[Senate Hearing 118-320]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 118-320

                WHY DOES THE UNITED STATES PAY, BY FAR,
                    THE HIGHEST PRICES IN THE WORLD
                        FOR PRESCRIPTION DRUGS?

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                                   ON

                EXAMINING THE COST OF PRESCRIPTION DRUGS

                               __________

                            FEBRUARY 8, 2024

                               __________

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

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
55-849 PDF                  WASHINGTON : 2024                    
          
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                 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

                       THURSDAY, FEBRUARY 8, 2024

                                                                   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--Panel I

Duato, Joaquin, Chief Executive Officer, Johnson & Johnson, 
  Brunswick, NJ..................................................     7
    Prepared statement...........................................     8

Davis, Robert, Chief Executive Officer, Merck, Rahway, NJ........    16
    Prepared statement...........................................    18
    Summary statement............................................    21
Boerner, Chris, Chief Executive Officer, Bristol Myers Squibb, 
  Princeton, NJ..................................................    23
    Prepared statement...........................................    24

                          Witnesses--Panel II

Maybarduk, Peter, J.D., Access to Medicines Director, Public 
  Citizen, Washington, DC........................................    73
    Prepared statement...........................................    75
    Summary statement............................................    87

Amin, Tahir, LL.B., Chief Executive Officer, Initiative for 
  Medicines, Access & Knowledge, New York, NY....................    88
    Prepared statement...........................................    90
    Summary statement............................................    94

Lakdawalla, Darius, Ph.D., Director, Research, University of 
  Southern California Schaeffer Center, Los Angeles, CA..........    95
    Prepared statement...........................................    96
    Summary statement............................................   101

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.

Sanders, Hon. Bernie:
    Statements from stakeholder groups and experts about the cost 
      of prescription drugs......................................   106

Kaine, Hon. Tim:
    Contributions of Public Health, Pharmaceuticals, and Other 
      Medical Care to U.S. Life Expectancy Changes, 1990-2015, 
      article, Health Affairs Journal, September 2020............   110

 
                WHY DOES THE UNITED STATES PAY, BY FAR,
                    THE HIGHEST PRICES IN THE WORLD
                        FOR PRESCRIPTION DRUGS?

                              ----------                              


                       Thursday, February 8, 2024

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10 a.m., in room 
430, Dirksen Senate Office Building, Hon. Bernard Sanders, 
Chairman of the Committee, presiding.

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

                  OPENING STATEMENT OF SENATOR SANDERS

    The Chair. The Senate Committee on Health, Education, 
Labor, and Pensions will come to order. Today is a busy day. As 
we all know, a very important vote is going to be taking place 
and Republicans Democrats will be meeting in their caucuses. 
So, people are going to be coming in and out.

    I also think that this hearing is important enough that we 
extend the time for questioning from the usual 5 minutes to 7 
minutes, if that is okay with folks. Let me begin by welcoming 
the CEOs of Bristol-Myers Squibb, Chris--Chris Boerner. We 
thank you for being here. CEO of Merck, Robert Davis. We thank 
you for being here. And the CEO of Johnson & Johnson, Joaquin 
Duato, for being with us this morning, thanks very much.

    There is a lot of discussion in our Nation about how 
divided our people are on many issues, and that is absolutely 
true. But on one of the most important issues facing our 
Country, the American people, whether they are Democrats, 
Republicans, Independents, Conservative, Progressive, could not 
be more united, and that is the need to substantially lower the 
outrageous price of prescription drugs in this country.

    According to a recent poll, 82 percent of Americans say the 
cost of prescription drugs is too high and 73 percent say that 
the Government is not doing enough to regulate drug prices. As 
a Nation, we spend almost twice as much per capita on health 
care as do people of any other country--$13,000 for every man, 
woman, and child.

    One of the reasons that we spend so much is the high cost 
of prescription drugs in our Country. The outrageous cost of 
prescription drugs in America means that one out of four of our 
people go to the doctor, get a prescription, and they cannot 
afford to fill that prescription. How many die as a result of 
that, how many suffer unnecessarily, nobody knows. But my guess 
is it is in the millions, and I have talked to many of them in 
Vermont and around the country.

    Meanwhile, our insurance premiums are much higher than they 
should be, and hospital costs are soaring because of the high 
cost of prescription drugs. Further, the cost of prescription 
drugs in this country is putting an enormous burden on 
taxpayers and seniors by raising the cost of Medicare and 
Medicaid. Medicare alone spends at least $135 billion a year on 
prescription drugs.

    This is not only a personal issue. It is an issue of the 
Federal budget. Meanwhile, as we pay by far the highest prices 
in the world for prescription drugs, 10 of the top 
pharmaceutical companies in America made over $110 billion in 
profits in 2022. They are doing phenomenally well while 
Americans cannot afford the cost of the medicine they need and 
the CEOs in general receive exorbitant compensation packages.

    This morning, we are going to hear a lot from our CEO 
panelists about how high prices are not their fault, and that 
the PBMs are forcing Americans to pay much higher prices than 
they should be paying.

    But let us be clear, in 2022, Johnson & Johnson made nearly 
$18 billion in profit, paid its CEO over $27 million in 
compensation, and spent over $17 billion on stock buybacks and 
dividends. That same year, Merck made $14.5 billion in profits, 
handed out over $7 billion in dividends in their--to their 
stockholders, and paid its CEO over $52 million in 
compensation.

    Bristol-Myers Squibb made $8 billion in profits last year, 
while recently spending over $12 billion on stock buybacks and 
dividends and giving its CEO over $41 million in compensation. 
Now, why did a majority of Members of this Committee invite 
these three pharmaceutical CEOs to testify today?

    The answer is pretty simple. Mr. Boerner, we will want you 
to explain to the American people why Bristol-Myers Squibb 
charges patients in our Country $7,100 a year for ELIQUIS, when 
that same exact product can be purchased for just $900 in 
Canada and $650 in France.

    Mr. Duato, we are going to ask you why Johnson & Johnson 
charges Americans with arthritis $79,000 for STELARA, when that 
same exact product can be purchased for just $20,000 in Canada 
and just $12,000 in France. Mr. Davis, please tell us later why 
Merck--why Merck charges Americans with cancer $191,000 a year 
for KEYTRUDA, when that same product can be purchased for 
$112,000 in Canada and $91,000 in France.

    Let's be clear, Johnson & Johnson, Merck, and Bristol-Myers 
Squibb are not just charging higher prices in the United States 
compared to other countries. They are also charging Americans 
much higher prices today than they did in the past even 
accounting for inflation.

    From 2004 to 2008, the median price of innovative new drugs 
sold by these three companies was just $14,000, inflation 
accounted. From 2019 to 2023, where we are today, the median 
price of new drugs sold by these three companies was $238,000.

    In other words, Americans are forced to pay higher and 
higher prices for the drugs they need to survive. And let's be 
clear, the overwhelming beneficiary of these high drug prices 
is the pharmaceutical industry.

    How do we know that? Well, that is precisely what they tell 
their investors. According to their own shareholder reports, 
Bristol-Myers Squibb made $34 billion selling the blood thinner 
ELIQUIS in the United States, compared to just $22 billion in 
the rest of the world combined. Make their money in the United 
States.

    In other words, the U.S. accounts for nearly two-thirds of 
all global sales of ELIQUIS. Not a single dollar of this 
revenue is going to PBMs. 100 percent of it is going through 
Bristol-Myers Squibb. Johnson & Johnson has reported to its 
shareholders that it made over $30 billion in revenue selling 
the arthritis drug STELARA in the United States since 2016, 
more than twice as much as the rest of the world combined.

    Nothing to do with PBMs. Merck has reported to its 
shareholders that it made $43.4 billion selling the cancer drug 
KEYTRUDA in the United States, compared to $30 billion in the 
rest of the world combined.

    Now, our CEO panelists from the drug companies will tell us 
this morning how much it costs to develop new drugs and how 
often the research that they undertake for new cures is not 
successful. And they are right. We appreciate that.

    But what they have not told us in their written testimony 
is that 14 major pharmaceutical companies, including Johnson & 
Johnson and Merck, spent $87 billion more on stock buybacks and 
dividends over recent 10 year period than what they spent on 
research and development--more on stock buybacks and dividends 
than in research and development.

    In fact, Bristol-Myers Squibb spent 3.2 billion more on 
stock buybacks and dividends in 2022 that it spent on research 
and development. Johnson & Johnson spent $46 billion more on 
stock buybacks and dividends than it spent on research and 
development since 2012.

    In other words, these companies are spending more to enrich 
their own stockholders and CEOs than they are in finding new 
cures and new treatments. Now, the average American who hears 
all of this is asking a very simple question, how does all of 
this happen? What is going on? How could your companies charge 
us, in some cases, ten times more than they charge Canadians, 
people around the world for the same drug?

    How did they get away with this when so many of our people 
cannot afford the high prices of the drugs that they need? How 
can it be uniquely among industrialized countries that these 
companies, not just these companies but the pharmaceutical 
industry in general, can raise prices any time they want to any 
level they want--want to raise double prices, do it any way 
they want. How do they get away with all of that?

    Here, in my view, is the answer. The U.S. Government does 
not regulate drug companies. With very few exceptions, the drug 
companies regulate the U.S. Government. That is the sad state 
of affairs in a corrupt political system. Over the past 25 
years, the pharmaceutical industry, not just these companies, 
the entire industry, spent over $8.5 billion on lobbying and 
more than $745 million on campaign contributions.

    Let me be fair here. I don't want to misspeak. They are 
bipartisan. They give to Republicans. They give to Democrats. I 
am especially impressed by the Pfizer drug company--Pfizer is 
not here this morning contributing $1 million to the Republican 
Party in Kentucky to expand its headquarters named after 
Republican leader Mitch McConnell.

    But again, it is not just Republicans. It is Democrats as 
well. Unbelievable, this is an astounding fact. Last year, drug 
companies had over 1,800 well-paid lobbyist here in D.C. to 
make sure that Congress did their bidding. There are 535 
Members of Congress and 1,800 well paid lobbyists, over three 
for every Member of Congress.

    If you want to know why you are paying the highest prices 
in the world, America, that is why. Now, here is some good news 
in the midst of all that. We are beginning, beginning to take 
on the greed of the pharmaceutical industry.

    As a result of the Inflation Reduction Act passed several 
years ago, Medicare for the first time ever is beginning to do 
what every major country on Earth does and what the Veterans 
Administration has been doing for over 30 years, and that is to 
negotiate the lower prices of drugs, including JANUVIA, 
STELARA, and ELIQUIS.

    Let me conclude by saying this, I am proud of what this 
Committee up to this point has accomplished. Last year, as you 
will all remember, the CEO of Moderna committed during a HELP 
Committee hearing that his company would make certain that no 
one in America would have to pay for their vaccine out-of-
pocket.

    We appreciated that. In a separate health Committee hearing 
last May, the CEO of Eli Lilly committed that his company would 
not raise prices on existing insulin products after having, in 
fact, lowered them.

    But let's be clear, much more needs to be done. I look 
forward to hearing from our CEO panelists this morning as to 
how they are going to go forward to substantially lower the 
cost of prescription drugs in this country.

    Senator Cassidy, you are now recognized for your opening 
statement.

                  OPENING STATEMENT OF SENATOR CASSIDY

    Senator Cassidy. Thank you. Thank you, Chair Sanders. Let's 
just be clear, everybody on this panel cares about the high 
cost of prescription drugs and wants to work on real solutions 
to address this.

    But it is also clear that this hearing is not about finding 
legislative solutions. It is kind of following a formula. 
Republicans--we publicly attack private--I don't but others, 
publicly attack private citizens for being successful under 
capitalism. We grossly oversimplify our problem and blame 
corporations.

    We demand CEOs come before the Committee for public verbal 
stoning. We reject the offer to send top executives with 
subject matter expertise and responsibility regarding issues at 
hand, and threaten a subpoena when CEOs are suspicious that 
they won't get a fair shake. Hold the hearing, get sound bites, 
then pick another set of CEOs for a show trial, but we don't 
pass meaningful legislation.

    That sounds familiar. That has been the hearing of 
Starbucks founder Howard Schultz, Moderna CEO Stephane Bancel, 
and now this hearing with the same formula. I would have gladly 
joined the Chair in explore exploring solutions to address the 
high cost of prescription drugs. I am a doc. I worked in a 
public hospital for the uninsured for 25 years. I did my best 
to get care to those who otherwise would not have received.

    I am aware of this. I am also aware of the perverse 
incentives. The kind of like, my gosh, it shouldn't be high, 
but it is high. Bad actors game the system and we need 
solutions that benefit patients and improve access. But the 
majority was not interested in working with this side of the 
dais to hold a serious hearing to inform serious legislation.

    They didn't seek Republican input. The goal was to haul you 
guys in, decry capitalism, and blame these corporations for the 
high cost of drug prices. Now, by the way, of course, drug 
companies play a role, and hopefully we will get answers today 
to legitimate questions about how drugs are priced.

    But the problem is far greater and more complex than 
individual companies or even a set of companies within an 
ecosystem, which is incredibly complex. Why do Americans pay 
more for certain drugs than patients in other countries? To 
understand, we need to have a serious effort to navigate the 
network of perverse incentives throughout the health care 
system.

    I lived in it for 25 years. I am very kind of aware of it. 
Taking a substantial look at insurance benefit design, price 
transparency, regulatory barriers, intellectual property 
barriers, the perverse effect Government discount programs have 
upon prices charged to commercial patients, etcetera.

    One example, just to say again a little bit of complexity 
here. The 340B drug program resulted in a $54 billion in drug 
discounts in 2022, but we actually don't know if those 
discounts lowered prices for the patient who bought the drug.

    There are reports that patients paid cash when the 
intermediary took the full price, even though 340B should have 
lowered it. That is a serious investigation being conducted by 
this side of the dais that the other side of the dais was not 
interested in participating in. That is an understanding of an 
ecosystem.

    I understand there is no one more eloquent than Chair 
Sanders on Medicare for all, and we can cherry pick examples of 
how other countries are doing something better. I can cherry 
pick the opposite. Canada is struggling--just to show you that 
there is a complexity here. Let me just take an example. Canada 
is struggling with specialty care.

    In May of last year, the Canadian government began to send 
4,800 Canadians from British Columbia to Washington State to 
``ensure people have faster access to life saving radiation 
treatment.'' They can afford their system because we are right 
next door.

    Relatedly to this hearing into that, Alison Decliso, a 
Canadian woman paid for her own treatment in the United States 
after the provincial health authority in British Columbia 
denied her access to life saving chemotherapy.

    Canada had a lower cost drug, SOLO. They didn't carry the 
chemotherapy, so she paid for it out of pocket in the United 
States so she could have lifesaving chemotherapy. The United 
States is not perfect, but if we cherry pick from other 
countries, we have to do a more thorough investigation to see, 
is there a balance there?

    Now let's return to prescriptions. Canadians pay less than 
we do. Let's figure out why. But let's also point out the 
public health insurance in Canada only covers 21 percent of 
newly developed drugs.

    Now, maybe that is a tradeoff, but I can tell you, you tell 
an American that they can't have access to a lifesaving court--
a lifesaving drug, they are going to see you in court. They are 
going to sue, and they are going to say, I want that access.

    The UK only covers 48 percent of newly available drugs. 
Americans just would not tolerate that. It is fair to say that 
Ms. Decliso, all those radiation treatment patients, are those 
not getting the newly developed lifesaving drugs as quickly 
might die in those countries that don't have access to the same 
treatments as do we in the U.S..

    These are serious questions. One more time, I am a doc. I 
am aware of this, but we need to fully consider all these 
issues and then maybe bring you in at the end, but we will 
bring you in with a context which is complete as opposed to 
isolated. As I said at the start, it would be best if this were 
a genuine exercise.

    I am so willing to do the work on this, as are my 
colleagues. We have shown that willingness on work on PBM 
reforms and generic drugs. And even though the Chair and I got 
off to a rocky start, we did some pretty good work on that, Mr. 
Chair. I think we got some good bipartisan legislation.

    This Committee, I agree with you, can accomplish that. But 
I don't want the Committee to devolve into a CEO whack a mole, 
ends up with no serious legislation as a result. Further proof 
of what I consider the unserious and cynical nature of this 
hearing is that the minority asked the Chair to have a witness 
on the panel that could actually explore some of these issues 
side by side these CEOs.

    That was turned down. We wanted an academic expert in drug 
pricing who could provide unbiased and substantial input to the 
issues at hand. Our witness was not allowed. He will be on the 
next, but the way this works is this get all the publicity and 
the next one gets crickets.

    We have not had that opportunity. And I will also point out 
we didn't split the majority of minority witnesses into 
different panels during several hearings, which promoted kind 
of labor union issues. I can think of no reason to not allow 
our witness to be here now except perhaps ruining the optics.

    As I said at our last markup, what ends up being hollow 
messaging gives D.C. a bad reputation. Folks want real answers. 
They want relief from high prices. It is in part what we are 
going to hear today, but it will be separated from a context 
that would have made it a lot more productive.

    If you are telling voters you are going to do something 
when you know at the get go you have no legislative solution 
which emerges, and that is why folks don't trust.

    If we are just looking for a social media clip, then I 
suppose we have accomplished something, but let's make a 
difference for the people whom we represent--for those patients 
in hospitals who I once treated who otherwise would not have 
access to care.

    We have the ability to craft meaningful legislation. Let's 
do it. With that, I yield.

    The Chair. Thank you, Senator Cassidy. Our first witness 
will be Joaquin Duato, Chairman and CEO of Johnson & Johnson. 
Mr. Duato has served as Johnson & Johnson's Chairman since 
2023, and Chief Executive Officer since 2022. Mr. Duato, thanks 
very much for being with us.

STATEMENT OF JOAQUIN DUATO, CHIEF EXECUTIVE OFFICER, JOHNSON & 
                   JOHNSON, NEW BRUNSWICK, NJ

    Mr. Duato. Chairman Sanders, Ranking Member Cassidy, and 
Members of the Committee, thank you for the opportunity to be 
here today.

    Johnson & Johnson has collaborated with this Committee over 
several decades to advance health care solutions for patients, 
including on diversity in clinical trials, nursing and health 
care workforce, pandemic preparation, mental health, and 
regulatory pathways for novel cell and gene therapies.

    I applaud this Committee for your commitment to such 
critical priorities. I have been with J&J for more than 35 
years and have held roles in Europe and in the U.S.. I 
understand the global challenges and complexities of health 
care innovation and delivery, and today I look forward to 
discussing our approach to pricing and the work we do to 
advance health care for all Americans.

    Fundamentally, our decisionmaking is guided by the values 
set forth on our credo, which states that our first 
responsibility is to the patients. Our drug pricing decisions 
reflect our commitment to bringing forward innovative medicines 
for patients today and for patients tomorrow.

    First, our prices are based on the value our medicines 
bring to patients, the healthcare system, and society. We take 
into consideration that our medicines improve patient's quality 
of life and show revival rates, while often reducing health 
care costs. And for context, in 2022, the average net price of 
our medicines declined for the sixth year in a row by 3.5 
percentage points.

    Over those 6 years, prices have declined by almost 20 
percent, and the real inflation adjusted price decline was more 
than 40 percent. Second, we price our medicines to support 
patient access.

    In 2022 alone, we paid $39 billion in rebate discounts and 
fees, almost 60 percent of the average list price of our drugs, 
with the intent that patients benefit from these substantial 
cost savings. We also support patient affordability and access 
by funding patient assistance programs.

    In 2022, these programs helped more than 1 billion--1 
million underinsured patients. And we donated $3.8 billion in 
free medicines, another support, to help patients with no 
insurance.

    Finally, we price our medicines to meet our commitment to 
innovate and develop different novel medicines for patients. 
The investment required to do so is massive. The average cost 
of bringing a drug through clinical trials in our industry is 
more than $2 billion.

    However, more than 90 percent of the drugs that enter 
clinical trials do not make it to patients. Consequently, our 
R&D investment is enormous and totally--totals near $78 billion 
since 2016.

    Despite the tremendous investment required to bring drugs 
to patients, drug costs in the U.S. have not increased 
significantly as a percentage of total overall health care 
costs. In fact, the largest spending in the U.S. is about 14 
percent of health care spending, slightly below the average for 
the rest of the world.

    While total U.S. health care spending is higher than other 
developed nations, this spending allows American patients to 
receive cutting edge health care earlier than any other country 
in the world.

    However, the burdensome co-pay obligations imposed in the 
U.S. are hard for patients to meet and undermine access and 
health equity. Remarkably, the GAO found that patient co-pay 
obligations often exceed payer costs for their drugs. This 
means that patients sometimes pay more for their medicines than 
their insurers.

    Clearly, this part of the system is not working as 
intended. We support proposals to reconcile this inequity and 
to ensure patient access. As outlined in my testimony, Congress 
should stop middlemen from taking for themselves the assistance 
that pharmaceutical companies intend for patients.

    Finally, it is essential that we reject the price caps and 
controls that exist in other countries which stunt innovation. 
Our nation's robust biopharmaceutical industry was created by 
policy choices that prioritized earlier patient access to 
breakthrough medicines and incentivized investment in medical 
innovation.

    Thank you for the bipartisan efforts of this Committee and 
for the opportunity to engage in today's discussion. I look 
forward to your questions.

    [The prepared statement of Mr. Duato follows.]

                  prepared statement of joaquin duato
    Chairman Sanders, Ranking Member Cassidy, and Senators of the 
Committee, I am the Chief Executive Officer of Johnson & Johnson and 
the Chairman of the Board of Directors, positions I assumed in January 
2022 and 2023. I joined Johnson & Johnson in 1989, and for the first 13 
years of my tenure, I held various executive positions with the company 
in Europe. Over my thirty-five years with the company, I have held 
roles in both our Innovative Medicine sector and MedTech sector. As I 
have practiced and witnessed throughout my career, Johnson & Johnson's 
decisionmaking is guided by the values set forth in Our Credo, first 
adopted in 1943, which states that our first responsibility is to the 
patients, doctors, nurses, parents, and all others who use our products 
and services. This responsibility extends to both the patients who need 
our innovative medicines today to treat some of the most challenging 
and life-threatening diseases, and to the patients of tomorrow, who 
need us to continue to research cures and treatments for the unmet 
medical needs that they will face in the future.

    Johnson & Johnson has collaborated with this Committee over several 
decades to advance the important work of pursuing novel healthcare 
solutions that benefit patients. Our engagement with the Committee has 
contributed to the efforts to address the mental health crisis, 
modernize the biopharmaceutical and medical technology regulatory 
pathways, provide critical access to affordable medicines and medical 
technologies, examine frameworks for use of artificial intelligence in 
health, enhance diversity in clinical trials, ensure pandemic 
preparedness, and support frontline healthcare workers and their daily 
challenges. I have long admired this Committee's ability to find common 
ground and deliver solutions for patients. Having held roles in the 
United States and Europe, and as a dual citizen of the United States 
and Spain, I understand well the global challenges and complexities of 
healthcare innovation and delivery.

    I am grateful for the opportunity to discuss these issues, and Our 
Credo values that shape Johnson & Johnson's approach to pricing for our 
innovative medicines. I look forward to sharing with you our 
perspectives on how we may collaborate to improve access to and 
affordability of medicines for all Americans, while continuing to bring 
to patients the life-changing and life-saving medicines that are the 
hallmark of American healthcare.
                              Introduction
    Johnson & Johnson's drug pricing decisions integrate our commitment 
to bringing innovative therapies to the patients who need them today, 
and our dedication to continuous research, innovation, and development 
of the next generation of medicines across dozens of diseases for the 
patients of tomorrow.

    In furtherance of those objectives, we price our therapies, first 
and foremost, based on the value that our therapies bring to patients, 
the healthcare system, and society. Johnson & Johnson focuses on 
developing transformational therapies that address challenging and 
complex unmet medical needs. Our drugs improve patients' quality of 
life and survival rates, while also reducing overall healthcare costs, 
for example, through fewer surgeries and hospital admissions. The 
pricing of our medicines reflects these important life-saving, life-
enhancing, and financial benefits.

    Second, we price our medicines to further our commitment to patient 
access. To that end, Johnson & Johnson pays significant rebates, 
discounts, and fees to pharmacy benefit managers (PBMs), payors, and 
other ``middlemen'' in the healthcare system. It is our intent in 
making those concessions that patients benefit from these cost savings, 
not these intermediaries. To foster an open dialog regarding the 
appropriate recipients of these savings--PBMs, payors, or patients--we 
started publishing information about our pricing 6 years ago in our 
annual Transparency Report, available online for all to review. As 
detailed in the most recent issue, the average net price of our 
medicines declined for the sixth year in a row, and cumulatively by 
almost 20 percent over that period. During that same timeframe, 
consumer prices rose by more than 20 percent, which equates to a 
decline in the real, inflation-adjusted pricing for our drugs of more 
than 40 percent. The decline in our average net price is due in large 
part to the increased amounts paid to these middlemen. In 2022 alone, 
our average net price declined by 3.5 percent, attributable to our 
payment of $39 billion in rebates, discounts, and fees to others in the 
healthcare system--constituting almost 60 percent of the average list 
price of our drugs.

    In addition to these price reductions, Johnson & Johnson furthers 
patient access by funding patient assistance programs designed to help 
manage copay obligations and provide free medicines to underinsured 
patients. As the Transparency Report details, in 2022, these patient 
assistance programs helped more than one million underinsured patients 
access Johnson & Johnson therapies their doctors prescribed. We also 
donated $3.8 billion in free products and other financial support 
through independent programs and foundations to help uninsured patients 
obtain the therapies they need.

    Third, we price our products to allow us to meet our commitment to 
innovate and develop new and novel medicines for the patients of today 
and tomorrow. To do so, we must price our existing medicines at levels 
sufficient to cover the investment required to pursue the development 
of broad portfolios of new drug candidates. The requisite investment is 
massive, as the average cost of bringing a drug candidate through 
clinical trials to patients is $2.6 billion over 10 years, across the 
industry. Moreover, we must pursue numerous drug candidates on parallel 
tracks because, across the industry, approximately 90 percent of the 
drugs that enter clinical trials (and 92 percent of cancer drugs) fail 
before they can make it to market. Even after a drug is approved and 
reaches patients, only around 20 percent to 30 percent of new drugs 
recoup the significant investments necessary to bring them to market. 
Consequently, Johnson & Johnson's pharmaceutical research and 
development spending is enormous, with an investment of $77.7 billion 
since 2016, $11.6 billion in 2022, and $12 billion in 2023. To our 
knowledge, this is one of the largest annual investments in research 
and development made among any of our biopharmaceutical industry peers. 
Accordingly, we must price our drugs both to recover funds for the 
investments made and to allow us to continue these efforts--including 
investments in promising drug candidates that ultimately fail and 
therefore generate no revenue.

    Despite the tremendous investment required to sustain the flow of 
new medicines, drug costs in the United States have not increased 
appreciably as a percentage of overall healthcare costs in over a 
decade. Moreover, the level of drug costs as a percentage of total 
healthcare spending in the United States is about 14 percent, slightly 
below the average for other major markets. In some instances, the 
prices of drugs in the United States are higher than in other 
countries--and so are the costs of other healthcare services in the 
United States. This spending allows patients in the United States to 
receive cutting-edge healthcare as compared to patients elsewhere in 
the world, including obtaining markedly earlier and broader access to 
breakthrough innovative medicines.

    Conversely, there is one notable attribute of the U.S. healthcare 
system that differentiates it from other countries in a way that is 
detrimental to patients. The United States healthcare system alone 
imposes onerous copayment obligations on patients, which are becoming 
harder for patients to meet and are undermining access and health 
equity. There is broad agreement among experts and policymakers that 
the copayment obligations imposed by both government programs and 
private insurers is a primary reason for patients' failure to complete 
prescribed courses of drug therapy, even with regard to cancer and 
other life-threatening diseases. Remarkably, as the Government 
Accountability Office found when analyzing the most highly rebated Part 
D drugs, patients' copay obligations often exceed payors' net costs for 
those drugs because rebates and other incentives paid by manufacturers 
to payors are not passed on directly to patients. The diversion of 
those price reductions from patients to middlemen is one reason that 
copayment obligations are neither an equitable nor effective means for 
controlling drug prices. We support the following proposals that have 
been advanced to address this inequity and to ensure patients receive 
the full course of drugs prescribed by their physicians.

    First, we agree that patient copayment obligations should be 
reduced. The imposition of lower caps on out-of-pocket costs for 
Medicare patients under the Inflation Reduction Act (IRA) is a good 
first step. But access problems remain across multiple markets. 
Policymakers should closely monitor the effect of these changes to 
ensure they improve patient access in practice and, in addition, 
consider ways to reduce cost sharing in the commercial market.

    Second, Congress or the Centers for Medicare & Medicaid Services 
(CMS) should stop payors, PBMs, and their agents from taking for 
themselves the copayment assistance that Johnson & Johnson and other 
companies intend for patients by eliminating the economic incentive to 
do so. As 19 Senators recognized in a recent letter to CMS, certain 
payors and PBMs have been capturing for themselves the benefits of 
copay assistance by excluding the patient assistance payments when 
assessing whether patients have met the copayment caps imposed by law. 
The economic effect of these programs--with benign-sounding names like 
``accumulators,'' ``maximizers,'' and ``alternative funding 
programs''--is to divert the patient assistance from patients to 
payors. These programs should be barred, and patients should be allowed 
to receive the intended benefits of the assistance.

    Third, Congress should require that PBMs and payors pass on to 
patients the rebates and other concessions they demand that 
manufacturers pay. Overall, in 2022, almost 60 percent of the list 
price of our medicines went to rebates, discounts, and fees, in many 
cases as a result of the financial demands of payors and others in the 
healthcare system. While the amount of these concessions is significant 
and increasing each year, studies show that the majority of these 
amounts is retained by these intermediaries and not passed along to 
patients. No other healthcare system tolerates the diversion of 
discounts intended for patients to these middlemen.

    Fourth, Johnson & Johnson supports pending legislation--such as the 
Pharmacy Benefit Manager Reform Act passed by this Committee last 
year--designed to address certain PBM practices that distort the 
healthcare delivery system by ensuring transparency to the payors that 
utilize PBM services. This legislation, especially if expanded to 
require delinking of PBM fees from list prices, would be an important 
step toward aligning incentives for lower net costs and improved 
patient access.

    Finally, it is essential that the United States reject the price 
caps and controls that exist in other countries and serve to stunt 
innovation and deprive patients of life-saving medicines. Our nation's 
robust biopharmaceutical industry was created and fostered by 
deliberate policy choices that prioritized and incentivized investment 
in medical innovation in exchange for a period of patent and regulatory 
exclusivity that enables innovators to price at levels required to 
recoup their investments and reinvest in the future. As reflected in 
the Constitution, this nation's founders recognized as a fundamental 
tenet, and a cornerstone of a free and capitalistic economy, that the 
award of exclusivity promotes progress. We can only make the 
significant research and development investments we do because U.S. 
policy has respected manufacturers' patent rights and afforded periods 
of market exclusivity for innovations. Those exclusivity periods are 
limited and often curtailed because they run from the date of 
invention, not from the date of market entry, which can be years 
thereafter. Moreover, as part of the laudable social bargain, upon 
expiry of patent and regulatory exclusivities, generic drug and 
biosimilar manufacturers are legally authorized to rely upon and 
leverage the innovator's investment in safety and efficacy studies to 
bring competitive drugs to the market. That social bargain is one 
reason that--over time and on average--drug costs in the United States 
are only 14 percent of total healthcare costs, which is below the 
average for other major markets. We support policies that encourage 
other countries to do more to foster innovation, rather than misguided 
approaches that would result in the United States doing less. This is 
critical not only to the health of the United States, but also to our 
Nation's financial and national security.

    The remainder of my testimony contains additional details regarding 
each of these important subjects.
         Investment in Innovation Leads to Treatments and Cures
    For more than a century, Johnson & Johnson has created breakthrough 
scientific innovations that address some of the nation's most important 
medical needs. We are proud of our proven history of pharmaceutical 
innovation. Since 2016, our total investments in pharmaceutical 
research and development have reached $77.7 billion. In 2022 alone, 
Johnson & Johnson committed $11.6 billion to the discovery and 
development of medicines. In 2023, we invested $12 billion in 
pharmaceutical research and development (and $15.1 billion in research 
and development across the company).

    Since 2016, our investment in the next generation of transformative 
medicines resulted in eight new drugs approved by the Food and Drug 
Administration (FDA) and an additional fifty-two approvals for expanded 
indications or new product formulations. Johnson & Johnson may achieve 
eight more significant approvals by the FDA in 2024. These medicines, 
if approved, will offer treatments for serious diseases, including 
multiple myeloma and lung cancer. Johnson & Johnson has an additional 
11 significant FDA regulatory submissions that are planned for later 
this year. In addition, we expect to obtain important data this year 
from eight Phase III trials and three Phase II trials, which will 
inform the clinical and regulatory strategy for these significant 
programs in our pipeline. These figures do not include our entire 
clinical development portfolio, nor the substantial investment in drug 
discovery, including internally, in incubator settings and in stand-
alone companies.

    These significant investments by Johnson & Johnson--and other 
innovators in the biopharmaceutical industry--have had dramatic effects 
on the lives of Americans: people live longer and achieve a better 
quality of life. From 1990 to 2015, biopharmaceutical drugs accounted 
for at least an estimated 35 percent of the increase in U.S. life 
expectancy. Over that same period, pharmaceuticals accounted for 76 
percent of the mortality reduction achieved for HIV, 60 percent of 
mortality reduction in cerebrovascular disease, 60 percent of mortality 
reduction in malignant breast tumors, 52 percent of mortality reduction 
in ischemic heart disease, and 27 percent of mortality reduction in 
colon, rectal, and related cancers.

    The industry continues to invest in new and life-changing 
medicines. Across the healthcare sector, the biopharmaceutical 
industry's spending on research and development accounts for 75 percent 
of all U.S. investment in medical and health research and development. 
The biopharmaceutical industry has a robust pipeline of more than 8,000 
medicines in clinical development, including more than 800 treatments 
and cures for diseases that disproportionately affect minority 
communities.

    The medicines that the Committee has identified, and that we are 
discussing today, are illustrative of the benefits that Johnson & 
Johnson's investment in medical innovation brings to patients and their 
providers, and I would like to address each one briefly.

    Stelara. Stelara is an innovative treatment for certain chronic and 
debilitating immune-related diseases. Stelara is approved for the 
treatment of adult patients with moderate to severe plaque psoriasis, 
active psoriatic arthritis, moderately to severely active Crohn's 
disease, and moderately to severely active ulcerative colitis, as well 
as the treatment of pediatric patients ages 6 years and older with 
moderate to severe plaque psoriasis and active psoriatic arthritis. 
These debilitating diseases can cause inflammation, ulcers, pain, 
bleeding, and serious complications in the intestines; painful itching, 
burning, and scaling of the skin; and painful swollen and tender 
joints. Patients living with Crohn's disease and ulcerative colitis are 
at increased risk for hospitalization and surgery, which both carry 
risks for patients and cost burdens for the healthcare system.

    Stelara was the first significant therapeutic advancement over the 
prior generation of treatments, TNF-inhibitors. Stelara can have a 
significant positive impact on patients. For Crohn's disease, a 
majority of patients were in remission 1 year after responding to the 
initial treatment with Stelara.

    Xarelto. Xarelto is a type of blood thinner called a direct oral 
anticoagulant that helps patients facing conditions that put them at 
risk of blood clots, which can lead to thrombotic events such as heart 
attacks, strokes, and pulmonary embolisms. Initially invented by Bayer 
in Germany, Johnson & Johnson partnered with Bayer to bring the 
medication to patients in the United States.

    Xarelto is a therapeutic advancement over other blood thinners, 
such as warfarin. Xarelto's benefits include fewer food and drug 
interactions, easier standardized dosing, and the elimination of 
invasive and costly blood tests required with some other therapies. 
Medical treatment guidelines provide that direct oral anticoagulants, 
including Xarelto, are preferable to warfarin for certain serious 
conditions such as nonvalvular atrial fibrillation and venous 
thromboembolism. Moreover, in about half of its FDA-approved 
indications, Xarelto is the only approved direct oral anticoagulant.

    Imbruvica. Imbruvica is a once-daily oral therapy for the treatment 
of chronic lymphocytic leukemia and other blood cancers, including 
small lymphocytic lymphoma and Waldenstrom's macroglobulinemia. It has 
helped evolve the standard of care for adult patients living with B-
cell malignancies, who until about a decade ago had poor prognoses and 
had to rely largely on chemotherapy and chemoimmunotherapy as the main 
treatment options available. Imbruvica is the only medicine in its 
class that has demonstrated a statistically significant overall 
survival benefit in first-line chronic lymphocytic leukemia and an 
established safety profile gained through clinical studies, long term 
follow up, and safety monitoring.

    Symtuza. Symtuza is the first complete, darunavir-based single-
tablet regimen for the treatment of HIV in adults and children who 
weigh at least 40kg. Developed by Johnson & Johnson, in collaboration 
with Gilead Sciences, Inc., Symtuza combines the proven high barrier to 
resistance of darunavir with a formulation designed for improved 
tolerability and the convenience of a single-tablet regimen. Symtuza 
offers an important treatment option for patients. Symtuza has been 
studied and used in patients who have never been on medications to 
treat HIV, as well as in those patients who have previously been well 
controlled on HIV medications and are not known to have any viral 
resistance to the components of Symtuza.
    Pharmaceutical Pricing and Access to Johnson & Johnson Medicines
    Johnson & Johnson's approach to pharmaceutical pricing balances our 
commitment to bring innovative therapies to the patients who need them 
today, and our dedication to continuous research, innovation, and 
development of the next generation of medicines across dozens of 
diseases. We strive to understand and address the serious health 
problems of today and create the potential medicines of tomorrow. In 
setting the prices of its drugs, Johnson & Johnson follows three 
guiding principles:

    1. Value to patients, the healthcare system, and society. In 
setting drug prices, a primary consideration is the value that the drug 
brings to patients, the healthcare system, and society as a whole. For 
patients, these considerations can include improvements in health, an 
extended lifespan, and an improved quality of life--such as the ability 
to take a pill rather than travel to a health center for an infusion, 
or conversely, to take a long-acting, twice-yearly injection rather 
than a daily pill. For the healthcare system, pharmaceutical 
innovations can significantly reduce other costs, such as surgeries and 
hospital admissions.

    2. Affordable access to medicines. Our approach to drug pricing 
reflects our commitment to making our innovations available to patients 
who need them. First, we negotiate with insurance companies--and the 
pharmacy benefit managers they engage to negotiate on their behalves--
to encourage insurance plans to cover our medicines. These entities are 
gatekeepers to patients. We work with these companies to demonstrate 
the value that our products bring to their policyholders, and we engage 
in negotiations on discounts and rebates that reduce the costs for our 
drugs. Second, we seek to ensure that a patient's financial situation 
is not a barrier to access through a variety of programs and approaches 
that promote patient access. For example, Johnson & Johnson's Janssen 
CarePath patient support program provides options for underinsured 
patients with commercial or private health insurance through solutions 
like copay assistance and medications free of charge.

    3. Investing in future cures and treatments. As demonstrated by our 
robust pipeline, Johnson & Johnson is dedicated to bringing the next 
generation of treatments and cures to patients. Drug development is 
costly and uncertain. Our approach to pricing therefore must include 
the ability to invest in innovation for the patients of tomorrow. 
Developing a new medicine requires, on average, a $2.6 billion 
investment over 10 years. Pharmaceutical pricing must allow for and 
fund research into potential innovations that ultimately fail. In fact, 
most promising drugs do not succeed, whether due to unacceptable side 
effects, limited efficacy, or other factors. Across the industry, 
approximately 90 percent of candidate medicines that show sufficient 
promise to warrant a Phase I clinical trial do not eventually result in 
a new FDA approval. This reality means that the revenue from only about 
10 percent of all drugs investigated for therapeutic potential in 
clinical trials must fund the research and development of all failed 
drug candidates and the research and development of all innovative 
treatments and cures of tomorrow. Even more, only around 20 percent to 
30 percent of new drugs recoup the significant investments needed to 
bring them through approval and to patients.

    With this understanding of the framework for Johnson & Johnson drug 
pricing, it is essential to consider the significant and substantial 
rebates, discounts, and fees that reduce Johnson & Johnson's revenue 
and result in a much lower effective price of our medicines than may 
seem apparent from the list price of our drugs. Because pricing trends 
and the extent of the diversion of discounts and patient assistance 
away from patients are, unfortunately, hidden from the public by our 
Country's byzantine drug pricing system, Johnson & Johnson has 
committed to transparency in its drug pricing and has issued a 
transparency report every year since 2016.

    In Johnson & Johnson's most recent Transparency Report, issued in 
mid-2023, the company reported that the actual price of its medicines 
had declined for the sixth year in a row. In 2022, the average net 
price of Johnson & Johnson's medicines declined 3.5 percent.

    There is a striking gap between the list price of medicines--often 
misleadingly cited in the media and by some in Congress--and the actual 
amount that Johnson & Johnson receives for its medicines. In 2022, 
Johnson & Johnson recorded $39 billion in rebates, discounts, and fees 
to commercial insurers, government programs, and others in the 
healthcare system. Overall, in 2022, Johnson & Johnson received well 
under half of the list price of its medicines--almost 60 percent of the 
list price instead went to rebates, discounts, and fees, in many cases 
as a result of the financial demands of payors and others in the 
healthcare system.

    These middlemen also put financial pressure on patients, as 
insurance companies have continued to impose higher deductibles, higher 
copays, and higher coinsurance requirements--even for patients who 
thought they were well insured. Nearly a quarter of Americans are now 
considered underinsured, meaning that they are open to significant 
financial risk from a healthcare necessity or find that the care they 
need is financially out of reach because of the requirements imposed by 
their insurance provider. Since 2014, commercially insured patients 
with deductibles have experienced a 50 percent increase in out-of-
pocket costs for brand medications due to these tactics.

    Johnson & Johnson has sought to address these challenges to access 
with a variety of robust patient assistance programs. For example, 
Johnson & Johnson's Janssen CarePath Program is a patient assistance 
program that supports eligible patients on commercial, employer 
sponsored, or government insurance, regardless of income. Patients with 
commercial insurance can apply to the program, which includes a number 
of solutions such as copay assistance and free product. In 2022, more 
than one million patients were helped with support provided by Johnson 
& Johnson's Janssen CarePath Program. Also in 2022, we donated $3.8 
billion in free product and other financial support to the Johnson & 
Johnson Patient Assistance Foundation and other independent programs.

    Commercial insurers and PBMs have responded to these programs with 
a variety of tactics designed to thwart manufacturers' patient 
assistance programs. For example, they impose prior authorization 
requirements and cost sharing models to control or restrict a patient's 
ability to access a medicine prescribed by a doctor. They impose 
exclusion lists that prevent a patient from accessing a prescribed 
medicine, given these are lists of products determined in the sole 
discretion of an insurer not to be covered. Exclusion lists have grown 
nearly 1000 percent since 2014 and now include more than 1,350 drugs.

    PBMs' newest tactics are designed simply to divert manufacturers' 
patient assistance funds to their own pockets. These tactics have 
opaque names like ``accumulators,'' ``maximizers,'' and ``alternative 
funding programs,'' but they share a common purpose of undermining 
manufacturers' access programs. As one example, PBMs improperly inflate 
patients' copay amounts to astronomical amounts and then seek 
``support'' from the assistance programs for this inflated copay. The 
patients quicky exhaust the available support, and the assistance 
programs' funds are effectively diverted to the PBMs. Johnson & Johnson 
brought suit against a company leading this practice in 2022.

    The medications we are addressing today exemplify our approach to 
pricing, the downward trajectory of our prices due to discounts and 
rebates, and our commitment to patient access. Stelara, for example, 
has experienced a declining price in six of the last 7 years, once 
rebates and discounts are included. From 2017 to 2023, the average 
yearly price decline for Stelara was 5.9 percent. Xarelto similarly 
experienced a declining price in six of the 7 years between 2017 and 
2023.

    Each of these medicines also exemplifies the support that Johnson & 
Johnson provides in our patient assistance programs. Under the benefits 
provided by Johnson & Johnson's Janssen CarePath Program, eligible 
patients can pay as little as $5 for each dose of Stelara, $10 per fill 
of Xarelto, $0 per prescription of Imbruvica, and $0 per prescription 
of Symtuza.
              U.S. Policy Supports and Fosters Innovation
    The robust biopharmaceutical industry in the United States--
currently the world's leading investor in innovation and developer of 
breakthrough treatments and cures--did not occur by accident. Instead, 
it was intentionally created and fostered by the policy choices of this 
Committee, Congress more broadly, and the many generations of 
policymakers that preceded those of us here today. Through thoughtful 
policy choices reflected in bipartisan legislation, in many cases 
emanating from this Committee, the United States created a medical 
innovation environment that is unique in the world.

    For example, in the 1990's, Congress enacted the Prescription Drug 
User Fee Act to ensure that the FDA had the resources needed to remain 
the world's leading drug review agency. The law provided the FDA with a 
new funding stream to ensure that the FDA could hire and train the 
staff needed to review drug applications with predictable timeframes. 
For many new drugs treating serious medical conditions, the statute and 
associated funding allow the FDA to perform priority review. Patients 
and their families who were waiting for help and hope in the face of 
difficult and worrying diagnoses were the great beneficiaries of these 
policies. This Committee has advanced reauthorizations of the program 
every 5 years since 1992, including most recently in 2022, to help 
ensure that critical new, safe, and effective medicines reach American 
patients as quickly as possible.

    Moreover, when the country has confronted challenges in healthcare, 
it has repeatedly looked for ways to spur private sector research, 
development, investment, and innovation. For example, when faced with 
concerns that diseases affecting smaller patient populations were not 
receiving sufficient attention in medical research, Congress enacted 
the Orphan Drug Act, which provided incentives such as market 
exclusivity and reduced taxes to spur investment in research and 
development. According to the National Organization for Rare Diseases, 
since the passage of the law, more than 7,000 rare diseases have been 
identified and more than 1,100 orphan indications for treatments have 
obtained FDA approval. Similarly, when families and pediatricians 
identified a need for more pediatric research, this Committee advanced 
the Best Pharmaceuticals for Children Act, which created an incentive 
of additional marketing exclusivity to innovators that voluntarily 
complete pediatric clinical studies. When Congress found that federally 
funded research grants were producing promising early stage research, 
but this research was not being developed into products that benefited 
the public, Congress enacted the Bayh-Dole Act, creating a path for 
private sector pharmaceutical companies to make the significant 
investments required to transform this early stage research into new 
medicines with the knowledge that privately developed intellectual 
property would be protected.

    More recently, when the Nation and the world faced the threat of a 
global pandemic, Congress's actions supported the development of 
multiple Covid-19 vaccines in an unprecedented timeframe. It is no 
coincidence that the three leading vaccines developed most swiftly--
Pfizer, Moderna, and Johnson & Johnson--were ultimately developed by 
U.S. companies. That result would not have been possible if the United 
States had made different policy choices along the way that stifled 
biopharmaceutical companies' investments in researching and developing 
innovative treatments and cures.

    Against this backdrop, the country again faces policy choices, 
particularly in light of the Inflation Reduction Act. Unfortunately, 
that statute diverges from the decades of U.S. policies that helped 
create the robust biopharmaceutical industry that the Nation and its 
patients have come to expect. Instead of adhering to those principles 
and ensuring that companies that invest and succeed in discovering and 
developing innovative new treatments that benefit patients receive 
appropriate and time-limited protections for their innovations, the IRA 
forces Johnson & Johnson and other manufacturers to provide innovative, 
patent-protected inventions to the government on pricing terms that, by 
law, must be significantly below market-based prices. As a result, the 
IRA's pricing provisions will constrain medical innovation, limit 
patient access and choice, and negatively affect the overall quality of 
patient care. For that reason, last summer, Johnson & Johnson filed a 
lawsuit challenging the constitutionality of the statute, as did every 
other manufacturer with a drug subject to the IRA's pricing provisions. 
We recognize that not everyone agrees with our decision to challenge 
the law. That is their right, just as it is our right to challenge in 
court a law that we believe violates the Constitution, upends decades 
of U.S. policies that have made the United States the center of medical 
innovation, and will inflict long-lasting damage to the American people 
by discouraging investment in future innovations.

    The unique strengths of the U.S. biopharmaceutical industry, driven 
by decades of U.S. policies specifically designed to foster the growth 
of that industry in order to support patients, are also the reason that 
comparisons between U.S. drug prices and prices abroad are particularly 
inapt. The United States is unique in the world in the policy choices 
it has made to spur innovation and invention. Although it is true that 
there are certain disadvantages associated with these policy choices, 
including that the United States pays a disproportionate share of the 
costs of such innovation, the upsides far outweigh the downsides.

    Americans access new medicines years earlier than other nations, 
including other wealthy nations, and sometimes have access to medicines 
that are never available at all in other countries. One study found 
that patients in Europe wait 2 years longer, on average, for new cancer 
treatments than patients in the United States. Fully 85 percent of new 
medicines are available in the United States, more than any other 
country. New medicines launch first and fastest, on average, in the 
United States compared to other G20 countries. Where Germany, France, 
and the United Kingdom, on average, face delays between 11 and 20 
months to access new medicines, new drugs are available in the United 
States within 4 months of global launch, on average.

    Finally, much of the debate about drug pricing outside the United 
States uses deceptively selected figures that do not reflect the true 
nature of drug pricing in the United States and abroad. For example, 
some critics ignore that about 90 percent of prescriptions in the 
United States are filled with generic drugs and biosimilars that are 
often cheaper in the United States than abroad. Lower cost generic 
drugs and biosimilars are enabled by the research and development of 
innovative drugs, and as a result of this framework, the United States 
spends roughly the same share of healthcare spending on medicines as 
other countries, on average. Additionally, some critics compare U.S. 
list prices of drugs--which do not reflect the discounts and rebates 
provided to middlemen--to the prices charged abroad.

    Johnson & Johnson supports solutions to address affordability and 
access to our innovative therapies. Imposing arbitrary price 
constraints on U.S. drug manufacturers, however, will harm innovation 
and deprive American patients of life-saving and life-extending 
therapies.

    On behalf of the dedicated Johnson & Johnson employees around the 
world who work tirelessly to bring innovative medicines to patients in 
need, thank you for the opportunity to engage in today's discussion. I 
look forward to your questions and comments.
                                 ______
                                 
    The Chair. Thank you very much, Mr. Duato. Our next witness 
will be Robert Davis, Chairman and CEO of Merck.

    Mr. Davis has served as Merck's Chairman since December 
2022 and CEO since 2021. Thank you very much, Mr. Davis, for 
being here.

  STATEMENT OF ROBERT DAVIS, CHIEF EXECUTIVE OFFICER, MERCK, 
                           RAHWAY, NJ

    Mr. Davis. Chairman Sanders, Ranking Member Cassidy, and 
Members of the Committee, thank you for the opportunity to be 
here with you today.

    As the CEO of Merck, I am here to offer concrete policy 
suggestions to address the barriers American patients may 
encounter as they attempt to access our medicines and the 
current pricing system, while also ensuring Merck may discover 
and develop the next generation of lifesaving medicines and 
vaccines.

    Based in Rockaway, New Jersey, our company is one of the 
world's most advanced, research intensive biopharmaceutical 
companies--an organization at the forefront of providing 
innovative health solutions that advance the prevention and 
treatment of disease in people and animals.

    I have worked in the health care industry for the entirety 
of my 34 year career. I joined Merck 10 years ago in large 
measure because the company was on the precipice of its first 
approval for KEYTRUDA, a revolutionary oncology treatment.

    At the time, people close to me were battling cancer, and 
unfortunately, they were not able to benefit from this amazing 
discovery. Following that first approval, Merck has 
demonstrated the efficacy of KEYTRUDA in 39 indications and 
reached nearly 2 million patients, with many of the most 
widespread cancers afflicting Americans.

    The impact of KEYTRUDA and other recent advances is 
difficult to overstate. With a recent American Cancer Society 
report finding that cancer mortality in the United States has 
fallen 33 percent from 1991 to 2021, representing an estimated 
4 million Americans whose deaths have been averted, and our 
work continues as we advanced KEYTRUDA into even more tumor 
types and earlier stages of cancer.

    Remarkable progress like this does not come cheaply. For 
KEYTRUDA alone, between 2011 and 2023, Merck has invested $46 
billion in development, and we expect to invest another $18 
billion into the 2030's.

    Oncology is just one of Merck's many areas of discovery. 
Right now, we have nearly 20,000 researchers seeking 
breakthrough treatments for immune disorders, infectious 
diseases, Alzheimer's, and other ailments threatening the 
health of millions of people.

    To advance this critical work, we have invested more than 
$159 billion in R&D since 2010, including $30 billion in 2023 
alone, and have invested more than $10 billion in capital in 
the form of both investments in manufacturing and R&D over the 
last 5 years in the United States, creating more jobs for 
Americans.

    We do not hesitate to make these investments because they 
are necessary to further Merck's mission to serve patients. At 
the same time, many Americans are struggling to afford health 
care, including prescription medicines, and we are eager to 
find solutions to these access and affordability challenges.

    That is why we supported changes to the Medicare Part D 
program to create an out-of-pocket cap that allow beneficiaries 
to pay their cost over time. We have also publicly disclosed 
our U.S. pricing data, including the average rebates and 
discounts we provide.

    In addition, we offer coupons and support a patient 
assistance program for those who cannot afford the medications 
they need. In the past 5 years, this program has helped nearly 
800,000 patients to obtain Merck products free of charge, with 
an estimated value of $7.8 billion.

    But the reality is that Merck's efforts alone are far from 
sufficient. They do not and cannot address the underlying 
systemic and structural issues underpinning our system. As more 
power and control has been concentrated into the ever smaller 
number of vertically consolidated players, their negotiating 
strength has increased dramatically.

    In contracting with them, Merck continues to experience 
increasing pressure to provide even larger discounts, and the 
gap between list and net price continues to grow. And patients 
are not benefiting from the steep discounts we provide.

    These problems could be addressed if other actors' revenue 
streams were de-linked from list prices, thereby removing 
incentives for the system to favor high list prices. This would 
also ensure that less value in the system flows to these 
middlemen who do not create these medicines, who do not 
discover, or develop, or manufacture them.

    In addition, the substantial savings provided by Merck and 
other manufacturers should be required to be passed through to 
patients to lower their out-of-pocket costs. We firmly believe 
that reforms like these will create a drug pricing system that 
incentivizes the discovery of new and important medicines, 
while at the same time ensuring patients can afford those 
lifesaving medicines and innovations.

    Future treatment breakthroughs hinge on what we do now. We 
must hold on to a U.S. pharmaceutical market that is free, 
competitive, and predictable. One that encourages and rewards 
investment, one that drives the American economy and creates 
jobs, and one that continues to deliver innovation and new 
treatment discoveries.

    I am here today to pledge our support and cooperation in 
these efforts. Thank you for your time and your consideration 
of these important perspectives.

    [The prepared statement of Mr. Davis follows.]

                   prepared statement of robert davis
    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee, thank you for the opportunity to be here with you today.

    As the CEO of Merck, I am here to share the steps we are taking to 
ensure that American patients can afford our medicines, explain the 
barriers to our efforts that we encounter in the current pricing and 
access system, and offer concrete policy suggestions to both address 
these barriers and ensure our Country continues to have the world's 
best climate for pharmaceutical innovation, so that Merck may discover 
and develop our next generation of lifesaving medicines and vaccines.

    On behalf of everyone at Merck, I want to thank you for your 
interest in working to ensure that safe and effective medicines are 
broadly accessible to all Americans who need them. As people who go to 
work each day to help protect and improve the health of others, my 
Merck colleagues and I share your desire to make today's medicines more 
widely available--even as we work to discover tomorrow's best 
treatments.

    At Merck, our mission is to use the power of leading-edge science 
to save and improve lives around the world. We develop and bring 
forward breakthrough medicines and vaccines and then make those 
treatments available to patients in the United States and worldwide. 
Based in Rahway, New Jersey, our company is one of the world's most 
advanced research-intensive biopharmaceutical companies, an 
organization at the forefront of providing innovative health solutions 
that advance the prevention and treatment of disease in people and 
animals.

    With a focus on scientific discovery, our company exists to help 
solve the world's toughest medical challenges. Indeed, we have a long 
history of taking on urgent health needs, stretching back more than 130 
years to Merck's founding in 1891. Over the decades, Merck has 
developed essential childhood vaccines; introduced the first protease 
inhibitor, which helped transform AIDS from a death sentence to a 
chronic disease; and developed the first statin, markedly reducing the 
negative health impacts of high cholesterol.
 Merck's groundbreaking work on the treatment and prevention of cancer
    Today, our journey of discovery continues. I have worked in the 
health care industry for the entirety of my 34-year career. I joined 
Merck 10 years ago in large measure because the company was on the 
precipice of its first approval for Keytruda, a novel programmed death 
receptor-1 (PD-1) inhibitor that had shown effectiveness in preventing 
cancer cells from suppressing the immune system. At the time, people 
close to me were battling cancer, and, unfortunately, they did not live 
long enough to benefit from this amazing discovery.

    Following that first approval, Merck has demonstrated the efficacy 
of Keytruda in 39 indications, in 17 tumor types and 2 tumor-agnostic 
indications, and reached nearly 2 million patients battling many of the 
most widespread cancers afflicting Americans: non-small cell lung 
cancer, melanoma, head and neck cancer, and renal cell carcinoma. The 
impact of Keytruda and other recent treatment advances is difficult to 
overstate, with a recent American Cancer Society report finding that 
cancer mortality in the United States has fallen 33 percent from 1991 
to 2021, representing an estimated 4 million Americans whose deaths 
have been averted. \1\ And our work continues, as we advance Keytruda 
into even more tumor types and earlier stages of cancer.
---------------------------------------------------------------------------
    \1\  Siegel RL, Giaquinto AN, Jemal A. Cancer statistics, 2024. CA: 
A Cancer J Clin. https://doi.org/10.3322/caac.21820. Published Jan. 17, 
2024. Accessed Feb. 3, 2024.

    Merck's breakthrough contributions in vaccine development have also 
played a critical role in the prevention of cancer. Our product 
Gardasil is the first-ever vaccine to guard against the human 
papillomavirus (HPV) that is the leading cause of nearly all cases of 
cervical cancer, which is the fourth most common cancer among women 
globally. A study of real world evidence published in the New England 
Journal of Medicine looking at Swedish girls and women between 10 and 
30 years of age found a substantially reduced risk of invasive cervical 
cancer among those who had been fully vaccinated with Gardasil. \2\ The 
American Cancer Society report found similar transformative public 
health outcomes in the United States, with a 65 percent decrease in 
cervical cancer rates in women in their early 20's, following the 
widespread adoption of HPV vaccines in the United States. \3\
---------------------------------------------------------------------------
    \2\  Lei J, Ploner A, Elfstrom E, et al. HPV Vaccination and the 
Risk of Invasive Cervical Cancer. N Engl J Med 2020; 383:1340-1348. 
DOI: 10.1056/NENMoa1917338.
    \3\  Siegel RL, Miller KD, Wagle NS, et al. Cancer statistics, 
2023. CA: A Cancer J Clin. https://doi.org/10.3322/caac.21763. 
Published Jan. 12, 2023. Accessed Feb. 3, 2024.

    These remarkable advances, and the others we are making in our many 
other oncology programs, have not come cheaply. Taking just Keytruda as 
an example, between 2011, when our focused Keytruda research program 
began, and 2023, Merck has invested $30 billion in our own internal 
clinical development efforts, $14 billion in research collaborations 
and acquisitions to further the study of Keytruda with other compounds, 
and $2 billion in capital expenditures to scale up our processes and 
facilities to manufacture the drug in large quantities. And we expect 
to invest another $18 billion in Keytruda clinical studies into the 
2030's. This is likely now the largest and costliest pharmaceutical 
research and development program ever undertaken. Over 2,200 clinical 
trials have been publicly disclosed to study Keytruda alone and in 
conjunction with other compounds in pursuit of new lifesaving and life-
extending applications for this revolutionary medicine.
 Merck's substantial investments across our research and manufacturing 
                                efforts
    Oncology is just one of Merck's many intense areas of discovery and 
development. Right now, we have nearly 20,000 researchers seeking 
breakthrough treatments for immune disorders, infectious diseases, 
Alzheimer's, cardiometabolic disease, and other ailments threatening 
the health of millions of people. To advance their critical work, we 
have invested more than $159 billion in research and development since 
2010, including $30 billion in 2023 alone.

    In support of these and other efforts, we are also making 
infrastructure investments, many of which are here in the United 
States. In fact, over the past 5 years, Merck has made capital 
investments across the United States totaling more than $10 billion, 
increasing our domestic capacity for R&D and manufacturing while 
creating hundreds of new jobs in our U.S. operations. For example, 
we've invested $3.6 billion in our Pennsylvania facilities since 2018, 
with plans to invest another $700 million this year. And in the past 5 
years, we have invested $1.4 billion in our manufacturing facility in 
Elkton, Virginia--about 2 hours from here--to increase domestic 
production capacity for our Gardasil HPV vaccine.

    We do not hesitate to make these investments because they are 
necessary to further Merck's mission: to serve patients--and not just 
the patients of today, but those who will need the new treatments and 
cures we have yet to discover. But we know that many Americans are 
struggling to afford health care, including prescription medicines, 
despite the best efforts of leaders in government, industry, academia, 
and the nonprofit community. Even though medicine costs are growing at 
the slowest rate in years, thanks in part to market competition, 
patients are too often being asked to pay more out-of-pocket for their 
medicines. And for some, that burden is simply too much to bear. As has 
often been observed, a lifesaving drug is not effective if the patient 
who needs that drug cannot afford it.

    Thus, I am here today to share our perspective about the structural 
elements in our Country's complex system of pricing, distribution, and 
insurance that have impeded Merck's efforts to bring our medicines to 
the American patients who need them. And I would humbly ask for your 
help and partnership in addressing these obstacles.
          Merck's efforts to address patient access challenges
    Merck has worked hard to help patients overcome access and 
affordability challenges. That work continues. We believe our company 
and our industry have a duty to act responsibly in our pricing 
practices and contribute to affordability solutions. That is why we 
supported changes to the Medicare Part D program to create an out-of-
pocket cap and allow beneficiaries to pay their costs over time. And we 
have a history and heritage of responsible pricing. We are also 
committed to transparency in our pricing practices. Merck publicly 
discloses U.S. pricing data, including the average rebates and 
discounts we provide across our U.S. product portfolio to payers such 
as insurance companies, pharmacy benefit managers (PBMs), and the 
government.

    We also have programs designed to help patients who cannot afford 
their medicines. To reduce patient out-of-pocket costs at the pharmacy 
counter, we provide coupons and other co-pay assistance for our 
products. Last year the value of this aid totaled $130 million. And 
through our support of a separate charitable organization that 
administers our patient assistance program, we provide free medicines 
to Americans of limited means who do not have insurance coverage or 
have some other hardship and cannot otherwise obtain their prescribed 
medications. In the past 5 years, this program has helped nearly 
800,000 patients to obtain Merck medicines or vaccines free of charge, 
with an estimated value of $7.8 billion.
 Structural challenges and Merck's suggested improvements for the U.S. 
                                 system
    But the reality is that Merck's efforts alone are far from 
sufficient. They do not and cannot address the underlying systemic and 
structural issues underpinning our system, which do not allow patients 
to benefit from the substantial discounts that manufacturers are 
providing on the medications they sell.

    As more power and control has been consolidated into an ever-
smaller number of vertically consolidated players, their negotiating 
strength has increased dramatically. In Merck's efforts to contract 
with them, we continue to experience increasing pressure to provide 
even larger discounts, and the gap between list and net price continues 
to grow. But patients are not benefiting from the discounts being 
negotiated by PBMs. Instead, their insurers often base their cost-
sharing on the list price, even when PBMs and insurance companies are 
paying a heavily discounted fraction of that price.

    Our diabetes treatment Januvia is a great example of this 
phenomenon. Today, the weighted average net price for Januvia 
represents a 90 percent discount off its list price; with the price of 
Januvia being 33 percent lower than its price when we launched it in 
2006. This is, in part, a result of significant discounts and rebates 
in a highly competitive market over the years. But these discounts and 
rebates are not being passed along to patients in a way that reduces 
their out-of-pocket costs.

    Simply reducing our list prices is not a solution because patients 
often experience reduced access to their drugs when they are either not 
included on or are dropped from PBM and plan formularies. For example, 
in 2016, Merck introduced our Hepatitis C medicine, Zepatier, at a list 
price 42 percent below that of the standard of care at the time. Yet, 
we had difficulty getting plans and PBMs to add the product to their 
formularies. The situation did not improve in July 2018, when we 
further reduced the list price by 60 percent and found no increased 
uptake. More recent efforts by other manufacturers to offer products 
with lower lists prices have resulted in similarly poor PBM and plan 
coverage compared to their high list price competitors. Thus, lower 
list prices can result in reduced access for patients.

    Rather than passing the steep savings they obtain through to 
patients to lower their out-of-pocket costs at the pharmacy counter, we 
understand that insurance plans retain them to cover overhead costs and 
reduce insurance premiums for all their insureds. When they do this, 
rather than reducing medicine costs for those that need them, it means 
sick people end up effectively subsidizing healthy people. This dynamic 
is contrary to the basic idea of insurance, which should use the 
premiums of healthy people to help fund the care of those who are 
struggling. This is yet another way in which our current system is 
fundamentally flawed.

    From 2010 through 2023, Merck's annual average net price increase 
across our U.S. portfolio has been in the low-to mid-single digits. In 
2017, our average net price actually declined nearly 2 percent. In 
2022, the average discount for our medicines and vaccines was 40 
percent off the list price. This money is flowing in part to middlemen, 
not to the innovative manufacturers that would reinvest that money to 
find tomorrow's cures. And, by and large, patients did not receive the 
financial benefits of these substantial discounts. Instead, their out-
of-pocket costs continue to rise.

    Though the issues I have described are complex and impossible for 
one company--or even the pharmaceutical industry collectively--to 
address, legislative solutions may not be difficult to implement. If 
Congress were to require that other actors' revenue streams be delinked 
from the list price of a medicine, it would remove incentives for the 
system to favor high list prices. This would also ensure that less of 
the value in the system flows to these middlemen, who did not discover, 
develop, or produce the medicines for which they contract.

    Another critically important fix is to require that the substantial 
savings provided by Merck and other manufacturers be passed through to 
patients to lower their out-of-pocket costs at the pharmacy counter, 
rather than allowing insurance plans to retain them. Reforms like these 
are necessary and will help provide long-term solutions for patients' 
out-of-pocket costs and ensure they can take advantage of the full 
breadth of innovative medicines available to keep them healthy and 
alleviate their suffering.

    We firmly believe that it is possible to have a drug pricing system 
that incentivizes the discovery of new and important medicines and at 
the same time ensures patients can afford those lifesaving innovations. 
But reform of our current system is desperately needed to ensure that 
patients in the United States continue to have the greatest access, to 
the best medicines, faster than anywhere else in the world. I would 
encourage you to support legislative or administrative remedies that 
would address these systemic problems.
        Fostering innovation alongside patient access solutions
    These are exciting times in the biopharmaceutical industry and the 
wider world of health care. Decades of research investment are 
producing discoveries of increasing promise and impact. Life-
threatening diseases like cancer are being conquered. Patients are 
living longer, healthier lives, even with serious conditions.

    But let me be very clear: today's investments drive tomorrow's 
discoveries of breakthrough treatments. If we disrupt an ecosystem that 
incentivizes robust investments in research, we put at risk not only 
the foundation of American leadership in pharmaceutical development but 
also the health and lives of countless people who would have benefited 
from future discoveries.

    We do not have to go down that path. In fact, we have examples of 
efforts that are already working. For instance, the Medicare Part D 
program facilitates actual negotiation, effectively holding down costs 
and broadening patient access without threatening to injure or destroy 
the innovation ecosystem that fosters future treatment breakthroughs.

    The most important positive contributions Merck makes in the 
world--impacting economies, health care systems, and the well-being of 
countless patients and their families--are pharmaceutical innovations 
that save and improve lives. Achieving such innovations requires us to 
invest billions of dollars a year in the often unsung work of thousands 
of brilliant researchers sitting at lab benches and striving, with all 
they have, to create transformative breakthroughs.

    The odds are stacked against these scientists, but they keep 
trying, and we keep investing. Even with all the advantages of modern 
technology, discoveries are few and far between. And, even among those 
discoveries that spark clinical trials, nine out of ten compounds will 
fail.

    Of course, our Country needs to contain health care costs and 
reduce out-of-pocket costs to patients. And Merck is committed to being 
part of the solution. But we must pursue greater affordability and 
accessibility for medicines--and health care more broadly--in ways that 
preserve and strengthen our innovation ecosystem across academia, 
smaller biotech firms, larger pharmaceutical companies, government 
agencies, insurers, providers, and other stakeholders.

    Ultimately, I believe we need to work together across these 
stakeholders to overcome the access and affordability challenges faced 
by today's patients without damaging our ability to innovate and 
discover new treatments for tomorrow's patients. Future treatment 
breakthroughs hinge on what we do now. We must hold onto a U.S. 
pharmaceutical market that is free, competitive, and predictable, one 
that encourages and rewards investment, one that drives the American 
economy and creates jobs, and one that continues to deliver innovation 
and new treatment discoveries.

    I am here today to pledge our support and cooperation in this 
effort and other measures to help Americans live longer, healthier 
lives with improved access to effective and affordable drug treatments, 
and in ways that protect incentives for future innovation.

    Thank you for your time and your consideration of these 
perspectives, and thank you again for the opportunity to share them 
with you today.
                                 ______
                                 
                  [summary statement of robert davis]
                                Summary
    Merck's mission is to use the power of leading-edge science to save 
and improve lives around the world.
    Merck conducts groundbreaking work to treat and prevent cancer.
    Keytruda treats cancer in 39 indications, including 17 tumor types 
and 2 tumor-agnostic indications.

          Since 2011, Merck has invested: $30 billion in 
        internal clinical development; $14 billion in research 
        collaborations and acquisitions; $2 billion in capital 
        expenditures for Keytruda alone.

          We expect to invest another $18 billion in clinical 
        studies into the 2030's.

    Merck has made substantial investments across our research and 
                         manufacturing efforts.
    Merck is making infrastructure investments in the United States. In 
the past 5 years we invested:

          $3.6 billion in Pennsylvania, with an additional $700 
        million expected this year.

          $1.4 billion in Elkton, Virginia.

          More than $10 billion total across the United States, 
        creating hundreds of new jobs.
           Merck works to address patient access challenges.
    We have a duty to act responsibly in pricing practices and 
contribute to affordability solutions. We:

          Supported changes to the Medicare Part D program to 
        create an out-of-pocket cap and to allow beneficiaries to pay 
        their costs over time.

          Publicly disclose U.S. pricing data, including the 
        average rebates and discounts we provide.

          Provide coupons and other co-pay assistance for our 
        products, totaling $130 million last year.

          Created a patient assistance program providing nearly 
        800,000 people with an estimated value of $7.8 billion.

          Structural challenges increase prices for patients.
    The savings Merck provides to PBMs and insurers are not passed on 
to patients.

          Payors retain the savings to cover overhead and 
        reduce insurance premiums for their insured.

          Sick people end up effectively subsidizing the 
        healthy, contrary to the basic idea of insurance.

          When list prices are reduced, medicines are dropped 
        from formularies, limiting patient access.

                Merck has a history of cost reductions.

          From 2010 through 2023, Merck's annual average net 
        price increase across our U.S. portfolio has been in the low-to 
        mid-single digits.

          In 2017, our average net price actually declined 
        nearly 2 percent.

          In 2022, the average discount for our medicines and 
        vaccines was 40 percent off the list price.

          Unfortunately, middlemen absorbed some of the 
        benefits from this price reduction--benefits that should have 
        gone to patients.

       Merck urges Congress to consider the following solutions:

          Require that other actors' revenue streams be 
        delinked from the list price of a medicine, which would reduce 
        incentives for the system to favor high list prices.

          Require that substantial savings provided by Merck 
        and other manufactures be passed through to patients to lower 
        their out-of-pocket costs at the pharmacy counter, rather than 
        allowing insurance plans to retain them.
                                 ______
                                 
    The Chair. Thank you very much, Mr. Davis. Our third 
witness will be Chris Boerner, CEO, Bristol-Myers Squibb. Dr. 
Boerner has served as CEO of Bristol-Myers Squibb since 
November 2023. Thanks for being here, Mr. Boerner.

 STATEMENT OF CHRIS BOERNER, CHIEF EXECUTIVE OFFICER, BRISTOL 
                  MYERS SQUIBB, PRINCETON, NJ

    Mr. Boerner. Chairman Sanders, Ranking Member Cassidy, and 
Members of the Committee, thank you for having me here today. I 
am proud to be representing Bristol-Myers Squibb, an American 
company that is committed to transforming patients' lives 
through science.

    I have spent more than 20 years in this industry, the 
majority in smaller, science driven biotechnology companies. I 
joined BMS because we have a similar focus on driving leading 
edge scientific innovation, and our scale allows us to bring 
more medicines to more patients faster.

    To help illustrate the type of work that we have been doing 
for more than 150 years at BMS, let me provide two 
illustrations of how our innovative medicines have helped 
patients and provided tangible benefits to society. Our work in 
HIV/AIDS transformed this disease from a death sentence into a 
chronic condition.

    Similarly, our pioneering immuno-oncology treatments, 
OPDIVO and YERVOY, harness the body's immune system to fight 
cancer and have contributed significantly to improved outcomes 
across a number of tumors, including metastatic melanoma, where 
the combination of these two medicines has changed the median 
life expectancy from less than 9 months to over 6 years. I am 
proud that our record of innovation continues today.

    We have invested more than $65 billion in research and 
development over the past decade. This has resulted in truly 
novel and transformational medicines, like Camzyos in 
cardiovascular disease, our cell therapy platform in cancer, 
and we are working toward bringing to patients the first 
medicine for the treatment of schizophrenia in 30 years.

    These medicines are but a few examples of the innovation 
that results from an American health care system that not only 
accounts for the majority of new medicines launched each year, 
but also one that delivers those medicines to U.S. patients 
faster than anywhere else in the world. This isn't by chance.

    The United States has built a health care system that 
prioritizes patient and physician choice, as well as the broad 
and rapid availability of cutting edge medicines. This is in 
stark contrast to many systems outside of the United States, 
which while they may deliver lower prices, carry an often 
overlooked tradeoff, that patients often wait longer for new 
medicines that are sometimes never approved or reimbursed.

    For example, Canadian patients have access to approximately 
half of the medicines available in the United States, and 
patients in other countries face a similar reality. Despite its 
benefits, we know our American system is far from perfect.

    Patients bear the brunt of a complex U.S. system that 
results in increasing health care costs and a lack of 
affordability. We have to make the system work better for them. 
After all, innovation that does not make it to patients is no 
innovation at all.

    While prescription medicines account for a relatively small 
portion of overall health care spending, we believe we have an 
important role to play in prioritizing the development of 
medicines that will bring savings to the health care system, 
and as an industry, we should set a higher bar for doing just 
that.

    Similarly, we have a role to play in addressing 
affordability and stand ready to partner with Congress and 
others to address this issue for patients in a holistic manner. 
But in developing those solutions, we should not abandon our 
system for one that denies U.S. patients the broad and rapid 
access to vital medicines that they appreciate today.

    We support policies that lower patient out-of-pocket costs 
without ultimately harming innovation. The need to strike this 
balance should not be abstract. I expect many of us in this 
room have lost a loved one to cancer or another devastating 
disease.

    In my case, it was one of my best friends and it happened 
as he awaited a medicine that I believe could have saved his 
life. This is an almost daily reminder to me that making 
patients wait for weeks, months, or years can be the difference 
between life and death.

    Thank you again for having me here today. On behalf of BMS 
and the more than 30,000 employees who share my passion for 
delivering new medicines for patients, I look forward to 
answering your questions.

    [The prepared statement of Mr. Boerner follows.]

                  prepared statement of chris boerner
    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee, thank you for the opportunity to testify today on behalf of 
Bristol Myers Squibb (``BMS''). I appreciate the chance to speak about 
BMS's groundbreaking work and efforts to enhance access to our 
innovative medicines for patients. I am proud to testify on behalf of a 
company that is committed to transforming patients' lives through 
science.

    At BMS, our mission is to discover, develop, and deliver medicines 
that help patients prevail over serious diseases. Our record of 
innovation has changed the outlook for countless patients. 
Groundbreaking BMS therapies helped transform HIV/AIDS from a death 
sentence into a chronic condition. Today, our medicines allow people 
with heart disease, cancer, diabetes, and autoimmune disorders to live 
longer and healthier lives.

    We are not content, however, to rest on our more than 150-year 
legacy of scientific innovation and are dedicated to developing the 
next generation of breakthroughs. We are pushing the boundaries of 
science to treat debilitating diseases, such as cancer, Alzheimer's, 
and multiple sclerosis, where unmet needs remain. As we look ahead, we 
are focused on introducing novel treatments in areas we know best: 
oncology, hematology, immunology, cardiovascular disease, and 
neuroscience.

    We are also focused on increasing access to our medicines. Patients 
in the United States get new medicines sooner than any other country in 
the world. That's a significant benefit. But we recognize that patients 
must be able to afford our medicines to achieve the clinical outcomes 
those medicines bring. BMS has long worked to enhance access to our 
innovative medicines for patients, while maintaining an environment 
that enables investments in cutting-edge science to deliver life-
changing treatments, and we remain committed to working with Congress 
to do so.

    Our commitment reaches beyond our medicines. BMS supports programs, 
initiatives, and organizations that improve health, broaden research 
opportunities, bolster STEM education, and bring essential human 
services to our communities. We also promote health equity and strive 
to increase access to life-saving medicines for populations 
disproportionately affected by serious diseases. From 2020 to 2023, BMS 
provided more than $118 million in grants and donations to non-profit 
organizations and independent medical educational partners for more 
than 750 health equity projects.

    Having spent more than two decades in the biopharmaceutical 
industry, I joined BMS 9 years ago because of its dedication to 
improving the lives of patients. I became CEO in November 2023 and am 
honored to be leading this great company through its next chapter.

    During my tenure, I have developed a deep admiration and respect 
for the over 30,000 dedicated BMS employees in the United States and 
around the world who harness their intellect, expertise, hard work, and 
passion on behalf of the patients we serve. From our scientists in the 
lab, to our manufacturing teams in our facilities, to our patient 
outreach teams in the field, I am proud to work alongside my BMS 
colleagues, who are dedicated to creating and delivering life-changing 
medicines to patients in need.
               BMS's Emphasis on Expanding Patient Access
    The United States has built a healthcare system that prioritizes 
the important role of patient choice and broad, rapid availability of 
cutting-edge medicines. Patients and their physicians in this country 
have access to more unique medicines than in any other country. This 
access is critically important because different medicines can have 
different side effects or safety profiles, different mechanisms of 
action, and different efficacies at stages of disease, such that the 
leading or most obvious therapy may not be the most appropriate. By 
providing physicians in the United States with more options, we give 
them the ability to choose the best treatment for their patients and 
offer potentially better outcomes.

    Despite the many benefits of the United States system, we 
acknowledge that patient affordability is a significant issue. It is 
also one of the least understood. The United States has a unique and 
complex healthcare landscape, replete with conflicting pressures and 
perverse incentives driving the system. Many of these factors exert 
strong influence on patient access and the price patients actually pay 
for their medicines.

    Manufacturers give significant rebates, discounts, and payments to 
intermediaries between us and patients in the pharmaceutical supply 
chain. BMS has provided these intermediaries with over $96 billion 
dollars of rebates, price concessions, and other discounts and fees 
over the last 5 years across our portfolio. But patients are not seeing 
the financial benefits of the sizable discounts because intermediaries 
are not required to pass on discounts to patients when they fill their 
prescriptions at the pharmacy counter.

    Additionally, the United States healthcare system has not yet 
evolved to account for the economic benefits of highly specialized 
innovative medicines that contribute substantial value to patients and 
the system. For example, a patient on the right medicine may avoid 
serious or life-threatening medical interventions. This in turn also 
provides cost savings to the healthcare system by reducing expensive 
and high-burden hospital stays and conserving capacity.

    We share your concerns about what patients pay for prescription 
medications, and we appreciate your work to examine this key public 
policy issue. It is our collective--and critical---- responsibility to 
ensure that patients receive the medicines they need. BMS invests 
billions in patient support programs with that objective in mind. 
Although patient support programs are an imperfect solution to these 
challenges, I am proud of our efforts to help patients access our 
medicines. Over the past 5 years, we have spent more than $2.5 billion 
on copayment assistance for commercially insured patients, helping 
patients receive medicines such as Eliquis, which treats and prevents 
blood clots. We broadened our existing patient support programs to help 
eligible patients in the United States without health insurance due to 
pandemic-related job loss.

    We also contribute to organizations that help support patients in 
need. For instance, over the last 5 years, BMS donated over $12 billion 
in free medicines to the Bristol Myers Squibb Patient Assistance 
Foundation. The Foundation is an independent organization that promotes 
health equity and improved health outcomes for populations 
disproportionately affected by serious diseases. It supports community-
based programs that promote cancer awareness, screening, and care among 
high-risk populations. In addition, BMS made cash donations to 
independent charitable organizations to support patients in the United 
States.

    BMS also supports comprehensive efforts across the continuum of 
care, including projects to train community health workers and patient 
navigators to help underserved patients navigate the healthcare system. 
In March 2023, we announced $10 million in grants to be made that year 
to 17 United States organizations that address social determinants of 
health. These grants support organizations striving to improve health 
in the United States, including through healthcare access and literacy 
and by integrating social care and healthcare to reduce health 
disparities.
  BMS's Commitment to Bringing More Innovative Medicines to Patients 
                    Through Research and Development
    We are proud to have a promising pipeline of innovative medicines 
that will allow us to continue delivering cutting-edge treatments to 
patients. BMS is investing in leading scientific programs, including in 
our core areas of oncology, hematology, immunology, cardiovascular 
disease, and neuroscience. Over the past 10 years, BMS devoted over $65 
billion--more than 21 percent of our total revenue--to research and 
development (``R&D''). \1\ In 2022, we conducted more than 460 clinical 
trials.
---------------------------------------------------------------------------
    \1\  Based on non-GAAP calculations.

    In fact, our investment in R&D as a percentage of total revenue 
consistently ranks among the highest of any large company in any 
industry globally. In the 2023 EU Industrial Research and Development 
Investment Scoreboard, BMS ranked 15th for total R&D spending among all 
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companies worldwide.

    Our investment in R&D has resulted in vastly improved outcomes for 
patients. For example, BMS is a pioneer in the field of immuno-oncology 
through the development of three medicines: Yervoy, Opdivo, and 
Opdualag. Prior to the development and introduction of immuno-oncology 
treatments for metastatic melanoma, outcomes were generally quite poor, 
with a median life expectancy of only 6 to 9 months after diagnosis. 
Today, thanks to these therapies, survival rates have significantly 
improved among patients with metastatic melanoma. Long-term follow-up 
studies have demonstrated a median life expectancy of over 6 years with 
the combination of Opdivo and Yervoy.

    Our investment of over $65 billion in R&D over the past decade is 
fueling the next wave of new treatments for areas of high unmet need. 
Our R&D pipeline includes potential treatments across a range of 
platforms, including those that harness the frontiers of genomics to 
translate that knowledge into gene therapies, cell therapies, RNA 
oligonucleotides, and other novel modalities. With our CAR T cell 
therapies, for example, we can now target cancer with a type of 
immunotherapy that works with a patient's own immune system by 
reprogramming their T cells. With a single treatment, CAR T cell 
therapy has been effective at producing durable responses in patients 
where other treatment options stopped working. BMS is the only company 
with two cell therapies approved against two distinct targets, and we 
are pursuing opportunities to bring them to more patients who may 
benefit.

    Overall, we have more than 45 novel compounds in development, with 
more than 40 disease areas under study. We are conducting late-stage 
studies for medications to treat various solid tumors, multiple 
myeloma, Crohn's disease, lupus, and atrial fibrillation. And we are 
leveraging our expertise in protein homeostasis, immunology, and 
inflammation to tackle neurological and neuromuscular diseases with new 
approaches.

    Our R&D efforts are not limited to discovering new compounds. We 
are constantly researching how we can use existing products to provide 
additional benefits to more patients through new indications and 
formulations. We are currently running and partnering with other 
innovators in more than 15 late-stage studies involving existing 
products.

    Our commitment to innovation and to patients also includes 
establishing strategic partnerships with other biotechnology leaders 
and acquiring companies that benefit from our global scale and 
expertise to bring medicines to patients faster. We offer deep 
scientific leadership, resources, and abilities to invest in research 
and development programs and highly developed commercial, 
manufacturing, and supply chain operations. This global scale and range 
of expertise enables us to reach the greatest number of patients 
worldwide. Our recently announced plans to acquire RayzeBio and Karuna 
Therapeutics demonstrate this commitment. We are excited about the 
potential of Karuna's KarXT, a late-stage developmental medicine with a 
novel mechanism of action aimed at schizophrenia and other 
psychological disorders. If approved, KarXT would represent the first 
new pharmacological approach to treating schizophrenia in several 
decades.

    R&D is complex and resource-intensive, often lasting 14 years or 
more for a particular compound. Results are far from guaranteed. In 
fact, the majority of our R&D efforts do not result in a medicine that 
we can deliver to patients. For instance, last year we had to 
discontinue two late-stage clinical trials into which we had invested 
multiple years and many millions of dollars. One was a phase-three 
trial that evaluated one of our existing medicines, Opdualag, for 
treating colorectal cancer. We invested more than $80 million and 
devoted thousands of hours of employee time to this research, which 
ultimately failed. In another case, after more than 6 years of 
research, we had to end a study evaluating a combination of our 
medicines, Opdivo and Yervoy, for advanced treatment of renal cell 
carcinoma. We invested over $130 million in that study alone.

    Because we pursue a wide range of possibilities on the cutting edge 
of science, we know that some of our research will not culminate in new 
treatments. Failures are an inevitable part of the process by which we 
develop new treatments, and we learn from them along the way. Our 
successes allow us to try. Those successes are a critical engine in our 
ability to continue to invest in new medicines, allowing the United 
States to lead the world in bringing new treatments to patients.
           The Disadvantages of International Pricing Systems
    Rules and regulations regarding the pricing of medicines vary 
widely by country. Some countries, such as Canada, the U.K., Germany, 
France, and Japan, essentially allow the government to set 
pharmaceutical prices. In effect, governments in those countries make 
choices for patients--choices that often result in patients having 
access to fewer innovative medicines, and waiting much longer for new 
medicines as compared to patients in the United States. These delays 
can be attributed to a variety of factors, including waiting for the 
government to complete reimbursement assessments, challenges with 
subpopulation coverage, or a failure to appropriately value innovation.

    In Canada and most European Union countries, the government 
regulates the pricing of a new medicine at launch through some 
combination of clinical and economic assessments, price negotiations, 
and international reference pricing. Prices are often reevaluated and 
further controlled after a medication has been introduced. Patients pay 
a significant price for these pricing schemes in the form of delays to 
access. For example, only about 45 percent of new medicines available 
globally have been introduced in Canada--compared to 85 percent in the 
United States. In France, Italy, and Japan, this figure is below 55 
percent. The United States launched 94 percent of new cancer medicines 
from 2012 through 2021, while the same figure for the average OECD 
country was 49 percent. These figures are startling, reflecting 
dramatic differences in access to medicines around the world.

    Patients outside the United States also often face longer wait 
times and obstacles before getting the medicines they need. According 
to a report published last week by the United States Department of 
Health and Human Services, medicines launch in the United States an 
average of 1 year before they launch in other major OECD markets. Other 
studies found that on average, there is an 11-month delay from a 
medicine's first launch globally to its availability and reimbursement 
in Germany, a 17-month delay in Japan, a 27-month delay in the U.K., 
and a staggering 52-month delay in Canada. Patients with multiple 
myeloma in the U.K. waited 4 years after the United States launch for 
BMS's medicine, Revlimid--a medicine that significantly improves 
outcomes. Canadian patients did not gain access to Opdivo and Yervoy 
for melanoma until more than 3.5 years after patients in the United 
States. Patients in Spain, Japan, Denmark, Australia, and other 
countries are still waiting for access to Camzyos, the first new 
treatment in decades for obstructive hypertrophic cardiomyopathy, which 
was approved in the United States in 2022.

    By contrast, the United States is generally first in the world for 
launching new medicines, and patients usually benefit from access to 
new medicines within days of regulatory approval. The United States 
healthcare system has allowed Americans to have access to more new 
innovative medicines sooner than any other country.

    This access generally translates into better outcomes to save and 
extend lives. For example, while it is challenging to precisely 
quantify and compare across different countries the impact of delayed 
access to anticancer therapy on survival outcomes, there is broad 
agreement that prompt access to effective treatments is a fundamental 
necessity, and it yields positive outcomes on patients, healthcare 
systems, and society in general. These outcomes include: lower 
mortality and avoidable deaths; gains in quality of life for patients, 
family members, and caregivers; lower healthcare costs; and avoidance 
in loss of productive employment for patients and caregivers, 
ultimately lowering costs to the national economy.
                 BMS's Value-Focused Pricing Philosophy
    We believe the prices of our medicines should reflect their benefit 
to patients, healthcare providers, payers, and society--both at launch 
and in future years. Guided by this belief, we price our medicines 
based on three primary factors, including aligning to the value of 
scientific innovation, investment into research and development, and 
our ability to provide rapid and sustainable access for patients, among 
other considerations. That means we look at longevity gains, clinical 
outcomes, and quality of life, as well as economic impact and 
productivity gains generated by a healthy population with more options 
to treat illnesses. We also consider our ability to sustain our 
research and development investment and to work with payers to secure 
access, so patients can have coverage for our medicines when needed.

    Our product Eliquis, an oral medicine that inhibits a key blood-
clotting protein, provides a good example of our approach to pricing. 
Over the past few years, Eliquis has become the standard of care for 
decreasing blood clot formation in patients--it is prescribed millions 
of times each year, and is the most prescribed branded medicine in 
Medicare Part D. However, it ranked 540th in Medicare spending per 
patient in 2021. Eliquis can lower the risk of a stroke and prevent 
deep vein thrombosis and embolism, and it is commonly used to prevent 
blood clots following certain surgeries. Because Eliquis can help 
prevent very serious medical conditions that require hospitalization or 
other expensive medical treatments, numerous studies have demonstrated 
that Eliquis provides substantial savings to our healthcare system, 
such as reduced hospitalization and institutional costs. Without the 
benefits of Eliquis, many patients would have substantially worse 
medical outcomes, and the healthcare system would face dramatically 
higher costs. For every 100,000 patients, we estimate that Eliquis 
offers patients and healthcare systems a $4.9 billion consumer surplus 
over older, generic products. This value to patients and to the entire 
United States healthcare system is reflected in the price of this 
medicine.
                              Path Forward
    The United States healthcare system prioritizes patient choice and 
access in a way other healthcare systems do not, but it is far from 
perfect. The system is mired in complexities and incentives that 
frustrate our efforts to meet patients' medical needs. These hurdles 
range from complex rebates, to high copays and deductibles, to Federal 
rules that restrict our ability to assist patients in Federal 
healthcare programs. I welcome the opportunity to work with your 
Committee and others in Congress to resolve these issues in our 
healthcare system. Ensuring access to medicines involves more than just 
the companies that discover and develop them--it requires the active 
engagement of the entire ecosystem of governments, payers, healthcare 
providers, pharmacies, and hospitals. BMS supports policies that remove 
barriers and perverse incentives in the system and focus on patient 
out-of-pocket costs. We believe we can do this without harming 
innovation. BMS stands ready to work with Congress to address 
affordability and eliminate barriers in the system that fail to pass 
discounts and rebates to patients, but this cannot be done in a vacuum. 
The measures we support include: expanding value-based contracting for 
which there are regulatory impediments today; incentivizing competition 
and production of biosimilars and generics to ensure a steady supply in 
the United States; and passing rebates on to patients at the pharmacy 
counter to address the incentives in a complex system that drive up 
list prices.

    As BMS continues to strive to enhance patient access, we are also 
committed to ensuring that we have the resources to fund cutting-edge 
R&D and to attract the private capital needed to do so. We also believe 
that policymakers should adopt and defend policies that promote 
innovation. Government policy should encourage innovators to take big 
risks and invest substantial sums, by promising a return on those 
efforts for a reasonable period of time. Such policies are the reason 
that the United States is a leader globally in medical innovations and 
developing new therapies. At BMS, we are eager to continue driving 
these efforts.

    Again, I am proud to speak here today on behalf of BMS, where we 
believe patients in the United States should not be deprived of their 
choice to access the best, most recent technologies and advancements in 
medicine. I look forward to answering your questions about how we can 
meaningfully address healthcare costs and patient access.
                                 ______
                                 
    The Chair. Mr. Boerner, thank you very much. Before I begin 
the first round of questions, let me remind our witnesses that 
while the HELP Committee does not swear in our witnesses as a 
general rule, Federal law at 18 U.S. Code Section 1001 
prohibits knowingly and willingly making any fraudulent 
statement to the Senate regardless of whether a person is under 
oath.

    I would also say, in response to many of your testimonies, 
we are aware of the many important lifesaving drugs that your 
companies have produced, and that is extraordinarily important, 
I think, is all of those drugs mean nothing to anybody who 
cannot afford it, and that is what we are dealing with today, 
that millions and millions of our people cannot afford the 
outrageously high cost of prescription drugs in this country.

    Now, my time and the time of all of the Members is limited, 
so we are going to just--I am going to ask--so my time is 
limited, so I am going to start by asking all of you a number 
of questions and I would appreciate it if you could respond 
with a yes or no answer.

    It turns out that a dysfunctional and extraordinarily 
expensive healthcare system, hundreds of thousands of Americans 
have gone to GoFundMe in order to raise money to pay for their 
health care needs and for their prescription drugs.

    Let me ask Mr. Davis if I might, have you ever searched on 
GoFundMe for your cancer drug, KEYTRUDA?

    Mr. Davis. No, I have not.

    The Chair. Okay. We have, I and my staff have, and we have 
found over 500 stories of people trying to raise funds to pay 
for their cancer treatments.

    One of those stories is a woman named Rebecca, a school 
lunch lady from Nebraska with two kids who died of cancer after 
setting up a GoFundMe page because she could not afford to pay 
for KEYTRUDA.

    Rebecca had raised $4,000 on her GoFundMe page but said the 
cost of KEYTRUDA on a cancer treatment was $25,000 for an 
infusion every 3 weeks. Mr. Davis, and please yes or no, is it 
true that the list price of KEYTRUDA is $191,000 a year in the 
United States?

    Mr. Davis. That is close to being true, yes.

    The Chair. Thank you. Is it true that same exact drug can 
be purchased in Canada for $112,000 a year, and $44,000 a year 
in Japan?

    Mr. Davis. Generally, yes.

    The Chair. Mr. Davis, even though the price of KEYTRUDA is 
one quarter of the price in Japan compared to the United 
States, does your company, does Merck make a profit selling 
KEYTRUDA in Japan?

    Mr. Davis. We do.

    The Chair. What I understand is you make a profit selling 
KEYTRUDA in Japan for one quarter of the price that you sell it 
for in the United States. My question to you is a pretty simple 
one. Will you commit to lowering the price of KEYTRUDA in the 
United States to the price of Japan?

    Mr. Davis. Well, Senator, I think--first, I acknowledge the 
prices in the United States are higher than they are in many of 
the countries you said, and not for all drugs, but for many 
drugs.

    That is the reality we face. But I think it is also 
important to point out that you get access in the United States 
faster and more than anywhere in the world. We have 39 
indications for KEYTRUDA across 17 tumor types in the United 
States. If you look across Europe, it is in the 20's.

    If you look across Japan, it is in that number or a little 
bit less. So, there is a reason why the prices are different, 
and we need to be careful because we are also seeing in those 
markets that they are unwilling to support the innovation and 
we are very hardly--working hard to try to get them to 
understand the need to help funding the innovation we have----

    The Chair. I apologize for cutting you off.

    Mr. Davis. That is fine.

    The Chair. There are two other witnesses--but I did want to 
make this point.

    Again, we all appreciate the breakthrough and important 
drugs that you and other companies have produced that save 
lives. No debate about that.

    But I do want to point out that after all is said and done, 
and after all the money we spend on the prescription drugs and 
health care in general, the life expectancy in Japan is 9 years 
longer than it is in the United States. Senator Cassidy talked 
about Canada. Life expectancy in Canada is 6 years longer than 
the United States.

    Life expectancy in Portugal is 6 years longer. Life 
expectancy in the UK is 4 years longer. Let me ask the last 
question to Mr. Davis, because I understand that you made $52 
million in total compensation in 2022.

    Will you commit to not accepting a single dollar more in 
compensation until there is not a single GoFundMe page for 
KEYTRUDA?

    Mr. Davis. Well, I can tell you at Merck we are very much 
sensitive to what is happening with patients. That is why we 
have very important patient assistance programs.

    We commented on the fact that we have over 800,000 patients 
benefiting where we provide free drug for those who can't 
afford it, as well as other assistance programs that help with 
co-pay and other.

    We are very committed as a company to doing what we need to 
do to try to help alleviate the challenges patients face that 
you are focusing on, and that is my focus as the CEO.

    The Chair. Thank you. Mr. Boerner with Bristol-Myers 
Squibb, Carolyn from Florida says that she cannot afford 
ELIQUIS, and so she will, ``stop taking it, though I need it to 
prevent the risk of having a stroke.''

    Mr. Boerner, again yes and no please, the list price of 
ELIQUIS is $7,100 a year in the United States. Dr. Melissa 
Barber, an expert at Yale University, has estimated that it 
cost just $18 to manufacture a year's supply of ELIQUIS. $7,100 
what we pay, $1,800 to manufacture.

    Is it true that the same exact drug, ELIQUIS, can be 
purchased in Canada for $900 a year?

    Mr. Boerner. Senator, that is roughly correct.

    The Chair. Let me ask you this, even at 13 percent of the 
cost in the United States, does Bristol-Myers make a profit 
selling ELIQUIS for $900 a year in Canada?

    Mr. Boerner. Senator, we do make a profit.

    The Chair. All right. So, you are selling the product for 
13 percent of what--in Canada of what we pay in the United 
States.

    Obviously, you sell it there because you make money. So, 
Mr. Boerner, will you commit today that Bristol-Myers Squibb 
will reduce the list price of ELIQUIS in the United States to 
the price that you charge in Canada, where you make a profit?

    Mr. Boerner. Senator, we can't make that commitment 
primarily because the prices in these two countries have very 
different systems that prioritize very different things.

    In Canada, medicines are generally made less available, and 
it takes oftentimes considerably longer for those medicines to 
be available. On average, roughly----

    The Chair. I apologize--I do apologize. Just life 
expectancy in Canada is 6 years longer than it is in the United 
States. Mr. Boerner, your company spent over $12 billion on 
stock buybacks in 2022. Given that reality, can you tell 
Carolyn why you can't lower the price of ELIQUIS?

    Mr. Boerner. First, Senator, let me say no patient should 
have to go through the types of choices that the patient you 
just described go through. It is our commitment to continue to 
bring down the price of medicines in the U.S., and I would love 
the opportunity to bring down the price of ELIQUIS in the U.S..

    Our net price, is what we are compensated, have actually 
over the last 5 years declined. At that same time, the list 
prices have increased. Why is that? Because of the complexity 
of this system and the billions of dollars in rebates that we 
have provided to intermediaries that unfortunately do not go to 
lowering the price of medicines like the patient you just 
described.

    The Chair. Again, I apologize. I want to get very briefly 
to Mr. Duato, who is with Johnson & Johnson. Mr. Duato, is it 
true that the list price of STELARA is $79,000 here in the 
U.S.? Is that roughly right?

    Mr. Duato. It is roughly right, but it is also true that 
the average discount of STELARA in the U.S. is 70 percent.

    The Chair. All of that, and we have dealt with PBMs, and we 
are going to get to that I am sure in--this morning. Is it true 
that while charging $79,000 in the United States, that the 
exact same product is sold in Spain for $18,000?

    Mr. Duato. I don't know the price in Spain. I can tell you 
that the average discount in the U.S. is 70 percent. So, the 
price that you quote, it is 30 percent of that.

    The Chair. Okay. Mr. Duato, is it true that it costs less 
than $15 a year to manufacturers STELARA?

    Mr. Duato. The manufacturing cost is only a component that 
goes into our pricing. When we price our medicines, we are 
looking at the value that the medicine brings to the healthcare 
system. Our ability to continue to invest in research.

    We invested $15 billion last year. And also, we look at 
affordability. The average copay, if they use our copay 
assistance programs in the U.S., for a patient using STELARA, 
it is $10 to $15 per month.

    The Chair. I apologize. I am over my time. I am going to 
give Senator Cassidy the same time that I had.

    Senator Cassidy. Thank you all. Mr. Duato, the--in 2021, 
Janssen constructed an exclusionary contract with their PBMs to 
protect REMICADE, their blockbuster drug, a treatment for 
ulcerative colitis. Very familiar with it. A wonderful drug. 
Changed the outcome for people with UC.

    But this deal protected REMICADE from competition by new 
biosimilar, Inflectra, which was launched at a 16 percent lower 
cost than REMICADE. Now, I understand this is confidential in 
terms of the settlement with the courts but--and by the way, 
let me just say this involves a rebate wall.

    For the sake of those who are watching, a rebate wall is an 
anti-competitive tool which can be used to restrict a 
competitor's entry into a formulary. A manufacturer would offer 
more significant rebates to a health plan through a PBM for 
access to the formulary contingent upon the PBM blocking a 
biosimilar.

    Now, we have been discussing the promise of biosimilars to 
lower the cost in a market oriented, competitive way. So, we 
are not going to have Government regulation, we have got to 
have a market situation, and the market would be a biosimilar, 
but this sort of arrangement blocked the biosimilar from 
entering.

    In the full support of a market oriented approach, do any 
of your current contracts employ rebate walls to prevent lower 
cost biosimilars from formulary access?

    Mr. Duato. We welcome biosimilars and generics. We believe 
it is an integral part of the system.

    As a matter of fact, in the U.S., 90 percent of the 
prescriptions are biosimilars and generics, and that is one of 
the reasons pharmaceutical expenses have remained flat or 
increased single digit during the last years.

    We believe that biosimilars and generic foster patient 
access, and we care deeply about that. And we don't----

    Senator Cassidy. But let me ask because my specific 
question, do any of your current contracts employ rebate walls?

    Mr. Duato. Our current contracts do not employ any 
technique to avoid biosimilars and generics to have uptick in 
the market.

    Senator Cassidy. Okay. Thank you. Now, I think at least two 
of you, maybe all three of you, are working on gene therapy. I 
have been concerned that we don't really know how we are going 
to price those.

    I think one of the concerns is that there will not be a 
market for us to lower the cost of an initial gene therapy, 
which are incredible. It is amazing the lifetime of benefit 
that gene therapy can create. But I was speaking to a medical 
director of Medicaid CMO, and he was telling me that the 
pharmaceutical costs related to Medicaid is now 35 percent were 
formerly it was like 25 or 30 percent.

    He says this is being driven by gene therapy. And when 
sickle cell comes widely spread, it is going to--I don't know 
how it is going to be priced, but my state has a lot of 
sicklers. I don't know how my state is going to be able to 
afford giving it to everybody who should have access.

    Very concisely, how are we going to show restraint on the 
price of some of these new gene therapies, which already is 
driving up Medicaid? So again, 35 percent of Medicaid is now 
pharmaceutical cost. Mr. Boerner, I will start with you.

    Mr. Boerner. Senator. We actually don't work in gene 
therapy----

    Senator Cassidy. Oh, then let me go to Davis. Mr. Davis.

    Mr. Davis. We actually do not work in gene therapy.

    Senator Cassidy. Oh, I thought I saw you at a press release 
that you all were doing so. You had a vector or something.

    Mr. Davis. No, we are--well, we are doing some very basic 
research, but we have nothing in advanced stages.

    Senator Cassidy. Mr. Duato.

    Mr. Duato. We do have a gene therapy served for treating 
inherited retinal diseases. And we support legislation in order 
to be able to do value based contracts in the case of gene 
therapy. So, we welcome legislation in order to be able to have 
value based contracts.

    Senator Cassidy. That is a really--that is good. Value 
based contract will be important, but it still doesn't address 
the opening cost. Because of the opening cost of sky high, you 
still--you see where I am going with that.

    Now, what would you give to us who believe in markets, a 
solution to an opening price that would be so much it would be 
difficult for society to afford the gene therapy. And I can put 
in any other drug, but let's just start with gene therapy.

    Mr. Duato. We have to look at the value of these therapies 
and the fact that gene therapy for inherited retinal diseases 
may affect only less than 1,000 people in the world. So, we 
have to understand that.

    You can rest assured that if we are fortunate enough to 
bring the solution that people that have diseases that can lead 
to blindness, we will sit down and evaluate very thoroughly our 
pricing in order to make sure that patients, all patients that 
need this therapy, are able to afford it.

    Senator Cassidy. I think I recall a couple of years ago 
there was a study that was shown, respected, and you probably 
know it better than I, that $2 million for gene therapy for 
ultra-rare diseases was a reasonable sort of--it would cover 
the cost. It would create the incentive to produce more.

    That would be for the ultra-rare, where presumably you 
wouldn't have the ability to produce more. You know, obviously, 
the more you produce, you get a little bit extra profit. You 
know where I am going with that. So, but that shows restraint, 
if you will, on the behalf of the manufacturer.

    Now we want to create incentive, but we want to be able to 
provide access, and without access, it is as if the drug has 
never been invented. So, is there any other thoughts you have 
on how society, if that is ultra-rare, $2 million, presumably.

    If it is not ultra-rare, it would be less. How can we have 
a market oriented approach to this? Because I truly am 
concerned about the ability of a Medicaid program to be able to 
afford some of these gene therapies.

    Mr. Duato. We care deeply about our medicines getting to 
the patients that are need it, especially in these, as you have 
mentioned, ultra-rare diseases that have therapy can have life 
changing consequences.

    We will always sit down and make sure that the way we price 
is reflective of the value of the medicine, but also 
importantly, it enables affordability, and it makes it possible 
that every patient that needs it in America, can get it.

    Senator Cassidy. Now, the affordability though, we are 
defining affordability for the patient. So, if Medicaid covers 
it, it is by definition affordable for the patient, or if the 
insurance does. But then that doesn't necessarily make it 
affordable for society. And society has got to pay for it.

    Obviously Medicaid is taking more and more of a state's 
budget and frankly, more and more the Federal budget. I am not 
sure there is an answer there but let me just challenge you 
because we want market oriented solutions.

    We want to create incentives so that good companies like 
the three of you and others are making these new things. But if 
my state goes bankrupt paying for a new gene therapy, then my 
state's--the taxpayer, we all are tough--in a tough shape.

    Let me just go to one more thing. There is evidence that 
pharmaceutical companies will do lifecycle management kind of 
to prolong the sort of exclusivity of a drug. And some have 
argued that actually defeats innovation because as opposed to 
making profit from innovation, you can make profit from 
lifecycle management. Any thoughts about that, Mr. Boerner?

    Mr. Boerner. Senator, I think lifecycle management, if you 
think about the extension of new indications for a product, is 
incredibly important to really being able to deliver additional 
benefits to patients.

    Obviously, the patents associated with any product will 
dictate when a generic enters. We have been in favor of a 
robust generic entry primarily because our focus is on 
innovative products.

    But think, for example, in cancer where typically you start 
the treatment of cancer very late in disease, learn more about 
how the drug works, show it is safe, but ultimately you can 
bring that into early stage cancer, where you have the 
potential to potentially cure patients.

    Now, that takes quite a bit of time, but that is an example 
of a lifecycle management where you are actually showing the 
true potential of a medicine. I would hate for us to cutoff the 
opportunity to show those benefits.

    At the same time, we should be, as an industry, welcoming 
of generic competition, because ultimately our focus as a 
company is to take resources as we get close to generic entry 
and focus those resources on the next wave of new product 
innovation, which is where I think we ultimately want to go for 
patients.

    Senator Cassidy. Mr. Davis, you have got 20 seconds. How 
would you do it?

    Mr. Davis. Well, the short answer is, as I look at it, one, 
we very much support generic drugs and biosimilar drugs. I 
think it is the core of how our system works. We have a period 
where we are protected.

    We are able to recoup our investment, and then society 
benefits in perpetuity beyond that. As we look at life cycle 
management, we always are asking, are we bringing value to the 
patient? I will give you a live example.

    If you look at KEYTRUDA. KEYTRUDA now, as I mentioned, is 
in 39 indications across 17 tumor types. It is revolutionizing 
the care of patients facing cancer. The reality of it is still 
only 30 percent of people show overall response.

    As great as it is, patients are still suffering. And what 
we are doing is investing in combination therapies to be able 
to extend and go beyond that 30 percent, which means much 
better benefit and value to the patients that will--that 
ultimately use those drugs.

    Senator Cassidy. Thank you.

    The Chair. Senator Murphy.

    Senator Murphy. Thank you very much, Mr. Chairman. Thank 
you for holding this really important hearing. Mr. Duato, 
looking at your arthritis drug, and we have talked already a 
little in this hearing about the difference in price between 
the United States and other countries.

    Annual cost around $80,000 in the United States, $20,000 in 
Canada, $12,000 in France. Are the prices that you receive from 
a country like Canada or France, which look to me to be about 
one quarter of the price that you get from the United States, 
are those prices covering your costs?

    Mr. Duato. Yes they do. To clarify, Senator, the price in 
the U.S. is discounted by 70 percent. So, the appropriate 
comparison would be $25,000 in the case of STELARA, if you are 
considering that price.

    Senator Murphy. Are the prices you are receiving from these 
other countries, so let's say France--but I will give you the 
benefit of your argument. France is still 20--it is still 50 
percent of the U.S. cost that you are claiming. Are those 
countries' prices covering your costs?

    Mr. Duato. They do. The difference is that, for example, in 
Canada, which was the first country you quoted, STELARA, which 
is mainly indicated for inflammatory bowel disease, Crohn's 
disease, and ulcerative colitis, not for arthritis, is not just 
reimbursed in the public system.

    Canadian patients that want to access STELARA, they cannot 
do it in the public system because 8 years, 8 years later is 
not yet reimbursed there.

    Senator Murphy. You don't identify any free rider syndrome 
today in which the United States is paying higher prices, 
allowing other nations to receive lower prices?

    Mr. Duato. I agree with you that the prices in the U.S. are 
generally higher for medicines, more aligned than what you are 
describing, as the rest of the healthcare system prices are.

    The percentage of pharmaceutical expenses over the total 
healthcare expenses in the U.S. is 14 percent, and that is 
lower than most of the advanced economies. The real difference 
is that in the U.S., patients get access to therapy, lifesaving 
therapy years before they do in the countries that you 
mentioned.

    Senator Murphy. If the United States were to restrict the 
prices we paid, would that create a different negotiating 
dynamic in countries that right now, for instance, are paying 
50 percent of what the United States pays? Would it allow you 
in your negotiations to get higher prices from other nations 
that right now are paying far less than the United States?

    Mr. Duato. We believe that price caps are not the way that 
innovation is going to be fostered. We have worked with the 
United States Trade Department and with U.S. embassies around 
the world to try to reject the price caps that some countries, 
as the one you to mentioned, impose.

    We welcome the support of the U.S. Government in avoiding 
that these Governments that are ultimately imposing price caps 
on those that are not benefiting their patients neither.

    Senator Murphy. What do you say to Americans who look at 
the way that you allocate revenue and wonder why, in your case 
for instance, you are spending $6 billion on stock buybacks, 
$11 billion on dividends, and $14 billion on research and 
development.

    You spend all of your advertising time talking about the 
research and development spend, but I think most Americans 
would be pretty surprised, given how much the industry talks 
about research and development, that you are actually spending 
more money shelling out money to investors and buying back 
stock than you are on research and development.

    What do you say to folks who look at that and come to the 
conclusion that you care much more about keeping your investors 
happy and keeping your executives happy than you do in 
researching and development the next class of drugs that is 
going to help regular Americans?

    Mr. Duato. We care deeply about patients, Senator, and we 
care deeply about being able to discover the next medicines 
that are going to address major problems like Alzheimer's. What 
we----

    Senator Murphy. But explain to me how you justify that 
division of dividends and stock buybacks versus research 
development. You could just choose instead of using $6 billion 
to buy back stock to put that into more research and 
development, but you don't.

    Mr. Duato. Our level of R&D investment in the 2-years that 
referred to the $6 billion program buyback, which were 2022 and 
2023, is six times higher.

    In that period, we invested $30 billion in R&D and $6 
billion in stock buybacks. So, we spent six times more in 
developing cures for patients than we did in the stock buyback.

    Senator Murphy. Well, I am looking at 2022 profits and 
spending by Johnson & Johnson, and it shows me $11 billion in 
dividends, $6 billion in stock buybacks, $45 million in 
executive compensation, and $14 billion in research and 
development.

    Can you understand--let me ask a different question, do you 
understand that one of my constituents in Connecticut would 
look at those numbers and think that you care more about 
padding the pockets of the folks that work for you and invest 
in you than in research and development?

    Mr. Duato. Our priority is investing in R&D. We have spent 
$77 billion since 2016. And yes, we have to pay dividends 
because it is the only way that the company can remain 
operational and sustainable.

    Otherwise, if we are not operational and sustainable, we 
are not able to do--fulfill our mission of developing medicine 
for patients and making them affordable.

    Senator Murphy. Mr. Boerner, you talked in your testimony 
about, the United States has a health care system that 
prioritizes the important role of patient choice.

    I just want to present you with the case of one of my 
constituents and ask you about the choices that she faces. So, 
I have a constituent who needs ELIQUIS. This is a blood thinner 
that is critical to her survival.

    She has priced the Medicare plan that gets her the best 
possible price. And that price is $350 a month. The average 
Social Security benefit in Connecticut is about $1,700 a month. 
And of course, somebody who is on ELIQUIS is likely on other 
drugs as well.

    Here is her choice. Her choice is to pay the $350 and go 
without food or pay her rent late, or not take the drug and 
risk heart attack or stroke. Is that the choice you are talking 
about when you refer to a health care system that prioritizes 
the important role of choice?

    Mr. Boerner. Senator, absolutely not. And in fact, I would 
say on behalf of all of our employees at Bristol-Myers Squibb, 
that is a choice no patient should have to make.

    Senator Murphy. But she makes it. She makes it because you 
have chosen to price a drug at a point that is not affordable.

    Mr. Duato. Senator, we have priced ELIQUIS in the U.S., in 
our in our estimation--in fact, we try to do this for all of 
our medicines, consistent with the value it brings. And we are 
very happy with the fact that ELIQUIS is the leading anti-
stroke drug----

    Senator Murphy. Why not take--why not--you put $8 billion 
into stock buybacks. Why not do $4 billion and instead take the 
rest of the money and bring the price of the drug down?

    The Chair. I am going to keep people to seven.

    Senator Tuberville.

    Senator Tuberville. Thank you, Mr. Chairman. Thanks for 
being here today. It is pretty well known where our Chairman 
stands on this--his worldwide view. Pretty clear that he 
believes you guys are setting drug prices and it is all about 
corporate greed.

    I am a true believer of capitalism. I believe that we have 
the best health care system in the world. Problem is we have 
got the Federal Government involved in it and it is not 
implemented the way probably it should be. That being said, I 
just got a few questions here on a couple of things.

    Mr. Davis, can you explain to me something, the Biden 
administration has two huge priorities, dictate prices of 
prescription drugs, specifically small molecule drugs, and cure 
cancer. Can you walk me through how those priorities might be 
in direct contradiction of each other?

    Mr. Davis. Well, Senator, I think what you are referring to 
is what is called the pill penalty----

    Senator Tuberville. That is correct.

    Mr. Davis. Underneath the IRA. And what that does is 
effectively--it says that at 9 years, post your first approval, 
your price for your drug will be negotiated, and if it is a 
small molecule--it is $13, if it is a large.

    The issue that raises is that it disfavors small molecule 
development. And the reality of it is if you look across the 
majority of cancer treatments, they are still small molecules. 
And, as Chris pointed out earlier, the development of cancer 
drugs usually starts in a phase starting at the very, most 
sickest patient, the last stage of disease, and then you work 
forward into earlier stages of disease where in fact you can 
start to maybe talk about cure.

    To do those studies in early stage disease, often called 
adjuvant or neoadjuvant care, and we have nine approvals in 
that space, those studies can take 7 to 9 years to do so. 
Obviously if at 9 years I have to significantly reduce the 
price of that drug to a point that it is potentially at 
basically no profit, my incentive to do those follow on studies 
is not there.

    That is our worry that if you look at cancer care, you are 
going to see patients suffer because we can't get to really 
talking about cure, which is in earlier stages disease. I would 
also point out you didn't ask about Alzheimer's and 
neuroscience diseases, but most CNS diseases also require small 
molecules because large molecules, biologics can't penetrate 
the blood brain barrier.

    We are disincentivizing some of the largest areas of 
sickness and chronic need in our society through that pill 
penalty you are referring to.

    Senator Tuberville. Thank you. Mr. Boerner, we hear a lot 
about how health care costs are ridiculous high. I think all of 
us would agree to that some degree. I want to peel back the 
onion here a little bit.

    Today, we are being led to believe that these costs are due 
to corporate greed. I want to know if we are going to talk 
about some additional drivers of health care costs. When the 
Federal Government dumped trillions into various industries 
during Covid, we upended our markets and drove prices through 
the roof.

    You know, when I talked to health care folks back in 
Alabama, labor cost is one huge problem. But there are other 
costs, including supplies and raw materials. What impact are 
these having on the drug development and how drug cost?

    Mr. Boerner. Certainly, Senator, when we look at the cost 
bases for us doing what we do as a company, which is to bring 
forward new medicines for patients, we have to factor in all of 
those costs.

    I will give you an example. In cellular therapy, which is 
really transforming very late line hematologic diseases. These 
are very complex medicines. You are taking patient cells, 
manufacturing them and re-engineering them to really target and 
hone in on cancer cells, and then you are inject them in the 
patients. This is really a first generation technology.

    Unfortunately, it has very high labor costs because this is 
one that is very manual. It is a multi-step process to 
manufacture these products. There are transportation costs, 
their raw material costs.

    All of those factors go into a cost of these first 
generation medicines. Now we are very focused on trying to 
innovate to get to a second and third generation quickly so we 
can bring those costs down, not only because it is important 
for us to be able to funnel additional research into 
development, but also so that we can bring ultimately the cost 
down to patients.

    They are absolutely a factor, Senator.

    Senator Tuberville. Thank you. Mr. Duato, I am going to ask 
you this. With your accent and mine, we will probably have a 
tough time. But I know you are probably aware in 2021, you 
weren't CEO, I don't think, at that time, but the Biden 
administration announced a mandate that U.S. troops and 
personnel must take the Covid vaccine in order to serve in the 
military. Are you familiar with that?

    Mr. Duato. I am familiar, sir. Thank you.

    Senator Tuberville. Are you aware that more than 8,400 
troops were kicked out of the military for declining to take 
the Covid vaccine? These were mostly young, healthy Americans 
for whom Covid risk was low. Are you aware of that?

    Mr. Duato. No, I was not aware of that, sir.

    Senator Tuberville. Thank you. Did you or did anyone at 
Johnson & Johnson encourage the Biden administration to mandate 
this Covid vaccine to the military? Are you familiar with that?

    Mr. Duato. We did not, sir.

    Senator Tuberville. Okay. How much did Johnson & Johnson 
benefit financially from the administration's military Covid 
vaccine mandate? Could you have any kind of guess to that?

    Mr. Duato. Our effort in the Covid vaccine that we 
collaborated with the Government, it was a time of a global 
emergency, so we thought that as a healthcare company that 
cares for patients we needed to collaborate with the U.S. 
Government on that, was entirely non-for-profit.

    Senator Tuberville. Do you think the soldiers who were 
expelled from the military was a right thing to do, and should 
they be reinstated?

    Mr. Duato. I was not aware of the situation, sir. I am not 
aware of these circumstances, so I cannot comment on that.

    Senator Tuberville. Thank you. Thank you, Mr. Chairman.

    The Chair. Thank you, Senator.

    Senator Murray.

    Senator Murray. Thank you very much, Mr. Chairman. And 
thank you all for being here. We really appreciate it. I think 
we hear from our constituents constantly, and frighteningly, 
about the cost of some of the drugs that they take.

    This is really an important hearing. And I continue to 
hear, as many have said, that sky-high drug costs are forcing 
many people, including in my home, State of Washington, to 
choose between filling their prescription and paying for other 
things they need, essentials like groceries or rent, and I 
often talk to people who are skipping their prescription 
altogether because they can't afford it and it puts their life 
at risk.

    I really believe that Congress does need to do more here, I 
have for a long time, and I also think pharmaceutical companies 
need to do much more to put patients first. And that doesn't 
mean that private companies can't make a profit, and I think we 
all have a really sincere appreciation for the cutting edge 
research that happens at each of your companies.

    But when you say you are in the business of saving lives 
and curing disease, you have to think about putting patients 
over profits, because, as we all know, lifesaving drugs don't 
do anyone any good if people can't afford them. So, I want to 
ask you about affordability. And I have heard the numbers. I 
was listening in my office.

    Mr. Duato, your drug company makes product to treat 
arthritis, STELARA. It costs $79,000 annually here in the U.S., 
$12,000 in France. Mr. Davis, your company makes a drug to 
treat cancer, KEYTRUDA. You have been talking about it. 
Annually, the cost here is $191,000. $44,000 in Japan.

    Mr. Boerner, your company makes a drug, ELIQUIS, to treat 
the risk of stroke that costs $7,100 in the year, and $770 in 
Germany. So, I mean, either you think that the same 
prescription drugs sold around the world work better here in 
America, or we are getting something more for it.

    I mean, I don't think that is the case, but I wanted to ask 
each one of you, explain to us why it costs more in terms that 
we can tell our constituents and they understand. And, Mr. 
Duato, let me talk to you.

    Mr. Duato. We share your concerns about what patients have 
to pay at the pharmacy counter for medicines. In the case of 
STELARA that you mentioned, the net price in the U.S. is 70 
percent lower than the price that you refer, so it would be 
$24,000. It is still higher than in France, but it is more 
aligned than here.

    The difference is that patients with inflammatory bowel 
disease, which is the main indication with STELARA, were able 
to afford STELARA years earlier than they did in other 
countries. As a matter of fact, in Canada, after 8 years that 
STELARA was approved, STELARA is not reimbursed in inflammatory 
bowel disease, nor in Crohn's disease, or ulcerative colitis.

    What are we doing for that? We have strong patient 
assistance programs. A patient that has commercial insurance 
pays $10 to $15 a month for STELARA, and if they are not 
insured or underinsured, we have free medicine program. We 
distributed $3.9 billion in free drug in 2022.

    Senator Murray. Mr. Davis.

    Mr. Davis. If you look at KEYTRUDA and the example you are 
bringing up between the U.S. and Japan, first of all, like all 
of us, we are trying to focus on making sure that patients 
everywhere in the world get access to our medicines. Each 
market operates differently. Japan is a unique market in that 
the way they price their drugs, and we have been working hard 
to get this to change.

    I think maybe we have successfully gotten some of it to 
change. Is that after you initially launched your drug, for 
every indication that comes afterwards, they treat it as a 
different drug. And in addition, if a competitor launches a 
drug, then you also still take a price decrease because of the 
competitor drug.

    We are in a strange situation and one that is a very 
concerning situation to me in Japan, where in reality we as the 
most innovative, we have the most indications, we were driving 
the market fastest, we have by far the lowest discounted price 
in Japan, and the levels in Japan would not be sustainable to 
support the $46 billion, $40 billion we spent on KEYTRUDA.

    We are working hard to help those markets and we could use 
Government help there to understand that we need to, across the 
globe, share in making sure we can invest to support 
innovation.

    Senator Murray. What would Congress do that would make a 
difference to lower prices here?

    Mr. Davis. I think. Well, on one hand it is a different 
question on lowering prices here. I think that is a question I 
am assuming we are going to get to, but this is, how do we 
focus on what is the really large discrepancy between the list 
price and the net price, which I believe we need to focus on is 
the out-of-pocket cost to the patient.

    That is really the core. We need to address that. But in 
addition, we need to continue to work together on--we can work 
on trying to drive innovation clauses into trade agreements, we 
have had some success with that, to also help us in those 
markets outside the United States as well.

    Senator Murray. Mr. Boerner.

    Mr. Boerner. Senator, there is no doubt that patients are 
going to pay less for our drug ELIQUIS, or frankly most of our 
drugs outside of the U.S. than in the U.S.. That, 
unfortunately, comes at a fairly significant cost for those 
patients outside of the U.S..

    In Canada, patients will wait roughly three and a half to 4 
years to get access to a medicine that is available in the 
U.S.. You see similar sort of stats in virtually every European 
country and in Japan. What we can do more in the U.S. to do is 
try to bring out the pockets down--out-of-pocket costs down.

    For ELIQUIS, for example, the average out-of-pocket is 
roughly $50, $55 in the U.S.. Most patients will pay less than 
$40. However, there are still patients for whom this drug is 
absolutely not affordable. That is not acceptable.

    Medicare, in particular, is a space where we can't provide 
those types of copay support programs that we do in the 
commercial setting, so we would love to work with Congress on 
that. But probably the most important thing, and ELIQUIS is a 
great example of this that we can do, is try to bring down the 
list cost of ELIQUIS----

    Senator Murray. Do you set the list price?

    Mr. Duato. We set the list price, but that lowest price for 
ELIQUIS is driven up by the incentives of intermediaries. And 
let me give you an example, order of magnitude. Over the last 5 
years, we have, as a company, paid almost $100 billion in 
rebates and discounts to intermediaries.

    The majority of those were on ELIQUIS. And our ability--
that is unfortunately what patients pay is a co-pay on that 
list price. We would love to work with Congress to bring that 
down.

    The Chair. Senator Marshall.

    Senator Marshall. All right. Thank you, Mr. Chairman. Mr. 
Boerner, I will start with you. Bristol Myers makes this new 
miracle drug, ELIQUIS, relatively a miracle drug.

    When I was in residency treating patients, I was using 
Coumadin--Heparin and then Coumadin. It might take three or 4 
days to get someone heparnized, and then we switch them over to 
Coumadin.

    They might be in the hospital for 10 or 14 days. So, in its 
own right, ELIQUIS saves money. It saves that length in the 
hospital and prevents hospitalizations as well. So, I want to 
point that out.

    As we think--talk about rationing care, we have discussed 
how we are rationing care in foreign countries. But I want you 
to speak about rationing care in this country. How do PBMs 
ration care when they take a drug like ELIQUIS and don't allow 
it on their formulary? Does that ever happen?

    Mr. Boerner. Senator, I am glad you raised that point. We 
have had absolutely that case happen on multiple drugs. We have 
had it happen on ELIQUIS. We have had it happen where when we 
have not been able to reach an agreement with an intermediary 
on a rebate, that they have taken ELIQUIS off of formulary.

    When that happens, those patients no longer have access to 
ELIQUIS and they have to go on to another branded or in many 
cases, they may go on to Warfarin, as you say. ELIQUIS is the 
No. 1 product in the oral anticoagulant space----

    Senator Marshall. Okay, so I am going to--sorry. So, they 
have to go back to Warfarin, the Coumadin, the drug that I was 
using in medical school in the 1980's. A drug with significant 
complications.

    Hassle factor, the patient has to go get blood testing done 
maybe twice a week as well. But with your drug the miracle, one 
of the miracle parts of it is that a, they don't bleed into 
their brains anymore. And two, they don't have to go get their 
blood testing done once a week as well.

    It is a huge amount of innovation. And it is just--it 
amazes me how much power these PBMs have obtained. Let's go to 
Mr. Davis next.

    I want to talk about de-linking. And you have, at the time, 
a pretty--a miracle drug of your own to treat diabetes with. 
And there is a list price. How much of that--what percentage of 
that list price does typically Merck get at the end of the day?

    Mr. Davis. Senator, if you look at JANUVIA, which is the 
drug you were speaking to, the list price is $6,900.

    Senator Marshall. Per year?

    Mr. Davis. Per year, for Merck. We recognize $690 on that 
drug per year.

    Senator Marshall. Of the list price, you are only getting 
10 percent.

    Mr. Davis. It is a 90 percent discount.

    Senator Marshall. 90 percent discount. Where does the rest 
of that money go?

    Mr. Davis. Into the middlemen. Into the system as a whole.

    Senator Marshall. If we had the time and the energy and a 
chalkboard, would you be able to explain to me and show me all 
the little places that goes?

    Mr. Davis. I could, but I think you appreciate it is highly 
complex and so complex that at times even learned people who 
play in the space can't understand it.

    Senator Marshall. Well certainly, I can't explain it, and 
that is my point. Is it is so nontransparent, we don't know 
where this money is going, but certainly, we know that pharmacy 
benefit managers are taking $0.50 to $0.75 of that dollar, and 
you are only getting 10 percent of it.

    I would like to know where the rest of it goes. Then I will 
go back to Mr. Boerner. Similarly, with your drug, with 
ELIQUIS, what type of--what percent of that list price do you 
think that you all are taking home?

    Mr. Boerner. Senator, it is a relatively smaller 
percentage. As I mentioned before, we have paid over the last 5 
years about $100 billion in rebates and discounts, and the 
majority of that go to one product and that is ELIQUIS.

    Senator Marshall. Okay. Go back to Mr. Davis. Let's talk 
about, you all have an antiviral drug that has been approved. 
How many drugs did you go down--when Covid hit, you were trying 
to develop multiple drugs. How many have made it across the 
finish line? What did you spend on R&D as you look at those all 
together?

    Mr. Davis. Yes, so we--when the COVID situation hit, we 
drove two--or four key programs, two in vaccines, two in 
antivirals. Only one of those succeeded, which is the drug 
LAGEVRIO. The total spend across those four programs is a 
little over $2.5 billion.

    Senator Marshall. You spent $2.5 billion. You got one 
across the finish line, an antiviral. Is that being used in the 
United States?

    Mr. Davis. Very little. It has emergency use authorization. 
It never got to full approval. And so, we are actually seeing 
it being used much more outside the United States.

    Senator Marshall. In actuality, you spent $2.5 billion and 
got nonsignificant market share in the United States despite 
that. Mr. Duato, I will talk to you for a second.

    In my 25 years taking care of patients, we were always able 
to find a solution for their drugs that they needed, 340B 
programs, rebates. There is always exceptions to the rules, but 
what type of efforts has J&J made to work with 340B programs 
and to help some of these people that need help?

    Mr. Duato. Thank you, sir. We care deeply about patient 
affordability, but also we care about the sustainability of the 
rural hospitals and the small hospitals that take care of 
patients that are underserved.

    We believe that the 340B program, it is an important 
program to support those hospitals and we are fully, fully 
looking forward to collaborate with them in any way we can to 
support patient access on those hospitals.

    Senator Marshall. I am going to point out once again, it is 
just not rural hospitals, it is our community health centers 
are taking great advantage of the 340B program as well, trying 
to make sure that every patient in America has access to 
primary care--true affordable access to primary care, plus 
having access to affordable drugs as well.

    I might make a couple quick points. The people of Kansas 
sent me here to save Medicare. To save Medicare, I need a 
miracle drug to treat Alzheimer's. It seems to me that 
Americans bear the burden of most of the R&D in this world, and 
other countries benefit from it.

    That impacts the price in many ways as well. Mr. Davis, am 
I wrong? Why does it feel like to me that Americans are feeling 
most of the brunt of the R&D cost, or is that not accurate? I 
don't know.

    Mr. Davis. Well, I think, Senator, it gets down to, as you 
look across the globe, different markets and I appreciate what 
the U.S. does. I think the U.S. favors innovation. It values 
it. It values access for our patients, fast access, most 
access. Many markets around the world don't do that.

    What they focus on more is their budget and how do they 
meet those budget needs, and we appreciate the budgetary 
constraints that everyone faces. But as a result of that, often 
patients aren't getting access to meds. They don't get them as 
fast, which we have commented on today, and it is harder to see 
how you can support the innovation we need to do in that 
situation.

    The Chair. Thank you. Senator Baldwin.

    Senator Casey.

    Senator Casey. Thanks so much, Senator Baldwin, for 
allowing me to jump ahead. Mr. Chairman, thanks for the 
hearing. I want to start with a sense of what I hear back home.

    When I talk to people in Pennsylvania, and a lot of your 
companies have a lot of interest in Pennsylvania, I hear over 
and over again this problem, the cost of prescription drugs, is 
like a bag of heavy rocks.

    It is when been people have been carrying this around their 
shoulders every day, year after year, and they are tired of it. 
And they don't believe that any player in this is doing enough.

    I think most Pennsylvanians are happy that I could vote for 
a bill in 2022 that allowed Medicare to negotiate for lower 
prescription drug costs and that we could cap the cost of 
insulin $35 bucks a month for Medicare Part D beneficiaries. 
They are happy that we could cap the out-of-pocket cost.

    That will go into effect about a year from now. But they 
are not happy--they are not satisfied that even Congress is 
doing enough, House or Senate, or either party. But they are 
certainly not happy with the level of work that you have put 
into this. Look, I hear all this talk about rebates and cost 
reductions you are trying to put in place, but it is not 
cutting back home.

    When I talk to people that see what PBMs are doing, they 
know that they are not meeting the obligation that they would 
expect them to. So, there is no question that your companies 
and big pharmaceutical companies are playing a role in this. 
You bear a measure of responsibility in this.

    I wanted to ask you a couple questions about that. First 
and foremost, tell me what concrete steps, very specific steps, 
that each of you are taking and your companies are taking to 
make sure that we can get these costs down. And even by way of 
repetition, you may have already said it.

    I'm not worried about you repeating yourself, but we need 
to know specifically what you are doing to lowering costs so 
that no one, especially someone who needs a lifesaving 
intervention, a lifesaving treatment, is going to be denied 
that solely, solely because of cost. And I will start on the 
left, Mr. Duato, going left to right.

    Mr. Duato. Thank you, Senator Cassidy. We absolutely want 
to be part of the solution. We understand that co-pay 
obligations for U.S. patients are burdensome, and it does 
create health inequities.

    What are we doing for that? We have a very extensive 
patient assistance program that, for commercial patients, 
enables them to be able to pay low co-pays, $5 to $15 per 
month. We supported more than 1 million patients in 2022 with 
our copay assistance programs. If a patient is underinsured or 
not insured, we provide free drug.

    We gave $3.9 billion in free drug in 2022. But I think we 
can do more, and we can work together in order to lower out-of-
pocket costs for patients even in Medicare, as you mentioned, 
because that is a real need that we are committed, all our 
employees are committed in order to make sure that our 
medicines get to the patients that did deserve it.

    Senator Casey. Mr. Davis.

    Mr. Davis. Well, Senator, very much like J&J, we have 
tiered levels of patient assistance programs because we want to 
make sure that patients who need our drugs can access them. If 
you have insurance but you fall below certain means where you 
are not able to handle your copay, we will give copay 
assistance to those patients through a program we run.

    If you are someone who doesn't have insurance, is not able 
to qualify for Government programs, we have a patient 
assistance program that basically provides the drugs for free. 
So, we are very much focused on this and making sure that we 
can do everything we can, and we are investing a lot of money 
on it.

    But something I would like to add, because I think it is 
important to the discussion. We are focusing on prices today, 
but we also need to think about innovation as a way to fix the 
problem. And something we are focusing on as a company is a new 
technology called micro cyclic peptides that allow us to 
potentially take what historically has been large molecules 
difficult to make, expensive drugs difficult to deliver, and we 
are starting to show the capability to convert those into 
cheaper, small molecule forms, oral forms.

    If we are able to do that, we have one in late stage 
development now called an oral PCSK9, which is for heart 
disease. But we are looking to do that for others. We are 
investing millions, billions behind that effort.

    I think we need to also think about how can innovation 
solve the problem. We need to address the price challenges 
today. We have to lower out-of-pocket costs. But innovation 
ultimately is what is going to help us fix this.

    Senator Casey. Sir.

    Mr. Boerner. Senator, maybe I would highlight three things. 
First, we obviously have a very robust, on the commercial side, 
copay assistance program that brings out-of-pocket costs down 
in many cases for certainly our oral oncologists, for example, 
almost to zero.

    They are complex at times, so we are working very hard to 
make those more universally available. That is step one. Step 
two, we would like to work with this Congress to find ways in 
which we could apply the same sort of programs in Medicare. 
There are some complexities.

    We want to make sure we are not diverting from the use of 
generics, for example, but we think there are potential ways 
that we could do that, and we would love to explore those 
opportunities with Congress to bring out-of-pocket costs down 
for Medicare patients.

    The second thing I would say is we are looking at doing 
more innovative work, innovative contracting work where we can. 
For example, if our drug works, we get paid. If it doesn't 
work, we get paid less and in some cases maybe even not get 
paid at all. There are technicalities in the U.S. that prohibit 
us from doing that more in the U.S..

    We want to work to get those removed. The third thing, just 
building on what Rob was saying, is we do believe that 
innovation plays a role here. Cellular therapy, while not gene 
therapy per the previous question, those are expensive 
therapies.

    We have got to bring those costs down, and the way we will 
do that is we will innovate to the next generation, which 
hopefully is way less complex than what I described previously.

    Senator Casey. Well, I will be submitting some more follow-
up questions for the record. Thank you, Mr. Chairman.

    The Chair. Thank you.

    Senator Paul.

    Senator Paul. I am not an apologist for big pharma. In 
fact, when corporations manipulate Government to their 
advantage, crony capitalism, I am an unfettered critic. But in 
defense of capitalism, I am a consistent, unapologetic 
advocate.

    Milton Friedman once wrote that if you want to create a 
shortage of tomatoes, just pass a law that retailers can't sell 
tomatoes for more than $0.02. Instantly, you will have a tomato 
shortage. I might also add that is true of prescription drugs. 
Virtually every shortage of drugs that we have seen in the last 
few years involves price controls that drive out production of 
the drug.

    One reason the United States leads in pharmaceutical 
innovation is because while the U.S. adhere to more--a more 
market based pricing and rewarded innovators, Europe adopted 
stringent price controls in the 1980's and 90's. It is not 
surprising that we lead the world in innovation and Europe does 
not.

    But unfortunately, this Committee in this hearing is not 
here to celebrate American success. Instead, the majority drags 
us to conduct a show trial to harangue companies challenging 
the Inflation Reduction Act price controls in court.

    They have simply brought forward people who question their 
partisan legislation. Ten years ago, the 5-year survival rate 
for patients diagnosed with advanced lung cancer was 5 
percent--terrible. Since Merck introduced the cancer drug 
KEYTRUDA in 2014, the survival rate has grown nearly fourfold, 
5 percent to 20 percent.

    We should be celebrating that instead of castigating people 
and telling them how to run their business, and why are you 
buying your stock back. I have a friend with a genetic 
predisposition to cancer. He is alive today because of 
KEYTRUDA. We should be celebrating that. Johnson & Johnson's 
REMICADE was the first monoclonal antibody approved for 
treating chronic conditions like Crohn's disease and rheumatoid 
arthritis.

    Since its approval, Remicade has revolutionized treatments 
for inflammatory disease, made remission a reality for patients 
with debilitating conditions, and paved the way for development 
of other autoimmune treatments. When I began in medicine, 
virtually all patients with rheumatoid arthritis you could see 
from a distance had crippling, disfiguring arthritis in their 
hands.

    Now, today, it is rarely seen because of the advances of 
American companies under an American system that allowed profit 
to occur. In 1987, Merck pledged to donate the entire stock of 
its drug, Ivermectin, to those suffering from river blindness. 
Nearly 37 years later, Ivermectin Donation Program treats 300 
million people annually, with over 11 million treatments 
shipped to endemic countries.

    This is charity, my friends, from capitalism. You don't get 
this under socialism because there is no profit under 
socialism. They have no money to give. They make extraordinary 
profits. Do they keep some of their investors? Yes, that is 
what they are supposed to do. But they also have some left over 
for charity and you don't get that under socialism.

    Because of Merck's donation, seven countries eradicated the 
transmission of the No. 1 cause of blindness in the world. 
Pharmaceutical innovation has improved cancer rates, cured 
hepatitis C, doubled the life span of patients living with 
cystic fibrosis. It goes on and on.

    We have tried price controls in general here. We did in the 
1970's under a Republican President, under Nixon. It was a 
disaster, and it led to lines at the gas pump. It was an 
ultimate disaster. A study at the University of Chicago, found 
that 254 fewer drug approvals over the course of 18 years would 
happen under price controls.

    Under communism, they knew this. Socialism, communism, and 
the economic system of socialism from price--it became a 
running joke. In Poland during the Soviet era there was a story 
of the guy who went to the store, he was looking for eggs, and 
he asked the clerk, is this a store with no eggs? And they 
said, no, this is a store with no toilet paper. The store with 
no eggs is across the street.

    That is the story of socialism. That is the story of price 
controls. Scarcity and empty shells are the inevitable result 
of price controls. Those who understand and appreciate 
capitalism do not need a show trial to dupe them into 
forgetting that price controls have never worked and never 
will.

    Let's get back to profitability. I don't think you guys did 
a very good job on answering this. Did you add into your 
estimate of whether it is profitable in Canada, whether or not 
it cost you $2.6 billion on average to develop it? You are 
talking about manufacturing costs. You are talking about how 
much it cost to make KEYTRUDA and how much you sell it for, and 
say you have a profit in Canada.

    Do you think it would still be a profit, Mr. Davis, if you 
added in all the R&D, the $2.6 billion to get it through this 
system, all--the apparatus of your company and you divided all 
of that out for profitability, would it still be profitable in 
most of these other countries?

    Mr. Davis. I have not done that analysis, but I would say 
that the profitability would be marginal at best.

    Senator Paul. Do you think you would have as much R&D if 
the whole world were Canada? Do you think you would be 
developing dozens of new drugs every year if the whole world 
were Canada?

    Mr. Davis. No, I do not.

    Senator Paul. This is what we are arguing against, you 
know. Sure, you can make it for pennies now, but it didn't 
start that way. And then people were like, oh, my it costs so 
much in the beginning. That is capitalism. That is the way it 
works in capitalism. Joseph Schumpeter talked about this, and 
he said, this is an old anecdote, but he said, the miracle of 
capitalism is not the queens have silk stockings, but that 
factory girls ultimately do.

    But in the beginning only the queen has silk stockings. 
Rich people get stuff in the beginning. Rich people drive the 
innovation. The first calculators that came out, $300 for 
adding, subtracting, and dividing machine.

    Now they are like pennies or free. But you have to allow 
the price to be higher in the beginning and the market brings 
it down as you have more widespread market. That is capitalism. 
We don't know what the correct price is. There is no moral 
price. There is no moral amount of profit.

    There is no business of any of you all telling them how 
much stock to buy back. Their job is to make a profit. It is 
actually against the law for them not to maximize their profit. 
For you to sit in judgment of how much profit they should make 
and how they should run their companies, you know nothing of 
running companies.

    You know, nobody up here, maybe some, but almost nobody up 
here has run big companies, billion dollar companies and you 
presume somehow to say you are going to tell these people how 
to run their company. List price versus net price. List price 
means absolutely nothing. I charged $1,800 for cataract 
surgery.

    The Government paid me $600. Two-thirds of it, nobody stole 
that. It disappeared because it never existed. So, if I build 
$1 million in charges, I really was only building $300,000 
because that is what I was getting paid. But because of the 
confusing nature of the system, the list price is much 
different than the net.

    But to quote list price and then compare it to net price in 
other countries is completely and profoundly unfair. The list 
price means absolutely nothing. All of these fallacies need to 
be addressed before we begin haranguing American CEOs. Thank 
you.

    The Chair. Thank you for your questioning.

    Senator Hassan.

    Senator Hassan. Well, thank you, Mr. Chair.

    The Chair. Senator Baldwin. I am sorry.

    Senator Hassan. She----

    Senator Baldwin. I yielded to Senator Casey.

    Senator Hassan. I know, but I was next----

    The Chair. All right. Senator Hassan, go in then Senator 
Baldwin.

    Senator Hassan. Thank you. So, I just wanted to say, at the 
outset that the last time I checked, when a buyer and seller 
negotiate for a price, that is capitalism.

    I wanted to talk with all three of our distinguished 
witnesses today, because one of the things that strikes me that 
we are struggling with is I think at various times in each one 
of your statements, you talked about your price reflecting the 
value of your product. And the thing is, human health and life 
is priceless.

    If that is the metric here, you will always have an excuse 
for charging increasing prices for these lifesaving drugs. And 
what we are trying to do here is figure out how you can 
continue the innovation that Senator Paul just so eloquently 
spoke about. I would suspect that every Member up here has a 
family member whose life has been saved by innovative 
medications are greatly improved.

    But at the end of the day, we have to find a way to allow 
you all to innovate but also to make sure that the market here 
and the system here works for the very people whose lives you 
are helping to save.

    I want to start with a question to you, Mr. Davis. While 
families in New Hampshire and across the country struggle to 
afford these lifesaving medications, pharmaceutical companies 
are doing everything that they can to keep their prices and 
their profits sky high. And I know you both talked about that 
not being the case, but let's just look at one thing here.

    One way that companies do this is by filing dozens, even 
hundreds of frivolous patents that lock in their exclusive 
right to sell their drug for decades.

    By playing games like this with the patent system, 
companies block low cost alternatives like generics from coming 
to market. Mr. Davis, the list price for Merck's cancer 
medication, KEYTRUDA is, as we have talked about, $190,000 per 
year. Can you tell us how many patents have been filed on this 
medication?

    Mr. Davis. I don't have the exact number, but I would focus 
you on probably the most important patents, which are the 
composition of matter patents. In addition to that, the 
formulation and manufacturing patents.

    There is one suite of composition of matter patents that we 
have and those are what allow us to continue to have 
exclusivity.

    Senator Hassan. Well, I don't think it would surprise you 
to learn that I do know how many patents you currently have. It 
is 168. This is what this looks like. Sheet after sheet after 
sheet.

    Patent office records show that not only do you have 168, 
but half of them relate to the process Merck uses to 
manufacture the drug, not the way that the drug is used to 
treat patients. Merck is using patent gimmicks and loopholes to 
delay other companies from selling lower cost versions of this 
medication, all while raising the price of KEYTRUDA in the U.S. 
year after year.

    It would be good if Merck would just stop blocking patient 
access to low cost medications by using the patent system in 
this way. It is clear that Merck and other pharmaceutical 
companies, you are not alone, won't stop abusing the patent 
system to keep their prices high.

    It is clear we also need to take action on that. And that 
is something we can do. Senator Braun and I have a bill called 
the Medication Affordability and Patent Integrity Act, which 
would help break up these patent rules. And I would urge my 
colleagues on both sides of the aisle to support that.

    Now, Mr. Duato, in your testimony, you mentioned that 
Johnson & Johnson provides financial assistance to uninsured 
patients in the United States. However, the barriers to access 
these programs are unreasonably high.

    For an expensive medication like your company's arthritis 
drug, STELARA, what does a patient have to do to get assistance 
from the Johnson & Johnson program?

    Mr. Duato. Thank you. We care deeply about patient access, 
and we put a lot of work in developing well and wide patient 
assistance programs. And we have mechanisms for patients to 
connect with us via--mechanisms like a website called Johnson 
Care Path, in which patients can access patient assistance. We 
supported 1.1 million people with patient copay assistance last 
year.

    Senator Hassan. Well, let me just talk a little bit about 
that. The initial application, which I have here, is six pages 
long, and it requires pages of additional documents for income 
verification.

    In the fine print, this document even requires the patient 
to consent to a credit report check and other financial 
disclosures. Mr. Duato, everyone on this dais wants you to 
charge a fair price for your company's medications.

    But if someone does need assistance paying for their 
medication, this process has to be streamlined and easily 
available to anyone who qualifies. So, I would urge you to look 
personally at this application.

    When somebody is dealing with a serious illness, the last 
thing they need to do is read the fine print and decide that 
they have to disclose a credit report, the relevance of which 
kind of escapes me. Mr. Boerner and Mr. Duato, we could also 
increase competition by making it easier for generic drugs to 
get approved.

    Mr. Boerner let's turn to the BMS stroke prevention drug 
ELIQUIS. The list price, as we have talked about, is $7,100 per 
year. How many generics of this drug could a patient in the 
United States get at the pharmacy today?

    Mr. Boerner. Senator, in the U.S., there are not yet 
generics available.

    Senator Hassan. Right. There are zero generic versions of 
ELIQUIS available to patients, even though the original patents 
on the medication began to sunset in 2019. Because your company 
has sued to block two approved generics from the U.S. market 
until 2028 at the earliest, isn't that right?

    Mr. Boerner. Senator, we have allowed for generic entry in 
2028. That is correct.

    Senator Hassan. Right. So, we have two generics ready to 
go. Your original patent is well past expired, but you still 
are actively trying to prevent generics from coming to market.

    Mr. Duato, the list price of Johnson & Johnson's autoimmune 
arthritis medication STELARA is nearly $80,000 annually. 
Similar to ELIQUIS, there are currently zero low cost 
biosimilar versions of STELARA available to U.S. patients. 
There are zero biosimilars for STELARA available in the United 
States today because Johnson & Johnson has also sued to delay 
the launch of a low cost biosimilar drug.

    We need--you know, you have all talked about the need to 
have speed of access--and Mr. Chairman, I am wrapping right up.

    Speed of access getting drugs to market, but then you are 
actively working to block the less expensive biosimilars and 
generics to come to market, and that is something we should 
address. Thank you, Mr. Chair.

    The Chair. Senator Romney.

    Senator Romney. Thank you, Mr. Chairman. And I appreciate 
these executives taking time away from your responsibilities at 
your respective companies to be here and to inform us, and in 
some cases, to get berated by us and give us an opportunity to 
pontificate on our various topics, which I am about to do.

    One is that I fully concur with Mr. Paul or Senator Paul 
indicated just a moment ago, Rand Paul, and that is that a free 
enterprise system works marvelously. And I know we keep asking 
you what are you doing to try and reduce the prices of your 
products?

    The answer is that is not what happens in free enterprise 
and capitalism. I hope it doesn't come as a shock to my 
colleagues. In capitalism, if you are running an enterprise 
where you have a fiduciary responsibility to your owners, you 
try and get as high a price as you can. That is what you try 
and do.

    You try and make as much profit as you can. That is how 
free enterprise works. You think Chevrolet sits back and says, 
gosh, how could we get the price of the Chevrolet down? No, it 
is like, how high price can I get and maximize the profit for 
my shareholder? What price does McDonald's charge for a 
sandwich?

    As high a price as they can get. But the amazing thing 
about free enterprise is that someone figured out that if 
everybody does that and you have competition among all the 
players, that somehow the prices come down, and the quality 
goes up, and the access to the product is broader. It is the 
marvel, it doesn't seem to make a lot of sense, but it is the 
marvel of capitalism.

    Now, obviously wise companies say, well, you don't just 
raise prices to the roof and do things that are going to harm 
your credibility and the trust in the marketplace, and have 
your employees not want to work there because they are going to 
figure they are working for bad people. So wise enterprises 
don't just do all the things I just mentioned.

    They also say we are going to do other things and care for 
the poor and care for people who want to come work in our 
company. We do those things too. But recognize free enterprise 
is about enterprises battling each other with higher prices in 
many cases, and then they get pushed out by people who develop 
new products and put them out of business. It is how it works.

    But let me turn to--and I know, as Senator Paul indicated, 
there are some who would like price controls. There are some 
who would like socialized medicine. And it is like, have you 
seen what that produces? It doesn't produce new drugs. It 
doesn't produce cures. It sounds great.

    We are going to--price controls is just another name for 
capitalism--excuse me, socialism lite. Our system works, but 
there are ways to improve it. And I am very concerned that this 
disparity between list price and what you actually get paid is 
a problem.

    I don't know why it is a problem or what we can do about 
it, but do you have PBMs and getting prices of discounts like 
this in other countries that you compete in? Yes, Mr. Boerner, 
yes.

    Mr. Boerner. Senator, we do not. This is a unique element 
of the U.S. health care system.

    Senator Romney. Is that true for you also, Mr. Davis?

    Mr. Davis. That is true for us as well.

    Senator Romney. Mr. Duato, is that also true?

    Mr. Duato. This is unique. The inequity that exists in the 
U.S.. It is because of that we have higher out-of-pocket costs 
for patients than anywhere else in the developed world.

    Senator Romney. I hope we focus on this. We may not have 
the right bad guys here, all right. These are the guys 
developing cures and helping people solve diseases.

    But we have something here they don't have in the rest of 
the world, these PBMs that want higher and higher prices 
because they get paid based on how high the list price is, 
because they get a percent of the list price.

    I am not sure where all the money goes. Some of it goes 
back to patients, some goes to the companies if they are self-
insured. I don't know where it all goes, but I think that is 
the issue.

    Let me ask each of you, if you were in our shoes knowing 
what you know, what should we be doing to try and get the cost 
of products down to our--to the people in the country and to 
the country at large, to the Government that buys a lot of 
goods, a lot of drugs--what should we be focused on?

    I know that you sell to PBMs, so you got to be careful not 
to step on their toes too hard because they might punish you. 
But what advice would you give us? What should we be looking 
at? Where is the problem in this mess? We will start here, Mr. 
Boerner.

    Mr. Boerner. Maybe three things I would offer, Senator. 
First, to the complexity that you just described, No. 1, 
dealing profits from intermediaries from the list price of the 
drug, and the rebates rather that are provided. If you could 
delink that, that would be important.

    Alternatively, require that those rebates be passed on to 
lower out-of-pocket costs for patients. That is No. 1. No. 2, I 
firmly believe we have the ability to help lower out of patient 
cost in Medicare if we could provide the same types of copay 
support that we do on the commercial side to Medicare patients.

    That would be a second thing. And the third thing, we have 
referenced it before, we do innovative contracting outside of 
the U.S. where we get paid if our product works. There are 
constraints on our ability to do that in the U.S.. I would like 
to see those removed. That would be very helpful.

    Senator Romney. Right. Thank you. Mr. Davis.

    Mr. Davis. I would say that I--Chris, basically covered all 
of the things we would also look to do.

    Senator Romney. Great. Thank you. Mr. Duato.

    Mr. Duato. Yes. Three things. As Mr. Boerner, I would make 
sure that the rebates and discounts that we pay to PBMs go back 
to patients to reduce out-of-pocket costs. I will make sure 
that as we are trying to do, and I know these Committee is 
looking into that, would delink the compensation of the PBMs 
from the list price. And finally, I would sit down to see what 
we can do to provide, a, patient assistance program for 
patients in Medicare Part D, but also look to further lower the 
out-of-pocket costs for patients that the IRA is bringing.

    Senator Romney. Thank you. You did mention the fact that 
the PBMs are largely owned by the insurance companies.

    Senators, we think PBMs are going to be lowering our costs 
as an employer, let's say, and you hire a PBM to lower your 
cost. But it might lower your cost, but then it is passing on 
their profit to the insurance company. Is that a problem?

    Is the fact that the PBMs are owned by the insurance 
companies, is that a problem here? Is that something we need to 
look at as well? Do any of you have any comment on that?

    Mr. Duato. The three PBMs are owned by the three largest 
insurance companies, and together they control about 80 percent 
of the market of the prescriptions in the U.S..

    Senator Romney. Yes. I am a big believer in free 
enterprise, as you can tell by my opening comments. At the same 
time, I am concerned that we have got some structures here that 
are anti-competitive and make markets less effective, and we 
probably ought to focus on some of those. Thank you. I 
appreciate your testimony.

    The Chair. Thank you.

    Senator Baldwin.

    Senator Baldwin. Thank you. It has been very interesting to 
listen to the back and forth.

    Senator Romney, your points about support of the free 
market, but understanding that there are times when there is 
market failures.

    We also have an obligation, I think, to oversee because our 
Committee with the--along with the Finance Committee, oversee 
and the need to have good stewardship of Medicare and Medicare 
dollars.

    But the point that Senator Romney just made about 
basically, I don't know--I can't follow the dollars and it is 
complex, is a real issue. I want to start just by sharing some 
of my constituents' struggles.

    I have a constituent who literally turns down the heat in 
the winter, because that is how she is able to afford the 
prescription drug she needs for her wellness. There are choices 
that people are making. People are rationing their medication. 
People are forgoing their medication because of affordability.

    I think we need more transparency. And I think we need more 
transparency to inform the policies that we adopt. I was 
pleased this last May that this Committee advanced my 
bipartisan Fair Drug Pricing Act, which I lead with Senator 
Braun.

    Our bill would require basic transparency from your 
companies at any juncture in which you want to raise the price, 
list price of a prescription drug by more than a certain 
amount, a certain percentage.

    Asking questions like, what is the cost to manufacture the 
product? What do you invest in R&D, something we really 
support? How much are you spending on marketing and 
advertising? What are you doing in terms of stock buybacks? Is 
there excessive executive compensation?

    I agree that we also have to have that transparency within 
the PBMs. I remember, under the last President, when we were 
having our confirmation hearing for the--his Secretary--
Secretary Azar, who came out of the pharmaceutical industry, 
and I shared with him a letter from a constituent who has two 
diabetic sons who is talking about the costs every month, not 
just the insulin, but the test strips, etcetera.

    I said, what do I tell this, dad about the high cost, which 
had just by the way, increased significantly. And he just 
responded, it is complicated. I can't tell my constituent, well 
we can't address this because it is complicated. I remember, 
when--this is years ago now when the EpiPen doubled in price 
overnight, went from $100 basically to $200.

    My constituents certainly told me what a burden that was. I 
asked if you could show me--follow the money, a chart, follow 
the money. Nobody could. We need additional transparency to 
inform our policies.

    Mr. Duato, the price of STELARA in the U.S. is $79,000 a 
year. And by the way, in Wisconsin, the median household income 
is $72,000. Your company has made twice as much selling this 
arthritis treatment in the U.S. than it did in the rest of the 
world combined. This is going back to 2016.

    Under the Fair Drug Pricing Act, you would need to account 
for this exceptionally high cost. So, just to look at one 
component of what I am talking about, how much does Johnson & 
Johnson spend on marketing and advertising for this particular 
drug?

    Mr. Duato. Senator, thank you for the question. We publish 
every year since 6 years ago a report that we call it 
transparency report, and we explain our pricing practices and 
we give transparency also to the different intermediaries that 
play into the model. We disclose our advertising expenses and 
our R&D expenses.

    What I can tell you is that in 2022, which was the last 
year that our report was published and is available, we spent 
double in R&D, 110 percent more in R&D that we did in sales and 
marketing.

    Senator Baldwin. Do you know what that dollar figure is for 
sales----

    Mr. Duato. I don't have it on my hand, but I will be sure 
to follow-up with you to bring it to you. But it was double the 
amount in R&D than we did to spend in sales and marketing.

    Senator Baldwin. Well, let's look at, Mr. Boerner, the 
price of ELIQUIS is--in the U.S. has increased by $4,000 since 
its launch. In other countries, the cost of this drug is 
decreasing. How much did your company spend on R&D last year?

    Mr. Boerner. Our company spent just over $9 billion last 
year on R&D.

    Senator Baldwin. Then how much did your company spend on 
stock buybacks, dividends, and executive compensation last 
year?

    Mr. Boerner. I don't have that exact figure, Senator. But 
we----

    Senator Baldwin. Does $12.7 billion sound right from the 
health study?

    Mr. Boerner. That is roughly correct.

    Senator Baldwin. Okay. For the first time, thanks to the 
Inflation Reduction Act, Medicare will negotiate the price of 
drugs, including ELIQUIS and STELARA, and this is really 
welcomed news for families in Wisconsin.

    But the truth is, it is really not enough, and my 
constituents should not be forced to decide if they should turn 
the heat on in winter or buy the medication they need, all 
while companies are raking in literally tens of millions of 
dollars or billions. We have more work to do.

    The Chair. Thank you.

    Senator Collins.

    Senator Collins. Thank you very much, Mr. Chairman. I think 
all of us could agree that when a doctor prescribes said needed 
medication, that cost should not be an insurmountable barrier 
to the patient using it.

    Yet for more than half of the adults in my state, according 
to a survey, it is a barrier. They are worried about affording 
the cost of prescription drugs. And in the last year, nearly 
one out of three Maine adults reported skipping a dose of 
medicine, cutting pills in half, or not filling a prescription 
because of cost.

    I talked to a young woman with type 1 diabetes who, after 
she aged out of her parents' insurance, started cutting back on 
her insulin. She ended up in the emergency room and was gravely 
ill because of that.

    She felt she just couldn't afford it and took a very unwise 
chance. So, this is a huge problem. But another aspect of this 
discussion is that many new medications represent true 
breakthroughs, disease modifying therapies, or even cures. And 
the other part is that literally billions of dollars are 
invested in developing drugs that end up to not be successful. 
I think we have to balance all of these concerns.

    These new drugs often cost more, but they have the 
potential to reduce the number of unnecessary hospitalizations 
that lead to better patient outcomes. They may be worth it for 
disorders like Alzheimer's.

    The breakthrough drugs can help keep patients healthier and 
active longer, benefiting society as well as their families. 
For example, I heard of a patient being diagnosed with mild 
cognitive impairment early enough that the patient was able to 
benefit from the newly available treatment and actually 
returned to the workforce.

    That is quite an accomplishment. Now, last year, the 
Chairman criticized this particular company for a list price of 
$26,500 per year, even after the company, in a really 
unprecedented fashion, issued a lengthy analysis of the process 
by which they arrived at the price. Still, sticker shock around 
list prices and speculative claims that certain therapies will 
bankrupt the Medicare program have contributed to restrictive 
coverage policies, patient confusion, and limited uptake.

    I would like, Mr. Davis, you to discuss how we can balance 
the need to have affordable medications without hampering 
innovation, and how access to the next--what would be the 
impact on access to the next generation of medications if price 
controls like those in Europe are implemented? How do you see a 
solution to the balance between affordability and innovation?

    Mr. Davis. Yes. Senator, thank you for the question. You 
know, I would start with at Merck and what are the principles 
we apply when we think about how we price drugs, because I 
think it also gets to some of the other questions that have 
been asked about what stops you from just raising your price.

    I can tell you that, as a company, and this goes back to 
the core of who we are over 130 years and is truly the purpose 
we live by, and that is we look at several elements. We look at 
what is the benefit to the patient. But equally we do look at 
what is the benefit of the cost to the system. We look at 
access and affordability.

    I can tell you, for instance, when we launched KEYTRUDA, we 
launched at parity to market price, even though we knew we had 
a better product, in part because we wanted to ensure access.

    We look at all of that, and then we look at what does it 
take to absorb the cost of all the failed drugs. We know 90 
percent of all drugs we will bring into the clinic fail. The 
reality of it is the drugs that make it have to fund that 
failure. In the case of Merck, it is just interesting, I think, 
to point out.

    Since 2014, the minority of drugs we have launched have 
actually even returned their cost of R&D. The minority--I am 
sorry, the majority have not returned their cost of R&D. So, it 
means that when you do get the rare drug that succeeds, it has 
to help cover that. So that is what we are facing in the 
system.

    But as we look at how can we fix this, I think we have to 
get to the out-of-pocket costs and we have to find a way to 
really drive that down, and then continue to find ways to bring 
better access through the types of access programs we have all 
talked about here, whether it is through patient assistance 
programs, copay assistance, all of the ways we can help the 
individual person address that affordability challenge, which 
we all know someone who has faced that, and I don't want to see 
anyone face that.

    Senator Collins. NIH provides a lot of assistance in the 
research that--and sometimes partners with pharmaceutical 
companies. How is the fact that there has been Federal help, 
for example, in the development of the Covid vaccines, how does 
that factor into the pricing?

    Mr. Davis. Well and obviously, as we look at the system, 
the ecosystem we live in, it is important to understand that 
all players are important. So, the role of NIH is important.

    But the NIH basically does the basic research, if you will. 
They provide the lock but they don't have the key. We provide 
the key. We take that basic research. We sculpt it into a 
molecule.

    We are able to say, now that we know a target of disease to 
go after, how do we do it? And then we spend our resources in 
the most expensive part of the development and the riskiest 
part, which is the clinical development, to ensure safety and 
efficacy, to bring the drug to market. So, we need all players 
in the ecosystem----

    Senator Kaine. If I could ask you to start to wrap up for 
Senator Smith----

    Mr. Davis. Yes. And it is important that we do that. And 
so, I think as you look in the Covid vaccine situation, we 
didn't have--we did not receive any Federal funding for what we 
did. We spent all of our own resources at risk.

    We commented, it was $2.5 billion. We did that at risk. But 
one of the programs we did do, LAGEVRIO, did have some basis 
from the NIH, and they were compensated for that.

    Senator Kaine. On behalf of the Chairman, Senator Smith.

    Senator Smith. Thank you, Mr. Chair. Thanks to all of you 
for being with us here today. I appreciate it. I am going to 
start with you, Mr. Davis. Could you tell us how much Merck 
spends on advertising every year?

    Mr. Davis. If you look in the United States, our direct to 
consumer advertising is about $350 million.

    Senator Smith. Then also direct to medical providers?

    Mr. Davis. I don't have that. I wouldn't know that. We can 
come back to you on that one.

    Senator Smith. Okay. I think it is approximately $2 billion 
overall is what I think--is what--worldwide. That is worldwide 
number. Pardon me for that.

    Mr. Davis. I don't recognize that number, but we can come 
back to you.

    Senator Smith. Okay. okay. And so one thing I bet most of 
us on this panel could agree with is that nobody likes that 
advertising. Doctors don't like it. Patients don't like it. 
Apparent--I know that the American Medical Association has 
called for a ban on direct to consumer advertising.

    Could you just address this issue? And I think it is also 
true that you sued to prevent regulations that would require 
you to disclose the list prices in that advertising. Could you 
address that?

    Mr. Davis. Yes, I am happy to do that, Senator. So, direct 
consumer advertising serves an important purpose.

    There has been studies that have shown that it drives 
better adherence. It drives patients to understand the use of 
their medications. And it overall will bring benefits to the 
health system. I do believe there is a valid educational piece 
to direct to consumer advertising.

    I also believe we need to be full and fair and transparent 
in helping people understand the cost of drugs. The reason we 
brought suit, the one you are referring to, was our concern 
that the specific request that was in that was that you show 
the list price of the drug.

    Our concern, based on all the conversations we have had 
here this morning, is that can often be very misleading, and in 
fact, could cause patients not to seek the drug when in 
reality, take JANUVIA as an example.

    If we put on an advertisement that it is $6,900, when in 
reality, if you take the total in the system, it is $690, I 
would hate to think someone doesn't show up to get that 
medicine because they don't understand the price.

    What we supported instead, which is what we do today, in 
all of our directing consumer advertising, we drive you to a 
site that gives our list price, it gives all of the rebates we 
provide so that you can see it, and we get further information 
and education.

    We think that is a more effective tool and a more accurate 
tool to stop the misperceptions that exist. That is why we 
raised that concern.

    Senator Smith. One of the things that I think is really 
confusing for patients is to try to figure out what--you know, 
how much things cost in the health system overall, including in 
prescription medications.

    Let me just ask you, I am going to ask you about this, Dr. 
Boerner, how much would acute myeloid leukemia patient, how 
much would that patient pay every month for your drug IDHIFA, 
the cancer treatment. That if let's say they had a 20 percent 
coinsurance responsibility.

    Mr. Boerner. Senator, I don't have that exact figure off 
the top of my head. What I can say is that for most of our 
world oncologic drugs, we are able on the commercial side to 
bring copays down to a very low amount and in many cases to 
zero.

    Now, to a point that was raised earlier, we have to do more 
to make that more widely available and an easier process to 
actually get into those programs, and we are working on that.

    We have been doing that since I became CEO in November, and 
that is something we are committed to. And again, I would like 
to be able to provide that same benefit on the Medicare side.

    Senator Smith. But if you have a list price that is--and I 
get what you all are saying about the list price is just the 
list price. That isn't necessarily what people pay. But if you 
have a list price and then you have a co-insurance 
responsibility that is a percentage of the list price, that 
could still be quite a significant amount of money. I mean, I 
think it could be in this case $6,800 a month for this 
medication.

    Mr. Boerner. Senator, what you are pointing out is 
absolutely why we believe we have got to also look at ways to 
bring that list price down.

    We have been discussing at length this sort of the 
complexity the intermediaries play in this system that lead to 
incentives to drive those list prices up.

    But unquestionably, because out-of-pocket costs and co-
insurance, for example, are typically tied to that list price, 
we have to find ways to bring that list price down.

    Senator Smith. Well, I would agree with that. I think that 
is a really significant issue, particularly as I think some of 
my colleagues have pointed out that when you get to these 
patient assistance programs, they are quite confusing and hard 
to navigate through.

    I think that, sometimes that is only available if you have 
commercial insurance. And if you don't have commercial 
insurance, then you could really be flat out of luck.

    Mr. Boerner. Senator, that is correct. And in fact, I 
reference that since I became CEO, one of the things we have 
done on the commercial side is really begun to look at how many 
hoops do patients have to go through to get access to these 
copay support programs?

    You know, we have provided $2.5 billion in copay support 
programs over the last 5 years as a company, provided $12 
billion in free product. But we have got to make it easier and 
more universally available for commercial patients to get 
access to that.

    Again, there are some constraints to us being able to 
provide those services on the Medicare side. There is some very 
legitimate concerns to providing those on the Medicare side, 
because you don't want to obviously be diverting patients from, 
for example, generic products onto these as a result of the--
onto branded products as a result of this, but we would love to 
work with Members of Congress to find ways to do this 
constructively.

    Senator Smith. Is it true that the cost of those patient 
assistance programs, you can then turn around and deduct on 
your taxes, to lower your tax liability?

    Mr. Boerner. Senator, I don't know the answer to that, but 
I can follow-up.

    Senator Smith. Okay. I want to get at the question--I just 
have a minute left and so let me see if I can do this really 
quickly.

    One of the challenges that we have are some pretty--often 
pretty severe shortages in medications. And I have heard so 
many stories about this from Minnesota folks who, they have a 
preferred treatment for a disease and then the drug is not 
available.

    I want to ask you all--I will just, I will cut to the chase 
on this, Senator Collins and Senator Murkowski and I have a 
piece of legislation that would require reporting of supply 
chain disruptions that could lead to shortages in medications, 
and I would like to know whether you all would support that 
concept to help people understand where these shortages are and 
where the route chemicals for their medications are coming 
from.

    Mr. Duato. We work--excuse me, we work very closely with 
the drug shortage office at the FDA, and we are constantly 
doing all efforts to dual source the entire supply chain of our 
medicines so there is no discontinuation in our supply.

    Mr. Davis. I am not familiar with the specifics of the 
bill, but I would say in general, the more we can continue to 
help understand what are the shortages, we should address that.

    But I think we got to get at the fundamental issues of why 
do we have a shortage in the first place. I can tell you in our 
example, we make a drug called----

    Senator Kaine. Again, you are over time. So, could you take 
those answers for the record, Senator Smith?

    Senator Smith. I would be happy to, Senator Kaine.

    Senator Kaine. Great. On behalf of the Chair, Senator 
Braun.

    Senator Braun. Thank you. I am going to start with Mr. 
Davis. What would your definition of a free market be?

    Mr. Davis. One where you are able to bring goods, and if 
those goods bring value and the system sees value in them, you 
are able to bring those at a value you think is fair and 
reasonable and negotiate with the other sides, in a world where 
you have free competition.

    Senator Braun. So right there you said negotiate. Most free 
markets are typified by this. And I would like y'all to listen 
to this because I think the big challenge, if I were in your 
seat running your companies, is that it is not a free market.

    A free market means you have got a lot of choices, you have 
got vibrant competition, no barriers to entry, and you have got 
an engaged consumer. Now, do any of those apply to your 
business?

    Mr. Davis. I think all of those apply. But I think one 
thing we need to understand in our--in the way our business 
functions, for a period of time, we have exclusivity. That is 
during the patent protection period. Thereafter--and in that 
period, we must reap a return on the investments we make to 
fund the R&D we do. Thereafter, drugs are freely available and 
there is total competition in that space.

    Senator Braun. But yet you would sue to keep transparency 
in terms of what the consumer price would be or the list price, 
or you do things like tweak patents. That doesn't happen 
anywhere else. And you are not alone there. Hospitals and 
insurance companies do all this stuff behind closed doors as 
well.

    I would think if I were in your shoes, you have got maybe a 
few years before--so none of that stuff really applies to you 
guys as I listed it. You might try to spin it that way, but it 
is not the case. I fixed it in my own business back in, oh, 
probably 15, 16 years ago by creating health care consumers, by 
trying to avoid the system through wellness and prevention, 
which you don't hear much about.

    But when you do need it, it has got to be there where you 
have got a lot of options. And I understand you are a little 
different in terms of the R&D that goes into it. Then many 
years ago, you created a monster called the PBM that now is 
sucking all kinds of money out of the market.

    Why can't you fix that in terms of doing alternative ways 
that would just smother the market with transparency and get it 
into a different channel of distribution? You got a guy like 
Mark Cuban that is trying to start a company, Cost Plus.

    You are going to probably need to find things like that or 
you are going to be appearing more often here, and it is going 
to be where you are going to be regulated like a utility would 
be. Because in my opinion, you operate more like an unregulated 
utility kind of cloak yourselves behind free enterprise, and 
now it is up to 18, 19 percent of our GDP. Something has got to 
give.

    Senator Sanders talked earlier about things costing 10 
percent to 25 percent overseas, and I think I heard the excuse 
was, well they have price controls. Well, I think I would be 
smart enough to know that sooner or later that will occur here. 
It is going to be up to the industry to fix it, and you are 
probably just 15 to 20 percent of the problem.

    You could fix the part that you get the most heat for by 
maybe trying to get more customers like the business Mark Cuban 
is putting out there that is based upon transparency. If not, 
you are going to get all the people that don't own health care 
businesses finally saying, we are not going to pay through the 
private side, the insurance system, three to four times what it 
costs through Government.

    I will let you complete the logical chain. You are going to 
have Government as your business partner. So, why would you 
persist in a paradigm that looks like you are going to be 
headed toward what you definitely don't want, and that is doing 
more business with the Federal Government? Mr. Davis.

    Mr. Davis. Well, I don't want to speculate on the system as 
a whole. I think what I focus on is what do we need to do to 
drive the mission of our company, which is in the near term, 
bring access and affordability.

    Make sure that when we bring affordability, we don't 
sacrifice access. Often patients lose access when we try to 
address affordability. And that we fund innovation. And that 
is--whatever ultimately we come to as a solution, if we can 
protect those elements, I think we will both help patients of 
today and we can make----

    Senator Braun. Have you ever looked at having some other 
system of distribution, like almost any other manufacturer 
would have when you make something? You do a pretty good job 
making the pill.

    You completely default on how it gets from where you make 
it to who uses it. You are putting independent pharmacies out 
of business because the PBMs and other kind of peculiarities in 
the industry.

    Have you thought about, at least in the place where most 
people confront the health care system with a prescription, 
about trying to restructure that, smother it with transparency 
and options to where people can get their stuff, and then apply 
that to biologics and the entirety of a spectrum, and don't 
tweak the patents and try to preserve a broken system.

    Mr. Davis. Yes. So, we have considered should we look at 
going direct.

    The reality of it is, as a single company, when you have 
now today three PBMs controlling 80 percent of the lives in 
this country, the ability to do that takes a portfolio of 
characteristics that we don't currently have.

    I don't believe any one company can do that. That is why we 
continue to believe we need free market, but we----

    Senator Braun. I bet if you collectively got together with 
the other drug companies and encouraged others like a Cost Plus 
that Mark Cuban has done to where you are going--I think you 
have got it under your control not to perpetuate a bad 
situation that was created by you. I mean, you make it.

    You don't have to necessarily use PBMs. Why don't you 
encourage an alternative structure? At least show us that you 
are wanting to compete. Because all I can tell you is that if 
you don't take it--take the bull by the horns, do something 
different, you are going to be like all other countries.

    You are going to be dealing with the Federal Government as 
a regulated entity, and I think we could lose some things. But 
in the meantime, Senator Sanders pointed it out, it costs a lot 
more here, the health care outcomes are better there, and 
pharma, hospitals, and insurance better figure it out before it 
is too late.

    The Chair. Senator Hickenlooper.

    Senator Hickenlooper. First, I will echo what Senator Braun 
said. Second, I will thank each of you for taking the time. And 
I know how busy you are, and I appreciate you coming in and 
answering questions.

    You know, I grew up like most of us, I think, looking at 
our pharmaceutical companies as treasures, as companies that 
America could be rightfully proud of as innovators. But that is 
slipping away.

    When I am back in Colorado, I hear much--let's just be 
generous--let's be gracious and say a wider diversity of 
opinion. According to a recent YouGov survey, more than a third 
of Americans report that cost has prevented them from filling a 
prescription they need.

    A separate Kaiser Family Foundation poll, this one just 
from last year, said that 83 percent of Americans rated profits 
made by pharmaceutical companies as the overwhelming 
contributing factor to the high cost of prescription drugs.

    You have all talked about the R&D, the innovation, which 
there could be no question about that, but what is the value of 
these cutting edge drugs and therapies if so many people can't 
afford them?

    I think that widespread belief that Americans feel your 
companies are too focused on profits, it damages your 
credibility and I think the culture of your businesses and the 
culture of your customers.

    I want to see how you feel about that in terms of the 
importance of people believing in your mission again, or 
believing as strongly that you are good leaders of the mission. 
Why don't we start with you, Mr. Duato.

    Mr. Duato. Thank you, Senator. I can assure you that the 
50,000 employees of Johnson & Johnson in the U.S. wake up every 
day thinking what they can do for patients, and I can represent 
proudly that sentiment.

    What can we do to address the real inequity that exists in 
the U.S., which is that seniors and patients that need the 
medicines the most pay higher out-of-pocket costs. In my view, 
that is the real problem.

    There are other things that are positive in the U.S. 
healthcare system, like the access to breakthrough, cutting 
edge treatments earlier than any other country in the world, 
but it is true, we have a real inequity there.

    I think we have to work together in order to address that 
inequity, and there is multiple ways that we can work on that. 
One is to make sure that----

    Senator Hickenlooper. Just give me one, because I want to 
make sure--I have got a couple more questions.

    Mr. Duato. One is to make sure that the discounts and 
rebates, we paid $39 billion in 2022, that we pay to the 
middleman, are passed to the patients, so we can lower the out-
of-pocket costs.

    Senator Hickenlooper. Got it. That is a good one.

    Mr. Davis. Senator, I appreciate the question. And I can 
tell you at Merck, we have lived by the statement our founder 
put out, that medicines are for the patients not for the 
profits. But so long as we have remember that, the profits 
follow.

    It really says we can both do good and do well for our 
shareholders together. And there is a balance. And I think what 
you are talking about is where is the balance? And we are 
always trying to find that balance.

    I am very much focused on it as the CEO of the company, 
because the legacy of Merck, the pride of our 70,000 employees 
and what we do matters to me, and a strong belief in the 
mission of the company.

    It is why I came to the company, and it is why I am in this 
industry. So, we are very committed to that. But I do think the 
challenge we continue to face is the structural issues in the 
system that are creating the problem.

    Senator Hickenlooper. We have heard that. I get it.

    Mr. Davis. Yes.

    Mr. Boerner. Senator, the challenge that we are facing in 
this Committee today and what we have been discussing is, how 
do we ensure affordability today without sacrificing tomorrow's 
innovation? That is what we were focused on.

    We have got to make sure we do what you have heard from all 
of us, are bringing highly innovative medicines to patients, 
but we also have to do a better job of ensuring that we are 
bringing drugs like ELIQUIS to market, which save the health 
care system money.

    For every 100,000 patients on ELIQUIS, we estimate we save 
the health care system $5 billion. We have got to place a high 
bar on the medicines we bring to patients and stick by that as 
an industry.

    Senator Hickenlooper. All right. Well, and I appreciate 
that. And I do--health is so precious to people that they will 
pay almost anything if it is serious, so that in a funny way, 
sometimes we see increasing costs based on that calculus of how 
much money we are avoiding, which I think can be a false 
pathway sometimes.

    But certainly, as a user of ELIQUIS and grateful 
recognizing what the old system was and how better ELIQUIS is, 
I salute that. The higher cost and the lower cost in other 
countries, you have all answered that.

    I understand there is some price setting there. But I think 
the solution--I mean, we are paying double. Even when you take 
out the PBMs and the list price from the net price, we are 
paying double what Europe or Canada and Australia are paying, 
and somehow that has got to be a negotiation that the rest of 
the world probably has to pay more, and you guys are going to 
have to figure out a way to do that.

    I am not saying it is easy, but it is one of those things. 
I want to--it is one of those things we have to address as a 
country and as an industry. I want to ask, earlier there is 
some mention of river blindness, of issues in underserved 
countries.

    I want to see if each of you have a--just a quick example 
of something where your company has gone in there, obviously we 
have heard about Merck, but done something in a country like 
that where it really was philanthropic.

    Mr. Duato. Thank you, thank you. We dedicate billions of 
dollars every year to treat diseases that do not have an 
economic counterpart. For example, one of the diseases that we 
have contributed to its treatment and eradication is intestinal 
worms.

    You know, we donate billions of pills every year in order 
to treat intestinal worms. We have programs to support 
frontline health care workers in the developing world that have 
supported more than a million frontline healthcare workers.

    We develop a medicine for multidrug resistant tuberculosis, 
which is widely used in every single protocol and which we are 
not enforcing our patents as we speak. So, we have made 
significant contributions.

    Senator Hickenlooper. That is impressive, but we most 
people don't know about that stuff. Mr. Davis.

    Mr. Davis. Well, you mentioned Dymethazine donation, where 
we have $4.6 billion. I would add another one we did. You know, 
recently--and we were very focused on COVID now, we forget 
about Ebola and the scourge of Ebola that hit in 2014, 2016, in 
Western Africa.

    We actually--and no profit to us, developed an Ebola 
vaccine. Have distributed that, continue to distribute that 
drug to address that devastating disease.

    Senator Hickenlooper. Mr. Boerner.

    Mr. Boerner. Senator, we had as a reference to large 
presence in HIV, and I am incredibly proud that in the late 
90's, our foundation worked with governments and local 
communities to set up the core infrastructure to deliver HIV 
medicines to sub-Saharan Africa, focusing on children.

    The President of Botswana recently congratulated the--or 
thanked the BMX Foundation for saving a generation from 
extinction, his words. We are now leveraging that same 
infrastructure, partnering with Baylor College of Medicine, to 
reverse something in childhood cancer----

    The Chair. Mr. Boerner, thank you. I am sorry. His time has 
expired. Apologize.

    Senator Hickenlooper. Anyway, thank you all. And I think 
those stories need to get out. But we also have to solve this 
issue of the price disparity.

    The Chair. Senator Kaine.

    Senator Kaine. Thank you. Since I have 7 minutes, I am 
going to do 2 minutes to celebrate innovation and then 5 
minutes to go after the cost question.

    On the innovation side, there is an article that came out 
in the Health Affairs Journal in September 2020, and I would 
like to put it in the record, Contributions of Public Health, 
Pharmaceuticals, and other Medical Care to U.S. Life Expectancy 
Changes, 1990 to 2015.

    [The following information can be found on page 110 in 
Additional Material.]

    Senator Kaine. The article looked at the fact that between 
1990 and 2015, life expectancy in the U.S. increased by 3.3 
years, and the authors of the researchers and authors of the 
study were able to say 44 percent of that increase was because 
of public health measures, 35 percent of the increase was 
attributable to pharmaceutical innovation, and 13 percent of 
the increase was attributable to other improvements in medical 
care, with 7 percent unknown.

    But the fact that pharmaceuticals led to more than a third 
of that increase in life expectancy is something that we need 
to acknowledge as a context to this discussion.

    In a Virginia example--Mr. Davis, you will know this 
example very well. In Elkton, Virginia, there is a plant that 
produces GARDASIL, which your company developed and began to 
market in the mid 2000's--2006, 2007.

    It is a vaccine against a virus, the HPV virus, that 
create--that leads to a lot of cancers, especially cervical 
cancer and other as well. And that has just been revolutionary 
in terms of cervical cancer.

    We were one of the first states to put a vaccine mandate in 
place for HPV vaccine, and cervical cancer among vaccinated 
populations has dropped 70 plus percent just in the last 15 
years. I mean, it is truly remarkable.

    I have been to that plant, and I know how proud people are 
to work there and believe that they have been at the vanguard 
of a revolution that has helped so many Americans, but people 
all around the world. So, that is the good side.

    Okay, now we got to get to the reality for the hearing 
which is, people here still pay too much out of pocket. 
Together with my colleagues here who voted for the Inflation 
Reduction Act, we said for a long time that we ought to be 
negotiating on prescription drug prices and we did it. And it 
passed by only one vote in the Senate.

    Each of us who voted for it, we were the deciding vote. And 
I know not everybody likes that, but it is working. We put the 
cap, the out of pocket cost cap on seniors under Medicare.

    We did the $35 insulin for seniors on the Medicare. And 
thank goodness that sent such a strong market signal that many 
of the companies that were reducing insulin cost to $35 a month 
said, we will just do it for not just Medicare patients, but 
others. And they wouldn't have done that had we not taking that 
step in the IRA.

    But there is more that we can do. And I really want to 
focus on one thing, because I think it is just right before us. 
This Committee took strong bipartisan action about 9 months ago 
on this PBM reform bill that is sitting on the floor of the 
Senate right now.

    I don't expect you to be the masters of all the details of 
that bill, but if we were to pass a meaningful PBM reform 
bill--and much of the conversation today has been about this 
weird difference between list prices and actual net prices.

    If we were able to pass a meaningful PBM reform bill, what 
would that do to the cost that American patients are paying out 
of pocket for pharmaceuticals? Please, and I will ask each of 
you to address that. Mr. Duato.

    Mr. Duato. Thank you. Thank you, Senator, and thank you for 
recognizing the value for patients of pharmaceutical 
innovation.

    If we were able to pass meaningful reform, meaning a reform 
that would delink the revenues of the PBMs and insurance 
companies from the list price, and that would pass rebates and 
discounts to the patients, I would anticipate two things. One, 
it would affect list prices.

    Two, it would significantly reduce the out-of-pocket cost 
for the patients. So, I welcome the bipartisan efforts of this 
Committee to go through PBM reform. It is a linchpin of 
lowering the cost for patients.

    Senator Kaine. Mr. Davis.

    Mr. Davis. Yes. You know, I also believe that in the 
provisions that are in the bill, at least some of the big ones 
around transparency and also de-linking are definitely steps in 
the right direction. I think we need them.

    There are a lot of what we have all been focusing on in our 
testimony and in the question and answers, and I do think it 
will--it can benefit patients if we move in that direction, so 
I am very supportive of what you are trying to do.

    Senator Kaine. Mr. Boerner.

    Mr. Boerner. Senator, if we could do that and we could 
reduce the significant amount that we are paying in rebates to 
intermediaries who are not passing those rebates on to lower 
out-of-pocket costs, speaking on behalf of Bristol-Myers 
Squibb, we could work almost immediately to begin to bring down 
list prices, and I would welcome the opportunity to work with 
this Committee to do that.

    Senator Kaine. Well, I know that in conversations with the 
Chair, the intent is to move on that bill pretty soon, 
potentially with some other health items as well. And I think 
that the opportunity is right before us.

    That bill passed out of Committee overwhelmingly 
bipartisan. I think it was an 18 to 3 vote, and that tells us 
that we would have some amendment on the floor. The de-linking 
provision was not in the bill.

    The Chair and Ranking were supportive of the concept, but 
at the time we marked it up, the CBO hadn't given us the score, 
and so we agreed that we would wait on that until we got on the 
floor. But the CBO has now scored the de-linking bill that 
Senators Marshall, Capito, Braun, and I, and Tester have co-
sponsored, and the CBO says that it would save about $650 
million over 10 years.

    That is in addition to the savings for patients. So, I know 
we would try, hopefully on the floor to add that in. My 
colleagues have all talked about the reality of what they hear 
from constituents, and I hear the same thing.

    I know, I think the complexity of the system and the fact 
that list price is different than net price, and the fact that 
we have rebates, ``rebates,'' that never show up in people's 
pockets. And you have programs to try to assist folks who can't 
afford medicines, but they have a six page application form, 
and both a sticker price might scare them off or a six page 
application might scare them off.

    We just have to simplify this and cut out a lot of the 
middlemen in this instance. I have long said to the Chair that 
I am very concerned about PBMs because we might fight with you 
about whether you are researching enough or should your 
research be more than your stock buybacks.

    PBMs aren't doing a single bit of research. They are not 
producing a single product. And yet, they seem to me to be the 
ones that are scooping up the most of money that is just 
sloshing through the system right now, so I hope we can address 
that soon. Thank you, Mr. Chair.

    The Chair. Senator Lujan.

    Senator Lujan. Thank you, Mr. Chairman. Thank you to 
everyone who is here today. Biosimilar competition is one way 
to drive down drug costs for patients and increase access. 
Would you all agree with that?

    Mr. Davis. Yes.

    Mr. Duato. Yes.

    Mr. Boerner. Yes.

    Senator Lujan. I appreciate that. Now, one of the concerns 
I have is we often see competition stifled in this particular 
area with biosimilars.

    The concern that I have is tactics and delay that lead to 
entry of the lower cost biosimilar drugs keep patients from 
often having a choice, but also being able to afford their 
prescription drugs.

    Now, Mr. Davis, yes or no, will you commit to not blocking 
other drugmakers from entering the market when the primary 
patent on KEYTRUDA expires?

    Mr. Davis. Well, Senator, at Merck--and we do believe that 
biosimilar competition and generic competition is core to the 
system. We need the patent protection, and then we need a 
robust biosimilar and generic market.

    I can tell you that, when the composition of matter patents 
expire on our drug KEYTRUDA, I fully expect, and I will not try 
to stop a biosimilar IV version of KEYTRUDA coming on to the 
marketplace.

    Senator Lujan. Is that a yes?

    Mr. Davis. That is a yes.

    Senator Lujan. I appreciate that. Mr. Boerner, yes or no, 
will you commit to not blocking other drugmakers from entering 
the market when your primary patent on ELIQUIS expires?

    Mr. Boerner. Senator, we have a number of patents on 
ELIQUIS, and we have certainly anticipated that when the 
patents that are most relevant for that product expire, we will 
have generic competition in this case, not biosimilar, but 
generic competition, and that would be around 2028.

    Senator Lujan. When the primary patent expires on ELIQUIS, 
will you commit to not blocking other drugmakers from entering 
the market?

    Mr. Boerner. Senator, I don't--I am not a patent attorney, 
so I am not entirely----

    Senator Lujan. You are the CEO.

    Mr. Boerner. Senator, I would say that when the most 
important, the most relevant patents expire on ELIQUIS, we will 
welcome generic competition.

    Senator Lujan. Is that a yes or no?

    Mr. Boerner. That is a yes, Senator.

    Senator Lujan. Mr. Boerner, I have the same question on 
OPDIVO. Yes or no, will you commit to not blocking other 
drugmakers from entering the market when your primary patent 
expires?

    Mr. Boerner. When the most relevant patents for OPDIVO 
expire, we would fully expect biosimilars to enter the market.

    Senator Lujan. Your answer is yes when--the words you are 
using are relevant patents, not the primary patent. Is that the 
clarification that I can--?

    Mr. Boerner. Yes, Senator. I am just not certain exactly 
what the most--what you are referring to is the primary patent, 
but when we--when those patents expire, we welcome generic 
company.

    Senator Lujan. First patent, primary, the initial one. The 
one that was filed when you got this drug done. Look, I am not 
a lawyer. I am not a CEO. I don't work at all. If I am not 
using the wrong words, please help me a little bit. You know 
what I am talking about here.

    Mr. Boerner. Yes. When the composition--generally it is 
when the composition of matter patent expires.

    Senator Lujan. That doesn't sound like a yes. I hear what 
you are saying. I am going to move on. Mr. Duato, we know that 
J&J entered into settlement agreements to delay the launch of 
some STELARA biosimilars in 2025.

    This will prevent competition in the drug market and 
Medicare negotiation, the way I read it. Will you commit to 
lowering the price of STELARA in 2025?

    Mr. Duato. Senator, thank you for the question. I 
anticipate that the price of STELARA will actually be lower in 
2025, as it has been lowering during the past decade. The path 
of STELARA has been a steady decline in the net prices, and I 
anticipate that the biosimilars in 2025 will further decrease 
the price of STELARA.

    Senator Lujan. Are you answering yes to my question?

    Mr. Duato. Yes.

    Senator Lujan. I appreciate that. Now, we have heard over 
and over that Medicare drug pricing negotiations will kill 
innovation.

    Mr. Boerner, I want to get a few things clear. Yes or no, 
is it BMS's position as stated in its lawsuit against the 
Health and Human Services that, ``the IRA's real victim is 
innovation, and in turn, the millions of patients who are 
counting on the pharmaceutical industry to develop new 
therapies, will save lives, and improve health and well-
being.''

    Mr. Boerner. Senator, we have serious concerns about 
elements of IRA, specifically the fact that this isn't an 
actual negotiation. We obviously like some elements of IRA, 
notably the out-of-pocket costs, but----

    Senator Lujan. I appreciate that, but do you stand by this 
statement that was filed in the lawsuit to the United States 
Health and Human Services Department?

    Mr. Boerner. We have very serious concerns about the 
implication of IRA----

    Senator Lujan. Do you stand by this statement?

    Mr. Boerner. Yes, sir.

    Senator Lujan. Yes or no, is it also true that you said in 
your Q4 earnings call, ``we see a legacy portfolio of well-
established products facing headwinds such as IRA.'' Through 
this portfolio--``or though this portfolio is declining, it is 
expected to continue to generate strong cash-flows to enable 
investment in our future growth drivers.'' Do you stand by 
that?

    Mr. Boerner. Yes. We actually have a legacy product 
portfolio that will continue to provide the necessary funds to 
innovate and bring the next wave of innovation to market, yes, 
Senator.

    Senator Lujan. Based on that, can I interpret that cash-
flows were generated even though the IRA went to place, and 
they are sufficient to support new innovations, as was reported 
to the investors?

    Mr. Boerner. Senator, we don't yet have IRA having been 
fully implemented negotiation. That process is ongoing. But we 
are generating cash-flows off of our existing products to fund 
innovation, sir.

    Senator Lujan. The statement in the same filing to Health 
and Human Services, what that case said, this portfolio--though 
the portfolio is declining, it is expected to continue to 
generate strong cash-flows to enable investment in our future 
growth drivers. So, is it generating cash?

    Mr. Boerner. Our legacy portfolio products is continuing to 
generate cash, yes, sir.

    Senator Lujan. So even in the face of IRA, you are 
generating cash?

    Mr. Boerner. Again, Senator, we haven't actually finished 
negotiation yet on our first drug, which is----

    Senator Lujan. I will move on. I appreciate that very much. 
This is one of--look, I grew up on a small farm in Northern New 
Mexico. When a cow does its business in the barn, there is a 
pile of stuff I have got to go clean. That is what it is. It is 
manure. It has other a lot of other languages, but that is what 
it is.

    I don't understand why this is so complex. The people in 
the room make these darn things so complex when no one 
understands them. I am beside myself, Mr. Chairman, that when a 
question was asked, can you break down where the money goes in 
this particular drug?

    The answer is, well, it is complicated. We don't know. I am 
hoping it is included in the filings for investors that people 
know where the money--well, I will follow-up with more 
questions.

    I have several, Mr. Chairman, but you all, help me and 
other laymen across the country and around the world to be able 
to understand what the heck is going on. You all have some good 
lawyers.

    Maybe 1 day I will go to law school and try to get a gig 
with one of you. I don't know, but this is just frustrating. 
Thanks, Mr. Chairman.

    The Chair. Senator Markey.

    Senator Markey. Thank you, Mr. Chairman, very much. 
Research is medicine's field of dreams from which we harvest to 
the indings to give hope to families that a cure can be found 
for the disease which has been running through their family's 
history. That is what it is all about. That is what we all hope 
for.

    That is what I represent in Boston, in Kendall Square, two 
miles from my house, and I have been for 47 years in Congress 
trying to help that industry to be able to grow and to be able 
to get the resources from NIH, all the resources to make the 
breakthroughs, to give hope to ordinary families, like my 
father who drove a truck for the Hood Milk Company.

    The companies have done great work over the years, but that 
funding, which I was on the Health Committee in these--in the 
House for 36.5 years, and I fought very hard for NIH funding, 
and those NIH dollars delivered results. For example, between 
2010 and 2016, every drug approved by the FDA was in some way 
based on biomedical research funded by the NIH.

    My father, the truck driver at the Hood Milk Company one 
mile from Kendall Square, he paid his taxes to make sure that 
the funding would go to NIH so that research could be made in 
order to make the breakthroughs that would help him and help 
his families.

    Merck's former president, and you have already quoted him, 
Mr. Davis, he said we never try to forget that medicine is for 
the people--you know, my father--it is not for the profits. And 
Merck's website states that this philosophy is embraced by 
their leaders and the employees to this day.

    FDA approved the cancer drug KEYTRUDA in 2014, based on NIH 
research that my father helped to pay for as a truck driver at 
the Hood Milk Company. And last year, the list price was 
$191,000 for this cancer drug that helps patients with lung 
cancer and other cancers, $191,000 a year.

    The annual meeting and proxy statement of 2023, says that 
it brought in $21 billion in revenue for the company, and it 
was driving key growth for Merck's business. And at the same 
time, patients are also straining under insurance premiums, 
struggling to afford this drug, taking on debt, or skipping 
treatments altogether.

    Merck has now filed a 168 patents on this cancer drug, 
KEYTRUDA. And as we know from this early discussion when we 
discuss this, we can be talking about primary patents or 
secondary patents.

    What I heard earlier was that the witnesses in general just 
want all the secondary patents to also be exhausted. Now, to a 
very large extent, of course, 168 patents then bring at least 
168 lawyers into the room.

    How do we use this patent in order to thwart another 
smaller company, hundreds of smaller companies from now making 
the breakthroughs that advance even further the breakthroughs, 
innovating, discovering. 168 new patents extend further, using 
lawyers, you know the time at which there can be a lower price 
drug made available to people so that they can get the 
treatment, which they need for lung cancer.

    Yes, we believe in competition, and we really believe in 
competition. In Massachusetts, we believe in Darwinian paranoia 
inducing competition. But when there is a monopoly on a drug, 
which is the key drug, there is no competition.

    There is no paranoia if 168 patents just extend and extend 
the ability to have new companies, smaller companies, smarter, 
new scientists to make the additional breakthroughs. And that 
is the play. We understand the play.

    That is how lawyers get into it, not scientists. You keep 
the lawyers, keep the smarter new 25 year old out with the new 
insight just by extending and extending. I do believe in 
research.

    Adam Smith hated monopolies. It was the No. 1 thing he 
hated the most, monopolies. And so, in this particular 
instance, my father died from lung cancer. And my father was--
drove a truck. So, the list price for KEYTRUDA is more than his 
entire pension. That is what he got from the Hood Milk Company.

    One year of his entire pension would have paid for 1 year, 
and he died from lung cancer. And I don't think that Judge 
Merck really intended that, that would be what the result of 
research, ultimately did.

    Mr. Davis, would it have been consistent with Judge Merck's 
philosophy to take research funded by my father's tax dollars, 
to invent a lifesaving lung cancer drug, charge him hundreds of 
thousands of dollars of his hard earned retirement for it, 
manipulate the market using patent law to block out competition 
that could have brought in new scientists that could have 
improved it and lowered the cost, and as a result, the costs 
are unaffordable.

    Then use the income you got from him to brag to your 
investors about the drug as a key growth area for your 
business. Do you think that is what Judge Merck intended when 
he had that high minded philosophy, which he used to describe 
Merck's----

    The Chair. In 17 seconds.

    [Laughter.]

    Mr. Davis. Are you looking for the answer now?

    Senator Markey. Yes.

    Mr. Davis. Okay. Well, I would say, the quote was, medicine 
is for the patients, not for the profits. But so long as we 
remember that the profits have always followed.

    What he was capturing was if you focus on bringing new 
medicines to benefit patients today and make sure you have an 
investment and a return to bring medicines for the future--
because we are a biopharmaceutical research company.

    Research is who we are. Innovation is the lifeblood of our 
company. Then we can deliver for the mission to the patients. 
And I can tell you at Merck, and I am very proud of this, we 
always put patients at the center, and we always look at ways 
to do that, and that will continue to be what we do.

    I do think actually what we are doing is consistent because 
it allows us to be sustainable for the long term to deliver for 
patients into the future.

    Senator Markey. I just think----

    The Chair. Thank you.

    Senator Markey. I just think it has turned into medicine 
for the shareholders and not medicine for the people like my 
father.

    The Chair. Okay. Let me--that is the last line of 
questioning. So, let me thank our three panelists for being 
here today, and all the Senators who participated. We are now 
going to turn to our second panel. Thank you all very much, 
gentlemen.

    Mr. Davis. Thank you very much.

    Mr. Boerner. Thank you.

    The Chair. Thank you all very much for being here. We have 
three very knowledgeable guests, panelists, on prescription 
drugs and pricing.

    Our first witness will be Peter Maybarduk, who is the 
Director of Access to Medicines Program at Public Citizen.

    He is a lawyer who has advocated for stronger price 
regulation and stronger public health protections in patent law 
in the U.S. and around the world. Mr. Maybarduk, thanks very 
much for being with us.

    STATEMENT OF PETER MAYBARDUK, J.D., ACCESS TO MEDICINES 
            DIRECTOR, PUBLIC CITIZEN, WASHINGTON, DC

    Mr. Maybarduk. Chairman Sanders, Ranking Member Cassidy, 
Members of the Committee, thank you. Public Citizen is a 
national public interest organization. We have 500,000 members 
and supporters, and for 50 years we have advocated with success 
for health and consumer protections.

    Drug prices are high because of monopoly power, leading to 
the rationing of treatment and preventable suffering. 1 in 3 
Americans has failed to take medicine as prescribed due to 
cost. Like Louise Chisholm of Fort Worth, who tells us of 
Merck's diabetes drug, I need JANUVIA to control my blood 
sugar, but I can't afford it while on Social Security.

    Robert Cherivano of Loveland, Colorado, and his wife both 
trying to afford J&J XARELTO, why do we have to pay so much? We 
are 90 and 81 on Social Security. Does anyone care about the 
elderly? Keith Clyburn, Lafayette, Louisiana, I am paying for 
ELIQUIS and other pricey meds from BMX. So, what do I do? I 
ration them so that I can eat and pay rent.

    Patients for Affordable Drugs has compiled 34,000 such 
stories from people struggling to afford their medicine, and 
that is a tiny fraction, a mere sample of the heartbreaking 
problems out there.

    High prices cost people their health. They can cost lives. 
They force impossible family budget decisions. We all pay for 
high prices, whether we are patients or not, whether out of 
pocket or through higher insurance premiums and wasted tax 
dollars. Medicare and Medicaid spent nearly $200 billion on 
prescription drugs last year.

    Americans pay the highest prices in the world three times 
what other countries pay, and that is net prices not list, to 
the point of the last panel--three times more in net prices, 
the real prices. We also do the most to support research and 
development.

    The world's largest biomedical research funder is a public 
funder, the National Institutes of Health, and we should be 
very proud of it, contributing more than $45 billion a year and 
laying groundwork for many, if not most, new medicines.

    Plus, public support is now indispensable to the late stage 
development of 1 in 4 drugs also. We the people drive 
innovation together. So, Americans first pay for the research, 
then contribute to the development.

    Then on top of it, when the drug comes to market pay the 
highest prices in the world. Other countries broadly negotiate 
prices to protect their people, but here, pharma has accrued 
tremendous influence in our politics, spending hundreds of 
millions a year in lobbying, outranking every other industry.

    Now, our Government provides patent protection and 
exclusivity on medicines. In theory, this should support 
innovation. But in practice, drug corporations write the rules, 
extending monopoly power sometimes for decades, blocking 
competition far longer than this body intends.

    Senators, it is not a market in the way that you may 
believe, respectfully. The corporations testifying here today 
claim any price relief would compromise their ability to invest 
in new medicines.

    No, that framing erases the millions of Americans rationing 
treatment. It erases the tens of billions of dollars the tax 
taxpayers invest in R&D for real health priorities.

    It erases the hundreds of billions of dollars the industry 
spends on self-enrichment. Last year, drugmakers selected for 
Medicare negotiation spent $10 billion more on stock buybacks, 
dividends, and executive compensation than they spent on R&D.

    J&J and BMX each spent $3 billion more on these self-
enriching activities. And over the prior decade, Merck's 
buybacks and dividends also exceed R&D by $3 billion. J&J spent 
an impressive $43 billion more on buybacks and dividends than 
R&D over this period. Of course, drugmakers do not set prices 
according to R&D costs.

    Instead, the price of a patented drug is simply the most 
that we as a society are willing to pay to care for our sick 
and loved ones, where monopoly power blocks affordable 
alternatives, blocks market competition, and we have little 
choice.

    Today, perhaps for the first time, our Country is making 
progress, challenging high prices and rationing, including 
through price negotiation, encountering price spikes, and we 
commend the Committee's attention to this problem. But the 
problem is getting worse, much worse, and more action is 
needed.

    We should negotiate prices from the moment a drug hits 
market, not wait a decade as we are today, which cost taxpayers 
tens of billions of dollars. We support legislation before your 
Committee to strengthen market competition and transparency and 
accelerate generic entry. Ultimately, we will have to confront 
monopoly power.

    That is the rotten foundation allowing drug makers to 
project influence, to game the law, and keep prices high.

    Other real challenges, including providing patient 
assistance and challenging middlemen who take advantage, real 
problems, but these flow inevitably from the patent monopolies 
that make it so lucrative and so easy to rip off patients.

    We can, we must do better for health, for access to 
medicines. Thank you for your time. Please count us with you in 
this fight.

    [The prepared statement of Mr. Maybarduk follows.]

                 prepared statement of peter maybarduk
    Chairman Sanders, Ranking Member Cassidy and Members of the 
Committee,

    Thank you for the opportunity to testify today on the high prices 
Americans pay for prescription drugs. I am Peter Maybarduk, Access to 
Medicines Director of Public Citizen. Public Citizen is a national 
public interest organization with more than 500,000 members and 
supporters. For more than 50 years, we have advocated for stronger 
health, safety and consumer protections; for corporate and government 
accountability; and in more recent years, for affordable access to 
essential medicines and biomedical technologies.
 I. The Drug Pricing Crisis at the Hands of the Pharmaceutical Industry
    This hearing unfolds against the backdrop of a drug pricing crisis 
in the United States. The Centers for Disease Control and Prevention's 
(CDC) data from 2021 shows approximately 9.2 million Americans aged18-
64 are unable to take medications as prescribed due to costs. \1\ 2023 
Kaiser data on all adults shows that three in 10 Americans have not 
taken their medications as prescribed due to costs, 82 percent of 
Americans say the cost of prescription drugs is unreasonable, and 73 
percent say that the government is not doing enough to regulate drug 
prices. \2\ People with disabilities are three times more likely not to 
take medications as prescribed due to cost barriers. \3\
---------------------------------------------------------------------------
    \1\  Laryssa Mykyta, and Robin A. Cohen, Centers for Disease 
Control and Prevention, National Center for Health Statistics, 
Characteristics of Adults Aged 18-64 Who Did Not Take Medication as 
Prescribed to Reduce Costs: United States, 2021, NCHS DATA BRIEF NO. 
470 (June 2023).
    \2\  Ashley Kirzinger, Alex Montero, Grace Sparks, Isabelle Valdes, 
& Liz Hamel, Public Opinion Prescription Drugs and Their Prices, KFF 
(Aug. 21, 2023), https://www.kff.org/health-costs/poll-finding/public-
opinion-on-prescription-drugs-and-their-prices/.
    \3\  Id. at 2.

    Americans also confront the highest drug prices in the world, 
paying nearly three times more for the same drugs than other countries. 
\4\ For the 20 top-selling drugs worldwide, drug corporations made more 
than $100 billion from sales to American patients in comparison to $57 
billion from all other countries combined in 2020. \5\ This pricing 
disparity is even more egregious considering significant taxpayer 
funded contributions to drug development. The taxpayer funded National 
Institutes of Health is the largest public funder of biomedical 
research in the world, investing nearly $45 billion in U.S. taxpayer 
dollars. \6\ Much of this funding focuses on the foundational research 
on biological targets for drug action that drug development is based 
upon. \7\ Further, recent estimates suggest that publicly supported 
research was critical to the late-stage development of one in four 
drugs. \8\
---------------------------------------------------------------------------
    \4\  ANDREW W. MULCAHY, DANIEL SCHWAM & SUSAN L. LOVEJOY, RAND, 
INTERNATIONAL PRESCRIPTION DRUG PRICE COMPARISONS: ESTIMATES USING 2022 
DATA (2024), https://aspe.hhs.gov/sites/default/files/documents/
277371265a705c356c968977e87446ae/international-price-comparisons.pdf
    \5\  RICK CLAYPOOL & ZAIN RIZVI, UNITED WE SPEND: FOR 20 TOP-
SELLING DRUGS WORLDWIDE, BIG PHARMA REVENUE FROM U.S. SALES COMBINED 
EXCEEDED REVENUE FROM THE REST OF THE WORLD (Sept. 30, 2021).
    \6\  National Institutes of Health, Serving Society, Direct 
Economic Contributions, IMPACT OF NIH RESEARCH, https://www.nih.gov/
about-nih/what-we-do/impact-nih-research/serving-society/direct-
economic-contributions (last visited Feb. 1, 2024).
    \7\  Ekaterina Galkina, Jennifer M. Beierlein, Navleen Surjit 
Khanuja, and Fred D. Ledley, Contribution of NIH funding to new drug 
approvals 2010--2016, 115 PNAS 2329 (2017).
    \8\  Rahul H. Nayak, Jerry Avorn, & Aaron S. Kesselheim, Public 
sector financial support for late stage discovery of new drugs in the 
United States: cohort study, 367 BMJ l5766 (2019).

    Drug pricing abuses also put an enormous strain on the coffers of 
public health programs, and consequently our tax dollars. Of the more 
than $400 billion spent on retail prescription drugs in 2022, almost 
$135 billion came from Medicare and $45 billion from Medicaid. \9\
---------------------------------------------------------------------------
    \9\  NHE Fact, CMS.GOV, https://www.cms.gov/data-research/
statistics-trends-and-reports/national-health-expenditure-data/nhe-
fact-sheet (last visited Feb. 5, 2024).

    Excessive drug prices and self-imposed rationing by American 
patients are the outgrowth of unregulated pharmaceutical monopoly power 
over drug prices. Prescription drug corporations receive government-
granted patent protection on drug inventions and statutory 
exclusivities on medicines. In theory, this incentivizes innovation of 
new medicines, and it is critically important that we support research 
and development. But in practice, the rules have been written by or 
with the deep influence of drug corporations, to maximize their ability 
to extract rents from our healthcare system. Corporations extend their 
exclusive power over new drugs through an array of anticompetitive 
tactics to the detriment of American patients. \10\ For example, many 
have abused the patent system to obtain subsequent patents over the 
same medicine with marginal differences or benefits to retain longer 
periods of exclusivity, sometimes decades. \11\
---------------------------------------------------------------------------
    \10\  E.g., Aaron Kesselheim, Jerry Avorn, & Ameet Sarpatwari, The 
High Cost of Prescription Drugs in the United States: Origins and 
Prospects for Reform, 316 JAMA NETWORK 858 (2016).
    \11\  Other tactics they use to maintain their extraordinary 
pricing power over essential medicines include switching patients from 
branded medications with patent protection nearing expiry to new drugs 
with no added clinical benefit and longer patent protection. Drug 
corporations also pay generic companies to delay their competing 
products in order to extract more profits.

    Pharmaceutical companies have exploited their monopoly power to 
accrue tremendous influence in our political system and protect their 
exceptional profits. The pharmaceutical industry expends hundreds of 
millions of dollars each year in lobbying efforts to advance its 
interests, outranking every other industry. \12\ When Medicare Part D 
was established to cover prescription costs for seniors two decades 
ago, pharmaceutical companies successfully lobbied to deprive the 
program of the power to negotiate drug prices. \13\ Federal law 
requires private insurers, Medicare, and Medicaid to cover FDA approved 
drugs, which effectively provides a government mandate to buy 
companies' monopolized drugs with absent or weak measures to contain 
costs. \14\
---------------------------------------------------------------------------
    \12\  Inci Sayki, Despite record Federal lobbying spending, the 
pharmaceutical and health product industry lost their biggest 
legislative bet in 2022, OPEN SECRETS (Feb. 2, 2023), https://
www.opensecrets.org/news/2023/02/despite-record-Federal-lobbying-
spending-the-pharmaceutical-and-health-product-industry-lost-their-
biggest-legislative-bet-in-2022/.
    \13\  Amy Kapczynski, The Political Economy of Market Power in 
Pharmaceuticals, 48 J. HEALTH POL., POL'Y L. 215, 223 (2023).
    \14\  Id.

    Other countries employ cost-containing measures to protect their 
residents from drug pricing abuses, which is why the price of 
prescriptions drugs in the United States is so excessive by comparison. 
\15\ Drug companies have been happy to benefit from a slew of U.S. 
Government actions and policies that have dramatically increased their 
profits in recent decades, but they balk at any attempt to implement 
drug pricing measures that already benefit wide swathes of the world.
---------------------------------------------------------------------------
    \15\  Id. at 223; Aaron Kesselheim, Jerry Avorn, & Ameet 
Sarpatwari, The High Cost of Prescription Drugs in the United States: 
Origins and Prospects for Reform, 316 JAMA NETWORK 858, 860 (2016).

    Drugmakers' largely unregulated, and government-expanded, pricing 
power has rewarded them with exceptional profits. To protect these 
profits, pharma trade groups claim that any measure that could deliver 
drug pricing relief to Americans will restrict resources to invest in 
new medicines and help patients in the future. \16\ That framing 
usefully erases the millions of Americans that currently self-ration 
their medicines and are harmed due to pricing abuses. It also erases 
the tens of billions of taxpayer dollars invested annually in research 
and development, and the hundreds of billions the industry spends on 
self-enrichment.
---------------------------------------------------------------------------
    \16\  See PhRMA, States Can Help Patients Pay Less for Their 
Medicines, STATE POLICIES AND ISSUES, https://phrma.org/en/States (last 
visited Jan. 11, 2023); PhRMA, INFLATION REDUCTION ACT'S UNINTENDED 
CONSEQUENCES,https://phrma.org/inflation-reduction

    The Biden administration is making significant progress in 
addressing our Nation's drug pricing crisis through implementation of 
Medicare drug price negotiation, inflationary rebates, the cap on out-
of-pocket costs for insulin at $35 per month for Medicare enrollees, 
the caps on annual out-of-pocket expenses for prescription drugs in the 
catastrophic phase of Medicare Part D that will be set at $2,000 next 
year, and other provisions of the Inflation Reduction Act. Bipartisan 
reforms which this Committee has considered and advanced can build on 
that progress. \17\ However, far more is necessary to provide material 
relief to all patients facing unbearably high prescription drug prices, 
including people with private insurance and those without insurance. 
\18\
---------------------------------------------------------------------------
    \17\  Specifically, Public Citizen supports legislation to promote 
generic competition and lower drug prices through taking on drug 
corporation citizen petition abuse and exclusivity ``parking'', 
clarifying the scope of orphan drug exclusivity, and providing greater 
transparency for generic applicants. Additionally, Public Citizen has 
supported bipartisan measures advanced through the Judiciary Committee 
that address pay-for-delay, product hopping and citizen petition 
abuses.
    \18\  Public Citizen also supports legislation to build on the 
Inflation Reduction Act, through expanding the number of drugs 
negotiated, who benefits from negotiated prices, and reducing and 
removing the negotiation delay periods currently mandated. Public 
Citizen has also supported legislation reducing the biologics 
exclusivity period to 5 years, in parity with that afforded small 
molecule drugs, and legislation to require reasonable pricing of 
federally----funded medical inventions. Public Citizen has repeatedly 
called on Congress to advance insulin access reform to ensure people 
without insurance and with private insurance can access affordable 
insulin. Public Citizen also strongly supports additional solutions to 
address patent thicketing suggested by the Initiative for Medicines, 
Access and Knowledge (I-MAK). See IMAK, ADDRESSING PATENT THICKETS TO 
IMPROVE COMPETITION AND LOWER PRESCRIPTION DRUG PRICES: A BLUEPRINT FOR 
REFORM (2023), https://www.i-mak.org/wp-content/uploads/2023/12/
Addressing-Patent-Thickets-Blueprint--2023.pdf).

    To highlight the need for stronger measures to deliver drug pricing 
relief to millions of Americans, this testimony focuses on the drug 
pricing abuses of Merck, Johnson & Johnson, and Bristol Myers Squibb. 
In our view, these corporations have taken advantage of weaknesses in 
our health system to price gouge Americans and used suspect patenting 
practices to unfairly extend their monopoly power.
   II. Merck, Johnson & Johnson, and Bristol Myers Squibb Engage in 
                Pricing Abuses of Life-Saving Medicines
    Merck

    Merck takes advantage of its monopoly power to excessively price 
its blockbuster drug, Keytruda, which treats many different cancer 
types, \19\ and Januvia, a widely used drug to treat diabetes. \20\ 
Additionally, Merck exploits its monopoly protections to price gouge 
Americans on the federally funded COVID-19 treatment, Lagevrio, that 
cuts the risk of hospitalization. \21\ For Keytruda and Januvia, Merck 
has been granted patent protection beyond their active ingredient or 
mechanism, which helps prolong its monopoly control over these drugs by 
deterring manufacturers from bringing more affordable alternatives to 
market.
---------------------------------------------------------------------------
    \19\  I-MAK, OVERPATENTED, OVERPRICED: KEYTRUDA'S PATENT WALL 3 
(2021).
    \20\  ASSISTANT SECRETARY FOR HEALTH AND PLANNING, HHS, INFLATION 
REDUCTION ACT RESEARCH SERIES: JANUVIA: MEDICARE ENROLLEE USE AND 
SPENDING (Nov. 13, 2023), https://aspe.hhs.gov/reports/ira-research-
series-Medicare-drug-price-negotiation-program.
    \21\  Sharon Lerner, Merck Sells federally Financed Covid Pill to 
U.S. for 40 times What It Costs to Make, THE INTERCEPT (Oct. 5, 2021), 
https://theintercept.com/2021/10/05/covid-pill-drug-pricing-merck-
ridgeback/.

    Keytruda
                                 ______
                                 
    First, Merck exploits its monopoly protections in Keytruda to price 
the drug outrageously. The price of Keytruda for just 3 weeks is over 
$11,000, \22\ and some patients may need to adhere to Keytruda for one 
to 2 years. \23\ The extraordinary list price of the drug, amounting to 
over $190,000 a year, means that insured patients routinely hit their 
out-of-pocket limits, which can be thousands of dollars every year. 
\24\ In 2023, Merck made $25 billion off of Keytruda according to its 
latest filing with the Securities Exchange Commission. \25\ Of the $18 
billion in sales of the drug globally in the first 9 months of 2023, 
Merck extracted $11 billion in revenue from American patients. \26\ 
Evidence suggests the price of Keytruda is not keyed to its research 
and development costs. Merck itself did not make the original research 
and development contributions critical to the drug's discovery: it 
obtained ownership of the drug, and many others, via a corporate 
acquisition in 2009 for $41 billion. \27\ In just 2 years, Merck has 
more than made up for those costs with $46 billion in sales for the 
drug. \28\
---------------------------------------------------------------------------
    \22\  Cost Info and Financial Help, KEYTRUDA, https://
www.keytruda.com/financial-support/ Feb. 1, 2024).
    \23\  What Do I Need to Know About My Treatment Schedule?, STARTING 
KEYTRUDA (last visited Feb. 1, 2024).
    \24\  Bob Herman, The Keytruda Boom, AXIOS (Oct. 19, 2021), https:/
/www.axios.com/2021/10/29/keytruda-sales-merck-drug-prices.
    \25\  MERCK & CO., INC., FORM 8-K, EXHIBIT 99.1 (Feb. 1, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar/data/
0000310158/000110465924009109/tm244517d1--8k.htm.
    \26\  MERCK & CO., INC., FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 
SEPTEMBER 30, 2023, at 29, https://www.sec.gov/ixviewer/ix.html'doc--/
Archives/edgar
    \27\  I-MAK, OVERPATENTED, OVERPRICED: KEYTRUDA'S PATENT WALL 3 
(2021).
    \28\  MERCK & CO., INC., FORM 8-K, EXHIBIT 99.1 (Feb. 1, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar/data/
0000310158/000110465924009109/tm244517d1--8k.htm.

    Second, Merck appears to be engaging in patenting practices 
designed to unfairly extend exclusivity over this biologic drug to 
prevent more affordable biosimilars from coming to market. \29\ The 
Initiative for Medicines, Access and Knowledge (I-MAK) found that 129 
patent applications have been filed to cover Keytruda, and 50 percent 
of these applications were filed after the drug's FDA approval in 2014, 
cutting against claims that these patent applications furthered 
innovation incentives for the drug's discovery. \30\ Fifty-three patent 
applications have been granted to date, and the primary patents 
covering the antibody that's considered the main component of the drug 
were filed in 2008 and will expire in 2028. \31\
---------------------------------------------------------------------------
    \29\  I-MAK, OVERPATENTED, OVERPRICED: KEYTRUDA'S PATENT WALL 5-6 
(2021).
    \30\  Id. at 1.
    \31\  Id.

    The other patents protect, among other things, methods of producing 
the drug and its use to treat different cancer types. \32\ But method 
of production patents are more critical to biologics like Keytruda than 
small molecule drugs because the techniques for producing these drugs 
are more challenging. \33\ As such, it's more difficult for 
manufacturers to work around these patents to create more affordable 
biosimilar alternatives. \34\ Additionally, once the mechanism of 
action is known for a biologic in addressing one condition, testing its 
use for other similar indications becomes obvious. \35\ Therefore, 
obtaining multiple patents for different clinical indications for these 
drugs appears problematic. The secondary patents on Keytruda grant an 
additional 8 years of Merck's monopolistic pricing power over the drug, 
and as a consequence of this exclusivity, it is estimated that 
Americans will spend $137 billion on Keytruda. \36\
---------------------------------------------------------------------------
    \32\  Id. at 3.
    \33\  Id.
    \34\  Id.
    \35\  Id.
    \36\  Id. at 4.

    In sum, Merck appears to be unfairly extending its exclusivity over 
Keytruda, which will cost American patients billions in the coming 
years, in light of the filing pattern of patent applications on 
Keytruda particularly after its FDA approval, and the granted patent 
protection to deter biosimilar competitors after the expiry of primary 
---------------------------------------------------------------------------
patents.

    Januvia

    Merck's pricing of Januvia, which treats diabetes, also exemplifies 
the pricing abuses rampant to the pharmaceutical industry. Merck 
charges Americans as much as $6,900 per year for Januvia, while the 
same drug can be purchased for $900 in Canada and $200 in France. \37\ 
Medicare Part D spent more than $4 billion on just this one drug 
between June 2022 and May 2023, \38\ and the drug has been selected by 
CMS for the first round of Medicare price negotiation. The drug on 
average costs Medicare nearly $5,000 annually per enrollee, with out-
of-pocket costs amounting to more than $500 each year for enrollees who 
do not receive the low-income subsidy. \39\ On Januvia, and the related 
product Janumet, Merck made $4.5 billion and $3.4 billion in 2022 and 
2023, respectively. \40\
---------------------------------------------------------------------------
    \37\  Bernie Sanders: U.S. Senator for Vermont, PREPARED REMARKS: 
Sanders Ahead of Vote to Subpoena CEOs to Testify on Outrageously High 
Prices of Prescription Drugs in America, PRESS RELEASES (Jan. 25, 
2024), https://www.sanders.senate.gov/press-releases/prepared-remarks-
sanders-ahead-of-vote-to-subpoena-ceos-to-testify-on-outrageously high-
prices-of-prescription-drugs-in-america/.
    \38\  The White House, FACT SHEET: Biden-.Harris Administration 
Announces First Ten Drugs Selected for Medicare Price Negotiation, 
BRIEFING ROOM: STATEMENTS & RELEASES (Aug. 29, 2023), https://
www.whitehouse.gov/briefing-room/statements-releases/2023/08/29/fact-
sheet-biden-harris-administration-announces-first-ten-drugs-selected-
for-Medicare-price-negotiation/.
    \39\  Id.
    \40\  MERCK & CO., INC., FORM 8-K, EXHIBIT 99.1 (Feb. 1, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar/data/
0000310158/000110465924009109/tm244517d1--8k.htm.

    Merck has managed to extend its monopoly pricing power over Januvia 
through unfair patenting practices. Januvia was first approved by the 
FDA in 2006, \41\ and the original patent covering Januvia's active 
ingredient, filed in 2002, expired in 2023. \42\ Americans already 
should have access to lower cost generics. Indeed, Merck lost 
exclusivity for the drug in 2023 in Europe. \43\ However, according to 
the FDA's Orange Book, one patent set to expire in 2027 stands in the 
way of low-cost generics for American patients. \44\ That patent covers 
a specific salt form of the active ingredient created from a reaction 
with phosphoric acid. \45\ According to Merck, innovating patents after 
the filing of the primary patent ``enhance[s] the benefits and 
convenience of treatments for patients.'' \46\
---------------------------------------------------------------------------
    \41\  Merck Sharp & Dohme, LLC v. Mylan Pharm., No. 1:19CV101 4-5 
(N.D.W. Va. Sep. 21, 2022); HIGHLIGHTS OF PRESCRIBING INFORMATION, 
https://www.accessdata.fda.gov/drugsatfda--docs/label/2012/
021995s019lbl.pdf (last visited Jan. 29, 2024).
    \42\  Merck Sharp & Dohme, LLC v. Mylan Pharm., No. 1:19CV101 16-17 
(N.D.W. Va. Sep. 21, 2022); U.S. Patent No. U.S. 6,699,871 Claim 17.
    \43\  MERCK & CO., INC., FORM 10-K, at 27 (Feb. 24 2023), https://
www.sec.GOV/ixviewer/ix.html'doc=/Archives/edgar/data/310158/
000162828023005061/mrk-20221231.htm.
    \44\  Product Details for NDA 021995, ORANGE BOOK: APPROVED DRUG 
PRODUCTS WITH THERAPEUTIC EQUIVALENCE EVALUATIONS, https://
www.accessdata.fda.gov/scripts/cder/ob/results--product.cfm'Appl--
Type=N&Appl--No=021995#23300 (last visited Feb. 2, 2024).
    \45\  Merck Sharp & Dohme, LLC v. Mylan Pharm., No. 1:19CV101 12-
13, 77 (N.D.W. Va. Sep. 21, 2022).
    \46\  Andrew Seidman, How Merck extended its monopoly on a 
blockbuster diabetes drug, PHILADELPHIA INQUIRER (Dec. 20, 2023), 
https://www.inquirer.com/business/merck-patent-januvia-Medicare-price-
negotiations-20231220.html.

    The validity of the patent and Merck's argument that these 
secondary patents, at least for Januvia, benefit patients are belied by 
the litigation surrounding this patent. Although a district court 
ultimately upheld the patent based on technical legal rules, it noted 
that the earlier patent claimed salt forms of Januvia's active 
ingredient, and most egregiously, the earlier patent disclosed that a 
salt could be formed using phosphoric acid and even lists it as one of 
eight preferred acids for creating such salts. \47\ The second patent 
simply covers the salt form product formed by a reaction of phosphoric 
acid with the active ingredient. \48\ In essence, Merck was able to 
extend its monopolistic pricing power over Januvia by claiming 
something it had basically previously disclosed, and what many would 
consider an obvious variation of the active ingredient. Further, 
Merck's claim that there is some corollary benefit to patients that 
arises from its salt patent is contradicted by the record: to reject 
the generic manufacturer's challenge to the patent's validity, the 
district court found that the active ingredient by itself was fine and 
did not need to be reacted with a salt. \49\
---------------------------------------------------------------------------
    \47\  Merck Sharp & Dohme, LLC v. Mylan Pharm., No. 1:19CV101 73, 
76-77 (N.D.W. Va. Sep. 21, 2022).
    \48\  Id. at 12-13, 77.
    \49\  Id. at 85. The district court's reasoning may have been 
flawed, as it noted earlier that Merck had been motivated to find a 
salt form of the compound because it proved unsuitable for making 
pharmaceutical tablets and was unstable. Id. at 7. Even if this were 
true, this should have provided the motivation for a person to arrive 
at this salt version of the active ingredient, rendering the patent 
claim obvious and invalid.

---------------------------------------------------------------------------
    Lagevrio

    A 5-day-course of Lagevrio, which cuts the risk of hospitalization 
from COVID-19, costs $17.74 to produce, but Merck charged the Federal 
Government $712, or over 40 times more, for the drug in 2021. \50\ The 
government had contracted with Merck to supply 1.7 million courses of 
treatment at this price for a total of $1.2 billion. \51\ The pricing 
of Lagevrio was particularly egregious because the Federal Government 
invested an estimated $29-35 million in the development of the drug. 
\52\ In 2023, Merck's sales of the drug brought in $1.4 billion, but in 
the previous year, Merck made nearly $6 billion off of the treatment. 
\53\
---------------------------------------------------------------------------
    \50\  Sharon Lerner, Merck Sells federally Financed Covid Pill to 
U.S. for 40 times What It Costs to Make, THE INTERCEPT (Oct. 5, 2021), 
https://theintercept.com/2021/10/05/covid-pill-drug-pricing-merck-
ridgeback/.
    \51\  Id.
    \52\  Id; Luis Gil Abinader, U.S. government rights in patents on 
Molnupiravir, based upon funding of R&D at Emory University, KNOWLEDGE 
ECOLOGY INTERNATIONAL BLOG (Oct. 4, 2021), https://www.keionline.org/
36648.
    \53\  MERCK & CO., INC., FORM 8-K, EXHIBIT 99.1 (Feb. 1, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar/data/
0000310158/000110465924009109/tm244517d1--8k.htm.

    In sum, Merck has been engaging in excessive pricing abuses with 
respect to Keytruda, Januvia, and Lagevrio, which bring in billions 
every year for the company. Additionally, it has sought to extend its 
monopolistic pricing power over Keytruda and Januvia using patenting 
practices we should deem unfair.
                           Johnson & Johnson
    Like Merck, Johnson & Johnson benefits from monopoly protections to 
price gouge American patients on vital medicines. These drugs include 
(1) Stelara, which helps treat psoriasis, psoriatic arthritis, Crohn's 
disease, and ulcerative colitis; \54\ (2) Xarelto, which prevents and 
treats blood clots and reduces health risks for patients with coronary 
or peripheral heart disease, and is licensed for sale in the U.S. from 
Bayer AG; \55\ and (3) Darzalex, which treats multiple myeloma. \56\ 
Imbruvica is another possible example of Johnson & Johnson's drug 
pricing abuses. Johnson & Johnson commercializes Imbruvica, which 
treats blood cancers, \57\ outside the United States and has co-
exclusive rights with AbbVie to commercialize the drug in the United 
States, though AbbVie states it is ``the principal in the end-customer 
product sales.'' \58\ The companies share profits and losses equally 
from the commercialization of the drug. \59\ Even if Johnson & Johnson 
does not ultimately control the prices of drugs in the United States, 
it profits equally from the abuses of its commercial partner.
---------------------------------------------------------------------------
    \54\  ASSISTANT SECRETARY FOR HEALTH AND PLANNING, HHS, INFLATION 
REDUCTION ACT RESEARCH SERIES: STELARA: MEDICARE ENROLLEE USE AND 
SPENDING (Nov. 13, 2023), https://aspe.hhs.gov/reports/ira-research-
series-Medicare-drug-price-negotiation-program.
    \55\  ASSISTANT SECRETARY FOR HEALTH AND PLANNING, HHS, INFLATION 
REDUCTION ACT RESEARCH SERIES: XARELTO: MEDICARE ENROLLEE USE AND 
SPENDING (Nov. 13, 2023), https://aspe.hhs.gov/reports/ira-research-
series-Medicare-drug-price-negotiation-program; BAYER ANNUAL REPORT 
2022 97 (2023), https://www.bayer.com/en/investors/integrated-annual-
reports,
    \56\  DAVID RIND, FOLUSO AGBOOLA, DMITRIY NIKTIN, AVERY MCKENNA, 
EMILY NHAN, MATT SEIDNER, & STEVEN D. PEARSON, INSTITUTE FOR CLINICAL 
AND ECONOMIC REVIEW, UNSUPPORTED PRICE INCREASE REPORT: UNSUPPORTED 
PRICE INCREASES OCCURRING IN 2022 10 (Dec. 11, 2023), UPI--2023--
Report--121123.pdf (icer.org).
    \57\  ASSISTANT SECRETARY FOR HEALTH AND PLANNING, HHS, INFLATION 
REDUCTION ACT RESEARCH SERIES: IMBRUVICA: MEDICARE ENROLLEE USE AND 
SPENDING (Nov. 13, 2023), https://aspe.hhs.gov/reports/ira-research-
series-Medicare-drug-price-negotiation-program.
    \58\  ABBVIE INC., FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 
2022, at 66-67, https://www.sec.gov/ixviewer/ix.html--doc--/Archives/
edgar/
    \59\  Id.

    Johnson & Johnson also benefits from unfair patenting practices 
extending exclusivity over Xarelto and Imbruvica, which will incur 
---------------------------------------------------------------------------
billions in costs to U.S. patients.

    Stelara

    Johnson & Johnson prices Stelara exorbitantly in comparison to 
other high-income markets. The drug is priced at $79,000 in the United 
States when it can be purchased for a fifth of the price in the United 
Kingdom. \60\ Even considering rebates, the price of Stelara is between 
28 percent-81 percent lower in Canada, Switzerland, Germany, Australia, 
the United Kingdom, France, and Australia. \61\ In 2023, Johnson & 
Johnson made nearly $11 billion in sales from the drug, almost $7 
billion of which came from U.S. patients. \62\
---------------------------------------------------------------------------
    \60\  Bernie Sanders: U.S. Senator for Vermont, PREPARED REMARKS: 
Sanders Ahead of Vote to Subpoena CEOs to Testify on Outrageously High 
Prices of Prescription Drugs in America, PRESS RELEASES (Jan. 25, 
2024), https://www.sanders.senate.gov/press-releases/prepared-remarks-
sanders-ahead-of-vote-to-subpoena-ceos-to-testify-on-outrageousl--high-
prices-of-prescription-drugs-in-america/; The White House, FACT SHEET: 
Biden-.Harris Administration Announces First Ten Drugs Selected for 
Medicare Price Negotiation, BRIEFING ROOM: STATEMENTS & RELEASES (Aug. 
29, 2023), https://www.whitehouse.gov/briefing-room/statements-
releases/2023/08/29/fact-sheet-biden-harris-administration-announces-
first-ten-drugs-selected-for-Medicare-price-negotiation/.
    \61\  Evan D. Gumas, Paige Huffman, Irene Papanicolas, & Reginald 
D. Williams II, How Prices for the First 10 Drugs Up for U.S. Medicare 
Price Negotiations Compare Internationally, Controlling Health Care 
Costs, THE COMMOWEALTH FUND (Jan. 4, 2024), https://
www.commonwealthfund.org/publications/2024/jan/how-prices-first--10-
drugs-Medicare-negotiations-compare-internationally.
    \62\  JOHNSON & JOHNSON, FORM 8-K, EXHIBIT 99.2 (Jan. 23, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc--/Archives/edgar.

    The drug has been selected for the first round of Medicare price 
negotiation, and between June 2022 and May 2023, Medicare Part D spent 
over $2.6 billion on the drug. Further, Stelara had incurred over 
$4,000 in out-of-pocket costs annually for enrollees who did not 
---------------------------------------------------------------------------
receive the low-income subsidy.

    There is reason to believe that Johnson & Johnson has engaged in 
unfair patenting practices to maintain its monopoly power over Stelara. 
Hagens Berman filed a class action lawsuit on Dec. 7, 2023 for health 
benefit providers on the basis that Johnson & Johnson illegally delayed 
the entry of biosimilar competitors to Stelara. \63\ Their complaint 
alleges that Johnson & Johnson defrauded the Patent and Trademark 
Office by intentionally misleading the examiner on the patentability of 
a subject patent in Stelara, purchased a manufacturer that had patents 
in the methods of producing biosimilar alternatives to Stelara, and 
used these fraudulently and unlawfully obtained patents to delay 
alternatives that would have been more affordable to patients. \64\
---------------------------------------------------------------------------
    \63\  Stelara Antitrust, HAGENS BERMAN, https://www.hbsslaw.com/
cases/stelara-antitrust (last visited Feb. 4, 2024).
    \64\  Id.

---------------------------------------------------------------------------
    Darzalex

    In 2022, the Institute for Clinical and Economic Review found that 
Johnson & Johnson's 6.8 percent price hike of Darzalex was unsupported 
by new clinical evidence, increasing spending by an estimated $248 
million in the United States. \65\ In 2023, Johnson & Johnson made 
nearly $10 billion on the drug, of which more than $5 billion derived 
from the U.S. market. \66\
---------------------------------------------------------------------------
    \65\  DAVID RIND, FOLUSO AGBOOLA, DMITRIY NIKTIN, AVERY MCKENNA, 
EMILY NHAN, MATT SEIDNER, & STEVEN D. PEARSON, INSTITUTE FOR CLINICAL 
AND ECONOMIC REVIEW, UNSUPPORTED PRICE INCREASE REPORT: UNSUPPORTED 
PRICE INCREASES OCCURRING IN 2022 10 (Dec. 11, 2023), UPI--2023--
Report--121123.pdf (icer.org).
    \66\  Id.

---------------------------------------------------------------------------
    Xarelto

    Johnson & Johnson prices Xarelto at $542 for a 30-day supply, which 
is nearly $7,000 a year in the United States. \67\ Even considering 
rebates, Xarelto is two to four times more expensive in the United 
States compared to Canada, Switzerland, Germany, Australia, the United 
Kingdom, in Canada, Switzerland, Germany, Australia, the United 
Kingdom, France, and Australia \68\ Xarelto has been selected for the 
first round of Medicare price negotiation, and between June 2022 and 
May 2023, Medicare Part D spent over $6 billion on Xarelto, with over 
$600 in out-of-pocket costs per year for enrollees who did not receive 
the low-income subsidy. \69\
---------------------------------------------------------------------------
    \67\  HOW MUCH SHOULD I EXPECT TO PAY FOR XARELTO?, https://
www.xarelto-us.com/cost (last visited Feb. 3, 2024).
    \68\  Evan D. Gumas, Paige Huffman, Irene Papanicolas, & Reginald 
D. Williams II, How Prices for the First 10 Drugs Up for U.S. Medicare 
Price Negotiations Compare Internationally, Controlling Health Care 
Costs, THE COMMOWEALTH FUND (Jan. 4, 2024), https://
www.commonwealthfund.org/publications/2024/jan/how-prices-first--10-
drugs-Medicare-negotiations-compare-internationally.
    \69\  The White House, FACT SHEET: Biden-.Harris Administration 
Announces First Ten Drugs Selected for Medicare Price Negotiation, 
BRIEFING ROOM: STATEMENTS & RELEASES (Aug. 29, 2023), https://
www.whitehouse.gov/briefing-room/statements-releases/2023/08/29/fact-
sheet-biden-harris-administration-announces-first-ten-drugs-selected-
for-Medicare-price-negotiation/.

    Johnson & Johnson benefits from the unfair patenting practices of 
another company to prolong its exclusive authority to price and sell 
Xarelto in the United States. Johnson & Johnson licenses Xarelto from 
Bayer AG, a German company that owns the patents in the drug. \70\ 
Johnson & Johnson received FDA approval for Xarelto in 2011, \71\ and 
the patent protection for two of three patents listed for the drug in 
the Orange Book expire in 2025. \72\ But the protection of a third 
patent covering the 10 mg, 15 mg, and 20-mg tablets of the drug expires 
in 2034. \73\ Bayer AG describes that the patents covering the active 
ingredient of Xarelto in the U.S. expire in 2025. \74\ Thus, the 
secondary patent expiring in 2034 for the drug prolongs Johnson & 
Johnson's monopolistic pricing power over these Xarelto tablets by 
almost a decade in excess of the protection afforded by the primary 
patents. This secondary patent appears to be a significant barrier to 
generic entry, as Johnson & Johnson and Bayer are relying solely on 
this patent's claims in lawsuits seeking to prevent at least three, and 
likely more, manufacturers from selling generics of the 10, 15 and 20-
mg doses of Xarelto. \75\
---------------------------------------------------------------------------
    \70\  BAYER ANNUAL REPORT 2022 65 (2023), https://www.bayer.com/
sites/default/files/2023--02/Bayer-Annual-Report--2022.pdf.
    \71\  Xarelto (rivaroxaban) 10 mg immediate release Tablets, DRUG 
APPROVAL PACKAGE, https://www.accessdata.fda.gov/drugsatfda--docs/nda/
2011/022406Orig1s000TOC.cfm (last visited Jan. 29, 2024).
    \72\  Product Details for NDA 022406, Orange Book: Approved Drug 
Products With Therapeutic Equivalence Evaluations, https://
www.accessdata.fda.gov/scripts/cder/ob/results--product.cfm'Appl--
Type=N&Appl--No--022406 (last visited Jan. 29, 2024).
    \73\  Id.
    \74\  Bayer Annual Report 2022 65 (2023), https://www.bayer.com/
sites/default/files/2023--02/Bayer-Annual-Report--2022.pdf.
    \75\  JOhnson & Johnson, Form 10-K For The Fiscal Year Ended 
January 1, 2023, at 91-92, https://www.sec.gov/ixviewer/ix.html'doc=/
Archives/edgar/. The patent's claims are likely barring the entry of 
even more generic manufacturers according to a more recent SEC filing. 
See Johnson & Johnson, Form 10-Q For The Quarterly Period Ended October 
1, 2023, at 35, https://www.sec.gov/ixviewer/ix.html'doc=/Archives/
edgar/

    While the earlier patents cover the active ingredient, its 
combination with other substances to form the drug, the process of 
preparing the drug, a solid oral version of the drug, and its use for 
preventing or treating cardiovascular issues, the primary marginal 
benefit claimed by the later-expiring patent appears to be its 
protection over a once-daily tablet version of the drug. \76\ Bayer 
itself states in its annual corporate statements that the patent 
covering 10, 15, and 20-mg once-daily tablets in Europe is set to 
expire in 2026. \77\ If this patent survives litigation in the U.S., it 
will likely be another instance in which Americans are uniquely 
deprived of more affordable generic medications.
---------------------------------------------------------------------------
    \76\  Compare U.S. Patent No. U.S. 9,539,218 with U.S. 7,157,456 & 
U.S. 9.415,053.
    \77\  BAYER ANNUAL REPORT 2022 65 (2023), https://www.bayer.com/
sites/default/files/2023--02/Bayer-Annual-Report--2022.pdf.

---------------------------------------------------------------------------
    Imbruvica

    Imbruvica was priced at over $180,000 in 2021, nearly double its 
launch price in 2013. \78\ The net price of the drug is higher than in 
Switzerland, Germany, the United Kingdom, France, Canada, Japan, and 
Australia. \79\ Excluding Switzerland, Imbruvica is priced two to four 
times more in the U.S. compared to these high-income nations. \80\ In 
2023, Johnson & Johnson made $3.26 billion in sales from the drug, with 
over $1 billion coming from U.S. patients. \81\ Additionally, the drug 
has been selected for the first round of Medicare price negotiation, 
and Medicare Part D spent over 2.6 billion on the drug between June 
2022 and May 2023. \82\ Imbruvica exacted the highest financial toll on 
Medicare enrollees of the drugs selected for Medicare price 
negotiation, with an average annual out-of-pocket cost of $6,497 per 
enrollee who did not receive the low-income subsidy. \83\ The price of 
Imbruvica is even more unreasonable in light of the preclinical 
research support from government and nonprofit sources that led to the 
drug's development and FDA approval, as described by Knowledge Ecology 
International. \84\
---------------------------------------------------------------------------
    \78\  U.S. House Of Representatives' Committee On Oversight & 
Reform, Staff Report: Drug Pricing Investigation: Abbvie--Humira And 
Imbruvica 3 (May 2021).
    \79\  Id.
    \80\  Id.
    \81\  Johnson & Johnson, FORM 8-K, EXHIBIT 99.2 (Jan. 23, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar/.
    \82\  The White House, FACT SHEET: Biden-.Harris Administration 
Announces First Ten Drugs Selected for Medicare Price Negotiation, 
BRIEFING ROOM: STATEMENTS & RELEASES (Aug. 29, 2023), https://
www.whitehouse.gov/briefing-room/statements-releases/2023/08/29/fact-
sheet-biden-harris-administration-announces-first-ten-drugs-selected-
for-Medicare-price-negotiation/.
    \83\  Assistant Secretary For Planning And Evaluation, Office Of 
Health Policy, Department Of Health And Human Services, Inflation 
Reduction Act Research Series--Medicare Enrollees' Use And Out-Of-
Pocket Expenditures For Drugs Selected For Negotiation Under The 
Medicare Drug Price Negotiation Program 5 (Aug. 29, 2023), https://
aspe.hhs.gov/sites/default/files/documents/.
    \84\  Arianna Schouten, Notes On The Preclinical Development Of 
Imbruvica (Ibrutinib) (2023), https://www.keionline.org/wp-content/
uploads/KEI-BN--2023--4.pdf.

    Like Xarelto, Johnson & Johnson profits from patent abuses on 
Imbruvica committed by its collaborator, AbbVie. There is a massive 
patent thicket depriving U.S. patients of more affordable alternatives 
of the drug, with 88 patents granted to date. \85\ The House Oversight 
& Reform Committee reported that the initial patent in Imbruvica's 
active ingredient was filed in 2006 and was expected to expire in 2026. 
\86\ Citing I-MAK, the Committee detailed how a ``drip----feed'' patent 
strategy was employed to prolong monopoly power over Imbruvica. \87\ 
Under this strategy, multiple additional patents were filed covering 
aspects of Imbruvica that had already been disclosed in earlier patents 
but with more pecificity. \88\ The sheer number of patents providing 
protection on the drug is designed to discourage generic competition 
against the drug. Even then, the Committee reports that nearly a dozen 
generic manufacturers sought FDA approval of generics, but most entered 
confidential agreements to delay generic entry until 2032, 6 years 
after the primary patent was expected to expire. \89\
---------------------------------------------------------------------------
    \85\  I-MAK, Overpatented, Overpriced: Imbruvica's Patent Wall 2 
(July 2020).
    \86\  Id.
    \87\  U.S. House Of Representatives' Committee On Oversight & 
Reform, Staff Report: Drug Pricing Investigation: Abbvie--Humira And 
Imbruvica 36 (May 2021).
    \88\  Id.
    \89\  Id. at 37.

    In sum, Johnson & Johnson price gouges American patients on several 
critical medicines. Moreover, the unregulated drug pricing power of the 
company will be unfairly extended by abuses of the United States' 
patent system.
                          Bristol Myers Squibb
    Bristol Myers Squibb, like Merck and Johnson & Johnson, has engaged 
in pricing abuses of several drugs to the detriment of American 
patients, including Breyanzi, a cell therapy for B-cell lymphoma; 
Pomalyst, which is used to treat multiple myeloma; \90\ and Revlimid, 
which treats the same. \91\ This is also true of (1) Abecma, a cell 
therapy for treating multiple myeloma, that BMS licensed from the 
company, 2seventy bio, and for which BMS shares profits and losses 
equally with its commercial partner, and (2) Eliquis, which is a small 
molecule drug used to prevent and treat blood clots, that BMS developed 
with Pfizer. \92\ Profits and losses are largely shared equally by the 
companies on a global scale, but BMS ``is the principal in the end 
customer product sales in the U.S., significant countries in Europe, as 
well as Canada, Australia, China, Japan and South Korea.'' \93\
---------------------------------------------------------------------------
    \90\  Bristol-Myers Squibb, Form 10-K For The Fiscal Year Ended 
December 31, 2022, at 2, https://www.sec.gov/ixviewer/ix.html'doc/
Archives/edgar
    \91\  Id. at 3.
    \92\  Assistant Secretary For Health And Planning, Hhs, Inflation 
Reduction Act Research Series: Eliquis: Medicare Enrollee Use And 
Spending (Nov. 13, 2023), https://aspe.hhs.gov/reports/ira-research-
series-Medicare-drug-price-negotiation-program; Bristol-Myers Squibb, 
Form 10-K For The Fiscal Year Ended December 31, 2022, At 77. https://
www.sec.gov/ixviewer/ix.html-doc/Archives/edgar.
    \93\  Id.

---------------------------------------------------------------------------
    Eliquis

    Bristol Myers Squibb abuses its monopoly protections to charge 
Americans over $7,000 for Eliquis while pricing the same drug for just 
$900 in Canada and just $650 in France. \94\ Even with rebates, the 
price of Eliquis is between 35-70 percent lower in the high-income 
nations of Switzerland, Germany, the United Kingdom, France, Canada, 
Japan, and Australia. \95\ Eliquis was selected for the first round of 
Medicare price negotiation. Between June 2022 and May 2023, Eliquis was 
the top spend among the 10 drugs selected for price negotiation, 
costing Medicare Part D over $16 billion. \96\ Medicare enrollees who 
did not receive the low-income subsidy paid over $600 in annual out-of-
pocket costs just for this one drug. \97\
---------------------------------------------------------------------------
    \94\  Bernie Sanders: U.S. Senator for Vermont, PREPARED REMARKS: 
Sanders Ahead of Vote to Subpoena CEOs to Testify on Outrageously High 
Prices of Prescription Drugs in America, PRESS RELEASES (Jan. 25, 
2024), https://www.sanders.senate.gov/press-releases/prepared-remarks-
sanders-ahead-of-vote-to-subpoena-ceos-to-testify-on-outrageously--
high-prices-of-prescription-drugs-in-america/.
    \95\  Evan D. Gumas, Paige Huffman, Irene Papanicolas, & Reginald 
D. Williams II, How Prices for the First 10 Drugs Up for U.S. Medicare 
Price Negotiations Compare Internationally, Controlling Health Care 
Costs, THE COMMOWEALTH FUND (Jan. 4, 2024), https://
www.commonwealthfund.org/publications/2024/jan/how-prices-first--10-
drugs-Medicare-negotiations-compare-internationally.
    \96\  The White House, FACT SHEET: Biden-.Harris Administration 
Announces First Ten Drugs Selected for Medicare Price Negotiation, 
BRIEFING ROOM: STATEMENTS & RELEASES (Aug. 29, 2023), https://
www.whitehouse.gov/briefing-room/statements-releases/2023/08/29/fact-
sheet-biden-harris-administration-announces-first-ten-drugs-selected-
for-Medicare-price-negotiation/.
    \97\  ASSISTANT SECRETARY FOR PLANNING AND EVALUATION, OFFICE OF 
HEALTH POLICY, DEPARTMENT OF HEALTH AND HUMAN SERVICES, INFLATION 
REDUCTION ACT RESEARCH SERIES--MEDICARE ENROLLEES' USE AND OUT-OF-
POCKET EXPENDITURES FOR DRUGS SELECTED FOR NEGOTIATION UNDER THE 
MEDICARE DRUG PRICE NEGOTIATION PROGRAM 5 (Aug. 29, 2023), https://
aspe.hhs.gov/sites/default/files/documents/
9a34d00483a47aee03703bfc565ffee9/ASPE-IRA-Drug-Negotiation-Fact-Sheet--
09-13-2023.pdf.

    Bristol Myers Squibb has sought to extend its monopoly protections 
over Eliquis using unjust patenting practices. Although generics 
received FDA approval in 2019, \98\ none will come to market until 
2026, with some alternatives prohibited until 2031 due to patent 
litigation and settlements. \99\ The company's patent for the active 
ingredient of Eliquis was filed in September 2002, and was set to 
expire in February 2023. \100\ But BMS received an extension of its 
patent term until November 2026 using a Federal law that can provide 
extensions for time lost in the premarket government approval process. 
\101\
---------------------------------------------------------------------------
    \98\  FDA approves first generics of Eliquis, NEWS RELEASE (Dec. 
23, 2019), https://www.fda.gov/news-events/press-announcements/fda-
approves-first-generics-eliquis.
    \99\  The Bristol-Myers Squibb-Pfizer Alliance is pleased with the 
U.S. District Court decision to uphold both the composition of matter 
(COM) patent (U.S. 6,967,208) and formulation patent (U.S. 9,326,945) 
covering Eliquis, PRESS RELEASE (Aug. 5, 2020), https://news.bms.com/
news/details/2020/The-Bristol-Myers-Squibb-Pfizer-Alliance-is-pleased-
with-the-U.S.-District-Court-decision-to-uphold-both-the-composition-
of-matter-COM-patent-U.S.
    \100\  U.S. Patent No. U.S. 6,967,208.
    \101\  Applications for patent term extension and patent terms 
extended under 35 U.S.C. 156, UNITED STATES PATENT & TRADEMARK OFFICE, 
https://www.uspto.gov/patents/laws/patent-term-extension/patent-terms-
extended-under--35-usc-156 (last visited Feb. 5, 2024); Patent and 
Exclusivity for: N202155, ORANGE BOOK: APPROVED DRUG PRODUCTS WITH 
THERAPEUTIC EQUIVALENCE EVALUATIONS, https://www.accessdata.fda.gov/
scripts/cder/ob/patent--info.cfm'Product--No--001&Appl--
No=202155&Appl--type--N (last visited Feb. 5, 2024).

    On top of its extension on the primary patent, BMS and Pfizer 
obtained a patent on a pharmaceutical composition with a particular 
crystalline form of the active ingredient that expires in 2031. \102\ 
In patent litigation, a generic manufacturer argued the claim was 
obvious because someone would have been motivated to develop the same 
claim based on what was known at the time. While American courts upheld 
the patent claim based on a finding that there was no need that would 
have motivated someone else to pursue this invention, the UK courts 
invalided the patent. \103\ That court argued that it would have been 
obvious because someone in the field would have arrived at the 
invention, and if the court believed BMS's argument that there really 
was no need that would have driven the obvious invention, then the 
patent would have been invalid for lack of utility. \104\ Ultimately, 
the patent appears to have marginal value given that it was not 
addressed to a particular issue at the time, but the consequences of 5 
years of additional monopoly power over the drug will be enormous. 
American patients will continue to face hundreds of dollars in out-of-
pocket costs and the coffers of public programs will be stretched in 
the absence of lower cost generics.
---------------------------------------------------------------------------
    \102\  U.S Patent No. 9,326,945.
    \103\  Compare Bristol Myers Squibb Co. v. Aurobindo Pharma U.S. 
Inc., 477 F. Supp. 3d 306, 356 (D. Del. 2020) with Sandoz Limited & 
Teva Pharmaceutical Industries Limited v. Bristol Myers-Squibb Holdings 
Ireland Unlimited Company & Pfizer Inc., [2022] EWHC 1831 (Pat) (Mead, 
J.) at 48.
    \104\  Compare Bristol Myers Squibb Co. v. Aurobindo Pharma U.S. 
Inc., 477 F. Supp. 3d 306, 356 (D. Del. 2020) with Sandoz Limited & 
Teva Pharmaceutical Industries Limited v. Bristol Myers-Squibb Holdings 
Ireland Unlimited Company & Pfizer Inc., [2022] EWHC 1831 (Pat) (Mead, 
J.) at 48.

---------------------------------------------------------------------------
    Abecma & Breyanzi

    The list prices of Bristol Myers Squibb's cell therapies, Abecma 
and Breyanzi, were $419,500 and $410,300 before BMS hiked the price of 
Abecma by almost $38,000 and Breyanzi by almost $37,000 in 2023; these 
spikes were among the nine highest list price increases of that year. 
\105\ The therapies reached a combined $836 million in sales in 2023, 
with nearly 80 percent of the sales deriving from American patients. 
\106\
---------------------------------------------------------------------------
    \105\  ASSISTANT SECRETARY FOR PLANNING AND EVALUATION, OFFICE OF 
HEALTH POLICY, HHS, ISSUE BRIEF: CHANGES IN THE LIST PRICES OF 
PRESCRIPTION DRUGS, 2017-2023 (Oct. 6, 2023), aspe-drug-price-tracking-
brief.pdf (hhs.gov). Due to the opacity of drug pricing, it is 
difficult to discern the financial burden of this drug on the average 
patient. According to one source from 2021, a single dose of Abecma 
cost $419,500. See Eric Sagonowsky, Bristol's new myeloma CAR-T needs a 
hefty discount to be cost-effective, watchdogs say while endorsing 
GSK's Blenrep, FIERCE PHARMA (Apr. 7, 2021), https://
www.fiercepharma.com/pharma/bristol-s-new-myeloma-car-t-needs-a-big-
discount-to-be-cost-effective-watchdogs-say-while.
    \106\  BRISTOL MYERS SQUIBB, FORM 8-K, EXHIBIT 99.1 (Feb. 2, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar.

---------------------------------------------------------------------------
    Pomalyst & Revlimid

    In 2022, Bristol Myers Squibb hiked the price of its drugs for 
treating multiple myeloma. It hiked the wholesale acquisition price of 
Pomalyst by over $4,000, increasing its price to $94,845 for 100 
capsules. The company also hiked the price of Revlimid by over $3,500, 
increasing its price for 100 capsules to $83,322. \107\ These price 
hikes were among the nine highest for 2022 in terms of total dollar 
amount. In 2023, Revlimid made BMS over $6 billion in sales, of which 
over $5 billion was earned from the U.S. market. \108\ That same year, 
Pomalyst's sales were $3.4 billion, of which $2.36 billion was earned 
from U.S. patients. \109\
---------------------------------------------------------------------------
    \107\  ASSISTANT SECRETARY FOR PLANNING AND EVALUATION, OFFICE OF 
HEALTH POLICY, HHS, ISSUE BRIEF: PRICE INCREASES FOR PRESCRIPTION 
DRUGS, 2016-2022, 2017-2023 (Sept. 30, 2023), Price Increases for 
Prescription Drugs, 2016-2022 (hhs.gov). Due to the lack of drug 
pricing transparency, it is difficult to determine the price for end 
users of the drug.
    \108\  BRISTOL MYERS SQUIBB, FORM 8-K, EXHIBIT 99.1 (Feb. 2, 2024), 
https://www.sec.gov/ixviewer/ix.html'doc=/Archives/edgar/
    \109\  Id.

    Thus, Bristol Myers Squibb's pricing practices are yet another 
example of how drug corporations price gouge American patients. 
Further, Bristol Myers Squibb engages in patenting practices of 
marginal value that appear to be widespread in the pharmaceutical 
industry to extend monopoly control over drug prices and unfairly 
deprive U.S. patients of lower cost generics.
III. These Companies Spend Billions on Self-Enriching Activities, Often 
             in Excess of Research and Development Expenses
    All three companies have alleged that the Medicare price 
negotiation provisions of the Inflation Reduction Act would detract 
from the innovation of new life-saving medicines and sued to invalidate 
these measures. \110\ But there is a wealth of evidence that 
contradicts claims that drug price regulation will impact the 
innovation of new medicines. First, experts, and even the Congressional 
Budget Office, conclude there is no connection between a drug's 
research and development cost and its future price. \111\ Rather, the 
current price of drugs reflects the maximum that companies believe 
healthcare payers will pay for monopolized drugs with few if any 
adequate therapeutic alternatives. \112\ More specifically, the 
Congressional Budget Office found that only 13 fewer drugs out of 1,300 
(1 percent) would come to market over the next 30 years as a result of 
the Inflation Reduction Act. \113\ Second, compared to the rest of the 
globe, the United States is an outlier that does little to protect its 
residents from the unfair pricing power of drug companies, \114\ and 
bringing American policy into alignment with those of other countries, 
including other high-income peers, will not destroy the incentive to 
innovate new medicines. Finally, drug corporations spend in excess on 
executive compensation, share buybacks, and dividends which enrich 
their shareholders, cutting against the industry's mistaken impression 
that it is strapped for resources to research and develop new 
medicines. \115\ For example, in just 2022, the manufacturers of the 
drugs selected for Medicare price negotiation spent $10 billion more on 
these self-enriching activities than research and development. \116\
---------------------------------------------------------------------------
    \110\  Complaint, Janssen Pharmaceutical Inc. v. Beccera et al., 
No. 3:23-cv-03818, para. 40. (D. N.J. July 18, 2023); The Inflation 
Reduction Act's Negative Impact on Patient-Focused Innovation, Value 
and Access, MERCK: COMPANY STATEMENT (June 6, 2023), https://
www.merck.com/news/the-inflation-reduction-acts-negative-impact-on-
patient-focused-innovation-value-and-access/; Impact of the inflation 
reduction act on innovative medicines for patients, BRISTOL MYERS 
SQUIBB (June 16, 2023), https://www.bms.com/impact-of-the-inflation-
reduction-act-on-innovative-medicines-for-patients.html; Kevin 
Dunleavy, Johnson & Johnson becomes 4th drugmaker to file suit against 
IRA's drug price negotiations, FIERCE PHARMA (July 18, 2023), https://
www.fiercepharma.com/pharma/johnson-johnson-becomes--4th-big-pharma-
file-suit-against-ira-drug-price-negotiations.
    \111\  CONGRESSIONAL BUDGET OFFICE, RESEARCH AND DEVELOPMENT IN THE 
PHARMACEUTICAL INDUSTRY (Aug. 2021) (``In CBO's assessment, current R&D 
spending does not influence the future prices of the drugs that result 
from that spending.''); Aaron Kesselheim, Jerry Avorn, & Ameet 
Sarpatwari, The High Cost of Prescription Drugs in the United States: 
Origins and Prospects for Reform, 316 JAMA NETWORK 858 (2016); Vinay 
Prasad, Kevin De Jesus, Sham Mailankody, The high price of anticancer 
drugs: origins, implications, barriers, solutions, 14 NAT. REV. CLIN. 
ONC. 381 (2016).
    \112\  Aaron Kesselheim, Jerry Avorn, & Ameet Sarpatwari, The High 
Cost of Prescription Drugs in the United States: Origins and Prospects 
for Reform, 316 JAMA NETWORK 858 (2016).
    \113\  CONGRESSIONAL BUDGET OFFICE, ESTIMATED BUDGETARY EFFECTS OF 
PUBLIC LAW 117-169 (Sept. 7, 2022), https://www.cbo.gov/system/files/
2022--909/PL117--169--9--7--22.pdf.
    \114\  Amy Kapczynski, The Political Economy of Market Power in 
Pharmaceuticals, 48 J. HEALTH POL., POL'Y & L. 215 (2023); S. Vincent 
Rajkumar, The high cost of prescription drugs: causes and solutions, 10 
BLOOD & CANCER J. 381 (2020).
    \115\  Amy Kapczynski, The Political Economy of Market Power in 
Pharmaceuticals, 48 J. HEALTH POL., POL'Y & L. 215, 230 (2023) (citing 
Aaron Kesselheim & Jeffrey Avorn, Letting the Government Negotiate Drug 
Prices Won't Hurt Innovation, WASH. POST (Sept. 27, 2021), https://
www.washingtonpost.com/outlook/2021/09/22/drug-pricing-negotiation-
biden-bill/); U.S. HOUSE OF REPRESENTATIVES' COMMITTEE ON OVERSIGHT & 
REFORM, DRUG PRICING INVESTIGATION: INDUSTRY SPENDING ON BUYBACKS, 
DIVIDENDS, & EXECUTIVE COMPENSATION (July 2021).
    \116\  JISHIAN RAVINTHIRAN, PUBLIC CITIZEN & PROTECT OUR CARE, 
PROFITS OVER PATIENTS: SPENDING ON SELF-ENRICHMENT EXCEEDS RESEARCH AND 
DEVELOPMENT COSTS FOR MANY MANUFACTURERS OF IRA DRUGS (Jan. 18, 2024).

    Stock buybacks enrich investors by reducing the number of 
outstanding shares in a company. The fewer shares there are in 
investors' hands, the more each share is worth. When a company buys 
back and cancels 10 percent of its shares, that makes each share still 
held by an investor or insider rise in value, as it represents a 
greater claim on the company's earnings. Spending money this way allows 
companies to enrich shareholders silently, as well as the executives 
often paid in stock. \117\ Stock buybacks are particularly problematic 
as they have historically increased stock value without raising taxable 
income, can provide a mistaken impression about the economic health of 
a company, and detract from more worthwhile investments in a company's 
own workers and productive capacity, such as research and development 
efforts. Dividends are another way of returning cash to investors. Each 
fiscal quarter, publicly traded companies typically issue fixed 
dividends to shareholders that rise when business is good and shrink or 
get suspended when business is bad. \118\
---------------------------------------------------------------------------
    \117\  PUBLIC CITIZEN, BAILOUT WATCH, FRIENDS OF THE EARTH, BIG 
OIL'S WARTIME BONUS 2 (2022).
    \118\  Id. at 8.

    Looking at these self-enriching activities, Johnson & Johnson spent 
nearly $12 billion on dividends to shareholders, over $6 billion on 
stock buybacks, and $45 million on executive compensation in just the 
year 2022. In total, Johnson & Johnson spent nearly $18 billion on 
these self-enriching activities compared to $15 billion on research and 
development. \119\ Similarly, Bristol Myers Squibb spent over $8 
billion on stock buybacks, nearly $5 billion on dividends, and 48 
million on executive compensation. \120\ The company spent 
approximately $3 billion more on these self-enriching activities 
compared to research and development in 2022. \121\ If we examine these 
spending patterns from 2012-2021, Johnson & Johnson spent $43 billion 
more on stock buybacks and dividends than research and development. 
\122\ Similarly, Merck's spending on stock buybacks and dividends over 
this period exceeded its research and development costs by $3 billion. 
\123\
---------------------------------------------------------------------------
    \119\  JISHIAN RAVINTHIRAN, PUBLIC CITIZEN & PROTECT OUR CARE, 
PROFITS OVER PATIENTS: SPENDING ON SELF-ENRICHMENT EXCEEDS RESEARCH AND 
DEVELOPMENT COSTS FOR MANY MANUFACTURERS OF IRA DRUGS (Jan. 18, 2024).
    \120\  Id.
    \121\  Id.
    \122\  WILLIAM LAZONICK & NER TULUM, INSTITUTE FOR NEW ECONOMIC 
THINKING, SICK WITH ``SHAREHOLDER VALUE'': U.S. PHARMA'S FINANCIALIZED 
BUSINESS MODEL DURING THE PANDEMIC (Dec. 6, 2022).
    \123\  Id.

    In sum, the spending patterns of all three companies belies their 
impression to the public that their profits are re-invested in research 
and development capacities; instead, they reallocate their profits 
mostly to the benefit of their shareholders and executives. As such, 
there is no necessary relationship between providing drug pricing 
relief for millions and harming resources for innovating new medicines.
                               Conclusion
    Supermajorities of Americans want decisive government action to 
rein in the price gouging tactics of the pharmaceutical industry. And 
though most drug corporations have been happy to benefit from an array 
of government policies that have expanded their monopoly power over 
drugs to the detriment of patients, many now fiercely resist any 
efforts to deliver material drug pricing relief to millions of 
Americans. The drug pricing tactics of Johnson & Johnson, Merck, and 
Bristol Myers Squibb are representative of the broader exploitative 
practices endemic to the pharmaceutical industry. They use their 
monopoly control to price life-saving medicines excessively, and either 
pursue, or benefit from, additional patents of marginal value to extend 
their power to exorbitantly price drugs. This profiteering demands 
greater action from the Biden administration and Congress, which would 
not tangibly impact the innovation of new life-saving medicines.
                                 ______
                                 
                 [summary statement of peter maybarduk]
    Chairman Sanders, Ranking Member Cassidy and Members of the 
Committee.

    Thank you for the opportunity to testify today on the high prices 
Americans pay for prescription drugs. Public Citizen is a national 
public interest organization with more than 500,000 members and 
supporters. For 50 years, we have advocated for stronger health, safety 
and consumer protections; for corporate and government accountability; 
and for affordable access to medicines.

    Drug prices are high because of monopoly power, leading to 
treatment rationing and preventable suffering. Three in 10 Americans 
have not taken their medications as prescribed due to costs. Americans 
confront the highest drug prices in the world, paying nearly three 
times more for the same drugs than other countries. In 2020, for the 20 
top-selling drugs worldwide, drug corporations made far more from U.S. 
sales than sales to all other countries combined ($101 billion to $57 
billion). Drug pricing abuses drain the coffers of health programs. Of 
$400 billion spent on retail prescription drugs in 2022, $135 billion 
came from Medicare and $45 billion from Medicaid.

    This pricing disparity is even more egregious considering taxpayer 
funded contributions to drug development. The world's largest 
biomedical research funder is a public funder, the National Institutes 
of Health, contributing more than $45 billion a year and laying 
groundwork for many if not most new medicines.

    Our government grants patent protection and exclusivities on 
medicines. In theory, this should support innovation. In practice, drug 
corporations too often are writing the rules to extract maximum rents 
from taxpayers. In 2022; the manufacturers of the ten drugs selected 
for Medicare price negotiation spent $10 billion more on self-enriching 
activities--stock buybacks, dividends and CEO compensation--than on 
R&D. Drugmakers do not set prices according to R&D costs. The price of 
a patented drug is the most that we, as a society, are willing to pay 
to care for our sick and loved ones, where monopoly power blocks 
affordable alternatives and we have little choice.

    Drugmakers extend their exclusive power over new drugs through 
anticompetitive tactics. Many have abused the patent system to obtain 
subsequent patents over the same medicine with marginal differences, 
sometimes for decades.13 The pharmaceutical industry has accrued 
tremendous influence in our political system, outranking every other 
industry in lobbying spending.

    Today, perhaps for the first time, our Country is making progress 
challenging high prices and treatment rationing, including through 
price negotiations and countering price spikes, among other measures. 
We commend the Committee's attention to this problem. Far more is 
necessary.

    Ultimately, we will have to confront monopoly power. That is the 
foundation allowing drugmakers to project influence, game the law and 
keep prices high. Other real challenges in medicine pricing and access, 
including secrecy, cost caps, patient assistance, and middlemen taking 
advantage, flow inexorably from the lucrative patent monopolies that 
make it so possible and so easy to rip off taxpayers. Thank you for 
your time, and please count us with you in the fight.
                                 ______
                                 
    The Chair. Thank you. Our next witness will be Tahir Amin, 
CEO, Initiative for Medicines Access and Knowledge, a nonprofit 
organization working to address inequalities in how medicines 
are developed and distributed. Thanks very much for being with 
us.

   STATEMENT OF TAHIR AMIN, LL.B., CHIEF EXECUTIVE OFFICER, 
   INITIATIVE FOR MEDICINES, ACCESS & KNOWLEDGE, NEW YORK, NY

    Mr. Amin. Chairman Sanders, Ranking Member Cassidy, and 
Members of the Committee, it is my honor to be invited here to 
share with you a root cause of why the U.S. pays by far the 
highest prices in the world for prescription drugs. That root 
cause is how the pharmaceutical industry manipulates the patent 
system to lengthen patent protection and its market monopoly in 
order to block competition, all while increasing prices.

    I qualify as a UK attorney in intellectual property, and I 
have been in the field for 30 years. I spent my first decade of 
my legal career practicing as an attorney at international law 
firms and for multinational companies, including American 
companies.

    Through this work, I learned both the legal and business 
side of intellectual property and its importance to inventors, 
investors, and companies. I also learned how to use loopholes 
to game the system.

    These loopholes enabled me to invent intellectual property 
rights so companies could obtain and maintain a monopoly in the 
market, while continuing to extract maximum profits. It was the 
reason why I co-founded IMAK and left the commercial world. 
America is in a severe drug pricing crisis.

    More than one-third of Americans say they are not able to 
fill a prescription for medication because of its cost. Black 
Americans are most heavily impacted, as they are more likely to 
require medication for chronic conditions and earn less.

    Now, prescription drug spending on retail and non-retail 
drugs is poised to grow 63 percent this decade to $917 billion, 
and branded prescription drugs, which are under patent 
protection, account for 84 percent of that spending.

    These price hikes correspond with a dramatic increase in 
patenting activity in the pharmaceutical sector. Now, we have 
analyzed the top 10 selling drugs in the United States, and we 
have found a total of 1,429 patent applications have been filed 
as of 2022.

    741 patents have been granted on these drugs. On average, 
that is, more than 140 patent applications filed per drug, and 
74 patents granted per drug. That is 66 percent of those 
patents are filed after the drug is approved by the FDA.

    Now, if we look at some of the drugs that are on the 
discussion today with the companies that were here, KEYTRUDA, 
Merck's ELIQUIS, STELARA, Johnson & Johnson, also IMBRUVICA, 
which is AbbVie, Johnson & Johnson.

    Between them, there is a combined of 494 patent 
applications filed on them, of which 235 were granted patents. 
I just want to dig a little bit deeper into Merck and 
particularly Senate Lujan's questioning of whether Merck would 
sort of allow biosimilar competition once the primary patent 
expires.

    You have to remember, KEYTRUDA actually represents 47 
percent of Merck's total pharmaceutical revenue. Now, as of 
June 2002, we have counted 180 patent applications, of which 78 
are granted. They have patent protection at least until 2039, 
which is in total 37 years of patent protection since they 
filed their first patent, which is 2002. You are supposed to 
get a patent for 20 years, remember.

    Market and media analysts a current reporting that we 
should see biosimilar competition in 2028, to Senator Lujan's 
question. I put myself on record here today, we will not see 
biosimilar competition until 2034.

    They will litigate the hell out of it, and they will use 
every cent that they can to kind of not leave $100 billion on 
the table, which is what those patents are worth to them.

    All this talk of R&D and new indications, these patents are 
already disclosing the earlier patents that should be expiring 
in 2024. Bristol-Myers Squibb, same problem. Bristol-Myers has 
actually increased the price of ELIQUIS by 124 percent since 
its induction in 2012.

    That is higher than the general rate of inflation. They 
have filed more patents here in the United States, 2.4 more 
times than in Europe. In fact, the patents that the CEO from 
BMX was talking about, the relevant patents, those were 
actually invalidated in Europe and that is why we have generic 
competition in Europe.

    But those patents are actually preventing competition here 
in the United States and it is going to cost us $48 billion in 
branded ELIQUIS. So, this Committee should recognize that the 
use of patent thickets to extend the market monopoly period on 
a product is not a case of a few bad actors, it is endemic.

    If you want to get to the heart of the problem, the first 
and most important thing Congress can do is solve the problem, 
is raise the bar for what classifies as an invention that 
deserves a patent. It is an enormous monopoly power that 
should--in the single hands of a drug maker, and we shouldn't 
leave it to the market and litigation to resolve these issues.

    The patenting activity goes well beyond the time limits in 
monopoly that the Constitution required. Lawyers, exploit 
sophisticated legal marketing Jedi tricks that they use under 
the guise of innovation.

    We need to actually not get sidetracked by this innovation 
talk. Most of these patents are tweaks deliberately for the 
financialization of profits, and that is what the 
pharmaceutical industry does today. I have been in the 
business, and I know what it is about. Thank you.

    [The prepared statement of Mr. Amin follows.]

                    prepared statement of tahir amin

    Chairman Sanders, Ranking Member Cassidy, and Members of the 
Committee. It is my honor to be invited here to share with you a root 
cause of why the U.S. pays, by far, the highest prices in the world for 
prescriptions drugs. That root cause is how the pharmaceutical industry 
manipulates the patent system to lengthen patent protection and its 
market monopoly in order to block competition, all while increasing 
prices.
                     I. Introduction and Background
    My name is Tahir Amin. I am a Founder and Chief Executive Officer 
of the Initiative for Medicines, Access & Knowledge, also known as I-
MAK, a non-profit organization working to address structural inequities 
in how medicines are developed and distributed. We do not accept 
funding from branded or generic pharmaceutical companies.

    I qualified as a UK attorney and have nearly 30 years of experience 
in the field of intellectual property. I have experience working with 
the intellectual property and patent systems of several countries in 
the world, including the U.S., both at the practice and policy level.

    I spent the first decade of my legal career practicing as an 
attorney at international law firms and multinational companies 
securing and protecting intellectual property. Many of my clients were 
American companies, as was one of my employers during this time. 
Through this work, I learned both the legal and business side of 
intellectual property and its importance to inventors, investors and 
companies. I also learned how to use loopholes to game the system. 
These loopholes enabled me to ``invent'' intellectual property rights 
so companies could obtain and maintain a monopoly in the market, while 
continuing to extract maximum profits.

    After a decade in private practice seeing how intellectual property 
rights--and especially patents--are often misused for commercial gain, 
I co-founded I-MAK to help restore integrity and to the patent system. 
For the past 15 years, I have worked alongside patients and advocates 
to remove unmerited patent rights that stand in the way of generic and 
biosimilar competition and keep life-saving medicines out of reach of 
the patients who need them.

    I speak to you today as someone who has seen both sides of this 
issue.
              II. The Link Between Patents and Drug Prices
    America is in a drug pricing crisis. More than one-third of 
Americans say they have not filled a prescription for medication 
because of its cost. \1\ Black Americans are most heavily impacted as 
they are more likely to require medication for chronic conditions, such 
as high blood pressure or diabetes, while having median incomes of 
nearly $30,000 less than white households. \2\
---------------------------------------------------------------------------
    \1\  YouGov, More than one-third of Americans have not filled a 
prescription because of cost, 10 March 2023, available at https://
today.yougov.com/health/articles/45388-americans-have-not-filled-
prescription-price-poll
    \2\  Protect Our Care, How High Drug Prices Hurt Black Americans, 
July 2021 available at https://www.protectourcare.org/wp-content/
uploads/2021/07/POC-Report-How-High-Drug-Prices-Hurt-Black--
Americans--.pdf

    Prescription drug spending on retail and non-retail drugs is poised 
to grow 63 percent this decade, reaching $917 billion dollars. \3\ This 
increase is fueled by spending on patent-protected branded drugs. While 
branded drugs make up just 8 percent of prescriptions versus 92 percent 
for generics, they account for 84 percent of all drug spending in the 
U.S. \4\ Even after adjusting for general inflation, U.S. prescription 
drug spending increased by 76 percent from 2000 to 2017.
---------------------------------------------------------------------------
    \3\  Charles Roehrig and Ani Turner, Projections of the Non-Retail 
Prescription Drug Share of National Health Expenditures Report, 
Altarum, July 2022.
    \4\  The Use of Medicines in the U.S. 2022, The IQVIA Institute, 21 
April 2022

    These price hikes correspond with a dramatic increase in patenting 
---------------------------------------------------------------------------
activity in the pharmaceutical sector.

    It took 155 years for the USPTO to issue its first five million 
patents in 1991. \5\ It has taken less than one fifth of that time for 
the USPTO to issue its next 6 million. This would suggest that over 
half of all inventions in the history of the U.S. patent system 
occurred in the last 30 years. But have we really become more inventive 
in the last 30 years, or have we just become better at ``inventing'' 
patents because our patent system is no longer stringent enough?
---------------------------------------------------------------------------
    \5\  https://10millionpatents.uspto.gov/

    A similar picture emerges when we drill down into pharmaceutical 
patents specifically. The number of pharmaceutical patents granted in 
the U.S. more than doubled between 2005 (1,580 patents) and 2015 (3,742 
patents). \6\ But nearly 80 percent of the drugs--products based on 
small molecules--associated with new patents during this time were not 
for new drugs, but for existing ones. \7\
---------------------------------------------------------------------------
    \6\  Report--S&E indicators 2018--NSF--national science foundation. 
Science & Engineering Indicators 2018 Report. Accessed Oct. 31, 2023. 
https://www.nsf.gov/statistics/2018/nsb20181/report/sections/invention-
knowledge-transfer-and-innovation/invention--united-states-and-
comparative-global-trends--uspto-patenting-activity
    \7\  R Feldman. May your drug prices be evergreen. Journal of Law 
and the Biosciences, Volume 5, Issue 3, December 2018, Pages 590--647, 
https://doi.org/10.1093/jlb/lsy022

    Our analysis for the top 10 selling drugs in the U.S. in 2021 alone 
revealed \8\:
---------------------------------------------------------------------------
    \8\  I-MAK, Overpatented, Overpriced, September 2022 available at 
https://www.i-mak.org/overpatented/ and https://drugpatentbook.i--
mak.org/

          A total of 1,429 patent applications have been filed 
---------------------------------------------------------------------------
        as of 2022;

          741 patents have been granted on these drugs in 
        total;

          On average, that is more than 140 patent applications 
        filed per drug, and 74 patents granted per drug.

          On average, 66 percent of patents filed on these 
        drugs are after the first approval for marketing by the U.S. 
        Food and Drug Administration (FDA).

          On average 55 percent of the granted patents for 
        these drugs were filed after FDA approval.

          Over four times as many patents were granted on these 
        top 10 selling drugs in 2021 when compared to Europe.

          Keytruda (Merck), Eliquis (Bristol-Myers Squibb 
        (BMS)/Pfizer), Stelara (Johnson & Johnson) and Imbruvica 
        (AbbVie/Johnson & Johnson) were 4 of the top selling drugs in 
        2021. As of June 2022, these four drugs alone have had at least 
        494 patent applications filed on them, of which 235 were 
        granted patents.

          Most of the patent applications (305) for these four 
        drugs were filed after FDA approval.

    A closer look at some of these best-selling drugs reveals the 
following.
                            Keytruda (Merck)
    Merck's Keytruda belongs to a class of drugs known as immune 
checkpoint inhibitors used for cancer immunotherapy. It was first 
approved in September 2014. At the last count in July 2023, it has 
received an additional 35 FDA approvals across 16 different types of 
cancer.

    Keytruda is projected to become the best-selling drug ever, taking 
over AbbVie's Humira. Its worldwide sales are forecasted to be $27.19 
billion in 2024. In 2023, global sales for Keytruda were $25 billion, 
with $15 billion in the U.S. alone. Keytruda represented 47 percent of 
Merck's total pharmaceutical revenue in 2023.

    As of June 2022, there are at least 180 patent applications and 78 
granted patents covering Keytruda and its various indications. 61 
percent of the 180 patent applications were filed after the first FDA 
approval for Keytruda in 2014. \9\
---------------------------------------------------------------------------
    \9\  https://drugpatentbook.i-mak.org/

    The first patent filed in relation to Keytruda was 2002. Based on 
our findings, the latest expiring patent for Keytruda will be in 2039, 
which will be 11 years after the key patents covering the drug are set 
expire (2028). In total, Merck currently has 37 years of patent 
protection for Keytruda (it is worth noting that patents are granted 
---------------------------------------------------------------------------
for 20 years for an invention). This protection includes

    Market and media analysts are currently reporting that we could see 
biosimilar competition for Keytruda when the key patents on the drug 
expire in 2028 (often referred to as the patent cliff). Given the 
patent thicket that Merck has accumulated around Keytruda, I think that 
is wishful thinking. If we have learned any lessons from how AbbVie was 
able to extend its market monopoly on Humira for an additional 7 years 
beyond its key patent and generate $102 billion in revenue alone in 
that period (which included continued price increases) because of its 
patent thicketing strategy (see Figure below \10\), then we can expect 
Merck to do the same. Based on an analysis of all Keytruda's patents, 
after all the patent litigation and settlements are done, we will be 
fortunate if we see biosimilars for Keytruda enter before 2034--roughly 
6 years after the key patents expire. I also predict, as AbbVie did 
with Humira, that Merck will continue to increase prices for its 
branded Keytruda during the additional market monopoly period because 
of its extended patent protection. I do not see Merck leaving some $100 
billion plus on the table, they will use whatever patents they have to 
litigate for every cent of it.
---------------------------------------------------------------------------
    \10\  I-MAK, Overpatented, Overpriced, September 2022
    
    
                  Imbruvica (AbbVie/Johnson & Johnson)
    Imbruvica is a drug used to treat a variety of B cell cancers, 
including leukemia and lymphoma. It was first approved in 2013 and is 
approved by the FDA for several different indications.

    The price of Imbruvica has increased by 108 percent in the U.S. 
since it was introduced in 2013, compared to a 30 percent general 
inflation increase in the same period. \11\ Imbruvica's list price has 
increased nearly 32 percent in the U.S. in the past 5 years, from $431 
in 2019 to $567 per capsule (70mg).
---------------------------------------------------------------------------
    \11\  Noah Tong, Here are 25 Medicare Part D drugs that have 
skyrocketed in Price, Fierce Healthcare, 10 August 2023, available at 
https://www.fiercehealthcare.com/payers/here-are-25-Medicare-part-d-
drugs-have-skyrocketed-price

    As of June 2022, AbbVie has filed 195 patent applications, of which 
96 have been granted to date. That roughly works out to over one patent 
filed every month for the last 14 years. Over half of these patent 
applications were filed after Imbruvica received its first FDA 
approval. Currently, granted patents for Imbruvica give AbbVie patent 
protection for 29 years, until 2036--nine additional years beyond its 
---------------------------------------------------------------------------
original 20 years of patent protection.

    Despite generic companies litigating AbbVie's patents, we have 
already seen six companies enter into patent settlement agreements. As 
a result of these agreements, competitors will delay introduction of 
generic versions of Imbruvica until 2032 and 2033. These 5 additional 
years of market monopoly because of extended patent protection could 
help AbbVie and Johnson & Johnson secure over $7 billion dollars in 
revenue.
              Eliquis (Bristol Myers Squibb (BMS)/Pfizer)
    Eliquis is an anticoagulant medication used to treat and prevent 
blood clots.

    Sales for Eliquis in the U.S. increased by 10 percent to $8.6 
billion in 2023. Eliquis accounts for 27 percent of BMS's sales in the 
U.S. The price of Eliquis has increased by 124 percent since its 
introduction in 2012 as compared to 31 percent general inflation 
increase during the same period. \12\ In January this year, the list 
price for Eliquis increased by 6 percent from the year before. This 
increase outpaced inflation and the annual price increases of the top 
50 best selling drugs.
---------------------------------------------------------------------------
    \12\  Ibid

    As of June 2022, BMS/Pfizer have filed at least 43 patent 
applications for the drug, of which 22 are granted. Sixteen of these 
patent applications were filed after FDA approval. There are 2.4 times 
more granted patents in the U.S. than in Europe. Generic versions of 
Eliquis entered some European countries in 2022 after several patents 
that would have extended the market monopoly period were found invalid. 
\13\ However, in the U.S. these same patents were held valid after 
litigation and generic versions are not expected to enter until 2028. 
As a result of extended patent protection, generic versions will have 
entered Europe almost 6 years earlier than in the U.S. By our estimate, 
BMS/Pfizer will make $48 billion in revenue during this extended market 
monopoly period. \14\
---------------------------------------------------------------------------
    \13\  Amy Sandys, Court of Appeal confirms invalidity of Bristol-
Myers Squibb apixaban patent, 9 May 2023, available at https://
www.juve-patent.com/cases/court-of-appeal-confirms-invalidity-of-
bristol-myers-squibb-apixaban-patent/
    \14\  I-MAK, Overpatented, Overpriced, September 2022
---------------------------------------------------------------------------
         III. Solutions to the Patent and Drug Pricing Problem
    This Committee should recognize that the use of patent thickets to 
extend the market monopoly period on a product is not a case of a few 
bad actors. This is an endemic problem across the pharmaceutical 
industry.

    If we want to get to the heart of addressing our National drug 
pricing crisis, the first and most important thing Congress can do to 
solve this problem is raise the bar for what gets patented. Over the 
last 30 years, more and more patents have been sought and granted for 
things that are not new inventions given what we know in the 
pharmaceutical sciences today.

    For example, no reasonable researcher would call combining two 
existing drugs or switching dosages novel science by today's standards. 
And yet, drugmakers regularly get 20 years of patent protection for 
this commonly practiced knowledge.

    In 1962, Senator Estes Kefauver of Tennessee said:

    ``If you want to tweak a drug, and you want to get another patent 
on it, the modified version has to be significantly better, 
therapeutically, for patients.'' \15\
---------------------------------------------------------------------------
    \15\  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4101807/

    A patent puts enormous monopoly power into the hands of a single 
drugmaker. That power should only be granted if the invention is 
original and materially better than what already exists. We cannot rely 
on the market and litigation to resolve these problems; they need to be 
addressed before a patent monopoly is granted in the first place.
                             IV. Conclusion
    The Constitution grants Congress the power to ``promote the 
progress of science and useful arts by securing for limited times to 
authors and inventors the exclusive right to their respective writings 
and discoveries.''

    But patenting activity today goes well beyond the time limited 
monopoly intended by the Constitution. Today's patent system has become 
less an engine for real invention than a tool for companies and their 
lawyers to exploit using sophisticated legal and marketing Jedi tricks 
under

    This is not an indictment of the pharmaceutical industry. 
Drugmakers and their armies of patent lawyers--people like me in my 
former life--are simply doing what the system incentives them to do, 
and what they are bound by their shareholders and clients to do.

    But it is in Congress's power to end this perversion and restore 
integrity to the patent system. Instead of incentivising investment in 
minor modifications for the purposes of extending a patent, we need a 
system that incentives bold research--breakthroughs that are 
therapeutically better than existing alternatives and fill a real 
market need, not low-hanging fruit designed to maximize profits. 
Congress has the ability to return the patent system to what it was 
always intended to be: not a vehicle for unprecedented profits, but an 
engine for inventions that are truly original and unprecedented.
                                 ______
                                 
                   [summary statement of tahir amin]
    A root cause of why the U.S. pays, by far, the highest prices in 
the world is because of how the pharmaceutical industry manipulates the 
patent system to lengthen patent protection and its market monopoly.
              I. The Link Between Patents and Drug Prices
    Keytruda (Merck), Eliquis (Bristol-Myers Squibb (BMS)/Pfizer), 
Stelara (Johnson & Johnson) and Imbruvica (AbbVie/Johnson & Johnson) 
were 4 of the top selling drugs in 2021. As of June 2022, these four 
drugs alone have had at least 494 patent applications filed on them, of 
which 235 were granted patents. Most of the patent applications (305) 
for these four drugs were filed after FDA approval.
                            Keytruda (Merck)
    There are at least 180 patent applications and 78 granted patents 
covering Keytruda and its various indications. 61 percent of the 180 
patent applications were filed after the first FDA approval for 
Keytruda in 2014. Given the patent thicket that Merck has accumulated 
around Keytruda, we will be fortunate if we see biosimilars for 
Keytruda enter before 2034--roughly 6 years after the key patents 
expire (2028). During that extended monopoly period Merck will continue 
to increase prices and could pocket over $100 billion in sales.
                  Imbruvica (AbbVie/Johnson & Johnson)
    AbbVie has filed 195 patent applications, of which 96 have been 
granted to date. As a result of patent litigation generic companies 
have entered settlements and will delay introduction of generic 
versions of Imbruvica until 2032 and 2033. These 5 additional years of 
market monopoly because of extended patent protection could help AbbVie 
and Johnson & Johnson secure over $7 billion dollars in revenue.
              Eliquis (Bristol Myers Squibb (BMS)/Pfizer)
    BMS/Pfizer have filed at least 43 patent applications for the drug, 
of which 22 are granted. There are 2.4 times more granted patents in 
the U.S. than in Europe. Generic versions of Eliquis entered some 
European countries in 2022 after several patents that would have 
extended the market monopoly period were found invalid. However, in the 
U.S. these same patents were held valid. after litigation and generic 
versions are not expected to enter until 2028. As a result of extended 
patent protection, generic versions will have entered Europe almost 6 
years earlier than in the

    U.S. BMS/Pfizer could make $48 billion in revenue during this 
extended market monopoly period.
          II. Solutions to the Patent and Drug Pricing Problem
    If we want to get to the heart of addressing our National drug 
pricing crisis, the first and most important thing Congress can do to 
solve this problem is raise the bar for what classifies as an invention 
that deserves a patent.
                                 ______
                                 
    The Chair. Thank you very much.

    Senator Cassidy.

    Senator Cassidy. Pleasure to introduce our witness, Darius 
Lakdawalla, currently the Quintiles Chair in Pharmaceutical 
Development Regulatory Innovation at University of Southern 
California Mann School of Pharmacy and Pharmaceutical Sciences.

    He also serves as Director of Research for the USC 
Schaeffer Center for Health Policy and Economics, a partnership 
between the Mann School and the USC Price School of Public 
Policy.

    He received his Ph.D. in economics from the University of 
Chicago as a renowned researcher and thought leader in health 
economics and health policy, which obviously impacts us today. 
Thank you, sir.

  STATEMENT OF DARIUS LAKDAWALLA, PH.D., DIRECTOR, RESEARCH, 
    UNIVERSITY OF SOUTHERN CALIFORNIA SCHAEFFER CENTER, LOS 
                          ANGELES, CA

    Dr. Lakdawalla. Thank you. Chairman Sanders, Ranking Member 
Cassidy, and honorable Members of the Committee, thank you for 
the opportunity to testify today about drug prices and the 
assessment of medical technologies.

    My name is Darius Lakdawalla. I am an Economist and a 
Professor at the USC Mann School of Pharmacy and Pharmaceutical 
Sciences and USC Price School of Public Policy. I am also the 
Director of Research at the USC Schaeffer Center for Health 
Policy and Economics. The opinions I offer today are my own and 
don't represent the views of the University of Southern 
California or the USC Schaeffer Center.

    I would like to start with a story. In December 1984, a 
young boy from Indiana named Ryan White was diagnosed with 
AIDS, a result of a transfusion with infected blood. In the 
immediate wake of his passing in 1990, Congress passed the Ryan 
White Care Act, ensuring affordable care for HIV/AIDS patients.

    The value of this program was fully realized 5 years later, 
when highly active antiretroviral therapy emerged as a 
lifesaving treatment for patients with HIV. Today, 9 out of 10 
patients receiving care through the Ryan White Program enjoy 
viral load so low that they are no longer infectious.

    Thanks to breakthrough medical innovation and to forward 
thinking public policy that made innovative HIV therapies 
affordable to many, HIV positive patients can now expect to 
live well into their 70's and beyond.

    But increasing patient access through bold expansion of 
affordable care means little when there are no valuable cures 
or treatments to access, and breakthrough medical therapies 
provide little value if high cost sharing pushes them out of 
patients' reach. This is the fundamental tradeoff we are here 
to address today.

    This tradeoff between innovation and affordability has 
played out in different approaches taken across the globe. 
There is little doubt that U.S. consumers access newer drugs 
sooner and more often than their overseas counterparts, and 
this increased access to the latest treatments matters.

    Schaeffer Center research suggests that introducing 
European style pricing policies would ultimately reduce 
innovation and cost American consumers just over half a year of 
life expectancy, about what would be lost if all American 
surgeons suddenly forgot how to perform heart bypass surgery.

    Yet there is no denying the sentiment that U.S. consumers 
unfairly pay higher drug prices than their peers overseas. The 
deteriorating accessibility of prescription drugs in recent 
years threatens to derail the access advantages and health 
gains American consumers have so far enjoyed and is one 
component of this growing sentiment.

    Even patients with good insurance are struggling to access 
the therapies their doctors prescribe. Plans frequently employ 
coinsurance requirements and utilization management tools that 
severely restrict access. These changes likely harm health, 
since the link between increasing out-of-pocket costs and worse 
patient adherence is well-established.

    Surprisingly, coverage has deteriorated even while the 
average manufacturer net prices of brand drugs, the amount 
manufacturers receive after rebates and discounts, have 
declined in each of the last 5 years.

    Shaeffer research analyzing the flow of money spent on 
insulin, found that while net prices fell by 31 percent, total 
expenditures remained nearly constant because intermediaries 
were pocketing the additional rebates and price concessions 
instead of passing them on to consumers.

    Transparency and pricing throughout the pharmaceutical 
distribution system would be a major step toward ensuring that 
drug prices reflect the actual value provided to patients, and 
don't simply enrich intermediaries.

    Rewarding drugs that do provide value promotes investment 
in the right kind of therapies and ensures good health will be 
increasingly within the reach of American patients for 
generations to come. Decades of economic research demonstrate 
that where innovators predict higher returns, innovative effort 
and discovery follow.

    Outside the U.S., many countries adopt pricing approaches 
that either fail to measure value to patients or make it hard 
to predict future returns to innovation. The UK, Australia, and 
Canada employ relatively transparent and predictable methods 
that nonetheless rely on quality adjusted life years, which 
discriminate against vulnerable patients.

    On the other hand, France and Germany avoid qualities and 
focus on rating clinical benefits in a way that often fails to 
correspond to the eventual price. These tradeoffs also 
underscore the risks of so-called reference pricing approaches 
that would tie American prices to those charged by other 
countries.

    In so doing, Americans would be forced to live with the 
vagaries of pricing systems designed and implemented elsewhere 
around priorities that may differ from ours. Ultimately, the 
right policies for American patients need to focus on the 
affordability of good health.

    Affordable and generous health insurance, transparent and 
predictable pricing, and an emphasis on value to patients 
provide the ingredients for a better approach that secures the 
health of American families now and for generations to come. 
Thank you very much.

    [The prepared statement of Dr. Lakdawalla follows:]

                prepared statement of darius lakdawalla
    Key Points:

          The challenge for public policy is to sustain the 
        pace of medical innovation while ensuring that valuable new 
        technologies remain affordable and accessible.

          The U.S. is by far the largest market for 
        pharmaceuticals in the world and the engine of global 
        pharmaceutical innovation. Other countries, in effect, free 
        ride off the innovation stimulated by the American market.

          Despite stable or falling net prices paid to 
        prescription drug manufacturers over the past decade, novel 
        medicines lie increasingly beyond the financial reach of 
        American patients.

          Blunt price controls are not the solution to the 
        worsening affordability of prescription drugs or to global 
        free-riding: Schaeffer Center research suggests that 
        introducing European-style pricing policies would reduce 
        Americans' life expectancy.

          Instead, aligning drug prices with the actual value 
        provided to patients stimulates innovation that benefits 
        patients and discourages innovation that does not.

          Legislation to increase drug price transparency, 
        coupled with better information about value, can help payers 
        and consumers spend their money wisely.

          Affordable and generous insurance for prescription 
        drugs ensures that drugs remain within the financial reach of 
        American families.

    Chairman Sanders, Ranking Member Cassidy, and Honorable Members of 
the Committee, thank you for the opportunity to testify today about 
drug prices and the assessment of medical technologies.

    My name is Darius Lakdawalla, and I am an economist, a professor at 
the USC Mann School of Pharmacy & Pharmaceutical Sciences and USC Price 
School of Public Policy, and the Director of Research at the USC 
Schaeffer Center for Health Policy & Economics. By way of background, I 
have been studying innovation in the health care sector for nearly 
three decades, I co-wrote the chapter in the Handbook of Health 
Economics on intellectual property and biomedical research, and I co-
authored the book Valuing Health on modern methods for valuing medical 
technology. The opinions I offer today are my own and do not represent 
the views of the University of Southern California or the USC Schaeffer 
Center.
               The Value of Innovation in Global Context
    In December 1984, a young boy from Indiana named Ryan White was 
diagnosed with AIDS, as a result of a transfusion with infected blood. 
While his doctors gave him just 6 months to live, Ryan outlasted those 
predictions and lived six more years. In the immediate wake of his 
untimely passing in 1990, Congress passed the Ryan White Care Act, 
which has since ensured affordable care for generations of HIV/AIDS 
patients. While the Act played a critical role in the fight against HIV 
almost immediately, its full value would not be realized until 5 years 
after its passage, when highly active antiretroviral therapy (HAART) 
emerged as a life-saving treatment for patients with HIV. The Ryan 
White Care Act put effective medical care within reach for many HIV+ 
patients that would otherwise have gone without it, while medical 
innovation brought new forms of treatment that changed the lives of 
patients and their families. Today, 9 out of 10 patients receiving care 
through the Ryan White program enjoy viral loads so low that they are 
no longer infectious. Thanks to breakthrough medical innovation, and to 
forward-thinking public policy that made it affordable to many, HIV+ 
patients treated with HAART in a timely fashion can now expect to live 
well into their 70's and beyond.

    The case of HIV illustrates a pair of health policy truisms. 
Increasing patient access through bold expansion of affordable care 
means little when there are no valuable cures or treatments to access. 
At the same time, breakthrough medical therapies provide little value 
if high cost-sharing pushes them out of patients' reach. The challenge 
for public policy is to sustain the pace of medical innovation while 
ensuring that valuable new technologies remain affordable and 
accessible to the patients who need them.

    At first blush, it may seem impossible to navigate the narrow 
straits between affordability and innovation. Medical innovation 
investment carries high risk that drives up the cost of discovery. 
Among investigational medicines that undergo human trials, 90 percent 
will fail to launch. Pharmaceutical and medical device firms will 
undertake these costs only if they expect to recoup the cumulative 
costs of their investments and receive a reasonable rate of return. 
However, these returns on innovation must ultimately be paid by all 
Americans, through out-of-pocket payments, health insurance premiums, 
and taxes. In this respect, therefore, greater rewards for innovators 
lead to more innovation but less affordability. The converse is also 
true: bluntly lowering prices makes new medicines more affordable for 
today's patients, but limits innovation for future generations of 
patients.

    This tradeoff between innovation and affordability has played out 
in the different approaches taken across the globe. There is little 
doubt that U.S. consumers access newer drugs sooner and more often than 
their overseas counterparts. Academic research shows how this tendency 
results in more and earlier new drug launches in the U.S., and 
correspondingly fewer and later launches in other countries. Schaeffer 
Center research suggests that introducing European-style pricing 
policies would ultimately lower innovation and cost American consumers 
just over half a year of life expectancy, about what would be lost if 
American surgeons suddenly forgot how to perform heart bypass surgery. 
\1\
---------------------------------------------------------------------------
    \1\  Bypass surgery adds about 1.1 years of life to patients 
treated with it. The lifetime risk of cardiovascular disease is around 
60 percent. Thus, even if every heart disease patient received bypass 
surgery, it would add just over half a year of life.

    Meanwhile, academic research finds that the American healthcare 
system performs better than its European counterparts in treating 
disease. For example, American mortality rates from breast, colorectal, 
and prostate cancer have fallen faster than European rates. Indeed, an 
analysis of cancer care across 16 countries found countries where 
cancer spending has grown more rapidly have also experienced faster 
declines in cancer mortality rates. According to our research, where 
the U.S. lags is in the prevention of chronic diseases like heart 
disease, hypertension, and diabetes. Faster growth in American obesity 
appears to have played an outsized role in driving these differences. 
In short, America's relatively low life expectancy appears to be in 
---------------------------------------------------------------------------
spite of, not because of, its healthcare system.

    Despite the good news, however, there is no denying the sentiment 
that U.S. consumers unfairly pay higher drug prices than their peers 
overseas. On the one hand, we cannot readily observe the actual extent 
of the difference between U.S. and overseas prices. Too often, price 
comparisons in the public discussion rely on U.S. list prices, which 
are easily accessible, but almost never reflect what is truly paid for 
a drug. While researchers have a rough idea of the average discount 
paid in aggregate, this provides little insight into the actual prices 
of specific drugs. Economic principles predict that volume will be 
higher on drugs offering higher discounts. Therefore, applying the 
average discount to the list price of every individual drug will 
overstate U.S. prices.

    Nonetheless, economic principles also predict that U.S. prices 
probably are higher than prices overseas, even if we do not know by 
exactly how much. The culprit is the problem of ``free-riding.'' The 
U.S. is by far the largest market for pharmaceuticals in the world. 
Smaller market countries have rational, self-interested incentives to 
pay lower prices, knowing that their small size allows them to save 
money without meaningfully reducing global pharmaceutical innovation. 
In effect, their lower reimbursements ``free-ride'' off the American 
market, which remains the engine of pharmaceutical innovation that 
benefits patients throughout the world.

    Americans have understandably become frustrated by footing so much 
of the world's bill for innovation. Unfortunately, we have no reliable 
ways to coerce other countries to act against their own self-interest. 
And, while it may seem tempting to stop paying higher prices and to 
join with the free riders, the resulting slowdown in innovation would 
harm American patients and their families most of all. Fortunately, 
there are actions we can take to ensure that patients benefit from 
medical advances, today and in the future.
 Ensuring Patient Access to Treatments: Net Prices Are Not the Problem
    The deteriorating accessibility of prescription drugs in recent 
years threatens to derail the access advantages and health gains 
American consumers have so far enjoyed. Even patients with ``good'' 
insurance are struggling to access the therapies their doctors 
prescribe. Plans frequently impose co-insurance requirements, where 
patients pay a share of their drug's list price, exposing them to 
artificially inflated list prices even when drugs' true costs are much 
lower. Plans are also restricting access or denying it altogether for 
an increasing share of drug compounds. Since 2012, the three largest 
pharmacy benefit managers have excluded a sharply increasing number of 
drugs from their formularies--last year, each of them excluded from 
coverage more than 600 products. At the same time, the average 
manufacturer net prices of brand drugs--the amount manufacturers 
receive after rebates and discounts--have declined in each of the last 
5 years.

    If it is getting cheaper to buy these drugs from manufacturers, why 
are they growing harder for patients to access? Part of the answer can 
be seen in a 2021 analysis of the flow of money spent on insulin. 
Between 2014 and 2018, net manufacturer prices for insulin fell by 31 
percent, but the total expenditure per unit of insulin remained nearly 
constant. Growing discounts and concessions offered by manufacturers 
were not being passed on to patients or taxpayers in the form of lower 
insulin expenditures. Instead, those savings were being pocketed by 
intermediaries in the pharmacy distribution system, including pharmacy 
benefit managers, pharmacies and wholesalers. Pending legislation aimed 
at increasing transparency in the distribution system will shed more 
light on the commercial practices that enable PBMs to divert savings 
like this and provide more insight into where our drug spending is 
going. Neither third-party payers nor consumers observe the net prices 
they themselves are paying for individual drugs. Even large self-
insured employers may be unable to get simple answers about how much 
they are paying for a given drug, no matter how widely used. 
Transparency in pricing would be a major step toward ensuring that drug 
prices reflect the actual value provided to patients, and don't simply 
enrich intermediaries.

    Some academics and Federal agencies have asserted \2\2 that price 
transparency harms consumers, purportedly by providing a means for 
pharmaceutical firms to cooperate with each other in raising prices. 
This argument is specious. In the first place, there are no academic 
studies showing that pharmaceutical price transparency limits 
competition; the argument against transparency proceeds primarily by 
means of a flawed analogy to a 25 year-old study of the Danish ready-
mix concrete industry. Moreover, the critique of price transparency 
rests on the quaint notion that confidential rebates yield vigorous 
price competition that benefits consumers. On the contrary, our 
research illustrates how confidential rebates explain why competition 
among branded drug companies is currently associated with higher-not-
lower-list prices for drugs, and correspondingly higher costs for 
patients paying co-insurance for their medicines.
---------------------------------------------------------------------------
    \2\  See page 362.

    In addition to hitting American families in the pocketbook, higher 
out-of-pocket costs for drugs also harm health. The link between 
increasing out-of-pocket costs and patient adherence is well-
established. USC Schaeffer Center research found that higher out-of-
pocket burden corresponds with lower patient utilization of insulin, 
while other studies have found similar relationships between patient 
costs and adherence in rheumatoid arthritis, breast cancer, and chronic 
kidney disease. In addition, USC Schaeffer Center research demonstrated 
in the context of novel oral anticoagulants (NOACs) that prior 
authorization and step therapy restrictions in Part D plans harmed 
patient health. Patients in plans with more restrictions were less 
likely to use NOACs, had worse adherence when they did use NOACs, took 
longer to fill their initial NOAC prescription, and faced higher risk 
of mortality/stroke/transient ischemic attack. This research does not 
imply that every access restriction harms patient health. Rather, it 
highlights the need to evaluate the risks and benefits of access 
policies, just as we evaluate the risks and benefits of new medicines.
     Sustaining Innovation for American Patients and their Families
    Fortunately, reforms that promote patient access do not have to 
lower medical innovation. Indeed, our research shows that generous 
prescription drug insurance unlocks affordability and access for 
patients while still enabling sufficient rewards for innovation. This 
is not to say, however, that all innovation should be unquestioningly 
rewarded. The goal is to encourage innovations that benefit patients 
and their families, and to discourage those that do not. These goals 
can best be achieved when prices reflect value to patients.

    Decades of economic research demonstrate that innovation follows 
pricing incentives. Where innovators expect higher returns, innovative 
effort and discovery follow. In contrast, innovators will avoid 
investing where they expect lower returns. As a result, aligning the 
price of every drug with the value it brings patients stimulates 
innovation that benefits patients and discourages innovation that does 
not. At a minimum, this requires a transparent and predictable approach 
to price-setting that rewards value. Predictability matters, because 
innovation investments follow what innovators expect prices will be, 
often many years in the future. Second, value must be measured in a way 
that holistically reflects what patients and their families care about. 
Doing otherwise stimulates the wrong kind of innovation.

    Looking outside the U.S., many countries adopt pricing approaches 
that force a tradeoff between predictability and the holistic 
measurement of value. The United Kingdom, Australia, and Canada employ 
relatively transparent systems that set prices based on three kinds of 
data: the clinical benefits of the new drug, the expected economic 
benefit of the new drug, and the likely cost impact of the new drug. 
Even though prices are not determined in a purely formulaic manner, 
drugs are more likely to be reimbursed when their prices result in 
sufficient economic benefit, and vice-versa. And, since economic 
benefit is computed using a known mathematical framework, this approach 
results in more predictable pricing outcomes.

    However, while these countries employ a more predictable approach, 
they also rely on old-fashioned methods of economic analysis--for 
instance traditional cost-effectiveness calculations using quality-
adjusted life-years (QALYs). While many have correctly observed the 
ethical challenges posed by the discriminatory nature of QALYs, our 
research demonstrates that traditional QALYs also get the mathematics 
and economics of value assessment wrong for patients.

    On the other side of the coin are countries like France and 
Germany, which recognize the pitfalls of traditional economic 
evaluation of new medicines. For the most part, these countries focus 
on clinical benefits as the main criterion for reimbursement decisions, 
rarely if ever attempting to form specific economic estimates of value. 
While these countries avoid flawed estimates of value, their approach 
compromises predictability. In contrast to economic evaluation, which 
is focused on estimating a monetary benefit, clinical evaluation 
typically considers many dimensions of health improvement without a 
clear and quantitative method for weighing these different dimensions 
against each other. For example, one academic study found that only 2 
out of the 5 official criteria specified for clinical benefit in France 
are statistically associated with the official rating of clinical 
benefit. Moreover, even if estimated clinical benefits are predictable, 
their effect on prices may not be. Under the German system, which uses 
a very specific, albeit complicated, process for measuring clinical 
benefit, there remains no clear quantitative relationship between 
measured clinical benefit and negotiated prices.

    These tradeoffs also underscore the risks of so-called ``reference 
pricing'' approaches that tie American prices to those charged by other 
countries. In so doing, Americans would be forced to live with the 
vagaries of pricing systems designed and implemented elsewhere, around 
priorities that may differ from ours. Moreover, academic research finds 
that bringing reference pricing to the U.S. would likely inflate 
overseas prices but leave U.S. prices largely unchanged. The net result 
will be little if any benefit for American families in the short-term, 
and some degree of harm to long-term medical innovation in the bargain.

    Instead, aligning prices with value encourages innovators to invest 
in areas that patients value. Achieving this outcome requires better 
information about value, which is ironic because we already have an 
overload of certain kinds of information about value. Prescription 
drugs nearly always arrive to market with studies estimating their 
value, often many of them, and they frequently reach divergent 
conclusions. Instead of even more studies, payers and consumers need an 
objective review and translation of the evidence on value. This might 
not result in a single, incontrovertible estimate of economic value, 
but even a range of values, when objectively determined, would benefit 
the people and organizations ultimately footing the bill for 
prescription drugs. Better information about value, coupled with price 
transparency, helps ensure payers and consumers spend their money 
wisely.

    While it is yet to be determined what the true impact of the 
Inflation Reduction Act (IRA) will be on biomedical innovation, there 
is strong evidence that cuts to Medicare's pharmaceutical spending will 
reduce discovery of new treatments as well as new uses for existing 
drugs. But there are ways to mitigate these adverse impacts. Most 
importantly, it is essential that Maximum Fair Price (MFP) 
determination hew to the principles of transparency and value to 
patients. Economic research provides transparent approaches that can be 
leveraged by CMS, and relying on economics no longer means relying on 
the old-fashioned QALY. For example, one new value assessment method 
based on research at the USC Schaeffer Center corrects the QALY's 
errors by recognizing the long-established principle that goods are 
more valuable to people who have less of them. Analogously, health 
improvements are more valuable for people with disabilities, terminal 
illness, or other severe disease. This approach comports with Federal 
law by avoiding value assessments that discriminate against vulnerable 
patients with disabilities or terminal illness.

    Finally, Medicare Part D's benefit design also implicitly 
encourages high list prices. Part D insurers favor high list prices in 
part because they move patients more rapidly to the catastrophic phase 
of coverage, where Federal reinsurance payments await. While the IRA's 
Part D benefit redesign provisions may moderate these reinsurance-
related incentives somewhat, other program features (such as an intense 
focus on premiums) suggest the upward pressure on list prices will 
continue absent other market changes.
             Sustaining Affordable and Valuable Innovation
    Ultimately, the right policies need to focus on the affordability 
of good health, not simply of health care. This is especially true for 
diseases with few or no treatment options. The least affordable drugs 
are those that have not yet been discovered. For example, in the days 
before the discovery of effective vaccines, freedom from the most 
devastating consequences of COVID-19 could not be bought at any price. 
To be sure, affordable and generous insurance for prescription drugs 
remains part of any solution, because today's medicines already put 
good health within reach for millions of Americans suffering from 
chronic disease. Making prices transparent and generating actionable 
information on value will help wring out wasteful spending that fails 
to benefit patients and their families. Finally, rewarding drugs that 
do provide value helps sustain innovation and ensures good health will 
be increasingly within the reach of Americans for generations to come.
                                 ______
                                 
                [summary statement of darius lakdawalla]
Ensuring Affordable and Valuable Pharmaceutical Innovation for Patients
    Increasing patient access through bold expansion of affordable care 
means little when there are no valuable cures or treatments to access. 
At the same time, breakthrough medical therapies provide little value 
if high cost-sharing pushes them out of patients' reach.

    This tradeoff between innovation and affordability has played out 
in the different approaches taken across the globe. There is little 
doubt that U.S. consumers access newer drugs sooner and more often than 
their overseas counterparts. And this increased access to the latest 
treatments matters. Schaeffer Center research suggests that introducing 
European-style pricing policies would ultimately reduce innovation and 
cost American consumers just over half a year of life expectancy, about 
what would be lost if American surgeons suddenly forgot how to perform 
heart bypass surgery. \1\ Thus, even though other countries likely 
free-ride off the revenue generated in the American market, importing 
overseas pricing policies will harm the health of American families.
---------------------------------------------------------------------------
    \1\  Bypass surgery adds about 1.1 years of life to patients 
treated with it. The lifetime risk of cardiovascular disease is around 
60 percent. Thus, even if every heart disease patient received bypass 
surgery, it would add just over half a year of life.

    Nonetheless, the deteriorating accessibility of prescription drugs 
in recent years still threatens to derail the access advantages and 
health gains American consumers have so far enjoyed. Even patients with 
``good'' insurance are struggling to access the therapies their doctors 
prescribe. An increasing number of plans frequently impose co-insurance 
requirements and exclude drugs from their formularies. These changes in 
the marketplace likely harm health, since the link between increasing 
---------------------------------------------------------------------------
out-of-pocket costs and patient adherence is well-established.

    Surprisingly, coverage has deteriorated even while the average 
manufacturer net prices of brand drugs--the amount manufacturers 
receive after rebates and discounts--have declined in each of the last 
5 years. Transparency in pricing throughout the pharmaceutical 
distribution system would be a major step toward ensuring that drug 
prices reflect the actual value provided to patients, and don't simply 
enrich intermediaries.

    Rewarding drugs that do provide value helps sustain innovation and 
ensures good health will be increasingly within the reach of American 
patients for generations to come. Decades of economic research 
demonstrate that innovation follows pricing incentives. Where 
innovators expect higher returns, innovative effort and discovery 
follow. As a result, aligning the price of every drug with the value it 
brings to patients stimulates innovation that benefits patients and 
discourages innovation that does not.

    Ultimately, the right policies need to focus on the affordability 
of good health, not simply of health care. The least affordable drugs 
are those that have not yet been discovered.
                                 ______
                                 
    The Chair. Let me start the questioning by saying that I 
have heard some of my Republican colleagues talk about free 
market capitalism. Mr. Maybarduk, isn't the entire 
pharmaceutical industry based on Government granted monopoly 
power?

    Mr. Amir, you may want to also speak to that. What does 
that have to do with free market capitalism if the Government 
is guaranteeing monopoly for many, many years?

    Mr. Maybarduk. Well, precisely, Senator. Prices are high 
because drug makers have monopolies over products we can't just 
substitute. A patient can't just say, I will take this 
alternative. The patents block them from having affordable 
access. That is a monopoly, not a market system.

    American taxpayers stand up to the world's largest and most 
productive funder of biomedical R&D at NIH. And it is we the 
people that fund the risk--we the people that support the risky 
early stage research that has led to such significant medical 
breakthroughs in the areas of mRNA, cancer, heart disease, gene 
therapy.

    The Chair. In other words, the Government has played a very 
active role in the entire process. Mr. Amin, what about free 
market capitalism and monopolies?

    Mr. Amin. Well, I mean, it is--the Constitution grants 
Congress the power to promote the progress of science and 
useful laws, securing for limited times a right to their 
inventions. What we have now is a system where the patent 
system is not a limited time.

    It is in a monopoly that gets extended, extended, extended. 
When we think about the free markets and the principles of 
capitalism, it is interesting Senator Paul mentioned Milton 
Friedman.

    In fact, the neoliberals actually didn't like monopoly 
power, and they really did actually believe in the free market, 
but the fact that the intellectual property system, the patents 
has been corrupted by the modern pharmaceutical system to kind 
of extend those monopolies, actually goes against the 
principles of free market.
    o, in a sense, they are not living up to the bargain of the 
free market.

    The Chair. Okay. Mr. Lakdawalla, what do you think about 
free market capitalism and Government protection of monopolies?

    Mr. Maybarduk. Thank you, Chairman. Well, truly free 
markets exist only on the whiteboard in my classroom at USC, 
first of all. But it is also true that without patent 
protection, there would be no innovation. That is a result that 
has been known in economics for centuries.

    The real question is how do we balance patent protection, 
which induces innovation, against the value of new innovations 
and being able to broadcast them more widely after the end of a 
patent? And that tradeoff can be tricky, although in the case 
of pharmaceuticals, we have a useful instrument which is health 
insurance, and that allows patients to access drugs at much 
lower prices than what manufacturers receive even during the 
patent period.

    That is an opportunity for us to expand accessibility even 
during the patent protection period.

    The Chair. Thanks very much. My last question for all three 
of you is I believe you all heard the CEO's testimony in 
response to questions. What would you say, briefly, about their 
responses?

    Did they in fact, effectively address the issue as to why 
we pay by far the highest prices in the world for prescription 
drugs, and why one out of three people can't afford the 
medicine that doctors prescribe?

    Mr. Maybarduk. Well, Senator, we heard some wild stuff up 
here this morning, including a lot of blaming middlemen for the 
problem of high prices. Look, drug makers' high prices are the 
whole reason that we have a middleman problem.

    It is because we have exceedingly high prices at the outset 
that there is an attractive market for middlemen to enter. But 
the fish rots from the head. If you break up the market, if you 
look at where the revenue is, drug makers capture two-thirds, 
$323 billion. Pharmacy benefit managers are a small slice, $23 
billion.

    You can't fix the problem of the pharmaceutical industry by 
going off middlemen who are just trying to skim off the top. 
You have to get to the root of the problem, which is the 
monopoly power.

    The Chair. Mr. Amin.

    Mr. Amin. I agree with what Peter says, and I would just 
add that some of the answers that these CEOs gave, for example, 
the Merck CEO about allowing biosimilar competition in when 
their primary patent ends, I believe that is not going to 
happen. I think if you look at all the patents that they have 
stacked up, they know what their game plan is.

    You just have to look at what happened Humira and AbbVie. 
Similarly, I believe you just look at what is happening with 
these weight-loss drugs. We are looking at the patents on those 
now. These are potentially going to become $1 trillion drugs.

    The Chair. Okay. Dr. Lakdula--Lakdawalla--pardon me for----

    Dr. Lakdawalla. No problem. I think an important point that 
maybe is often missed is that net prices of pharmaceuticals 
have been falling for the past 10 years very consistently. CMS 
recently released its national health expenditure accounts 
data, and it confirms this fact as well. We have to reconcile 
that with rising costs for consumers.

    I think intermediaries are actually playing a bigger role 
than it might appear. About $0.40 of every dollar spent on 
pharmaceuticals goes to intermediaries. And unlike 
pharmaceutical firms, they are not engaging in innovation that 
ultimately improves health.

    The Chair. Thank you very much.

    Senator Cassidy.

    Senator Cassidy. Thank you all. Mr. Maybarduk, I think it 
is made very persuasively--by the way, clearly, patents are 
part of the free market system, is the way that you protect 
intellectual property, and you incent creativity.

    Now, whether it is being abused is another issue. And you 
mentioned the patent thickets, which is actually legislation 
sponsored by John Cornyn to do away with them. So, that is 
recognized. But I think without protection of intellectual 
property, we would not have this innovation. Now, why would 
you--why would you put the time into it?

    Let's just make that point. But Mr. Maybarduk, Dr. 
Lakdawalla makes, I think, a persuasive point that without the 
profit incentive, you will not get the innovation. Are you 
disputing that?

    Mr. Maybarduk. I am not.

    Senator Cassidy. You are just kind of--the degree of the 
profit taking, if you will. I will point out, by the way, that 
the three examples you gave seem to be all Medicare patients 
and there is legislation out there which will cap the out-of-
pocket exposure to--for Medicare patients on these expensive 
drugs. I think it will be $2,000 in June 2025, and the 
catastrophic portion is going away now.

    But Dr. Lakdawalla, that said, somebody is paying. Yes, 
insurance is making it more affordable. Medicaid is making it 
more affordable. Medicare is making it more affordable. I could 
go down, but somebody is paying. In my state, I was recently 
told that pharmaceutical costs for the Medicaid program are now 
35 percent of the total. And so, yes, maybe we could do some 
value-based purchasing.

    That is a lot of money, though. That is a huge program. 
That is not hospitals and doctors. It is a pharmaceutical cost. 
So, I think Mr. Mubarak would say, listen, they have got enough 
profit to innovate. What we are really talking about is more 
than the profit required to incent. Would you disagree with 
that?

    Dr. Lakdawalla. Well, I think the question is really how 
much--whether we want to decrease profits or not. And we know 
that whenever you decrease profits, you get less innovation.

    The research that we have done gets exactly that question. 
If you were to reduce prices and profits, what would the net 
result be? You would certainly save money, but you would also 
lead to fewer new drug discoveries and----

    Senator Cassidy. Are we at the sweet spot now, or could we 
do something to make drugs a little bit more affordable to the 
Medicaid program, for example? Because I am looking at this 
gene therapy and obviously how they are initially price is only 
based upon the restraint of the company.

    But if you have a compelling gene therapy, they could 
almost name their price and it is going to be very difficult 
for a Medicaid program not to cover. So, but this could 
bankrupt taxpayers. So, thoughts on that?

    Dr. Lakdawalla. Yes. So, I don't think we are at a spot 
where lowering prices makes us better off. But for gene 
therapies, I absolutely agree there is a significant problem. 
And the issue is that the prices are all paid upfront when 
there is the most uncertainty about whether the gene therapy is 
going to work in the long run.

    Senator Cassidy. Now, value-based purchasing could 
obviously play a role here. But if you do value based 
purchasing, you still have a--how do you negotiate the upfront 
cost? I come up with a drug for a gene therapy for sickle cell. 
I treated a lot of sicklers.

    You want to treat them, and you charge $20 million a 
person. I can't believe they would get that, but you see, the 
only thing that would stop them from asking that may be the 
sticker shock. So, how do you negotiate that first out of the 
gate price?

    Because I think that is a kind of a question that is kind 
of hanging out there. And you are the free market guy, so I 
would like your opinion. You are the whiteboard guy.

    Dr. Lakdawalla. On the white board, yes. That is correct. 
It is actually not the case that you should negotiate the 
actual price upfront. Instead, a value based price would mean 
that the price will respond over time. So, imagine a situation 
where gene therapies were paid for in installments----

    Senator Cassidy. I get that. And believe me, I have written 
about that in Stat, if you ever wish to dig up something out of 
Stat behind a paywall. But it still means that if you have got 
an initial high price, no matter what your value-based 
purchasing arrangement is, it could still be something which 
society could not afford. What do you think of the German 
model? Dr. Baker, I think, came up with that in which there 
is--you know, you can ask whatever price you want for the first 
2 years, but then after that, there is going to be some sort of 
negotiation based upon real world data.

    Dr. Lakdawalla. Yes. I think the challenge with the German 
model is it is actually very hard to predict the outcomes. That 
if you look at the ratings that the Germans produce of the 
benefits of drugs, they are not well correlated with negotiated 
prices.

    If I am an innovator trying to figure out what I am going 
to get paid in Germany, it is really hard. And if you can't 
predict your returns, then they are not going to work as 
financial incentives.

    Senator Cassidy. Mr. Amin, have you had a chance to 
evaluate the bill that is working its way through Judiciary 
Committee--it might be included in a year end package. It is to 
its effectiveness in addressing patent thickets. Yes, push your 
button----

    Mr. Amin. Senator Blumenthal and Cornyn's bill?

    Senator Cassidy. Yes.

    Mr. Maybarduk. I think it will potentially cap the 
biologics patents that can be enforced to about 20. I have 
actually given some technical advice on that bill. I don't 
think it is going to resolve the problem.

    Senator Cassidy. You don't think it is going to resolve the 
problem?

    Mr. Maybarduk. No.

    Senator Cassidy. I see. Okay. Well, thank you all. Very 
thoughtful.

    The Chair. All right. Thank you all. Very good discussion. 
Appreciate you being here. That is the end of our hearing 
today, and I want to thank all of our witnesses for their 
participation.

    For any Senators who wish to ask additional questions, 
questions for the record will be due in 10 business days, 
February 23rd at 5.00 p.m.. And finally, I ask unanimous 
consent to enter into the record three statements from 
stakeholder groups and experts about the cost of prescription 
drugs.

    [The following information can be found on page 106 in 
Additional Material.]

    The Chair. With that, the Committee stands adjourned. Thank 
you.

                          ADDITIONAL MATERIAL

                                      Families USA,
                                      Washington, DC 20005,
                                          February 8, 2024.
Senator Bernie Sanders, Chairman
U.S. Senate Committee on Health, Education, Labor, and Pensions,
Dirksen Senate Office Building,
Washington, DC 20510.

    Dear Members of the House of Representatives,

    Chairman Sanders and Ranking Member Cassidy, on behalf of Families 
USA, we want to thank you for holding this important and timely hearing 
and offer our appreciation for lifting up the reality of high drug 
costs in the United States. It is well documented that the United 
States is paying significantly higher prices for prescription drugs 
compared to peer countries. A recent report from the Assistant 
Secretary for Planning and Evaluation (ASPE) at the Department of 
Health and Human Services (HHS) found that in 2022, across all brand 
name and generic drugs, families in America pay nearly three times as 
much as 33 Organization for Economic Co-operation and Development 
(OECD) countries. \1\ And this gap is continuing to widen as drug 
prices in the U.S. continue to skyrocket. This problem can easily be 
traced directly back to failures in U.S. patent policy that incentivize 
big drug corporations to keep old drugs on the market and push out 
healthy competition, as well as these corporations' ability to price 
gouge year over year with no repercussions.
---------------------------------------------------------------------------
    \1\  ``Comparing Prescription Drugs in the U.S. and Other 
Countries: Prices and Availability `` https://aspe.hhs.gov/reports/
comparing-prescription-drugs

    Congress and the Biden administration have taken meaningful steps 
to address high drug costs for Americans, importantly through enactment 
and implementation of the Medicare price negotiation program and 
inflationary rebates. It is essential that Congress build off this 
critical progress by taking additional steps to further address this 
uniquely American failure.
               The Impact of High Drug Prices on Families
    While high drug prices are a source of seemingly constant policy 
debate in Washington, DC, for millions of America's families, they are 
a painful and burdensome reality that often impacts their ability to 
meet basic necessities of life. For example, consumers facing increased 
drug costs report cutting back on key areas of their budget, such as 
buying food. \2\ For some the choice is even more dire, with research 
showing that nearly three in ten adults--approximately 80 million 
people--in our Country have not taken required medicine as prescribed 
due to its costs. \3\ Approximately one in five adults forgo essential 
medications altogether because they can't afford to fill their 
prescription in the first place. \4\ The impact of being forced to make 
these decisions has on health is clear: medication nonadherence, such 
as rationing or skipping needed medication, causes an estimated 125,000 
deaths a year. \5\
---------------------------------------------------------------------------
    \2\  Gill, Lisa L. ``How to Pay Less for Your Meds.'' Consumer 
Reports. April 5, 2018, https://www.consumerreports.org/drug-prices/
how-to-pay-less-for-your-meds/
    \3\  Kirzinger, Ashley, Lunna Lopes, Bryan Wu, and Mollyann Brodie. 
``KFF Health Tracking Poll--February 2019: Prescription Drugs.'' The 
Henry J. Kaiser Family Foundation. March 01, 2019. https://www.kff.org/
health-costs/poll-finding/kff-health-tracking-poll-february--2019-
prescription-drugs/
    \4\  ``Americans' Challenges with Health Care Costs'' The Henry J. 
Kaiser Family Foundation, December 14 2021, https://www.kff.org/health-
costs/issue-brief/americans-challenges-with-health-care-costs/
    \5\  Fred Kleinsinger. ``The Unmet Challenge of Medication 
Nonadherence'' National Library of Medicine. https://
www.ncbi.nlm.nih.gov/pmc/articles/PMC6045499/

    While people who need high-priced drugs often face the most 
significant financial pain from high and rising prices, the impact of 
the skyrocketing cost of drugs is widely felt beyond the pharmacy 
counter. Approximately 20 percent of health insurance premiums are 
driven by the rising cost of prescription drugs, which means as drug 
prices continue to rise so do premiums, deductibles, and other health 
care costs for all families--even those who are not taking prescription 
medications. \6\
---------------------------------------------------------------------------
    \6\  Kim Keck, ``Six Ways We're Lowering Drug Prices,'' Blue Cross 
Blue Shield of America, March 3, 2022, https://www.bcbs.com/the-health-
of-america/articles/six-ways-were-lowering-drug-prices.
---------------------------------------------------------------------------
 Big Drug Corporations Abuse U.S. Patent System to Protect Profit and 
                           Limit Competition
    The business model of big drug companies is rooted in exploitation. 
They take extreme steps to create a monopoly drug market and then abuse 
it for profit, including price gouging, protecting drug exclusivity 
through anticompetitive behavior, and increasing profits on old drugs 
rather than investing in new and innovative treatments to help our 
Nation's families. \7\ Drug companies regularly deploy a barrage of 
tactics to extend their exclusivity periods, keep generics off the 
market, and maintain their market dominance. \8\ Common examples 
include blanketing one drug with multiple and overlapping patents to 
create a ``patent thicket'' and ``product hopping'' a patent by making 
minor tweaks to existing drugs that typically confer no additional 
clinical benefit but allow for extended patent protections. In fact, 
the 10 top-selling drugs on the market today have been granted an 
average of 74 patents per drug, with an average of 140 patents filed 
for each of them. \9\
---------------------------------------------------------------------------
    \7\  Bailey Reavis and Hazel Law, The Reality of Prescription Drug 
Innovation: Drug Manufacturers Limit Innovation to Protect Patents and 
Profits (Washington, DC: Families USA, August 2023), https://
familiesusa.org/wp-content/uploads/2023/08/Drug-Companies-Limit-
Innovation-for-Profit--2.pdf.
    \8\  Patricia Kelmar and Abe Scarr, The Cost of Prescription Drug 
Patent Abuse: How Drug Companies Abuse the Patent System and Demand 
Inflated Monopoly Prices in America (U.S. PIRG Education Fund, April 
2023), https://pirg.org/edfund/resources/the-cost-of-prescription-drug-
patent-abuse/
    \9\  Tahir Amin and David Mitchell, ``Big Pharma's Patent Abuses 
Are Fueling the Drug Pricing Crisis,'' Time, February 24, 2023, https:/
/time.com/6257866/big-pharma-patent-abuse-drug-pricing--modifications

    Once these big drug corporations have blocked other competitors, 
they are free to raise their drug's price year after year at shocking 
rates, even long after the drug's release. We see this problem across 
the drug market: Between July 2021 and July 2022, 1,216 drug products 
had price increases that were higher than the inflation rate (8.5 
percent). Some drug prices increased by more than 500 percent. \10\ 
These prices are not being justified by any additional benefits or 
effectiveness of that drug. In fact, one study of high-spend drugs 
showed that seven of the 10 drugs reviewed provided no additional 
clinical benefit relative to other available drugs. \11\
---------------------------------------------------------------------------
    \10\  Bailey Reavis and Hazel Law, The Reality of Prescription Drug 
Innovation: Drug Manufacturers Limit Innovation to Protect Patents and 
Profits (Washington, DC: Families USA, August 2023), https://
familiesusa.org/wp-content/uploads/2023/08/Drug-Companies-Limit-
Innovation-for-Profit--2.pdf.
    \11\  Eliot Fishman, Our Broken Drug Pricing and Patent System 
Diverts Resources Away From Innovation and Into Mergers, Patent Gaming 
and Price Gouging (Washington, DC: Families USA, August 2021), https://
familiesusa.org/wp-content/uploads/2021/08/RX--2021--209--Innovation-
Drug-Pricing-Issue-Brief.pdf.

    These abuses only occur because of the loopholes littered 
throughout the U.S. patent system and are major contributors to the 
uniquely high drug prices that American families face.
      Proposed Legislation Could Address Corporate Pricing Abuses
    Recently, Congress took important steps to systemically bring down 
drug prices and rein in the rate of skyrocketing price increases. The 
Inflation Reduction Act (IRA) of 2022 is landmark legislation that 
includes several key provisions to address the high prices that are a 
hallmark of the American experience with prescription medication. The 
recently passed reforms include giving Medicare the authority to 
negotiate the price of drugs, as well as penalties (through rebates) 
for big drug companies that raise the price of their drug higher than 
the rate of inflation. These are both foundational steps that change 
the incentives specific to the U.S. market that have led to these high 
drug costs.

    Congress can build on this foundation to further rein in 
prescription drug costs and make health care more affordable for 
everyone in two key ways:

          1. Extending the reforms in the IRA to apply to the 
        commercial market to better protect all consumers from high and 
        irrational drug costs. This includes allowing the commercial 
        market to adopt Medicare's negotiated rates and extend the 
        inflationary rebate to fight price gouging year over year in 
        the commercial market.

          2. Close loopholes that allow companies to create monopoly 
        drug markets and prevent generics from coming to the market in 
        a timely fashion. This includes ending patent abuses like 
        patent thickets and product hopping, simplifying the generic 
        approval process and ending pay for delay policies.

                               Conclusion
    High and rising drug costs are a uniquely American problem and a 
major factor as to why health care affordability is an American crisis. 
Drug prices threaten the health and financial security of families and 
individuals in every state and community. Big drug companies abuse the 
patent system, delay the entry of generic drugs, and price gouge to 
support their greed while families and individuals go into medical 
debt, ration or skip medications, and have to choose between filling 
their prescription or filling their fridge. Even those not taking 
prescription drugs are left with difficult financial decisions due to 
rising insurance premiums, higher deductibles, and stagnant wages--all 
of which can be tied back to rising drug costs. This cannot be allowed 
to continue. We appreciate the important work of this Committee to 
address these concerns and look forward to continuing to work with you 
to ensure all families can achieve affordable health and health care.
                                 ______
                                 
    Dear Members of the House of Representatives,

    As organizations representing patients and consumers, we write in 
opposition to H.R. 485, the so-called Protecting Health Care for All 
Patients Act of 2023. This bill claims to protect people from 
discrimination but would in fact result in harm to patients if enacted 
into law.

    There is no single factor more important in arriving at an 
appropriate price for a new drug than the value to patients. It is 
axiomatic that to stimulate and reward innovative new drug development, 
we should pay more for high-value drugs and less for low-value drugs. 
Put another way, we want drugs with high clinical effectiveness against 
the disease or condition they target and with a low burden of 
undesirable side effects or toxicities.

    Patients in this country--especially those with disabilities--need 
a reliable system for evaluating the value of a medicine. Comparative 
Effectiveness Research (CER) can clearly and transparently assess the 
value of drugs in order to both inform patient decisionmaking and 
arrive at appropriate prices. Instead of prioritizing legislation that 
could lower prices, assess value, and improve health, the House 
Committee on Energy and Commerce advanced a version of H.R. 485 that 
would impose further limits on CER. If enacted, language referring to 
``similar measures'' in the current version of the bill would introduce 
ambiguity across the health sector that could invite lengthy lawsuits 
from an industry eager to stop any efforts to constrain its ability to 
set prices as high as it wants for any drug--regardless of the drug's 
value. This is not a new fight. Powerful drug companies have fought to 
block CER for years with the single goal of preventing policymakers and 
payers from scrutinizing value in order to rein in prices.

    If the leaders of this bill truly wish to protect people with 
disabilities from discrimination, they would instead advance 
legislation to address our drug price system at its core given that 
high drug prices disproportionately harm people living with 
disabilities, chronic conditions, and low-income communities. In fact, 
a recent study found thatpeople living with disabilities were about 
three times more likely to ration medications as those without a 
disability. High drug prices also disproportionately impact people of 
color. Big drug companies exacerbate health inequities and inflict harm 
by charging prices as high as the market will bear, untethered from the 
value of a drug and at the expense of people's lives and livelihoods.

    To be clear, we emphatically support measures that protect people 
with disabilities, the elderly, and those with chronic or terminal 
illness from analytical tools that are discriminatory. Due to concerns 
about the use of the Quality Adjusted Life Year (or QALY), we believe 
its use should be prohibited in Federal programs. But we must also 
preserve the ability of our Nation to employ other measures that value 
all lives equally, such as the Equal Value of Life Years Gained 
(evLYG). Unfortunately, the leaders of the bill have rejected 
amendments that would ban QALYs while preserving non-discriminatory 
tools to assess value. So in the interests of patients, consumers, 
employers, taxpayers, and all Americans who pay for health care and 
prescription drugs and who need and want high value, innovative 
treatments, we urge a no vote on H.R. 485 in its current form.

    Signed,

    ACA Consumer Advocacy

    AFL-CIO

    AFSCME

    Alliance for Retired Americans

    Center for Popular Democracy Action

    Citizen Action/Illinois

    CT Health Policy Project

    Communities United

    Health GAP

    Labor Campaign for Single Payer

    Lower Drug Prices Now

    MomsRising

    Oregonizers

    Patients For Affordable Drugs Now

    People's Action

    Protect Our Care

    Public Citizen

    Salud y Farmacos

    Social Security Works

    Spaces in Action

    Unite HERE International Union

    Universities Allied For Essential Medicines

    VOCAL-NY
                                 ______
                                 
                              [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
                                 
    [Whereupon, at 1:25 p.m., the hearing was adjourned.]

                                 [all]