pensions here in America--but we also paid for our out-of-
pocket cap commitments and poured 25 percent of all of our revenues 
back into research and development for new medicines.

    Reforms are needed. We need a system that incentivizes both world-
leading innovation and lower out-of-pocket costs for Americans. Those 
reforms must help patients at the pharmacy counter, while also 
maintaining the incentive for U.S. companies to continue to invest 
world-leading amounts into research and development--an incentive that 
results in Americans having access to more and newer medicines than any 
other country. We're ready to continue to do our part, and we're 
confident that policy solutions that will address the real underlying 
problems are possible and relatively simple. We look forward to 
continuing this important dialog.
              A. Embracing the Next Century of Innovation
    Innovation is woven into Lilly's fabric. In 1923, we introduced the 
world's first commercially available insulin, which was animal based 
and crude by modern standards. In the decades that followed, we helped 
pioneer significant advancements to enhance the purity, concentration, 
and delivery of insulin. In 1982, we launched Humulin, the first 
genetically engineered human insulin (and the world's first medicine 
created using recombinant DNA technology), ending concerns about 
whether there would be enough animal-based insulin to serve the growing 
number of people with diabetes. In 1996, we launched a new genetically 
engineered insulin, Humalog, which provides tighter blood sugar control 
with a lower risk of hypoglycemia. And we've continued to innovate 
throughout the last decade, including launching the rapid-acting 
mealtime insulin Lyumjev in 2020, which begins working faster than 
other mealtime insulins.

    But our work is not done. Only one in three people living with 
diabetes has control over the disease. That's why we are not satisfied 
with treating people in the future with only the medicines available 
today. We are actively investing and working on new solutions for 
people with diabetes, that if successfully developed and approved, 
could make a significant impact. This includes a glucose-responsive 
insulin that can sense sugar levels in the blood and automatically 
activate as needed, and Basal Insulin Fc, a once-weekly basal insulin 
injection.

    We outpace our competitors by consistently investing 25 percent of 
our total revenue in research and development. We invested $7.1 billion 
in 2022, and we plan to invest $8.5 billion this year. We employ more 
than 5,000 people in the U.S. in pharmaceutical research and 
development activities, including a substantial number of physicians, 
scientists holding graduate or postgraduate degrees, and highly skilled 
technical personnel. These are good-paying American jobs for people 
doing really good things. Over the last decade, we introduced 19 new 
medicines, and we hope to launch several more by the end of this year.

    Lilly's investments cut across many major diseases like 
Alzheimer's, cancer, diabetes, and autoimmune diseases. Our 
neurodegeneration pipeline, for example, reflects thirty years and 
billions of dollars spent developing potential medicines for 
Alzheimer's and related afflictions--$8.5 billion in the last 15 years 
alone. We were proud to report, just last week, the exciting results of 
our Phase III clinical study for donanemab, our potential new 
Alzheimer's medicine, which will hopefully be approved by the FDA and 
covered by CMS soon. At 18 months compared to placebo, study 
participants on donanemab had a 40 percent less decline in their 
ability to perform activities of daily living, and participants on 
donanemab experienced a 39 percent lower risk of progressing to the 
next stage of disease. There's finally real hope on the horizon for 
patients and families ravaged by Alzheimer's.

    Lilly's new Alzheimer's medicine is a testament to American 
ingenuity and American capitalism. Without our market-based system, 
Lilly's efforts to find a solution for Alzheimer's would never have 
been possible. Along this multi-decade project, Lilly proceeded to 
extraordinarily expensive late-stage clinical trials with three other 
drugs that, unfortunately, ended in failure. But we persevered and 
continued to pour resources into the effort motivated by the promise of 
filling this vast unmet medical need, which finally led to the success 
for the field and for people living with Alzheimer's that we reported 
last week. And we hope that all Americans who need it--including those 
in Medicare--will benefit from it, if approved. Under a system of 
socialized medicine that some advocate--where the government imposes 
artificial price controls, and it guides, directly or indirectly, the 
direction of medical research--Lilly's Alzheimer's efforts would have 
not been possible.

    This experience is not unusual in the pharmaceutical industry. As 
with donanemab, all our groundbreaking medicines inevitably occur 
alongside exploration, trials, and billions of dollars in investment 
that do not result in FDA-approved medicines. The average cost to 
discover and develop a new medication is $2.6 billion, and the average 
length of time from discovery to the introduction of a new medicine is 
10 years. \1\ 90 percent of drug candidates fail. But we believe those 
costs and struggles are worth it: they yield newer and better medicines 
that once were inconceivable for diseases that were once untreatable. 
They save and improve the lives of the patients we exist to serve.
---------------------------------------------------------------------------
    \1\  Eli Lilly and Company, Key Facts (2023), https://bit.ly/
3Fy2lNl.

    Compared to those living in other countries, Americans benefit in 
unique ways from our market-based economy. Studies have shown that 
nearly 90 percent of new medicines launched are available to people in 
the United States, \2\ and Americans get access to those new 
medications within 4 months of a medicine's launch \3\--rates that far 
exceed any other country. For example, Canadians typically wait 17 
months to get access to new medicines and then only have access to 
about half of the newer branded medicines.
---------------------------------------------------------------------------
    \2\  ``New analysis shows that more medicines worldwide are 
available to U.S. patients,'' PhRMA, June 5, 2018, https://
catalyst.phrma.org/new-analysis-shows-that-more-medicines-worldwide-
are-available-to-u.s.-patients.
    \3\  Research and Development in the Pharmaceutical Industry, 
Congressional Budget Office, April 2021, https://www.cbo.gov/
publication/57126.

    We should aspire to have a system that incentivizes both world-
leading innovation and lower costs for patients. The U.S. market-based 
system produces the best results for patients because it efficiently 
allocates resources to accomplish breakthroughs that people need to 
survive and lead better lives. Alternative systems like socialized 
medicine starve innovation because price controls drain the incentive 
to make big and necessary investments, not to mention more intrusive 
---------------------------------------------------------------------------
tendencies to dictate research priorities.

    Simply put, new medicines and scientific breakthroughs like 
donanemab would not be possible under any other system. And experience 
elsewhere tells us these other systems don't work. As trends in Europe 
toward socialized medicine increased, research and development spending 
there migrated to the United States. For example, Lilly alone will 
likely spend about the same on research and development this year as 
the entire country of Germany, which had a gross domestic product of 
over $4.2 trillion. We should protect the current system that continues 
to support that level of investment into the next generation of 
medicines that many so desperately need--and we can do it while 
enacting reforms that protect patients at the pharmacy counter.

    Lilly prioritizes keeping as much of our research and development 
and manufacturing work in the United States as possible. We are proud 
to be a U.S.-based company--headquartered in Indianapolis for nearly 
150 years--with nine production, distribution, and corporate 
administrative sites in the United States, and research and development 
facilities in five different states. Over the past 3 years, Lilly has 
invested $6.4 billion in U.S.-based manufacturing sites to deliver 
medicines to people worldwide. In 2022, we committed to invest more 
than $2 billion in new facilities in Indiana to manufacture existing 
and future medicines and more than $1 billion in a new facility in 
North Carolina to manufacture medicines and devices. Just last month, 
we committed to investing an additional $1.6 billion in our new Indiana 
facilities to support the manufacturing of several medicines. Lilly is 
also the only major insulin manufacturer that has end-to-end supply 
chain capability for insulin within the United States.

    We are also proud of our research, development, and manufacturing 
to help Americans during the COVID-19 pandemic. We tested an existing 
medicine and developed new antibodies in record time, receiving 
Emergency Use Authorization for three COVID-19 therapies. Our 
manufacturing teams boosted Lilly's production of our COVID-19 
antibodies from zero doses to nearly one million by the end of 2020--
all while maintaining high quality standards. And we experienced no 
supply disruptions across our portfolio of medicines, despite 
unprecedented challenges.
  B. Insulin Affordability--$35 Insulin and Lilly's Industry-Leading 
                               Solutions
    We are tremendously proud of the work we have done to make Lilly's 
insulins affordable for everyone. Lilly led the way earlier this year 
in announcing we were reducing insulin prices, launching a new lower-
priced biosimilar, and enhancing our efforts to ensure that all people 
have affordable access, regardless of their insurance status. We 
announced we are cutting the list price of Humalog and Humulin, our two 
most-popular insulins, by at least 70 percent. We embraced competition 
by launching Rezvoglar, a biosimilar to, and interchangeable with, a 
competitor's basal insulin (Lantus), at a 78 percent lower price. We 
also lowered Lispro's list price again, now to $25 per vial, making it 
the lowest list-priced mealtime insulin available and less than the 
price of Humalog in 1999. And we enhanced our efforts to cap out-of-
pocket costs for all our insulins at $35 per month--a program we first 
introduced in 2020--by making it automatic for most people. That's $35 
for all our insulins, regardless of the number of pens or vials someone 
needs in a month.

    Our commitment to ensuring people have affordable access to insulin 
is not new. Over 25 years ago, in 1997, Lilly began supporting a 
separate charitable organization called Lilly Cares, which provides 
free Lilly medicines to people who qualify. Eligible people with a 
household annual adjusted gross income of up to 400 percent of the 
Federal poverty level, which for a family of four means an annual 
income of about $120,000, can receive insulin for free. \4\
---------------------------------------------------------------------------
    \4\  For more information about Lilly Cares, including available 
products and eligibility requirements, see LillyCares.com.

    Lilly has also introduced competition and lower list price 
insulins. In 2016, we launched the first follow-on biologic basal 
insulin, Basaglar, at a significant discount to Sanofi's Lantus, which 
created competition in the long-acting insulins market. In 2019, we 
introduced more competition, this time competing with ourselves, when 
we introduced Lispro. We launched Lispro at half of Humalog's list 
price, and then cut Lispro's list price again to 70 percent less than 
Humalog. Effective May 1 of this year, we further reduced Lispro's list 
price to $25-per-vial, which is less than the list price of Humalog in 
---------------------------------------------------------------------------
1999.

    Unfortunately, lower list prices don't necessarily translate to 
lower costs for people because the lower-priced medicines are not 
always available to insured patients due to their insurance plan 
design. Lilly has taken the lead in helping those left with high out-
of-pocket costs. In early 2020, we introduced the Lilly Insulin Value 
Program. Under this program, people who have commercial insurance or no 
insurance at all can visit InsulinAffordability.com, click two 
checkboxes, and within seconds receive a savings card to fill their 
entire monthly prescription of any Lilly insulin for $35. And those 
without internet access can get the $35 card by calling the Lilly 
Diabetes Solution Center at 1-833-808-1234. Our $35 program does not 
require any application, waiting period, identifying information, or 
income thresholds. We made this solution even easier earlier this year 
by automating the $35 cap wherever possible for people with commercial 
insurance, so they no longer need to present the savings card to their 
pharmacist or even know the program exists. Whatever their insurance 
company would have charged them for their monthly supply of Lilly 
insulin, we buy it down to $35 automatically, with no action needed by 
the person filling the prescription.

    We also partnered with the Centers for Medicare and Medicaid 
Services several years ago to pioneer the Medicare Part D Senior 
Savings Model, expanding our $35 solutions to Medicare. Under this 
program, seniors in participating plans can fill their insulin 
prescriptions for no more than $35 per month. This program is now the 
law of the land, as Congress has made Lilly's $35 monthly cap permanent 
for seniors in Medicare Part D. Congress can go further. We encourage 
Congress to make the same $35 monthly cap--which Lilly already 
provides--permanent for people with commercial insurance or no 
insurance at all, too.

    Our programs work. Last year, our commitment to cap insulin costs 
saved people with diabetes over $185 million (which Lilly covers). And 
so far this year, each month, it saves 100,000 patients about $20 
million. Lilly regularly supports these people at a loss--paying 
rebates and paying down someone's prescription at the pharmacy--
sometimes losing hundreds of dollars on a prescription to ensure 
someone doesn't have to pay over $35 at the pharmacy counter. Because 
of our efforts over the past few years, in 2022, people paid an average 
of $20.48--less than 75 cents per day--for their entire monthly supply 
of Lilly insulin, and we expect that number to decrease further this 
year.
   C. Insulin Highlights the Broader Structural Change that Is Needed
    Unfortunately, one company alone cannot ensure everyone has 
affordable access to the medicines they need. Our healthcare system 
creates an incentive for other actors to prefer higher list prices. 
This incentive then shifts healthcare costs onto people with chronic 
illnesses to support lower overall premiums for those fortunate to be 
healthier--the opposite of how insurance is supposed to work. This 
isn't right. Until we address those underlying structural issues, we 
will not fix the problems at the root of high out-of-pocket costs.

    Let me explain why. The vast majority of people have insurance 
coverage. They pay premiums, and their insurance is supposed to cover 
the cost of their medicines. But often it doesn't. People increasingly 
need to pay for more of their medicines out of pocket, especially when 
they have a high deductible health plan, until they hit their 
deductible.

    At the same time, Lilly wants to ensure that people have access to 
our medicines by including our medicines on formularies--the list that 
determines whether a person's medicines are covered by insurance at 
all. Getting on formulary is the best way to ensure most people can 
access our medicines affordably--once again, that's how insurance is 
supposed to work. But that requires manufacturers to pay ever-
increasing rebates and fees, which can place upward pressure on 
medicines' list prices. If we cannot offer competitive rebates, our 
medicines may be excluded from formularies, and people cannot access 
them. Last year alone, to ensure our medicines were covered, Lilly paid 
more than $12 billion in rebates for all our medicines, and $1 billion 
in fees.

    Last year, about eighty cents of every dollar spent on our insulins 
went to pay rebates and fees. Only 20 cents of each dollar went to 
Lilly, even though we create insulin and employ thousands of employees 
in the United States, who receive good salaries and benefits (including 
pensions) and work 24 hours a day to manufacture it. Our net price for 
insulin--again, what Lilly receives after paying increasing rebates and 
fees--is about the same today as when we launched Humalog in 1996 after 
adjusting for inflation. List price increases, which have not occurred 
after 2017, went to increases in rebates and fees to make sure as many 
people as possible had access to our insulin through their insurance.

    This system does not help people who rely on our medicines. Some 
say that most of the rebates are passed on to health plans. We don't 
have the visibility to verify that, but either way it's one step short. 
Not enough of those savings are passed along to people at the pharmacy 
counter who are prescribed the rebated medicine. Instead, others in our 
healthcare system say they often use those dollars to lower overall 
premiums. In the case of chronic medicines like insulin, where people's 
prescriptions are generating rebates that don't help them at the 
pharmacy counter, this dynamic effectively ``transfer[s] financial 
resources from sick patients to healthy premium-paying beneficiaries--
the opposite of what insurance is supposed to do.'' \5\ The chronically 
ill need our system's support; they cannot be responsible for 
subsidizing the healthy.
---------------------------------------------------------------------------
    \5\  Testimony of Erin Trish, Ph.D., Senate Committee on Commerce, 
Science, and Transportation (Feb. 16, 2023).

    Some say manufacturers like Lilly should simply lower their list 
prices on insulin. We tried. But our experience proves that won't solve 
the problem. Again, in 2019, we launched Lispro, a nonbranded version 
of our most popular insulin, Humalog, for half the list price, and 
later further dropped its list price to 70 percent below Humalog and 
now only $25 per vial. We hoped others would be eager to make this 
lower-priced option available to people because it would reduce their 
out-of-pocket costs in the deductible phase of a high deductible health 
plan. Unfortunately, they did not. Today, only one in three insured 
Americans has a policy that covers Lispro, leaving patients with only 
higher-priced options. That's because Lispro's lower list price means 
other actors receive lower rebates and fees--fees tied to a percentage 
basis to the list price--even though the net cost to the health plan 
should be the same (or lower) regardless of whether they choose the 
---------------------------------------------------------------------------
high-or low-list price version of the same medicine.

    Our experience refutes the argument some have made that our recent 
decision to reduce insulin prices shows we could always have done so 
without risking access for people with diabetes. In fact, it proves we 
were right to be worried. While many factors went into our recent 
decision, we saw an opportunity to accomplish our longstanding goal of 
delivering lower list-price insulins due to changes in market dynamics 
that we hoped might reduce the risk that our inability to offer high 
rebates would result in exclusion of our medicines from formularies. 
Still, in leading the way, we took a risk that lower prices would 
result in exclusion. We hope that doesn't happen.

    The preference for high list prices is not unique to insulin or to 
Lilly. The link between rebates and higher list prices has played out 
with many other medicines, and this dynamic has been documented by 
recent government reports discussing medicines that treat asthma \6\ 
and hepatitis C. \7\ Earlier this year, for example, Amgen launched a 
Humira biosimilar at two different prices: 5 percent and 55 percent 
discount off of Humira's list price--the exact same medicine at two 
prices.
---------------------------------------------------------------------------
    \6\  Medicare Payment Advisory Committee (MedPAC).Analysis of Part 
D Data on Drug Discounts and Rebates (Sept. 30, 2022), https://
pink.pharmaintelligence.informa.com/-/media/supporting-documents/pink-
sheet/2022/10/medpac-slides-29-sept-2022.pdf-rev-
293b80c5a8634f4985d4b69437b33593&hash-5BE40A6DF109D4432E1E09852C46DC7F.
    \7\  Office of the Inspector General, HHS. Part D Plan Preference 
for Higher-Cost Hepatitis C Drugs Led to Higher Medicare and 
Beneficiary Spending (Aug. 2022), https://oig.hhs.gov/oei/reports/OEI-
BL-21-00200.pdf.

    It was widely reported that other actors would likely favor the 
higher-priced option--just like they favored Humalog over Lispro. \8\ 
These examples show that, while some say they want lower list prices, 
their actions show they often deny or limit coverage of lower-cost 
medicines, including generics and biosimilars.
---------------------------------------------------------------------------
    \8\  Silverman, Ed. Amgen pricing for its Humira biosimilar may 
benefit PBMs and insurers more than patients (Jan. 31, 2023), https://
www.statnews.com/pharmalot/2023/01/31/amgen-humira-biosimilar-pbm-
rebates-insurers/; see also Brennan, Zachary. Amgen launches the first 
US Humira biosimilar at two different list prices (Jan. 31, 2023), 
https://endpts.com/amgen-launches-the-first-us-humira-biosimilar-at-
two-different-list-prices/.
---------------------------------------------------------------------------
      D. We Can Achieve Meaningful Solutions through Simple Fixes
    As these dynamics show, the affordability solutions that Lilly has 
implemented are a band-aid on a much larger problem. But fixes are not 
complicated, and we can have a system that incentivizes both world-
leading innovation and lower costs for Americans. Reforms that target--
and eliminate--the incentive for high list prices are necessary and can 
help provide long-term solutions for patients' out-of-pocket costs. 
That is why we advocate for policies that untether fees from list 
prices, ensure rebates for a medicine go directly to the people who use 
it, and increase transparency in the healthcare system.

    Delink Fees and Price. We support removing the incentive for high 
prices by delinking other actors' revenue streams from a medicine's 
list price. Fees, rebates, and other payments in the healthcare system 
are often calculated as a percentage of list price. Higher prices mean 
they make more money, but the same services are performed whether a 
medicine is $10 or $100. We can fix that problem by ensuring that 
payments are based on the services actually provided, not a medicine's 
list price.

    Ensure People Benefit from Rebates. No one should have to pay more 
for their medicine than their insurer pays. Payer negotiated discounts 
are typically passed fully to patients for all healthcare services, but 
not for medicines. Lilly believes any rebate it pays should be passed 
through to people at the pharmacy counter to offset the cost of their 
medicines, not to support someone's bottom line or to subsidize the 
healthy. Some states have already implemented this rule by requiring 
that rebates for any specific medication directly reduce out-of-pocket 
costs for the people using that medication. This approach would enable 
manufacturers' price concessions to flow directly to people and lower 
their costs at the pharmacy counter. Lilly has long supported this 
approach to reducing out-of-pocket costs, including in the context of 
the proposed rebate rule that was proposed 4 years ago and then 
legislatively delayed. \9\
---------------------------------------------------------------------------
    \9\  See HHS, Proposed Rule Fraud and Abuse; Removal of Safe Harbor 
Protection for Rebates Involving Prescription Pharmaceuticals and 
Creation of New Safe Harbor Protection for Certain Point-of-Sale 
Reductions in Price on Prescription Pharmaceuticals and Certain 
Pharmacy Benefit Manager Service Fees, 84 Fed. Reg. 2340 (Feb. 6, 
2019).

    Cost-Sharing Reform. Lilly supports reforming the cost-sharing 
structures in insurance plans. This could take the form of expanding 
the preventive medication lists on insurance formularies to include 
insulin, which would reduce the amount that people spend on insulin in 
the deductible phases of their plans and eliminate any risk that they 
may be exposed to the full list price for their medications. Today, 
many plans exempt insulin from the deductible requirement by including 
it on a preventative medicines list, which is an important step toward 
a more sustainable model that mitigates potentially high out-of-pocket 
costs that people with chronic illnesses may face. Finally, Lilly also 
supports legislation like the Affordable Insulin Now Act, which would 
cap the monthly out-of-pocket costs of all insulins at $35--a Federal 
solution that would make permanent part of what Lilly has already done 
on its own. Access to $35 insulin should not depend on whether the 
---------------------------------------------------------------------------
person has Medicare, commercial insurance, or is uninsured.

    Increase Transparency. We support additional transparency in the 
system. We commend legislation like the Pharmacy Benefit Manager 
Transparency Act of 2023, which encourages fair and transparent 
practices that benefit local pharmacies and consumers.

    We at Lilly appreciate that the Committee shares our commitment to 
insulin affordability, and we will continue to do our part. We stand 
ready to work with this Committee--and all other actors and 
policymakers who share this goal--to find lasting and meaningful 
solutions.

    Thank you for the opportunity to be here today. I look forward to 
your questions.
                                 ______
                                 
    The Chair. Mr. Ricks, thank you very much. Our next witness 
is Mr. Paul Hudson, who is the Chief Executive Officer of 
Sanofi. Mr. Hudson, thanks for being with us.

  STATEMENT OF PAUL HUDSON, CHIEF EXECUTIVE OFFICER, SANOFI, 
                         PARIS, FRANCE

    Mr. Hudson. Chairman Sanders, Ranking Member Cassidy, 
Members of the Committee, thank you for the opportunity to be 
here today. I am here to talk about what I hope is our shared 
goal, to deepen our understanding about how the health care 
system works and what can be done to improve it for patients. 
It is also an opportunity to dispel some misconceptions.

    For example, insulin is sometimes described as a 100-year-
old drug, but much like the cars bear little resemblance to the 
Model T, today's insulins are the result of years of research 
that have delivered significant improvements to patient 
outcomes and quality of life.

    At Sanofi, delivering transformative medicines for patients 
is our strategic imperative, and it is the role that we, and 
the innovative biopharmaceutical industry, uniquely play for 
society. Shortly after I arrived at Sanofi, I committed to 
refocus our research and development on medicines with the 
potential to deliver first in class and best in class 
treatments across areas of unmet need.

    Today, I am very proud of the progress we made in support 
of these goals. Earlier this year we announced positive results 
from a phase 3 study in COPD, the third leading cause of death 
worldwide. If approved, this medicine will be the first 
innovation for patients suffering from this disease in over a 
decade.

    This fall, we anticipate the approval for the first 
immunization against RSV disease for all infants. With this 
immunization, the burden of RSV on providers and its toll on 
families may never happen again. Finally, we also recently 
launched Tzield, the first medicine proven to delay the onset 
of type I diabetes.

    Over the next 50 months, we will learn the results of 
another 36 clinical studies, each with the potential to become 
a first or best in class medicine or vaccine. But these 
advances mean nothing if patients can't get the medicines they 
need. This is why I am equally proud of Sanofi's long-standing 
commitment to affordability.

    We are transparent about our approach to pricing, including 
limiting our price increases, making medicines affordable 
through our patient assistance programs such as capping out-of-
pocket costs on insulin at $35 for the uninsured, and launching 
low price versions of our insulins.

    We recently announced our decision to reduce the list price 
of Lantus by 78 percent. This was not the first time we have 
offered a low-priced medicine to the system. Unfortunately, 
each time these medicines have received very limited coverage, 
resulting in limited benefits to patients. Because the system 
is largely driven by the financial structure that links rebates 
and fees to the list price.

    For all the focus on the price of insulin, the list price 
is not the amount the system pays. In 2022, 84 percent of our 
gross insulin sales were returned to the system as rebates and 
fees--$0.84 on the dollar. In fact, since 2012, the average 
price of Lantus for commercial insurance and Medicare Part D 
plans has dropped by over 50 percent.

    Yet out of pocket costs for people in these plans has 
increased by 45 percent. Today, the average amount the system 
pays for Lantus is lower than it was when it launched in 2001. 
Simply stated, while competition is working to drive down 
insulin prices for the system, those savings aren't reaching 
many patients.

    Why aren't patients benefiting from the lower prices at the 
pharmacy counter? Well, today there are just three players in 
the system that cover 80 percent of American lives. These 
consolidated entities encompass pharmacy benefit management, 
health insurance, specialty pharmacies, and group purchasing 
organizations.

    This vertical integration gives these corporations near-
total control over the products that the patients can access 
and the price they have to pay. And each of these integrated 
entities benefits from the selection of high-priced products on 
formularies because the rebates and fees they receive are 
calculated as a percentage of the list price. I know the 
Committee is actively looking at solutions.

    We welcome changes that will make the system work better 
for patients, while protecting the innovation ecosystem that 
allows new miracles to be developed and delivered to patients.

    We have contributed in the past and we are willing to do so 
again. It starts with a holistic approach that fixes the 
misaligned incentives that drive the system's preference for 
high list prices. Specifically, delinking fees from the list 
price, and requiring rebates to be used to lower prescription 
drug costs for patients at the pharmacy. Otherwise, I simply 
worry that policy reforms will do little to help patients.

    Thank you again. I look forward to answering your 
questions.

    [The prepared statement of Mr. Hudson follows.]
                   prepared statement of paul hudson
    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee, thank you for the opportunity to appear before the Senate 
Committee on Health, Education, Labor, and Pensions to discuss issues 
related to pricing, affordability, and patient access to insulin in the 
United States. I am Paul Hudson, the Chief Executive Officer of Sanofi.

    I am here today to have an open discussion about the current system 
for pricing and accessing insulins in the U.S., the actions we have 
taken to improve patient access and affordability to our insulins, and, 
most importantly, what more can be done to make the system work better 
for patients and ensure every patient has affordable access to insulin.

      I. Chasing the Miracles of Science to Improve People's Lives

    At Sanofi, we work passionately to prevent, treat, and cure illness 
and disease, understand and solve health care needs of people across 
the world, and transform the practice of medicine. Our focus spans 
therapeutic areas, including immunology, oncology, rare diseases, rare 
blood disorders, neurology, diabetes, and cardiovascular diseases, as 
well as vaccines.

    We employ approximately 14,000 professionals in the U.S. in a broad 
range of critical roles, including research and development, 
manufacturing, and business operations. Our most significant U.S. 
presence is in Massachusetts, where we are one of the largest employers 
in the life sciences industry, and in New Jersey. We also have major 
research and development (R&D), manufacturing, and business operations 
in Pennsylvania and Tennessee.

    Last year, Sanofi spent more than $7 billion globally on R&D, 
reflecting our commitment to pursuing first-in-class and best-in-class 
medicines and vaccines that have the greatest potential to transform 
the practice of medicine, improve peoples' lives, and protect public 
health. With a strong focus on difficult-to-treat diseases and 
immunization, our R&D pipeline includes 84 clinical-stage projects, 26 
of which are in phase 3 or have been submitted to regulatory 
authorities for approval.

    Today, I am very proud of the progress we've made. Earlier this 
year, we announced positive results from a Phase 3 study in COPD, the 
third leading cause of death worldwide. If approved, this medicine will 
be the first innovation for patients suffering from this disease in 
over a decade. This fall, we anticipate approval for the first 
immunization against RSV disease for all infants. With this 
immunization, the burden RSV placed on providers and its toll on 
families may never happen again. Finally, we also recently launched 
Tzield, the first medicine proven to delay the onset of type 1 
diabetes.

    These treatments directed to meet unmet patient needs serve as an 
important reminder of the importance of fostering a policy environment 
that makes these breakthroughs possible.

    Our responsibility includes demonstrating the value of our 
medicines through clinical data and real-world evidence, assuming 
massive risk to discover, develop, and deliver the medicines and 
vaccines that solve meaningful health problems for patients, and to 
enable continued investment in the innovation cycle.
                       II. Evolution in Insulins
    Sanofi's innovations in diabetes, and, specifically, for insulin, 
have been significant. Much like modern cars bear little resemblance to 
Ford's Model T, the variety of insulin products available for diabetes 
patients today reflects years of research that have led to significant 
improvements over early formulations.

    The earliest insulin preparations were limited by their short 
duration of action, requiring patients to inject themselves multiple 
times a day and wake up at night for injections to control blood 
glucose levels.

    We are proud at Sanofi of our innovation history in insulin and the 
meaningful ways in which this has transformed the standard of care for 
patients, from the introduction of Lantus, which provided significant 
improvements in basal insulin levels, to the introduction of Toujeo, a 
next generation basal insulin that more closely mimics the body's 
endogenous insulin secretions, among others. In addition to delivering 
meaningful innovation in the types of insulin available to patients, we 
are proud of the role we have played in transforming the patient 
experience through the development of devices to ease the daily burden 
of insulin administration, allowing for fewer injections and, in some 
cases, fewer refills and related patient copays.

    Today, our goal is to transform diabetes care by treating not just 
symptoms but addressing the underlying disease. We are attempting to 
understand and disrupt the immunological triggers for the development 
of diabetes through several partnerships, including the recent launch 
of a groundbreaking medicine TZIELD, which is approved in the U.S. as 
the first and only therapy to delay the onset of Stage 3 type 1 
diabetes in adults and pediatric patients aged 8 years and older with 
Stage 2 type 1 diabetes.

            III. Sanofi's Commitment to Responsible Pricing

    Pharmaceutical innovation brings value to patients, our society, 
and our health care systems. Our responsible approach to pricing 
reflects our medicines' value, and our commitment to patient access and 
to minimizing our contribution to health care inflation.

    In May 2017, Sanofi announced our commitment to sustainable pricing 
through our progressive and industry-leading principles. This 
commitment includes transparency to help stakeholders understand our 
pricing decisions and to advance a more informed discussion regarding 
our approach to pricing our medicines. \1\
---------------------------------------------------------------------------
    \1\  For more information on our Responsible Pricing policies and 
initiatives, please see our ``Sanofi 2023 Pricing Principles Report,'' 
at https://www.sanofi.us/dam/jcr:356cc1f592dd47a19770-ba60dfdfab1e/
Sanofi2023-Pricing-Principles-Report.pdf.

    We hold ourselves to a rigorous and structured process, that 
includes consultation with external stakeholders, when we set the price 
---------------------------------------------------------------------------
of a new medicine. Our approach considers the following factors:

          A holistic assessment of value, including (1) 
        clinical value and outcomes, or the benefit the medicine 
        delivers to patients, and how well it works compared to 
        standard of care treatments; (2) economic value, or how the 
        medicine reduces the need--and therefore costs--of other health 
        care interventions; and (3) social value, or how the medicine 
        contributes to quality of life and productivity. Our 
        assessments rely on a range of internal and external 
        methodologies, including health technology assessments (HTAs) 
        and other analyses that help define or quantify value and 
        include patient perspectives and priorities.

          Similar treatment options available or anticipated at 
        the time of launch, in order to understand the landscape within 
        the disease areas in which the medicine may be used.

          Affordability, including the steps we must take to 
        promote access for patients and contribute to a more 
        sustainable system for payors and health care systems.

          Unique factors specific to the medicine at the time 
        of launch. For example, we may need to support ongoing clinical 
        trials to demonstrate the longer-term outcomes of our 
        medicines, implement important regulatory commitments, or 
        explore opportunities to improve care management/patient 
        experience and help decrease the total cost of care.

    When evaluating whether to change the list price of any of our 
medicines, including our insulin products, we consider four factors:

          Our ambition to chase the miracles of science to 
        improve people's lives and ensure patients have access to the 
        medicines they need now and in the future;

          Patient affordability;

          Government policies, including inflation penalties 
        enacted under the Inflation Reduction Act; and

          Evolving trends in the marketplace.

    In 2020, 2021, and 2022, Sanofi did not increase the list price of 
any of its insulin products. \2\
---------------------------------------------------------------------------
    \2\  Price increases on Sanofi's combination product, Soliqua, 
have been within the National Health Expenditures (NHE) growth rate, a 
measure of medical inflation.

    The table and graph below demonstrate how our responsible approach 
to pricing has been put into action, with limited list price increases 
resulting in an average aggregate net price decline every year since 
Sanofi started reporting data in 2017--even as consumer inflation has 
---------------------------------------------------------------------------
increased prices on other goods and services:


  The net price paid to Sanofi for our products has declined for seven
                           consecutive years:
------------------------------------------------------------------------
                       Average Aggregate List     Average Aggregate Net
        Year                    Price                     Price
------------------------------------------------------------------------
2016                  4.0 percent INCREASE      42.1 percent DECREASE
------------------------------------------------------------------------
2017                  1.6 percent INCREASE      8.4 percent DECREASE
------------------------------------------------------------------------
2018                  4.6 percent INCREASE      8.0 percent DECREASE
------------------------------------------------------------------------
2019                  2.9 percent INCREASE      11.1 percent DECREASE
------------------------------------------------------------------------
2020 \3\              0.2 percent INCREASE      7.8 percent DECREASE
------------------------------------------------------------------------
2021                  1.5 percent INCREASE      1.3 percent DECREASE
------------------------------------------------------------------------
2022                  2.6 percent INCREASE      0.4 percent DECREASE
------------------------------------------------------------------------
------------------------------------------------------------------------
\3\  Price increases or reductions that are taken mid-year may have an
  impact in two calendar years. In our 2019 pricing report, Sanofi
  announced that it took a price reduction on Admelog (insulin lispro
  injection) 100 Units/mL in July 2019. The 2020 carryover impact of
  that change is not included in the 2020 Average Aggregate List Price
  above. If included, the 2020 Average Aggregated List Price change vs.
  2019 would have been effectively zero percent, and the Average
  Aggregate Net Price would decrease by 8.0 percent.


    U.S. Portfolio Annual Aggregate Price Change from Prior Year \4\
---------------------------------------------------------------------------
    \4\  Aggregated across Sanofi's prescription portfolio.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
    
---------------------------------------------------------------------------
                  A. List Prices versus Net Prices

    While list price often receives the most attention, it simply 
reflects the initial price Sanofi sets for a medicine. It is not the 
amount Sanofi receives, nor the price typically paid by government and 
commercial insurers, employers, pharmacy benefit managers (PBMs), or 
patients. Manufacturers, including Sanofi, pay significant discounts, 
rebates and fees--often as a percentage of a medicine's list price--to 
different stakeholders across the health care system with the goal of 
ensuring our medicines are available to patients at affordable prices. 
Payors, including their PBMs and government and private insurance 
plans, ultimately decide which medicines to make available to patients 
through their plans in part based on the discounts and rebates we give 
them for each of our medicines. In 2022 in the U.S., across all insulin 
medicines, Sanofi returned 84 percent of our gross insulin sales to 
payors as rebates.

    Due to increased competition, including from biosimilars, the 
growth of rebates for insulins has been significant. Sanofi is 
committed to making transparent both the average aggregate list and net 
price changes across its portfolio to help illustrate how revenue 
accrues to Sanofi versus other parts of the pharmaceutical supply 
chain, highlighting our discrete role in the broader U.S. health care 
environment and enabling a better-informed discussion on solutions to 
improve patient access and affordability. Between 2012-2022, the net 
price for commercial insurance and Medicare Part D plans for our most 
prescribed insulin, Lantus, has fallen by 55 percent. In fact, the 
average net price of Lantus is lower today than it was in 2004.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


  B. The Growing Disconnect Between Net Prices and Patient Out-Of-
                              Pocket Costs
    Unfortunately, there is a growing disconnect between net prices and 
patient out-of-pocket costs.

    Indeed, despite the significant decrease in net price, the average 
out-of-pocket costs for Lantus for patients with commercial insurance 
and Medicare have risen approximately 45 percent since 2012. Although 
PBMs frequently pass rebates on to their plan clients, health plans are 
placing more of the cost burden on patients through benefit designs 
that include high deductibles, coinsurance, and multiple cost-sharing 
tiers--often coupled with narrower drug formularies offering fewer 
choices in covered medicines.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


    For individuals on health plans provided by employers, average 
patient spending on deductibles has increased by 61 percent from 2012 
to 2022. \5\ Such high cost-sharing, particularly for highly rebated 
therapies like insulin, creates a financial barrier for patients, 
making it difficult to obtain essential treatments without the 
manufacturer's financial assistance programs. Rather than lowering out-
of-pocket costs for medicines, plans often use rebates to subsidize 
premiums or other costs. As a result, the chronically ill in this 
country subsidize insurance costs for the healthy.

    \5\  Kaiser Family Foundation (KFF), 2022 Employer Health Benefits 
Survey (Oct. 27, 2022), https://www.kff.org/report-section/ehbs-2022-
summary-of-findings/.


    At the same time, there has been significant consolidation across 
the system. As a result, PBMs, insurers, wholesalers, specialty and 
retail pharmacies, group purchasing organizations, and, more recently, 
provider groups, are now increasingly under common corporate ownership, 
with three consolidated entities now covering 80 percent of American 
---------------------------------------------------------------------------
lives.

    In addition to rebates, many of these intermediaries require 
manufacturers to pay fees, and other payments based on a percentage of 
a medicine's list price which are increasing in scope and amount. 
Today, we pay administrative fees, data fees, and GPO fees, among 
others, to ensure access to our medicines. Over the past 10 years, both 
the scope and quantity of these fees have grown and are an increasing 
source of revenue for the various intermediaries in the system \6\.
---------------------------------------------------------------------------
    \6\  https://wendellpotter.substack.com/p/unitedhealth-cvsaetna-
cigna-pulled.

    Can the system do more to use the value extracted from 
manufacturers to lower costs for all patients at the pharmacy counter? 
We believe the answer is yes. We support policies requiring all fees to 
be calculated based on a flat payment, otherwise the incentive in the 
system of high list prices will continue.
                 C. Sanofi's Lower List Price Insulins
    Sanofi's recent announcement regarding lowering the list prices of 
Lantus and Apidra is just the latest in a series of actions we have 
taken to introduce lower list price products. Sanofi has previously 
launched two insulin products at prices well below other available 
therapies, but as described below, our experience demonstrates that the 
current incentives in the system led to limited uptake of our lower 
list price options.

    In 2018, Sanofi launched Admelog, a follow-on biologic to Eli 
Lilly's Humalog, at a list price that was 15 percent lower than the 
reference product. In July 2019, Sanofi reduced the list price of 
Admelog by 44 percent and then again by another 25 percent in January 
2022. Despite Admelog launching at the lowest list price among 
mealtime insulins and subsequent list price cuts, we continue to see 
very limited coverage of Admelog by PBMs and health plans.

    Similarly, in June 2022, we launched the unbranded biologic Insulin 
Glargine Injection 100 Units/mL (U-100)--an insulin identical to 
Lantus--at a list price 60 percent less than the 2022 list price of 
Lantus. As with Admelog, commercial and Medicare coverage for our 
unbranded Insulin Glargine Injection has been limited, with less than 
25 percent of commercial and 5 percent of Medicare Part D plans 
choosing to cover the lower list price version in 2023, even though we 
offered this version at a similar net price to Lantus.

    It appears that the reason these low-priced options have not had 
broad uptake in the system stems from the precise issues outlined 
above: because many intermediaries in the pharmaceutical supply chain 
require manufacturers to make payments based on a percentage of a 
medicine's list price, rather than as a flat fee, they generate more 
revenue from high list price medicines. These perverse incentives drive 
the system's preference for higher cost medications, even if some 
patients have to pay more out-of-pocket. Until there is a commitment by 
the full supply chain to make the system work better for patients or 
policies are enacted to remove these perverse incentives, the reality 
is that lower list prices will have limited benefit for patients and 
may lead to reduced coverage and access for lower-priced products.
  IV. Sanofi's U.S. Affordability and Access Programs and Initiatives 
                    Related to Diabetes and Insulin
           A. Sanofi's Affordability Programs and Initiatives

    As stated above, systemic reform is necessary so that patients can 
access lower costs at the pharmacy counter. But these challenges have 
not stopped Sanofi from doing our part: within the confines of the 
system, we have developed and evolved a suite of innovative and 
patient-informed savings programs to help people reduce their 
prescription medicine costs, regardless of their insurance status or 
income level. Each of our programs is tailored to a specific population 
and designed within the parameters of U.S. legal and regulatory 
requirements. We broadly inform patients and providers about the 
availability of these programs through a number of different avenues 
and continue to look for additional ways to educate the public about 
their availability so that all eligible patients have access to them.

    We are proud that our actions to improve access and affordability 
have benefited millions of patients, but we are not satisfied stopping 
here--we are continually listening to patients, patient advocates, 
caregivers, and others to better understand additional actions we could 
take to address ongoing and/or emerging access or affordability 
challenges. As we have done several times in the past, Sanofi will 
continue to review and evolve these programs to better serve and 
improve affordability for our diabetes patients.
                    1. Copayment Assistance Programs
    Sanofi offers copayment assistance programs for its insulins and 
other products covered on commercial formularies. These programs aim to 
lower out-of-pocket costs for commercially insured patients regardless 
of income level, and eligible patients can enroll online or over the 
phone in only a few minutes. \7\ Through these programs, in 2022, the 
majority of participating patients paid $15 or less for their diabetes 
medicines. Beginning January 1, 2024, all commercially insured patients 
who fill their Lantus prescriptions at participating pharmacies will 
be auto-enrolled in this program and will not pay more than $35 for a 
monthly supply.
---------------------------------------------------------------------------
    \7\  U.S. Department of Health and Human Services' Office of the 
Inspector General (HHS-OIG) has issued guidance stating its view that, 
under the Federal Anti-Kickback Statute, manufacturers cannot offer co-
pay support through manufacturer-sponsored programs for prescriptions 
covered by Federal healthcare programs, such as Medicare and Medicaid. 
See HHS-OIG, ``Special Advisory Bulletin: Pharmaceutical Manufacturer 
Copayment Coupons'' (May 2014), available at https://www.oig.hhs.gov/
fraud/docs/alertsandbulletins/2014/SAB-Copayment-Coupons.pdf. 
Consistent with this guidance, Sanofi does not make its co-pay card 
programs available to patients covered by Federal healthcare programs. 
Sanofi supports policy changes that would expand these financial out-
of-pocket support programs to all patients who might benefit from copay 
assistance.

    In 2022, across Sanofi's diabetes medicines, patients used a Sanofi 
copay assistance card more than 582,000 times at the pharmacy counter, 
saving more than $70 million.
                   2. Insulins Valyou Savings Program

    In 2018, Sanofi launched the Insulins Valyou Savings Program to 
lower out-of-pocket costs for uninsured patients who pay cash for their 
insulin. This program helps patients, regardless of income level, who 
are exposed to high out-of-pocket prices at the pharmacy counter and 
who do not qualify for Sanofi's free drug or other patient assistance 
programs. In June 2019, Sanofi expanded this program to provide 
eligible patients with a predictable and affordable monthly out-of-
pocket cost for any combination of Sanofi insulins, regardless of the 
quantity they need.

    Today, our Insulins Valyou Savings Program allows uninsured 
patients with a valid prescription to buy any combination and amount of 
Sanofi insulins (Lantus, Insulin Glargine Injection, Toujeo, 
Admelog, and Apidra) for $35 per 30-day supply. \8\ Eligible patients 
can enroll online or over the phone in only a few minutes.
---------------------------------------------------------------------------
    \8\  Additionally, through the Soliqua co-pay card, uninsured 
patients can pay $99 per box of pens for up to two boxes of pens for a 
30-day supply.

    In 2022, patients used the Insulin Valyou Savings program more than 
---------------------------------------------------------------------------
98,000 times, resulting in savings of almost $44 million.

             3. Sanofi Patient Connection Free Drug Program

    Sanofi Patient Connection is a patient assistance program (PAP) 
that provides free Sanofi medicines, including insulin, \9\ to low-and 
middle-income patients earning greater than or equal to 400 percent of 
the current Federal Poverty Level (in 2023, $120,000 for a family of 
4), including Medicare beneficiaries, who meet eligibility criteria.
---------------------------------------------------------------------------
    \9\  Sanofi Patient Connection provides eligible patients with 
access to free supplies of Admelog, Apidra, Lantus, Soliqua 100/33, 
and Toujeo SoloStar, among other Sanofi medicines and vaccines.

    In 2022, more than 53,000 patients received free diabetes medicines 
through the PAP, valued at more than $185,000,000.
 B. Sanofi's Efforts to Promote Awareness of its Affordability Programs
    Sanofi has taken steps to increase awareness of these affordability 
programs so that as many eligible patients as possible may benefit from 
them. Sanofi includes descriptions about how to enroll in applicable 
affordability programs on each medication's website and on the Sanofi 
Patient Connection website. We also promote these assistance programs 
directly to patients through social media platforms and syndicated, 
direct-to-consumer advertisements in local newspapers and radio 
stations. Sanofi shares program information with patient advocacy 
groups which then publish that information on their websites and 
otherwise share program details with their members. Specifically, 
Sanofi meets with more than a dozen advocacy stakeholders at least 
quarterly to share information and updates about Sanofi's programs and 
other information that may benefit patients and to obtain feedback 
about affordability and access barriers.

    Sanofi also has partnered with other organizations to disseminate 
information about its affordability programs. For example, Sanofi's 
affordability programs are included in the Pharmaceutical Research and 
Manufacturers of America's (PhRMA) Medication Assistance Tool (MAT), a 
search engine designed to help patients, caregivers, and healthcare 
providers locate patient assistance resources offered by 
biopharmaceutical manufacturers. Information about Sanofi's 
affordability programs is also available at GetInsulin.org, an online 
tool created by the patient advocacy organization Beyond Type 1 to 
connect diabetes patients in the U.S. with insulin access and 
affordability options, as well as other resources to support diabetes 
care and management that match a patient's particular circumstances. 
Last, information about Sanofi's affordability programs are accessible 
through GoodRx's platform and Optum Store's digital pharmacy platform.
          C. Participation in the Part D Senior Savings Model
    Before the Inflation Reduction Act (IRA) capped insulin out-of-
pocket costs in Medicare, Sanofi worked with the Centers for Medicare 
and Medicaid Services (CMS) Innovation Center to support the creation 
of the Medicare Part D Senior Savings Model. Launched in January 2021, 
the Senior Savings program enabled Medicare beneficiaries to access 
insulins at a maximum $35 copay for a month's supply. Based on CMS's 
estimates, beneficiaries who used insulin and enrolled in a plan that 
participated in the Model could see an average out-of-pocket savings of 
$446 or 66 percent annually, funded in part by an estimated additional 
$250 million in discounts from manufacturers over the 5-years of the 
model.
    V. Market-Based Policy Solutions to Address Patient Access and 
                             Affordability
    Sanofi is committed to working with Congress and other stakeholders 
to identify market-based policy solutions that will incentivize a high-
value and sustainable healthcare system that improves the affordability 
of innovative medicines in the U.S. and in which the patient truly 
benefits. By establishing policies that encourage competition and align 
incentives so the value driven by competition accrues to patients, we 
can accomplish our shared goal of lowering drug prices and patient 
costs, while also protecting and cultivating the entrepreneurial risk-
taking necessary for pharmaceutical manufacturers to continue to 
discover, develop, and bring to market life-saving new medicines.

    Reducing out-of-pocket costs for patients should remain a top 
priority, but as we have experienced, limiting launch prices or 
reducing the list price of medicines alone is not sufficient to solve 
this problem. We support Congress' recent reforms to the Medicare Part 
D benefit that cap patient out-of-pocket costs and allow beneficiaries 
to spread their payments across the benefit year. There are a number of 
additional policy options that could effectively reduce out-of-pocket 
costs for patients, including:

          Requiring at least a substantial portion of the 
        discounts and rebates paid by manufacturers to be used to 
        reduce costs for patients at the pharmacy counter (not simply 
        passed through to plans, which is common today), such as 
        requiring any coinsurance amounts be based on the net price and 
        not the list price.

          De-linking fees (e.g., wholesaler and retailer fees, 
        and PBM and group purchasing organization (GPO) administrative 
        fees) from list price, which would remove the perverse 
        incentives that sometimes feed the cycle of higher list prices 
        paired with higher rebates and fees and create impediments to 
        patient access to lower list price medicines.

          Prohibiting commercial health insurance plans from 
        misappropriating patient-directed savings through accumulator, 
        maximizer, and alternative funding programs, and requiring 
        commercial payers to designate all covered drugs as ``essential 
        health benefits'' and count manufacturer copay coupons toward 
        any plan deductible and/or out-of-pocket limit.

          Prohibit the use of spread pricing to save money and 
        ensure everyone is getting the best deal possible.

          Let people get the medicines their doctors prescribe 
        at a pharmacy that is most convenient for them, not one that 
        makes the middleman more money.

    Our shared goal of lowering drug costs while maintaining the 
innovation engine of the U.S. to bring novel, beneficial medicines to 
patients will not be fully realized if policies are enacted that solely 
target the list price of medicines. Without a holistic approach that 
addresses current system incentives favoring higher list prices, as 
well as common-sense patient protections paired with continued 
incentives for innovation, U.S. health system challenges, including 
access and affordability of medicines, will not be adequately 
addressed. For our part, we will continue to listen to patients, 
patient advocates, caregivers, and others to better understand 
additional actions we could take to address access and affordability.

    I look forward to having a productive conversation about the 
complexities of the current system and policy solutions to improve 
affordable patient access to medicines.

    Thank you for the invitation to speak with you today. I welcome the 
opportunity to work with you on this important issue.
                                 ______
                                 
                   [summary statement of paul hudson]
    Sanofi is committed to pursuing first-in-class and best-in-class 
therapies and vaccines that have the greatest potential to transform 
the practice of medicine, improve peoples' lives, and protect public 
health. In particular, Sanofi is proud of our innovation history in 
insulin and the meaningful ways in which our products have transformed 
the standard of care, from Lantus--which provided significant 
improvements in basal insulin levels--to Toujeo--a next generation 
basal insulin that more closely mimics the body's endogenous insulin 
secretions. Today, our goal is to transform diabetes care by treating 
not just symptoms but addressing the underlying disease.

    However, these scientific advances mean nothing if patients cannot 
access or afford the medicines they need. For this reason, Sanofi is 
equally committed to increasing patient access and affordability 
through responsible and transparent approaches to pricing.

          We also have a suite of innovative and patient-
        informed savings programs to help people reduce their 
        prescription medicine costs, regardless of their insurance 
        status or income level, as well as launched low-priced 
        insulins.

          In May 2017, Sanofi announced our progressive and 
        industry-leading pricing principles to help stakeholders 
        understand our rational for pricing decisions. \1\
---------------------------------------------------------------------------
    \1\  For more information on our Responsible Pricing policies and 
initiatives, please see our ``Sanofi 2023 Pricing Principles 
Report,''https://www.sanofi.us/dam/jcr:356cc1f5-92dd-47a1-9770-
ba60dfdfab1e/Sanofi-2023-Pricing-Principles-Report.pdf.

    But we cannot solve patient affordability challenges on our own. 
Broader systemic reforms are needed to address the perverse incentives 
in the system that favor higher list price products and ensure patients 
---------------------------------------------------------------------------
benefit from the robust competition driving down net prices.

    Manufacturers negotiate with plans through their pharmacy benefit 
managers (PBMs) to obtain affordable health plan coverage for their 
products. In recent years, there has been significant consolidation 
across the system creating three players. These entities also have 
integrated with other intermediaries in the supply chain.

          As a result, PBMs, insurers, wholesalers, specialty 
        and retail pharmacies, group purchasing organizations, and, 
        more recently, provider groups, are now increasingly under 
        common corporate ownership that covers 80 percent of American 
        lives.

    While medication list price often receives the most attention, it 
is not the price that Sanofi receives for its medicines, nor the price 
typically paid by the system.

          With the goal of ensuring our medicines are available 
        to patients at affordable prices, Sanofi pays significant 
        rebates and fees--often as a percentage of a medicine's list 
        price--to different intermediaries across the healthcare 
        system. Across all insulin medicines, Sanofi returned 84 
        percent of our gross insulin sales to payors as rebates in 
        2022.

          In fact, since 2012 the net price--the amount Sanofi 
        actually receives--of Sanofi's insulins has declined by 58 
        percent.

          The average net price of Lantus is lower today than 
        it was in 2004.

    Unfortunately, patients do not always benefit from falling net 
prices. In fact, benefit plan design increasingly places greater cost 
burden on patients through high deductibles and copays--often coupled 
with narrower drug formularies offering fewer choices in covered 
medicines.

          For example, between 2012-2022, the average net price 
        for commercial insurance and Medicare Part D plans for our most 
        prescribed insulin, Lantus, has fallen by 55 percent.

          Over that same period, the average out-of-pocket 
        costs for Lantus patients with commercial insurance and 
        Medicare have risen approximately 45 percent.

    In addition to rebates, Sanofi also pays fees to intermediaries 
based on a percentage of a medicine's list price. Thus, these 
intermediaries generate more revenue from higher list-price medicines. 
These perverse incentives drive the system's preference for higher cost 
medications, even if patients have to pay more at the pharmacy counter.

    Sanofi has experienced these perverse incentives first hand, with 
the system expressing little interest in our lower-cost insulins. For 
example, in June 2022, Sanofi launched Insulin Glargine Injection 100 
Units/mL (U-100), an unbranded version of Lantus, at a list price 60 
percent less than the 2022 Lantus list price. Despite the lower price 
offered at a similar net price, commercial and Medicare coverage has 
been limited, with less than 25 percent of commercial and 5 percent of 
Medicare Part D plans choosing to cover the lower list price version in 
2023.

    Future policy solutions must put patients first and include 
contributions from across the entire healthcare system. Sanofi 
supports:

          Requiring at least a substantial portion of the 
        discounts and rebates paid by manufacturers to be used to 
        reduce costs for patients at the pharmacy counter, such as 
        requiring any coinsurance amounts be based on a medicine's net 
        price and not the list price; and

          De-linking supply chain payments to intermediaries in 
        the supply chain from list price, which would remove the 
        perverse incentives to favor higher list price products when 
        lower list price options are available.
                                 ______
                                 

    The Chair. Mr. Hudson, thank you very much. Our next 
witness is Mr. Lars Jorgensen, who is the President and CEO of 
Novo Nordisk. He is going to be speaking to us virtually from, 
not sure, Denmark is that where you are now? Yes. All right.

    Mr. Jorgensen. Yes, that is correct.

    The Chair. Thank you very much, Mr. Jorgensen, for being 
with us.

  STATEMENT OF LARS FRUERGAARD JORGENSEN, PRESIDENT AND CHIEF 
      EXECUTIVE OFFICER, NOVO NORDISK, BAGSVAERD, DENMARK

    Mr. Jorgensen. Chairman Sanders, Ranking Member Cassidy, 
and Members of the Committee, thank you for the opportunity to 
speak today on behalf of Novo Nordisk. Our mission is to 
pioneer scientific breakthroughs and ultimately cure the 
diseases we research. We share the Committee's concern that too 
many people fall through the cracks of the U.S. healthcare 
system.

    We hope today's conversation will lead to meaningful 
action. But I should begin by briefly introducing myself. I 
grew up in small rural town in Denmark. My sisters and I helped 
my parents around the family farm. That early experience taught 
me to take responsibility and to work hard not only for myself 
but also for others.

    I joined Novo Nordisk almost 32 years ago and went on to 
work for the company in the Netherlands, the U.S., and Japan, 
before I returned to headquarters in 2004. By then, my father 
had been diagnosed with diabetes, so I know the disease both 
professionally and personally. I am humbled to serve as CEO of 
a company that always keeps the patient at the center of 
everything we do.

    Our company was born out of a love story between two Danish 
scientists, August and Marie Krogh. When Marie developed 
diabetes, the company embarked on a path to find a cure. This 
journey is where Novo Nordisk's commitment to treat and defeat 
diabetes began.

    Today, Novo Nordisk is comprised of more than 55,000 
colleagues worldwide. It is not well-known, but our majority 
shareholder is the Novo Nordisk Foundation. Just last year, the 
Foundation awarded almost $1 billion worldwide.

    Some of these projects support research partnerships 
between industry and academia here in the United States, while 
others focus on cutting edge innovations around quantum 
computing and drug resistant bacteria. We are proud of our 
company's financial success, and it fuels the Foundation's 
work.

    As we have worked to treat and cure diabetes for over a 
century, I would like to address an often missed--often 
repeated misconception that insulin is still the same as it was 
back in 1921. Nothing could be further from the truth.

    100 years ago, patients were supplied with large, reusable 
needles, glass syringes, and a whetstone to keep the needle 
sharp. They boiled the needle between uses and insulin had to 
be injected repeatedly throughout the day and night.

    Early insulin saved lives, but it was difficult to use and 
came with serious risks. While the advancements in insulin may 
seem minor or insignificant to those of us who do not have 
diabetes, patients tell us how our inventions have meaningfully 
improved their lives.

    We also know that no matter how pioneering a drug might be, 
it can only help patients when it is accessible and affordable. 
No one who needs insulin should have to ration or go without it 
because they cannot afford it. That should never be the case. 
Novo Nordisk has worked hard to fill the gaps of the U.S. 
healthcare system, but we know that the problem remains.

    That is why we are all here today. Patients too often find 
themselves trapped by a healthcare system with a misaligned 
economic incentive. It is a system where more and more dollars 
float to insurers, the newly created subsidiaries, so-called 
group purchasing organizations, and the PBMs, but not to 
patients.

    We now pay on average, $0.75 of every dollar of medicine we 
sell. And this money goes back to the middlemen to ensure that 
our medicines remain available to patients. Every day we ask 
ourselves, what more can we do for patients. What we can do is 
to try to fill the gaps for those the system has left behind.

    For example, we provide an immediate one-time supply of 
free insulin to any patient who will face rationing. We provide 
a long-term supply at no cost for Americans in need whose 
household make less than 400 percent of the poverty line. That 
is $120,000 for a family of four. And we supply insulin for 
patients through Walmart and other pharmacies that is sold for 
$25 for one vial.

    We work hard to ensure these programs help as many patients 
as possible. We would like to do more and work with you today. 
Now is the time for all participants in the healthcare system 
to work for solutions that are for the patients first. I look 
forward to your questions. Thank you for listening to me.

    [The prepared statement of Mr. Jorgensen follows.]
            prepared statement of lars fruergaard jorgensen
    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee, thank you for holding this hearing and for giving me an 
opportunity to speak today on behalf of Novo Nordisk.

    At Novo Nordisk, our mission is to pioneer scientific breakthroughs 
that improve patient care and to ultimately cure the diseases we 
research.

    We share the Committee's concerns that too many people continue to 
fall through the cracks of the U.S. healthcare system. We hope today's 
conversation will lead to meaningful action and changes that benefit 
patients. I will share some additional thoughts, but first, I'd like to 
briefly introduce myself.

    I grew up in a tight-knit family in a small rural town in Denmark. 
Together with my three sisters, I helped my parents run our family 
farm. That early experience taught me to take responsibility and work 
hard, not only for myself, but also for others.

    It also taught me the importance of finding solutions that are 
sustainable--back then it was about balancing the interests of the 
family, the business, the environment, and the community we were a part 
of.

    I joined Novo Nordisk as a Finance Graduate almost 32 years ago, 
having just returned from studies in the U.S., and I went on to work 
for the company in the Netherlands, the U.S., and Japan, before I 
returned to Danish headquarters in 2004. By then, my father had been 
diagnosed with diabetes, so I know the disease not only professionally, 
but personally.

    I am incredibly humbled and honored to find myself in the position 
of being the CEO of a company today that always keeps the patient at 
the center of everything we do.



    While many patients and healthcare professionals know of Novo 
Nordisk, some people in this room may not. So, I'd like to also briefly 
introduce the company.

    Our company was born out of a love story between two Danish 
scientists, August and Marie Krogh. When Marie developed diabetes, the 
couple embarked on a path to find a cure. This journey is where Novo 
Nordisk's commitment to treat and defeat diabetes began.

    While our company has grown to employ more than 55,000 colleagues 
around the world with 16 production sites in nine countries, and to 
expand our research and development into several new therapeutic areas, 
many people are surprised to learn that our majority shareholder is a 
foundation--the Novo Nordisk Foundation.

    This means our company cannot be acquired. It also means our 
articles of association's commitment that we ``conduct [our] activities 
in a financially, environmentally, and socially responsible way'' 
cannot be weakened or altered.

    In fact, our Board of Directors evaluates me and the entire 
executive team on how we deliver on all of these factors.

    Moreover, the Novo Nordisk Foundation is the largest charitable 
foundation in the world. Just last year, the Foundation awarded almost 
$1 billion in grants around the world. Some of these projects combat 
hunger, poverty, and public health in developing countries; while 
others support research partnerships between industry and academia here 
in the United States; and still others focus on cutting-edge 
innovations around quantum computing and fighting anti-microbial 
resistant bacteria.

    Thanks to our unique structure with the Novo Nordisk Foundation, we 
can be proud that our business successes not only mean bringing 
innovative medicines to patients around the world, but also ensure our 
dividends help fuel the Foundation's investment in additional 
scientific and humanitarian causes.



    As a company committed to defeating diabetes for over a century, 
I'd like to address a serious misconception that has taken on a life of 
its own.

    Too often, it is repeated that insulin has been on the market for a 
hundred years. This implies that nothing has changed since insulin was 
discovered in 1921.

    Nothing could be further from the truth.

    When insulin was discovered, patients were supplied with a large 
reusable needle, glass syringes, a whetstone to keep the needlepoint 
sharp, and sterilizing equipment for boiling the needles and syringes 
between use.

    Early insulin had to be injected repeatedly throughout the day and 
night. Patients also commonly suffered severe allergic reactions and 
considerable medical complications.

    The reality is, while the insulin of the 1920's saved lives, it was 
difficult to use, and tight control was demanded to prevent blindness, 
amputations, and kidney failure.

    Even today, patients with diabetes exist on a razor thin line 
balancing their blood sugar.

    This means that while advancement in insulins--such as going from 
animal to human and from human to analog fast-acting or long-acting--
may sound insignificant to those of us who don't live with diabetes; in 
reality even small steps forward can meaningfully improve a patient's 
life.



    At Novo Nordisk, we know that no matter how pioneering a drug may 
be, it can only help patients when it's accessible and affordable.

    No one who needs insulin should have to ration or go without 
because they cannot afford it.

    This should never happen.

    Novo Nordisk has aggressively worked to fill gaps in the U.S. 
healthcare system for people taking insulin, but we know there are 
still problems that need to be addressed.

    That is why we are all here today.

    Patients who struggle to afford insulin too often find they are 
trapped by an integrated insurance system full of misaligned economic 
incentives.

    It is a system that is driven by increasing the dollars going to 
insurers, their Group Purchasing Organizations, and their Pharmacy 
Benefit Managers--or ``PBMs,'' instead of patients living with 
diabetes.

    Over the years, these middlemen have added more and more fees, 
discounts, points, and rebates across the supply chain--siphoning more 
money out of the system.

    From every dollar of medicine we sell, Novo Nordisk pays back an 
average of 75 cents--and for insulins, it is often higher--to these 
middlemen to ensure our medicines remain covered by insurance companies 
and remain available to patients.

    Every day we ask ourselves: what more can we do for patients?

    Over the last several years, we've implemented many new programs to 
help ensure that no American living with diabetes goes without insulin, 
and we are constantly evaluating what more can we do.

    Today, patients have access to a suite of affordability options 
that provide Novo Nordisk insulins at low or no cost.

    We provide an immediate, one-time supply of free insulin to 
patients who face rationing.

    Our Patient Assistance Program provides a steady supply of free 
insulin to patients in need whose households fall below 400 percent of 
the Federal Poverty Line. That's $120,000 for a family of four.

    We have made human insulin available at Walmart and other 
pharmacies that is sold for approximately $25 a vial for all patients 
regardless of income and insurance coverage status.

    We are working hard to ensure that these programs reach and help as 
many patients as possible.

    We want to work with this Committee and Congress to lower patients' 
out-of-pocket costs.

    Now is the time for all participants in the healthcare system--
including insurers, their PBMs, their Group Purchasing Organizations, 
and, of course, manufacturers--to work for solutions that put the 
patient first.

    Thank you. I look forward to your questions.
                                 ______
                                 
    The Chair. Mr. Jorgensen, thank you very much. We have 
heard from representatives of the three major drug companies. 
Now we are going to hear from representatives of the three 
major PBMs.

    Our next witness is Mr. David Joyner. He is the Executive 
Vice President and President of Pharmacy Services for CVS 
Health. Mr. Joyner, thanks very much for being with us.

    STATEMENT OF DAVID JOYNER, EXECUTIVE VICE PRESIDENT AND 
   PRESIDENT OF PHARMACY SERVICES, CVS HEALTH, WOONSOCKET, RI

    Mr. Joyner. All right. Thank you, Chairman Sanders, Ranking 
Member Cassidy, and Members of the Committee. Thank you for the 
opportunity to discuss our work--Okay. Thank you for the 
opportunity to discuss the work. We make health care more 
affordable, accessible, and ultimately to improve the health 
outcomes in this country.

    Our goal as the PBM is to remove as many drug pricing 
challenges as possible for our clients and their members. When 
people can't afford their medications like insulin, they are 
more likely to adhere to the prescribed therapies. Adherence 
means better outcomes. Better outcomes mean the health care 
system will spend far less on complications and 
hospitalizations.

    In order to make medications more affordable, our job at 
CVS Caremark is to go head-to-head with the drug manufacturers 
to negotiate the lowest possible prices. The last 2 years have 
been challenging for millions of Americans as inflation surged 
and strained household budgets.

    A recent 2023 study by the IQVIA Institute examining drug 
costs found, over the last 5 years, list prices have increased 
at a rate of 7.4 percent. Over the same time period, the PBM 
industry has helped clients hold increased spending to just 4.5 
percent and kept member cost growth to just 1.4 percent.

    Specifically for CVS Caremark clients and for the sixth 
consecutive year, we have reduced patient costs at the pharmacy 
counter with an average member out-of-pocket cost below $9 for 
a 30-day supply.

    Today, it is important to note that more than 90 percent of 
all prescriptions dispensed are generic, and they represent 
just a little bit more than 18 percent of the total spend. By 
using competition in the generic categories, generic prices 
have been deflationary over the last decade.

    Now we are securing affordability for the final 10 percent 
of the name brand drugs, and that is our focus. Competition in 
the branded marketplace is critical, and we use this 
competition to deliver discounts to our customers. By 
negotiating rebates and discounts, we lower costs for our 
clients and their members where competition exist.

    Not surprisingly, many drugs without competition are the 
high list price medications without discounts and account for 
much of our client spending today. We encourage the Committee 
to focus its efforts here and support--and we support the three 
bills addressing competition that the Committee will consider 
in its markup.

    Drug manufacturers claim rebates are the reason for price 
increases, but the facts show otherwise. Government study after 
Government study has concluded that price increases are not the 
result of rebates or discounts.

    Now, we also understand there are questions about the level 
of transparency we provide to our clients. The trust of our 
clients is critically important to us, and the trust is built 
on this transparency.

    Transparency starts at the beginning of our client 
contracting process and is a cornerstone of our approach 
throughout. Using sophisticated third-party consultants, 
clients negotiate transparent contracts in granular detail and 
understand how their health care dollars are spent.

    We have always prioritized bringing transparent offerings 
to the marketplace, and today we passed more than 98 percent of 
all the rebates back to our clients. We also provide them with 
regular detailed updates on drug spending and utilization, 
prescription claims process, cost savings achieved, and also 
the manufacture rebates that we receive.

    Our clients choose how to use those discounts or rebates by 
either reducing the out-of-pocket costs and or delivering lower 
overall premiums at the point of sale for the medications. I 
began by highlighting the importance of adherence and reducing 
complications and hospitalizations.

    That is why we create and maintain preventative drug lists. 
This allows our clients to offer members $0 copays, including 
for insulin to treat diabetes and many other medications that 
are actually treating chronic conditions outside of the 
deductible. At CVS Health, we use this program to help our 
200,000 employees stay healthy.

    We have made tremendous progress on insulin affordability 
through negotiations by inducing competition and encouraging 
clients to adopt plan designs that lower the out-of-pocket 
costs for their members.

    We have reduced the insulin cost on average 7 percent per 
year for the last 5 years, and our clients and plan members 
paid one-third less on average for a 30-day supply of insulin 
in 2022 than they did in 2017. At CVS Caremark, the average 
member costs for a 30-day supply of insulin was less than $25.

    For those using the preventative drug list, again, it is 
zero. We also launched Reduced Rx, a program for the uninsured 
and underinsured patients with high out-of-pocket costs, 
providing insulin at just $25 per vial. We proudly provide 
pharmacy benefits to over 110 million people and improving 
their health every day.

    We will continue to improve and innovate on our model and 
help clients provide affordable coverage for the medications 
their members need to stay healthy. I look forward to answering 
your questions.

    [The prepared statement of Mr. Joyner follows.]
                   prepared statement of david joyner
    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee, thank you for the opportunity to discuss our work to make 
health care more affordable, accessible, and ultimately, to improve 
health outcomes in our Country.

    Our goal is to remove as many drug pricing challenges as possible 
for our clients and their members. When people can afford their 
medications, like insulin, they are more likely to adhere to prescribed 
therapies. Adherence means better outcomes; better outcomes means the 
health care system will spend far less on complications and 
hospitalizations.

    In order to make medications affordable, our job at CVS Caremark is 
to go head-to-head with drug manufacturers to negotiate the lowest 
possible prices.

    The last 2 years have been challenging for millions of Americans as 
inflation surged and strained household budgets. A recent 2023 study by 
the IQVIA Institute examining drug costs, found over the last 5 years, 
list prices have increased at a rate of seven-point-four percent. \1\ 
Over that same period the PBM industry helped clients hold increased 
spending to just four-and-a-half percent and kept member cost growth to 
just one-point-four percent. \2\
---------------------------------------------------------------------------
    \1\  IQVIA, The Use of Medicines in the U.S. 2023, https://
www.iqvia.com/insights/the-iqvia-institute/reports/the-use-of-
medicines-in-the-us-2023.
    \2\  Ibid.

    Specifically for CVS Caremark clients and for the sixth straight 
year, we have reduced patient costs at the pharmacy counter with an 
average member out-of-pocket cost below nine dollars for a 30-day 
supply of medication. \3\
---------------------------------------------------------------------------
    \3\  CVS Health 2022 Drug Trend Report, https://
insightslp.cvshealth.com/download-the-2022-drug-trend-report.html.

    Today, more than 90 percent of the prescriptions dispensed are 
generics and represent a little more than 18 percent of total spend. 
\4\ And by using competition, generic prices have been deflationary 
over the last decade.
---------------------------------------------------------------------------
    \4\  Association for Affordable Medicines, 2022 U.S. Generic and 
Biosimilar Medicines Savings Report, https://accessiblemeds.org/
resources/reports/2022-savings-report.

    Securing affordability for the final 10 percent of name brand drugs 
is our focus. Competition in the branded marketplace is critical and we 
use this competition to create discounts for our customers. By 
negotiating rebates, or discounts, we lower drug costs for our clients 
and their members where competition exists. Not surprisingly, many 
drugs without competition are high list price medications without 
discounts and account for much of our clients' drug spending. We 
encourage the Committee to focus its efforts here and we support three 
---------------------------------------------------------------------------
of the four bills that the Committee will consider in its markup.

    Drug manufacturers claim rebates are the reason for price 
increases. The facts show otherwise. Government study after government 
study has concluded that price increases are not the result of rebates 
or discounts. \5\
---------------------------------------------------------------------------
    \5\  U.S. Department of Health and Human Services Office of 
Inspector General, Rebates for Brand Name Drugs in Part D Substantially 
Reduced the Growth in Spending from 2011 to 2015, https://oig.hhs.gov/
oei/reports/oei-03-19-00010.asp.

    We understand there are questions about the level of transparency 
we provide to clients. The trust of our clients is critically important 
---------------------------------------------------------------------------
to us, and trust is built on this transparency.

    Transparency starts at the beginning of our client contracting 
process and is a cornerstone of our approach throughout. Using 
sophisticated third party consultants, clients negotiate transparent 
contracts in granular detail and understand how their health care 
dollars are spent. We have always prioritized bringing transparent 
offerings to the marketplace and today we pass more than 98 percent of 
all rebates back to our clients. We provide regular, detailed updates 
on drug spending and utilization; prescription claims processed; cost 
savings achieved; and manufacturer rebates received.

    Our clients choose how to use those rebates, including reducing 
out-of-pocket costs at the point-of-sale and to lower overall premiums.

    I began by highlighting the importance of adherence in reducing 
complications and hospitalizations. That is why we create and maintain 
preventive drug lists. This allows any client to offer members zero-
dollar copays, including for insulin to treat diabetes and other 
medications for many other chronic conditions, outside of the 
deductible. At CVS Health, we use this program to help 200,000 of our 
employees stay healthy.

    We've made tremendous progress on insulin affordability through 
negotiation, inducing competition and encouraging clients to adopt plan 
designs that lower out-of-pocket costs.

    We've reduced insulin costs an average of 7 percent per year for 
the past 5 years. Clients and plan members paid one third less on 
average for a 30-day supply of insulin in 2022 than they did in 2017. 
At CVS Caremark, the average member cost share for a 30-day supply of 
insulin was less than 25 dollars. \6\
---------------------------------------------------------------------------
    \6\  Internal CVS Caremark book of business data, 2017-2022.

    We also launched ReducedRx, a program for the uninsured and 
underinsured patients with high out-of-pocket costs, providing insulin 
---------------------------------------------------------------------------
at $25 per vial.

    We proudly provide pharmacy benefits for over 110 million people, 
improving their health every day. And we will continue to improve and 
innovate our model, and help clients provide affordable coverage of the 
medications their members need to stay healthy.

    I look forward to answering your questions.
                                 ______
                                 
    The Chair. Mr. Joyner, thank you very much. Our next 
witness is Dr. Adam Kautzner, President of Express Scripts. Dr. 
Kautzner, thanks for being with us.

  STATEMENT OF ADAM KAUTZNER, PRESIDENT, EXPRESS SCRIPTS, ST. 
                           LOUIS, MI

    Dr. Kautzner. Chairman Sanders, Ranking Member Cassidy, and 
Members of the Committee, thank you for inviting me to testify 
today. My name is Adam Kautzner. I grew up in rural Missouri 
outside of Saint Louis and began my career as a pharmacist in a 
regional hospital.

    After working in nuclear pharmacy, I began my career at 
Express Scripts, just over 15 years ago. I am proud of our work 
to deliver affordable access to lifesaving medications. This 
cause is personal to me.

    I was diagnosed with stage four melanoma in my early 30's. 
That experience strongly shaped how I approach our work to 
advance pharmacy care and lower prescription drug costs for 
patients and employers.

    As a business leader, I am guided by my experiences as a 
father, cancer survivor, rural American, and a pharmacist. 
Express Scripts believes all patients should have access to the 
medications they need at affordable prices. For decades, we 
have taken on one of the toughest challenges, negotiating with 
pharmaceutical manufacturers to lower costs for employers, 
health plans, Federal and State Governments, and, most 
importantly, patients.

    We exist to help solve the challenges you are exploring 
here today. Our company has been at the forefront of 
introducing solutions to address the insulin crisis. In 2019, 
we launched a program capping patient cost for insulin to $25 
or less.

    These lifesaving medications also have been extended for 
additional savings for cardiovascular diseases as well. We are 
constantly evolving and improving our services. This includes 
working to shield patients from exposure to high list prices at 
the pharmacy counter, to shield our clients from exposure to 
crippling drug costs, and to provide multiple transparent 
contracting options, ensuring our clients have complete control 
and flexibility to choose their benefit design, network, and 
pricing structure, and are provided robust financial 
disclosures.

    Our solutions for driving lower drug spending for patients 
and the broader health care system are working. Each year, 
Express Scripts saves more than $30 billion for employers, the 
public sector, and the patients we serve. This is driven by 
effective drug negotiation to medical management and to 
targeted clinical support programs.

    The savings are passed on to our clients at their 
direction, which benefits Americans in the form of lower 
premiums, reduced out-of-pocket costs, and expanded coverage. 
In 2022, savings negotiated by Express Scripts helped keep out-
of-pocket average costs to less than $15 in the commercial 
market, less than $18 for patients using high deductible health 
plans, less than $9 in Medicare, and less than $1 in Medicaid.

    None of this means the system cannot be improved. Drug 
manufacturers seek the highest price point possible and exploit 
the patent system and marketing practices to maintain monopoly 
status for their brands. For employers sponsoring high 
deductible health plans, restrictions prevent lowering costs 
for patients before meeting their deductible.

    Rebates have been characterized by some as the mechanism 
for increasing list prices and thus increasing costs for 
patients. This claim is false. Rebates are discounts we 
negotiate to lower prices.

    More than 95 percent of our rebates are passed to Express 
Scripts clients, which benefits Americans in the form of lower 
premiums, reduced out-of-pocket costs, and expanded coverage. 
Without the ability to use this negotiating tool to achieve 
lower drug costs, healthcare spending would be much higher.

    Drug competition is ultimately what drives rebates, lower 
list prices, and lower net costs. We applaud recent efforts in 
Congress to speed the availability of generics and biosimilars, 
and address abuses of the patent system that work to delay 
competition and maintain high drug prices.

    We recognize there are questions regarding the transparency 
and availability of pharmacy benefit services. Express Scripts 
is committed to be transparent to our clients and our 
beneficiaries. We provide robust disclosures which include 
principal revenue sources and information on rebate 
arrangements, fees, and pharmacy claims.

    We strongly caution against prohibiting contracting options 
entirely. These are options, not mandates, within contracts 
that are serving many of our clients today. Overall, our 
beliefs, our business model, and our orientation is geared 
toward, one, providing innovative solutions that enable access 
to medications at affordable cost with improved health 
outcomes.

    Two, providing clients with choices to enable them to 
deliver accessible, affordable pharmacy benefits. And three, by 
providing additional levels of transparency about the value we 
create. Express Scripts will continue innovating to address 
drug pricing challenges and to respond to the needs of 
patients.

    I appreciate this opportunity to address the important 
questions raised about our role and how the value we create 
reaches patients. I look forward to your questions. Thank you.

    [The prepared statement of Mr. Kautzner follows.]
                  prepared statement of adam kautzner

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                 ______
                                 
    The Chair. Dr. Kautzner, thank you very much. Our final 
witness is Ms. Heather Cianfrocco, who is the Chief Executive 
Officer of OptumRx. Ms. Cianfrocco, thanks very much for being 
with us.

   STATEMENT OF HEATHER CIANFROCCO, CHIEF EXECUTIVE OFFICER, 
                   OPTUMRX, EDEN PRAIRIE, MN

    Ms. Cianfrocco. Chairman Sanders, Ranking Member Cassidy, 
and Members of the Committee, good afternoon. OptumRx, a part 
of UnitedHealth Group, provides essential services to our 
customers, which include employers, unions, health plans, and 
Governments.

    Our team works every day to make prescription drugs more 
affordable and to improve health outcomes for people. We do 
this by conducting evidence based clinical review of 
medications, negotiating with manufacturers and pharmacies to 
bring down the cost of drugs, providing tools to help consumers 
and their providers use their benefits, and find the lowest 
cost options, supporting patients with medication adherence and 
disease management programs, and serving patients in our 
pharmacies.

    Our customers pay for the medical and pharmacy care for 
their employees and their members. They count on us to be a 
counterweight to the substantial market power of manufacturers, 
which have the sole discretion in setting and in raising prices 
for their products.

    We are held accountable for consistently delivering savings 
on prescription drugs, for lowering overall health care costs, 
and ensuring people have access to the medications they need. 
Overall, we deliver on average $1,600 in annual drug savings 
per person to our customers. 98 percent of our negotiated 
discounts pass directly to our customers, and they use these 
discounts to help reduce premiums to provide point of sale 
savings and to invest in health and wellness programs.

    Without our negotiations with manufacturers, the cost of 
drugs would be even higher. PBMs save the system $145 billion 
annually. People need consistent, affordable access to insulin. 
In the century since insulin was discovered, it has saved and 
improved countless lives. But over the last decade, 
manufacturer's list prices for insulin have nearly doubled.

    Along with leadership from Congress and others, our company 
has been at the forefront of efforts to make insulin more 
affordable. We began offering point of sale discounts on 
insulin and other related drugs to fully insured group 
customers in 2018.

    Since 2019, the number of consumers we serve who pay $35 or 
less per month for insulin has increased by 34 percent. 
Millions of people now have access to insulin at reduced costs 
through our preventive drug list.

    The 8 million people in United Health Care standard fully 
insured group plans now pay nothing out-of-pocket for preferred 
short and long-acting insulins and other lifesaving drugs, 
which includes EpiPens and Albuterol. And working with Sanofi, 
we offer a monthly supply of insulin for $35 for uninsured 
individuals. The standing--the standard offering we recommend 
to our customers caps insulin out-of-pocket at $35 and supports 
affordability for patients and high deductible health plans.

    As a result, our 1.7 million consumers who take insulin now 
pay an average of $22 per month, and our efforts are ongoing. 
We also welcome the recent announcement by the three largest 
insulin manufacturers to lower their list prices on some 
insulin products. And let me be clear, we support and encourage 
lower list prices across the board. Despite the recent progress 
on insulin, more can be done.

    Cost sharing on a month's supply of insulin is now capped 
at $35 in Medicare. A similar approach in the commercial market 
would close the gap for Americans who still cannot consistently 
afford insulin. But importantly, such a cap must preserve the 
ability of PBMs to negotiate for lowest costs of insulin for 
their customers.

    Because even with the welcomed list price reductions by 
some manufacturers on some insulins, the list price of insulin 
is still above $35 per prescription. Beyond insulin, broader 
reforms are needed to foster competition among manufacturers 
and to make prescription drugs more affordable for Americans 
and sustainable for our Country.

    Reforms are needed to promote access to generics and 
biosimilars, including closing loopholes that enable pay for 
delay, product topping, and other delay tactics. A 10-year cap 
on a product's exclusivity should be established, regardless of 
the number of follow-on patents. And public policy should also 
support more value-based arrangements to ensure that resources 
are focused on the treatments that deliver the best outcome for 
patients.

    We appreciate this opportunity to share our perspective 
with the Committee. Our company will continue to do our part to 
make insulin and all prescription drugs more affordable and to 
improve the health for all Americans. I welcome any questions 
you may have. Thank you.

    [The prepared statement of Ms. Cianfrocco follows.]
                prepared statement of heather cianfrocco
    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee:

    I am Heather Cianfrocco, CEO of Optum Rx, a part of UnitedHealth 
Group. I appreciate the opportunity to address the vitally important 
topic of the cost and accessibility of insulin. While meaningful 
progress has been made through both private sector and government 
actions, more can be done to close the remaining gaps in consistent, 
affordable access to insulin for everyone who needs it.

    Our customers--employers, unions, health plans, and governments--
count on us to help them access the most effective medicines at the 
most affordable cost. Our team of pharmacists, pharmacy technicians, 
clinicians, and health care professionals works every day to improve 
health outcomes and simplify the health system for consumers. It is 
important to note that companies like ours are the only link in the 
drug supply chain that exists to reduce costs.

    My testimony focuses on three areas:

        1. How our Company makes prescription drugs more accessible and 
        affordable and improves health outcomes for patients.

        2. Actions our Company has taken to make insulin more 
        affordable.

        3. Policy solutions to make insulin and other prescription 
        drugs more affordable for people and more sustainable for the 
        country.

How Our Company Makes Prescription Drugs More Accessible and Affordable 
                      and Improves Health Outcomes

    Our Company's role is to ensure patients have access to the 
prescription drugs they need while managing the cost of those drugs. 
Companies like ours act as a counterweight to the substantial market 
and pricing power of drug manufacturers, which have the sole discretion 
in setting prices for their products. Under loopholes in the current 
patent system, periods of product exclusivity can be extended by 
manufacturers and product competition limited for decades, amounting to 
government-granted monopolies. This makes our role even more critical.

    Thousands of employers of all sizes rely on our negotiations and 
the resulting savings off of high and increasing drug list prices. Our 
negotiated discounts and clinical tools deliver approximately $1,600 in 
average annual drug savings per person. A recent paper by a University 
of Chicago economist concluded that without these negotiations with 
manufacturers, the cost of drugs would be even higher. In fact, this 
research shows Pharmacy Benefit Managers (PBMs) save the system $145 
billion annually. \1\ Our customers rely on our essential services and 
these material drug cost savings to control medical and pharmacy 
benefit costs for their employees and members. Moreover, the role we 
play is more important than ever with the advent of exceptionally high-
priced specialty drugs, a large and growing piece of the prescription 
drug market in which competition is lacking, and many manufacturers 
offer no discounts.
---------------------------------------------------------------------------
    \1\  Casey Mulligan. ``The Value of Pharmacy Benefit Management.'' 
July 2022. Available at: https://bfi.uchicago.edu/wp-content/uploads/
2022/07/BFI-WP-2022-93.pdf.

    Our customers recognize the value of our services, which are 
provided in a highly competitive market. As of 2021, there were 70 
companies that offered a full range of pharmacy benefit services in the 
U.S. market. \2\ We must compete day in and day out to win and retain 
our customers. We face competition from pharmacy benefit companies of 
varying sizes with different value propositions--some of which are 
growing disruptors in the market. We are constantly innovating to drive 
costs lower and meet the unique needs and demands of current and 
prospective customers.
---------------------------------------------------------------------------
    \2\  PCMA. ``The Highly Competitive PBM Marketplace.'' April 2021. 
Available at: https://www.pcmanet.org/highlycompetitive-pbm-
marketplace/.

    We compete for business on our clinical capabilities, patient 
support programs, drug trend analytics and insights, but most 
importantly on our ability to lower drug costs for our clients, 
regardless of list price. This squarely aligns the interests of 
pharmacy benefit companies with our clients and our consumers, not with 
---------------------------------------------------------------------------
the manufacturers that set the prices for prescription drugs.

    Optum Rx plays four essential roles in serving customers and 
consumers.

    First, everything we do begins with a clinical foundation. Our work 
is anchored by clinical data and starts with our independent Pharmacy & 
Therapeutics (P&T) Committee, which applies significant clinical rigor 
and provides unbiased, evidence-based review and appraisal of new and 
existing drugs and their place in therapy. Our P&T Committee is made up 
of physicians, nurses, and pharmacists who are not affiliated with 
Optum Rx and operates in a highly transparent manner. Our customers are 
welcome to observe the P&T Committee's clinical decision-making 
process.

    Second, once we have completed our clinical assessment, we 
aggressively negotiate with drug manufacturers to secure the lowest net 
cost for our customers to enable them to control costs for their 
members. Although more than 90 percent of prescriptions are for low-
cost generics, often without rebates, \3\ negotiated discounts are the 
only check on manufacturers' pricing power for most branded drugs (the 
remaining 10 percent of prescriptions). While negotiating for discounts 
on these expensive branded drugs is a vital role, it is only one of the 
ways we work to ensure people have access to the most affordable 
medicines. We offer our customers a wide range of formularies, which 
enables them to choose the solution that best fits their needs and 
meets their affordability, predictability, and transparency 
expectations.
---------------------------------------------------------------------------
    \3\  Food and Drug Administration. ``Office of Generic Drugs 2021 
Annual Report.'' Available at: https://www.fda.gov/drugs/generic-drugs/
office-generic-drugs-2021-annual-
report#::text=Currently%2090%20%E2%80%949%20out,they%20are%20on%20the%20
market.

    Third, we provide a range of options for providing the prescription 
drug benefit that meets the needs of our diverse employer, union, 
health plan, and government customers. While our customers ultimately 
determine their medical and pharmacy benefit design, we offer benefit 
plans that balance their health care cost affordability with patient 
out-of-pocket cost protections, such as our $35 insulin and critical 
drug affordability program. We also offer our customers choice in how 
they compensate us for the savings we generate and reimburse us for 
pharmacy claims administered by our pharmacy network. Some customers 
choose to compensate us for the savings we generate and the services we 
provide by opting for us to retain a small fraction of the discounts we 
negotiate with pharmaceutical manufacturers. Other customers prefer 
that we pass along to them 100 percent of the savings we negotiate and 
instead compensate us via administrative fee. Some reimburse us for 
pharmacy network claims through a predictable, aggregate payment and 
some choose a per claim or ``pass through'' reimbursement. Our clients 
are provided options and they each make the choice that best meets 
their needs. On average, Optum Rx passes through 98 percent of the 
discounts and the pharmacy rates we negotiate to our customers. These 
savings enable them to reduce premiums, provide point-of-sale 
---------------------------------------------------------------------------
discounts, and invest in population health and wellness programs.

    A key underpinning of this process is Optum Rx's ability to achieve 
the lowest net cost for our customers for the benefits they provide--
through a combination of negotiating both discounts with manufacturers 
and reimbursement with a network of pharmacies where members fill their 
prescriptions. The essential value we deliver is validated by each of 
the employer, union, health plan, and government customers who have 
selected us as their PBM. For this service, our fees equate to 2 
percent of these savings, which covers the administrative functions of 
negotiation, formulary management, pharmacy network management, 
credentialing, payment, auditing, and reporting. After performance of 
these functions--and all the clinical, claims, client, provider, and 
patient related benefit administrative functions, our Optum Rx margin 
was roughly 4 percent in 2022.

    Fourth and finally, we deploy innovative clinical support programs 
to actively support the patients we serve at each stage of their health 
care journey, as well as tools to drive affordability. Our PreCheck 
MyScript tool enables health care providers and patients to see how 
much a prescription will cost--and if there are any lower cost 
alternatives--before leaving a provider's office. Our Price Edge tool 
ensures patients pay the lowest cost in the market for their 
prescription and has already saved patients more than $4 million since 
the program launched in January. We also offer condition-specific 
medication adherence programs to make sure patients stay on therapy 
once prescribed. All these tools help people cut through the complexity 
that can be a barrier to accessing affordable, high-quality care.
     Actions Our Company Has Taken to Make Insulin More Affordable
    Diabetes is the eighth leading cause of death in the United States. 
\4\ More than 37 million people, or 11.3 percent of the U.S. population 
has diabetes. \5\ Diabetes leads to decreased life expectancy and 
higher health care costs. The appropriate management of diabetes may 
encompass a range of interventions for patients, including insulin for 
those who depend on it.
---------------------------------------------------------------------------
    \4\  Centers for Disease Control and Prevention, National Center 
for Health Statistics. Available at: https://www.cdc.gov/nchs/fastats/
leading-causes-of-death.htm.
    \5\  Centers for Disease Control and Prevention. ``National 
Diabetes Statistics Report: Estimates of Diabetes and Its Burden in the 
United States.'' Available at: https://www.cdc.gov/diabetes/data/
statistics-report/index.html.

    Insulin was discovered more than a century ago and it has now been 
23 years since long-acting insulin was first made available to 
patients. \6\ Since that time, little significant clinical advancement 
has been made, but insulin manufacturers have continued to raise prices 
due to pricing power and insufficient competition.
---------------------------------------------------------------------------
    \6\  Food and Drug Administration. ``100 Years of Insulin.'' 
Available at: https://www.fda.gov/about-fda/fda-history-exhibits/100-
years-insulin.

    Loopholes in U.S. patent law enable pharmaceutical manufacturers to 
continue extending patent protection for a drug well beyond its 
original date through tactics such as product hopping, where 
manufacturers attempt to switch patients to new formulations of their 
products before losing exclusivity. This action results in higher 
prices that directly impact patients. As another example of efforts to 
delay competition, one insulin manufacturer accumulated more than 70 
secondary patents to block biosimilar competition. \7\ Only after 
significant litigation and a change in the approval pathway for insulin 
biologics were competitors able to come to market. Moreover, as noted 
in the Senate Finance Committee's 2019 Report on the insulin market, 
many of the secondary patents filed for insulin are related to 
mechanisms for delivery (e.g., pens and auto-injectors)--not the 
medicine itself. \8\ This finding raises important questions about what 
kind of innovation current patent law is encouraging.
---------------------------------------------------------------------------
    \7\  Initiative for Medicines, Access and Knowledge (I-MAK), 
``Overpatented, Overpriced, Special Edition: Lantus.'' October 2018. 
Available at: http://www.i-mak.org/wp-content/uploads/2018/10/I-MAK-
Lantus-Report-2018-10-30F.pdf.

    \8\  See footnote 4, U.S. Senate Committee Finance. ``Insulin: 
Examining the Factors Driving the Rising Cost of a Century Old Drug.'' 
January 2021. Available at: https://www.finance.senate.gov/download/
grassley-wyden-insulin-report.

    The Senate Finance Committee Report also found insulin 
manufacturers raise prices in lockstep with one another--a practice 
known as ``shadow pricing.'' This practice has resulted in a lack of 
price differentiation and high insulin list prices with no connection 
to the rate of health care inflation or the cost of goods. This 
historical insulin pricing serves as a case study for harmful 
manufacturer pricing strategies. Shadow pricing exists because of 
manufacturers' sole control of the price of their products and a lack 
---------------------------------------------------------------------------
of meaningful competition in the insulin market.

    In the last several years, with leadership from Congress and action 
in the private sector, meaningful progress has been made in making 
insulin more affordable in Medicare and the commercial market. Last 
year, UnitedHealthcare was the first to implement zero-dollar cost 
sharing for insulin for its fully insured members. The Medicare Part D 
$35 monthly out-of-pocket cap on insulin that went into effect this 
year is providing certainty to all seniors in Part D. The recent 
announcements by some drug manufacturers that they will lower their 
list prices on some insulin products in advance of the approaching 
removal of the cap on Average Manufacturer Price rebates in Medicaid 
was a welcome development and confirms that drug manufacturers alone 
have the power to set and raise prices. They also have the power to 
lower them when it is in their interests to do so. Policies that 
discourage list price increases help reduce drug costs to customers and 
consumers.

    We know that when patients have reliable, consistent, and 
affordable access to needed medications, including insulin, they are 
better able to adhere to their medications as prescribed, which leads 
to better health outcomes. Our company has been at the forefront of 
efforts to improve access to affordable insulin and provide 
comprehensive care to patients with diabetes:

          Optum Rx negotiates discounts from manufacturers on 
        behalf of our customers and on average passes 98 percent of the 
        discounts through to them, which allows them to keep premiums 
        low, improve benefits, or lower out-of-pocket costs for 
        patients.

          We began offering point-of-sale discounts on insulin 
        and other rebated drugs to fully insured group customers in 
        2018.

          As part of the company's initiative to make critical 
        and life-saving drugs more affordable, in July 2022, 
        UnitedHealthcare eliminated out-of-pocket costs in its standard 
        fully insured group plans for preferred short-and long-acting 
        insulins as well as EpiPens, Albuterol and Naloxone. \9\ 
        Offering these preferred drugs at $0 cost share builds on our 
        previous actions, including point-of-sale discounts, that have 
        delivered millions of dollars of savings directly to consumers 
        at the pharmacy counter.
---------------------------------------------------------------------------
    \9\  ``UnitedHealthcare To Eliminate Out-of-Pocket Costs on Several 
Prescription Drugs, Including Insulin, for Eligible Members.'' July 
2022. Available at: https://newsroom.uhc.com/news-releases/uhc-
eliminate-out-of-pocket-costs.html.

          We have placed insulin on our Preventive Drug List, 
        given the important role insulin plays in preventing the 
        development of additional health conditions. These drugs are 
        available at a reduced out-of-pocket cost to patients with 
        preventive drug benefits through their health plans. This 
        action is particularly important for patients enrolled in high-
        deductible health plans in the commercial market and has driven 
        more than $14 million in patient out-of-pocket savings on drugs 
---------------------------------------------------------------------------
        in the first quarter of 2023 alone.

          In addition, for new clients, our standard 
        recommended benefit caps out-of-pocket costs for the preferred 
        insulin at $35, and for customers in high-deductible plans, our 
        plan clients have the option to bypass the deductible and apply 
        their rebates to the customer's co-insurance obligation at the 
        point of sale.

          We were active partners in the CMS Medicare Part D 
        Demo Model that piloted $35 insulin. The program rolled out to 
        all Part D beneficiaries in 2023.

          Through our integrated pharmacy and clinical care 
        services, we provide comprehensive chronic care management to 
        patients with diabetes. Patients have access to pharmacists and 
        pharmacy technicians--24 hours a day, 7 days a week--who 
        provide face-to-face or virtual consultations and coaching to 
        help patients manage diabetes and other chronic conditions. 
        More than half of the patients in our Diabetes Management 
        Program experienced improved A1C levels.

          Working with Sanofi, we offer a monthly supply of 
        insulin for $35 for uninsured individuals.

          As a result of these efforts, our 1.7 million 
        consumers who take insulin now pay an average of $22 per 
        month--and our efforts are ongoing.

    Manufacturers have blamed companies like ours, along with health 
plans and hospitals, for high drug prices. They contend that the 
discounts we negotiate with them are the root cause of the problem. 
However, drug prices are rising fastest on specialty drugs, where 
manufacturers are less willing to negotiate discounts due to the lack 
of clinical alternatives or other meaningful competition. It is no 
surprise, then, that CMS reported that in 2016 and 2017, prices 
increased the most for drugs with only one manufacturer. \10\ 
Additionally, economist Alex Brill concluded that list prices of 
rebated and non-rebated drugs have been increasing at comparable 
rates--dispelling the myth that discounts negotiated by companies like 
ours are responsible for the list prices set and raised unilaterally by 
drug manufacturers. \11\

    \10\  Sarah Karlin-Smith, Sarah Owermohle, and Janie Boschma. 
``Drugs with a single manufacturer drive Medicare, Medicaid, spending 
increases, CMS says.'' Politico, March 2019.

    \11\  Alex Brill. ``Understanding Drug Rebates and Their Role in 
Promoting Competition.'' March 2022. Available at: https://
www.affordableprescriptiondrugs.org/app/uploads/2022/02/CAPD-Brill-
Report-FINAL.pdf.

  Policy Solutions to Make Insulin and Other Prescription Drugs More 
       Affordable for People and More Sustainable for the Country
    While progress has been made in promoting insulin affordability, 
more can be done. Our company strongly supports policy solutions that 
will fill in gaps, increase competition among manufacturers, and ensure 
all patients--regardless of their coverage situation--can access this 
lifesaving medicine.

    As mentioned earlier, under Federal law cost sharing for covered 
insulins in Medicare is now capped at $35 for a month's supply. A 
similar approach in the commercial market would close the gap for 
Americans who still cannot consistently afford insulin. Importantly, 
such a cap must preserve the ability for pharmacy benefit companies to 
negotiate for the lowest cost of insulins for our customers. Even with 
those welcomed list price reductions by some manufacturers on some 
insulins, the list price of insulin is still above $35. Taking this 
approach in the commercial market would protect patients at the 
pharmacy and ensure employers, plans, unions, and governments can still 
obtain the lowest net cost for insulin.

    Beyond insulin, broader reforms are needed to make all 
prescriptions drugs more affordable for people and sustainable for the 
country. This starts with creating more competition in drug 
manufacturing.

    We are most effective in negotiating with manufacturers to achieve 
savings when competition exists. To that end, public policies are 
needed that both encourage competitors to enter the market and end the 
widespread use of manufacturer practices that actively prevent 
competition and extend patent protections for medicines far longer than 
originally intended.

    Congress should address abuses of the patent system that prolong a 
drug's market exclusivity and delay the entrance of generic and 
biosimilar therapies. While patents play an important role in ensuring 
manufacturers earn a return on a successful drug, current law allows 
manufacturers to exploit loopholes and extend these protections for no 
other purpose than greater profit. Manufacturers' ability to build 
``patent thickets'' around products and engage in pay-for-delay and 
product hopping schemes should be prohibited. To prevent these and 
other abuses, a 10-year cap on a product's exclusivity should be 
established--regardless of the number of patents associated with it. 
Additional support should also be given to the Patent and Trademark 
Office to ensure it has tools to identify and invalidate weak or 
superfluous pharmaceutical patents in a timely manner.

    Finally, we continue to support efforts to expand value-based 
arrangements between payors and pharmaceutical manufacturers. The 
flexibilities offered by these models can speed access to new 
therapies, ease budgetary pressures on health systems, and ensure 
health care dollars are spent on treatments that work. The Federal 
Government can advance these goals by adopting more modernized price 
reporting requirements in Medicare and Medicaid and allowing greater 
flexibility in the Medicare benefit to enable cost sharing structures 
that reflect value-based pricing arrangements.

    In conclusion, we appreciate the opportunity to share with the 
Committee the meaningful steps we have taken and will continue to take 
to make insulin more affordable for patients we serve. We are committed 
to doing our part to make insulin and all prescription drugs more 
affordable and to improve health outcomes while enhancing the consumer 
experience.
                                 ______
                                 
               [summary statement of heather cianfrocco]
    Optum Rx appreciates the opportunity to address the vitally 
important topic of the cost and accessibility of insulin. While 
meaningful progress has been made through both private sector and 
government actions, more can be done to close the remaining gaps in 
consistent, affordable access to insulin for everyone who needs it.

    My testimony focuses on three areas:

    1. How our Company makes prescription drugs more accessible and 
affordable and improves health outcomes for patients.

          Companies like ours are the only counterweight to the 
        substantial market power of drug manufacturers, which have the 
        sole discretion in setting drug prices.

          Our negotiated discounts and clinical tools deliver 
        approximately $1,600 in annual savings per person.

          Across the sector, research has found that PBMs save 
        the health care system $145 billion annually.

          Optum Rx plays four essential roles in serving 
        customers and consumers:

                Y  Developing a drug formulary with a strong clinical 
                foundation.

                Y  Negotiating with drug manufacturers to drive toward 
                the lowest net cost for medicines.

                Y  Developing a range of options for our customers to 
                compensate us for providing the prescription drug 
                benefit.

                Y  Deploying innovative clinical support programs that 
                lead to affordable, high-quality care.

    2. Actions our Company has taken to make insulin more affordable.

          Our company has taken many actions to improve access 
        to affordable insulin and provide comprehensive care to 
        patients with diabetes, including:

                Y  We pass 98 percent of the discounts we negotiate 
                with drug manufacturers through to our customers, 
                allowing them to keep premiums low, improve benefits, 
                or lower out-of-pocket costs for patients.

                Y  We began offering point-of-sale discounts on insulin 
                and other rebated drugs to fully insured group 
                customers in 2018.

                Y  UnitedHealthcare eliminated out-of-pocket costs in 
                its standard fully insured group health plans for 
                preferred insulins.

                Y  We placed insulin on our Preventive Drug List making 
                insulin available at a reduced out-of-pocket cost to 
                patients with preventive drug benefits. This is 
                particularly important for patients enrolled in high-
                deductible health plans in the commercial market.

                Y  Working with Sanofi, we offer a monthly supply of 
                insulin for $35 for uninsured individuals.

                Y  As a result of these efforts, our 1.7 million 
                customers who take insulin now pay an average of $22 
                per month--and our efforts are ongoing.

    3. Supportive policy solutions to make insulin and other 
prescription drugs more affordable for people and more sustainable for 
the country.

          A cap on insulin cost sharing in the commercial 
        market could help those Americans who still cannot consistently 
        afford insulin. However, such a cap must preserve the ability 
        for PBMs to negotiate for the lowest cost of insulin for our 
        customers.

          We also support efforts to create more competition 
        among manufacturers, promote access to generic and biosimilars 
        therapies, close patent loopholes, and facilitate greater 
        adoption of value-based arrangements.
                                 ______
                                 
    The Chair. Ms. Cianfrocco, thank you very much. We are now 
going to begin questioning, and I will begin it. Let me start 
off by saying if somebody in the real world is watching this 
hearing, they have heard every single person from the drug 
companies and from the PBMs say we are working tirelessly to 
lower the cost of prescription drugs, just knocking our brains 
out.

    Yet at the end of the day, 1.3 million Americans are 
rationing their insulin. People have died. People end up in the 
hospital. And you are working night and day to lower the cost. 
And all over the world, people are paying a fraction of the 
price, not only for insulin, but for other products, drugs, 
than we are paying.

    I am going to--and I would appreciate very brief answers 
because we don't have a whole lot of time up here. So let me 
start off with Eli Lilly, and I am going to go down the line 
here. Mr. Ricks, since 1996, Eli Lilly increased the price of 
Humalog 34 times from $21 to $275 bucks--same exact product.

    I am told that it costs $5 to manufacture this product, and 
the story is not different for the products produced by Novo 
and Sanofi. So, my question to you, and to the other drug 
companies, will you commit to this Committee today that you 
will not increase the price of any insulin product again? Mr. 
Ricks.

    Mr. Ricks. Thank you, Chairman, for the question. As I 
mentioned in my comments, all we have done----

    The Chair. Be brief----

    Mr. Ricks [continuing]. Is reduce the prices since I have 
been CEO. So, I am comfortable saying, we will leave our prices 
as they are for the insulins on the market today.

    The Chair. All of your products?

    Mr. Ricks. Yes. In fact, we have been cutting them, is the 
point I am making.

    The Chair. All right. You are not going to raise--Mr. 
Hudson.

    Mr. Hudson. We have said before, we have a responsible and 
sustainable pricing approach. We have had it since 2017 and 
that price has continued to fall, and the net price for insulin 
today for Lantus is lower than it was in 20--when it was 
launched in 2001.

    The Chair. I am hearing from you that you will not increase 
the price of any insulin product again?

    Mr. Hudson. To repeat myself, we have a responsible pricing 
policy standard in the----

    The Chair. Yes or no would be the better answer.

    Mr. Hudson. We have a responsible pricing policy. We have 
set that since 2017.

    The Chair. All right. Mr. Jorgensen.

    Mr. Jorgensen. Yes, sir. Thank you. Senator, we are 
committed to limit the potential price increases to a single 
digit. We have not taken any for the past many years. In fact, 
we see double digit decline in the price of insulin for the 
past 6 years.

    Our price, our net price today is lower than when we 
launched our products. So, we see a dramatic, dramatic fall in 
price, for instance, in the U.S. market.

    The Chair. Okay. Let me ask the drug companies another 
question before we go to the PBMs, and that is there are a 
number of newer insulin products that all three of you have 
brought forth to the market.

    Do all of these insulin products still cost more than $300? 
Will you commit to doing to those products what you have done 
to your other insulin products and substantially reduce the 
price of all insulin products? Will you make that commitment to 
us?

    Mr. Ricks. Senator, we have capped the cost for the 
consumer at $35 for every Lilly insulin.

    The Chair. That means, I may be mispronouncing it, 
Lyumjev--how do you pronounce it?

    Mr. Ricks. Lyumje.

    The Chair. Lyumjev--wasn't close. All right. That is going 
to be sold for $35?

    Mr. Ricks. The patient will pay no more than $35 in the 
United States for that product.

    The Chair. Okay. Mr. Hudson, your product is Toujeo, is 
that what it is?

    Mr. Hudson. Yes, and it is equal for us that it would be 
less than $35. If I could just add one quick thing. Our most 
recent launch was Atlanta's at 60 percent lower list price that 
was not accepted by the system.

    The Chair. Okay. And Fiasp is sold by Novo Nordisk. Mr. 
Jorgensen?

    Mr. Jorgensen. Yes. And I can also confirm that we have 
availability of insulin that is below $35 for all arrangements 
for patients, if they want that support from us.

    The Chair. All right. Let me ask--thank you. Let me ask the 
PBMs a question. It is a simple question, and I would 
appreciate a yes or no answer. Will you commit today that your 
companies will put insulin products on your formularies with 
the lowest list price? Mr. Joyner.

    Mr. Joyner. We will commit to put the lowest cost product 
on our formulary--net of discounts and rebates. So, whether it 
be the low list price or the high list price, our job is to 
deliver the lowest net cost, post discounts. Discounts off of 
high and, or lowest price.

    The Chair. Dr. Kautzner.

    Dr. Kautzner. Thank you for the question, Senator Sanders. 
We will commit to putting the lowest net cost product on 
formularies. However, we also have other formularies that are 
other choices for our employers to choose from which do have 
low list price products also available. So, we offer multiple 
different choices to our employers.

    The Chair. Ms. Cianfrocco.

    Ms. Cianfrocco. We commit to always providing the lowest 
cost option to our clients, to the lowest cost, and other 
products that are available to other clients through other 
formularies.

    The Chair. Thank you. All right. Let me go back to Mr. 
Ricks. Mr. Ricks, Eli Lilly charges $196,000 in the United 
States for Cyramza, a stomach cancer drug. That same drug can 
be purchased in Germany for just $54,000. Would you commit to 
this Committee to lower the price of Cyramza in the United 
States to the same price that you are selling in Germany, 
54,000? Yes, no?

    Mr. Ricks. Respectfully, Senator, that product has been on 
the market for a while. We do expect biosimilar entry. That is 
the primary mechanism in the U.S. where the price will fall 
when that occurs. I am sure there will be competition and the 
price will fall.

    The Chair. But what you are telling me is that the American 
people will have to pay four times more than Germans do for the 
same product that you manufacture? Okay. Mr. Hudson, Sanofi is 
a French company.

    In France, Sanofi sells a thyroid cancer treatment, 
Caprelsa, for $30,000 a year. Sanofi sells the same drug in the 
United States for $203,000 a year. It is nine times as much.

    Will you commit to lowering the price of Caprelsa in the 
United States to $30,000, the same price as it is sold in 
France?

    Mr. Hudson. Over time with the introduction of competition 
and other biosimilars, etcetera, you will see the price fall.

    The Chair. The answer is no. Mr. Jorgensen----

    Senator Cassidy. Mr. Chairman.

    The Chair. Yes.

    Senator Cassidy. I hate to interrupt, but we are now--you 
are at 7 minutes----

    The Chair. You will have the same amount of time.

    Senator Cassidy. Does every Member have that?

    The Chair. Absolutely. Mr. Jorgensen, in Denmark, Novo 
Nordisk sells a diabetes treatment, Ozempic, for $2,000 per 
year. That is six times more--you charge six times more to 
Americans. Will you reduce the cost of Ozempic in the United 
States to what it is in Denmark?

    Mr. Jorgensen. [Technical problems]--the amount you 
mentioned for the U.S. is before rebates. So, on average we pay 
75 percent in rebates in the U.S., and for Ozempic, we actually 
see price going down, only the prices going down, year over 
year. So, we get a low price already.

    The Chair. All right. Answer is no.

    Senator Cassidy.

    Senator Cassidy. I defer to Senator Paul.

    Senator Paul. The great thing about capitalism is that 
supply and demand intersect, and you get the largest supply at 
the least cost when you allow capitalism to function. Now, 
capitalism doesn't function very well in drug markets because 
Government has been involved for a long time.

    But prices need to be based on supply and demand. A 
publicly traded company to promise to base their prices on 
bullying from a politician would actually be in breach of their 
fiduciary duty.

    I mean, it is actually illegal to say, I am going to make 
all the prices go down in my company. But it would also be 
irrational because if you did and there was no profit margin, 
the companies would be gone, and they would no longer exist.

    Mr. Ricks, if a patient has a co-pay of $50, would the 
rational decision be then to choose Lispro over Humalog?

    Mr. Ricks. In the case where they were buying one unit, 
yes, they pay $25, not $50.

    Senator Paul. Right. So, if the patient had a co-pay of $25 
and Lispro is $25 and Humalog is $100, but I am only going to 
pay $25, is there any rational reason why I would want to buy 
the least expensive one? I would want to buy the more expensive 
drug at that point.

    Mr. Ricks. Well, they are identical. In that case, they 
would be indifferent because they are paying $25 out of pocket 
either way.

    Senator Paul. Right. So here is the interesting thing. The 
lower the co-pay, the less the consumer cares about the price.

    You can mandate lower and lower co-pays, but you might 
actually get the opposite. You might actually drive consumers 
toward something that is actually more expensive. So, for 
example, under Obamacare, we made birth control have no co-pay, 
so there is no co-pay for birth control.

    But if you look at the price of birth control as it became 
free, the demand became enormous or greatly enhanced, and so 
the prices went up. From 2013 to 2019, you had a threefold 
increase in the price of birth control. So, the most important 
thing, as we think things through.

    We all want lower prices, but if you want to mandate lower 
co-prices for things, you may well get the opposite because you 
are taking away the consumer from the equation.

    Now the consumer is only involved in drug prices through 
the co-pay or the deductible, and so much of healthcare, 80, 90 
percent of it is beyond that. And so how do we lower co-prices, 
or we lower prices for drugs?

    People hire an intermediary. Dr. Kautzner, does anybody 
hire you, who, what businesses, labor unions, because they want 
higher prices?

    Dr. Kautzner. Absolutely not, Senator.

    Senator Paul. If you didn't provide lower prices, would 
they hire either another PBM or do it on their own?

    Dr. Kautzner. We exist in a highly competitive market. So, 
if we didn't deliver the value that we commit to our clients, 
they would certainly go elsewhere.

    Senator Paul. It is quite confusing. We want to blame PBMs 
for everything, but why do people hire them? No one is forcing 
anybody to hire them.

    As I understand, the companies represented here represent 
tens of thousands of businesses who voluntarily come to you and 
hire you. And they pay you and you make a profit.

    Your profit, is it exorbitant? Is your profit--Ms. 
Cianfrocco, is your profit greater than the drug companies 
somehow?

    Ms. Cianfrocco. Senator, our profit is--our margin is 4 
percent, roughly 4 percent for the services we provide to all 
of our clients.

    Senator Paul. That is about like Wal-Mart. I mean, I am 
surprised we don't have Wal-Mart here today to beat up on Wal-
Mart. We are all unhappy, but we have to be rational about what 
we are doing.

    Spread pricing, everybody is like, oh, this terrible spread 
pricing. Dr. Kautzner, do you offer spread pricing and also 
pass through pricing?

    Dr. Kautzner. Yes, Senator. We offer both options to our 
clients today. Roughly one-third choose spread pricing. Two-
thirds choose a pass through type of model. They choose spread 
pricing in order to have predictability on their pharmacy 
benefit.

    We shield them from incremental costs because we 
effectively provide them with a guarantee or a lock in on 
price.

    Senator Paul. Which is more expensive, spread pricing or 
pass through pricing when you offer it?

    Dr. Kautzner. We are agnostic to the type of pricing that 
we offer. It is more for the client to make that decision.

    Senator Paul. No, but there is a price. One--is spread 
pricing cheaper or more expensive than pass through pricing if 
I am a customer.

    Dr. Kautzner. Generally, they are going to be roughly equal 
in price or cost. There may be----

    Senator Paul. Ms. Cianfrocco, same question.

    Ms. Cianfrocco. You are referring to spread pricing as the 
mechanism where a client pays one price for all the pharmacy 
claims adjudicated. It offers predictability, and often cases, 
it offers controlled pricing and can be less expensive than if 
they pay every claim on a pass through model. But both are 
offered to our clients.

    Senator Paul. This needs to be pretty clear, and people 
need to think through. We have a bill before us to ban spread 
pricing. So at least one of the companies, and I think others 
have said this, spread pricing is less expensive than pass 
through pricing.

    We are going to ban the cheaper form of buying your drug 
insurance. Why would we ban the cheaper form? It sounds like if 
you ban the cheaper form, you might get the opposite result of 
what you are intending.

    You might actually get higher prices. Not to mention why we 
should be banning any of this but is there a possibility you 
ban spread pricing and then they, people decide to add more of 
a fee on the pass through pricing because, see, their 
obligation is to their stockholders, and they are legally bound 
to make a profit.

    If you tell me can't make a profit here, wouldn't they have 
to try to make a profit somewhere else if they are going to 
please their stockholders. But the thing is, we haven't thought 
this through. We are angry. Everybody is angry. I am angry. I 
have gone to the drugstore before and seen something for 
$1,600, an acne cream.

    We are angry. But why is it so obscure? Why is it different 
than electronics? Why is it different than buying a car? Why is 
it different than a lot of expensive things? Because we have 
made it opaque through all of these different things that we 
have mandated. In the 1930's, we passed antitrust law, the 
Robinson Patman Act, and we made it illegal to pass through 
discounts based on volume.

    Then we had a court case that now says you have to move 
market share and all these complicated things to get these 
rebates. But the bottom line is, in a free society, rational 
thinking, labor unions, and businesses, and health 
organizations are choosing a PBM. Why are they choosing a PBM?

    Do you think they want higher prices? And if a PBM is 
gouging them, why don't they go to another PBM? There is like 
70 some odd PBMs, and yet we have got in our heads somehow, we 
are going to forbid this.

    In the Lispro example, Dr. Kautzner, so what happens to 
that, if we have a $25 co-pay and you got $100 Humalog and you 
got a bigger rebate, and you are going to make more profit on 
the rebate? Are you keeping Lispro off of your list or can I 
get Lispro if I am a business and I have people who are 
diabetic in my business?

    Dr. Kautzner. Thanks for the question, Senator. So, our 
focus is on lowest net cost of the product. And so that is 
where we are focused the most. And as we all know, all insulins 
are not created equal. We actually separate insulins into three 
different categories as well. But our focus is lowest in the 
cost to patients----

    Senator Paul. Let's say they were equal. You have Humalog 
and Lispro, it is the same thing, and Lispro is $100 bucks, and 
you get a $75 rebate to make it $25.

    Now we are equal price to the business you are selling your 
plan too, but there is more rebate. Does that mean you are 
excluding Lispro from a list, that I--if I am a business, is it 
somehow working that way to exclude cheaper generics is my 
question.

    Dr. Kautzner. Our focus is on where lowest net cost is 
available for products.

    Senator Paul. I think there is a possibility, and I think 
that might be one complaint. There is a possibility of this. 
However, here is the rub. They are still giving you the lowest 
net price.

    If you say, well, gosh, the generic, I would rather the 
generic, it is underneath the copay, so it is outside of what 
the negotiation is, and so that is the only way it's going to 
make a difference to the consumer. But actually, I think that 
in the long run, as we look at it, the net cost is still what 
we are looking at.

    When everybody shakes their hands, oh, the net cost, the 
list price--the list price means absolutely nothing the same 
way they mean nothing in medicine. But the thing is, we got 
this complicated thing. This isn't capitalism.

    We got this because of antitrust laws in the 30's. We got 
this from a court case based on the antitrust law in the 90's, 
and we have this complicated system. But instead of trying to 
unravel the complications we put on the market, what we are 
asking is to ban certain contracts.

    I think what you are going to have in the end is you are 
going to have the unintended consequences of doing something, 
trying to do to make things better, and actually make the 
situation worse.

    The Chair. Senator Paul, thank you.
    Senator Baldwin.

    Senator Baldwin. Thank you, Mr. Chairman. Thank you to our 
witnesses today. In preparation for this hearing, I was 
reflecting back a few years when this very Committee had held 
several hearings on drug prices, and we had panels not totally 
unlike the one we have today with representatives from PBMs and 
representatives from drug companies, and a lot of finger 
pointing.

    I remember a few weeks after those hearings, having then 
Secretary of HHS, Alex Azar in front of us, who was formerly 
associated with a pharmaceutical company as an executive. And I 
was reading a letter that I got from a constituent. It was a 
father, two sons, both with juvenile diabetes.

    He was talking about just how much the family had to spend 
each month to keep his sons healthy. And at the end of sharing 
that letter, I said to Secretary Azar or asked, what should I 
tell my constituent about why these costs are so high? And he 
said, it is complicated. That is what he said. It is 
complicated.

    That is not an answer I can provide to my constituents who 
struggle with this. And there was just a discussion by one of 
my colleagues about opaqueness and lack of transparency. I find 
that basically an issue of the industry not being transparent.

    When I ask questions like help me follow the dollars, if 
you double the price of a drug, help me figure out who is 
pocketing that extra price. And I get, it is complicated as an 
answer. If we are going to make good policy, we have to have 
more transparency, and it is why I am glad this Committee is 
working on measures to achieve that.

    But one thing I can say when we look at people versus 
profits is greed is not complicated. Prescription drug 
manufacturers tell us they invest significant resources in 
research and development.

    PBMs tell us they invest significant resources in making 
drugs more affordable and accessible to patients. But both 
industries are also working overtime for profits and self-
enrichment. Mr. Ricks, yes or no, did Eli Lilly conduct $1.5 
billion in stock buybacks in the year 2022?

    Mr. Ricks. I believe that is approximately the number.

    Senator Baldwin. Mr. Joyner, yes or no, did CVS Health 
conduct $3.5 billion in stock buybacks in 2022?

    Mr. Joyner. I am not sure.

    Senator Baldwin. If I had the consolidated statement or 
consolidated financial statements in front of me that indicated 
such, would you agree that is the figure?

    Mr. Joyner. I would.

    Senator Baldwin. Okay. Dr. Kautzner, yes or no, did Express 
Scripts parent company, Cigna, conduct $7.6 billion in stock 
buybacks in 2022?

    Dr. Kautzner. I believe that is accurate, Senator, yes.

    Senator Baldwin. Ms. Cianfrocco, yes or no, did 
UnitedHealth Care, which owns OptumRx, conduct $7 billion in 
stock buybacks in the year 2022?

    Ms. Cianfrocco. Yes, that is about correct for UnitedHealth 
Group.

    Senator Baldwin. Mr. Jorgenson, yes or no, did Novo Nordisk 
conduct $24 billion in Danish krona, worth roughly $6--or $3.6 
billion worth of stock buybacks in 2022?

    Mr. Jorgensen. I believe that is approximately incorrect. 
We have majority ownership in the Novo Nordisk Foundation who 
gets the money and award money back to society for social and 
scientific purposes.

    Senator Baldwin. Mr. Hudson, yes or no, did Sanofi conduct 
a 497 million of stock buybacks in 2022, or roughly equivalent 
to $544 million USD?

    Mr. Hudson. That is correct, Senator.

    Senator Baldwin. Thank you. We are taking, Mr. Chair, some 
steps in the right direction, Mr. Ranking Member, in the 
legislation that we will be working on tomorrow in this 
Committee. And I am hopeful that we are able to specifically 
tackle insulin prices later this year.

    But we can't ignore the business practices of the companies 
that have come before us today. Part of how we tackle drug 
prices relates to that need to get transparency and that need 
to take on the aspect of greed.

    The Chair. Thank you very much, Senator Baldwin.
    Senator Cassidy.

    Senator Cassidy. I will go ahead and take my questions now. 
I agree with some of my colleagues, Senator Paul said regarding 
the adverse kind of paradoxical effect of decreasing rebates, 
but I differ with them on spread pricing.

    Now, Mr. Kautzner, looking at your testimony, I noticed 
that you were not, as you know, kind of hesitated when you ask 
if it is cheaper to do spread pricing versus a fee.

    Looking in your testimony on page 20, you speak about your 
pass through pricing models, and you say, clients pay exactly 
what Express Scripts pays pharmacy for a prescription, in this 
particular model.

    Clients receive 100 percent of the drug rebates that the 
Express Scripts gets, and clients pay one simple fee. And in 
this, the pilot program from 500,000 people was a -3.5 percent 
drug trend, a 12 percent total medical cost reduction, $193 in 
savings from closing clinical care gap, and I really like this 
as a doctor used to take care of uninsured patients, an 86 
percent of patients that were previously non-adherent to their 
medications, improved adherence through your coaching 
intervention. That is a good thing.

    A -3.5 percent drug spend. So, it is pretty clear from your 
testimony that banning or not using spread pricing actually 
decrease cost by 3.5 percent. So, but I think it raises the 
issue of what is actually the spread. Mr. Joyner, can you tell 
us on those contracts with which you have spread pricing, what 
is a typical spread?

    Mr. Joyner. I do not know the average spread per client 
because it varies based on the performance of the network.

    Senator Cassidy. Mr. Kautzner?

    Dr. Kautzner. Senator, I don't have the exact amount of 
where the profitability is.

    Senator Cassidy. Ma'am.

    Ms. Cianfrocco. Senator, I can't speak to the specific per 
claim. On some claims there is a difference by claim. I can 
tell you we passed through the 98 percent of the discounts, not 
just the rebate, but from the spread.

    Senator Cassidy. I have limited time. I am sorry, I don't 
mean to be rude. Thank you. By the way, I appreciate everything 
you are doing. I have an article that was sent to me today from 
first author is Mattie Lee, Understanding Spread Pricing, How 
Doctors Flow Through the Pharmaceutical Company for High 
Utilization Generic Drugs in Medicare Part D.

    This is Part D. Now the spread here, Medicare Part D paid 
an average of $22.50. $3.80 went to the pharmacy. $2.71 went to 
the wholesaler. $6.73 went for the manufacturer, and 41 percent 
or $9.18 went to the PBM.

    That was their spread. Now, this is generic drugs and 
Medicare Part D. It is a pretty good spread. 41 percent of the 
Medicare payment for generics is going for spread pricing. Now, 
I spoke to someone in the--I don't have this in an academic 
article, but I spoke to someone who has looked at the 
commercial market and they have found the average spread is 
$11.50.

    Now, I agree with Senator Paul. It should be transparent 
that someone says, well, wait a second, here we have got a 3.5 
percent decrease if we have full pass through. 3.5 percent 
decrease if we just pay a fee.

    Why don't they just do it? One thing we have been hearing 
from manufacturers is they have a really hard--excuse me, from 
the employee sponsor. They have a really hard time getting 
this. Now, in you all's testimony, you say that a third-party 
auditor can look at this, but that is a third-party auditor for 
a Fortune 500 company, for the local kind of 200 people 
employee, they don't have those assets, so I am told.

    They are more likely to be fully insured. And the fully 
insured product is where it is more likely to have spread 
pricing. I talked to Southern Scripts in Natchitoches, 
Louisiana, and they charge a fee-based claim with 100 percent 
pass through of everything, and it is $8.50 per paid claim. Now 
in Medicare Part D, it is a $9 something spread and with some 
retention of some percent of the rebates.

    Here one is purely a per fee claim. It is $8.50. So, it 
strikes me both from your data and from this and from anecdotal 
data that the employer is doing better. It is just difficult to 
figure it out if you are a smaller employer.

    Now, Mr. Joyner, or one of you, I apologize, in your 
testimony, you speak about how the average person in a high 
deductible health plan only pays $18.60 for her prescription. 
But we know that in a high deductible health plan, you have got 
an initial deductible of $3,000. Let's just pick that number. 
And then through the course of the year, you have got continued 
drug spend.

    What is unclear to me is that when you are paying list 
price for a drug, not insulin, because apparently you guys have 
done a good job of some of these drugs trying to lower it for 
the person. And I think I spoke to you, Mr. Kautzner, and you, 
ma'am, about how you lower it. Hats off, just thank you.

    But for other drugs, they are paying the full list price 
when they are in their deductible. It may be $18.60 on the 
average, because through the remainder of the year they pay a 
lower price. Have you looked at--and I think I know that 34 
percent of employees nationwide are in high deductible health 
plans.

    What is the average cost of a drug when someone--list price 
of a drug when someone is in her deductible? Do you all have 
that data? Because it is $18.60 on the average through the 
year, but when she is in her deductible, that is where I have a 
concern.

    That is where, if the insurance company knows where the 
deductible is and that is what has been negotiated with the 
plan sponsor, and now she is going to have to pay full freight 
for that list price because the rebate does not pass to her.

    The spread pricing is fully operative. She is just paying 
full freight. Do we have a sense of what that average drug cost 
is during that period? Mr. Joyner.

    Mr. Joyner. I don't have the exact average, but I will say 
that most of our clients with high deductible plans understand 
the first dollar coverage and the fact that they want to 
provide an affordable benefit.

    In categories that are attached to the preventative drug 
list, in many of the cases, the members are paying zero. And 
then there are many of our customers that choose to pass the 
discounts through the point of sale, meaning that at the 
counter they are getting the discounts.

    Senator Cassidy. You have a percentage of the customers 
that would do that relative to the number of patients?

    Mr. Joyner. We have over 10 million of our lives in the 
high deductible plans that are doing that today. So, it is a 
meaningful number.

    Senator Cassidy. 10 million of the--10 million employees 
who have high deductible plans would get a point-of-sale 
rebate?

    Mr. Joyner. Exactly. On average, we--our average insulin 
cost per month----

    Senator Cassidy. No, but that is insulin. I am sorry, that 
is insulin. I was just talking about drugs in general.

    Mr. Joyner. On average, the average out-of-pocket expense 
for our members are less than $9 a month.

    Senator Cassidy. Again, I am talking about specifically----

    Mr. Joyner. I understand.

    Senator Cassidy. Ms. Cianfrocco, let me ask you on 
something different. You mentioned the margins being 4 percent. 
Does that--is that net of expenses? I assume it is.

    Ms. Cianfrocco. Yes, Senator. Final margin for roughly 4 
percent.

    Senator Cassidy. Now, what I have learned is there is a lot 
of vertical integration where there is a GPO or rebate 
aggregator, others providing data analytics, etcetera, but they 
are all vertically integrated within the same insurance 
company, the same pharmacy benefit manager.

    If you pay the GPO a fee for whatever they do, and the 
rebate aggregator a fee, etcetera, one, they may retain a 
little bit of it, but on the other hand is, are you 
subtracting--is that is a business expense and you do not 
include that in the margin?

    Ms. Cianfrocco. Senator, for Optum, our affiliated group 
purchasing organization does not cost the client anything and 
it is----

    Senator Cassidy. No, but is that--but is your margin net of 
that or include that?

    Ms. Cianfrocco. Our margin is straight margin. It is net of 
everything.

    Senator Cassidy. Okay.

    The Chair. Senator Kaine.

    Senator Kaine. Thank you. To my colleagues, I have some 
good news for you. In Virginia, there is a company called 
Civica. It is a nonprofit pharmaceutical company that has taken 
over a closed pharmaceutical manufacturing company and reopened 
it as a nonprofit to bring both low prices but also 
transparency to prescription drugs.

    Last year, Civica announced that they will manufacture and 
distribute affordable insulin products that are interchangeable 
with most popular brand names currently on the market, Lantus, 
Humalog, Novolog. Civica's insulins will be available to 
consumers at no more than $30 per vial or $55 for five pins.

    No rebates, no opaque discounts. A price everyone can count 
on. I am grateful that this innovative nonprofit has stepped in 
to increase competition in the market, ensure people have 
access, bring more transparency.

    I would like to ask to my PBM representatives, Mr. Joyner, 
Mr. Kautzner, and Ms. Cianfrocco, will you commit to offering 
such low-cost biosimilar insulins as tier 1 products with $0 or 
low-cost copays?

    Mr. Joyner. We will certainly--we are certainly open to 
adding any drug that comes with the low net cost and lower drug 
price. What I can't commit to is the benefit design because 
that is the decision that our plan sponsors, employers, unions, 
etcetera, decide.

    Senator Kaine. Dr. Kautzner.

    Dr. Kautzner. Senator, we actually, in 2020, already capped 
the cost of insulin in partnering with manufacturers that are 
here today at no more than $25. We saved patients last year 
over $18 million with that solution, and now are offering a new 
flat dollar co-pay plan designed for our plans, which also will 
cap preferred brands at $25, and specialty generics at just $5.

    Senator Kaine. It sounds like a no, but I will go to Ms. 
Cianfrocco.

    Ms. Cianfrocco. Senator, in addition to all the things we 
have talked about to lower the cost of insulin, I want to be 
very clear that any insulin offering that is clinically 
effective can be delivered with support to our patients at 
scale and is available list price or net price. As long as it 
is the lowest cost and it is competitive, it is offered, and it 
will be offered.

    Senator Kaine. Let me move to my pharmacy execs, and I had 
a question. I have heard so often from pharmacies--pharma 
companies that you tried to develop a low-cost product that you 
offer to patients, but the PBMs turn you down. They don't let 
you have access to the system.

    I have heard many in your industry say because they would 
prefer products with high list prices, because they gather fees 
and the fees are a percentage of the list price, not of the net 
price. And that, if I am right about that in that sense, to Dr. 
Paul, that Senator Paul said the list price is meaningless.

    It is meaningless maybe to a patient. I don't think it is 
meaningless in the industry because I think the PBMs collect a 
percentage of list price, even when the negotiated price is 
much lower.

    Mr. Hudson, you said something a few minutes ago that 
perked my ear up. You talked about trying to offer a low-cost 
insulin product that was, ``not accepted by the system.'' That 
is too opaque for us slow Senators to understand exactly what 
you mean by that.

    Can you go into more detail what it means, that Sanofi had 
a low-cost insulin that you wanted to provide to more patients, 
but it was, ``not accepted by the system''?

    Mr. Hudson. Yes, of course, Senator. You know, Lantus has 
been around over 20 years, and we have tried to bring lower 
cost alternatives. Biosimilars have been available, not used in 
any great detail since 2016.

    Last year in August, we launched Lantus--an unbranded 
Lantus made in the same factory by the same excellent people 
with a 60 percent discount to the list price, it was just not 
listed on the health plans.

    Senator Kaine. What was the reason for that?

    Mr. Hudson. Well, it is complicated for me to try and be 
precise because the conversation will, I am sure, be between 
the PBM and the health plan, not between me and the PBM.

    We tried to bring a much lower cost, Lantus, a lot much 
lower priced Lantus to the table. Of course, there will be less 
rebate associated with that----

    Senator Kaine. But when you say it wasn't accepted by the 
system, and we have heard there is all kinds of competition 
among PBMs, you couldn't find any of the major PBMs that would 
accept this insulin product that had a dramatically lower list 
price?

    Mr. Hudson. That is correct.

    Senator Kaine. Can I ask that Mr. Ricks and Mr. Jorgenson, 
have your companies had similar experiences, whether it is in 
insulin or something else, of bringing a pharmaceutical at a 
dramatically lower list price that had capacity to really help 
people and to be told that, no, these would not be available on 
formularies? And if I go to Mr. Ricks first and then Mr. 
Jorgensen.

    Mr. Ricks. Yes, thanks for the question, Senator. We have, 
as I mentioned, and I brought two boxes of the Humalog product. 
We make them both. Once is called Lispro, once is called the 
Humalog.

    They are made in the same factory by the same hardworking 
people. And after 4 years, the Lispro product, which is the 
copy and now cost $25, which is available on about one out of 
three formularies in America. So, I think it is clear that the 
lower price is not preferred.

    Senator Kaine. The PBMs who make the decisions, if it is a 
higher list price, they like the higher list price better than 
the lower list price.

    Mr. Ricks. That is what the data tells us, based on the 
market share, the poor performing lower cost----

    Senator Kaine. Mr. Jorgensen, how about your company. Have 
you had a similar experience?

    Mr. Jorgensen. Yes. So, Senator, we have a similar 
experience. We have also launched an unbranded version, which 
is exactly the same product from exactly the same factories, 
and it has around one-third of the access as the higher list 
priced products.

    Senator Kaine. Are you told why the lower list price 
offering is not being accepted on formularies by PBMs you deal 
with, Mr. Jorgensen?

    Mr. Jorgensen. No, I am not aware of that specifically. I 
can say that in general we keep increasing our rebates and they 
go into the PBMs, and obviously, I understand they do not 
decide on the plan designs, but this is the Bermuda triangle 
where things get lost.

    Patients are paying more, and we are paying more in 
rebates. And somehow in the middle, that is something that is 
not really working.

    Senator Kaine. All three of our pharmaceutical--pharma 
company who are here today have had the experience of trying to 
put drugs with lower list prices out available for patients but 
been told they would not be offered on formularies, even so 
that somebody could make a choice.

    I mean, if something is on a formulary, it doesn't have to 
be the product that is chosen, but it is not even getting to 
the formulary. To our PBM witnesses, do you collect fees based 
on a percentage of the list price of the drug or a percentage 
of the negotiated actual price of the drug?

    Mr. Joyner. Every client contract is different, but we 
generally either have a fixed fee and or a PM, meaning that we 
kind of collectively manage the expenses across the population. 
If I could go back to the----

    Senator Kaine. Let me just though, so you do not have any 
fee structure in your company where you collect a fee based on 
a percentage of the list price?

    Mr. Joyner. We certainly may have a few in our client 
base----

    Senator Kaine. Dr. Kautzner, how about you? Do you, do you 
collect fees based on a percentage of the list prices of drugs 
that are on the formulary that you manage?

    Dr. Kautzner. Senator, we have a mix of both, where some 
are percentage fee, some are a flat fee. But as we have been on 
the record before, we welcome manufacturers that continue to 
lower their list prices on all their products, not just on some 
new products that they are bringing out that are copies of 
other products. We have been asking for them to do that for 
years.

    Senator Kaine. I yield back, Mr. Chair.

    The Chair. Senator Collins.

    Senator Collins. Thank you, Mr. Chairman. In 2018, I 
chaired a hearing of the Senate Aging Committee on why the 
costs of insulin was so high. And Mr. Chairman, one of the 
witnesses was a father from Maine who was going to Canada to 
get insulin for his 10-year-old son.

    What we found was a system of getting insulin from the 
manufacturer to the customer that was rife with perverse 
incentives, convoluted and opaque, so opaque that the witness 
that we had who had done the study on the system could not 
fully explain the chart showing all the links.

    I want to put up a chart that shows insulin list price, 
which is the top line versus net prices from 2012 to 2021. And 
starting with you, Mr. Ricks, I want to find out where the 
money is going in that gap between the list price and the net 
price over 9 years' time. And as you can see that gap has 
gotten bigger.

    You have testified that I think it was $0.80 per dollar 
doesn't go back to the manufacturer. Mr. Hudson said $0.84. So, 
similar. So, explain to us who gets that money. Because I can 
tell you, it is not, for the most part, going to the consumer 
at the pharmacy counter. Mr. Ricks.

    Mr. Ricks. It is a good question. I can explain much better 
what are the costs that make up the bottom line, because from 
that, that is our revenue.

    We pay our workers, we make the product, we pay to 
distribute it, and we invest 25 percent of that line in 
research and development.

    The difference, there are concessions made in price 
negotiations with large payers like the PBMs here today. I 
think you have to ask them how that gets redistributed in the 
system.

    Senator Collins. Mr. Hudson.

    Mr. Hudson. That is already a very complete answer. It is 
the same for Sanofi.

    Senator Collins. Mr. Hudson. You would agree that this 
money does not find its way in most cases to the consumer at 
the pharmacy counter?

    Mr. Hudson. I would agree. I mean, over the last decade, 
the list prices increased over 50 percent, but the out-of-
pocket expense, what someone is paying at the counter has 
increased 45 percent.

    It is on average not making its way to the counter for the 
person who is trying to make a choice between groceries and 
medicines.

    Senator Collins. I think we have a very strange system here 
because--to say the least, because most of us would think that 
the rebate, the discount that is negotiated by the PBMs, would 
largely benefit the consumer at the pharmacy counter. But in 
fact, it goes to the PBMs themselves and it goes to the plan's 
sponsors.

    That could be an insurer, that could be a large employer 
with an ERISA plan, but it is not making its way down. So, the 
insurers will tell you that, well, we use it to moderate rates, 
to keep rates lower for everyone.

    The problem with that explanation is insurance is based on 
the principle that the healthy are subsidizing the sick. What 
we are doing is turning this on its head. So, in order to lower 
the premiums for the healthy, we are not passing on the savings 
to the sick. Mr. Ricks, would you agree with that?

    Mr. Ricks. I agree that happens frequently. And I think 
particularly where Senator Cassidy was going with the high 
deductible phase in particular, where patients are exposed to 
full list pricing, there is an enormous difference between what 
the system pays and what they have paid, and that creates a 
surplus that is supporting premiums or other things.

    Senator Collins. I want to ask our 3 PBM representatives. 
Mr. Joyner, who owns your PBM company?

    Mr. Joyner. CVS Health.

    Senator Collins. Isn't there a connection also to Aetna, 
the large insurer?

    Mr. Joyner. That is correct.

    Senator Collins. Dr. Kautzner, who owns Express Scripts?

    Mr. Ricks. Senator, the Cigna group owns Express Scripts. 
And if I----

    Senator Collins. Another large insurer, correct?

    Mr. Ricks. Cigna Health Care, yes.

    Senator Collins. Ms. Cianfrocco, and I apologize, I have 
misspelled--if I have mispronounced your name. Who owns Optum?

    Ms. Cianfrocco. Optum is owned by UnitedHealth Group.

    Senator Collins. Again, another large employer--another 
large insurer. So, to me, this is an example of the system's 
incentives.

    If you are in fact negotiating for your clients, you are 
negotiating for your owners who are all large insurers, for 
other plan sponsors that are insurance companies, for large 
self-insured employers, but you are not negotiating for the 
customer because it is not--to be fair, it is not up to you 
what the people who hire you or for whom you work, decide to do 
with that discount.

    They could pass it all on. But the evidence is overwhelming 
that they do not. I want to go back to an issue that Senator 
Kaine raised, and that is the difficulty that biosimilars have 
in getting on to the market and getting chosen by a PBM for a 
formulary. This makes no sense whatsoever to me if you care 
about lowering prices.

    Mr. Hudson, Senator Kaine talked about the fact that when 
you come up with biosimilars that are cheaper than your branded 
product, you can't get chosen. But it is not just you.

    Even when a competitor comes up with a brand--with a 
biosimilar that is way cheaper, and I would use Viatris as an 
example, which came up with insulin glargine, which was 65 
percent cheaper than Lantus. It couldn't get on the formulary.

    It takes the same product, relaunches it at only 5 percent 
lower, and guess what it gets chosen?

    The Chair. Thank you, Senator Collins.
    Senator Hickenlooper.

    Senator Hickenlooper. This is one of the most amazing 
hearings I have heard. It reminds me of a long time ago when I 
used to be in the restaurant business. I knew a guy who, it was 
probably 30 years ago, had an Italian restaurant, worked very, 
very, very hard. And some months he just could barely make 
things balance--could not balance the budget at the end.

    If there was a snowstorm or something, he would have to go 
through incredible contortions to stay in business. And he 
would get frustrated, and he went, and he doubled the prices of 
everything. It was an Italian restaurant. Pizza, spaghetti, 
whatever, he doubled the prices. Within 3 weeks, the number of 
people coming into his restaurant almost doubled. Same food. He 
just doubled the prices.

    That shouldn't be the case. I say that because that is an 
aberration of capitalism, Senator Paul would say if he was 
here, for sure. And but that is what we are seeing here. We are 
seeing a case where the higher the price, the more likely a 
pharmaceutical company can sell their product through the PBM 
system.

    I have got a couple of questions. The $0.84, so that means 
that $0.16 stays with your--with the pharma--you are roughly 
somewhere between $0.16 and $0.20. You are $0.16, you are 
$0.20, roughly in that range.

    I guess we should go down the list of the PBMs and just 
say, how much of that, all the rest of that stays with the PBM, 
right, and then how much goes--is rebates to the plans or to 
hopefully eventually some of the consumers. Mr. Joyner, why 
don't we start with you.

    Mr. Joyner. Today we pass through more than 98 percent of 
all the rebates and discounts to our customers. And 100 percent 
in Medicare.

    Senator Hickenlooper. It goes right straight to the 
customers.

    Mr. Joyner. It goes straight to the customers, which are 
the employers, unions, Governments, etcetera.

    Senator Hickenlooper. Okay. I should have gotten Senator 
Collins to keep her poster up, because that is a big space up 
there for--98 percent sounds like a big number there. That is 
an awful lot of--it doesn't seem like it is going to the 
consumer who is purchasing it, which is that bottom line, 
right?

    Mr. Joyner. Yes. I think that is a perfect example of PBM 
competition. When you saw the price separation, it was at the 
point in time when we selected one insulin product.

    The result was declining costs for our customers, the 
payers, while the manufacturer was increasing pricing. So, we 
are passing through 98 plus percent of that value.

    Clients are using that to invest obviously in their out-of-
pocket expense, $0 co-pays in many respects, and, or trying to 
deliver the discounts at the point of sale.

    Senator Hickenlooper. Got it. Got it. All right. Dr. 
Kautzner.

    Dr. Kautzner. Senator, for our commercial employers, labor 
groups, health plans, and public sector entities, we passed 
back over 95 percent of rebates. I would also comment on 
Senator Collins list price component.

    That list price continued to go up in the height of extreme 
competition. Manufacturers are on the record of saying they 
control list prices. We have been asking them for years to 
lower their list prices. No one made them increase their list 
prices. They made that decision on their own.

    Senator Hickenlooper. Seems to me the more they raise their 
price, just like the Italian restaurant in Boulder, Colorado, 
their sales go up, which is anybody put in that position would 
have a very difficult choice. Yes, Ms. Cianfrocco.

    Ms. Cianfrocco. 98 percent of the value of the amount of 
savings that we negotiate gets passed directly to our customer. 
They do use that for programs like the $0 out of pocket that we 
saw on the lifesaving drugs.

    They do use it, and we always recommend that those dollars 
are used to protect the patient through things like the high 
deductible preventive drug list, which would protect patients 
for preventive--for drug and prescription drugs for preventive 
disease. For life saving drugs and chronic disease.

    Senator Hickenlooper. Right. Okay. I am just going to throw 
out a fact because I was puzzled when I went home last night 
just because of as I looked into this, it became more puzzling, 
but at the same time, somehow almost symbolic of the whole 
health care system, the troubles we have.

    This is just Googling, so this might be a little bit out of 
date. But you look at the Fortune 500, the Fortune 100, the 
Fortune 25, CVS is No. 4 in the country. Let's see, 
UnitedHealthcare is No. 5.

    Express Scripts, you got, Cigna is number 12. So, 3 out of 
the 15 largest corporations in America are all significantly in 
this integrated vertical spectrum, which somehow finds very 
puzzling. If you go back and look at the top 20, there are 
really 8 companies in there that are health care related, or 7 
for sure.

    I am not sure whether you would say Walgreens is more of a 
retailer or a health care company. But the weight there, the 
preponderance of market mass, it seems inconceivable that these 
companies could be that large if they are pushing 98 percent 
through to their customers, that they would be able to do $6 
billion, $7 billion stock buybacks. It doesn't sound like they 
are losing profitability.

    Mr. Hudson, at one point you said that, or someone had said 
that you felt that you guys were almost like the canaries in 
the mineshaft. Is that some reflection of the situation?

    Mr. Hudson. Well, what I have said publicly before is that 
when we use the same insulin as unbranded and reduce the price 
60 percent, we wanted to see whether the system in all its form 
would pass that on, the lower price, to patients.

    We recently reduced the price, again, as you know, 78 
percent, and we have some anxiety that it won't make its way to 
patients. In fact, patients may be taken off.

    Senator Hickenlooper. You get--the lower you--the more you 
lower the price, the less patients you achieve. So that is the 
canary at a certain point.

    Mr. Hudson. That is, as Chairman Sanders said, that we, 
this Committee may look again in a year to see whether it had 
impacted access affordability. I think that is the key 
question.

    When you bring the price down--remember, our net price is 
$21, which is often less than the co-pay across all channels, 
$21 a vial for Lantus. You know, that should change what is 
available and what patients pay.

    If you come back in the year and nothing has changed but 
less Lantus is being used, you have to say, the system is not 
working.

    Senator Hickenlooper. That is for sure. Mr. Ricks let's ask 
all three of the pharmaceutical companies the same question. If 
you, and you all lowered your prices, do you think you will 
have gotten your products, your insulin to more customers a 
year from now? Mr. Ricks.

    Mr. Ricks. Well, I think it was a risk to lower prices, but 
one that we thought was worth taking. We were happy that 
competitors independently followed that, but we need to make 
sure that we can have our insulins stay on formularies and 
available.

    Hopefully it would increase availability, but those 
decisions are in front of us--in front of them.

    Senator Hickenlooper. Well, what is your prediction a year 
from now when we all have a reunion?

    Mr. Ricks. Well, I hope that we will have better access to 
low priced insulin.

    Senator Hickenlooper. Okay, great. Mr. Hudson, what is your 
sense of that?

    Mr. Hudson. Yes, look, I agree. I think we spend a lot of 
time talking about insulin pricing. It is really a net price 
conversation. It is really what money makes it to make it more 
affordable for patients. If in a year's time more patients can 
get access to more affordable insulin, then it was worth doing. 
I really hope that is the case.

    Senator Hickenlooper. Right. Mr. Jorgensen, I am just going 
to assume you are of the same mind?

    Mr. Jorgensen. Yes, I share the same concern. We don't know 
yet whether we even have access to the patients we have access 
to today. And I can add that our net price after rebates, fees, 
and discounts, today is lower than when we launched the 
products. So again, if patients are paying more and the price 
has gone down, something has not worked. Thank you.

    Senator Hickenlooper. Thank you. I am out of time, but I 
do--I think we can challenge the PBMs that are here represented 
that if you are the--if you guys are part of the 4th largest, 
the 5th largest, and the 12th largest companies in this 
country----

    The Chair. Senator Braun----

    Senator Hickenlooper. You can help resolve this--resolve 
this issue.

    The Chair. Senator Braun.

    Senator Braun. Thank you, Mr. Chairman. I have been 
wrestling with this issue across the board for at least 15 
years prior to coming here. Actually, did something about it in 
my own company, across the board too, to make things work for 
my own employees. That occurred in about 2008.

    I was sick and tired of hearing how lucky we were through 
our insurance companies that it is only going up 5 to 10 
percent per year. And Senator Paul earlier talked about free 
markets. He and I are going to be in agreement on that mostly. 
But let me tell you what free markets have in common, unless it 
is entangled with Government like this business is even more so 
than most industries.

    No barriers to entry, robust competition, full 
transparency, and here is probably the most important one, that 
the consumer--Senator Paul mentioned this, the consumer has no 
skin in the game the way it is currently constructed. They 
either want, when they need remediation, which is a very 
inelastic demand, when you get critically ill or have a bad 
accident, they want it done immediately.

    They don't want to shop around. And they either want their 
employer to pay for most of it or the Government. It is a 
system by its nature that is about as far from free enterprise, 
it is more like an unregulated utility, and you are a part of 
it. The good news is, when I first started looking at it, 
hospitals were about 30 percent of the health care dollar. 
Practitioners were about 30 to 35 percent.

    Pharma was 15. Insurance, 15. Insurance and pharma have not 
changed a lot, even though insurance has become this 
disproportionately more impactful in terms of keeping the whole 
system glued together the way it is.

    Sadly, hospitals have grown to almost 45 percent of the 
health care dollar simply because so many practitioners, it 
would be like losing farmers in agriculture, aren't even 
wanting to get into the business like they used to. Used to be 
not only the Hippocratic Oath, but they wanted to have their 
own business to boot.

    They are increasingly being employed by large corporate 
hospitals that all play into this lack of what most markets 
have. So, you pile all that up, you get to where Senator 
Sanders is. People are getting fed up with it. I got fed up 
with it 15 years ago. The rest of the world can buy drugs for 
one-fourth the price.

    They have healthcare that is being tended, 12 percent of 
their GDP, with every developed country having outcomes as good 
as, if not better. And here we are at 18 percent of our GDP, 
and it is going up as opposed to going the other way. Nothing 
works like that in a true market context.

    Maybe we will not get there. Let's look at pharma itself. 
You have got a proprietary product. It takes a long time. 
Investment in R&D. Pointed out that a lot of these drugs have a 
$5 maybe material cost yet sell for hundreds of dollars. So 
that means you have got very low variable cost, very high fixed 
costs.

    That is a classic case for how you can charge things and 
you don't have it related to your actual cost of doing 
business. Sounds like maybe on PBMs, if that is accurate that 
you are working on a 4 percent profit margin, I assume that is 
on sales.

    I am assuming you are getting a lot better return on equity 
than that, or you probably wouldn't be growing your businesses. 
Something has got to give. You are either going to get what 
Senator Sanders is proposing, where all other countries have 
done it because they have never found a way to address the 
broad issues I have mentioned.

    Probably the easiest place that you could fix it would be 
maybe in primary health care, which never did--was insurance 
intended to cover scratches and dance. Never should consumers 
being in any market where they want someone else to pay 100 
percent of it.

    Those who can afford it shouldn't even be under insurance 
for their primary health care. Those who can't, should have 
that support, otherwise you never have a real market. I am 
going to go to the thing that struck me most kind of 
significantly was when I heard Senator Sanders ask, why are you 
selling especially--I am sure it is simple molecule drugs, as 
well as the biologics.

    Why is this stuff selling minimally for one-quarter of the 
price in most other markets that you sell to and sometimes one-
tenth? Obviously, you are covering your variable costs. Why are 
we as Americans paying the bill even though it is only 15 
percent of our GDP?

    If it is not working here, how are we going to get the rest 
of the system to work? Why is that? I never was clear, and I 
didn't hear a clear answer other than you are going to continue 
to do it. You want to start, Mr. Ricks.

    Mr. Ricks. I can, yes. Thanks for the question. First, one 
problem with the data that is often cited is list prices in the 
U.S., where we get paid on net pricing after negotiation. Those 
numbers versus Europe are typically about 35 percent higher in 
the U.S. than Europe, not double or some other number.

    I will admit they are higher on a net average basis. What 
do we get for that? We get the earliest access to new medicines 
of any country in the world. And in general, we have the 
industry here as well, which I think supports jobs and 
manufacturing roles, etcetera, so.

    Senator Braun. If you are breaking the bank, the thing you 
got to realize is all the things that you say are attributes of 
our system, they shouldn't cost us 50 percent more than what 
health care does across the world.

    In your case, since most people have a prescription as 
maybe their first entry into the health care system, here, you 
are showing us where you are charging minimally four times as 
much here, if not ten times.

    I don't think politically that is going to get you into the 
next generations of where you will be like a regulated utility, 
and it will be the same format that all other countries have 
had to go to.

    Mr. Ricks. With all due respect I think we get one other 
thing, which I wanted to mention, which is the possibility of 
new cures and treatments. That is funded by the more or less 
the premium we get in the developed world. They fund that for 
the world. And I think we have to strike a balance between 
having low-cost medicines today and future----

    Senator Braun. What does that have to do with charging us 
ten times to at least four times? I mean, why can't they 
carry--they are the ones not even doing the work. They should 
be paying more.

    Mr. Ricks. I mean, you raise a good point. Lilly will spend 
about what the entire country of Germany does on pharmaceutical 
research this year. So why are they not funding that? I don't 
know.

    Senator Braun. Well, I think that is something you need to 
ask yourselves, or else I think the structure of what you are 
used to is not going to persist into the future because we 
simply can't afford it.

    The other, you are in a business that has the peculiarity 
of uncertain outcomes. R&D, that is bona fide, but I think 
where you have defaulted, maybe somewhere down the line--you 
say you don't need PBMs.

    We have had that conversation. Why wouldn't it then--why 
would you not need PBMs when they are making a smaller margin, 
and it is such a complicated system, and you are the producer 
of the product.

    In all other industries, you have a wholesaler that buys 
it, distributes it across the marketplace, and--was that 7 
minutes, Mr. Sanders?

    The Chair. That is 8 minutes.

    Senator Braun. Very good. I will yield the floor. We will 
have the discussion further. Thank you.

    The Chair. Thank you.

    Senator Smith.

    Senator Smith. Thank you, Chair Sanders and Ranking Member 
Cassidy. And thanks to all of you for being with us here today. 
I would like to start with going at how this system affects 
folks with--who don't have health insurance.

    My first work in the Senate focused on this when I met my 
fellow Minnesotan, Nicole Smith Holt, who--and heard about her 
son Alec, who I believe Chair Sanders raised at the beginning, 
who died of ketoacidosis when he went off his parents' 
insurance and couldn't afford his insulin.

    He rationed and he died. Now, HHS analysis tells us that 
uninsured patients typically pay the most for insulin, and 
that, of course, leads to rationing. And so, we have heard 
about your patient assistance programs, and you have argued 
today that insulin is different and better than it was 100 
years ago.

    Diabetic patients need different drugs, need different 
insulin based on their body and what works best for them. So, 
my first question to the drug companies, can uninsured patients 
currently access each of your insulin products through all of 
your patient assistance programs at somewhere between $25 and 
$35, which I think is the range of prices?

    Mr. Ricks. Want me to start? Yes, is the answer. If you are 
insured, it is capped at $35 for every Lilly insulin. If you 
are uninsured and your income is below $57,000 a year, it is 
free.

    Senator Smith. For all--it doesn't--whatever----

    Mr. Ricks. Doesn't matter what insulin you are on----

    Senator Smith. Doesn't matter--it is all of them. Okay. Mr. 
Hudson.

    Mr. Hudson. The same for us. And in fact, the data is that 
uninsured patients use that facility over 100,000 times last 
year for $0 co-pay.

    Senator Smith. For all of the insulin products that you 
own, not just some of them.

    Mr. Hudson. That is correct. Yes. That is correct.

    Senator Smith. Okay. And Mr. Jorgensen.

    Mr. Jorgensen. Yes, Senator. We also offer a program where 
people can get access to free insulin and any insulin if they 
are in a situation where they have to ration. So, we are there 
for patients without insurance.

    Senator Smith. Okay. So, what I don't understand is, 
because I hear about patients being charged list price if they 
don't have insurance. So, I am having cognitive dissonance 
trying to understand how this all works. Why don't you just 
lower the list price for all of those medications, and just 
make it simple? Yes----

    Mr. Ricks. Yes, we would like to get there, honestly. I 
think Senator Braun mentioned that we would be happy if there 
weren't rebates in the system. They don't do anything for us, 
and we are----

    Senator Smith. You would be willing to lower list price?

    Mr. Ricks. We have been, as I mentioned in my comments.

    Senator Smith. Let me just turn to the PBMs, because the 
drug companies are saying they would lower list prices. You 
have been asking for them to lower list prices. Can we just 
like have an agreement today that we are going to lower list 
prices?

    You won't charge rebates. They won't--they will lower list 
prices and we would be all done? Who wants to----

    Dr. Kautzner. I can answer that, Senator. So, we have been 
asking for years for them to lower list prices.

    Unfortunately, the lower list prices are coming far too 
late compared to when they could have occurred years ago. Now 
they are coming because of the Medicaid cap that is going away, 
and so they are going to be exposed, and would have to pay 
more.

    They are actually doing this because of Government 
intervention, not because they just want to lower the prices. 
But we welcome them to lower the list prices and we will be 
excited to do so for the value that is going to provide to our 
patients.

    Senator Smith. Mr. Joyner.

    Mr. Joyner. Similar to Express Scripts, we also would 
applaud and enjoy the lowering of list--of drug prices.

    Senator Smith. Then this gap that Senator Collins showed on 
her chart, which appears to be the rebates and discounts that--
then you would get rid of those?

    Mr. Joyner. Yes, I think there is two things because one is 
that is what the PBMs have done to date. So, the prices that 
have been announced on that chart is actually below the cost at 
the time that they have listed for coverage.

    Senator Smith. Mr. Hudson.

    Mr. Hudson. Yes, just to be clear that it was 2018, we 
brought a lower price analog. Nothing to do with recent 
policies or announcements and reduced the price of that three 
times to no effect.

    Then it was last August that we bought, made in the same 
factory, as I said earlier, an unbranded Lantus at 60 percent 
off, long before this year's debate. So, I am a bit perplexed 
because they are there. They have been there--we have stepped 
up and done that.

    Senator Smith. I am perplexed too. Right. And to the PBM 
executives, what do you say to this critique that your 
profitability is enhanced or higher when list prices are 
higher?

    Mr. Joyner. I will give the Lantus example, because I think 
it is an important point that is being made that of a lower 
list price being brought to the market has not been accepted by 
the PBM.

    Back in 2017, a biosimilar came to market by the name of 
Basaglar, which was generic competition in that category. We 
adopted that product as our preferred product. So, we lowered 
the list price, and we lowered the overall net cost for the 
customers, and we converted 97 percent of all the patients on 
Lantus on to Basaglar.

    It was a significant savings for our customers, and we 
actually embraced a much lower list price than what Lantus was 
promising at the time.

    Senator Smith. This critique that PBMs do better when list 
prices are higher, does anybody--I mean, is that an unfair 
critique, or how do you see that?

    Dr. Kautzner. Senator, our focus continues to be for our 
employer, clients, and patients that we drive to the lowest net 
cost, regardless of where the list price is. Lantus is an 
interesting example.

    Lantus, when it didn't have competition between 2010 and 
2014, actually doubled in price. The price didn't moderate 
until 2015 and beyond when competition actually entered the 
market. Discounts were about 3 percent. They increased to about 
20 percent in the 2015 range, and then certainly have more than 
tripled since that point.

    Just to the questions earlier on products, other products 
in other countries and how expensive they are. Unless there is 
competition in the market, and for us to drive that 
competition, you are going to continue to see sky high list 
prices by drug manufacturers.

    We are going to do everything we can to bring those prices 
down, and that may be in the form of rebates so we can provide 
discounts back to our employers and our patients.

    Senator Smith. Well, so let me ask--let me just follow-up 
on that a little bit with you, if I could. Actually, Senator 
Braun and I will be mark--tomorrow we will be marking up 
legislation that Senator Braun and I have introduced that would 
basically be a bill that would help bring lower cost generics 
to the market more quickly.

    But of course, that only benefits patients if they have 
access to them. This is another place where I am having 
cognitive dissonance because this brings me to the formularies 
that basically determine what medicines patients can get at 
what cost.

    A recent study showed that in Medicare Part D, a greater 
proportion of generic drugs are being placed on higher tiers on 
formularies, which leads to increased patient cost sharing.

    Another report showed similar trends forcing patients 
that--they actually, so they end up paying more for generics 
because of where what tier they are placed in on the formulary.

    Can you explain how you see that? What is going on there? 
Why is that happening? Why are not--why does it appear that 
lower cost generic benefits are not getting passed on to 
patients like we would have expected and hoped?

    Dr. Kautzner. Senator, we are absolutely supportive of 
legislation that could help to improve the accessibility to 
generic drugs, that will remove patent thickets, remove pay for 
delay, and will provide faster accessibility to more 
competition in the market. And we welcome anything that can 
help to do that.

    On the biosimilar front, we also welcome reducing the 
patent expiration down from 12 years to 7 years to create more 
competition, and interchangeability rules as well on biosimilar 
products so that it is easier for biosimilar manufacturers to 
come to market and actually be competitive.

    Senator Smith. Mr. Chair.

    The Chair. Thank you, Senator Smith.

    Senator Marshall.

    Senator Marshall. Thank you, Mr. Chairman. Ms. Cianfrocco, 
what percentage of Optum's rebates go back to UnitedHealthcare?

    Ms. Cianfrocco. Similarly, we pass along the majority of 
those rebates. 98 percent go to all clients----

    Senator Marshall. My question is on UnitedHealthcare. What 
percentage of all these rebates go back to your parent company, 
UnitedHealthcare?

    Ms. Cianfrocco. Yes, just like the other 5,000, we pass 
along the 98 percent. So UnitedHealthcare is one of 5,000. We 
pass along 98 percent of the discounts to the client.

    Senator Marshall. Of all the reasons we were talking--so 
Dr. Kautzner, maybe you can answer the question better. What 
percentage of your rebates are kicked back to Cigna?

    Dr. Kautzner. Senator, the--so we passed back over 95 
percent of rebates to our clients. I don't know the exact 
number that is passed to Cigna Healthcare, if that is the 
question.

    Senator Marshall. Okay. I think that is exactly what I 
said. Mr. Joyner, any idea what type--percentage, your 
kickbacks go back to Aetna.

    Mr. Joyner. Yes, we don't pass kickbacks back to our 
company. We do actually pass through 98 plus percent of our 
rebates to our customers, retaining a little bit more than 1 
percent.

    Senator Marshall. But you won't tell me how much is going 
to Aetna?

    Mr. Joyner. At this point, it goes back to our parent 
company, CVS Health. It doesn't go to--it doesn't go to Aetna.

    Senator Marshall. Okay. All right. Mr. Chairman, certainly 
I think we agree, everyone on--most everybody up here agrees 
America is spending too much on prescription drugs. America is 
spending $600 billion a year on prescription drugs.

    That is almost what we are spending on the military. And I 
don't have to tell anybody here, but I want to make sure we 
understand that American spend per capita almost twice of what 
comparable nations spend--almost twice what comparable nations 
spend. Show my next one.

    I think it is important to separate brand name versus 
generics. That brand names represent only 8 percent of 
prescription drugs dispensed, but 80 percent of the cost. So, 8 
percent of the drugs accounting for 80 percent of the dollars. 
Generics account for 92 percent of prescription drugs dispensed 
but only 14 percent of the cost.

    Eventually we need to have a conversation about what games 
are going on with those two types of drugs. Next, I want to 
talk a little bit about the history of insulin. When I think 
about insulin today compared to what it was 100 years ago, I 
think comparing the single prop airplane that Amelia Earhart 
flew across the Atlantic to today's F-35.

    I think it is important, again, that we make sure that 
Americans realize the innovation that has occurred in the 
industry. Certainly, insulin was discovered in 1921. Was 
launched in 1923. Slow acting insulins were added in the 30's 
and 40's. We took insulin and added protamine and zinc and made 
them last longer. Insulin was the first protein to be 
synthesized in 1963, so figured out the amino acid chain.

    There are some innovations going on with the gadgets, the 
insulin pumps. But I want to point out that synthetic insulin 
was not produced until 1978. That it took the industry 15 years 
to tease E. coli into making insulin. It was not a simple task, 
but then that took your industry, some of the players here 
another 4 years to bring it to market in 1982.

    I have to highlight that FDA approved this in only 5 
months' time. We go on through the history of this, there is 
more advancement in technology pumps, and eventually we are 
able to manipulate the amino acid sequence and we come up with 
even new and better insulins, able to more match what we are 
doing with our own pancreas.

    It has been quite a development and we think we should 
share the value of what that--what has happened. If you think 
back to 1921, insulin dependent diabetes, and that is what I am 
talking about, the type I insulin-dependent diabetes was a 
death sentence. Life expectancy, one or 2 years.

    But once we started squeezing insulin out of the pancreas 
of animals, people maybe lived 5 or 10 years, but they still 
were 25 years below the life expectancy of other people in this 
general population. We continued in 1950, and there, 15 years--
mortality rate is 15 years below the general population.

    In 1978, it is 12 years below the general population. And 
then today we are sitting at about 7 years below the general 
population. It is not perfect, but because of these 
improvements, we have gained a lot of progress.

    I just want to stop--Mr. Hudson, what does the future look 
like for you, just very briefly, as far as innovation 
opportunities?

    Mr. Hudson. Well, I think, and thank you for sharing the 
journey. I think it is important to realize the contribution, 
the continued improvement in innovation insulin has made. The 
next barrier is really to help patients protect the insulin 
making function that they have, treat them earlier.

    We launched Tzield a few months ago, which is to try and 
stop the progression of the disease, trying to halt the 
disease, try and give young adults a chance to live insulin 
free for a number of years and maybe indefinitely, if the 
trials support that.

    We don't know. But a life free from needing insulin, a life 
free from medicines in general is the ultimate goal. I think we 
would all agree with that--a normal life.

    Senator Marshall. Well, thanks. I guess I just want to be 
careful today we don't throw the baby out with the bathwater.

    We certainly think that the prescription drugs are too 
expensive, but we don't want to get rid of the innovation, if 
at all possible. I want to turn back to the PBMs for a second. 
Again $600 billion prescription spending in this country. PBMs 
gross revenue last year was $500 billion. $0.84 on the dollar 
goes to the middleman. I think, just I want Americans to see 
what has happened in this industry.

    I think that this picture paints a thousand words. That we 
see the vertical integration that is occurring within this 
industry. Mr. Hudson, of the dollar being spent on prescription 
drugs, what amount of that money is going to go to the 
middleman?

    You testified earlier. I just want to get this on record 
again.

    Mr. Hudson. It is $0.84 of all insulin on the dollar goes 
to the system or the middleman. On Lantus specifically, it is 
93 percent across all channels--93 percent.

    Senator Marshall. Mr. Ricks, would you--somewhere in that 
same range?

    Mr. Ricks. Similar. Insulin is $0.80 on the dollar for us. 
For our whole portfolio, which includes newer medicines, it is 
about two-thirds of all gross pricing goes to the PBMs and 
insurance companies.

    Senator Marshall. Okay. I think it has been pointed out 
earlier that these are top 500 companies. CVS is number 4, 
UnitedHealth number 5, Cigna is number 12. Turn to my 
executives from the PBMs. You all are recently forming some 
GPOs. Dr. Kautzner, where is the location of your GPO? What 
country?

    Mr. Ricks. Senator, it is located in Switzerland.

    Senator Marshall. Ms. Cianfrocco, where is yours?

    Ms. Cianfrocco. It is domestic. It is a Delaware company.

    Senator Marshall. Okay. And Mr. Joyner, where is yours?

    Mr. Joyner. It is here in the states as well. It is a 
Delaware company.

    Senator Marshall. Okay. What is the purpose of the GPOs? 
Ms. Cianfrocco, what is the purpose of the GPO? And I hope you 
don't tell me it is to increase purchasing power.

    Ms. Cianfrocco. Well, it is a group purchasing 
organization, so it is designed to allow other companies, 
companies that negotiate with pharmaceutical manufacturers, to 
increase the counterweight against those high list prices and 
negotiate additional savings to lower the cost of drugs.

    Senator Marshall. Okay. It feels like it is a shell game to 
me. That is what it feels like to me, is that we are hiding 
money here and there. Mr. Joyner, why don't you put some of 
these lesser expensive insulins on your list of drugs that you 
can sell, your formulary?

    Mr. Joyner. I think, as I mentioned earlier, we have. So, 
in the Lantus example, which is a very high-priced insulin, 
when the biosimilar were released----

    Senator Marshall. You are telling me that the 
pharmaceutical managers are--the pharmaceutical makers don't 
get the story, right? They all three said that there are 
certainly drugs that they have for sale that you won't put on 
your formulary.

    Mr. Joyner. If it is not on the formulary, it is because it 
is not the lowest net cost in the therapeutic class.

    Senator Marshall. Dr. Kautzner, why won't you put some of 
these on your formulary?

    The Chair. Sorry.

    Senator Marshall. Thank you.

    The Chair. Senator Hassan.

    Senator Hassan. Thank you, Mr. Chair and Ranking Member 
Cassidy, for the hearing. And I want to thank all of the 
witnesses for being here today.

    I want to start by following-up on Senator Smith's line of 
questioning, because I think all of us here would like a world 
in which your doctor writes you a prescription, and you go to 
your pharmacy, and the pharmacy produces the prescription at a 
predictable price that the drug companies tell us is their 
price.

    I mean, that is what I would like, and I would like it to 
be a low price. And I think every one of us has experienced 
going to the pharmacy counter and being told by a pharmacist 
standing in front of a computer, this won't go through, or you 
are going to need to pay $300.

    I know your co-pay for medications is supposed to be $10, 
but for this one, it is $300, and they can't really tell you 
why. And we all know, you all know, everybody in this room 
knows, when you have got a child who is sick or a loved one who 
is sick and you have just been through a process of getting a 
diagnosis and getting a prescription that you hope is going to 
help, this is the last complication you need.

    Senator Smith was asking about why not just offer, to the 
pharmaceutical reps here, why not just offer insulin at the 
price at the pharmacy counter? Eli Lilly, you recently 
announced, Mr. Ricks, you would have insulin for $35 or less. 
Mr. Hudson and Mr. Jorgensen, your companies have said you have 
made similar commitments.

    My question is in your patient assistance plans, how does a 
patient go about getting this assistance if, one of you said it 
is a $57,000 income threshold, what happens to people who 
aren't on one of these plans or are uninsured in terms of 
getting the actual assistance that you say is available to make 
sure that people don't pay too much for insulin, let's say?

    Mr. Ricks. Yes, I can start. Thanks for the question, 
Senator. It is important. I think we have all experienced the 
frustration you just described. It is why we have worked hard 
to eliminate it wherever we can.

    The $35 buy down we have for anyone with a valid insurance 
card that covers Lilly insulin is automatic in 85 percent of 
the cases. The only reason we have 15 percent that aren't, are 
the pharmacy computer networks aren't plugged in yet, but we 
are working to close that gap.

    If someone has no insurance, they have two options. They 
can go to lilly.com and in literally a few clicks qualify for 
the coupon and show that at sale. Or they can call our phone 
number and we will help them.

    Senator Hassan. Okay. Mr. Hudson.

    Mr. Hudson. It is exactly the same. If you go to value.com, 
you can do that. If you go to many of the patient associations 
websites, you can get a connection. If you are uninsured, you 
go, you print it off, you will get your insulin for free.

    Senator Hassan. When you say you print it off, you print 
off some sort of coupon or application?

    Mr. Hudson. A coupon. Yes.

    Senator Hassan. How lengthy is the application process? I 
mean, what kind of information do people have to provide? You 
can start, Mr. Hudson.

    Mr. Hudson. Yes. I mean, it is really not that complicated, 
and that is--and it is done--as I said, it was over 100,000 
times, it was done for the uninsured. Over 600,000 times for 
people to reduce their co-pay. It is very straightforward.

    Senator Hassan. I think it is very straightforward for you. 
I am not sure it always is for patients. Mr. Ricks, and then I 
will get to you, Mr. Jorgensen.

    Mr. Ricks. Yes. In the case of an emergency, which we have 
heard about, and those are terrible situations that should 
never occur, I think we all agree on that. If you contact Lilly 
today, we will ship you a month's supply at no cost with one 
question, what is your address?

    You then need to enroll in an annual program if you are 
below the low-income subsidy level, the $57,000. But that is 
for the next year. But in an emergency, it is absolutely 
simple.

    Senator Hassan. What happens if you are at $58,000?

    Mr. Ricks. Yes. So, then you are eligible for the buy down 
to $35 at the point of sale. And in many cases, people are 
between insurance plans, and it is a short-term need, and $35 
is reasonable. Or they can buy our $25 Lispro, which is often 
purchased without insurance now.

    Senator Hassan. Okay. And Mr. Jorgensen, what is the 
process like for patients for your company?

    Mr. Jorgensen. It is a similar process, and I don't live in 
the U.S., so I actually took the time to go to the U.S. and 
visit patients and physicians to ask about some of these pain 
points. And that lead to that we enhanced our--programs.

    It is for a patient without insurance, it is free to go to 
our website and it is a few clicks, and then you can get access 
to all our insulin at decent prices, at some $30. Or you can go 
to Walmart and buy a vial of insulin for $25. That takes no 
paperwork whatsoever.

    Senator Hassan. Okay. Thank you. I want to turn to our 
representatives from the PBMs now. And this is really 
following-up on a point Senator Kaine was trying to make or did 
make. As we have heard today, manufacturers are taking steps to 
lower list prices and over-the-counter prices of insulin.

    However, patients with insurance only benefit from these 
reduced prices if PBMs also step up to make sure these lower 
cost options are covered. So, Mr. Joyner and Ms. Cianfrocco and 
Dr. Kautzner, how are each of your companies ensuring that 
lower cost insulins, including generics, are available to 
patients with commercial insurance?

    Mr. Joyner. Yes. This is a very good question. And I would 
say we start with using competition to negotiate to the lowest 
net costs. So, once we do that, that passes on to our employers 
and Government entities, etcetera, in order to manage the 
benefit.

    We encourage them, with the savings that are generated 
through the rebates and discounts, to actually offer a more 
affordable benefit either on a preventative drug list and or 
encouraging them to use the discounts at the point of sale. And 
so, 10 million lives, as I mentioned, is already doing the 
preventative drug list.

    We have a large number of customers doing the preventative 
drug list, which is zero. So, on average, the actual average 
cost of insulin is $25 or less. And CVS Health, specifically on 
our own 200,000 employees, which we want to make the model 
plan, does pass the discounts at the point of sale.

    We also have a preventative drug list so that our employees 
actually pay $0. So, we are very much in alignment.

    Senator Hassan. Dr. Kautzner, I am going to ask you to 
address the same thing. I am going to follow-up on, and I think 
it was Senator Marshall, to just say we are hearing something 
different from our pharmaceutical manufacturers here about 
their ability to list the lowest price drug, insulin on your 
formulary. So why don't you go ahead and address the question.

    Dr. Kautzner. Thank you, Senator. So back in 2020, we 
capped the cost of insulin across all the different types of 
insulins and working with these manufacturers at $25.

    Last year, it saved our patients $18 million in utilizing 
that program. We also just recently announced another co-pay 
assurance plan. This plan caps not just insulin, but for all 
employers that adopt it, all other branded products at just $25 
that are not specialty drugs. So, it keeps it very, very 
affordable.

    We also are expanding our preventative drug list as well 
for those employers that do have high deductible health plans 
or HSA accounts. I would say having additional options where 
today medical and pharmacy are combined in the deductible, 
separating those since pharmacy is the most utilized component 
of the benefit 11 times a year, and having a separate pharmacy 
deductible would be another benefit for patients.

    Senator Hassan. Thank you. And I am sorry we are not going 
to get to our last witness because my time is up. I do want to 
follow-up with you, Dr. Kautzner, on the relationships you all 
have with independent pharmacies, especially in rural parts of 
the country. Thank you.

    The Chair. Thank you, Senator Hassan.

    Senator Budd.

    Senator Budd. Thank you, Chairman. Again, thank the panel 
for being here. Ms. Cianfrocco, in your testimony, you said 
that PBMs develop formularies for the placement of prescription 
drugs using clinical foundations.

    I would like to understand this a little bit better. As you 
know, this Committee is going to vote on a bill tomorrow that 
asks PBMs about their rationale for formulary placement. So, 
what do you mean by clinical foundation for formulary 
placement?

    How does this influence a patient's ability to fill the 
prescription from their doctor?

    Ms. Cianfrocco. Sure. Thank you, Senator, for the question. 
First to be clear, our formularies have some of the drugs we 
have talked about today, which are rebated, but also hundreds 
of drugs, generic.

    There are meant to be the lowest cost options for our 
customers on behalf of their consumers, but it all starts with 
your point, clinical evaluation by an independent Committee 
that evaluates the efficacy of those--and outcomes of those 
therapeutics before they can be offered on our formularies.

    Senator Budd. Okay, thank you. In North Carolina, about 40 
percent of our 10 million residents live in rural areas of the 
state, and access for pharmacies is critical, especially for 
those rural patients. I have heard from North Carolinians about 
rural pharmacy closures, and they are concerned about them.

    Mr. Kautzner, Ms. Cianfrocco, and Mr. Joyner, what steps 
are your companies taking to make sure that rural Americans 
have access to pharmacies to fill their prescriptions? Let's 
start with you, Mr. Joyner.

    Mr. Joyner. It is a good question, and I will just, as a 
reminder, the independent pharmacies, especially in the rural 
markets, are an essential part of our pharmacy network. In many 
cases--and they represent close to 40 percent of all the 
pharmacies in our network today.

    We do negotiate generally with what I would call a PSO or a 
group purchasing organizations, or the independent pharmacies 
have come together with large wholesalers to actually contract 
specifically for them. So, our contracts with the PSOs, or with 
the group purchasing organization, is actually higher than it 
is for other chain and grocery store pharmacies.

    We have actually reimbursed them more, trying to--they have 
actually aligned with large purchasing organizations to improve 
their purchasing. And again, it is what we believe is an 
essential part of our pharmacy network.

    Senator Budd. Thank you for that.

    Dr. Kautzner.

    Dr. Kautzner. Thank you for the question, Senator. As a 
pharmacist and a rural America, myself from Missouri, it is 
extremely important for our organization to ensure that 
patients do have access regardless of where they live in this 
country.

    Unfortunately, today, less than 10 percent of physicians 
live in rural America, even though over 20 percent of the 
population does. So, we are working with independent 
pharmacies, one, and improving overall reimbursement rates for 
rural pharmacies on average of 10 percent.

    Second, we are working with them to do things beyond 
pharmacy to provide improved access to care of other services, 
whether those be for diabetes testing, vaccines, doing 
components around behavioral health testing, opioids.

    Those are additional services where they can provide 
quality of care and be accessible, where you don't have to go 
to your doctor where they may not be. So, we are working to 
enable rural and independent pharmacies so that they can be 
much more of a health center, so patients have access to 
quality care regardless of what zip code they live in America.

    Senator Budd. Thank you for that.

    Ms. Cianfrocco.

    Ms. Cianfrocco. The independent pharmacies make up over a 
third of the OptumRx network, so they are a critical part, and 
their services unique.

    The focus that I would point to for our community 
pharmacies is, No. 1, increased sort of reporting, 
predictability of reimbursement, and add in reimbursement that 
addresses their unique business model together with revenue 
enhancement opportunities in areas where they are uniquely 
qualified, such as medication adherence coaching, disease 
management diabetes, and most importantly, identifying barriers 
to things like rationing and inability to get insulin, because 
in many cases, they are the source of trust and access, and 
sometimes the only source of trust and access in a rural 
community.

    Senator Budd. Thank you. Thank all the witnesses. Chair, I 
yield back.

    The Chair. Thank you, Senator Budd.

    Senator Casey.

    Senator Casey. Thank you, Mr. Chairman. I want to thank you 
and the Ranking Member for the hearing. I want to thank all the 
witnesses for being here. I am going to be rather brief in 
light of the time and the vote that is going on.

    I don't think I have to explain to anyone in this room. I 
think there is a consensus, when we go back home, we hear from 
people about the cost of prescription drugs. It is for a lot of 
families like a heavy bag of rocks on their backs every single 
day. And we have got to do a lot more.

    I think both sides of this table have to do a lot more to 
lower those costs. We are happy the Inflation Reduction Act got 
those costs down for Medicare Part D beneficiaries. We are 
happy the companies took actions after that.

    But my question is, why stop at insulin? So, I am going to 
ask first on the left side, my left side of the table, starting 
with you, Mr. Ricks. I want to just--just in 1 minute, you, 
being the first one, in 1 minute itemize for me specific steps 
that your company is taking right now or will take to lower the 
cost of prescription drugs more broadly, well beyond insulin.

    Mr. Ricks. Thank you, Senator Casey, for the question. And 
I totally agree with the sentiment. We need to do more. We are 
working on a number of things. First of all, we have capped 
out-of-pocket costs for basically all of Lilly's branded 
medications, on patent medications.

    Typically, it is around $25 to $35 in the United States. 
So, people with insurance should have a limit of what they pay 
no matter how much they use. That is the first step we have 
already taken. Increasingly, we have talked today about some of 
the dysfunction in the system whereby lower list price products 
may not be on someone's formulary, so it is not presented as an 
option.

    But I do think I see a future where there will be more 
products introduced with two forms, both a high price and a low 
price, so that those that are in high deductible plans will 
have a choice that is actually cheaper for them, and that is 
something we can do.

    The third thing I would say is, we support policies that 
have a system where there is a beginning and an end to patents 
and to intellectual property periods, and at the end 
competition should flourish.

    We do support that system. And ultimately, I think it was 
shown earlier about the low-cost generics in America. That is a 
real success story for American health care. We have the 
cheapest generics in the world, and we support that world. We 
also support a world where we can afford to invent the product 
that became generic to begin with. That requires a premium for 
new products.

    Senator Casey. Mr. Hudson, if you can just itemize for me, 
that is----

    Mr. Hudson. Sure. Starting with the out-of-pocket 
commitment as well, in 2022, our co-pay card was used 2 million 
times, at a cost to us of $850 million. So, we are all in on 
trying to make sure we help.

    We bookend a rather challenging health care system, 
investing in R&D at one end and trying to help patients make 
sure they get on drugs at the other end, and a black box in the 
middle. I accept as well that it may be that we have to have 
high and low priced equivalents of the same medicine, but we do 
now for Lantus.

    I think it is somewhat disappointing that has to be the 
case. I think there has to be a better way where lower prices, 
lower out-of-pocket, and a reasonable fee by the way, for a 
service is provided along the chain. I think it needs some 
effort. To biosimilars, I think the biosimilar penetration in 
the U.S. lags the rest of the world.

    I think it really should be 60, 70 percent mirroring what 
is happening in Europe and other places, and it isn't. And we 
have to look to why that is. We bring them forward, but it is 
not for us to choose what goes on the plan, and that is a 
broader conversation about how to reduce health care costs in 
the United States.

    Senator Casey. Mr. Jorgensen.

    Mr. Jorgensen. Yes, thank you, Senator. So, we have similar 
programs. So, patients who have insurance, they get co-pay 
support from us, so they typically pay around to $25 in co-pay. 
And for patients without insurance, we have patient system 
programs for all our products.

    I would just add that I think we should be focused on what 
it is that the patient pays at the counter. We hear a lot about 
passing on rebates to clients, but it is really about the 
patient pays at the counter that this--should be about.

    Senator Casey. Mr. Joyner, it is a similar question, but 
what additional steps can you and the other PBMs take to ensure 
that patients can afford prescription drug costs?

    Mr. Joyner. Well, I will go back to the original premise 
that competition works. And so we will continue to look for 
competition in the therapeutic categories, lowering the cost 
for the plan sponsors or the employers, unions, etcetera, that 
actually pay and fund the other benefit, and then encouraging 
them to adopt benefit designs that actually allow it to be more 
affordable for the members, similar to what we do at CVS, which 
is a $0 copay for insulin.

    Senator Casey. Doctor.

    Dr. Kautzner. Thank you for the question, Senator. We are 
absolutely focused on continuing to lower costs for our 
employer plans, our clients, but also for patients. We just 
introduced a new co-pay assurance plan, which is flat dollar 
co-pays, $5 for generics and specialty generics, $25 for 
preferred brands, $45 for specialty brands, that we are 
bringing out to our constituents.

    We are also, through competition, continuing to beat the 
drum on biosimilar accessibility, interchangeability, and 
having more access, and reducing the patent life for biologics 
down from 12 years to 7 years to enhance that competition, 
which will flow through to have additional options in the 
biologics space.

    I would also say there has been a lot of focus here on just 
price. Care is also a key component of what we do and what we 
must continue to do. So, when patients are on the drugs, they 
are on the right drugs, and we are able to help them with 
specialized care models that we have based on specific disease 
states like multiple sclerosis and diabetes.

    You have nurses, physicians, and pharmacists that are 
trained and can help those patients. Through our program, over 
80 percent of the patients that have specialty conditions are 
adherent on their medications and can have better health 
outcomes to live better and healthier lives.

    Senator Casey. Ms. Cianfrocco.

    Ms. Cianfrocco. Thank you for the question, Senator. I will 
point to three things. The first is a continuing commitment to 
work for lower drug costs, and that is through a negotiated 
savings or a list price. We are looking for lowest list prices.

    As we embrace the lower list price. We welcome the lowest 
list--the lower list prices from the insulin manufacturers, and 
we request more of it. I will give you one example. Biosimilar 
for the most--for a highly utilized drug, Humira, new 
biosimilars have and are coming to market.

    We are offering up to three of those biosimilars at parity 
with the original product so that patients, their prescribers, 
and the health plans and clients can select the best option for 
them. And where the biosimilar manufacturer offered a low list 
price, we are offering the low list price.

    Second thing I will point to is we will continue to 
recommend and push for benefit designs for our clients that 
would use the savings that we negotiate and put those to 
consumer out-of-pocket costs, particularly in the high 
deductible plans.

    The third thing is to Senator Hassan's and Senator Smith's 
comments that no one should be confused at the pharmacy, so 
additional tools that help consumers navigate their benefit, 
understand the best options in generic and brand drugs so that 
they can find the best affordable option for them. That is our 
commitment.

    Senator Casey. Thank you, Mr. Chairman.

    The Chair. Thank you, Senator Casey.

    Senator Mullin.

    Senator Mullin. Thank you, Chairman. I am just going to 
make an open comment here. I kind of feel like hell's freezing 
over because Chairman Sanders and I actually agree on 
something, and it is that something needs to be done with PBMs.

    I do appreciate you having this hearing in the order that 
we are having it, Chairman. It is such a compliment coming from 
my side, if you can believe that. I want to point out this 
chart behind me.

    This is the integration chart or start showing how PBMs 
have integrated themselves and they have become their own 
customer, which is kind of like the fox guarding the henhouse. 
And it is difficult when you start thinking about that Congress 
was--actually wanted to help stand up the PBMs to help bring 
down cost.

    You have seen costs do nothing but skyrocket on 
prescription drugs. At the same time, you have seen that PBMs 
have become literally $1 billion industry. In the last 5 years 
alone, you have seen prescription drugs increase by 16 percent. 
At the same time, you have seen the net income of PBMs, and 
their integrated companies grow substantially.

    Start thinking, why? I mean, if the $1 billion industry has 
grown up not because of taxpayer dollars. It is because it has 
got to be going to the drug costs. If it is going to drug cost, 
who is ultimately paying that price?

    Well, it is the consumer, obviously. The money has got to 
be passed on to some place. It is just retail politics, and it 
is retail consumers. The price has to be made up because every 
one of you guys are in business for profit. And I think that is 
great. That is called America. We are able to do that. But I 
want to kind of bring down on some things that maybe need to be 
clarified.

    For instance, when Senator Marshall was asking the question 
of why is it that some drugs aren't able to make it to the 
market, and I believe it was said that they are if they are the 
lowest cost.

    But Mr. Hudson, when that comment was being made, you were 
shaking your head saying--because what Senator Marshall was 
asking is what prohibits drugs from coming to the market, 
especially competitive drugs, because everybody says 
competitiveness is what brings down the price.

    I agree with that. But I don't think you actually agreed 
with--is it Joyner? With Mr. Joyner's answer when he said it is 
based on formula, whichever is cheapest for the consumer? And 
as I was noticing, just reading your body language, he was 
going like this. Can you explain more for your perspective, 
what prohibits drugs from coming to the market?

    Mr. Hudson. I think what I was perhaps reflecting was a 
lack of unknown, because as I said in 2018, we launched a lower 
price analog into the end of the market last year, a lower 
priced, direct equivalent made in the same factory.

    You would expect if price was the answer, and perhaps we 
talk in slightly different terms.

    The use of cost versus price, I am not quite sure what it 
means on both sides, but I am reflecting on the fact that if 
the intent of the Chair and everybody here is to lower the 
price of medicines, and we do, and it doesn't change for 
patients, I don't know----

    Senator Mullin. You brought a generic to the market and 
that was significantly cheaper than the other one, but it 
didn't reflect the patient's payment?

    Mr. Hudson. Well, it just didn't get listed in any way. If 
price is really the motivator, it would have been listed.

    Senator Mullin. Who prevented that from being listed?

    Mr. Hudson. I am--I was not part of that conversation.

    Senator Mullin. But I mean, but the PBMs are the ones that 
help bring that to market, right?

    Mr. Hudson. Well, my assumption----

    Senator Mullin. Your assumption----

    Mr. Hudson. The PBM----

    Senator Mullin. I think you are being very politically 
polite here, and I appreciate that. But I think we can all read 
between the lines on this one.

    Mr. Ricks, when you are talking about rebate checks, 
because the comments were made earlier, because a question was 
asked about rebates, and our PBM officials over here, they were 
saying that the PBMs go to their customers, which I am curious 
of who the customers are, because I think the public would 
assume that it goes to the public, to the individual, to the 
person buying the drugs.

    But I know I have six kids that seem to always be in the 
emergency room, that always seem to be getting prescription 
drugs of something, and I have never got a rebate check. So, 
who is the customers? Where do you send your rebate checks to?

    Mr. Ricks. Yes. Thanks for the question. We send them to 
the PBMs, as mentioned.

    Senator Mullin. But where does a check actually get mailed 
to? Does it get mailed to someplace outside the United States--
?

    Mr. Ricks. We are increasing--yes, we were instructed to 
send them to the GPO.

    Senator Mullin. Where is the GPO at?

    Mr. Ricks. I think it was asked earlier, the various 
organizations you have up there. I think----

    Senator Mullin. Most of your checks, what country are they 
mailed to? Outside the United States or--?

    Mr. Ricks. There are some that go outside the United 
States.

    Senator Mullin. In the tune of how many? How much would--
give me a guess.

    Mr. Ricks. Our total rebates in the United States for 
commercial that was paid to the major three last year was $8 
billion. It is not a third, but it is roughly that.

    Senator Mullin. A big chunk of that goes outside the United 
States.

    Mr. Ricks. Several billion.

    Senator Mullin. Goes outside the United States. But yet 
these are customers for inside the United States.

    Mr. Ricks. Yes.

    Senator Mullin. All right. These are rebates for 
customers----

    Mr. Ricks. For U.S.--access to U.S. formularies, yes.

    Senator Mullin. But yet the rebate checks aren't actually 
staying inside the United States, the biggest chunk of them?

    Mr. Ricks. Correct. Or a big chunk.

    Senator Mullin. That is interesting. That is interesting, 
too. I wonder why that is. And so, when we start talking about 
customers for the PBMs, who are your customers that you are 
referring to that rebates go to? Because you say the PBMs only 
keep 97, 98--or you guys send out 97, 98 percent of your 
rebates, right. And the customers are the insurance companies, 
right?

    Dr. Kautzner. Senator, the--our customers--so Express 
Scripts has over 2,500 customers. Many of them are employers, 
small middle, market employers, some large employers. Labor 
unions are clients, public sector entities----

    Senator Mullin. Self-employed or self-insured--and health 
plans, right?

    Dr. Kautzner. Yes, self-insured.

    Senator Mullin. But also, your insurance companies, right? 
And the whole reason is to supposedly bring down premiums. But 
yet, if you look at this top line here, which says insurer, the 
PBMs only insurance companies, that the rebates are going to--
it is self-integrated. So, you are rebating yourself.

    That is just, wow, great business model. And we wonder why 
prices are high to our consumers. And this is why the Chairman 
and I actually agree on something. This isn't working for 
America. It is working for you all great. I mean, you guys are 
killing it. But if we are talking about bringing down prices, 
what have you all done to bring down prices?

    That was the whole reason why you guys were created, to 
bring down prices. We have seen nothing but them increase. It 
is not going to the pharmaceutical companies that are making 
it. It is not going to the pharmacies unless you own them.

    But if you own them, we really don't care if it makes it 
because upstream or downstream, depending on where they are in 
the integration chart, that is where you are getting your money 
back. And there--it--you wonder why you are here. Are you 
actually serving your purpose?

    Heck no. You are not. And as I said before, it is like the 
fox guarding the henhouse. You have literally forced us to make 
the changes. And in my private company, if I have an entity 
that is not being effective for what their intended purpose is, 
I would shut them down. And that is what I think the solution 
here is. With that, I yield back.

    The Chair. Thank you, Senator Mullin.

    Senator Lujan.

    Senator Lujan. Thank you, Mr. Chairman. Thank you, Senator 
Mullin. I appreciated that line of questioning as well, sir. 
One thing I wanted to share with everyone as we open up today 
is, one thing I am very proud of is that New Mexico, as you all 
may know, recently moved to cap insulin at $25 for a 30-day 
supply.

    I think we are seeing more and more attention state to 
state clearly here. I appreciate agreements to make insulin 
more affordable at $35 as well. And I am hoping that we can 
find some common ground here to expand upon that.

    Especially when we talk about folks where this is make it 
or break it. And for me, that has new meaning. As some of you 
may know, I survived a stroke about a year ago. If folks don't 
get their insulin, it would be like if I didn't have a 
neurologist or a neurosurgeon. It is a false choice to think 
you can live without.

    There are too many families back home that have shared with 
me decisions they are making on trying to make that insulin 
last longer than it should. Making decisions about what they 
are going to buy. And I join my colleagues in saying whether it 
is this or in other areas, not in our Country, that just--I 
don't want to get in the way of innovation.

    I don't want to stifle research. But when we have something 
that can transform someone's life and save someone's life, 
there has got to be a better way for us to make this affordable 
so that families aren't having to worry about other stuff. And 
then they have the stress on top of whatever that insulin is 
going to help with.

    I can tell you, that stuff doesn't help, because you could 
end up in the same situation that I was in. Now, while I am 
proud of what we did in New Mexico, as you all know also that 
the policy left out, public plans like ERISA and others.

    There is still almost 200,000 people in New Mexico that 
need insulin that don't get the cap. And that is one of the 
reasons why I wanted to be here today. And so, Mr. Joyner, what 
percent of appeals for coverage are denied for the insulin 
prescribed and preferred by a patient's doctor?

    Mr. Joyner. I do not have that stat, sir.

    Senator Lujan. Mr. Kautzner, do you have that information?

    Dr. Kautzner. We can pull that for you, Senator, and get it 
to you.

    Senator Lujan. I appreciate that, doctor. Is it Ms. 
Cianfrocco? Did I pronounce that correctly?

    Ms. Cianfrocco. Yes. Thank you, Senator. Similarly, I will 
have to--we can follow-up with your office with that exact--
with exact number.

    Senator Lujan. I appreciate that, because in the end here, 
being able to work with physicians as well and trying to better 
understand what happens when there is a denial. And I am hoping 
we are not going to see high rates here.

    I won't be surprised if we do, but that is another area 
where we can do some work and make sure that people are getting 
what it is that their doctors think that they should get as 
well. And that is another conversation I have been having with 
people back home.

    Now, Mr. Ricks, Mr. Hudson, and Mr. Jorgensen, your 
companies have made recent announcements about reducing list 
prices to some of your insulin products, and I very much 
appreciate that.

    Now, what my team tells me is that according to CDC, about 
16.5 percent of people in the U.S. who use insulin report 
rationing it because of cost. Something I was saying earlier. 
Mr. Jorgensen, yes or no, can you commit to keeping the price 
of your current and future insulin prices affordable?

    Mr. Jorgensen. Yes, we have a free option. So, people who 
are in a situation where they have to ration, they can get free 
insulin from Novo Nordisk. And last year, more than 60,000 
Americans got a free insulin from our company.

    Senator Lujan. Well, I appreciate that I heard you say yes. 
That is important to me as we talk about future insulin prices. 
Mr. Hudson, yes or no, can you commit to keeping the price of 
your current, future insulin prices affordable?

    Mr. Hudson. We can commit to that.

    Senator Lujan. Mr. Ricks, I want to ask you the same 
question, and specifically should Mounjaro be approved to treat 
weight loss, will you commit to keeping that drug affordable?

    Mr. Ricks. Yes, we will commit to that. And Mounjaro for 
diabetes today is already a $25 a cap for everyone.

    Senator Lujan. I appreciate that. And last, I just want to 
point out that we know that these reforms work. When there was 
an effort to cap Medicare Part D, we saw about 9,000 New 
Mexicans that are going to benefit from saving $443 right off 
the top. $35 cap here, I am hoping because of actions that were 
taken and everyone involved, that we can find a way to get 
there.

    But Congress is probably going to have to take some action 
here, and I am hoping that Congress is willing to do so. So 
that when we are talking to families, at least that is 
something that we can all agree on, with the work, the 
research, the investments that are made in these spaces, that 
we are going to say, yes, we can save people's lives.

    When we have these incredible scientists and doctors that 
are developing these lifesaving technologies, that we are doing 
it in a way that says, you are going to get help regardless of 
how much money you make. You are not going to have to worry 
about getting that insulin to stay alive.

    I am certainly hopeful we can get there, Mr. Chairman. I 
just wanted to come to just share a few of those stories that 
we heard from people back home as well. And again, 
understanding access to care.

    Like I said, this mattered to me a lot before this last 
year, but there has been a bit of a revelation to me, that when 
you get sick, when you need help, when you need prescriptions, 
they should be there for you.

    Otherwise, you might not get another day to fight for other 
people. And someone decided that I was going to get another 
day. So, I am going to be here. I am going to follow and--be 
nice. But I know how to fight too. And I am certainly hopeful 
that we can find a way to get this done together.

    Thank you, Mr. Chairman.

    The Chair. Thank you, Senator Lujan.

    Senator Markey.

    Senator Markey. Thank you, Mr. Chairman, very much. 
Obviously representing Massachusetts. I am very proud of our 
biomedical research and development. But the challenge remains 
that much innovation is locked behind walls of research 
institutions, drug manufacturers, and mazes of pharmacy benefit 
managers and insurers.

    Innovation without access is a hallucination for patients 
across the country. They need access to these lifesaving drugs. 
One in five Americans with diabetes is forced to ration their 
insulin, and when patients don't get the insulin they need, 
they show up in emergency rooms in acute crisis.

    Patients receiving care from community health centers 
shouldn't show up in emergency departments. And that is in 
Massachusetts. And we pride ourselves as the No. 1 state. You 
know, we are the brain state.

    But even we have problems with this issue. In March, both 
Eli Lilly and Sanofi announced cuts in insulin prices. Some of 
these forms of insulin have been available since 1996 and 
prices have only been going up.

    Now the price cuts that did occur followed intense public 
pressure and drug price reform in the Inflation Reduction Act. 
And if I am right, it seems that Congress acting was key to 
actually seeing a reduction in insulin prices that had not 
occurred in a generation.

    Mr. Ricks, do you agree with that, that Congress has a role 
here to play?

    Mr. Ricks. Senator Markey, thanks for the question. I agree 
everyone here has a role to play. In the case of Lilly, we 
started reducing--capping our prices in 2017 and implementing 
programs, including half price versions of our own best-selling 
products in 2019. So, it has been going on for a while. But I 
agree, everyone can play a role.

    Senator Markey. Do you agree with that as well, Mr. Hudson?

    Mr. Hudson. I think that everybody does have a role to 
play. Of course, we introduced responsible pricing in 2017.

    Lower cost versions of our most popular insulins in 2018. 
As recently as August last year, an unbranded Lantus made in 
the same manufacturing center, by the same highly qualified 
people, at a much lower price.

    I think we are all trying to do our best. I would add 
importantly that we are yet to see whether it makes a 
difference for patients, whether their out of pockets go down, 
whether their access goes up, whether the lower list price 
actually has an impact on the choices and the--what they pay 
themselves.

    Senator Markey. Right. And again, that is just another 
reason why Congress should act to put together some formula 
that ensures that the benefits flow down to those most in need. 
And I think that what we have seen in the last couple of years 
is that once Congress started to act, it got everyone's 
attention in the industry, and some of it was voluntary, some 
of it was coerced.

    But from my perspective, it did demonstrate the need 
finally for the Congress to be playing a role, because the 
system is broken fundamentally, and we have to find ways of 
ensuring that all of these benefits ultimately flow down to 
those who are most vulnerable.

    Mr. Jorgensen, do you agree that Congress acting has helped 
to control the drug prices out in the marketplace?

    Mr. Jorgensen. Senator, we, like the peer companies, we 
have faced declining prices since 2015. We have also tried to 
launch products with a lower list price. So, I agree with you 
that the complexity of the system creates a floor system where 
patients are not getting the benefits. I think we should again 
really focus on the patient.

    What happens at the counter for the patient? If you have 
insurance and a high deductible, and end up paying a list price 
that is a big issue. And that is the story I hear from many 
patients.

    That, in the beginning of the year, they are in a very 
tough situation. And for those patients, we have already passed 
on the rebates, so they should pay manifold more than we as 
manufacturer----

    Senator Markey. Just this week, Eli Lilly announced 
positive results from phase 3 trials on its own Alzheimer's 
treatment. And just as insulin for people with diabetes, these 
drugs could be a lifeline for people diagnosed with 
Alzheimer's. But comparable drugs on the market costs over 
$25,000 per year.

    This is completely out of reach for most Americans. And if 
the medication is covered by insurance, it will weigh heavily 
ultimately on taxpayers. Eli Lilly has demonstrated that they 
can reduce their prices compared with their competitors. They 
have done it.

    Obviously, this is a good example that we are talking about 
here today. Mr. Ricks, will you commit today to offering your 
Alzheimer's drug at prices lower than your competitors?

    Mr. Ricks. Thanks for the question. We are really proud of 
those results, so I appreciate you highlighting that. We have 
been working in Alzheimer's for three decades and spent over $8 
billion on research to get to that point.

    Today, unfortunately, there is a blockade on Medicare 
access for Alzheimer's drugs. The first step we need to talk 
about is how to remove that, because as you would imagine, most 
people rely on Medicare, rather, who have the condition.

    I think when you have Medicare coverage, the out-of-pocket 
costs for patients will naturally be low, and I think the 
primary issue we want to talk about is how to lift that 
prohibition from Medicare.

    Senator Markey. Right. No, I appreciate that. What you are 
saying on the one hand is, we would like to help patients, but 
we have to have the Federal taxpayer cover it. And that would 
ensure that obviously you would get paid.

    But the question then comes back to you, what can you do to 
lower the price that then makes it more affordable, separate 
from a Medicare reimbursement? And I think that is the central 
issue that we are dealing with here today, is the excess of 
profit taking from a corporate perspective that just leads to 
catastrophic pricing, and then the off ramp is, well, we will 
just have to have the Federal Government pick up the tab.

    I think that is something that this hearing is intended to 
finally put a spotlight on in terms of corporations reducing 
their pricing and maybe having a more reasonable discussion 
with the Federal Government with regard to then what is the 
cost to the Federal taxpayer.

    Mr. Ricks. If I could, Senator. We will be reasonably 
lowering pricing in the sense that we will produce value to the 
health care system by delaying the effects of Alzheimer's.

    But unique to Alzheimer's, Medicare beneficiaries paid into 
that program in their entire life, and they have access to 
every other type of pharmaceutical for every other condition, 
but not Alzheimer's right now. I am just pointing out that flaw 
in the current system. That needs to change.

    Senator Markey. What I am saying is $25,000 a year is too 
high. And it is the ask that then goes to the system and then 
people are then afraid would have an excessively impossible 
burden for the system to be able to carry.

    It then comes back, the ball comes back to you and your 
court in terms of what you can do to lower that price, as you 
are looking out at this vast number.

    We have 15 million baby boomers who are going to have 
Alzheimer's, and that is just for our Country. It is a global 
issue, obviously, and so your market is going to be massive and 
$25,000 per year is just too extraordinarily high----

    The Chair. Thank you so much. Senator Cassidy wanted to say 
a few words and----

    Senator Cassidy. It is two quick questions. I thought my 
first one, I must address spread pricing. But Mr. Joyner, Dr. 
Kautzner, both of y'all spoke of things that your organizations 
are doing to address some of the market distortions. I want to 
acknowledge that.

    But for the rural pharmacies as well as for those people 
within their deductible, it is a question of how do we get 
wider spread adoption of some of the things that y'all are 
doing that would actually address the things that we are 
frustrated about. That I hear about in church. Like let me go, 
let me go, let me go.

    I don't know if you have a real quick comment on that. I 
will call on you, Dr. Kautzner, because again, I appreciated 
our conversations. All the things that you have done. Is there 
a way we can get better, faster uptake in the market for that?

    Dr. Kautzner. Thank you for the question, Senator. So 
absolutely, we are leading the way on patients having 
accessibility and affordability with our new co-pay assurance 
plan that we have developed. Cigna actually as an employer is 
going to implement it on September 1, and lead the way for 
that.

    We are also asking employers to start--pharmaceutical 
manufacturers, to help us offset the cost to employers as we 
bring down the cost of getting to $5 generics, $5 specialty 
generics, and $25 brands. In terms of our initiative around 
helping independent pharmacies, we are absolutely working with 
them in partnership.

    We have actually created a Committee with other independent 
pharmacies from across America, so owners of pharmacies that 
will help to inform us so that we can very quickly implement 
some of the things that I spoke of with Senator Budd.

    We are excited to get to work on that and to make some real 
improvements, especially for rural Americans.

    Senator Cassidy. Thank you. Ms. Cianfrocco, I don't know 
this. I know what I am told, not what I know. I am told that 
the rebate aggregator is where a lot of money hangs up and is 
not included in that 98 percent pass through that you describe.

    Your answer suggests that, no, that in the vertical 
integration of the company, 98 percent is passed along. I don't 
know the answer to that.

    Is the money that hangs up--does money hang up in the 
rebate aggregator, or no, no matter where it is in the vertical 
integration of the company, 98 percent of a rebate in a fee 
goes back to the plan sponsor?

    Ms. Cianfrocco. Senator, 98 percent of total discounts go 
back to the plan sponsor. For our GPO, it does not cost the 
client anything. So, it is for the benefit of the client with 
no additional costs.

    Senator Cassidy. Thank you very much.

    The Chair. Thank you, Senator Cassidy. Let me begin by 
thanking all of you for being here. I know you have to juggle 
your schedules. And thank Mr. Jorgensen, who is in Denmark, for 
being here as well. I think anybody who has listened to this 
hearing, has concluded that the system is broken.

    It is enormously complicated. There is virtually no 
transparency. I know that the price that Medicare will pay for 
drug is different than what Medicaid will pay. It is different 
than what VA pays. That hospitals pay a different price. Then 
doctors pay a different price. And all of that opaqueness, lack 
of transparency works for both the drug companies, and I think 
the PBMs as well.

    The end result is, we have got to conclude, that there is 
an enormous amount of greed going on. Different Members have 
touched on this. Let's not be naive. The drug companies, major 
drug companies last year made $100 billion in profit. PBMs made 
$27 billion in profit. Drug companies tell us, well, we need 
that money. It goes into research and development.

    Well, guess what, more money went into stock buybacks, 
significantly more, than went into research and development. 
So, Wall Street and your investors are making huge amounts of 
money while ordinary Americans are going bankrupt trying to 
afford the drugs that you sell. And I got a real concern that 
many of the new drugs that are coming out are outrageously 
expensive.

    In fact, nearly half of all new drugs coming to the market 
are over $150,000. I don't know how somebody who has cancer 
pays $150,000 for a drug. And by the way, I talked to a leading 
oncologist who told me that in some cases, it costs a few bucks 
to manufacture those drugs. All right, let me just conclude by 
saying this Committee is going to stay on this issue.

    We need profound change in the industry and in PBMs. 
Tomorrow, we are having a markup on a very modest set of bills. 
We are going to come back. And when you go to sleep tonight, I 
hope you ask yourselves, think about the people who died 
because they can't afford medicine.

    Think about the millions of people, even not in the United 
States, who cannot afford the products that you make that cost 
you a few bucks. I, for the life of me, just don't understand 
how when you have something that saves a life, and it cost you 
a few bucks to manufacture it, and you are already making huge 
amounts of profits, why we can't make that product available to 
all at a price that they can afford. That is a moral issue.

    We have got a lot of work to do, but we clearly need 
revolutionary changes in the way we do prescription drugs in 
this country. And that is tied into the fact that some of the 
Republican Senators have made, we are spending twice as much 
per capita in healthcare in this country.

    Drug prices are an important part of that. People can't 
afford healthcare as well. So once again, we look forward to 
continue to work with you. I thank you all very much for being 
here. And this is the end of our hearing today. For any 
Senators who wish to ask additional questions, questions for 
the record will be due in ten business days on May 24th at 5.00 
p.m..

    Finally, I ask unanimous consent to enter into the record 
one statement from a stakeholder group outlining their views 
about insulin access to the prescription drug affordability 
crisis.

    [The following information can be found on page 110 in 
Additional Material:]

    The Chair. The Committee stands adjourned. Thank you all 
very much.
                                ------                                


                          ADDITIONAL MATERIAL

                                                        CIVICA Inc.
                                                        May 8, 2023
Hon. Bernie Sanders, Chair,
Hon. Bill Cassidy, Ranking Member,
U.S. Senate Committee on Health, Education, Labor, and Pensions,
Washington, DC.

    Dear Chairman Sanders and Ranking Member Cassidy,

    Thank you for holding a hearing on the cost of insulin.

    Civica Inc. (Civica) is a non-stock, non-profit pharmaceutical 
company that is developing quality, affordable insulin for the benefit 
of the 8 million Americans with diabetes who depend on this life-saving 
drug.

    Civica was established by U.S. health systems and three 
philanthropies to reduce drug shortages and ensure a reliable supply of 
essential medicines to hospitals at fair prices. CivicaScript, a public 
benefit corporation, is the operating unit of Civica that was 
established in partnership with health plans to lower costs for 
consumers at the pharmacy counter.

    Civica will produce biosimilar versions of the three insulins that 
account for most daily use in the United States--insulin glargine, 
lispro and aspart (corresponding to, and interchangeable with, Lantus, 
Humalog and Novolog respectively). Each will be available both in vials 
and prefilled pens.

    As with any drug that Civica supplies, insulin will be available at 
a single transparent price, without rebates (except as required by law) 
or off-invoice discounts.

    Civica plans to set a recommended price to the consumer of no more 
than $30 per vial and no more than $55 for a box of five pen 
cartridges, a significant discount to prices charged to uninsured 
individuals today. To maximize transparency and limit predatory supply 
chain markups, Civica will include a QR code on the drug packaging to 
make it clear that this is a maximum amount that consumers should pay 
(some pharmacies may charge less).

    Our intent with this pricing strategy is both to pressure other 
insulin manufacturers to lower their prices (one of multiple factors 
likely leading to recent list price reductions) and, crucially, to 
eliminate the pattern of high list prices and non-transparent rebates 
that are common in the drug supply chain and which serve to harm 
consumers--especially the uninsured and anyone who has to pay full list 
price out of pocket at any point during the calendar year.

    As you consider policies to protect consumers from high insulin 
prices, we urge you to ensure that payers and PBMs provide coverage of 
low-net-cost insulin products and do not continue to favor the rebated 
pricing long offered by brand insulin companies.

            Sincerely,
                                             Allan Coukell,
                                             Senior Vice President,
                                                     Public Policy.
                                 ______
                                 

    [Whereupon at 4:02 p.m., the hearing was adjourned.]

                              [all]