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tv   House Energy Commerce Subcommittee Hearing on Prescription Drug Prices  CSPAN  July 19, 2019 3:14pm-6:21pm EDT

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special counsel robert mueller will testify before both the house judiciary committee and the house intelligence committee. the judiciary committee hearing will get underway at 8:30 a.m. eastern and the intelligence committee hearing begins at noon eastern. both are live on c-span 3. you can listen with the free c-span radio app. in c-span 3's presidential leadership surveys wood row wilson drops from sixth to 11th place and bill clinton rises from 21st to the 15th spot. where does your favorite president rank. learn more about their lives in c-span's "the presidents." it's great vacation reading. the house energy and commerce subcommittee on health held a hearing on how to bring
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down prescription drug prices. the witnesses at the hearing, representatives of the pharmaceutical industry and advocates for patients. >> good morning, everyone. the sub committee on health will now come to order. the chair now recognizes for five minutes for an opening statement. last week our sub committee held a hearing to essentially follow the money in the drug supply chain. we came away with much valuable information, but we also found there are many secrets. secret decisions about how drugs are priced. secret deals between drug companies and the pbms and secret agreements between pbms and insurers. today we're considering seven bipartisan bills that essentially unmask the secrets, that secret process, and ensure that low income seniors can
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afford their medications and build on the drug pricing package passed by the house last week. the first and very important bill ensures that seniors can afford their drugs. representatives cunningham and bill araukus introduced a creating lower cost alternatives for your prescription drugs act. the bill eliminates cost sharing for generic drugs for low income medicare enrollees and caps their out of pocket costs for other drugs. nearly 25% of seniors who take drugs report it's difficult for them to afford their medications. this bill will not only save seniors money. it will also help save their lives in many instances. the second group of bills exposed how drug prices are set. the spike act and the fair drug
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pricing act require drug manufacturers to justify large spikes in drug prices. the reporting accurate drug prices act proposed by representatives dog it and buchanan require manufacturers to report the average sales price of medicare part b, b as in boy, drugs. this bill makes sure medicare is paying the right price for part b drugs. the sunshine samples act directs companies to report the price in quantity of the free samples of drugs, devices and medical complies they give to health care providers. the bill does not prohibit free samples. instead, it will help us to see how free samples influence drug pricing and distribution.
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the third group of bills exposes the deals between pbms and the other stake holders in the drug supply chain. the public disclosure act of drug discounts act offered by representative spanberger and holding requires pbms to report discounts they negotiate with drug manufacturers. this transparency will help to ensure the discount is passed down through the chain to patients. to patients. and i want to underscore that. the prescription pricing for the people act authored by representatives nadler and collins directs the ftc to review pbm's behavior and whether it is anti-competitive or not. at our hearing we learned three pbms control the majority of the market, and those own large pharmacy chains and specialty pharmacies. and we believe that has potential conflicts of interest. with this bill the fdc will krut
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news pbms to ensure there are not any distortions of the market. last week i said we needed to examine the system from beginning to end because in order to fix it, we not only have to -- we have to understand all the parts of it first and then act. with these seven bills today, i think we're taking important action. each bill is directed to reform the drug supply chain and transparency is only as good as the accountability and enforcement that has to follow. so i want to welcome our witnesses. thank them for being here today with us. we look forward to your important testimony. and the chair now recognizes the ranking member of the sub committee on health dr. bunch us for five minutes for his opening statement.
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>> i thank the chairman for the recognition. we have convened this morning to address an issue that affects and complicates the lives of many of our constituents. when i return home to north texas and conduct meetings in my district office i hear the personal stories of individuals and families who are struggling to afford their medications. unfortunately, solving this problem is not as straightforward as you might hope. as exemplified by our recent drug supply chain hearing. there are a number of stake holders interwoven throughout the supply chain making up the existing convoluted system. our counterparts on the ways and means committee have taken a first pass at addressing transparency in hr 2113, the star act. on its face, transparency sounds like a useful and good thing. in other markets in the united states, people can shop around for goods and seek the best price or value. in health care that's more easily said than done because of the nature of the system, especially the drug supply chain. it is especially important that as we evaluate this legislation, we consider the possibility of unintended consequences for both the patient and for the market.
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this committee laid the groundwork and 21st century cures for the development and treatments and cures that really until the passage of that bill, those -- some of those things were science fiction and now they're becoming reality. two and a half years after cures was signed into law, i'm receiving meeting requests from stake holders who bring good news about how this law is producing real results for patients. we must strike this delicate balance with the policies we pass through this committee to ensure that they do not dampen the success or deter future investment in bio medical research and innovation. no surprise. i do have some thoughts about section 2 of hr2113 which requires a notification and
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public posting of companies that launch a drug at a price of $26,000 or more. there are some newer therapies. these may be a single dose or a single shot that can cure an individual of a rare disease. the cost of research and development and clinical trials that goes into these treatments is immense. we must consider the potential impact that this requirement could have on the industry. the incentives for drug development in this space are working. but scaring companies away from investing in such drugs does not serve patients who might benefit from this innovation. i'm reminded -- you can contribute a lot of things to capitalism and capital, but it's not necessarily courageous. so if we make it difficult, capital will go elsewhere, and
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yet, we want the innovations in this space. so the fair act does not include the launch price trigger. i think that's a good place to start. i would also like to take a minute and express some concerns about section three about 2113. this policy would require manufacturers of drugs, devices, biologics and medical supplies to report on the samples they give to health care providers each year, and this information would be publicly posted. i fear this policy could lead to a sort of public shaming of companies that are trying to benefit patients. should such a policy deter manufacturers from providing samples to physicians, i promise
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you patients will be harmed. as a physician, i can say that i've seen the benefits of samples for patients firsthand. sometimes the patients insurer requires a prior authorization process. a sample of the medication allows the patient to begin receiving timely treatment. additionally physicians may use samples in clinical decision making. for example, if a new drug has come to market that may work better for a patient, the doctor can use the sample to establish whether or not the patient responds in an improved way to the new drug without subjecting the patient to financial burden or side effects developed by an unnecessary purchase. i appreciate the work the ways and means committee has done. we are the energy and commerce committee. we should be in the lead and i believe there are some areas in this policy we need to think through more.
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i want to thank our witnesses in advance for their thoughts on this legislation and i look forward to working in a bipartisan fashion. i yield back my name. >> the gentleman yields back, and thank him for his opening statement. i now would like to recognize the gentleman from south carolina who is going to offer the chairman of the full committee's opening statement. >> thank you. let me correct the record. i'm from north carolina. >> i'm sorry. >> i know you californians, whenever you heard the word carolina, you think of the south. >> we have north and south in california too. i should have been -- i'm sorry for not being accurate. >> thank you for your friendship. >> great state. the great state of. right. >> thank you for holding this latest hearing in our series on prescription drug pricing. i say latest hearing because
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this is not the first and certainly will not be the last. democrats are serious about the problem of rising drug prices. it is a complicated problem. i acknowledge that. it's consequences are very far reaching. i represent the first district of north carolina where many hard working families are struggling every day to afford the basic necessities of life. steep price hikes have the potential to force these communities have decisions between paying their bills and purchasing medications that are vital to their health. all too often these circumstances result in rationing prescription drugs or the abandonment of treatment altogether. i have long-held that quality and affordable health care is a basic necessity. a right that every american must have equal access. consumers should be able to anticipate the price of their prescriptions, and must be able to rely on those prices to remain stable from year to year.
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all of us understand that corporations exist to make a profit. i've acknowledged that in many hears and i understand that dynamic. pharmaceutical investment have led to unprecedented breakthroughs and treatment that have improved outcomes and patient quality of life. unlike most consumer products for many, a prescription is the literal difference between life and death. therefore, the need to fund new innovations must be balanced. it must be balanced with the obligation to make medications widely available and affordable to the public. we find ourselves here today hopefully in a bipartisan way in pursuit of that goal as congress continues to work with every entity among the pharmaceutical supply chain to find practical solutions that support innovation and reduce costs for consumers. i look forward to today's discussion. i thank those who have authored these amendments and in particular, i thank the question lady from illinois for her passion and her leadership on this issue.
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i yield at this time to the gentle lady from illinois. >> i thank the gentleman for yielding. i thank the chairwoman of the sub committee for allowing me to wave onto this hearing on a tonic to important to all of us. the pharmaceutical industry is worth almost $1 trillion. i believe they're holding american consumers hostage. our constituents are suffering and some are dying. we have the names of the dead, some of them. because they can't afford life-saving and life-enhancing drugs they need. and why have drug prices skyrocketed? sometimes 1,000 percent? well, that's a really good question. and because drug companies have hidden the price policies, consumers have no choice but to pay the price if they can until now. my legislation the fair drug pricing act, hr-2296 is a bipartisan, bicameral bill that will force the drug companies to be transparent which is the very least that we can expect from
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them. the bill does two things. pharmaceutical manufacturers must notify hhs and submit a transparency and justification report 30 days before they raise the price of certain drugs by more than 10% or by more than 25% over three years. the report will require manufacturers to provide the manufacturing, research and development costs for the drug. net profits attributed to the drug. marketing and advertising, spending on drugs and others. unlike hr-2069, the spike act also being considered today. my bill does not allow manufacturers who pick and choose what information they would like to disclose, and unlike the spike act, my bill requires hhs to make all of the nonproprietary information from those reports public and available to everyone online for everyone to see. for the first time ever this bill will offer taxpayers nationwide notice of price
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increases and bring basic transparency to the market for prescription drugs. the bill being considered today are only a start. and transparency is only a piece of the puzzle in bringing down the cost of prescription drugs. these bills are all bipartisan, and i'm proud that representative rooney joined me in reintroducing this. senator baldwin, and senator ron and the senate are also doing this bill. i hope we'll have positive consideration of it, and let me also enter into the record a very important letter from the national multiple sclerosis society representing people who are having trouble paying for the spiked prices in their drugs, and i yield back. >> the gentlewoman yields back. now i would like to recognize the ranking member of the full committee, and offer my condolences to him on your trail blazers. they did play well. >> really? >> but not good enough.
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>> this is how we're going to start? >> yeah. boy, and i was going to say nice things about you this morning. it was tough in overtime last night. >> it was. >> and it was close. >> it was a great game. >> close counts in horseshoes, not basketball, but we appreciate that, mad m chair. thank you for that reminder this morning. now let's get on about serious business. patients need our help. what goods and prescriptions if a patient cannot afford to pay for their medicine? drug pricing is of great concern to all americanss and our president. it's come up at nearly every one of the 20 town halls i've done in my district. often prices continue to rise and while there are reasons given, patients rely on the medications. when market forces weaken or fail, we need to step in with common sense legislation. we've taken steps recently passing a requirement that companies pay the proper rebait
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and passed the orange and purple book reforms on the floor. while i am dismayed, we did reach agreement here through bipartisan negotiations on several other provisions that will increase the availability of generic drugs. this sub committee is also built off the foundation last congress by examining how the medicare program pays for drugs and pealing back the layers of pharmaceutical price and supply chain. i thank the chair for her leadership in that regard. i'm glad we're examining legislation. i hope we can find bipartisan agreement on, but we must also ensure in the efforts we are pursuing policies that provide a benefit for patients. we've got to put the patient first. we need to ensure as we work to shine a light on how drugs come to market and our price, that we realize the market must also be sustainable to produce the next generation of cures and
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treatments. we're living in an amazing time of innovation. it's producing cures for conditions we didn't even have a name for 30 years ago. the promise of what lies ahead is staggering in their ability to relieve human suffering from conditions. we're on the cutting edge of solving all of those. in our efforts to bring more transparency to the system, which i support, we must inherently first do no harm. for example, i'm concerned that provisions of some of the bills before us could allow manufacturers to back in the rebates paid. this committee has been a leader in encouraging the innovation of patients are benefitting from today through our work on the fda user fees and from the work to pass the 21st century cures led by my friend and colleague fred upton. we know that the cost of bringing a drug to market especially one that targets an orphan or neglected disease is
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high. we cannot ignore that. we should not randomly categorize as bad actors who has ib vested in cutting edge therapies because their list prices is over an arbitrary amount. i can tell you the new drugs, improve or save lives and that's better than investing in another me to drug. we must put the patient front and center. i'm concerned about some of the policies that could have the risk of decreasing the ability of physicians to give samples of drugs. those who have prior authorization or coverage issues from starting treatment to informed medical judgment or help patients manage side effects. i think working in a bipartisan spirit, i'm hopeful we can address the concerns, and on a final note, thanks to the chairmen for arranging the jurisdiction on the bills. that's important. while most have been marked up by other committees, we are, after all, the committee of
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primary jurisdiction. with that, thank you for your hearing and condolences on the blazers, and i'll yield back the balance of my time. >> i thank the gentleman. he yields back. the chair would like to remind all members written opening statements shall be made part of the record. i now would like to introduce our witnesses that have willingfully come forward today.
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we appreciate each one of you being here. we have the seen yore vice president insurance and state issues for the pharmaceutical research and manufacturers of america and her son garrett is here with us too. i hope you find this interesting, garrett. if nothing else, you'll know the complicated business your mother is in. kristin bass with the pharmaceutical care management association. welcome to you. dr. madeline feldman, the president of the coalition of state rheumatology organizations, the alliance of specialty medicine. thank you to you. mr. frederick isasi, executive of families usa. welcome to you. dr. mark miller, the executive
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vice president of health care, arnold ventures. welcome to you, sir. and dr. douglas hotel, eagan. president of the american action forum. thank you to each of you for joining us today. at this time the chair will recognize each witness for five minutes so the light that means the most is the red light. that means when you're driving, you stop. and i'd like to -- and -- i think several of you have already testified, so you know what the system is. so now i would like to call on miss joldersma. you're recognized for five minutes. we thank you for being here with us today. you may begin. >> okay. thank you very much and good morning distinguished members of the sub committee and thank you, chairman and ranking members for the invitation to testify today. i am lisa joldersma and a senior
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vice president at the pharmaceutical research and manufacturers of america or pharma. as many of you know, pharma represents the leading research-based bio pharmaceutical companies. since the year 2000 or companies have collectively invested half a trillion dollars in the search for new treatments and cures including more than $70 billion in 2017 which i would note is an amount twice the entire operating budget of the nih. these investments yield breakthroughs and continue use progress against both kroing and acute conditions. creating, discovering and developing a new therapy is a challenging high-risk endeavor with just 12% of those molecules that enter a clinical trial ultimately securing fda approval. in other words, of those molecules entering the clinical
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trial phase, nine times out of ten we fail, and t not for lack of trying. the average cost to develop a new medicine is $2.6 billion, and the entire process takes an average of 10 to 15 years from start through fda approval. despite these difficult odds and increasingly challenging science, pharma members persist, supported by private investment, and in collaboration with others including the nih. while medicine's importance to health care has grown considerably over the years, the share of u.s. health care
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spending attributed to drugs has been largely stable. prescription drugs consume roughly 14% of national health expenditures today. that includes both drugs dispensed at retail and administered in the hospital, and these are cms numbers from the national health expenditures data. growing reliance on generic medicines which currently represent 90% of all prescriptions filled in this country is a key element to keeping our prescription drug system affordable overall. and i would note that growth and bio similars thanks to the
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leadership of many on this committee is expected to further help constrain costs moving forward. and yet, patients are really, really struggling to afford their medicines. and i want to be really clear today that for our part, pharma accepts that a product's list price does influence what patients pay. in today's world of multi-tiered formulas, drug exclusion lists and rising cost share, however, there are other entities that play a significant role in what patients pay as well. pharma is focussed on changing
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the status quo, and bringing forward solutions that will sustain innovation, ensure safety, and help patients. for too many patients today even those with insurance, they are struggling to afford their medicines. the share of u.s. health care spending attributed to drugs has been largely stable. prescription drugs consume roughly 15% of national health expenditures today.
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is it prospective in nature and finally, are there appropriate protections for confidential and proprietary information so we can prevent harmful interference in the market? in closing, i would like to say that we do believe greater transparency is an important part of the solution to the problems we are discussing today, but they will not be enough on their own. we also need to take steps to promote competition to address misaligned incentives in our current system and to explore ways to make insurance work better for sick patients who need today's medicines and those who are waiting for tomorrow's. thank you very much. >> we thank you, miss holdersma, and now i would like to
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recognize miss christian bass for five minutes of her testimony. welcome again and thank you. >> thank you, chairwoman, ranking member burgees and members of the subcommittee. i am kristen bass, chief policy and external affairs officer for pcma, which is the trade association for the pbm industry. i am pleased to be here today to talk about the important transparency bills before the subcommittee and to discuss how pbm's lower prescription drug cost for 2 hun million americans with health coverage through employers, labor union, health plan, medicare and medicaid. every day in this country people go to the pharmacy to get needed drugs to make their lives better. pbm's only mission is to increase affordability and access to those drugs for consumers and our clients. pbms are an important link in a chain that includes manufacturers, wholesalers,
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physicians, pharmacies and pharmaceutical service administrative organizations all working to get needed therapies to patients. within that chain, our companies are the only ones whose mission is to help control costs. pbms can only help lower prescription drug costs for patients when there is sufficient competition among drug companies where there are competing clinically equivalent brand drugs that will work equally well for patients, pbm's negotiate rebates or discounts off the manufacturer's list price to arrive at the lowest net cost drug. the rebates are then used by sponsors to reduce patient premiums and out of pocket costs or both. we are proud that our industry has delivered results. according to federal data, in 2018 overall u.s. spending on drugs increased only 3.3% and in 2017, 4%. one large pbm reported a decline in costs for its clients in 2017. that is our industry's mission. yet, we know that today too many individuals still find their
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drugs unaffordable. driving more competition among drug companies is the key to providing relief for patients. i want to commend the subcommittee for their work on the creates act and legislation limited on delay agreements. greater transparency can also be a part of the solution and the pbm industry is supportive. we support transparence toe empower patients and their physicians. our industry provides realtime benefits tool so physicians and patients know immediately in the doctor's office what drugs are on formulary and what the patient's cost sharing will be. pbms are transparent to our clients including how the pbm has made for its services and the negotiated rebates and we support transparency to policymakers. pbms already report on concession, costs and fees to
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medicare and cms and we support legislation that would provide that data to congressional advisers at med a pack and medpac and that's just for our industry. we would support others for in the supply chain and wholesalers and the psaos and this gets us to the bills under consideration today. with respect to hr-2115 we support aggregate reporting of rebates. we urge the subcommittee to make sure manufacturers cannot use public reports to calculate competitors' discounts and avoid competition and thus keep drug costs high, a risk that has been validated by the ftc. we want to empower patients, not drug companies. we have ideas on how to minimize transparency without premiums and cost sharing and are happy to work with subcommittee staff on those. with respect to hr 2376 and its provisions to direct ftc to scrutinize industry practices we welcome and support this review. while the ftc has previously
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examined pbms extensively and concluded that we operate in a competitive market to the benefit of consumers and our client, we are confident that additional ftc study of our industry will further validate previous conclusions. we strongly encourage the subcommittee to expand ftc's review to all others in the prescription drug supply chain to ensure a complete and transparent picture to all those who play a role. in addition, increased manufacturing reporting can help bring sunshine into the pricing and other maing practices as addressed in the bills that are the subject of today's hearing. i'll conclude by commending the subcommittee by considering ways to reduce prescription drug costs. we appreciate the opportunity to testify and i look forward to answering your questions. >>. >> thank you, miss bass. i now would like to recognize dr. feldman. you have five minutes for your testimony and thank you for
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being here with us. you can proceed. >> chairman eschew, a nonpartisan coldition of medical societies representing 100,000 specialty physicians. my name is madeleine feldman, with the rheumatology organization and i practice full time in new orleans. i treat a variety of diseases and the one i see most on often is rheumatoid arthritis or ra. we used to be only to provide symptomatic relief, but now there are therapies that help us halt the disease activity, stop joint destruction and even reduce the cardiovascular risks associated with rheumatoid arthritis. lower priced generics are always
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used first before the specialty drugs. now the list prices of these specialty drugs have risen to the point where many patients can no longer afford even their can no longer afford even their co-insurance based on the list price. i hope you'll find it helpful to hear my feedback as a practicing physician. i'd like to first talk about the sample's provision in the prescription drug star act. section 3 would broaden the scope of the sunshine act to improve the total quantity and value of samples and manufacturers' reporting. we're concerned this reporting might have serious unintended consequences for patient care. let me tell you how we use these samples in rheumatology. we derive in financial benefit from the samples and, in fact, it costs us resources in staffing and managing this very complex inventory. because patients can wait weeks to over a month before getting
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final approval and then actually getting the prescribed medicine, it's extremely important to have on hand these samples to start the patients right away. i mean, it can make the difference between saving a joint or not. we're also able to see if the drug causes any tolerability issues at no cost to the patient or the payer. in its june 2017 report medpac recommended reporting on samples to oversight agencies, researchers, payers, and health plans under confidential data use agreement. they did not recommend publishing it publicly online. i fear that broadening medpac's recommendation to public online publishing will have a chilling effect on manufacturers' willingness to provide us with samples because of the potential of false shame campaign on twitter and the like. this can be harmful to the doctor/patient relationship and undermines patients' trusts in
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their petitihysicians. i can tell you, sometimes that trust is more important than the medication, itself. in light of the concerns, we urge congress to more closely follow medpac's recommendations to accomplish the important goals of hr-2113 without the bill's unintended consequences. next, i would like to briefly discuss section 5. that would increase transparency of pbms. the current rebate system creates perverse incentives to increase list prices that everyone in the drug delivery system profits on except for the patients. i'd be happy to explain why competition increases prices as opposed to decreasing them. i've seen where some drugs with lower list prices are not allowed to be on the preferred formular. shed light on how the preferred formularies are designed and why they change every 6 to 12 months for no clinical reason and actually stop payment for drugs that stabilized my patients.
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less egregious than that behavior, something that happened a week and a half ago to one of my patients who it took us nearly two years to find the right drug for his rheumatoid arthritis. we had given him the generics and specialty drugs. he was september a notification from his pbm asking him to switch to a completely different specialty drug. one that hdad a completely different mechanic schism of action like asking a cancer patient in the middle of a successful treatment to change their drug. in order to help us fully understand the financial considerations that are overriding the clinical ones, we support transparency not only for the formular rebate but all of the price concession, admin fees and price protection fees and even if disclosures are only to regulatory agencies. i have provided comments on two additional policies and would be happy to answer any questions on those. the alliance for specialty medicine is truly encouraged by congress' bipartisan attention to drug pricing. while we believe some policies under consideration may need changes to avoid unintended
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consequences, we're supportive of increased transparency in the drug supply chain. thank you so much for your consideration of our viewpoints. >> thank you, dr. feldman. i now would like it recognize dr. frederick isasi. welcome and thank you. >> thank you, chairman eshoo. members on the subcommittee health. thank you for this opportunity to speak to you today. i am frederick isasi from families usa. for 40 years we've led as voices for health care in d.c. and the state level. we are here today because american people are hurting. families across this nation are being put in terrible positions, choosing between securing prescription drugs for themselves and their children and their financial security. the problem is growing worse every year. what is most important to say is this problem was created by congress in our federal patent and exclusivity laws and only
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congress can solve it. our families need you to act. today's bills are a step in the right direction and we need much bolder action as well. let me give you a sense of what the suffering of our families looks like. approximately one in three families, 80 million people, have not taken prescription drugs as prescribed because they simply cannot afford them. some skip a dose, cut their pills in half, and others simply get sicker. we are one of the wealthiest nations in the world and we are spending two or three times more than other wealthy nations on health care and, yet, this is the life to which we subject our nation's families. what does it look like to be a family struggling with drug costs? let me tell you about catherine from wheeling, illinois. she worked hard. she had a career as a secretary. then in her late 50s she developed a cough and it wasn't going away. how many of us have had similar
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problems? but then within three months of going to the doctor for the cough, she was told she had a rare lung disorder and that without a lung transplant, she wouldn't live to see the end of the year. her condition worsened. her doctors prepared her to die and catherine prepared herself to die. then she got the call, a new lung had been found. she was going to live. this all happened about five years ago. this incredible gift and a new chance at life. but unfortunately, her experience has turned into something else. catherine takes 36 pills a day including anti-rejection and pain medication. catherine, a medicare ben fish ye fishiary, has to ration her medications to make them last. she spends an astounding $1,000 each month on her medications which is exactly half of her income. think about what this means. catherine, having lived through the experience of almost dying, receiving a lung transplant, fighting for her life, is left
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to spend half of her income to pay for medications. catherine sold her home. she moved in with her parents. her mom is 86 and her dad just passed away at 89. she lives an extremely frugal life, but as her drug costs escalate year over year, she moves closer and closer to financial ruin and deep poverty. at the end of each year she finds herself thousands of dollars short. she lives each day with the anxiety of wondering how she will find the money to pay for the drugs keeping her alive. that is the life that catherine lives with amazing grace and courage as do so many other americans. as catherine struggles each day, the drug industry continues to enjoy some of the highest margins in the nation, making billions upon billions of dollars. and, remember, the reason that profits are so astronomically high is not that they are investing the best drugs for our families. it's because congress, all of you, continue to grant them the ability to charge whatever they possibly can get.
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they abuse federal laws to charge higher prices. they coan only do this because f congress' inaction. despite the astounding amounts of money they where making, you will hear industries say if government acts to stop these abuses, inno investigation will dry up. it is not true. do you be fooled. how much are they spending on so-called innovation right now? trillion dollars, a trillion dollars in worldwide revenue, are they spending thee-quarters on innovation? no. are they spending half? no. are they spending at least a third? no. are they spending a fourth? no. industry is spending less than a fourth of their revenue on innovation. much more in marketing and on profit. and, of course, all of their innovation is on the backs of taxpayers who funded the underlying research. instead of innovating in drug development they innovate in illegal strategies to extend
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exclusivity. in fact, more than three-quarters of new patents are for existing drugs. think about that. from an industry cluttered with money, where, indeed, is the innovation? thank you for your work on the bills were considered today. i am pleased to say that families usa supports all of the bills under consideration. we believe that price transparency can help families and policymakers better understand how prices are set. however, these bills, alone, will not meaningfully affect the price of drugs. we strongly support the bill and other proposals aimed at bringing down price. in the midterms a few months ago the american people sent a strong signal to capitol hill. an astounding 82% of republicans and 90% of democrats said taking action to lower prescription drug prices should be a top priority for this congress. now is the time for congress to act boldly. on behalf of our constituents,
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thank you for this opportunity to testify. >> thank you, mr. isasi. i now would like to recognize dr. mark miller for five minutes of his testimony, and thank you for being here. >> chairman eshoo -- >> you may proceed. >> -- ranking member burgess and distinguished members of the committee. i appreciate you asking arnold ventures to testify today. arnold ventures is a philanthropy dedicated to reforming dysfunctional markets and programs to assure a better return on investment. we work to develop evidence and ideas to improve public policy. we believe strongly in markets and we also believe in evidence-based intervention when markets fail. with respect to drugs, our objective is to protect innovation, but to explicitly lower the cost for the employer, the taxpayer, and most importantly, the patient. we believe there are strong reasons for the congress to act. we spent $470 billion on drugs in 2016. that number is expected to grow 24% by 2020.
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medicare part "d" we spent $100 billion after rebates. that number is projected to double in the next ten years. medicare part "b," we spent $30 billion. that number doubled since 2010. medicaid, we spent $30 billion, and that number has increased 50% since 2011. meanwhile, at the federal level and this is deficit financed and three in ten americans can't afford their prescriptions. 40% of families can't produce $400 in an emergency. to that end, we urge the congress to act comprehensively on the drug issue. number one, to curb patent abuses and other anti-competitive behaviors so when a drug is available as a competitor can actually get to market. number two, remove market distortions through greater transparency and reforming price inflationary actions such as the misuse of rebate and fees and misuse of coupons. number three, directly address high launch prices and price increases for those drugs that
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do not have competitors through such actions as reference pricing, negotiation, or inflation rebates. more precisely with respect to medicare part "d," consistent with medpac recommendations, the committee should consider a series of reform to change the payment structure to increase pressure on the pbms to more aggressively negotiate the lower-cost drugs. for example, for the pbms to pick up the catastrophic cost. concurrently that policy should offer greater protections to the beneficiary when they hit the catastrophic cap. those proposed reforms also include modifications to the co-payment for the lis, for the low income subsidy population, in order to encourage them to use lower-cost drugs when they're available. as the right policy direction that those policies need to be designed very carefully to assure that they result in taxpayer savings and don't cut
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off access to important drugs. where there's no competition in pbms have no leverage over prices, we would suggest that you consider such tools as an inflation rebate, pricing to the clinical value of the drug, or a negotiation strategy. these tools would allow the medicare program to address situations where the manufacturer has set excessive prices in the absence of competition. with respect to part "b," we would suggest moving from a percentage of based payment to a flat fee, empowering physicians to form their own purchasing groups to negotiate prices, and consider lowering the overall payment using the average sales price blended with an international price index. turning to the public justification of price inyees increases. there's a value in that information as a policy source and a motivation for policy action, and without additional action that in and of itself will not curb drug prices. that said, a well-designed policy should set a minimum drug
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price, trigger reporting on both a percentage and an absolute dollar basis, require legal attestation of a ranking company official, and avoid disclosing proprietary information. with respect to the sunshine act we recommend reporting payments made to patient groups who often act as a proxy for the manufacturers and would report the economic value of the samples provided to physicians. however, if that issue can't -- if public reporting can't be reached, at a minimum the sample value should be made available to oversight organizations and researchers. in closing, any policy that you undertake will involve a number of difficult tradeoffs across stakeholders. we know there will be stiff resistance from the status quo. we also know the status quo hd behaviors, higher taxpayer spending and higher prices for the patient.
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arnold ventures and its grantees stand ready to work with you on these difficult issues. i would like to thank you for your attention. i look forward to your questions. >> thank you, dr. miller. i was just sent a nice handwritten note from my colleague, mr. long. and i should have done this at the outset of our hearing this morning. people are wondering what these yellow roses are all about. well, today is the 100th anniversary of women's suffrage. and the suffragettes distinguish themselves, as the vote was being taken, i think the final vote in the state of tennessee. the suffragettes and their supporters wore yellow roses and those that opposed them were red. so we're celebrating today with the yellow roses women gaining the right to vote in our country. the 100th anniversary. so that's what the yellow roses are all about. we didn't attend an
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early morning wedding. nonetheless, this is a great celebration. so now i would like to recognize dr. holtz-eakin. welcome to you. you're an accomplished testifier. and we look forward to your five minutes of testimony. >> thank you, chairwoman eshoo, ranking member burgess, members of the committee for the privilege of being at this important hearing. drug prices are a very important topic in the united states, and i want to say a couple of things about the debate in general and then a few remarks on the pieces of legislation under consideration today. the first thing i would emphasize is that at least to my eye, there is not a broad general widespread drug pricing problem. instead, it's important to recognize that we have some targeted areas with extreme drug pricing issues, notably in specialty drugs, largely oncology drugs right now, and sole source drugs and in thinking of solutions, it's
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important to identify the problems first and i'd focus on those. second, there's often little clarity about what price people are trying to affect. and there are different measures of price bandied about. there is the list price of manufacturers and probably most important price and the price post-rebate that which the drug has acquired and the price the beneficiary actually pays at the counter including the out of pockets. the one that is probably most important to the american public. thinking clearly about that price allows you to avoid situations where you simply shift cost but don't change the fundamental problem or address the issue, itself. and then lastly, i think it is important to recognize that this is a difficult world of tradeoffs. there are no simple solutions because in the end there is a tradeoff between financial incentives like price and the innovation that has made the united states the premier place for medical science on the globe. and being cognizant of that as you go forward is very important and secondly, for this hearing,
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the notion of transparency is a good thing. there are times when transparency becomes quite costly and not worth it and interferes -- to compete vigorously and to have fierce negotiation, which we should want in our health markets, particularly our pharmaceutical markets. in looking at the bills under consideration today, i think some concerns do arise. for example, the s.p.i.k.e. act which looks at backward-looking triggers for price increases or an absolute value of $26,000 for a drug. that's independently the value of the drug as ranking member burgess said in his remarks. it does trigger a set of disclosures and documentation that is quite intrusive and costly to produce and when combined with the potential for the secretary to offer a variety of different triggers backward looking and launch prices would be a quite costly measure of transparency with no particular accountability measure included that would guarantee any effort on drug prices. so i'd be concerned about that.
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the f.a.i.r. act is similar in character. has some n , in my view, virtuef targeting. it's forward looking as opposed to backward looking and that's an advantage in this setting. it excludes vaccines and focuses on the drugs by physicians. i worry about the transparency that generates no end result in those situations. with regard to the samples which has come up a couple of times already, samples are very important to beneficiaries. i think that's been documented and so you don't want to damage this valuable source of drugs. i think it makes sense to build on the existing reporting rather than inventing a new reporting, provide the information to the fta and tell it to -- provide this information to oversight and to professional researchers to that the information about the influence of samples on the competition in the market is learned, but the damaging public
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disclosure is avoided. and i think that's something that the committee should think a little bit about. and finally, with regard to providing public documentation of drug rates negotiated by pbms, i really have two sets of concerns. i understand why this committee should care deeply about how well the part "d" program is functioning. i'm a longtime fan of the part "d" program, having been present at its birth. i think it's our best entitlement program. occasionally, i say i like it more than my children. won't repeat that today. oops. too late. i don't think the same sort of information be provided for commercial transactions. these are in private contracts and i don't think they should be publicly disclosed. so collecting the information on part "d," making sure part "d," there's vigorous competition that is effective, is appropriate, and should be done. again, that means proprietary information provided to oversight and researchers, not necessarily disclosed into the
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public domain. so i really do appreciate the chance to be here today. these are, in the end, difficult issues on one of the most important topics facing the american public. i look forward to the chance to answer your questions. >> thank you very much, dr. holtz-eakin, and, again, we all want to thank our witnesses for being here today and the testimony that you've given. we've now concluded those opening statements and we're going to move to members' questions. every member, i think, knows that they have five minutes to ask questions of our witnesses and i'll start by recognizing myself for five minutes. dr. feldman, you said that pbms have pushed you to describe -- to prescribe higher-priced drugs, is that right? microphone.
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>> thank you. what i have found is there are some drugs that have come to market with lower list prices than have been unable to get on to the formulary because their list price was too low. and what i mean by that, the price concession, for example, the rebate would be the list price times the discount times the market share. >> nonetheless -- >> yeah, so, yes, a lower -- >> you put on the table that pbms pushed you to prescribe a higher cost prescription drugs. i want to go to miss bass and say to you, what's the answer to that? >> our companies always negotiate to the lowest net cost. zb zblo. >> so how -- why was she pushed to a higher-priced drug? >> because the lowest net cost of that drug was lower than the drug with the lower list price. >> so the -- the higher was lower and the lower is higher? >> sounds like dr. seuss, but,
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yes. >> maybe you can rephrase it. >> yes. so competition can raise prices or lower prices. because the price concession is the highest-priced concession, which ultimately they're calling the lowest cost, sometimes to get at the highest price concession, you need the highest list price. and, therefore, a drug with a lower list price can't offer as big of a percentage rebate. i think the lowest list price should get preferred status. >> the way the map woth works o that, let me quickly say. >> quickly. >> if both drugs had different pricing but came in at the same low net cost, that would be great. >> if they'd come in or you negotiated? >> our companies negotiate to the lowest net cost. if it's a lower list price drug that has the lowest net cost, that is the preferred drug. >> well, there doesn't seem to be an agreement here.
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dr. feldman is shaking her head in the negative. dr. feldman, why do you think that drug manufacturers will not give samples to doctors if there there's a public reporting requirement? i wasn't so clear on why you -- >> why i feel that way? >> yeah. >> for example, it goes back to the list price of the drug. >> the fda already requires drug samples to be reported. so the reporting burden, at least on the surface, to me, i don't think would be a deterrent. >> i can tell you, if it actually worked to the opposite, i mean, some of the samples that are given, the list prices of those are $6,000 a month and we'll get 3 months -- >> it's better that people don't know what that is and that, in turn, motivates samples being contributed?
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>> what i fear is that when it looks like the pharmaceutical manufacturers are giving this much money to the doctor that it may make them not do that. however, if it had just the opposite effect where everyone thought, look how generous pharma is and it actually didn't affect the ability. i just want to do whatever will keep the samples coming -- >> i understand. >> -- to our patients. >> i understand. i -- i don't think that the case has been definitely made on the point that you raised. maybe it will be, but i'm not -- >> i understand. >> i'm not convinced. we're looking for money. we're looking for savings across the entire system so that at the end of this chain, this pipeline, and you heard members on both sides of the aisle say this, so that the patient captures the savings, so that
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the price at the counter goes down. now, there are some things that are real market influencers, and i want to exam this. i've thought for many years that research and development is the top cost, but as it turns out, the marketing of drugs exceeds that, it outstrips it. and we only, i think, actively study and market drugs that are on patent. is there any major drug company that advertises generics? anyone know the answer to that? i think i know the answer. i stay up late at night. i haven't seen one. maybe i'm missing them. i don't have the tv on at the right time. there's something -- i think that that kind of makes --
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stands the system on its head because it's a huge cost, and i understand costs. there are many costs to bring a drug to market, but you know what, when it exceeds research and development, which is absolutely essential, i think that we have an issue here. when the -- there's marketing to physicians and other health care professionals. is there anyone here that can put a price tag on that? do you know? do you know, dr. holtz-eakin or dr. miller? no? mr. isasi? >> what we know, this is very hard information to get at because prices are so obfuscated. we know they're spending 20% to 25% of their revenue. >> we know that marketing to
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physicians and other health care professionals by companies increased from 15.5 billion in '97 to 20.3 billion in 20 cane. that's about a 30% increase. >> and it's much more than they're spending on rnd. on innovating. >> does pharma want to weigh in on this? wish to weigh in on it? >> yes, i do. thank you, chairwoman. you know, i would say at the outset that i think it's important to check our facts. we do hear regularly that the pharmaceutical industry spends more on advertising and marketing than we do on rnd, and at least speaking from my membership, that is patently false. frequently, comparisons overstate marketing expenditures because those expenditures are pulled from the sales in general administration figures which includes a whole host of things -- >> why don't you get us some definitive information from your
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viewpoint? >> sure, i'd be happy to do that. absolutely. >> i've gone over my time. i now would like to recognize the ranking member of the subcommittee, dr. burgess, from texas for five minutes for his questioning. >> thank you. and, dr. feldman, as i look online, you referenced that you've been practicing rheumatology for 35 years. i'm a little older than you are. so i actually remember not only was there wasn't much with which to treat rheumatoid arthritis, some of the treatments we had were probably as hazardous as having the disease, itself. i mean, collodial gole shots?
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does anyone do that anymore? >> very rarely. >> toxicity and you raise the dose that your earringing became so loud that people couldn't hear. so i, for one, am grateful that as i look online there are about eight or nine biologics that are available. these are new medicines that are game changers for not only guiding relief for your patients, but preservation of function which previously wasn't available. so, i mean, that's a good thing, right? we've got nine agents that now are available to you. i will confess when i watch some of the ads on tv and i play a little game. i have one of the pharmacy pricing apps on my phone, so i type in the name of the drug. i, for one, would like to see, i think secretary azhar is on to something when we says we ought
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to disclose what the cost to the patient will be. look, if i saw all the ads and had to make a decision which drug to start, do i want the one phil mickelson is oncinyndi lau? >> i don't know -- >> yes, she is on my itunes. i promise you. but i think that information could be helpful and it might be even helpful for a physician to know that as well. just going down this list of medicines and they're all fairly expensive, but some are more expensive than others. and is it something that you will be on over the long term and you correctly said, it would be wrong for a formulary or insurance company, anyone else, to change your patient's medication. that's a practice of medicine. and we should not let that happen other than by a physician. now, on the issue of advertising
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generics, look at my state. i assume most states are the same. i read a prescription and the pharmacist had actually substituted generic, even if i write dispense as written, i don't know if they always agree with that. so, no, generics may not be advertised, but at the same time the pharmacist has the ability to substitute the generic equivalent for the patient at the pharmacy counter, is that not correct? so, i mean, if i'm in the business of selling a generic, why would i advertise? i got the good people at crestor already doing the ads for me. i don't need to spend my money doing that. i think the thing is you have eight or nine medicines that are advanced treatment for rheumatoid arthritis. your professional lifetime, certainly my professional lifetime, at the beginning of our professional career, those things were not available. it's a great thing that they're
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available now. i do not know how many trials there were that didn't work out. i suspect there were. i don't know how you go back and price that in. i suspect that that's difficult to do. you gave a figure of, what, 12% success rate? i mine, that's a lot of dry holes that you're drilling in order to get the home run. i want you to drill those dry holes. i think that's important. i want you to have eight or nine medicines that not just treat a patients' symptoms now, but presentation of function. that's the whole purpose of doing cures. we were getting to a place where things that were unthinkable a few years ago are now within our grasp. a single-shot therapy to cure a disease that otherwise not would bankrupt an individual, but a family, and perhaps even a
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health plan. now a single shot that can cure it, i don't know how you price that in. we're going to have to figure it out. that's why these discussions are so important because we do have to figure that out for the future. sickle cell disease which was featured on cbs "60 minutes" a couple of months ago. the cost for this therapy that dr. collins referenced as a cure for sickle cell, that's a big deal. we heard in this very room, this very table, in 2016, the witness for sickle cell disease association said there has been no new sickle cell fda-approved treatment in 40 years, so when we look at the cost of this new sickle cell therapy, when we look at that cost, i think we have to look at it in light of the fact that for 40 years, we didn't improve at all, and what was the cost over those 40 years
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where we didn't improve? we've got do somehow find a way to advertise that going 40 years into the future. it's a good time to be in the business that you all are in. >> gentleman yields back. >> we appreciate you being here today. we've got some tough decisions is to make and we're anxious to get on about making them, apparently. >> thank you, dr. burgess. >> i'll yield back. >> the gentleman yields back. it's a pleasure to recognize the gentleman from north carolina, mr. butterfield, for his five minutes of questioning. >> thank you, very much, madam chair. let me just begin with miss jilsdober. i'm sure i got that wrong. i have a little trouble with names. >> jilsdober. >> yes. i'll just call you lisa. >> call melissa. i prefer it. lisa j., if you will. >> thank you. i'm very pleased to hear that your member companies support the whole notion of transparency.
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that's a very important word now. it means sunlight. thank you so much for making that acknowledgement today. especially with respect to prescription drug pricing. i guess my question is sort of a reverse-type question. what information would you consider to be inappropriate for transparency? >> that's a very good question. i think as many on the committee and other witnesses have noticed, we do need to be concerned about very commercially sensitive information, proprietary information, that if released publicly could cause conduct distortions in the market that woe may not love. that is why, you know, i think both of the transparency approaches on the table today do attempt to protect proprietary confidential information and that's a very, very good thing. >> i suppose you're struggling every day to try to find a balance between those two
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interests. >> absolutely. >> would that be correct? >> absolutely. >> what circumstances would require you to significantly raise drug prices? i mean, what would be the circumstances that would precipitate an increase in drug prices other than corporate profit? >> well, sure. there are many, many -- >> just give me two or three examples. >> two or three examples. increased costs, increased supply chain, expanded indications, expanded value. maybe we learned that a drug is more effective than we previously thought it was. >> and that would be corporate profit? >> no. >> that would be separate from corporate profit? >> no, and i do want to talk about corporate profit briefly. you know, a lot of people say that this industry's profits are far out of whack with other industries, and the truth is that's because traditional accounting measures are not
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recognizing the high level of risk that this industry takes on, and when you're talking about a 90% failure rate, the fact of the matter is that 10% of the time when we don't fail, yeah, it's true that the investors and the private epttiept t entities that invest and that help us fund this very difficult scientific search for a cure -- >> let me switch over to miss bass. my time is clicking away. miss bass, in your testimony, you discussed the need to increase transparency in order to lower cost and improve the overall quality of care. do you acknowledge that rebate practices are driving increased drug costs, or do you dispute that? >> we would dispute that. >> are you suggesting that the pbms are sufficiently transparent, or is there room for improvement? >> as i testified, we are happy
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to report aggregate rebates. we have the same concerns that others on the panel have with respect to putting out information publicly that would allow for tacit collusion. often when one competitor learns that he or she has discounted more deeply than another competitor, what happens is that competitor doesn't discount as deeply the next time. >> as a -- >> that's our big concern. >> you are a non-profit entity, if i'm not mistaken. a 501c6. >> we are the trade association for the industry, yes. >> which means you're not in the business to make a profit. you're in the business to, according to your 990 submission, you're in the business to lower prescription drug cost and increase access. >> our trade association represents the companies who are in the business to lower prescription drug costs and increase access, yes. >> you told the internal revenue service that your mission is to lower prescription drug costs. that's on your form 990 that you
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submitted. >> it sounds like we need to amend our form to say we represent the companies whose mission it is to lower prescription drug costs and increase access. >> take a look at that, if you would. >> i will. thank you. >> dr. miller, let me switch over to you, if i can. in your testimony, you discussed the importance of transparency and the consequence of congress' inability to act to increase it. why is transparency so important to implementing effective reforms? you'll have 15 seconds. i'm sorry. >> i mean, what i would say is i think transparency can compel the issue forward. it may produce useful information for the congress and other policy actors to act. i don't think transparency in and of itself will be enough to affect the drug price issues that you're facing now. >> thank you. i yield back. thank you. >> i thank the gentleman, and he yields back. i now have the pleasure of recognizing the ranking member of the full committee, the gentleman from oregon, mr.
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walden, for five minutes. >> hey, madam chair. i have a question for miss joldersma and dr. holtz-eakin. hr 2064 is an attempt to provide transparency and i'm worried that the bill would have unintended consequences of patients. they often provide samples to providers that help low-income patients who may have trouble accessing a therapy. either because they lack insurance or an insurer does not provide robust coverage for a drug or device. yet, this bill places new reporting requirements on manufacturers. my question is, doesn't this bill create a perverse incentive for manufacturers to simply not provide samples to physician offices, and can you describe how low-income patients benefit from samples provided by drug and device manufacturers and any other unintended consequences? and i'd just throw that out to the three of you.
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>> sure. thank you for that question. very briefly, i think there is a real question as to whether this could cause the lessening of provision of samples. i would also note that a significant amount of information is already reported to the fda with regard to samples. so in somecreating a duplicate bureaucracy, if you will, and a duplicate reporting so our preference would be to work with what fda already has. >> to me, it also seems like a real convenience when you're with your physician, they say, here, why don't you take these then go get this and whatever. dr. feldman? what's your view? >> yes. you know, we agree with medpac's recommendation under drug reuse confidentiality agreements. it can be something as simple as mandated mail orders for patients. we'll deliver refrigerated drug on the front porch in new orleans in the middle of the summer. >> that would seem to be a
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problem. >> and the medication is destroyed, so, of course, we can offer them samples. >> okay. dr. holtz-eakin? >> i don't know that it would eliminate the samples, but i think that's a risk you don't have to take. there are ways to collect the data you're interested in. have them available to researchers and oversight. without the public disclosure people are worried about. i would recommend that. the other thing i would mention is there's existing reporting for drugs. this expands the net to include the devices. it would be worth asking yourself if it's worth doing that. that's a costly new set of reporting and i'm not sure that devices are all that typical in a device world. >> okay. that's a good point, and i don't have too many people rushing me at town halls saying, please, add more reporting requirements and more regulations and more rules. yet we know there is a place for that, but we have to be really judicious when we go down the path, when we have more
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bureaucracy and more time caring for patients. i want to put the patient first. i know a lot of states have been passing legislation. to get to the bottom of this through price increasing legislation. the bills we're talking about today go beyond any state law currently on the books, i believe. my question would be do you worry about the burden of companies complying with the patchwork of 50 different state laws plus a federal law? should congress, if we go down this path, consider preemption language? ms. joldersma, would you like to comment on that? >> absolutely. i think we have seen transparency legislation enacted now in seven or eight states. >> right. >> obviously, today, we have two different approaches before us. >> right. >> they were competing approaches in the senate as well. so, certainly harmonization of these reporting requirement is a high priority and reedpreemptio would be one way to achieve that. >> all right. dr. holtz-eakin, do you want to comment on that?
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>> drugs are traded commodities that should prevail across all 50 states. i think preemption makes a lot of sense. >> okay. on transparency and pbm reporting, my question is, what detailed concerns of where -- or my question is, can you detail concerns of where to -- too much disclosure could be anti-competitive. i've heard this from people. i'm into disclosure, public right to know. i think the more out there, the better. i also recognize there comes a point where too much disclosure could actually have an unintended and reverse consequence. and if a consolidated market was able to back in competitors' rebates, for example. so, dr. holtz-eakin, can you comment on that? >> i think that's a real concern. if you can't identify the deal that your competitors' getting, that's information that allows you the ability to perhaps negotiate less vigorously and get a higher price. we never want to let that happen. and so all of these desirable attempts to ensure that these
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markets are competitive and work on behalf of beneficiaries particularly on part "d," i applaud. but disclosing those deals is a step in the right direction. >> miss bass, could you comment on that, as well? >> sure, it sounded like you wanted specifics and what we would recommend would be that making sure the bill calls for reporting by class. you would need to make sure every class would have three drugs, otherwise it wouldn't be reported because it would back into rebates. lagged, preferably three years, again, to give a little bit of time between contracts and want to make sure it wasn't pbm specific, but across pbms for the same reason. >> all right. i thank you all, and i know the chair has been quite generous with giving me extra time, and i guess in recognition of the blazers' defeat. so we appreciate that. >> all-around nice man. all-around -- >> i yield back. >> gentleman yields back.
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i just want to add something here. i believe in this particular legislation that it's referencing a class of drugs. so it's not one at a time. it's a class of drugs. and i think we have to -- all members are going to have to do a deep dive on the actual wording and that's our job to do. but i thought i would throw that in the mix. now, it's a pleasure to recognize a real gentlewoman from california, miss matsui, for her five minutes of questioning. >> thank you very much, madam chair. i want to thank all the witnesses for appearing before us today. we've been discussing in this committee there's a needtranspa. that's a word we keep throwing around. an entire drug supply chain that really gives us clear insight into formulary, price and consumer dynamic that drive up the price consumers pay for
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medications at the pharmacy counter. it has outpaced medical inflation and overall wage growth for years. lacking transparency, these price increases often seem arbitrary and indiscriminate and very confusing. i'm particularly interested today in discussing the trend of list price increases for drugs that already are on the market. a recent analysis found that prescription drug krost s co are attributable -- not the introduction of new innovative therapies or improvements to existing medications. and medpac has determined for high-cost part "d" enrollees the growth was largely due in increases to the average price of prescription filled. mr. isasi, you mentioned in your testimony, drugs under
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exclusivity have generated $108 billion in revenues and without price increases revenues would have been flat over the last decade for brand pharmaceutical companies and overall spending on drugs would have fallen due to increased utilization of generic drugs. that's a staggering statistic and speaks to the motivation some manufacturers may have to raise prices for drugs already on the market. mr. isasi, from your perspective, what are the reasons that prices are increasing for drugs already on the market? >> thank you very much for that terrific question. i think it's really important, we, all of us, want what's best for america's families and want to incentivize innovation in the development of new drugs. that's a really important goal. what we know, the current system is not doing that. as you point out, what's happened is so much of the pharmaceutical market share has migrated from patented name-brand drugs to generics and the drug companies are not developing the innovations that we need. so instead, they're just raising the prices on the remaining
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patented drugs as fast and as quickly as they can, and there are terrible examples of this. i'll give you one example just last year, catalyst pharma acquired rights for a 20-year-old drug used to treat neuromuscular disease and the price increased to $375,000. the drug was previously available from jacobs pharmaceutical and could be purchased for free through an fda program. right? those are the kind of abuses we're talking about. >> okay. dr. miller, do you agree? >> yeah, i agree. i'm sorry. i agree with the direction of your conversation. the intention -- where i'd dire attention, both in part "b" and part "d" you could consider inflation rebates that penalize back part of the revenue that a manufacturer gets through its price increase. you could devote that money to giving greater patient protections. >> okay.
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so, doctor, it seems rising prices for a product that's been long on the market kind of represents a market failure. is this a typical market response for products outside the pharmaceutical marketplace? >> belwell, as a general proposition and what i understand about how broad your question is, no, it's not a typical -- >> okay. >> insulin is, in particular -- >> right. >> -- a poster child for the problem. >> so both mr. isasi and dr. miller, from your perspectives, do you think they account for the drug price increases? and i think i know the answer to that. >> no. >> okay. what about high launch prices? >> no. >> let me give you a great example, civaldi was purchased by gilead 2. they did not -- >> i have a pbm question. as i understand it, one way pbms
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keep costs down is by keeping patients' out of pocket costs hype. simply put, what the plan pays as a net cross for a drug is calculated as a list price. minus the rebate, minus the person out of pocket share. dr. miller, you mentioned embedded incentives in your testimony. from your perspective, how are drug supply chain rebates preventing patients' cost sharing from coming down? >> so, i mean, i want to be clear when i answer. i do think there is a role for negotiation and there's a role for a net price analysis in thinking through it. because those more -- those savings can be spread more generally through the benefit. but given the current state of play in particular in part "d," there are drugs being placed on preferred formularies because of the rebate and that's driving the out of pocket for the beneficiary and making it hard for the patient to afford it at the counter. >> okay. >> yes.
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and to the chairwoman's earlier question, when you were told, chairwoman eshoo, that the net cost was lower, the question is to whom? net cost to whom? right? not the beneficiary sitting in the pharmacy. >> right. okay. i think i ran out of time. i yield back. thank you. >> excellent. it's a pleasure to -- the gentlewoman yields back. it's a pleasure to recognize the gentleman from michigan, mr. upton. the former chairman of the full committee. your time. >> thank you, madam chair. a delight to be here. i just got a couple questions. you know, when we worked on 21st century cures, we spent a whole lot of time about -- thinking about policies that advance new treatments for patients who had no therapies available, sort of like what former chairman walden said about sickle cell. one of the main goals was to reduce the burden of discovery and development for small companies to ensure sththat new
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therapies got to patients who literally had no hope. so i'm a little bit worried about the s.p.i.k.e. act, one of the bills we're looking at today, looking at, perhaps, an opposite approach. the bill sets an arbitrary launch price level that triggers burdensome price reporting for companies. many of the drugs produced for the orphan diseases are often developed by small companies. so the price threshold doesn't always account for rebates and discounts provided by the manufacturers. if we're going to consider federal price reporting, shouldn't we keep the focus on price inyeess, what was said earlier sh rather than launch prices of orphan drugs produced by smaller companies advancing cures? dr. holtz-eakin, what's your reaction to that? >> a couple of thoughts. i mean, in the end, i think it's important to focus on what the beneficiary ends up paying. often there's a big gap between
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list and what they pay. often they pay the list and that's through the rebate structure. i think thinking through that carefully is important. i do think that the kind of documentation that's envisioned by the s.p.i.k.e. act is unprecedented. i've never seen a request anywhere else in the economy. for smaller manufacturers, it's going to be quite burdensome. i would be concerned about that. and i don't see that this produces any particular pressure on pricing. and so it's a pretty expensive piece of transparency that may or may notbyfective. >> my next question is concerned about the hr-2064, the sunshine for samples act of 2019. it impacts both drugs as well as devices. so in 2017, medpac recommended that congress expand the physician sunshine act and require drug companies only,
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didn't include medical device companies. so as you look at device companies, they often provide, i guess, some free devices that are used like prosthetics and others to measure. really, a device is a one-time deal. and what are your reactions to including devices as well onto this bill versus just pharmaceuticals? >> i think it would make sense to not include the devices, see how effective the bill would be if it goes forward on the drug front, and then you could always revisit that issue going forward. devices are very different than the drugs in terms of the one-time aspect. there is no existing reporting, so that's the most costly part of what would be envisioned on this. and i would just, again, say i think building on what's in place as opposed to creating a new reporting channel makes a lot of sense. and that you can have oversight and you can have the fda be
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required to provide the data to professional researchers to make sure that samples are used for the therapeutically appropriate functions and not to distort physician decisions. that's really what you want to know. all that can be done without putting this on a public website. >> thank you. i yield back. >> the gentleman yields back. i now recognize the gentleman from new mexico, mr. lujan, for five minutes of questioning. >> thank you, madam chair. dr. miller, you noted in your testimony that more and more drugs are saving people's lives or vastly improving their health outcomes and quality of life. launching unsustainable prices that are simply unaffordable. what tools are currently available to control launch prices for the first in class
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sole source novel therapies, and are there any mechanisms currently in place that constrain the price for these drugs? >> as a general proposition, i would say, no, that the mechanisms are not in place. i think it goes back to some comments earlier. when you grant a patent, you're granting a monopoly and the company can charge any price. i direct your attention to in my testimony and some of the comments is in part "d," you might think of additional tools in the instances where you don't have a competitor, part "d" was created to exploit competition and have the pbms negotiate. you're still going to have drugs that don't have competition and you might want to think about things like pricing to the clinical value of the drug or some kind of negotiation strategy. >> how should we better ensure manufacturers are accountable to the public when setting prices for newly launched drug products?
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>> well, i think if you were to pursue the mechanisms that i just mentioned to you, that would bring a greater accountability, at least a better price to the medicare beneficiary and to the taxpayer. if that's what you meant. >> the question that we had last week at hearings as well was the notion that there's a system that has been established such that you post your launch price, which i regarded as the highest price, pen you hathen you have negotiations. there's discounts. there's rebate. there's other pieces that get to different lower prices, if you will, that you have for each partner. and i just have a hard time understanding why we just don't get to that lowest price to begin with. they know how low they're willing to go. they know where they're going to be. so if this is truly going to take into consideration the impacts to the patient and lowering costs, then that's where we should start.
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mr. -- is it isasi? >> isasi. >> you noted in your testimony that the threshold to trigger reporting requirements for newly launched from the current amoun included in hr 269 of the of the $26,000. the average income of maryland median medicare beneficiary processes. can you say what they would like it reduced for reporteding purposes. >> thank you for the question. it's critically important we understand as the changes take place it's going to adapt. all the launch price also come in whatever the threshold is set. we have to lower the threshold to a threshold based on the actual realities of the families who are in the benefit for a the earlier question i want to mention a lot of folks don't realized from the company's perspective the a lot of companies that aren't american they start here in the u.s. launch here because we pay the highest price three times four times more than the rest of the world. right they start here.
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they set it incredibly high price then go out in the world and negotiate because we don't negotiate. >> i still want to talk a little bit more about the average medicare beneficiary. and one, i agree with your response to my first question. that's a concern that i have as well. with how do we address that? and how do we set up a better environment when it comes to fairness, to the question that i asked dr. miller, which the number of people that are going without the therapies because any can't afford them. >> that's right. >> which is growing in the united states. the advocacy that you are bringing forward in your testimony about lowering the amount that's listed in 2069, the 26,000 in your amount case would be a lower amount. but as the 26,000 is how much a family would make in a year. alls in saying is if you're going to list your drug price higher than a medicare
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beneficiary makes in an entire year, you should say why? does that sound fair. >> very fair. >> madam chair wsh i think we talk about pricing care and the notion that if you just leave it alone and if congress walks away and no one wants to be a part of this that it will fix itself, it's not worked yet. and too many people out there are suffering. they are getting hit everyday. and we should be reminded we made a commitment when we went to the american people over the last two years that we would pass legislation to lower the cost of prescription drug pricings for the american people. and we better deliver on it. and with that i yield back. >> amen. the gentleman yields back. i to you would like to recognize the gentleman from virginia, mr. griffith. five minutes for questioning, sir. >> thank you very much, madam
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chair. let me see so everybody is clear, my democratic colleague just said that taking no action isn't working. he is right. and we're going to have to take action. and so we'll have to sort out what the best action that we can take. but i think both sides of the aisle are dedicated to figuring this out. and there is all kinds of different ways to do it and all kinds of issues. dr. feldmann in your oral testimony i was very taken with what you were saying. and you indicated you had a patient who had gotten the call to change their drug -- i believe for rheumatoid arthritis is that correct. i want to know mo called not the individual was it the pbm or the insurance company. >> who called and say let's switch you to the new drug. >> it was the pbm and they received a notification in the mail. >> they received a notification in the mail from the pbm. and were you ever consulted about that? ? >> no, in fact the patient brought it to me and said, i've
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been asked to switch to this drug, a lower cost alternative. and it's not necessarily a lower list price. and in happens all the time when you have mid--year formulary changes. patients just get dropped. they won't even pay for it anymore. this at least was slightly lessee greejs than the complete exclusion of a drug from preferred formulary. >> you also indicated that this drug was not similar. it was not really an alternative for that patient. can you explain that to me. >> it really was -- it treats rheumatoid arthritis but not a they are the putic equivalent drug. there are different mechanism of action in the immune system. and the drug this patient finally ended up on affected t-cells in a certainty way. this was a different drug entirely that did not affect the same part of the immune system. it wasry ridiculous for me to
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change it. >> let me break this down into terms i understand. pan hopefully other folks will be able to zblunds i take take and a tack because of food allergies. tums doesn't do much for me and and a tack mass an a anti-histamine. are you took them off the and a tack and moved them to tums which might be good for sum. scientifically in the the the same but skreptly yes. >> at least i got the skrept. ms. bass, all right all right, shouldn't pbms at least try to contact doctors when you -- when you are dealing with something, look my stomach upset is not a big deal. but somebody with rheumatoid arthritis that's a big deal. shouldn't the pbm contact the doctor fos for this patient does in switch make sense. because we're saving money.
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i don't mind people saving money but let's make sure it works for the patient. >> in those situations there are appeals rights for everybody in medicare and every private sector plans and pbms work with doctors to figure out in that instance what the right thing is. >> but most patients don't understand the appeals rights, appeals process. petition just know they got in and what about the cases like there dr. feldmann said in some cases there is no choice. it's a matter of we are no longer paying for the drug you've been on the last four or five years that's been effective for you. and we're swisk you this drug and you can pay for the other drug if you want, but we are not paying for it. that really can be disruptive. >> sounds terribly disruptive. i agree. >> what can we do about that. >> there are exceptions in medicare part d and processes to go through. in that instance the patient would have to go through that with his or her physician. >> so the physician and the patient are going to have a lawyer to then them figure out
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the process. >> and that's why we need the safrmtss to continue on the correct meditation because it can take six to eight weeks for appeals process. >> thank you. so that way you have more time for the appeals process. . that makes sense. thank you, dr. feldmann. how many different pbms are members of your association. >> right now about 15. >> about 15. across the country we have about 15 or how many -- how many pbms do we have. some aren't members i guess. >> there are 66 full service pbms in the u.s. and more organizations that provide pbm services. >> does that seem like maybe we got a little monopoly going. >> three pbms control nearerly 80% of the population. >> that's why i was ungz the question. i understand you can't answer that because you have the association to represent. the point is that when we hear testimony that the pbms are asking our drug manufacturers to raise the list price and then they -- many of them get a percentage of the cost of the
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drug for handling it, it looks like to me we got the foxes in the henhouse and we have to take some action. i yoeld back, madam chair. >> thank you the gentleman. and he yields back. and now i'd like to recognize the gentleman from oregon, mr. schraeder for five minutes of questioning. >> thank you madam chairman, appreciate very much. >> i associate myself with the remarks of the last two members that talked because industry is unfortunately at a situation where a lot of changes -- the pricing structure is completely opaque and very complex. i don't blame anyone in the industry sectors for that, just grown up that way. but as a result it calls for unfortunately our work here to make it a little more transparent. and everyone apparently loves transparency. but what that means is in the eye of the beholder is what we
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hear now. it will be unfortunately or fortunately our judgment call process baseden on hearings we have had high pressure and we've had a number of hearings and hopefully give the american people some assurance we are on their side and not stifle innovation but famt make sure they get the best deal possible out there. miss joldersma, appreciate you being here, your discussion and role that rebates may play in having a higher list price drug get a preferable place on the formulary. could you give any examples of medicines where you think that might be the case? >> well, it's challenging for me as a trade association to speak to you know what would be a very proprietary arranges era arrangement. i can say i noticed last week one of our member companies did testify here and talk about the difficulties it has had formulary uptake after it did lower the list price of one of
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its blockbuster medicines. so there is that in the record. i believe that other statements have been made on the record in the diabetes phase where we have seen companies who launched authorized generics with the hope of being able to lower that list price. and they too have faced some challenges. so there certainly are examples. >> so then do you think public disclosure of the discounts, including administrative fees would be helpful the preventing this? >> so, yes we do agree that more disclosure is required in that, including administrative fees would be important. we have seen the fees that manufacturers pay to manufacturers increase enormously in the last several years. and at least my read of the current statute is that a whole
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swath of administrative fees are excluded from reporting under section 1150 a that was enacted by the aca. >> seems a little bit like the pbms almost double dip tp tp. . you have the rebate and the pricing negotiation goes on then this administrative fee which seems a little -- a little inairport. ms. bass, i appreciate the explanation of the role at least in your testimony that the pnt committees and evaluating all the clinical and medical evidence that's out there before making coverage recommendations. does cost and rebate amount play at all in these determinations. >> the pnt committees work solely on the clinicalesqueticy drugs and then give recommendations to the pbm and the pbm ft. negotiate. >> if that's the case how does it explain the higher list price
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dug drug with greater drug ree bait receives a favorable formulary placement. >> if the list price drug came down as low and on that net cost basis it would be on the formulary. >> it does have impact apparently. do you support increase in transparency in the fees, including administrative fees i just talked about that you receive from the pharmaceutical companies, and also d.i.r. payments that go on with the pharmacies. >> you will a of a the fees and pharmacy dir are report maryland medicare part ddms. >> you wouldn't object to them being public. >> we have issues around public reporting when it is very clear and would get at -- would allow for tacit collusion but in the aggregate, no. >> okay. okay. question for dr. feldmann on the samples. i listened to dr. burgess talk about his lack of attention to the samples from the standpoint
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of what he is going to prescribe. he knows what he thinks that patient needs best. i would assume dr. buschon would feel the same way. the samples to your testimony as a veterinarian for many years do provide an opportunity for a patient to get much needed care they couldn't get otherwise in the interim. to me the sample issues much to do about nothing. is there really a reason to collect all the data and go down that road in your opinion? >> as long as it keeps the samples coming for the needed -- the patients that need them i'm happy. i have specific examples of the question about lower price drug not getting on the formulary if anyone wants to know. >> maybe we could get that to my office after the hearing is finished. following up a little bit. would utilizing existing frameworks for evaluating the
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quality of a physician and their conduct, how they do things, be a suitable metric for lifting prior authorization. you testified about how that really makes it difficult. and ergo the samples become important. we are trying to find ways tossen the requirements for prior authorization. are there some policies either a physician as offense or hospital follows or whatever that might give uts guidance to help us help you? >> yes with specific guidelines and pathways developed by certain physician groups we can by pass p.a.s on things from mris to certain drugs. and injury that's a valuable way to make it easier for the patient to get the proper medication. >> well if we could get some of that that would be outstanding. and i yield back. i'm sorry. >> the gentleman yields back. i now recognize the gentleman from indiana, mr. buschon.
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>> thank you, adam chair wom. >> dr. buschon. >> i'm sorry. >> thank you. i would agree mr. schraeder that the sample issue a red herring. i'll say as a physician, the basic premise that we practice medicine based on this type of thing as a group is -- is false. we use -- i would decide what type of medication the patient is on and then ask my staff do you have any samples of this not the other way around. it's just -- honestly -- the other thing is from a pbm perspective i don't restricted formalaries i don't like it when non-maryland medical people don't lah access to medications based on profit. en a we've heard a lot of them. and i don't think -- that may not be pervasive across the industry but there clearly are substantial evidence that that's happening. and i -- and i don't believe it when -- when people say that --
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that drug companies aren't being called literally daily and talking about list provides and margins and things like that. that is happening. and it's a -- the incentives are just dis -- not alined. the last thing i'll aand we have a couple of questions. we've been going after providing since the late 80s. cutting reimbursement to the people actually in the arena taking care of patients. and it's solved all the problems, right? >> the provider providers fault making too much money. you know they are doing too many procedures. prescribing too many drugs. and yeah well the reason we haven't been able to make a dent in kmed prices in fact worse not only in in but other areas of med is because that's not the problem. and niepow we've got shortages of physicians nationwide as a result, including particularly in primary care.
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miss jorlds sma as rp 2087, the drug transparent i is act the all priors would be required to submit information op. however it's my understanding that certain medicals devices reimburse ds on und the drug benefit could be excluded -- could be excluded from this requirement in keeping with the excuse me -- the spirit of transparency and market based pricing, is there opposition to including a policy change to ensure all such devices reimbursed as drug products all also would be subject to asp reporting? >> from the perspective of pharma, no, there is no opposition. >> okay. chairwoman, i'll ask you i hope we can work together to address this issue in the legislation as it moves forward. i just want to, again, on the -- on the -- on the samples, dr. feldmann, you raise the issue and, again, is there any
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evidence that -- in your view anywhere that samples that are given to physician offices have any affect on overall practice of medicine? and also, doing this type of reporting, do you feel like it would do anything to lower drug price sns. >> i don't think it will do anything to lower drug prices. and, no, they have absolutely no bearing on my prescribing habits whatsoever. >> mr. holtz-eakin, do you think on the- dsh particularly that the sample issue is a big enough issue that it would have any substantial impact on lowering drug prices? as you pointed out the key is out of pocket costs, that's what we are trying to get down. >> i don't think the sample issue drives much. >> yeah, so there is just really -- really no evidence that that that would be the case. and i guess miss bass, what do you think of the administration's proposed rule
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on rebates? >> we don't think that the administration's proposed rule on rebates will do anything to lower list prices. >> how come? >> because the manufacturers set the list priss. and the pbms negotiate lower net cost but pbms are not involved in list prices. >> don't get me wrong i know that pbm of have a value added role in this thing. i squus -- my personal view is that the proposed rule is -- is -- although the devil is in the details is something that's going to lower -- going to take away the upward pressure on list price. i know the pbms all say is won't make any difference at all. but i would -- did i would argue that it does. i mean what's were your view on that. >> we would respectfully have to grow to disagree. i do think there is a conversation to be had around the use of the price concessions pbms negotiate. >> fair enough. >> right now ner used for premium in part d.
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and what the secretary is trying to get at i believe in part aside from lowering list is to help people at the pharmacy counter. >> with your indulgesis madam chair woman mr. holtz-eakin you had a kbent angle if you have the ability to negotiate rebates you ought to have the ability to negotiate prices. it's the same negotiation it would be more effective if the rule covered not just part d but the commercial market as well. >> i agree with that. thank you. yield back. >> the gentleman yields back did you want to add something to that dr. miller you looked like you were ready to turn on the microphone. >> excuse me. i didn't recognize him to respond to my question. >> i'm recognizing him. >> okay fair enough. >> i mean, we think the most credible analysis is that the -- that it ends up in the part d program adding to the cost of the taxpayer. and that it doesn't have a
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significant effect on list prices. >> thank you. recognize the gentleman turbcalifornia, mr. cardenas. >> thank you very much madam chair. and thank you for recognizing as the chair, as you have the to do so. also i'd like to thank the ranking member for having this committee as well, to both of you. i'm very proud to serve on the energy and commerce committee and proud to say we take the time to consider many perspectives so that we can move forward with meaningful legislation. and the bottom line is that the right now americans across the country are hurting. it's our job to tackle the big problems like drug pricing, to help all americans, to give real choice that is don't involve choosing between keeping families fed and keeping them healthy. with that in mind we have had several hearings on prescription drug price. and one thing we have been
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hearing about it is how efforts to cut cost are not making it to the everyday american citizen. ms. bass, thank you for being here today. i am interested in discussing how price concessions and rebates directly impact consumers and whether insurance marines or their beneficiaries are more likely to benefit from these negotiated prices. you mentioned that man sponsors can determine how pbm negotiated price concessions are used. can you explain some ways that health plans and specific prescription drug plans will use rebates and other price concession that is pbms acquire. >> sure. thank you for the question. in part d the rebates are used essentially to buy down the premium or to lower the premium and to keep it affordable across all beneficiaries. in the commercial market plan sponsors use rebates across their health plans sometimes to help offset hospital costs.
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in other instances they think about the rebates when they set the enrollee cost sharing. so your $10 generic co-pay and $30 preferred brand co-pay. the health plan probably takes into account the rebates it gets when it determines that level of cost sharing. so it goes sometimes toward premium, sometimes toward cost sharing. it depends on the pran. in part d it's almost always for premium. >> so what you just described is it could be that the bigger -- biggest beneficiary of the system that we have today might actually be favoring the decision making of an insurance provider not necessarily directly to the end user, the citizen. >> i guess the way i would characterize it is if whoever the plan sponsor is decides to use it for premium, it benefits all enrollees with a lower premium. if the plan sponsor decides to put it toward cost sharing, then
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it -- it helps the people who are using drugs that have rebates. and 61% of brand drugs do. >> okay. all right. >> are plan responses required to disclose how they utilize price concessions. >> in medicare every plan sponsor reports its rebates, its fees which we talked about earlier to cms. and cms is aware of how those are used. in the commercial market, the pbm is -- discloses to the plan sponsor what its rebates are. but plan sponsors are not required to publicly disclose or even really to the secretary how they use the rebates. >> okay. i'd like to point out on hr 23776 the prescription pricing for the people act would require the federal trade commission to study the role of pbms in the supply chain and report to congress on recommendations. do you have any recommendations on how we can best ensure
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consumers are directly benefitting from the cost savings generated by pris concessions and rebates negotiated by process pbms. >> ms. bass. >> first of all we welcome the ftc review. our recommendations are that in part d you as policy makers and in effect as the plans -- you are overseeing the plan sponsors have a conversation about should that money be used for reducing premium, holding down the premium or should it be used for reducing cost sharing? that's a conversation you as policy makers should have. and we welcome that conversation as well. >> again, madam chair, i really appreciate the opportunity for us to cover this very important issue. and health care is complicated. and earlier today i was able to meet with a young woman in my office who actually grew up in my zip code, very few people in my zip code make it to four-year institutions she went beyond and currently studying to be a
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doctor in heir third year i asked her what motivated her. what motivated her was her little brother who passed away from a non-diagnosed illness he had since he was born. he was a little boy we he died. when her father got ill. and she urged him to go to the doctor. and he died from a heart attack. here we have a young person as of an example of a american citizen decided i'm going to make a better place by becoming a doctor. i hope we have the same urgency as members of congress to get to the bottom of the issues and to make the world a better place for american citizens and everybody in the country by doing what we can in the way we've been pointed to do so or elected to do so. thank you to the witnesses and thank you, madam chair. i yield back. >> the gentleman yields back. thank you for your beautiful words. i now have the pleasure of recognizing the gentleman from
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florida, mr. bilirakis who has an important bill with mr. cunningham, the kroeting lower cost alternatives for your prescription drugs act. gentleman recognized for five minutes of questions. >> thank you madam chair. i appreciate it. thank you for holding this important hearing we've had a couple of hearings on this issue and we should be focusing on this issue, because this is what our -- a lot of our constituents care about. i have a lot of seniors in my district. and large veterans population. and lowering prescription drug prices is an utmost priority for me. to that end, i want to ask a question of dr. holtz-eakin. to that enthe bill i recently introduced, as madam chair alluded to with congressman cunningham, the creating lower cost alternatest he is for
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prescription drugs or clay act is a great first step in my opinion. modernizing part d to lower prings drug costs. however it's a first step. and i believe that part d has been an outstanding program. one of the greatest programs we've had and it's been below budget like 40% below budget and helped out our seniors. but we must upgrade and modernize it. i understand that aaf has a comprehensive proposal for modernizing part d. would you please share your input with the committee, dr., please. >> certainly we'll be happen happy to copy of the paper that tara o'neill hase wrote who is here with me. it's similar in spart to dr. miller's remarks. what we see in part d is the most rapidly taxpayer cost is the reinsurance area, above the
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catastrophic maximum. the proposal in the essence says why don't we have the prescription drug plans and the pharmaceutical industry be responsible for their share of the costs above that catastrophic maximum so that the incentives to have high priced drugs are diminished. why don't we fully protect taxpayers against their out of pocket by having a catastrophic maximum where with they don't owe anymore past that. and have a sort of typical 80/20 split for the remainder of the drugs so that p. d. ps have a strong incentive to get pbms to negotiate op their behalf for the remainder of the drugs. where typically they are not sole source. there is competition and the possibility of vigorous dpegs is much more likely. it is a good program. it's not broken. it's been successful. but we can sharpen the basic negotiating incentives built in the program make it better going forward. >> very good.
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again, dr., congress developed incentives to the development of rare diseased therapies and i work on that issue where innovation was previously almost non-existent. how might -- how might the s.p.i.k.e. act in its current form have an outsized impact on future innovation or rare disease drug development and how can we best address this concern. >> i guess i would say a couple of things. you know i have my reservations about the s.p.i.k.e. act i mentioned them in my written and opening remarks. there is nothing about it i think that guarantees lower drug prices. it's most likely to impact the start-ups specializing in those drugs and where launch prices are typically very high. you'll be above the arbitrary threshold with the high value drug and i worry about diminishing the incentives. having said that i want to echo something dr. miller said which is i don't think transparency in the end is going to deal with the places where we have high
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drug costs in the united states. and the things under consideration today have merritt but not ultimately the slugs. it's fundamental reforms of the type you talk about in part dp it's important in part b where there is no reason to give 6% of the asp to delivery of a drug. that's uncorrelated with the cost of treating a patient. so reimburse for that instead. those are the reforms that will be more effective than just transparency. >> thank you. one other question. often when discussing high drug prices we tend to focus on what is wrong without mentioning what is going right to ensure we achieve the desired result in a way that does not undermine the progress that has already been made or produce other negative unintended consequences. can you share with us what is currently working and how we might double down on these efforts? >> as i noted at the outset there is a trade off between
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financial incentives like prices and innovation. we are literally in an era with unprecedented innovation in the capacity to treat illnesses that were not previously deemed treatable. and all of that is evidence of the power of that incentive. i think it's important to hold onto that. i think it's important to thing price for who that's coming up several times. and and keep focusing on the fact that in some cases -- so for example with the rebate rule if in fact list prices don't go down then there is a chance that premium also go up for everybody. but the people who are going to be protected are those who have the big drug costs and the most severe conditions. that's exactly what an insurance program should do. and so let's keep track of who whose price is affected as much as prices in general. >> all right. thank you very much. i yield back madam chair. >> the gentleman yields back. i now would like to recognize the gentleman from vermont, mr.
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welch for five minutes. >> thank you. just starting to acknowledge something that dr. holtz-eakin said. we have made a lot of progress in pharma. unfortunately the price is starting to kill us. and i want to go to you ms. joldersma. you mentioned that r & d is a big deal. nine farls for every one success. and you said you spent a lot on r & d. my question is this. would you on behalf of your member organizations, companies, provide to the committee specific and concrete information as to how much each company claims it spent on r & d, how much it spent on advertising, how much it spent on stock buybacks and how much it spent on the top five paid compensation executives. would you do that? >> i would have to consult with
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my counsel to. >> this is not a mystery here. i mean what's the big deal? pharma is claiming that it spends all the money on r & d but won't show us the books. so at a certain point count me as skeptical. now dr. miller, i think your research shows that the -- the -- what the pharma claims it needs to spend is about 176% higher than what is required to get the return. >> i wanted to be clear the research i cite by other people. summarized in my testimony. there were a couple of things that were said. the amount of revenue that comes out of the united states alone exceeds worldwide r & d investments by something like 70%. and there have been study that is arnold venture supported that show the cost of producing the drugs are less than claimed by the stroo he.
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>> suggesting a inflated claim by pharma. >> suggesting that. >> madam chair. r & d rs and ds whatever side we want to know the facts. you won't answer me now. you've got to go back to your quote counsel. go back to your counsel and then answer me and tell us whether we get that information. >> sir i'd be happy to provide the wealth of information that's already filed by our companies. >> i don't want a wealth. >> quarterly and annually. >> i do not want a wealth of information. i want four issues. one, r & d spending. two, stock buybacks. three, advertising. four executive compensation. that's all i want. not a wealth of information. >> i believe that's all available i'd be happy to provide it. >> i want to ask this question. there is the justification of r & d. senofi seasoned the price of its drug lantis by 171% from $99 in
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the 2010 to $270 in 2018. that drug had been on the market since 2001. presumably the r & d done to put the drugs on the mechanic was done before 2001. how much r & d was part of the justification for that explosion in the price between 2010 and 2018? >> i'm not sure on the answer. but i suspect that it would be r & d for treatments and cures that were still waiting for not for that product. >> give us the facts, all right. now, dr. holtz-eakin, you have made some criticisms that i actually think have merit about nibbling on the edges with transparency. i want transparency when there is a claim that it justification the price increases. in some of the reporting. that's a big hassle. the heart of this is you nibl
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around the edges but what it reflects is the frustration that states and payers have era are having to get a grip on on how they are hammered every year. and my question is whether some of the suggestions dr. miller makes you agree with where we have to really bite the bullet and have the government play a role that our government is the only one in the western industrialized democracies where we stand aside and let the consumer get hammered. price negotiation. would you be supportive of some of the price negotiation suggestions that dr. miller is making so apply to commercial as well the pbms and the rebates? >> let me disappoint pu. when i was cbo director we wrote any number of studies saying negotiation wouldn't lower spending. cbo issued a response. >> without a formulary. with or without a formulary. >> that's part of it, yes. >> and you get saving was a
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formulary. the formularies we have now are not done on behalf of public they're for the benefit of the pbms. dr. miller, give me your top three steps. we have to take in order to start bringing to heel the outrageous drug prices. >> the first thing is in medicare part d adopt the changes recommended that bring more pressure on the pbms and change the risk structure which both of us agree on. there is a whole set of patent, anti-competitive behaviors, legislation. that you're moving on. you need to move on, move further. last one, this is where with he disagree potentially. on the drugs where there is not competition that's where we are recommending that you think about things like negotiation and/or reference pricing. and we think it can be done without formulary exclusion. and i'm happy to talk to you and your staff about that. >> i yield back. i thank the witnesses. and thank the chair.
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>> the gentleman yields back. i now recognize the gentleman from oklahoma, mr. mullen for five minutes of questioning. >> thank you madam chair and thank you for the witnesses being here. i'm going to focus on the fair act. and there is going to be a little bit of difference of approach. this is the difference between the gentleman from vermont and myself. we both agree that drug pricing is too high. 100%. we 10 oh% agree with that. we do agree there has to be something done. the approach is what's different. see i believe in the private industry. i believe that when the government gets in things they only get the entry to the stre only gets more difficult. and the less competition is there at that point. and the more regulation that you put on the industry the less people are going to enter into that industry. it's just matter of fact. when you look at the fair act. you start looking at what it's
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wanting the companies to do what that is is just one step closer to i think what the ultimate goal is, to through some members in congress, that is to take over the industry and be government ran. that's the quickest way you can possibly kill an industry. i mean, you look at the fair act and it says they want the total revenue and net profit generated from the kwausk drug for each calendar year since the fda approved, the total cost associated with marketing and advertising for the drug pl "rolling stone" total revenue and net profit of the manufacturer not the drug the manufacturer 12 to 36 months. what does that have to do with anything? the compensation for the executives, what does that have to do with the federal government? since when does the federal government get into the fact that they can limit the compensation for a non-federal employee. but that's exactly what the fair act is going to. what we want to do is figure out how congress can make it more competitive. see congress is not in the
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business of creating businesses. we should not be in the business of creating jobs. what we should be in the business of is creating an environment for entrepreneurs to create jobs. when you allow competition in the market, then you're going to start seeing the competitive prices move downward. now, dr. miller what you said a while ago, i think there might be something that we can work on there when you said where congress should maybe look at is when there is no one else in the market when it's especiallily drug, i could see that. i could see where there could be a way for us to possibly find an area to where we could help come up with a rebate or come up where you kind of look at it with the insurance with someone with preexisting conditions where we can mep offset maybe some of the cost. there could be some areas for us to work on there. and i agree there is plenty of bad actors here.
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i think everybody has some stake to blame in this. and what i don't want to happen is that congress overreact. and i believe that's where moving especially when you look at the fair act. so i'm going to ask -- ma'am and i'm going to do my best with your name. joldersma that will work how do you pronounce it? >> joldersma is how they say if in the homeland. you're exactly right. but we say joldersma here in the u.s. >> joldersma. >> i'm going to say ma'am. let me get into some questions first of all for you. is pharma opposed to reporteding provides increasing to the secretary? >> no. in fact it's already publicly disclosed. >> okay. what kind of problems do you say with the fair act. >> fairness -- that's another bill i'm working on. >> one leading concern is it is somewhat ambiguous. but it appears that could be
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applying retroactively. one of the trying certifies a three-year trigger. taking the fact that effect in 2019. that's imposing the requirement going back to price increasing taken three years ago. that retroactivity seems not ideal and not a great precedent. and you know, it's certainly challenging to comply with the law in good faith when the law was not even on the books at the time the conduct occurred. that's probably our top issue. >> the fair act requires i believe a 30-day notice. >> yes, sir. >> does that time acceptable? or is there a better time frame for you. >> it does require a notification of price increases 30 days in advance. it goes to the secretary. we are concerned that that could lead to some negative behavior in the market, including
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potentially opportunityistic buying at the lower price, stock piling, that could lead to drug shortages, et cetera. so in general we are very concerned with advanced notice. >> thank you. with that i yield become. thank you, madam chair. >> the gentleman yields back. and now i have the pleasure of recognizing the gentlewoman from new hampshire, ms. kuster. >> thank you, madam chair. and thank you to all of you for your patience, bearing with us. so far we have had multiple hearings on the critical issue of the -- our bipartisan efforts to lower prescription drug prices. and the bottom line is simple. drug spending is placing an undue burden on our constituents, patients across this country. and taxpayers who are footing the bill for our public programs. mr. miller, you mentioned in your testimony whether we would like to admit it or not we are actually rationing drugs in our country. and in our current system
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patients and payers are forced to make difficult tradeoffs and choices. i want to step into -- i understand there is no silver bullet on bringing down the rising cost of drugs, but i do want to focus in on your testimony if i could, mr. miller. you mentioned how transparency efforts under consideration would not necessarily lead to lower drug prices, though they might help us understand more clearly why drug prices increase at the rates that they are. do you believe that requiring justification for launch prices and price increases will at least slow the rate of growth in drug prices or that pharmaceutical companies might reconsider price increases with transparency. >> i think you could have some small sentinel effect. i think ultimately it doesn't stop the wave. >> so your advice seems to be to go further than that and go
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toward the negotiation of volume discounts and in particular i'm looking at the medicare negotiation based on leveraging volume discounts. and you mentioned part d negotiation. can you elaborate on how part d negotiation might look, especially taking into consideration the high cost of drugs now with limited competition? it seems to me both the patient and taxpayer are paying more than they should. >> yes, i will. but very quickly i want to remind you part of our recommendations are start to rebuild competition in the market. yoept to forget that. >> that's important. >> absolutely important. >> i concur. >> we also think in part d once again bringing the -- the pressure to the pbms and the manufacturers in the catastrophic cap, to force negotiations where in fact you do have competitors is very important. and then i'm stepping into your question, okay. >> got it. >> sorry about that.
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but you will still always be faced with very expensive drugs that don't have competition. so there is a few ways we would suggest that you might think about that. one is is you think about a reference price. so we look at the clinical value of the drug and say that the medicare program will cover this drug. but the pris it pays and the beneficiaries copayment will be tied to the clinical value. >> let me up you there clinical value as compared to hospitalization, compared to future surgery? how do you determine clinical value. >> usually what you are do something talking about the performance of the drug in and of itself on the value of the it adds to the life of the patient. >> longevity or quality of life. >> you could engage in other studies like hospitalization, watch while waiting. mostly what we are talking about are clinical and cost effectiveness analysis talking about extending the patient's life. that type of thing.
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let me give one other to the question backup you can think of the negotiation process in which you set lanes for the bids, sulcus you say there is a range of negotiation between the manufacturer and the government. but it is not completely wide open. and you might use some of the clinical effectiveness to set the ranges, or international prices, some set of considerations. why i'm making this point is it's a way to try and get a more rigorous process that cbo might give credit for. >> so let me ask you this. do you think that the federal government is taking maximum advantage of their volume purchasing power, if you will, in the negotiations? i'm just wondering for example if we were to consolidate, say, for medicare and medicare, veterans, federal employees, d.o.d., all of these together, do you think that we could do better in the price negotiation for the drugs where there is an
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equivalent, where we're talking about competition. >> i see. so in this instance you are moving the conversation -- you are not talking about the drugs without kegs. >> right. >> you're talking about the drugs that do have competition. i haven't thought about it. and i just want to to say one thing. there are tradeoffs you'd str to contemplate in how do you that. for example, in medicare there are very large discounts. and so if you move to a different system you have to ask yourself, do you lose those discounts. >> can you do better than that discount. >> can you do better? and then v.a. which i'm very uninformed on, same question. but a very. >> just as a thereto thele concept would you agree the volume you share. >> that's where i was going. straight economics, bigger volume, bigger ability to extract discounts because it's harder to walk away. >> thank you. i yield back. >> the gentlewoman yields back. i now would like to recognize the gentleman from north carolina, mr. hudson for five minutes of questioning.
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>> thank you to the chair and thank you our panel for being here today. this is a very invitive. every time i go home i hear from constituents about high drug prices. never forget the constituent who told me she literally some months had to choose between picking up the prescription and paying for groceries. this is a problem. and in this committee we have a long history of bipartisan work to address the most serious problems facing americans. i believe we should continue that work. but i'm having a tough time seeing what some of the policies that were prepared will accomplish for american patients. doing some rough back of the envelope math i took one of the most recent examples of a drug parel. biogen alzheimer drug and looked at what it would take to recoup the investment. biogen spent 950 billion for eeking a cure that ultimately failed. it was disheartening for me and others. particularly those with relatives with alzheimer's but illuminated what at a takes to big bing let's say they were
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krech 5.8 million in the united states with alzheimer's every assuming every one accessed the drug. biogen would have to charge 164,000 to break even on research. this is arguably a bargain compared to the not only the roughly 350,000 of cost to care for an alzheimer patient of the lifetime of the illness but also the emotional cost the families endure watching a loved one deteriorate before their eyes as my family experienced. unthe s.p.i.k.e. act this price or anything higher would have triggered a naming appear shaming exercise. what benefit is this for patients. ideally patients would be taken out of the middle of the conversation. and this brings my question which i'll open onto the panel. the fairatic includes penalties for non-compliance. where should the penalties where should that revenue go to as it's currently written do you see them benefitting patients or wak to the treasury to be spent by politicians? shouldn't they be explicitly designated to help those need going most and not go to the treasury for congress to spend?
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just open up to the panel if anyone would like to talk on that? >> we would agree. we would note that the -- the fees were quite high. and yes. it would be ideal to have those fees going to help patients. >> anybody else? >> i see some nods. okay. >> it's kind of a no brainer back to the patients. >> okay. i'll assume everybody agrees. ms. bass, in your testimony, you mentioned the realtime benefit tools to help physicians and patients know what drugs are on formulary and what the cost sharing would be. how could your industry pbm industry facility in making this at a a reality. >> so those tools are already in use. and i think one of the issues -- everybody understands that it needs to be a as streamlined as possible for a physician work flow. and so hopefully the interoperability keras the
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administration is undergo is make sure every physician has access and works quickly. but most of our pbms are making that product available already in the marketplace. >> great. and ms. jorlds in. i hope epinot butchering your name. i know lots of states have been passing legislation to get to the bottom of why drug pricing is increasing. but the bills today go beyond any state law on the backs. do you worry about the burden of the companies cli with a patchwork of 50 state laws plus this this federal will you. if there was a time for prefrpgs it seems this is it. what are your feelings. >> absolutely. it's -- you know, there are i think seven or eight different approaches already on the backs and states and additional states who are probably today considering all -- a different approach. we have different approaches at our coming to light here in the congress as well. and all of that is it just added cost that is not going to
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research and not going to help patients. absolutely, harmonization, preemption are high priorities. >> madam chair i look forward to working with you to focus on patients. we have a long track word of working together in a bipartisan way on this committee. as long as we focus on the patients and use common sense i think we can get there. with that i'll yield back. >> the gentleman yields back. and now the gentlewoman from california pb miss barragan is recognized for five minutes for her questioning. >> thank you. i want to follow up on that. you know we're here in dress drafting legislation and debating what td we have seen states taking up legislation that shines light on manufacturers drug pricing. part of that is adistributed to the fact is that congress isn't moving and doing anything with that states are acting to help consumers and to help people who
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are rationing their drugs. in my state of california they passed a drug transparency law in 2017. it requires drug companies to notify health insurers and government plans at least 60 days in advance if they plan to increase a drug price by more than 16% in a two-year period. now the law also requires the companies to explain the reason behind the increase in price with all of the information provided to the state made public online for citizens to review. now pharma sued to block the california law. this may be because the law was effective in shining a light on upcoming price increases, for example it showed that valiant was going to raise the price of a generic gluk ma prescription by 29%. and 40% increase in a solution to prevent asthma attacks.
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miss joldersma, you testified that pharma supports transparency. in this case, pharma sued to block this california law that would have transparency. did pharma sue to block the california law bus you are concerned about the unfair drug pricing policies of drug manufacturers? >> no. we -- we sued to block the california law because we believe it is unconstitutional and in at least two ways. dormant commerce claus and also first amendment compelled speech. and we're also kbernd the impact that that 60-day advance notification could have on the market -- could have on the market given the opportunity it creates for bulk purchasing, stock piling -- >> let me ask you another question. congress passed the same law you
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would have the same concerns, correct. >> well the federal government obviously has different authority to regulate commerce. >> i'm asking if congress passed the same law would have the same. >> first amendment compelled sfeech remains a zblern i'm taking that a yes if. i have other questions i want to get to. >> thank you very much. during the drug supply chain hearing. a.m. gen raised the issue of lowering the list price of cholesterol drugs by 60%. however pbms have not shifted this drug from high cost formulary tiers to lower cost tiers which carry lower copayments. miss bass you testified that the mission of the association you represent, the pbms is to help control cost. so do you support patients having access to these lower price drugs? it seems that when you have a specific instance like in this one, we're not seeing the
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movement. >> so i testified that the mission of our companies is to provide access to lower cost drugs. i can't speak to specific company decisions with respect to the drugs. but our companies negotiate for the lowest net cost and make their decisions accordingly. >> okay. well, thank you. so mr. isasi. i'm dead focused on trying to find meaningful solutions to the drug pricing problem. my constituents continue to demand that we find a way to significantly lower the price of medications. in your testimony you discussed that while you're supportive of the transparency bills that transparency legislation alone will not significantly affect the price of prescription drugs. you go on to state that medicare part d negotiation should be enacted as meaningful step to lower prices. while you discuss one specific negotiation bill in your testimony i would like you to
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focus on the policy generally. do you have any projections on the impact on drug pricing if we enact medicare part d negotiations and then beyond medicare negotiation what other policies should congress pass to meaningfully lower prices? >> sure, thank you very much for the question. so this question of the projected savings is very difficult. in large part because industry has done a very good job of veiling what the actual price is we say how the monies flow. it's a very difficult thing to model. what we know for sure is that in order to work something as simple as just saying the government can negotiate won't work. we need to have a serious way to put teeth in the negotiations to make sure that industry shows up and in a good faith negotiates. there is lots of policies one would be something like allowing others to produce the drugs if the pharmaceutical industry isn't negotiating a fair price. another is imposing a tax on excess profits, things like that. there is a lot of different
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mechanism. you have to have real teeth in negotiation ohs are it doesn't work. but then common sense. as i mentioned the pharmaceutical industry starts in the u.s. when they launch prices most often because they knownot negotiate. they have high pricing in the united states. they try to negotiate. for example, we know we spent 50% or 100 times more than other countries on drugs. not all drugs. many drugs. for example, in norway, humira is twice as much as what we are paying. printer is twice as much in australia. in those cases, the government negotiation results in a four fold decrease in price. then, another thing we know is, as i mentioned, many factory starts in the west. there are important policies beyond negotiation. the first is think carefully about the increases in price
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year over year. it is not a launch price alone. we have heard industry has had a hard time because it cost to engineer drugs. they increased prices year over year. when you think about how a price is tied to inflation year- over-year, it is important. as dr. miller mentioned, we need to understand the value of the benefit. >> i interrupted cause it is over the time. there is also a 1:30 pm pacified briefing for all members of the house. i think that it is important that everyone be able to get there. so, the gentlewoman yields back. i would like to recognize the judgment from georgia, esther carter. >> thank you madam chair. thank you for the hearing. i think each and everyone of you for being here. dr. feldman, you had a conversation earlier about list price . my calling before you mentioned about ms. list price.
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ms. bass you mentioned your concern was that price. let me ask you. a copayment to a patient, is it based on list or net cracks >> copayments are a set price. >> they are a set price. is that percentage based on the list price or the net price?'s >> it is typically based on the plan. in medicare, coinsurance is based on list price. >> if the list price is higher, the co-pay to the patient could be higher. >> yes. that mathworks. >> it is new math but it still works. great. let me ask you in medicare part d, also, patients go from deductible to the donut hole into the catastrophic. is that based on this price or is it based on net price?'s it
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is based on list price. the higher the list price, the quicker they get to the general, the quicker they get into catastrophic. if they get too catastrophic, then the taxpayer is one who is on the hook. they're paying the majority of it, not the plan sponsor or the insurance company. correct? that is correct. let me ask you, dr. feldman, you mentioned correctly, when ms. bass was asked about how many members or pbm's were in the nation, there were 66. however, you mentioned they were 3 pbm's that control 80% of the market. that is correct. not only that, but those pbm's that control 80% of the market also have an insurance company they own. they also own pharmacies. that vertical integration carries into that. you mentioned you have some patience who came in and had a letter that said they had to change a particular drug to something else on the formulary. just out of curiosity, any of those, the pharmacy is owned by the pbm?'s would you know that?'s?'s
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>> this is a particular pbm that is owned by an insurance company. >> exactly. in other words, the pbm is directing the patient to use a drug on the formulary through the mail-order pharmacy. it may not be a mail-order. we know that aetna owns caremark, and cvs. we know express scripts on cigna owns mail-order. we know that opt in is owned by united and owns the mail-order. what we essentially are talking about here is taking money out of one pocket and putting it in the other pocket. if you ask the pbm's, where are these details as the chair lady likes to say, or rebates going? these discounts. who is setting that premium?'s the insurance company that they own, in many cases. the vertical integration is something that is very concerning. let me change gears for a second. want to ask dr. miller. earlier
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we were talking about one of the parts of this deal that says drug companies would have to give notification before they went up on a price. there was concern about stockpiling. are you familiar with spread pricing and how that works? either of you?'s >> yes. >> okay. do you agree in her assessment, that if we know a pharmacy or wholesaler knows a price will go up, there is a possibility they will stockpile the drugs in order to purchase them at a lower cost and also to be able to keep them so that they can sell them at the higher price?'s >> my own comments are that, and i want to preface by saying, i do not think the transparency has a huge effect. >> did i ask you that 14 i was asking about spread pricing. >> i think i would say i would
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not do a prior notice. >> you would not do a prior notice. >> for the reasons you are raising. >> thank you. >> i would be concerned as well. >> i can tell you from first- hand experience from having been in business and owning a pharmacy for 30 years before it became a member of commerce congress, that was something we did all the time. the price was going up with but it at a lower price and stockpiled it. there is a danger there. i would wonder carefully in this legislation to be careful with that. it is something that could happen. madam chair, i want to thank you again for holding this hearing. also, the prescription pricing for the people, who have the investigation into potential anticompetitive business practices in the pbm pharmacy relationship, that is an issue our committee has asked the ftc to investigate. i hope, madam chair, that will come to us and we will have access to that report so this committee can look at it.
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>> thank you. >> i get back. >> i recognize the judgment from maryland, for 5 minutes of questioning. >> thank you. thank you to the panel. >> mr. isasi, i assume you're familiar with how regulators regulate their premium hikes that health insurance companies bring on an annual basis. where they ask for information to justify those proposed increases . and then, as well, we see the example of electric utilities who have two justify any rate increases that they oppose and
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provide a good deal of information. do you have a sense of how the height of information that we have available to us from the pharmaceutical companies or the pbm's compares to the kind of information that is available to the public or to the commissions that operate in those other arenas that i mentioned ? >> a much poorer quality. it is not being collected. you have to understand how the rates are being billed. it is is being collected. >> and, i am increasingly intrigued by using that example as a kind of reference point, to the kind of insight we should be getting into the drug pricing, because, frankly, i think, if you look at the
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impact on the public, of drug prices, it is hard to argue that it is not as expensive and permeating as those other things are, where we bring a different kind of approach. i wanted to ask -- i cannot see her name all the way down at the end -- -- >> call me lisa. >> and ms. bass, talking a bit about the excuse/explanation for resisting some of that transparency measures that we have suggested, based on the concern about proprietary information. what is the argument there exactly ? >> so, i will say the office of
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the actually and cbo as well, in suggesting that, if pricing becomes public, which it would under the secretary's rebate rule, prices go up by about 15%. in other words, competitors are not willing to discount deeply when they know the competition is less deep with discounts. the net cost, the way we talk about it, flows upward. probably, there would be, and we think it is about right, a 50% loss in effect of savings versus the increase. >> do you buy that, mr. isasi, and if you buy it, do you think the approach i was discussing a moment ago could be an antidote to the result that was just being described ?, i.e., if that kind of transparency creates some pressures in the direction ms. bass suggested, and the counter pressure could
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be authority residing in some governmental entity to come in and pushback on that ? >> that is right. that is the fundamental question here. just transparency with teeth. it is important to note that we need to have transparency with teeth and an ability for the government to come in and say -- and this is again, 80% republicans and 90% democrats are asking for -- to come in and say that is not a fair price and we will not pay. you have to combine both ings together. >> yes i am for transparency with teeth, just for the record. and maybe dr. douglas j. holtz- eakin wants transparency with teeth. you did at least observe the transparency loan might not alone might not achieve the goals we seek. i servicenow those misgivings. i think transparency in combination with other measures, we could take. it would get us to a place that
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we want to get to on behalf of americans who are paying too much for [ indiscernible ] drugs . with that i get back my time. thank you. >> >> the gentleman yelled back. now i want to recognize the gentleman from montana >> i continue to hear from my constituents about the cost of drug prescriptions and what they have to pay for drugs. during the first hearing on these prices come i spoke about a constituent in great falls who has lupus medication that increased by hundreds of dollars in recent years. the price increase put her and her family, made them financially on table. unfortunately, her story is not uncommon. we need to find common sense solutions, and i look forward to finding those
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with my colleagues across the aisle to make drug prices less six beds of, increase transparency, where needed, and put patients first. all the way appreciate the fair act, and understand what it is trying to a compass, as a business owner, when you look at the list of reporting requirements in the bill, i do have some concerns. it seems that there are requirements that manufacturers might not be able to provide answers for. dr. holtz-eakin, can you speak to the challenges of gathering the required information guarding research and development and manufacturing costs ? >> certainly. i think the reporting require months are extraordinarily expensive. if you started today and went back, you might not be able to do it, especially with smaller firms. going forward you have to put in place the mechanisms to collect on a regular basis. >> do you believe based on the complexity it might be the
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situation in certain firms that would not be able to comply with these new rules ? >> i would suspect that at the outset, yes . >> i'm also concerned that the fair act gives the secretary very broad authority to include other information that the secretary considers appropriate. typically, i would say i am all in favor of flexibility for the secretary, but the list of regulations in the bill is already incredibly robust. to me, it seems something was left out or needs to be added. and it should be done legislatively, as opposed to through the secretary. so, i just want to follow on if i can, 20 dr. holtz-eakin, can you speak to the estimate cost to consumers of these regulations ? >> i don't have an estimated cost. i want to echo something you said. you can imagine putting in place systems to collect data because want to comply with the
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law assuming it was passed. the secretary changes the nature of information you have to provide. you're now back at the situation we have not collected. you have to go back. it could get progressively more costly if that is how it transpired. >> so, if you cannot comment specifically on cost, if all these new reporting requirements were signed into law, and the secretary decided there was more information that he needed, i do think that would affect new drugs coming to market ? >> i think it would be more costly to provide and they would be more expensive. >> which is not the objective we are starting four. questioned if i could, for the whole panel, i support transparency across healthcare. i think consumers need to know exactly what they are paying for. it is my understanding that the rationale behind these bills is that the federal government is a large pay are in the system today. therefore we need to know about price increases. that make sense. i support the idea of flagging large increases in price. but, looking at the whole picture, pharmaceutical spending accounts for less than 20% of what the government spends on health care.
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other other aspects of healthcare in the 80% that need to report price or fee increases as well to the federal government ? for example, do hospitals have to report increases in surgical supplies or procedures that medicare is going to cover ? >> one thing to keep in mind is hospitals on the medicare side do reports a cost report. and they do layout what their cost structures are. however, you have a very similar situation in the hospital industry, where you have high degrees of consolidation, and high prices escalating. there is certainly a question that can be brought to bear in there. >> we're told every year how much we are paid. that information is already out there. >> so we should be arguing, we should be working for transparency in all areas.
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would anybody else like to add anything ? >> i strongly agree with that. the problem with pricing in healthcare is it is not just a farm issue. it is a big pharma issue. >> are consistent constituents expect us to look at all the healthcare cost, certainly dogs. more broadly. comments ? >> i would like to just follow up quickly on something that representatives are beans raised. he did mention representative greg gianforte five rays. the fact that they have to give advanced notice. >> my time is up. i yelled back, and i'm chair. >> he yells back. i recognize the gentleman from kentucky, mr. guthrie. >> thank you very much. i apologize. i was in another hearing where i was on the wrecking subcommittee. i missed a fair amount of this. i know where pushing against a deadline. for dr. feldman and dr. holtz-
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eakin, medpac recommended the information provided to the secretary regarding temples be shared with specific other entities. how might this information be helpful to oversight agencies , researchers, payers and health plans ? and how is selectively sharing this information different from publicly posting it ? >> public posting it leaves it open to anyone with any opinion to create a campaign on twitter and various social media, which can lead to false impressions of what the samples really do accomplish for patients. >> i think that is the chief concern. the professional analysis of the data should be welcomed. >> thank you. everybody here wants transparency and lower drug prices. we have to get this right. we're looking at a spike in the fair act. it used different definitions for manufacturers, while the fact uses the proper food and drug and cosmetic act
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definition, the spike act uses a definition for a manufacturer that is improper. the drafted concerns have been raised that, while the intent of the drafters was to provide descriptions of the manufacturer on which materials will justify, the spike disclosure, the language is not clear or prohibitive that the secretary cannot reject such a justification or ask for additional disclosures from the manufacturer. the question is, do you agree that this is an issue, and if we pursue, the language needs to be clarified ? >> i do. >> what are the issues that would happen if you did not clarify?'s the issues, if it was not clarified, it would open up to -- >> it was not clarified, i think that, given the notification will comment, in that bill, i think manufacturers would believe they have to provide every single thing. listed as in the bill, regardless of whether it was applicable to the actual increase or not.
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>> as our colleague mentioned, their fair act is the better route ? >> they both have issues that we would like to work with the committee on. >> the get. one other question, dr. holtz- eakin. you noted, there are elements of transparency that can have inverse market impacts. can you explain this issue more and how congress can ensure helpful transparency is done while not driving unwanted behavior ? >> we simply don't want to disclose the outcome of other people's negotiations. so they take advantage of it. the kind of transparency is kind of productive. >> can you give me an example ? >> for example, if mark cut a deal on a rebate for his drug and i found out about it, i would say, i can get that rebate. that would lead the negotiation to have less vigor the next time around. they would not be such a big rebate. >> think you.
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i yield back. >> >> the gentleman yells back. the gentleman yields back. i recognize that gentlewoman from illinois, the sponsor of the fair drug pricing act, jan czajkowski, 5 minutes. she will be the last member who is questioning. jan schakowsky . please hold on, testify. we are almost finished. >> i think that chairman for allowing me this. this is where people with multiple sclerosis are facing, for example, schilling increases over 3 years showing increases over 3 years of the cost of their drugs. this one went from $65,000 to $92,000 in those 3 months. this drug went from $62,000 to $88,000 in 2 months.
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in those 3 years. i am sorry. i also, the whining that is going on about having to talk about some transparency is really irritating to me. the drug companies tell us all the time it is about research and development. it costs so much. how much ? that is the question in the fair act. my bill. how much ? if you're going to use that as an excuse for raising the prices, then i think we have an absolute right to know how much is being spent. the 10 top drugs advertised on television, and we will see, because of the cooperation with the president of the united states, those list prices, next to the drug on television, that 10 top once, every month, it is either between $500 per drug up to $17,000 per drug per month.
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and so, we want to know, how much are you really spending on marketing and advertising ? believe me, these are not extraneous questions. these are what consumers want to know. they want to know the manufacturing cost. they want to know how much money are you making ? i cannot afford short medications, they say, and so, i am going to get sick . i want to know, how much you making off of me when i can actually pay for this ? really, the idea that transparency is going to cause all these problems, and problems for consumers, i wonder, if my friend, mr. isasi, could enter that. >> >> it is mr. isasi. no problem. i would say, we share your skepticism about this concern very much. at the very least, as you say,
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when people's lives hang in the balance, and the make decisions that in some cases end up in debt because they cannot afford drugs, the very least is there could be more transparency about how the funds are spent. the makers of the top 12 best selling drugs in the u.s. have on average 25 patents per drug for an industry filing 125 patents per drug, it seems like a little transparency on how they are spending their money is not much of a burden. >> i really appreciate that. we do have to go to a classified briefing. i just want to say, i think, at the very least, consumers deserve transparency. but, i also want to agree with you, it has to be with teeth. we are going to do more than just getting transparency. we are going to have to lower the cost of prescription drugs. apel are dying. they cannot afford it. this is just the beginning. thank you very much, and i yelled back.
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>> the gentlewoman yields back. pursuant to committee rules that members have 10 business days to submit additional questions for the record, to be answered by the witnesses, who have appeared, and i asked each witness to respond as promptly and as fully as possible the questions you receive, i ask unanimous consent to enter into the record the following documents. letter from the american society of medical oncology regarding hr 4296, 2087, 2164. letter from the campaign for sustainable prescription pricing in support of 2296, 2069, 2087, 21 2064, 2757, letters from aarp in support of 2296, 2069, 2087, 2115, and 2164. letter from the national multiple sclerosis society. and a letter
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from the alliance of specialty medicine with regard to hr 2113. without any objections, without objections, the documents will be placed into the record. i want to thank all the witnesses once again who have been here for 3 hours. you have worked hard. and i think the hearing has been worthwhile, more than worthwhile, recognizing that we have a deal to do. i also think that we need to really scrub the written testimony, because many of you have really put forward worthwhile ideas that we did not get to ask questions, and, they are worthwhile, and deserve
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the full attention of committee members. so with that, the house subcommittee will now adjourn. >> [ meeting adjourned ] >> this week marks the 50th anniversary of the apollo 11 moon landing, and a new c-span poll shows nearly three fourths of americans watch footage either live or recorded of the moon landing. >> 10 minutes and counting. >> starting tonight at 8 pm eastern, what's the 1969 cbs 4 of the apollo 11 mission, beginning with flight preparations. >> we have final checks and
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tracking beacons. this is the guidance system for the power phase of flight. >> we have liff.. 32 minutes past the hour. left off on apollo 11. >> that is one small step for man. one giant leap for mankind. >> on saturday at 8 pm eastern, the landing and moonwalk. >> columbia, this is houston reading you loud and clear. >> sunday morning at 10:30 am eastern, coverage of the apollo 11 returning to earth and greetings from president richard exam. >> i want you to know i am the luckiest man in the world. i say this not only because i have the honor to be president of the united states, but particularly because i have the privilege of speaking for so many in welcoming you back to earth. >> watch the 1969 news coverage of the historic apollo 11 mission on c-span and . or listen with the free cspan radio app.
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>> two this weekend on our companion networks, congressman derek,, chair of the new democrat coalition, and chairman of the select committee on modernization of congress, will join us to discuss his legislative priorities. he is on newsmakers, sunday at 10 am and 6 pm eastern on c- span. >> sunday night, on c-span's q&a, -- >> we found public officials, the people who really govern this country, not congress, not the president, it is bureaucrats, they wrote thousands of rules and regulations with the force of law. we found out they do not think much of ordinary americans.
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>> benjamin ginsberg, professor of political science and chairman of governmental studies at johns hopkins university, discusses his book, "what washington gets run, the unelected officials who actually run the government and their misconceptions about the american people." >> we learn we elect a congress that makes law. the president executes the law. the courts review the laws. that isn't exactly how the system works. i am not sure what we think of as the law. it consists of rules and regulations written by bureaucratic agencies. by bureaucrats who were not elected by anyone, and who often serve for decades. >> sunday night at 8 pm eastern on c-span's q&a. the justice department recently held a forum on anti- semitism. education secretary betsy devos look to the gathering about college students protesting the policies of the israeli government. >> [ applause ]


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