Years of relentless price increases taken by drugmakers Celgene and Teva on two widely used brand-name drugs were driven by company executives' push to meet revenue targets and earn bonuses, a long-running investigation by the House Oversight Committee concluded in separate reports published Wednesday.
The probe, begun by the late committee chairman Elijah Cummings in January 2019, gathered more than a million pages of internal company documents, memos and emails from a dozen drugmakers, including Celgene and Teva as well as Amgen, Novartis, Mallinckrodt and others.
Two hearings this week are meant to publicize the committee's findings and, for the Democratic majority, support efforts to rein in drug prices through legislation like the major bill passed by the House of Representatives last December.
At the first, held Wednesday, Democratic lawmakers on the committee decried the pricing strategies behind Revlimid, a blood cancer medicine now sold by Bristol Myers Squibb, and Teva's multiple sclerosis drug Copaxone, criticizing the companies' current chief executives and former Celgene CEO Mark Alles.
"You charge more for this drug here in the U.S., and you made more money from this drug here in the U.S., than in every other country combined," said Chairwoman Carolyn Maloney, D-N.Y., addressing Bristol Myers CEO Giovanni Caforio and referring to Revlimid.
Bristol Myers bought Celgene last year for $74 billion, in large part because of Revlimid and the immense sales it generates. A good portion of the nearly $11 billion in revenue Celgene (and from Nov. 19 onwards, Bristol Myers) earned last year from Revlimid reflect the nearly two dozen price hikes taken by Celgene since the drug's launch in 2005. In 2018, for instance, analysts at SVB Leerink calculated that nearly half of the growth in U.S. sales for Revlimid between 2014 and 2017 was directly due to price increases, with higher usage accounting for the rest.
Bristol Myers added another 6% price hike this January to bring Revlimid's monthly cost north of $16,000, more than triple what it was in 2005.
Typically, drugmakers claim high drug prices are needed to support investment in research and development, offset rebates paid to insurers or, more simply, reflect a medicine's value as new uses are demonstrated through clinical trials. And indeed, the executives testifying Wednesday used several variations of those same responses.
"The U.S. is the world leader in medical innovation and free market pricing in the U.S. continues to drive much of the medical innovation for the world," Alles said at Wednesday's hearing.
The House committee reports attempt to puncture those defenses, marshaling documents procured during the probe to argue that revenue and earnings targets play a more prominent role in drugmaker decision-making.
Faced with lower-than-expected revenue from Revlimid early in 2014, for example, then Executive Vice President Alles pushed for faster and steeper price increases that year.
"I have to consider ever legitimate opportunity available to us to improve our Q1 performance," Alles wrote in a March 1 email disclosed by the committee.
The committee painted a similar picture of Teva, which has increased the price of Copaxone 27 times since 1997, boosting the drug's cost to more than $70,000 per year.
While not the focus of either report, letters submitted by the drugmakers to the committee suggest their R&D expense on each drug was only a small fraction of their cumulative sales. Celgene, for example, told the committee its R&D spending on Revlimid totaled $800 million, while Teva said its R&D costs on Copaxone added up to $689 million, just 2% of its net U.S. revenue between 2002 and 2019.
More notably, committee staff took aim at drug executive pay, charging that bonuses and incentives tied to revenue growth meant raising prices would likely result in higher compensation. This is true of many drugmakers, but for companies like Celgene, which earned much of its revenue from Revlimid alone, the link between price hikes on a single drug and higher executive pay is stronger.
According to the committee, Alles earned $508,406.09 in bonuses over 2016 and 2017 due to a series of price increases, without which the bonus targets would not have been met in 2017.
Katie Porter, a Democratic congresswoman from California, criticized Alles harshly on this point, producing one of the hearing's more fiery exchanges: "The drug didn't get any better; the cancer patients didn't get any better; you just got better at making money."
But the hearing lacked some of the punch seen in earlier showdowns between lawmakers and pharmaceutical executives. Republicans on the committee were less aggressive, with some musing whether government attempts to rein in drug prices would neuter the scientific progress that's allowed several U.S. and multinational companies to rapidly develop and test coronavirus drugs and vaccines.
While President Donald Trump has made several, so far unsuccessful, attempts to go after drugmakers on pricing, neither he nor Congressional Republicans supported the Democrat-passed bill H.R. 3, which would have permitted the government to negotiate on certain drugs.
Chairwoman Maloney, who has accused Republicans on her committee of undermining the investigation, argued the probe's findings make clear the government needs to take a more active role.
"We need to get rid of this ridiculous law that says the government cannot negotiate drug prices," she said.
Should such a change ever occur, Revlimid could be among the most affected drugs. Medicare spent $3.3 billion on the treatment in 2017 before rebates, making it the biggest pharmaceutical outlay that year.
Executives from Amgen, Novartis and Mallinckrodt will testify on Thursday, with drugs like Enbrel, Gleevec and H.P. Acthar Gel the likely targets. AbbVie, one of the other companies targeted in the probe, hasn't cooperated to the committee's satisfaction, drawing a subpoena from Maloney to produce more information on its top drug Humira.