Senators Grill Drug Execs Over Soaring Prices

Pharmaceutical executives prepare to testify in a Senate Finance Committee hearing on drug prices on Tuesday. (AP Photo/Pablo Martinez Monsivais)

WASHINGTON (CN) – Executives from some of the most lucrative pharmaceutical companies in the world were grilled by lawmakers Tuesday over their role in the increasingly burdensome cost of prescription drug prices. 

Tuesday’s hearing in the Senate Finance Committee was the first time lawmakers heard from a large number of high-level pharmaceutical industry executives on the subject. Some executives reportedly sought private meetings to discuss their price mechanisms but lawmakers refused and threatened to issue subpoenas to those who refused to testify. 

Calling for greater transparency, Chairman Chuck Grassley, R-Iowa, urged the executives to avoid using their time before Congress to blame rising costs on pharmacy benefit managers, or PBMs, which administer prescription drug insurance for employers, the federal government and other insurance providers. 

“I’m sick and tired of the blame game. It’s time for solutions,” Grassley said. 

Historically, drug makers have argued the reason why list prices are so high is partly due to the value a higher price tag serves during negotiations among manufacturers and other companies or people along the supply chain. 

But this longtime justification, repeated by heads of AstraZeneca, Pfizer and others on Tuesday, appeared to ring hollow among both Republicans and Democrats on the committee. 

By keeping list prices high, Medicare patients or those who carry high deductible plans suffer first, Grassley said. 

The committee’s ranking Democrat, Senator Ron Wyden of Oregon, slammed the executives as peddlers of “unacceptable and unsustainable” business models that put revenue over research and development. 

Rattling off the “empty gestures” made by each representative testifying Tuesday, Wyden harshly criticized AbbVie Inc., the producer of the world’s top-selling arthritis drug Humira.

The senator said the relentless pursuit of profit made Humira akin to “Gollum with his ring,” referring to the wealth-grubbing J.R.R. Tolkien character in “Lord of the Rings.”

Wyden said AbbVie nearly doubled the cost of a yearly supply of Humira from $19,000 to $30,000 and its CEO Richard Gonzalez’s pay was directly tied to the sale of the drug.

“He received an incentive when sales went up,” Wyden said. 

A committee review also showed all of AbbVie’s top executives had the same arrangement, the senator noted. 

Executives testifying before Congress may offer honeyed-words on how they put patients first, Wyden said, but it’s hard to take those claims seriously when executives appear tone-deaf or say the right thing but do another.

For example, AstraZeneca CEO Pascal Soriot “said the quiet part out loud” in a September interview with the London daily newspaper The Times by telling a reporter he was “annoyed” at being the lowest paid pharmaceutical CEO in the world, Wyden said. Soriot earns $12 million per year. 

Bristol-Myers Squibb was similarly dinged by Republicans and Democrats on the committee alike for its allegedly counterproductive spending habits. The company spent three times more on marketing, stock buybacks and administrative costs than it did on research and development in 2017, according to testimony by CEO Giovanni Caforio.

Johnson & Johnson’s decision in January to raise drug prices mere days after CEO Alex Gorsky told stakeholders the industry must begin “self-policing” if it wished to avoid a federal crackdown was the epitome of the industry’s lopsided nature, lawmakers said. 

“The system is so convoluted and nontransparent that my constituents can’t figure out what the price of their medication is going to be day to day,” Senator Maggie Hassan, D-N.H., told Jennifer Taubert, executive vice president of Johnson & Johnson subsidiary Janssen Pharmaceuticals.

Hassan and other Democrats argued it would be easier to stabilize drug prices if Medicare providers could negotiate on prices directly with the industry. That method was largely panned by Republicans on the committee but overall, Tuesday’s hearing signaled lawmakers were close in agreement about the need to regulate drug prices.

The CEOs offered a host of potential solutions which may lower costs, including some suggestions straight from the Trump administration’s playbook, like allowing patients to share rebates when buying medication. 

Lower cost generic drugs should also be promoted more, the executives agreed. 

When pressed by Democratic Senator Maria Cantwell of Washington state, Merck & Co. CEO Ken Frazier ultimately agreed with Democrats: one of the most effective ways to drive down drug prices is to empower the states to negotiate on their own behalf, he said. 

The executives also unanimously acknowledged the lopsided burden American taxpayers face. Compared to other developed nations, Americans pay more for brand prescription drugs than anywhere else in the world. 

Ultimately, that overpayment foots the bill for the companies’ costly research elsewhere in the world while Americans are left without many affordable health care options. 

“Your profit is outsized, you get a massive portion of revenue from American taxpayers,” Senator Wyden said. “Yet you bear none of the consequences of these skyrocketing prices.”  

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