Politics, Pricing

In landmark hearing, drugmakers and lawmakers agree that US policy on drug pricing is ripe for change — but there’s no consensus on much else

Seven big pharma executives faced a platoon of US senators on Tuesday, expecting a dressing down on the industry’s track record of relentless price hikes that has sparked bipartisan furor — but were instead treated to a conscientious debate, high on concern and low on contention.

Matters kicked off with Senator Ron Wyden admonishing every biopharma representative for their company’s tactics, including AbbVie protecting its $18-billion-a-year Humira from generics like “Gollum with his ring,” and Pfizer for making the “emptiest pricing gesture” by pressing pause on hikes under pressure from President Donald Trump for a period only to resume later.

He gave way to prepared remarks from the company representatives: AbbVie chief $ABBV Richard Gonzalez; AstraZeneca $AZN chief Pascal Soriot; Bristol-Myers $BMY chief Giovanni Caforio; J&J’s $JNJ Janssen head Jennifer Taubert; Merck $MRK chief Ken Frazier; Pfizer’s $PFE chief Albert Bourla and Sanofi $SNY chief Olivier Brandicourt.

Unsurprisingly, each executive blamed high list prices on the middlemen: PBMs and insurers, suggesting that while the magnitude of rebates offered by them were increasing, those benefits were not being accrued to the patient in the form of co-pays.

Frazier — Merck’s firebrand chief and de-facto leader of the unlikely troop of panelists thanks to his legal expertise (Frazier served as Merck’s chief counsel back when it was fighting a flood of Vioxx lawsuits) — also underscored the fact that the issue of pricing is systemic to the US healthcare system, lamenting that patients are expected to pay on average 13% in drug co-pays, but only 3% of hospital costs. 

Kenneth Frazier, Chairman and Chief Executive Officer at Merck, testifies before the Senate Finance Committee hearing on drug prices on Tuesday, Feb. 26, 2019 (AP Photo/Pablo Martinez Monsivais)

In general, the drugmakers voiced their support for rebate reform. AstraZeneca’s Soriot suggested that on average, roughly 50% of his company’s list prices comprise rebates, and if they were to be discarded altogether he would not be averse to cutting prices by the same magnitude. When asked point blank by more than one senator about whether each executive would pledge to cut list prices if rebates were eliminated, executives proposed cutting rebates not just for Medicare but also on the commercial side to even the playing field for all drug manufacturers, as sufficient incentive to lower list prices.

Another solution endorsed by the panel of drugmakers was value-based pricing.

Pfizer’s newly-minted CEO Bourla told senators he would prefer that the company be paid for “the heart attacks we prevent, and not the pills we sell.”  Although the concept is gaining traction for newer, higher priced drugs, it has not universally been adopted. Meanwhile, older drugs (including insulin that is subject to frequent price hikes) are not in contention for such value-based contracts.

Drugmakers also expressed enthusiasm for shoring up biosimilar and generic competition in the United States as a mechanism to lower drug prices.

Some panelists also endorsed the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act — a bill designed to create a faster and more potent legal process for generic manufacturers to challenge branded drugmakers that they claim are withholding drug samples in order to obstruct generic competition. When senators inquired whether any of the drugmakers at the hearing had any history of blocking drug samples when to thwart copycat drug development, each declined that their companies had engaged in any such practices. But a cursory look at the FDA’s website suggests otherwise.

The mood at the hearing was a mixture of cautious admiration for the industry for having developed a plethora of scientific breakthroughs, but incredulousness that the United States effectively shoulders the cost of innovation, considering other Western industrialized nations — on average — pay lower drug prices.

“Why are we a price taker, when we are the largest purchaser?,” Senator Bill Cassidy asked in one exchange. Another senator cited support for the Trump administration proposal to import drug prices from overseas, but was immediately rebuffed by the drugmakers who argued that a number of these nations do not accept new medicines due to their pricing policies, often restricting access or declining to adopt them altogether.

Although drugmakers were asked whether their tax breaks — engineered by the Trump administration — had been used to cut prices, the pharmaceutical companies largely acknowledged that the savings had largely not been used in that fashion.

The main villain of the hearing was AbbVie chief Gonzalez, who was persistently called out for his company’s patent-aggressive approach to protecting their biggest, most lucrative asset Humira — the world’s largest selling drug whose main US patent ran out in 2016. Gonzalez’s main talking point was that that while some European nations have bagged an 80% discount on Humira, the US price (and sales) is what keeps the company’s R&D engine hot.

Persistent questions by one senator to adopt Costco-style pricing — getting sales via volume versus pricing — got a tepid response from panelists. But, one proposal did whet panelist appetites. Senator Sheldon Whitehouse called out the bad actors and “non-innovators” of the industry (remember Shkreli, the poster boy of bad, smug biotech?) that buy off-patent drugs used in conditions with few or no treatment options and jack up their prices creating a monopoly and hanging patients who use these decades-old treatments out to dry. When we try to crack down against these actors, Whitehouse said, your lobbyists pushback. “Help us at least solve that problem…turn off your lawyers and your lobbyists!” he said to the nodding heads of industry reps. “We will,” Frazier responded.

Earlier on, Senator Bob Menendez made a thinly veiled threat to the crop of panelists before him, suggesting that if drugmakers were unwilling to rein in prices, “policymakers are going to do it for you.”  At the end of the proceedings, the panelists largely agreed. The “government has to step up and change the rules,” Soriot said. Now there’s just the small matter of figuring out how to do that.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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