[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
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
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]