America's top pharma CEOs just got grilled by Congress over the cost of their drugs

Shayanne Gal/Business InsiderLawmakers are trying to get some answers about the high cost of prescription drugs by grilling executives from seven top pharmaceutical companies.
  • Seven leaders of major pharmaceutical companies testified about high US drug prices as part of a congressional hearing on Tuesday.
  • Lawmakers pushed the pharma executives on what they and their organisations could do to make change for patients.
  • “We’ve all seen the finger-pointing,” said Chuck Grassley, the Republican senator from Iowa who led the hearing. “But like most Americans, I’m sick and tired of the blame game. It’s time for solutions.”
  • The pharma executives sought to justify prices by emphasising the value of their medicines to patients. They also shifted blame to other parts of the US healthcare system like intermediaries.

High US drug prices have been top of mind for many Americans lately.

On Tuesday, lawmakers tried to get some answers by grilling executives from seven top pharmaceutical companies at a congressional hearing. The seven drugmakers, which include Merck,Pfizer, and Johnson & Johnson, collectively have a market value of $US1.13 trillion.

The executives, in turn, defended the value of their medications in treating a wide range of severe and debilitating diseases. Drugmakers must invest massive sums into researching and developing new drugs, a notoriously expensive process, the executives said in prepared remarks.

Many of the executives acknowledged that high drug prices affect people’s ability to afford treatments, even as they shifted blame for high costs to the wider US healthcare system.

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Pfizer CEO Albert Bourla, for example, listed work his company has done in treating breast and lung cancer, leukemia, and meningitis B, as well as developing a promising non-opioid pain treatment.

A high-profile group heads to Washington

“All of these breakthroughs won’t do anyone any good if patients can’t afford them,” Bourla said in his prepared remarks. “Our healthcare system is broken, and we need to fix it.”

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Six of the seven companies sent their CEOs to Tuesday’s hearing: Merck’s Kenneth Frazier, Pfizer’s Bourla, AbbVie’s Richard Gonzalez, AstraZeneca’s Pascal Soriot, Bristol-Myers Squibb’s Giovanni Caforio, and Sanofi’s Olivier Brandicourt. Johnson & Johnson sent Jennifer Taubert, an executive at the company’s Janssen pharmaceutical unit. At least two medical doctors and one veterinarian/doctorate-holder were in attendance.

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With such a high-profile cast, the healthcare industry had been abuzz about Tuesday’s hearing for weeks. Drug pricing could also be a rare bipartisan issue this year, with President Donald Trump frequently raising it and the Democratic majority in the House making it a priority too.

Like most pharmaceutical companies, those called to Washington on Tuesday have raised their prices over the years. Pfizer, under its previous CEO, Ian Read, even got into a high-profile altercation over drug pricing with Trump last year.

The US spent an estimated $US344.5 billion on prescription drugs in 2018, and the figure is expected to rise to $US576.7 billion in 2027, according to projections from the federal Centres for Medicare and Medicaid Services.

The share of total US healthcare spending that goes toward drugs will increase to 9.7% from 9.4% over that time, according to the projections. The advent of new drugs and a push to consistently treat people with chronic diseases are projected to drive that growth.

How big pharma defends its prices

Chuck Grassley, the Republican senator from Iowa who leads the Senate Finance Committee, indicated in his opening remarks that he’s tired of efforts to deflect responsibility.

“We cannot allow anyone to hide behind the current complexities to shield the true cost of a drug,” he said.

“We’ve all seen the finger-pointing. Every link in the supply chain has gotten skilled at that,” he added. “But like most Americans, I’m sick and tired of the blame game. It’s time for solutions.”

The CEO of a $US210 billion pharma company says that US drug prices are working against patients. One chart explains why.

Democratic Sen. Ron Wyden of Oregon, the committee’s ranking member, heavily criticised the drug companies represented at the hearing, calling each out for things like price increases and stock buybacks.

US drug prices “did not become outrageously expensive by accident,” Wyden said, but are “astronomically high because that’s where pharmaceutical companies and their investors want them.”

“The brakes have come off pharmaceutical pricing, and American families are hurtling along in the passenger seat, terrified of what comes next,” he added.

But the drugmakers on Tuesday still emphasised problems in the healthcare system, including the role of rebates in keeping drug prices high.

Drugmakers pay these discounts to intermediaries called pharmacy-benefit managers, which also benefit from high drug prices, and drug companies have sought to deflect blame to them in recent years.

Bourla and other executives described rebates as an issue in the US health system that exposes patients to high costs.

“The list price is actually working against the patient,” Merck’s Frazier said, adding that the US’s drug-price reimbursement system was “regressive” in some ways.

Some of the pharma executives, though not all, said that getting rid of rebates in the broader healthcare system would bring down their prices. The Trump administration has proposed banning rebates, but it would apply only to the government-funded Medicare health program and part of the Medicaid program for people with lower income, and not to privately funded health insurance plans.

Some of the pharma executives’ suggestions for improvements on Tuesday also included limits on the out-of-pocket costs seniors face in the government’s Medicare Part D program, which covers prescription drugs.

A lifesaving product gets scrutinised

Wyden also criticised Sanofi for price increases it has taken on insulin, a lifesaving product for people with diabetes.

Insulin has been of interest to patients and lawmakers. It was a focus of a previous Senate Finance Committee drug-price hearing and of a bipartisan investigation launched on Friday by the two leaders of the committee, Grassley and Wyden.

Insulins have been sold for decades, and the market for the treatment should be competitive, with many drugmakers selling it. But that hasn’t stopped prices from rising steeply in recent years.

In his prepared remarks, Brandicourt defended the price of Sanofi’s Lantus, the top-selling long-acting insulin. Though average patient out-of-pocket costs for Lantus have risen, Sanofi’s take-home has declined since 2012, according to his remarks. The drugmaker has said that discrepancy is due to the rebates it pays intermediaries.

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AbbVie was also criticised for taking consistent price increases on its bestselling arthritis medication, Humira, as well as the company’s sizeable number of Humira patents, 136.

Gonzalez defended the number, saying that AbbVie paid for research that got Humira approved for conditions like inflammatory bowel disease, Crohn’s disease, and ulcerative colitis and that the patents did not prevent competition.

Grassley and Sen. John Cornyn of Texas said the issue was worth further discussion in the Senate Judiciary Committee.

Analysts at Cowen had said that while the hearing would “likely be great theatre,” they expected little concrete action from Washington to bring down the cost of drugs.

A big drug-pricing deal “gives President Trump a win on an issue Dems have called their own for more than a decade, particularly ahead of the 2020 elections,” they said.

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