By Robert Pear, The New York Times, February 26th, 2019.
WASHINGTON — Pharmaceutical executives, testifying before Congress, could not readily explain on Tuesday why the prices for many brand-name prescription drugs were much higher in the United States than in other developed countries.
“It is almost as if the taxpayer has ‘stupid’ written on their face,” Senator Bill Cassidy, Republican of Louisiana, told the seven executives, who faced a barrage of questions and criticism at a three-hour hearing of the Senate Finance Committee.
Mr. Cassidy joined two other Republican senators, Charles E. Grassley of Iowa and John Cornyn of Texas, and all the Democrats on the panel in expressing deep concern about constituents who could not afford the drugs they needed to survive.
Senator Robert Menendez, Democrat of New Jersey, the home to many drug and biotechnology companies, offered what he described as “a friendly warning” to the witnesses. “If you don’t take meaningful action to reduce prescription drug prices,” he said, “policymakers are going to do it for you.”
The hearing was political theater, but could also be a first step toward legislation to provide some relief to consumers, as lawmakers of both parties and President Trump have vowed to slow the relentless rise of drug prices.
It was also clear from the hearing that senators had a lot to learn about drug pricing and that pharmaceutical executives did not fully appreciate the explosive political potential of the issue.
“I feel like I need a Ph.D. in prescription drug pricing to understand how the heck this industry works,” said Senator Maggie Hassan, Democrat of New Hampshire.
Richard A. Gonzalez, the chairman and chief executive of AbbVie, the maker of the best-selling arthritis drug Humira, told the committee that his company made profits in countries like Germany and France where prices of brand-name drugs were often much lower than in the United States.
“The U.S. has some of the highest prices in the world,” Mr. Gonzalez said.
Senator Ron Wyden of Oregon, the senior Democrat on the committee, asked, “How is that not gouging American consumers with high prices?”
“You’re willing to sit by and hose the American consumer while giving price breaks to consumers overseas,” Mr. Wyden said. Drug makers’ attempts to justify their prices, when so many patients cannot afford them, are “morally repugnant,” he said.
The drug makers vehemently opposed Mr. Trump’s proposal for Medicare to pay for certain prescription drugs based on the prices paid in other developed countries.
The Trump administration has said Medicare is paying 80 percent more than the amount other advanced industrial countries do for some of the most costly physician-administered drugs. Under its proposal, Medicare would still pay 26 percent more.
But the drug company executives bristled at the idea. Under such proposals, they said, the United States would be importing price controls from other countries where coverage of costly new drugs is sometimes delayed or denied.
“American patients have access to cancer medicines about two years earlier than patients in other countries, including Germany, France and the United Kingdom,” said Pascal Soriot, the chief executive of AstraZeneca. As a result, he suggested, American patients have generally seen greater improvements in cancer survival rates.
Kenneth C. Frazier, the chief executive of Merck, said his company could not just walk away from European markets where health officials set lower drug prices. It would be “immoral to leave the patients behind,” he said.
Mr. Cornyn said AbbVie had tried to block competition for Humira by surrounding it with a thicket of patents. In response to questions, Mr. Gonzalez, the chief executive, said AbbVie had 136 patents on Humira, with different patents protecting its use to treat different conditions.
“I support drug companies’ recovering a profit based on their research and development of innovative drugs,” Mr. Cornyn said. “But at some point that patent has to end, that exclusivity has to end, so that patients get access to those drugs at a much cheaper cost.”
Mr. Cassidy expressed interest in an idea that has been embraced by many Democrats but few Republicans: that Medicare should, in some cases, be able to negotiate prices with drug manufacturers.
“Right now,” Mr. Cassidy said, “Medicare has a very limited ability to negotiate” prices based on the relative value of a therapy. Medicare’s prescription drug plans, offered by private insurers, hire pharmacy benefit managers to negotiate, but they are not always effective, he said.
Senator Sherrod Brown, Democrat of Ohio, said taxpayers subsidized pharmaceutical research, through the National Institutes of Health, and advertising, through tax deductions for business expenses. But, he noted, many drugs cost more than the median income of Medicare beneficiaries, about $26,000 a year.
“We can’t afford to gave Big Pharma the blank check that you’ve had,” Mr. Brown told the executives.
Mr. Grassley, the committee chairman, set the tone for the hearing when he said that practices of the pharmaceutical industry “thwart the laws and regulations designed to promote competition” and the use of lower-cost generic drugs.
Several themes ran through the testimony of the drug company executives, who were clearly playing defense. The main problem, they said, is not the high list prices set by drug manufacturers, but the high out-of-pocket costs paid by patients.
Several drug company executives suggested establishing a monthly or annual limit on a Medicare patient’s out-of-pocket costs for prescription drugs.
Several chief executives, including Mr. Frazier of Merck and Olivier Brandicourt of Sanofi, said they could also support legislation that speeds the development of generic medications by requiring brand-name manufacturers to provide samples to generic drug companies. Generic drug developers need samples to show that a generic copy is equivalent to the original, but they have often had difficulty getting them.
Ronny Gal, a securities analyst who follows the drug industry for Sanford C. Bernstein & Company, said he doubted that drug companies would change their pricing practices because of the hearing.
“This is a $460 billion industry,” Mr. Gal said. “You think three hours of an orchestrated show before Congress will lead to different behavior? I don’t think so.”
Pharmaceutical executives do “want to be at the table for whatever comes next,” Mr. Gal said, and that could eventually include discussions and negotiations on legislation.
Mr. Gonzalez, of AbbVie, said drug prices were a problem for some patients because their out-of-pocket costs were often a percentage of a drug’s list price.
Mr. Soriot said the list prices of drugs did not reflect the true cost because AstraZeneca and other companies provided rebates and discounts to many health insurance plans and the middlemen known as pharmacy benefit managers. On average, he said, the rebates — intended to secure a favored position on a health plan’s list of covered drugs — are “nearly 50 percent of our gross revenues in the United States.”
AbbVie, AstraZeneca and several other companies said they would reduce prices for consumers if Congress outlawed the rebates that drug makers pay to insurers and middlemen to promote the use of their drugs in Medicare and commercial insurance.
Democratic senators wanted a firmer commitment. They asked the drug company executives to put it in writing.
Albert Bourla, the chief executive of Pfizer, said he supported efforts to eliminate rebates paid to health plans and middlemen. Patients, he said, should get the benefit of such price concessions at the pharmacy counter.
“None of the close to $12 billion of rebates that Pfizer paid in 2018 found their way to American patients,” Mr. Bourla said.
He also said drug makers should be paid in proportion to the value of their medicines. Pfizer, he said, could be “paid based on the number of strokes we prevent or the number of cancer patients who go into full remission, rather than the number of pills we sell.”
With the proliferation of high-deductible health plans, Mr. Bourla said, patients are paying a larger share of prescription drug costs.
“Patients are made to pay on average 14 percent of the cost of their medicines, but only 3 percent of the costs associated with hospital stays,” he said.
Patients, doctors and members of Congress have cited rising insulin prices as an example of what is wrong with drug prices in America, and Mr. Brandicourt, the Sanofi chief executive, defended the company’s record.
“The net price of our insulin product Lantus has fallen over 30 percent since 2012,” Mr. Brandicourt said. “Yet over this same period, average out-of-pocket costs for patients with commercial insurance and Medicare — before the benefit of any Sanofi financial assistance program — has risen 60 percent.”
A version of this article appears in print on , on Page B6 of the New York edition with the headline: Drug Makers Try to Justify Higher Costs at Hearing.