| March 4, 2019

Takeaways From the Pharma Testimony at Senate Drug Pricing Hearing

Anca Spanu

Anca's career in journalism spans over 2 decades. She has served as staff writer, editor and deputy chief editor at... Anca's career in journalism spans over 2 decades. She has served as staff writer, editor and deputy chief editor at various media outlets all over the world. At Healthcare Weekly, Anca writes about current events, innovations in the healthcare space and events/ conferences with a focus on investing & startups.

Top executives from seven pharmaceutical companies came together on Tuesday to discuss rising drug prices in the pharmaceutical industry. The major pharmaceutical companies told the Senate committee that they cannot commit to lower prices for commonly used prescription drugs but did not disclose the reasoning behind this.

This hearing was the first time many of the pharmaceutical executives, including AstraZeneca, Merck & Co., Pfizer and others, appeared before Congress to testify before the Senate Finance Committee. The Senate Finance Committee hearing was lengthy and contained questioning by Democratic and Republican members who are focusing on a search for solutions to this current healthcare issue.

The increasing price tags of drugs was the central topic of interest in this Senate hearing. Executives from the drug companies argued that the rebates, that are usually geared to benefit pharmacy benefit managers (PBMs), are to be blamed from the rising drug prices. The executives argued that it is the PBMs who are responsible for driving up the costs for consumers.

Seven Major Pharmaceutical Company Executives Testified

The executive members from the pharma companies who testified in this hearing are as follows: Pascal Soriot (CEO of AstraZeneca), Giovanni Caforio (CEO of Bristol-Myers Squibb Co.), Richard Gonzalez (CEO of AbbVie Inc.), Kenneth Frazier (CEO of Merck & Co., Inc.), Olivier Brandicourt (CEO of Sanofi), Albert Bourla (CEO Of Pfizer), and Jennifer Taubert (Executive Vice President and Chairman of Johnson & Johnson Pharmaceuticals).

The executives who testified stated that they remain committed to continue working with lawmakers to address the issue of rising drug prices. Their focus remained on the fact that PBMs are to blame for the current spike in drug prices, which is why people who are unable to afford the prescribed drugs are required to pay the most.

According to Kenneth Frazier, who is the chief executive officer and chairman of Merck, stated that it’s the poorest patients who must pay the most for medicine since they pay list price, while others are able to benefit from rebates.

“The people who can least afford it are paying the most,” Frazier said. “That’s the biggest problem we have as a country…  We have a system where the poorest and the sickest are subsidizing others.” said Kenneth Frazier.

Pharmacy Benefit Managers Under Fire

Many of the pharmaceutical companies placed blame on the PBMs. PBMs are companies that handle and administer the prescription drug benefits of patient health plans. PBMs are able to process and pay for your prescribed drug claims. They are the “middlemen” who negotiate discounts with manufacturers.

How do pharmacy benefit managers influence the list drug price? PBMs are in charge of administering prescription drug benefits and providing plan members with access to prescription drugs and benefits, while keeping costs to a minimum. They do this by negotiating drug prices with pharmacies to establish networks of pharmacies that you can use to get your prescriptions filled from (including mail-service pharmacies).

Before the hearing, Sen Chuck Grassley (R., Iowa), who is one of the committee chairmen, warned the executives and CEOs against blaming everyone but themselves. However, PBMs were put under fire by the executives as to why the prices are so high. Several CEOs tried to blame both insurers and PBMs as equal culprits for the high drug price ranges.

Following this, the executives from the seven pharmaceutical manufacturers ignored the tougher questions asked by the panel’s members. No commitments were made to lower prescription drug prices.  The executive members instead focused on promises for innovation and new cures.

Key Takeaways from the Senate Hearing

The Congress has made the lowering of drug prices one of their top priorities. Led by Sen. Chuck Grassley and Ron Wyden, it is argued that the list drug prices are way too high and the pace at which the drug prices are increasing is “unsustainable”. In 2017, prescription drug costs totaled more than $333 billion. These prices continue to increase.

Sen. Ron Wyden, the Senate Finance Committee’s top Democrat said “I’ve heard a lot of happy talk this morning… But what people are taking away from this hearing … well, no firm commitments have been made to lower list prices.”

Below are the three key takeaways from the hearing, summarized:

Most of the blame for the high prices goes to PBMs and insurers

All pharmaceutical executives were in agreement that PBMs are highly responsible for the role in the high prices faced by consumers. The CEO of AbbVie, Richard Gonzalez, mentioned that there are two issues at play for prescription drug pricing: system affordability and patient affordability. He further stated that changes need to be made while keeping consumers in mind.

The pharmaceutical executives defend medical breakthroughs and explain the need for further innovation

The pharmaceutical executives repeatedly mentioned their contributions to healthcare. They also warned lawmakers that if the government keeps interfering in their processes, it can slow down the progress of future innovations that could save the lives of millions of people.  

The seven companies reported that their expenses exceeded marketing budgets in 2018, and this allowed them to focus on the goal of bettering clinical outcomes and support further medical breakthroughs. Lawmakers questioned why the companies were being so protective of their patients who widely used prescription drugs, however, they did note the efforts made by the companies.

Praise given to Trump’s administration and the new proposal to eliminate PBM rebates

Much of the praise was given to Trump’s administration for the proposal that could kill PBM rebates following the spike in prescription drug prices. Ken Thorpe, former Deputy Secretary for Health Policy in HHS told HealthLeaders that the Trump proposal could lower drug prices. He mentioned that PBMs are quite good at their job, but the discounts they provide do not always benefit the patients. Removing the PBMs could save the drug industry lots of money. Thorpe supports the recent rebate proposal that could potentially save nearly $20 billion by 2028.

AbbVie, Pfizer, and AstraZeneca executives also expressed their support for the Trump administration’s proposed rule to ban PBM rebates. Representatives of Johnson & Johnson and Merck also endorsed the proposal to reform the rebate system.  

The Overall Industry Impact

Rising drug prices were in the spotlight before the Senate Finance Committee and lawmakers continuously questioned the executives about their pricing methods and practices. Both Democrats and Republicans warned the pharmaceutical executives against shifting blame to others in the industry, but the executives did so anyway.

Some of the companies endorsed legislation (similar to the version of the CREATES Act which was proposed by sponsor Senator Patrick Leahy in 2017) that focuses on preventing brand-name manufacturers from refusing to sell prescription drugs to companies that manufacture generic drugs.

Furthermore, the pharmaceutical companies declared the industry’s commitment to working with Congressional members in order to transform the healthcare system. Significant reforms are required to change the marketplace that will be disruptive to the industry. However, according to the Senate members, it is necessary to improve the industry so that patients can afford the prescribed drugs at lower costs.

The CEO of Pharmaceutical Research and Manufacturers of America (PhRMA), issued a press statement in which he emphasized that drugmakers need to improve the drug pricing situation in America before it gets worse.


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