In front of Congress, pharma execs blame 'broken' system
- Pharma executives testifying Tuesday in front of the Senate Finance Committee stuck to a familiar script on drug pricing, criticizing the current system as "unsustainable" while highlighting the growing separation between the prices drugmakers set and the prices net of rebates and discounts provided to insurers.
- "Our healthcare care system is broken, and we need to fix it," said Pfizer chief Albert Bourla in written testimony. CEOs of AstraZeneca, Merck & Co. and Sanofi shared a similar sentiment, acknowledging the growing cost burden felt by patients but arguing incentives in the drug supply chain are misaligned.
- Committee leaders, however, appeared less willing to entertain such arguments. Sen. Ron Wyden, D-Ore., the ranking member on Senate Finance, opened Tuesday's hearing by targeting drugmakers one by one, listing off examples of billion-dollar products and rising pharmaceutical revenues. "This is all a stark illustration of drug makers' profiteering and two-faced scheming," Wyden said in remarks prepared for delivery.
Drugmakers have staved off congressional scrutiny on drug pricing for years, successfully deflecting most of lawmaker criticisms while making few major alterations to a business model that's featured steady list price increases.
However, signs are growing that the current moment is different. Past hearings on the contentious issue have featured individuals the pharma industry has been able to paint as outliers — most notably Martin Shkreli and his now infamous 5,000% price increase for an old drug for toxoplasmosis.
Tuesday's hearing, by contrast, features household names like Johnson & Johnson, Merck & Co. and Pfizer, and a committee with leaders who have made clear that addressing drug pricing is central to their legislative agenda.
"We’ve all seen the finger pointing. Every link in the supply chain has gotten skilled at that," said Sen. Chuck Grassley, R-Iowa, in his opening remarks. "But, like most Americans, I’m sick and tired of the blame game. It's time for solutions."
The hearing comes following a year in which the Trump administration rolled out several policy proposals targeting drugmakers and the current system of rebating. With both Republicans and Democrats in Congress focused on the issue, the risk of legislation anathema to the industry advancing appears higher than in the recent past.
In opening remarks, CEOs frequently highlighted the new medicines developed in industry laboratories that have changed how many diseases are treated.
"Just 10 years ago, the idea of harnessing the immune system to treat cancer was viewed with great skepticism," said Bristol-Myers Squibb CEO Giovanni Caforio. "But Bristol-Myers Squibb researchers saw the promise of the approach and ignited an era of scientific innovation that has changed survival expectations in multiple tumor types."
Implicated in Caforio's comments, and those of his peers, is the argument that forcefully regulating pharmaceuticals brings the risk of slowing R&D — a point the industry continues to rely on. This week, for example, the industry lobby PhRMA rolled out its latest advertising push, a one-minute spot featuring tireless researchers working to develop new medicines.
Increasingly, drugmakers have attacked pharmacy benefit managers and the role played by drug rebates, laying blame for rising patient out-of-pocket costs on an opaque supply chain.
"We understand that patients are having a harder and harder time affording their health care, including their prescription medicines," said Merck CEO Ken Frazier in prepared remarks.
"As a result of robust negotiation and competition in the marketplace, medicine costs are growing at the slowest rate in years, but the system is still not working for patients who are too often being asked to pay more out-of-pocket due to the complex system of pricing, distribution, and insurance."
AbbVie, Bristol-Myers Squibb, Pfizer and Sanofi made similar arguments, and indicated their support for a Trump administration proposal that would eliminate certain drug rebates paid to insurers in Medicare.
Wyden, however, dismissed from the start drugmaker arguments blaming rebates. "PBMs don't set list prices; manufacturers do," the Democrat said. "Those prices continue to rise. That's on the drug companies, not on PBMs."
Many drugmakers opened 2019 with list price increases on scores of drugs, although most large companies expect net prices to remain flat or decline in the U.S. this year.
Recently published data from Iqvia showed invoice prices — which track lists prices — on certain branded drugs in the U.S. grew by 5.7% — the lowest figure it's tracked over the past five years. Net prices grew by 1.5%, below growth in the Consumer Price Index.
Several drugmakers also proposed legislative action to cap out-of-pocket costs in Medicare and encourage adoption of value-based, or outcomes-based, contracting.
Wyden indicated the Finance Committee plans to continue its scrutiny of drug pricing, saying PBMs "are going to have their day in front of the committee, too."
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