On Tuesday, top executives from seven major drugmakers will testify before the Senate Finance committee in what looks set to become a high-profile confrontation between lawmakers and industry on drug pricing.
Rising pharmaceutical costs have drawn congressional scrutiny for years now, but rarely has that attention fixed so directly on the industry's standard bearers, including Pfizer, Johnson & Johnson and Merck & Co.
Past hearings have featured executives, such as Turing Pharmaceuticals' Martin Shkreli and Mylan's Heather Bresch, responsible for actions the industry has been partially successful in painting as outlier behavior.
The executives called before Senate Finance on Tuesday will likely seek to highlight a growing gap between the prices they set for their products and the prices actually charged after factoring in discounts and other rebates. Blaming pharmacy benefit managers and insurers has been part of the drug industry's standard playbook, but senators on the Finance committee may not be receptive to such arguments.
Bristol-Myers Squibb, Sanofi, AbbVie and AstraZeneca will also be represented at the hearing.
Tuesday's proceedings could become a key moment as both Democrats and Republicans unveil agendas seeking to rein in drug prices and hold the pharma industry to account. And a White House focused on making pricing a domestic policy issue ahead of 2020 elections could add further momentum behind a legislative push.
Executives from each company will arrive well-prepared, but each still has political vulnerabilities for which to cover.
Jump to see each drugmaker's potential Achilles' heel (executive testifying in parentheses):
AbbVie's political exposure, as well as majority of its revenue, stem from one drug: Humira. If lawmakers turn the spotlight onto company CEO Richard Gonzalez, the anti-inflammatory disease therapy will be a likely target.
Humira is the world's top selling pharmaceutical, earning AbbVie nearly $14 billion in the U.S. last year.
Price increases have played a large role in the drug's steady, double-digit growth. A recent analysis from investment bank Leerink found that, between 2014 and 2017, hikes to Humira's list price accounted for 43% of U.S. sales growth over that time — a contribution of nearly $2.5 billion.
Just last month, the drugmaker increased Humira's wholesale acquisition cost by 6.2%, a lower amount than in past years but still a sizable increase for a treatment that costs tens of thousands of dollars per year.
AbbVie has also meticulously built a ring of protective patents around Humira that should prove capable of preventing biosimilar competition until 2023. Settlements between the company and potential rivals have attracted scrutiny, even if the agreements don't quite fit the bill as "pay-for-delay."
Under now former CEO Ian Read, Pfizer publicly tangled with President Donald Trump and his administration's efforts on drug pricing.
After hiking the price of several dozen drugs last summer, the pharma giant earned a public rebuke from the president, spurring a rare reversal. But Read soon made clear that the retreat was temporary, declaring the start of 2019 would bring a return to "business as normal" on drug pricing.
Sure enough, Pfizer moved ahead with price increases on 41 drugs last month, including a 9.4% hike for the key arthritis drug Xeljanz.
Yet newly minted CEO Albert Bourla has pitched a slightly different message since becoming head of the pharma.
"Pricing is not going to be a growth driver for us now and, I think, in the future," Bourla told investors in January. What that means in practice isn't exactly clear, but Pfizer does not expect net prices in the U.S. to grow this year.
Lawmakers could focus on Lyrica, a drug for diabetic nerve pain that made Pfizer nearly $5 billion, or Prevnar 13, a pneumococcal vaccine and Pfizer's top-seller.
Last month, the Senate Finance committee held its first hearing on drug pricing in this congressional cycle. Along with a bench of academic and policy experts, senators invited Kathy Sego, a choir teacher from Indiana whose son, Hunter Sego, has Type 1 diabetes and is insulin-dependent.
Sego detailed how Hunter, faced with a $1,700 price tag for a month's supply of insulin, began rationing the needed medicine and risked potentially fatal diabetic ketoacidosis. Hunter and the Sego family managed, but the story is familiar as Americans grapple with rising list prices for insulins and an insurance safety net with gaps in coverage.
In response, lawmakers from both parties have stepped up political pressure on Eli Lilly, Sanofi and Novo Nordisk, which between them manufacture most of the insulin sold in the U.S.
Neither Lilly nor Novo were publicly invited to testify Tuesday, meaning Sanofi could face the brunt of lawmaker anger. The French drugmaker makes Lantus and Toujeo, which together earned over $2 billion in the U.S. last year.
Company CEO Olivier Brandicourt will come to the hearing armed with fresh data showing that while Sanofi has more than doubled the list price of Lantus since 2012, net prices have fallen by 25%. That's due to billions of dollars in rebates paid by the drugmaker to insurers in exchange for favorable coverage — reducing the actual price charged.
Lawmakers, though, may not be sympathetic to such arguments, especially as examples multiply of patients who remain exposed to list prices.
Merck & Co.
Ken Frazier has, in some ways, become the conscience of an industry skewered for corporate malpractice and bad actors.
Under his leadership, Merck took steps to improve transparency around the company's pricing practices and, last year, announced plans to reduce the price of seven medicines. While the drugs in question were all relatively immaterial to Merck's bottom line, the decision still made for a rare move.
The veteran CEO, who previously served as the company's top lawyer, has also overseen a transformation of Merck's business from one focused on primary care medicines to its current emphasis on oncology.
Yet senators looking to hold Merck to account won't have to go back far to find fresh examples of price increases. The pharma raised list prices for its immunotherapy Keytruda, top-earning vaccine Gardasil and three other products in November.
"We share the committee's goal of reducing patient out-of-pocket costs and are committed to working with Senators Grassley and Wyden on innovative policy ideas," the company said in an emailed statement earlier this month.
Giovanni Caforio, the CEO of Bristol-Myers since 2014, may not have the name recognition of some of his executive peers. Yet the company veteran is in the midst of navigating the industry's largest acquisition since Pfizer bought Warner-Lambert in 1999.
Bristol-Myers planned takeout of Celgene for $74 billion — which would bring together two of the top-selling cancer drugs under one name — may prove hard to ignore for lawmakers concerned about pricing power.
Opdivo, Bristol-Myers' star immunotherapy, is part of a new class of drugs rapidly changing care across a number of different cancers. While it represents some of the industry's best science, the treatment is also expensive, costing over $150,000 a year at list price.
Celgene's multiple myeloma drug Revlimid, meanwhile, has been a blockbuster therapy for years, earning the biotech nearly $6.5 billion in the U.S. last year. Notably, Revlimid also accounted for the second highest Medicare Part D spend per drug in 2016, according to a federal database.
And while the drug's first approval came 14 years ago, generic competitors aren't expected until 2022 thanks to strong patent protections.
Acquisitions also frequently come with cost cutting and layoffs, potentially of interest to Sen. Robert Menendez, D-N.J., who represents a state home to Celgene's headquarters. Menendez, as it happens, recently defeated an election challenge from Bob Hugin, Celgene's former chairman.
Johnson & Johnson
J&J will be represented Tuesday by Jennifer Taubert, head of the company's pharmaceutical unit, rather than CEO Alex Gorsky.
Given J&J's sprawling business, Taubert makes sense to testify on the company's drug pricing practices. Yet the move also provides a useful check to any stray questions from lawmakers on ongoing litigation surrounding J&J's talc products, which are alleged to have contained asbestos.
Senators will still have plenty to prod J&J on, however. One potential pressure point could be its TNF inhibitor Remicade, which the company is defending from biosimilar competition in the U.S.
Pfizer has sued J&J, alleging anticompetitive practices such as exclusionary contracting have prevented Pfizer's copycat version of Remicade from gaining market share.
Lawmakers have put faith in the ability of biosimilars to reduce spending on expensive biologic drugs like Remicade, so J&J's defensive strategies could come under the microscope.
Remicade also ranks highly when measured by Medicare Part B spending, accounting for the fourth highest per drug spending total in 2016.
CEO Pascal Soriot will attend Tuesday's hearing, but in a line-up of seven pharmas, AstraZeneca may sneak by lawmakers eager to probe the actions of others.
The British drugmaker, known best for its blockbuster primary care drugs Nexium and Crestor, is still finding its footing in the wake of patent expiries for those previously top-earners. A restructuring, meanwhile, has claimed the name of its U.S.-based biotech subsidiary MedImmune.
While AstraZeneca might have escaped headlines on January price hikes, data from research firm 46brooklyn show the company raised prices on around a dozen products last December.
"AstraZeneca agrees with many that the current healthcare system in the US is not sustainable — we are committed to shaping a system that more directly benefits patients and continues to support scientific innovation," a company spokesperson wrote in an emailed statement on the hearing.