Transcripts For CSPAN3 Prescription Drug Costs 20171019

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That means that the woman pretty much ever works in her chosen career ever again. And she can never talk about it. She is gagged. Now, how else do you solve Sexual Harassment suits . You put in arbitration and Employment Contracts which makes it a secret proceeding, so again, nobody talks about it, you can never talk about it again ever. Nobody ever knows what happens to you in most cases, youre terminated from the company and the predator in many cases is left to still work in the same position in which he is harassing you. So this is the way our society has decided to resolve Sexual Harassment cases. So gag women so that we can show everyone else out there that weve come so far in 2017. Former fox news host Gretchen Carlson talks about take your power back, and interviewed by Washington Post columnist sally quinn. Watch on tuesday night. Next, representatives of the Prescription Drug manufacturing and retail industries, examine why current costs are rising, we hear about transparency and pricing practices, as well as what it costs to buy drugs in the u. S. Compared to the rest of the world, held by the Senate Health committee this is two hours hours. The committee on health, labor and pensions will each come to order. Well each have an Opening Statement and introduce the witnesses, after the testimony well each have five questions. There is a vote scheduled for 10 30, i think what well do is continue right on through until about 10 45. And then well alternate going back and forth to vote. I think well have time to hear all the witnesses testimony before we have to leave for the vote. Today we have a hearing which is the second in a series on Prescription Drug costs in response to a bipartisan request led by senators cassidy, franken, along with senators colins, baldwin, murckowski, sanders and warren, as well as other senators who are interested in this subject. Not only was the request from the senators bipartisan, but the hearings on drug prescriptions was bipartisan, which means we agreed on the witnesses. Despite this our first hearing in june went so far off trade th track that i delayed this hearing, especially because they wanted to talk about such things as the Affordable Care act. I acknowledged their deep feelings and differences of opinions on the aca, but the senator has been stuck over what has been a relatively small part of health care. The individual health percent, senator murray and i have been working for several weeks to find with the senate a limited consensus bipartisan stabilization agreement. There are many other issues that have caused Health Care Issues to grow from 9 of the Gross Domestic Product in 1980 to nearly 18 in 2015 and a predicted 20 in 2025 according to the center for medicaid medicare services. We need to look at all aspects of Health Care Spending, the percentage owe spend on percentage drugs and drugs administered in hospitals and the other 85 of Health Care Spending which includes doctors visits, surgeries, and medical devices and ways to get these costs under control. Were having a hearing on thursday to discuss wellness and Healthy Lifestyle changes and how they could decrease serious illnesses and bring down health care costs. So while senators are free to do whatever they wish to do, i hope we focus on the cost of Prescription Drugs while we have these excellent witnesses before us. Next month well have a third hearing, and consider the report from the National Academy of sciences, the study is called ensuring Patient Access to affordable drug therapies. We set a good bipartisan act, user fee agreements for 18 months. This county worked with our counterparts in the house, including provisions from many senators on both sides of the aisle. Including measures that will provide additional staff and resources to the fda or approve, and genetic drugs that lower drug costs. That bill came this summer. Last year the committee worked together on 20th cures to spur the development of new drugs and treatments. My goal for these hearings is to continue these to work on a bipartisan way about what goes into the price patients pay when picking up their prescriptions and what steps we can agree on to lower this prices. Were in the middle of a remarkable time in science, which produces amazing discoveries for patients. We have drugs to help patients with hepatitis c and keep cancer at bay, as well as strokes. We need to make sure all patients can benefit, weve all heard from patients that the cost of new drugs are often too much for them to afford. We need to make sure that any action we take doesnt jeopardize the innovation and the breakthroughs. The Prescription Drug Delivery System, how the drug gets from the manufacturer to the patient is complicated. More than 4. 4 billion prescriptions are written for americans who then pick up the prescriptions at 60,000 drug stores or receive them from doctors or hospitals or online pharmaci pharmacists, and the prescriptions are estimated to cost 450 billion, paid for in a similarly comely indica ll ll l way. Medicaid, 340 b, medicaid part b and d, tricare, va and Indian Health services. Patients often pay a set amount called a copay or a percentage called insurance. Sometimes the patients have to cover the whole cost if they have not met the deductible. What amount of coverage they have determines how much Health Insurance they have. I hope we understand the system and the role that affects the price patients pay. Our witnesses represent the Brand Manufacturers who take enormous risks. Generic drug manufacturers who will make 89 of all prescriptions lowering costs. Drug wholesalers who purchase from manufacturers and deliver all over the country daily. And buyers who use their power to lower the prices on all drugs but also make the decisions on the cost and copay and insurance, and of course pharmacists who are on the front lines of helping patients that find out the cost of their medicines when picking them up at the drug store and having to make them fit within their budgets. As we look at it and address the fundamental cost of health care and hope we can continue to do this in a bipartisan way, senator murray. Thank you, chairman, for your leadership and holding these hearing and for all the colleagues on both sides, the commitment to address the challenges which is the increasing burden and soaring prices of Prescription Drugs. This is truly an urgent discussion. Ive heard from so many families who are forced to choose from high price medication and putting food on the table and their bills. So this is clearly a challenge we need to meet and meet it quickly. Fortunately we have taken some steps in the right direction, im very pleased this committee worked to enforce transparency and work in the economic drug market in the authorization act. In taking suggestions from both sides, we were able to improve the process from bringing a generic to market by increasing communication and transparency between the fda and manufacturers, encourage new generics to compete, with products vulnerable to prices and shortages and permit gaming of the drug act which brought hope to so many patients. But as we know, generic competition alone will not address the high prices paid by so many families and out of pocket premiums. We have to make more progress to get at the root of the problem. I am glad democrats have put forward a number of ideas and legislation to demand more transparency from pharmaceutical companies about what is behind drug prices, allow medicare to negotiate fair prices for Prescription Drugs, prevent manufacturers from engaging in price gouging and crack down on the practices that keep prices high. These measures would make a real difference when it comes to bringing down prices, all it requires, this administration has to be our partner, not a hindrance, we saw President Trump continuing to take unilateral steps to increase premiums and undermine protections for people with preexisting conditions and cause chaos in our Health Care System. That pattern of governing by the administration is reckless and appalling. I believe it is critical that Congress Shows patients and families we can Work Together to undo the damage being caused and move on to actually doing good when it comes to Families Health care. President trump talks a big game on twitter but has not taken any action to actually lower drug prices. And the little weve seen from the administration, a leaked executive order in july barely scratches the surface. In fact, many will not do anything, but in fact target the support for the clinics who serve the various communities who cannot afford the drugs they need to stay healthy. I hope the administration chooses a different path. I would note that President Trump could nominate a secretary of health and Human Services when it comes to families and Prescription Drug prices and changes, i expect a very rigorous change. They have a very Important Role to play. I want to thank all of our witnesses to joining us, we very much look forward to your testimony and again i want to thank chairman alexander, all of our colleagues for their efforts to tackle this pressing challenge to make sure Prescription Medication and lifesaving treatments are not just available but accessible and affordable. I hope our bipartisan work on market stabilization can lay the ground work for serious action on drug prices, given we all agree this is a priority. As we know, patients and families we serve cant wait much longer. So thank you everybody, i turn it back over to you. Thank you senator murray and thank you for creating a bipartisan environment where we can work ahead as you indicated on trying to stabilize the individual Health Insurance market and begin to move away from Health Insurance to the larger issues of affecting health care such as drug prices. We thank the witnesses for coming. I would ask you each to summarize your comments in about five minutes. And that will leave senators more time to ask questions, first witness is laura riley, the executive Vice President of policy research and mentorship. At farma, leading the policy and Research Department there, the trade association of Brand Manufacturers. Chip davis is the president and chief executive of the trade association that represents generic drug manufacturers. Distributors and suppliers. The senior Vice President for Government Affairs and general counsel. Representing Prescription Drug wholesalers. Welcome to you. Mark merritt is the president and chief executive officer of National Group that represents americas pharmacy benefit managers. And thomas managan is the executive director and chief executive of the largest association of pharmacists in the United States. So ms. Riley, lets begin with you. And then well hear from each witness. Thank you. Over the past 20 years, the food and Drug Administration has approved more than 500 new medicines to market and those have resulted in significant progress against some of our nations most costly and challenging conditions. Through innovation, the hiv aids death rate has dropped 80 in this country from the mid90s. And recently, the strides made in oncology helps in a game changer with medicines. In the middle of the incredible scientific progress that weve seen, drug spending growth is actually declining from its peak in 2014. In fact, last year Prescription Drug spending cost growth was 3 to 5 , according to public and private experts that was in line with all forms of spending and growth. And the retail condititinues to remain about 14 in terms of what we spend on Health Care Dollars in the country. Often when people talk about it there is a presumption that it comes back to the brand name manufacturer, in fact, less than half of that, the amount of what we spend in this country comes back to the brand name industry. The rest goes to the generic industry and others in the supply chain. One important part of the supply chain that is not with us here today is the hospital sector, just this morning we released a paper that looked at the 20 most commonly prescribed expensive medicines and outpatient hospital settings, and found that hospitals increase and are reimbursed 2. 5 times the acquisition costs in which they purchase medicines in this country. Theyre an important part of the supply chain and i hope we talk more about them later today. Going forward in the next decade medicines are prejudiojected to stabilize the medications. We know that over the next ten years were likely to have 40 to 45 new medicines approved every single year. But the reality is we have for pharmaceuticals some of the strongest Cost Containment across the entire health care sector. Pharmacy benefit managers use the fact that there is a great deal of competition within therapeutic areas to limit formularies and to use a host of management techniques to keep the cost under control. Over the next five and a half years the medicines will come off patents and become cheaper and generic for americans to afford. And more importantly, about three pharmacy benefit managers buy on behalf of 75 of all prescriptions in this country. Because of the leverage them exert, in 2015 they were over to allow billions in rebates, often they are not making their way back to patients at point of sale. Compounding this problem today is an increasing number of patients who have high cost sharing for their medicines either because they have a deductible. Today, 50 of insured patients have a deductible for their medicine. When they have a deductible, theyre asked to pay a nonnegotiable amount for their medicine. We have policies to put in place, the first is the 100 billion in discounts and rebates should find themselves at the Retail Pharmacy level. The discounts should be passed back to patients to lower their health care costs. We also need to do more to reform government rules around how companies can contract today. There is a desire to move our Health Care System towards contracting, towards value, but today because of government rules and regulations it makes it harder to have some simple contracting. Third, we need to look at benefits, as i mentioned before we know in the hospital sector often times hospitals are increasing the price of their medicine 2. 5 times, to 3 and a half times often getting reimbursed three times as much as the manufacturer is getting reimbursed for the medicine. Lastly we need to speed the medicines, competition is the best medicine to lowering costs over the longterm and we need to build on the work that this committee passed to continue to modernize the food and Drug Administration to have efficient and Safe Delivery of medicine and future medicines. Future progress is waiting and patients are waiting for the kind of medicine our sector can deliver. Thank you very much. Thank you, ms. Riley, mr. Davis. Thank you, chairman alexander, Ranking Member murray and members of the committee, i very much appreciate the invitation to testify here today. The associate for accessible medicines is the nations leading trader of manufactureproduced Prescription Drugs, our managers manage more than 90 of the medicines dispensed in the United States, providing tens of thousands of jobs in over 150 facilities throughout the country and manufacture over 61 billion doses of medication here in the United States. Ams core mission is to improve the lives of patients, to affordable genuine and bio similar medications. Let me begin by thanking the members to convene, to examine the prices and look at authorizing the medications for this year, Generic Medicines currently represent as the chairman said, 89 of all prescriptions dispensed in the u. S. , but more importantly we account for only 26 of all expenditures on Prescription Drugs saving patients and pairers nearly 5 billion every week. Last year, Generic Medicines saved more than 50 billion for the Health Care System, generics actually operate currently in a deflationary market, consider in the past 12 months, prescriptions have gone down by 7 while their revenue has increased slightly, by contrast, generic prescriptions have gone up, up 2 year after year, wh e revenue has declined 15 . It is easy to recognize when it comes to prices that we often see at the pharmacy counter. The dramatic difference on how brand and generic drugs operate is not as widely understood, when they enter competition, payers typically shift away from the rebate model of the reimbursement that you hear about and rely on distribution channels, generics compete for sales, commonly the only leverage the generic manufacturers have is the ability to lower price and guarantee volume. This creates fierce competition in the marketplace among our members which in turn causes prices to decline. So the reality is markets for brands and generics are very different, these differences create vastly different incentives for all the stakeholders, this report was issued by the university of Southern California center for health, policy and economics entitled the flow of money through the distribution system. Among the findings, they captured significantly more revenue. Spent more on generic brands, in fact, for every 100 spent on dispensing the generic brands, approximately 65 goes to reimbursing the members of the supply chain. The consolidation in the wholesaler and arrangements between pharmacy change and distributors have left the manufacturers with a very small number of largescale purchasers. Essentially, they account for 90 of all generic manufacturers. Ultimately a market that has three large scale purchasers will see consolidation on the supply side, which is our side. Running the risk of marketing smaller portfolios can easily translate into less competition, not more, while simultaneously increasing the risk of drug shortages a scenario none of us want to see happen. As this company has identified and reflected on the title of this hearing how do these realities affect what patients pay and what does it mean for them moving forward . We all know a remarkably strong system was created to design and balance the access. That system can only function if there is Competition Among buyers and sellers and can only work if the manufacturers can get the drugs they need and start the fda and approval process which this committee has spearheaded processes to accelerate and reform. That only works when they have the ability to enter the market, when the patents and protections are meant to expire. Ultimately that works when they dont favor one side at the expense of the other. In closing, we all know that something must be done about Prescription Drug prices, given the fact that the new fda commissioner characterized Public Health costs as a concern, they will consider policies that enhance the generic and bio similar competition. We have provided those in our written testimony and i look forward to answering your questions as we move forward. Thank you. Thank you, mr. Davis. Good morning, chairman alexander, Ranking Member and members of the committee, thank you for the opportunity to participate in the hearing. I am general counsel for the health ca alliance. The members include national, regional and specialty companies, the expertise will provide safety and efficiency, serving over 200,000 pharmacy settings across the country while achieving cost savings for our nations Health Care System, about 40 bill annually. The u. S. Health care supply chain is a complex one, each day, the members who purchase directly from authorized manufacturers ship 15 million products daily from about 176 warehouses across the country, a relatively small and higheffici network. Distributors are unlike any other supply chain participants. Their core business is not manufacturing and they do not prescribe medicines or dispense to patients. They focus the significant resources on the safety and security of the supply chain. These efforts may in fact be the most important function the distributors supply. The hda strongly advocated for the drug supply Chain Security act, which sets the framework for the unit chaseability. They placed orders with hda distributors for the medicines they need. Without the distributors, customers would have to carry weeks of inventory and place daily orders with each and every manufacturers. Providers can maintain just in time inventory saving them time and expense necessary to carry the expensive inventories or have large storage facilities. In addition, primary distributors provide pharmacy Management Systems and instore retail support. With regard to the upstream supply chain, the work of the hda numbers enable manufacturers to concentrate on producing medicines, without the added stress to getting them across the country. While hda numbers are supply chain and logistics and operations experts this is no longer the industry focusing on products going from point a to b. Today they provide a valuable service to patients. Some of these examples include receiving and accurately processing orders, shipping products safely, inventorying management, providings orders with utilizization data and charge backs, in exchange for these Services Provided to manufacturers, distributors charge reviews, they represent a fair market value for the itemized numbers, but the manufacturer would have to otherwise perform it themselves. The distribute industry is a very high volume yet very low profit margin industry, with the industry margin just over 1 on average for 2016. Moreover, the study showed the cost was just under 1 , generally, traditional pharmaceutical distributors purchase from manufacturers based on wholesale acquisition costs or whack. And charge Manufacturers Service fees, they represent the list price does not include rebates, prompt payments or other adjustments in price. Distributors are not privy to how such pricing decisions are made. On the other side, driistributo tend to sell the drugs established solely by manufacturers, they provide drugs or may also price generic drugs sold to customers in response to the market, for example when there are more than one generic drugs, as such, wholesale distributors do not control the price of Prescription Drugs but rather pick prices made by distributors. Primary distributors goal is a simple one, efficiency, security, Timely Delivery so that providers can concentrate on patient care and ensure that the patients have access to the medicines they need. Historically, hda distributor members have a positive effect on the supply chain, helping to make the supply chain one of the most efficient in the world. Thank you and i would be happy to answer any questions you may have. Thank you, mr. Merritt, welcome. Thank you for inviting me to discuss drug prices and the Delivery System drug makers use. I would like to start by providing a brief overview, a very complicated subject, an executive summary if you will. We will discuss the role the supply chains made, there are several reasons for the concerns, first as drug makers recent shift from producing blockbuster drugs like lipitor, to other drugs that cost a thousand a day, not everybody is prepared to pay a thousand a day even if it is a great drug. All this comes on the heels of generic drugs that hit the market. Second reason for concern were the high profile scandals involving three drug makers, specifically, epipen and others and buying rights to low cost drugs in order to sale them at much higher prices. There were hearings and i testified at a few of them. Third, many of them have raised deductibles in the face of higher costs, not just of drugs but of overall medical costs, higher deductions means that people paying 25 in copays came face to face with the actual price of the drugs which can run hundreds or thousands of dollars. The scandal surrounding particular manufacturers and high deductible plans have converged to raise the deductibility on this issue. First, supply chains are a routine part of how consumers access not just drugs but almost any product in the marketplace. They are a normal part of american business, not something that you need Prescription Drugs or health care. Theyre used all across america. It should be noted that supply chains have nothing to do with why manufacturers didnt raise prices, they didnt raise prices 400 because of supply chains. The laws determine how the manufacturers set prices, in the simple terms the Prescription Drug marketplace is a market like any others, a market of sellers and buyers, they set prices according to what the market will bear. Likewise, the buyers want to pay as little as possible, the employers, unions, and Health Care Programs that negotiate prices between drug makers, they do a number of things to reduce costs. Design i designing networks to pay for generic drugs, pbms negotiate rebates and other prices from Drug Companies, they are simply discounts made after payments been made instead of point of sale. We welcome Drug Companies to offer alternatives to rebates, including simply lowering a price for drugs, rebates and clients and stores who determine the amount of pbh passed through to them. 90 and half of large employers require 100 of them to be passed through. Typically theyre used to reduce premiums, deductibles, copays, so the marketplace is evolving on the issue. They set and raise prices regardless of the amount associated with pbms, in fact, other competitors came to market and were able to bring prices and costs way down, in fact, lower than a lot of price control countries in europe. Its helped to sustain the growth to 3 to 4 a year. I would like to thank senators colins and franken for their fda authorize to promote competition and guarding against price hikes of decadesold drugs, we also worked with congress to ack accelerate the price. These would foster competition, which is the key to reducing the prices. Thank you, mr. Merritt. Mr. Menagen. Thank you, chairman alexander and Ranking Member murray. An opportunity to discuss a very important topic for our nation, patients families and pharmacists. Its an honor to be here. Im tom menagen, abha is the largest and most diverse pharmacist organization. We promote the access and coverage for the patient care services. Our members contribute to health care in a wide variety of settings, including physician offices, specialty and Community Offices both chain and independent, senior care, ambulatory care, for many years, as a practice pharmacy owner i shared the challenges with partner families facing choices on medicine or health care. And explaining complex Insurance Coverage policies. As the organization representing pharmacists in all practice settings we support policies that increase patients access to affordable and costeffective medicines. Decisions among the entire supply chain impact patient medication costs, including arrangements among manufacturers, wholesalers, insurers and pbms. Pharmacies are where millions of americans are first confronted with complex prices or changes in coverage, deductibles, copayments, many of which they dont know or understand. Upstream decisions often limit pharmacists options. Instead of helping to address the nearly 300 billion, the u. S. Spends money on fixing the problems of medication use, many spend time on the phone pursuing affordable coverage and treatment. To address this challenge, we supported the transparent framework that would eliminate the mechanism on the price fees imposed on pharmacies. These policies generally point to higher pricing and consumers and higher beneficiary copayments. We include the prices to increase Patient Access and choice, which can improve adherence and health outcomes. Hpha encourages them to study, and lower the medical costs rather than scoring them in silos, full value in health care will come from integrating these silos in the related costs. As the drugs become more spoe expensive. The need to optimization, patients must understand how to use the medication effectively. And pharmacists must help to provide services focused on safe and appropriate use. For example, pharmacists provide Medication Management services, especially important for patients who take multiple drugs or have chronic conditions. And we address Hospital Readmissions by helping patients transition between care settings. Unfortunately, medicare does not cover our services, many of our nations seniors are medically underserved despite Many Americans living within five miles of a community pharmacy, pharmacies are undertrained and it can positively affect the beneficiaries care and support. We ask your support today for the enhancement act and urge the swift passage to provide access to underserved seniors, the act will help to improve beneficiary outcomes, particularly those impacted by medications, but we have to be on the team. Finally, apha supports a safe and secure supply chain. Americas farm ises and patients should not have to worry. We believe the diversity of the medications will do more harm than good. We believe it is in direct conflict with recent efforts by congress to secure the u. S. Supply chain and secure and improve patient safety. In summary, thank you for including pharmacists today. The medication experts on the Patients Health care team in this discussion. Ultimately, the most expensive medicine is the one not purchased. Not taken, abandoned, or not used correctly by patients. Pharmacists stand ready to help. I look forward to answering any questions on a positive role we can play and do play in reducing patients Prescription Drug costs, thank you. Thank you very much for all the witnesses, well now begin a fiveminute round of questions. Ill begin, and well go to senator murray and well leave and go vote and come back but well continue the hearings so that senators can ask questions. Ms. Riley, did you hear you right . I think you said three of the pharmacy beneficiaries, which he negotiations rebates for 75 of prescriptions sold about 100 billion of money in 2015, over 100 billion was negotiated on behalf of commercial health plans as well as government mandated and a rebate means that the pharmacy benefit managers then the managers get less money, the pharmacy benefit managers then decide in their negotiations where that 100 billion gusoes. Right, so it lowers the net price to the manufacturer, that money then gets sent back to the manufacturer, a portion of which is kept by the manager. Mr. Managen, you said we dont need benefit managers . What i said was we need more transparency in the system so we know where theyre coming from. At the end of the day when the patient walks up to a pharmacy and the pharmacy presents them with the cost of the medicine to them, the impact of rebates is not really felt until after. Well, ms. Riley was saying that people who go into your pharmacies dont really see the direct or dont necessarily see the direct benefit of the rebate negotiated by the pharmacy. That is senator murray and i, others of us have been working on Health Insurance which we find to be very complicated. Where the money goes in Prescription Drugs is more complicated. I have yet to figure out exactly where it goes. Why do we need rebates at all . I mean, wouldnt it increase transparency if the drug manufacturers just established a list price, and then they negotiated with the pharmacy benefit managers, or to whomever else they sold to, a reduction in that price if they wanted to. And then we wouldnt have some mystery about who is getting the benefit of a rebate. Without commenting on the need for rebates, they clearly why wouldnt you comment on it . They used to drive market share, often times in our views that is not necessarily to the benefit of the patient, when pharmacist are trying to manager medication use my question is why do we need rebates . Why dont we just get rid of rebates and let you negotiate directly with the manufacturers, take that 100 billion a year and then just reduce the list price . Wouldnt that make it simpler to understand where the money goes . Rebates are usually not used by manufacturers of drugs but other products because they want to keep one high price because the lower volume clients will pay that price, but then as they have bigger volume price, they often bigger d offer bigger r i would argue that the high numbers the managers and Insurance Companies like because they get a big change at the end of the day, and then can use the dollars. Would you be inclined to eliminate the rebates . We would like to see the rebates get pushed back to the patient at the end of the sale. Why worry about a big chart, why not just eliminate rebates . Well, that is one option to have a lower list price but i will tell you today plans and pbms tend to prefer, the product with a high list price and then a rebate because then that money goes back to them to decide what to do with. Do we need rebates at all . Honestly, to be candid, wholesale distributors to be candid, wholesale distributors dont have any role in this rebate. But you have a nice view of the Prescription Drug business. Do you think it would be more transparent and easier to follow and consumers could get a more direct benefit from the insurance if rebates could be eliminated . I think that is what were exploring. Yeah, mr. Chairman, how about you . This is a good example between the brand and the generic amount. Our work in setting a wholesale acquisition cost is generally directly to the wholesalers, well have 20 or 25 generic manufacturers competing for the business of the three wholesalers, usually leading to an upfront negotiation with them on price, which forces the deflationary aspect. Were seeing a decreased involvement as the Branded Products come close to patent expiree, that will unable ultimately the rebate model is not ascommonly used in the generic side as it is the retail brand. Do you agree that our Current System of brand and generic drugs is designed to strike a careful balance between protecting the market share of innovative drugs for a limited period to recoup cost and driving competition to bring prices down, do you plaef that . I believe that is the intent of our system. I do too, here is my concern, your Member Companies are taking action to deliberately dru ll l that. Advi recently settled in court to extend the market for humera for 20 years, biogem extended the time to 15 years by getting additional patents by covering only the dosage amount. And allergan, protecting a more than 15year monopoly, and recently settled with the generic drug on the market to keep those drugs down. So is that common to bring down prices . In the case of patent settlements, companies are given patents by the trademark offers and they believe they have every right to defend those patents in the court of law. In the case that you mentioned, there was no exchange of money. The patents on that particular product according to public recorded extended to 33, so this product will come on the market, i understand there are other companies trying to get on the market to challenge that particular product. So yes, we have a system and that system was in part designed by the hatch waxman act to encourage the manufacturers to get on the market before our patents expire, its a system that worked very well. In 1984, there were 19 of prescriptions generic. Today, nearly 90 are generic. The patent settlements is one way to get the patents to market well before the patent would have expired. Often times there are anecdotes pointed out. I would argue that by and large the patent settlements in the waxman system have served to get those medicines to market sooner than they would have been otherwise. I would like you to comment on that. That, as well as i think there are other tactics at play to keep the drug prices high. When Congress Passed the innovation act, it cleared the path for products to compete with pricey biologics, they estimated that it could save patients and families 7 billion just through 2019. But even though fda has now approved several of those we are not seeing any great savings. So why is that, and combine it with an answer. Thank you for the question, i think there are three things having an enormous impact on the system that are quite frankly threatening the continued viability and sustainability moving forward. One was the market talked about, taking time for the market to be worked out where you have essentially three buyers in control of the 90 of drug supply. The two others are directly related to policy and your question. The second is, that there have been a series both here in washington at the state level of what we would call well intentioned but misguided policy. For instance, they are only 26 of the total costs but not focusing on the increasing costs of drugs and brands going up every year. The generic brand as part of the 2015 budget agreement is a great example of that in addition to bills in california and maryland on the state legislative side. Directly to your question, the third area, we are absolutely seeing an increased effort on the part of certain branded manufacturers, on the part of behaviors to keep the brands off the market, you mentioned a number of them. The reality overall is the reason were seeing this is there are companies doing the business math and political math and thinking they can actually get away with it. To your question on the bio similars, interestingly, the question on the Affordable Care act, the government began estimating savings as early as fiscal year 2014, to your point, bio similar didnt get to market until 2015. Seven approved, only three are on the market, the other four are tied up in litigation. Thank you, mr. Chairman, i just think its really real that in order for competition to bring down costs we have to make sure the market is actually working. So you know that is one of the concerns that i have as we move forward. In the absence of other senators ill ask a question and when they come back ill defer to them. With the kpeexception of drugs compounded in pharmacies and the drugs sold in the United States requires a careful review by the fda before that drug can be sold in the United States. We call that the fda gold standard. There are 4. 4 billion prescriptions a year, most of us when we go into our local pharmacy or the Doctors Office dont really worry about the safety of those prescriptions, because we rely on the fda gold standard. Sometimes when the cost of drugs comes up, there are proposals that we should import drugs from other countries. And sidestep the careful fda review and approval of each drug sold in the United States. I would like to ask each of you, starting with mr. Managen and then going across whether you agree that we should allow drugs approved by other countries to be sold in the United States without careful review and approval of each drug by the food and Drug Administration. The short answer is absolutely not. While hapa appreciates the effort to combat drug costs, we dont believe importation of the drugs would help, it conflicts with the efforts to increase the integrity and the security of the drug supply chain and disrupts value of care and payment and delivery. Were concerned that savings if any will be shortterm and instead there will be a longterm cost to patients. Thank you, mr. Merritt. Ill give a short answer, we oppose it. Thank you, ms. Galanar. We oppose importation as it will threaten patient safety. We have done a lot of work, phase one of that law. One thing it requires is serialized product by all t sterilizatio sterilization, there is no global standard, from the manufacturer to distributor at the unit level, there is also no global standard for that data change. Weve done a lot of work to protect the u. S. Supply chain and make it as safe as possible and we dont think that allowing foreign imports will do anything to keep that level of security. Senator colins has returned and im going to turn the chair over to her but i would like for mr. Davis and ms. Riley to answer the question about drug importation. Yes, briefly, we share the concern here by the other witnesses relative to safety. The health and Services Administration has an opportunity to study the safety. There is an additional element related to generics from a practical perspective, generics are less expensive in the u. S. Market than they are in major developed markets across the world so it would beg the question why would you want to import something that is more expensive to begin with . Opening our borders to potentially counterfeit medicines is a risk to americans, its a lowpenalty, lowrisk enterprise, and if we open the borders we subject the americans to risk. So we adamantly oppose. Thank you for your response. First of all, let me say that i love having the gavel in my hand, even if its only temporary, and because of the need of other members to go vote. I went and voted early so that i could relieve senator alexander so the chairman could go vote. Last year the snatd aging committee did an extensive investigation into the spiraling Cost Increases of certain Prescription Drugs. Its been mentioned this morning, we looked at turin, we looked at valiant. And what we found was a pattern of certain what i call hedge fund Pharma Companies buying the rights to a drug and then overnight increasing the cost overnight as much as literally 5,000 . In the case of deraprim. And these are companies that played absolutely no role in the development of the pharmaceuticals. So there was not any any investment in the rnd that would justify that kind of increase. So i am particularly pleased that the chairman is holding this hearing today. Because i think that we have a lot of work to do. One of the issues that really troubles me is the lack of transparency in the system. The the prices of what was negotiated, the prices vary according to obviously whether a generic can be substituted. But there are there is just a lack of transparency in the entire system. And i would like to go across the panel and have each of you comment on how we can increase transparency into the pricing. Because until we do that, it is going to be very difficult for us to get a handle on whether these Cost Increases are justified. Ms. Riley. Thank you for the questions, and thank you for the work that you have done on issues that you raised such as the ones with deraprim and the pharmaceuticals. We too share the concerns that you raised about the fact that companies can buy and gauengage knowing that the approval could take years. We look at whether the fda can fast track reviews of medicines to compete with the products so they can list on their website the suppliers and names of companies that may be able to help producing competing products. So we are thankful for your leadership on that issue and would welcome working with you on that. The issue of transparency i think is a very important one. Yeah, often times when we hear the word transparency it means Different Things to different people. Transparency is important but its important if it applies holistically, often times the legislation we have seen wants to focus on one industry, the brand name pharmaceutical industry and leave out the rest of the supply chain. As i mentioned in my tempt, brand name pharmaceuticals represent about half of what we spend on total drugs in the country. The rest is subsumed by the chain, the rest is the distributors, pharmacy benefits and payers. We think its important to have one that holistically involves the supply chain, because there are costs in the wholesale sector alone, theyre reimbursing two times over what they require the product for. We definitely need to have more transparency into areas like that. I see two of my members of the committee have returned. So rather than another question i want to get in. I want to direct it to you. Last night nbc nightly news ran a story about an investigation which found that a wide variety of Prescription Drugs on certain insurance plans are actually cheaper when the consumer pays out of pocket. That makes no sense to me. We also learned at least in some negotiations, some contracts, there is a gag order that prevents pharmacists from telling patients they would be better off paying out of pocket than using their Health Insurance. So i would like both of you to answer the question of how common is this break and how can this occur . How can it occur that a prescription benefit manager whose very job is to negotiate prices is negotiating a price thats actually higher than the consumer would pay out of pocket. Mr. Merrill. Its a good question. To answer your question, its not something that should be going on in the marketplace. Its an outlier behavior. Im not sure if its a pbm or insurer behavior, but its not something we support. We think the pharmacy should pay lesser amount cost sharing or cost of drugs. If its a generic that costs 5 and theres a 20 copay, they should pay 5. They shouldnt pay that. I agree its a practice we dont support. Its an outlier practice and a practice we hope goes away. Mr. Monahan. Thank you, senator collins. First i should say i didnt handle an earlier question about rebates in all their forms. We oppose rebates in all their forms. Pharmacists are incredibly frustrated with inability patients. Providing patient care shouldnt be this difficult. My members feel incredibly frustrated with their lack of connectivity, their lack of communication with plans. Essentially they have no negotiating power and theyre sort of told when they have to do and they can take it or leave it. They can either be in a network or not. Typically not. If they are not if they are in the network, they are told hu to perform. So is it an outlier . No, its not an outlier. Is this a common practice . Its common. Thank you. Senator kane. Thank you, madam chair, and thank you to the colleagues and witnesses for their good testimony. I want to ask a couple of questions. Mr. Menighan, if i can start with you at the frontline with pharmacies and dealing with patients, commonly i hear as i travel around virginia about how high prices affect financial decisions. Your last line was great, the most expensive drug is the one somebody doesnt get, often for a financial reason, or if they dont get it. One in four americans who take Prescription Drugs report that they have difficulty affording them and these high costs lead to lack of access and that disproportionately affects the most Vulnerable People in my population. Talk a little about your customers. How do you see this highprice challenge affecting your customers . On the front end, oftentimes patients have to make tough choices. Pharmacists are in a great position to help with those choices if given latitude to do so. Oftentimes we spend time chasing adminitrivia when we should spend time copying patients on effective use of the medicines which they so desperately need. Patients wont make lifestyle choices, wont be better nourished, wont increase their activity without longterm coaching and support. When they face Major Barriers on the front end they throw up their hands and say i cant do it, its too hard, and they go back to their old ways and dont manage their chronic disease. The decisions they have to make, limited resources and lack of transparency that affects pharmacists ability to understand the reasons why pbms say this is available, this is not, and the conflict that occurs there when a physician says this is a drug i want for my patient, i think its best for that patient, the pharmacist says id like to give that to you but its going to cost you 500. The patient says i cant handle that, i give up. Pharmacists are challenge with that. To the degree we know the reason behind those formulary choices, we can be better advocates for our patients. The degree we insert lower cost options in collaboration with our physician colleagues, we can help our patients. But we need the time to do that and transparency and better understanding of information behind those decisions often made far above us and without any transparency. I would like the record to reflect that mr. Menighans use of the word administriva should be added to the dictionary. Im going to use it and say i thought of it. Its yours, senators. My next question, mr. Davis. Your written testimony has something i love, Congress Must act generic and biosimilars, you give us three things. I want to make sure i get two i want to make sure i understand and i wonder if you can explain. First repealing misguided medicaid penalty on generic drugs. Describe what that penalty is and why its misguided. Sure, senator. Thank you for the question. In the fall 2015 is part of the budget agreement that i believe was reached in october of that year, a rebate penalty that has long been associated with the branded industry. In medicaid base level rebate if youre a branded product. If your price increases exceed medical inflation, theres an additional penalty over and above. That was instituted in the early 1990s through the overprocess in an effort to con train a mon oppist companys price increases above and beyond the rate of inflation. Through weekend deliberations around that budget agreement, there was a decision made, a bill introduced in the house and senate that quite frankly had languished for several years that ultimately decided that was ultimately included in an effort because it was allegedly scored at saving a billion dollars over 10 years. The net effect of that provision, senator, is that it actually applies in the commoditized market, can impact a generic manufacturer when they dont take a price increase. That penalty has gone into effect beginning earlier this year. We have heard from our members that in certain instances some 40 of their generic portfolio is impacted by this additional penalty in instances when they did not take a price increase. A penalty that affects generics in a different way than branded. Yes. We have an added additional expense back to the government that is not tied to when companies actually take a price increase. Thats the net effect. Second you want to ensure biosimilar medicines have a level and competitive Playing Field in medicare. Could you describe that. Sure. Theres two components to that. One actually is that our members would actually like for biosimilars to be included in the 50 discount to the Medicare Part d coverage gap. To make sure theres not sort of an inverse incentive to make sure a patient stays on the higher cost, biosimilar, biologic if its appropriate to be on the biosimilar but we have to be exposed to the same 50 discount in the coverage gap. Thats something we have supported and urge congress to consider that at the appropriate option. The last area with respect to that, and actually cms to their credit is now looking at several of the Reimbursement Policies that originally came out relative to how they were going to treat biosimilars. We think theres more opportunity to encourage the marketplace, not distinguish the originator biologic and then group all biosimilars that have never been compared to each other in a j code and were optimistic cms will come up with a different decision. Thats critical to making sure we have a more conducive environment for biosimilars going forward. Senator cassidy. Thank you. I think a lot about drugs. I have to admit it turns my head. Im going to focus on insulin and come back to Something Else in a little bit. Im going to focus on two different areas. Ms. Riley, if we speak about some of our insulin products, theyre increasing at 20 per year. Wall street journal had an article in 2016 about 2015. At that point they actually refer to the role of pbms but if i look prior to 2015, there were no rebates for pbms but prices were going up anywhere from 10 to 20 per year. This is toward the end of the monopoly. Presumably they recoup their cost of Drug Development but costs are going up 20 per year. So from 2015 to 2016 goes up. As deductibles have grown, patients cant afford this. You make a good case that were investing in development, when going up 20 a year on the tail end of a monopoly presumably those have been recouped, americans with diabetes and all americans are upset. What do you say about that . Thank you for asking that question. I think the diabetes marketplace to your point is often confusing. Today it is i would argue one if not the most competitive marketplaces on average. Can we go back to the specific period from 2010 to 2015 or 2011 where people were basically price taking, getting 20 increase a year even though they had recouped their cost of ver investment prior to that. I would argue, senator cassidy, rebates were occurring before 2010. Today the average 2013 to 2014, quarter four, year over year, price list 22 with rebate of 1. 2 increase. For sanofi, 22 with rebate of 5. 4 , net price increase 20. 8 and 26. 4 . Im not sure im seeing that, at least in that period up to 2014. Im not sure what youre looking at but what i can tell you is today they publicly reported an average of im not speaking of today, im speaking of that period in the early part of this decade. Right. Now, those drugs have now had a new competitor. Frankly when theres new competitors pbms draw bigger rebates. I have a question for mr. Merit about that in just a second. If youre an american looking at your insulin price, believe me theres a guy from lafayette, louisiana, that texts me about three times a week talking about how his daughter cannot afford insulin and the price increase its had coupled with her highdeductible premium. Hes a rock river republican but hes about his daughters diabetes. What can we say . I would say a couple of things are important that happened. Prior to 2012 most patients that had medicine, that took medicine did not have a deductible for their medicine. When they showed up at the pharmacy counter in january the price that they paid for their medicine was often a copay and a pretty modest one. For diabetes medicines, 20. From 2012 to 2015 theres been a dramatic increase in the number of patients that today have a deductible. If i may, i have limited time. Youre addressing the fact the individual may not have seen the price. Somebody is paying. Either indirectly through a premium or directly through a copay so somebody is paying. I would argue too, when Companies Price their product, they are not just looking to get reimbursed for the prices they spent on getting that individual product to market. Companies are investing in the next generation of cures and treatments, those costs also have to be recouped. Theres been many advancements in insulin since they first began many years ago. Some newer insulins are longer acting if i may say just to counter, more emphasis raising prices on established drugs than new an innovative drugs. I dont have the statistic in front of me but ive read that in the past. Last year price increases on all drugs was at 2. 5 . Price increases moderated over the past few years. While that may have been the case several years ago we are not seeing the kind of price increases today that we had years ago. I didnt mean to be rude, i apologize. Mr. Merit, ive learned to say what im told, not what i know. Wall street journal article i refer in my questions to ms. Riley point out in 2015 actually insulin prices did moderate. Prior to that it was like oh, my gosh, i wish my stocks were doing as well. In 2015 it actually flattened but the price increased dramatically because they had to pay higher rebates to pbms, a competitor entered, pbm could choose. To pay the rebate they jacked up their price in order to pay for the rebate. The ceo of mylan came in to speak to me. She said actually their price is relatively flat. Then a kpcompetitor came in and pbms said now theres a competitor, well only carry you if you give us a big rebate. They had to increase their price in order to pay the rebate. She said its paradoxical in the world of pbms when this is no competitor your prices are lower and competition increases the price. Now, ive heard that from ceo of mylan and wall street journal. Your thoughts regarding that . I would disagree with that. Mylan raised the price of epipen 400 because they felt like it. They would counter and say we had to do it because theres a competitor, be it on the market only for a short time. We would told they would not carry the epipen, only the competitor unless they got a rebate and thats when we increased it. Lower it, all we want is lowest net cost. Wait a second on insulin, again, looking at this wall street journal article dated october 2016. They say at that point the net price going back to the manufacturer remained flat even though the price increased dramatically and they were paying the pbm for this with a delta between their net price and their list price. Are you disagreeing with that, too . The simplest thing is to lower their prices. Typically the rebate goes up because the price goes up. If the price goes up our clients are going to demand we get more discount. Thats just how it works. What we want is lower net cost. That can be done several ways. To chairman alexanders point, rebates are one way things can work. But the simplest thing would be for prices to go down. Im way over. Ill ask you to direct the response directly to the article of the wall street journal which disagrees with that a little bit. Im sorry for being way over. I apologize to my colleagues. Senator hess. Thank you, senator collins and i want to add my thanks to the senator for holding this hearing and thank you to the witnesses for being here today. Ms. Riley, i hear from granite staters all the time who struggle to afford their medications and they are so frustrated. Drug makers are reaping sky high profits as patients choose between having their medicine or for example heating their homes, choices they have to make too often because of the brazenly anticompetitive behavior that bad actors in the drug industry engage in. Most recently allergan who makes the blockbuster dry eye drug restasis. Restasis brought in sales of 1. 5 billion last year alone, which is on average 4 million per day. Allergan has had a market monopoly on this multibillion dollar drug since approval in 2002 and boy is it working to keep it that way. On september 8th of this year, just one week before its patents were set to be the subject of a hearing at u. S. Patent and trade office it announced it cut a deal with native american tribe in order to shield restasis from review by exploiting the doctrine of tribal sovereign immunity. A Federal District court judge called a employ and it it signed it over to the tribe and basically licenses back the patents from the tribe and continues to sell the blockbuster drug. So allergan using tribal sovereign immunity to shield restasis from review, maintaining its market monopoly, preventing generic competition and keeping prices and profits high. Meanwhile patients who need restasis are struggling to afford it. Allergans behavior here is unacceptable. If other Companies Follow its lead its only going to get worse. Im very concerned about the potentially devastating implications about the deal for our entire patent system, for the delicate balance struck in the hatchwaxman act. And most importantly for patients access to affordable drugs. Miss riley, your organization has a role to play. In may 2017 pharma approved new membership criteria to and this is a quote tackle the Biggest Challenges facing patients. Pharma expelled 22 Member Companies which was seen as a response to public concern over the rising cost of Prescription Drugs and to remove bad actors. So miss riley, you are head of membership for pharma. What i want to know, yes or no, is whether you believe allergan in its actions are consistent with your mission in the organization. Thank you very much for the question. I want to make clear a few things. Today Member Companies are asked to defend their patents. Not in miss riley, i have very limited time and another question to ask. Yes or no, is it consistent . I believe ipr process which is in play here is a process that needs significant reform. Our company thats fine. To exploit tribal sovereign immunity to avoid competition as opposed to dealing with the patent system in my view is unacceptable. Im sorry but because i have limited time id like to move onto my next question. I want to discuss with you my serious concerns about the Washington Post 60 minutes report this weekend on a bill from last year that your organization lobbied for aggressively. The dea had the power to immediately stop distributors from supplying opioids and other Prescription Drugs to pill mills and other corrupt sources. But according to dea chief Administrative Law judge last years law makes it much harder for the dea to use that power. Under the new law the agency must provide substantial evidence that a distributors actions makes death or serious bodily harm considerably more likely. And the dea needs to do so before any witnesses are produced or any evidence is admitted at a hearing. As a result, the judge writes that the law appears to and this is his quote completely eliminate deas ability to ever impose an immediate suspension. Yet your Organization Spokesperson told Washington Post, quote, to be clear, this law does not decrease deas enforcement against distributors. Thats a direct contradiction from what the judge is saying and its his job to interpret the law. Doesnt that make your organizations statement pretty misleading . Thank you for the question, senator. The Opioid Epidemic in general is a very serious concern and complex issue that we are also very concerned about as distributors. We work with supply chain partners daily to try and find solutions to that. Miss gallengagh, i understand that. But heres the point. Your organization which lobbied aggressively for this law last year claimed that it does not decrease the deas enforcement against distributors. The dea chief Administrative Law judge says youre wrong, that law eliminates the ability to take certain enforcement actions. Its his job to interpret the law. So is the judge wrong, or was your Organization Statement misleading . In that sense i believe that the judges statement was misleading and i stand behind our organizations statement and i i suggest you read the judges article which has now been published. What he points out, among other things, all this time when there wasnt a statutory definition of immediate harm that constrained the dea the way the bill that was passed last year does, over many, many years the industry didnt challenge the deas actions because very often theres almost no case law on it. I suggest you go read it. There are a lot of us extraordinarily concerned. A minute over. I thank you for your time and thank you chairman alexander. Thank you, senator haas and senator young. Thank you. Miss riley, Congressional Research Service Tells Us the United States spends more for Prescription Drugs than other wealthy companies. In europe drug prices set by governments not by pharmaceutical companies. Theres a recent study by mckenzie which indicated on average the price difference between the price of one drug in the United States and the same drug in france, uk, germany, italy, and spain was 50 . So u. S. Consumers, by my reading, are subsidizing the worlds research and development. Im not the first one to divine this insight. Research and Development Magazine said u. S. Accounted for 46 of global life and sciences r d, the vast majority of that going to biopharma. The challenge is even if europeans or wealthy countries were to raise their prices and reduce the extent to which they are freeriding, that wouldnt automatically lead to a decrease in prices here in the u. S. For our consumers. Instead a company would be punished by their investors and by their stockholders for lightening the burden on rank and File Americans who are trying to obtain pharmaceuticals. So i guess my question is twofold. The first part is an easy yes or no, as i would see it. Am i correct Foreign Countries pricing and reimbursement systems actually affect our Prescription Drug costs . I would definitely say the u. S. Does bear the burden for the world in terms of supporting research and development. I think the numbers you gave are much higher than ive seen in terms of price differential between the United States and other countries. They often rely on list prices and not prices paid. Well go back and look at the mckenzie study and see where you disagree with their prices and findings. Maybe we can engage offline in a dialogue about that. Second part of the question since youve acknowledged there is an impact on foreign reimbursement systems and foreign pricing on the price to u. S. Consumers, how might we mitigate the extent to which americans are innovators, are consumers, are shouldering the burden of financing the worlds medical innovation. One thing to make clear, we do have a different system in the United States. We reward innovation, companies that bring their products to market. We pay more up front and significantly less on the back end. Youre giving me a lot of background. Are there strategies we might use as policymakers to change this dynamic or mitigate the extent to which were shouldering the burden like through free trade agreements . Absolutely. Stronger trade agreements could go a long way to ensure other countries are paying more of their fair share. I would note a comment mark said with regards to recent hep c medicines pbms here on record said patients here paying less than what was being paid abroad in part because of considerable market consolidation in pbm market, many on behalf of more people than entire Foreign Countries in the eu. Are there other strategies we might employ to reduce the price to consumers in the state of indiana . Again, we have to look at what our insurance system looks like today. Oftentimes we treat pharmaceuticals differently than we treat other aspects of the Health Care System. Based on an individuals biology if you need a medicine youre being asked to pay significantly more out of pocket as opposed to if you needed to go into a hospital setting. I think we do need to examine if its fair to say to a patient with Rheumatoid Arthritis you need to pay 40 of the price of your medicine and if i need to go into the hospital i pay 4 of the cost. One possibility to lower prices and increase value, as i understand it, is the use of outcomebased contracts increasingly piloted by pharmaceutical companies and insurers alike. Can you explain how these work in summary fashion and their potential to lower drug costs for patients and then perhaps elaborate on any policy initiatives we here might engage in that might be standing in the way of moving these pilots to scale. Sure. Great question. I think there are anumber of innovative arrangements being produced. The goal instead of historic, volume basis, well pay for what we buy. A Movement Toward saying we will pay for these medicines at differential rates depending if they need the outcome the payer and Pharmaceutical Company can mutually agree to. Theres lots of potential benefits of moving in this direction. First of all, our companies are putting money where their mouth is. We might be paid less or nothing depending on if our medicine produces as we believe it should. Its helpful for the Health Care System for the ability to lower cost and helpful for patients, too, because the goal again is also if patients arent being helped by them, then their cost sharing should also be lowered. They are in their infancy stage in part because there are government rules like antikickback statute, price reporting and communications with the fda that need to be addressed to make these become much bigger than they are today. Follow up with you and your organizations to see if theres specific ways we might be helpful to empower our companies to make use of these contracts. Thank you so much. Appreciate it. Thank you, senator young. Senator warren. Thank you, mr. Chairman. So the high cost of Prescription Drugs is a huge problem. Lets talk about the best way to tackle this Public Health crisis. Ms. Riley, your association which is called pharma, represents brand name Drug Companies. You said in your testimony that, quote, the competitive market is the engine that drives the drug industry. So i take it you think that Market Solutions are the most effective way to deal with the rising price of drugs. I do believe that markets lower costs, yes. Good. I love markets and i also believe in markedbased solutions. Lets talk about one of the best marketbased solutions and thats competition. If the restrictions that prevent purchasers from importing the impact same drugs at lower prices from places like canada were removed, wed see some real competition and wed see some lower prices. Another Market Solution is negotiation. If the federal government were allowed to negotiate competitive drug prices for medicare beneficiaries, then prices would come down. So ms. Riley, youve already said that pharma opposes importation of drugs from canada. Let me ask about letting the federal government negotiate with Drug Companies over medicare prices. These two marketbaced solutions. I would argue price controls are not marketbased solution. I didnt ask about market controls. I asked about bringing in drugs with prices here. Bringing in drugs with other countries that price control their products is not a marketbased way to get drug prices. You would be in favor of drug importation from any place thats not doing what you call price control . I would argue almost every country outside of the u. S. Artificially limits prices that satisfies your requirement . How about the federal government competing and actually having some competition and saying were going to negotiate prices . I think theres often a fallacy that because the federal government is not setting prices in medicare that theres not negotiation, and that couldnt be further from the truth. As weve seen in Medicare Part d theres been robust negotiation. Rebates over 35 on average in part d. So your let me stop you there. I want to make sure i understand the point of the group that you represent here and lobby for. That is, is it that the federal government ought to be table to negotiate all drug prices . No, we dont believe the federal government is in the best position. We have rapid market consolidation in the pharmacy benefit manager space that exerts significant pressure in the 100 billion in rebates last year. I understand you have other concerns. But you know, drug competition from canada, price negotiation are Market Solutions, they are not government mandates. I would have thought if you believe in Market Solutions you would have embraced them. I dont believe that price controls are marketbased solutions. I also think you need to look at the down sides that happen in those countries, which is patients dont get the kind of access they get to therapies here in the United States. I realize you can call it price controls but this is a real question of whether or not theres any place else for consumers to go to purchase drugs or whether or not the federal government can negotiate on a drug by drug basis every time taxpayers are picking up the ticket. I looked this up and the organizations who are testifying here today spent a combined total of 30 million lobbying Congress Last year. Pharma, your organization, is responsible for almost threequarters of that total. A lot of that money that is spent lobbying congress is to keep drug prices high. Thats what improves profitability for your industry and the companies you represent. Here is what i think is really wrong about this. You talk about wanting Market Solutions but your industry isnt based on competitive markets. Its based on totally artificial taxpayergranted monopolies. Companies invent new drugs, and then the government hands the companies the exclusive right to manufacture and sell those drugs at whatever prices they want for decades. So i just have a little bit of time left but i want to ask, do you know the average length of a governmentgranted monopoly for top selling drugs in this country . Ten to twelve years. Ten to twelve years. The law says five, five years of exclusivity but Drug Companies game the system. According to a 2015 analysis by researchers at harvard, Companies End up with a monopoly that last as medium length of 12 1 2 years. Senator, a patent 20 years long, that is how long a pharmaceutical patent is. We have im sorry. The law says five years of exclusivity on basic drugs. Absolutely. Do you think the harvard study they dont know how to do it there, study how much money youre making off these things or how long you have exclusiv y exclusivity . Companies have five years of data exclusivity. Immediately after that a Generic Company can get to market. Let me tell you they try very hard to get to market as soon as they can. Youre saying the Drug Companies dont game the system at all to expand their exclusven exclusivity to 12 years . Senator try the story on someone else willing to listen to it. You can finish your no. I just wanted to say taxpayers watch when weve granted exclusivity to these companies and then they watch as the prices go up and theres not a darn thing for taxpayers to do about it. This is just fundamentally wrong. Thank you, senator warren. Senator mccow ski. Thank you, mr. Chairman. I want to follow up quickly with the discussion you were having with senator hassan regarding this latest news with the weakening of the dea enforcement authorization. Big expose 60 minutes, Washington Post. You have a drug czar thats now effectively withdrawn from this position. The president himself is saying need to look into this and investigate it. A colleague on the other side of the aisle introduced legislation that would repeal it. Some suggested it needs to be modified. Youve indicated to the senate are hassan that you think that the judge had misinterpreted or you disagreed with the judges interpretation i believe. Do you think what was passed in 2016 is actually good and sound, or do you believe that, in fact, given what we know today that it might need to be modified or amended in some way . Thank you, senator. First let me say the senators who authored that bill in the senate worked very closely with the dea to ensure that the bill did not inhibit the able to take action against the dea and did not oppose that bill. Regarding aljs article, which was a draft, i understand, aljs are not involved issuing immediate suspension orders. They are recommended by dea staff. They are issued by an administer or a deputy administrator. Do you think something needs to be done to address what clearly has come out to be limitations within deas authority that we might need to address through legislation . I think it should be explored as to what deas limited actions were and their limited involvement collaborating with industry and talking about defining the terms that registrants operate under. We have pages of questions we have submitted over the years that have gone unanswered. This bill, from our understanding, is sound and we supported it but we are open to talking through those issues more closely with you and other offices. I do think that it is an issue that has risen to perhaps a higher level given what we are seeing around this country with regards to just the ease, availability of these opioids that are just ravishing parts of our country. This is something that needs to be continued and addressed. Ive listened to the testimony from each of you, read through your written comments, and i just have to express the frustration that i think the general public feels in just being so limited in their ability to understand why. All they know is that the most expensive part of their health care that they can see is what is going on with the cost of their Prescription Drugs. Then when we talk about all we need is transparency, but if you look to try to understand it, youve got a manufacturer that sets a list price but almost nobody pays that. Youve got pbms that negotiate different prices, gbos that negotiate different prices, one hospital might charge Something Different than the hospital across the street. There may be rebates, may be discounts, may be other pricing things. There is no way that anyone can follow this. And for the average consumer, if you all are talking transparency, it doesnt mean anything to them. So i look to ways that we might be more transparent, that actually could translate to something. We put on the back of any product what the ingredients are and how thats allocated out. When alaskans get a Permanent Fund dividend, it actually lists on that voucher, if you will, where all of the associated costs are attributed to. Are we crazy to think that we could be doing more with actually accounting for the cost so that the consumer could better understand and make it legible . Because right now its impossible to understand. Even those of us that are listening to you as supposed experts, its all greek. Were not doing anything to help the consumer. So maybe its a rhetorical question here but i challenge you all to translate how the pricing mechanisms, who gets discounts, who doesnt, why its fair for one hospital to charge something that the other one doesnt. In no other industry that i can think of do you have this latitude for a discrepancy in pricing and the ability to just set it and be done with it. Im over my time. So perhaps if you can respond to me with some concrete examples of the ways that we can be more transparent, because i think ultimately that can help us push down the cost. Right now its impossible to discern. Id like to ask the witnesses are welcome to respond to the senator in writing with concrete examples. I think that would be helpful to her and all of us. Senator murphy. Just to senator murkowskis point, i get to be general of the Health Committee when i was 2 years old because i was the only one that took time to figure out how a drug was priced, what awp and amp meant, what the dispensing fee meant. It was the most opaque market that existed in our stated Health Care System. To this day i think there are only a couple of state legislators in connecticut who understand how a drug is priced either in the private market or through medicaid. It does behoove us when we talk about transparency to understand that if you just layer transparency on a Pricing System today that has 1,000 different prices, its really, really difficult. I just have one question because i know weve got to sneak in senator baldwin and myself before the bell here. Its for miss riley, so ill just prepare you for it. Trump administration recently announced it wants to expand Association Health plans and something called limited Duration Insurance plans. That was part of last weeks executive order. The risk is youre going to set up one system of care for Healthy People who can get into those plans, which dont require you to price without respect to medical acuity and one for sick people who will stay in the marketplace under Affordable Care act where insurance plans cant discriminate. Your ceo said on Television Last week that the executive order was a good idea because we need to be trying everything that can lower costs for patients. But the fact of the matter is, when you review these shortterm limited duration plans by and large they do not cover Prescription Drugs. If you look at the best selling plans that are sold on ehealth, they exclude preexisting conditions, mental health, exclude substance abuse, exclude Prescription Drugs and maternity expenses. I looked up the best selling plan in my home state offered by National General accident and health and it doesnt cover Prescription Drugs either. So why is pharma taking a position to support the executive order when to the extent that these shortterm duration plans become available to more and more americans, it will exclude the very product you sell in addition to all sorts of other coverages that people desperately need . Thank you for the question. Let me offer two points, first of which is our ceo was asked that question before the executive order was actually released, so i would note that. The second, i think some of the words reheard coming out prior to the release of it had to do with how do we increase competition, how do we address some of the consolidation thats happening in the marketplace. I think those are principles that many people espouse. I think the details in terms of how this ultimately gets worked out, the devil is certainly in the details and we will be looking anxiously as various agencies look to implement that. Again, our goal is to ensure patients have access to care. That is our primary goal. Let me ask that more specifically. If the result of i understand what the rhetoric is when the president talks about his executive actions, they are often very different than the words in the eos. If the result of this executive order is to dramatically expand access to limited duration plans, is that something that pharma would support . Our goal, as i said before, is to ensure patients have access to therapies including innovative medicines because so many patients rely on them. We will be looking in earnest as agencies work on this to ensure patients do have access to medicines. I would argue now would be the time to weigh in and make your feelings known on this. Thank you, mr. Chairman. Thank you, senator murphy. Senator baldwin. Thank you, mr. Chairman. Today were heard many competing reasons and even how its very complex to know why drug prices are high and are increasing. So i continue to believe we should start from the beginning of the story. I have a bipartisan bill with senator mccain and its pretty simple. It would give us more information as policymakers by establishing basic transparency for Drug Companies when they increase the price of a drug. Thats it. California just enacted with bipartisan support a new law similarly requiring transparency for drug price increases. While many changing factors contribute to a price that a patient pays, one factor has remained constant. We now see Drug Companies systematically increasing list prices of existing drugs every year. According to reports in just the First Quarter of 2017, there were 40 increases of drug prices, which is more than the First Quarter of 2016. If as we have heard today the list price provides an inaccurate picture, then im not sure why we shouldnt just ask Drug Companies for information to help paint an accurate picture and to explain why we are seeing these prices increase as my bipartisan bill would do. Mr. David, you noticed that you noted that in the last year revenues for branded drugs have increased as a direct result of price increases. Can you please briefly elaborate on this and describe what your industry is seeing when it comes to list price increases. I do want to ask another question, so please be brief, concise. Sure. Thank you, senator, for the question. Just to clarify, you asked a question relative to the brands or generics . What were seeing in brands . Branded drugs, you noted in your testimony. So what weve actually seen and this an example of how different the markets operate while were experiencing unprecedented generics, year over year the prescriptions are going up, revenue is going down in our industry. Thats opposite of what were seeing in the branded side where the prescriptions are going down and the revenue is continuing to go up. So there can be a whole host of economic reasons for that. One of them that we submitted in our testimony is we are seeing an increasing level despite some of the communications about supporting generic and biosimilar competition, we are seeing an increased level of activity, some referenced by senator hassan and her comments around outsourcing ip to native american tribes lately of these types of behaviors making it more challenging for generics to get to the market. Miss riley, like my colleagues have reflected in their comments and questions, i way too often hear concerns, stories from my constituents about the impact on drug price increases on their lives. Often these are tearful discussions because health and your ability to treat Health Conditions is deeply personal. I hear about the insulin list prices that have continued to increase since 2002, about top selling drugs like humira that have increased almost every year for 10 years, and about the more than 14 drugs for multiple sclerosis that have increased since 2004 to an annual average of about 83,000. A woman named diane from webster, wisconsin, talked about a heartbreaking conversation she had with her husband earlier this year where they decided to stop that she would stop taking her ms medication after 23 years because of it reaching 90,000 a year. At the same time reports have indicated that most of the big Drug Companies spend more on marketing than on research and development. A recent Health Affairs study of the 20 top selling drugs found that earnings from charging high drug prices in the u. S. Exceeded global spending in r d. Ms. Riley, last year your trade association updated its membership criteria to stipulate that Branded Companies invest in certain amounts of global r d spending per year to be eligible to join. Given this renewed commitment to r d, do you support Drug Companies making their r d spending and investments more transparent for the public as my bipartisan bill would do, including when they increase the list price of an existing drug . Yes or no . Absolutely. Research and Development Cost and our companies by and large make that information public. It is an important part of what we do. I would take issue, our companies spends significantly more on research and development than on marketing costs. With regard to transparency do you disagree with the conclusions of the Health Affairs study . I do, yes. With regard to transparency, again, i think a couple of things are important. One, it needs to be holistic and apply to the entire supply chain. As we talked about here today, were half or slightly less than half of what we spend on brand name drugs. Lots of other folks in the supply chain also have a piece of this equation and i think that needs to be explored. Arguments youve made. However, lets start at the beginning. Lets get transparency throughout but lets start at the beginning and the fair drug pricing act would be a good start in that direction. I would just say list prices too as weve talked about here today are not indicative of net prices and what are actually paid in the marketplace. Thank you, senator baldwin. Im going to need to go vote so im going to thank each of you for coming today. Youve been excellent in helping us put a spotlight on drug prices. We have two senators who one or two who have questions to ask. Im going to ask senator franken to chair in my absence. Hell ask his questions and then if other senators come back who have not answered asked their questions, hell call on them and then hell adjourn the hearing. So thank you very much for coming. Senator franken, thank you for chairing. Thank you. As youre leaving, id like to thank you and senator murray for calling this hearing and also for the negotiations that youre the important negotiations that youre involved in. So thank you. I just wanted to do that. Sorry, i havent been here for the whole thing. I had some other stuff to do and i ran back so that i could do this. So youll excuse me. Actually, i didnt run back. This is just such an exciting hearing. It seems like from your testimony and mainly from your testimony that like every one of you in some way or another is responsible for getting prices down. Thats what it seemed like from your testimony. And i think senator young touched on this, but i want to try to go over it again for myself. The u. S. Spends more on Prescription Drugs than any industrialized country in part because drug prices are higher in the u. S. Than in any other country. The drug industry pushes back and says that these price comparisons dont take into account the discounts that manufacturers give to insurers and other actors in the system. So to cut through that, id like to ask you some questions. Lets use the drug adviar which is an asthma drug. Its produced this new york new york. Its a drug thats produced in the United States. Ms. Riley, what is the list price for advair in the United States and how does it compare to the cost in canada, france and germany . I honestly do not know the list price of advair off the top of my head. Id have to get back to you on that. Sure, sure, very understandable. I want to ask you the price of every drug, see how you do. A Bloomberg News report from 2015 found that the list price for advair was 309. 60 in the United States. Accounting for, say, a 50 discount, then the price would be 154. 80 which is still higher than the price in canada which in 2015 was 74. 12. The price in germany which was 37. 71. The price in france was just 34. 52. Ms. Riley, why are prices so much higher in the United States for a drug produced in the United States . And its true of drugs produced in the United States and not produced in the United States. Why are they so much higher . I think americans really want to know this and i think they want to know this because you guys talked about research. Americans pay for a lot of the basic research, right . Yeah, through nih. And our industry, yes. But much of it through the taxpayer who pays directly to the nih to do the basic research. Most of the research you do is not in your industry is not basic research. We do a fair amount. You do a fair amount. Yes. Most of it is not basic research. Ill give you the figures on that. Well call that up in a second. These higher prices in the United States support high level profits and some research and Development Costs but we also pay these high prices because of the way our system is structured. The laws we set and the clout of the drug industry, for example, Congress Passed a law that prohibits the federal government from negotiating with drug manufacturers for lower prices for medicare which is the single largest payer for Prescription Drugs. In those other countries, you have the government able to bargain with the pharmaceutical companies. All of you presented yourself as part of the piece that keeps of prices down. Why are the prices so much higher in this case assuming a 50 discount from the list pri price, in a number of cases twice as high, four times as high, canada and france respectively, and more than four times as high in germany. Why . Americans want to know why. Im happy to start. We do have a different system in the u. S. Relative to other European Countries. We actually compensate companies for the innovation and the value of the medicines that they bring. I would argue in many European Countries it is prices are artificially depressed. They send tend to also pay more a medicine goes generic and they use fewer jen acgenerics. Yes, they probably do spend a little bit less. I would grew thouargue though t country incentivizes new therapies to come to market and then in that period of time when a patent expires and exclusivity is gone, 90 of the market, 95 of the markets shifts overnight to low cost generics. In that system that we have we are able to support a broader inoh vacation ecosystem. The fact that we have 90 jen air iks here and in other countries its 50 to 60 because they dont incentivize the dropping of price here, we do so in a way that that Additional Resources are able to fuel the next generation of therapies for patients. I would suggest its very small comfort for minnesotans that i visit around my state who cant pay for their pharmaceuticals. And i would suggest to you that this is a longer discussion, but why americans have to ask why do we and why do americans pay more two times as much, four times as much for our pharmaceutica pharmaceuticals, many of which we produce, many of which weve done the basic research for through the nih. Why do we have to pay why does the American Consumer have to pay more than the Canadian Consumer for the same drug, more than the german consumer, more than the french consumer . Senator, i would also argue okay, go ahead. There is a case here for the need for stronger trade agreements to ensure that other countries, particularly European Countries, are paying more of their fair share. So the answer is just to make them pay more . No. I think them paying more would permit prices here to potentially fall and permit more money to go back into research and development which over time lowers the cost of innovative therapies as well as generics. Anybody else on the panel . If i can add just to reinforce a comment previously made, to say that all drugs are more expensive in the United States fails to recognize the distinction between brands and generics. It has been a carefully balanced system created by hatchwaxman. We created a system in the 80s to make the investment for the ability to bring novel therapeutics to the market sooner rather than later. To a question that was asked earlier, why shouldnt we consider importing generics to canada, theyre more expensive in canada. I bet the idea and i approve of being able to import, i bet you the idea would be to import the drugs that are cheaper. Thats just my guess about what consumers would do. I almost i dont know, i used to be in comedy and i almost think that your answer there was a tad absurd which is of course were not do you understand the ubsurdity of saying that . The markets operate fundamentally differently. Theyre loer than they are in other developments markets. If you look that whole universe of the drug prices we pay more and youre acknowledging that. Thats what im talking about. Let me focus on the very specific issue which is the question of monopoly. Okay. And lets set aside for a second the licensed monopoly that people get when their intellectual property is protected by patent or a trademark. Lets just set that aside. Were not talking about that particularly approved monopoly. Were talking about other kinds. Does everybody agree that we have seen circumstances recently in which a drug manufacturer has an effective monopoly with a respect to one or more of their products . Does anybody dispute that phenomenon . Everybody agrees . Weve seen that. Its not complicated. So to say that you are a patient and you have taken a particular drug for many, many years and its not under any patent or trademark protection but somebody whos not in the pharmaceutical industry, an investor sees a monopoly, and jacks the price up by 500 just because they can. We know that has happened also, dont we . Yes, from everybody. No descent with that. So heres the problem that i have which is that in that circumstance the question then is where do you go . How do people respond to that particular problem . And the thesis that i have is that in those circumstances, which we all admit are true, that there is a clear monopoly and further we see price manipulation consistent not with any market but with monopoly power, my thesis is theres no places for anybody to go. There is no entity in the United States government that has the authority to say hold it. Thats a monopoly. You are extracting monopoly rents to use the economic term, and you got to knock it off. You may be able to get a lawsuit out of the department of justice for a price fixing violation but we havent seen lot of that. The fda nibbles around the edges of the problem. It doesnt have authority to step in at that point. Shouldnt there be some place in government where it is clear once a monopoly exists and theres no doubt about that and its clear that monopoly rent extraction is being done nothing related to market pricing. In that narrow circumstance, shouldnt there be somebody able to act . And lets go right down the line. Thank you, senator. We share your frustration. We often serve as uncompensated Insurance Agents for those with coverage who have to navigate complex insurance and co payments and insurance. We want desperately to be part of the team that helps people navigate so you concur theres no place to go . We have relatively few places, other than perhaps compassionate use programs that some companies provide but not all companies provide that. Mr. Merit. Yes. Its frustrating it is part of the marketplace. Not part of a legitimate marketplace, though . Extracting monopoly rents is not seen as correct behavior . We didnt like when he sold it for thousands of percent more and i testified in the same panel but other than scolding him here in congressional committees, nobody said no you cant do that. Ill tell you one thing we did and let laurie talk about the legality. He bought the drug for 1350 or Something Like that and jacked it up to several hundred dollars. Maybe it would be great if he cut that in half or if you looked at maybe he shouldnt charge more than it was originally, 13. We found a compound pharmacy that would do it for 1 and we cut his drug off the form laer and said everybody can have this drug. But thats not to say or imply that its not a challenge. It just takes time to overcome. My time is already out. If you have quick responses, ill go to mrs. Sure and thank you, senator. As you know theyre unique in the supply chain but we do support anything that supports increased competition in the marketplace. Mr. Davess. I think what youve been characterizing is a defacto monopoly and it requires a lot of analysis before individuals like mr. Sclely decide to go in there. Theres a need to continue focus here. I think some of the things he the new fda commissioner in his action plan in legislation that this committee insured was part of fadaro which was a listing of like drugs so theres more visibility in an effort to try to minimize the risk with more of those types of circumstances. You agree nobody has Regulatory Authority over monopoly priceprices . To the credit of the fda i think hes doing all he can but does he have everything to address that, noe. I think they took advantage to dramatically increase the price. I do think there is a lot ing. Because there was no direct regulator on the beat whose responsibility was to look for a clear defacto monopoly and address the excess price extraction. And to chips point right . Your answer . I would say in the in that particular case and weve seen a handful of others that mimic the same pattern is exactly right. And weve got lots of ideas on how you could address that. Thanks for letting me go over, chairman franken. Oh, i went way over and im going to ask one more question to mr. Merit real quick. Pay for delay because were talking about monopolies. Pay for delay. Drug company has a patent and then a generic comes up, the patent runs out, generic has it, company has it and they pay the generic not to bring it to mark market. What do you think of that practice . We oppose that practice. It is an interesting economic question because ive heard both sides. I think chip can address this better than me. What generics would say is its so hard to break through a patent that well try but overall artistrys on the other side of the issue. Thank you. The hearing record will remain open for 10 days. Members may submit Additional Information for the record within that time if they would like. The help committee will meet again tomorrow, october 18th at 9 30 a. M. For an executive session. Thank you all for being here today. The committee will stand adjourned