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tv   Senate Hearing on Lowering Prescription Drug Prices  CSPAN  March 28, 2021 10:03am-11:57am EDT

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monday, watch live coverage of the trial for derek chauvin, who's charged in the death of george floyd. watch the trial live at 10:00 a.m. eastern on c-span2, on demand at, or listen on the c-span radio app. >> next, health care advocates testify on how prescription drug prices in the u.s. compared to other countries. they were also asked about the drug development process and how congress can have a role in reducing costs. this is just under two hours.
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>> let me thank all the subcommittee members who will be participating and those who will be participating virtually in a few minutes. there is an interesting >> let me thank all the subcommittee members who will be participating and those who will be participating virtually in a few minutes. there is an interesting debate among the people of this country about which powerful special interests have the most clout on capitol hill. some people think it may be wall street and some people may think it's the military-industrial complex, i myself, i may be wrong, but i would give the nod to the pharmaceutical industry, an industry which charges the american people by far the highest prices in the world for prescription drugs and has managed to create a situation where they can raise their
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prices to any level they want, any day of the week. today people walking into a drugstore, walking into a pharmacy, the pharmacist is telling them the price of your medicine has substantially gone up. that's what the drug companies have done. drug companies are in industry wood year after year make huge profit and they pay their ceos incredibly large compensation packages. it's an industry that is significantly responsible for the fact that in the united states, we pay almost double what any other country pays. it is an industry which has an incredibly opaque pricing system which pays one branch of government, which charges one branch of government a very different price than it charges another for the same exact drug.
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medicare will pay a price, medicaid will pay a price. the veterans administration will pay a price. offer the same exact drug. that is true for hospitals, nursing homes, and for individuals. very hard to know what they are charging anybody else. this is an industry that has paid $32 billion in fines for a variety of illegal actions over the last years, including price-fixing, overcharging state and local governments, bribery, collusion, fraud and deception. and yet this is an industry that keeps going on its merry way year after year. how do they get away with that? it is not hard to understand. during the last 23 years, drug companies have spent $7.6 billion on lobbyists, including the former leadership of the democratic and republican parties.
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there are more than 1500 lobbyists in washington, d.c. they have 1500 lobbyists as well as lobbyists in every state capital in this country. since 1990 have spent nearly $730 million on campaign contributions which have gone to many hundreds members of congress in both political parties. let's be clear, the pharmaceutical industry is not particularly sympathetic to the republican party or the democratic party. they try to buy both parties. it is fair to say it is not congress which regulates the drug companies but the drug companies which regulate congress. that has got to change.
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congress, finally after years of talk, has got to summon the courage to take on the drug companies and lower prescription drug prices. that is what the american people want and that is what we need to do. one out of five americans could not afford to buy the medicine prescribed by their doctor. how crazy is that? going to the doctor, getting a diagnosis, getting a prescription, but not affording to fulfill it. meanwhile americans are dying are getting sicker than they should because they cannot afford medications they need. nine large drug companies made over $58 billion in profit last year. just six pharmaceutical industry ceos made $564 million in total compensation over the past three years. not too shabby.
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every day in my office and i'm sure every congressional office we hear , stories of americans not able to afford prescription drugs they need. today we will hear from eliana spates who will tell us how the outrageously high price of insulin has impacted her life. she is not alone. in 2018, one out of every four americans with type one diabetes were forced to ration insulin because they could not afford it. let's be clear. insulin is not a new drug. it was invented almost 100 years ago by scientists who sold the patent rights for just three dollars because they believed it should be accessible to everyone who needed it. and yet over the past decade the , price has gone up over 300%.
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yet 50 miles from my home in vermont you can purchase insulin in canada at about 1/10 of the price in this country. let's be clear, prescription drug prices in canada are also high compared to other countries around the world. according to a study, a standard unit of insulin cost $98 in the united states, $12 in canada, $11 in germany, six dollars in austria. -- in australia. it is not just insulin. a drug to treat crohn's disease cost $81 in canada. $830 in the u.s. one inhaler cost $242 in the u.s., $27 in canada. two epipens cost $278 in canada. on and on it goes.
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the same medicines manufactured by the same companies all available in countries around the world at a lower price than here in the united states. in my view we can no longer , tolerate the system that allows the former ceo of gilead to become a billionaire by charging $1000 for hepatitis c drug that costs just a dollar to manufacture and can be purchased in india for four dollars. we cannot tolerate a system for a chairman to receive a millions of dollars package after his company jacked up the price of epipen's by 550%. all over this country, the american people are asking a simple question, how many people need to die, how many people
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need to get unnecessarily sicker because congress is not prepared to take on the pharmaceutical industry? the people are demanding congress listen to their concerns and not cower before the power of the pharmaceutical companies. i've introduced three bills with many of my colleagues in the senate and the house that would substantially reduce prescription drug prices in this country and save the federal government money. the first bill is the prescription drug price relief act which would cut prices in half by pegging the price of medicine in the u.s. to the median price of five countries. the second bill is the medicare drug price negotiation act which would direct the secretary of health and human services to negotiate lower prices for pop -- for prescription drugs under
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medicare part d. every country on earth negotiates drug prices and it is overdue for medicare to do the same. according to a recent study, if this bill became law, the u.s. government could save more then $345 billion over the next decade. the third bill, the importation act would allow patients, pharmacist, and wholesalers to purchase safe, low-cost medicine from canada and other major countries. we import all sorts of stuff, no reason why we cannot safely import prescription drugs. with that, the bottom line is we have been talking about this issue for decades. it is time to act. senator collins. sen. collins: thank you for holding our first subcommittee hearing on an
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issue in which i hope democrats and republicans can find common ground. that is improving the affordability of prescription drugs. when a doctor prescribes a needed medication, an insurmountable barrier to taking it should not be its cost. more than half of americans, an overwhelming majority of our seniors take at least one , prescription drug each month. for many, access to these medicines not only is critical to their well-being but also can literally be a matter of life or death. during my recent tenure as chairman of the senate aging committee, one of my priorities was to uncover the reasons pop -- spikes in pharmaceutical drug four prices and to help make medicines more affordable for more americans. i led a bipartisan investigation
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with senator mccaskill on price spikes of off patent drugs and the manipulation of the market. i also worked with senator bob casey to investigate entities in the opaque market for pricing of prescription drugs such as pharmacy benefit managers. our committee also held hearings on the price of insulin and drugs to treat rheumatoid arthritis, listening closely to patients and other witnesses. the answer the agency answered -- received resulted in several bills signed into law. for example, the making
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pharmaceuticals were competitive act provides an open application process for generics. it expedites the timeline to fda to review and approve applications. since the enactment of this law, not only are we seeing more applications, but approvals are up considerably with 28 priority generics and 35 competitive generic therapies approved in 2020 alone. the patients'right to know act -- drug prices act banned gag clauses. they prevented pharmacists from telling their customers if there prescription would cost less if they pay for it out of get -- out-of-pocket rather than using their insurance plans. this legislation required the disclosure of settlements reached between biologic and bio
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similar developers to the federal trade commission. this has been required of generic drug developers since 2003. at the end of 2019, congress passed legislation that will improve and streamline the fda approval process for new forms of insulin which should usher in more competition into a category that has seen huge and unwarranted price increases. at a hearing of the cost of insulin in 2018, a father from new gloucester, maine, testified that insulin for his son had tripled in price, forcing him to purchase from kam at her -- from canada at a lower cost, similar to what the chairman has described.
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the cost of insulin is one of the most prominent examples and i am grateful a constituent of the chairman is here to share the story. as cochair of the diabetes caucus which i founded in 1998, senator shaheen and i introduced legislation to create a new pricing model for insulin which was first started a century ago in canada and has soared in price. recently we have seen nascent steps on insulin availability. -- affordability. more than 1700 medicare advantage plans have agreed to cap monthly co-pays for insulin at $35. additionally, manufacturers are adding more affordable options such as eli lilly's $35 co-pay program which has been available during the pandemic.
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these are good first steps but i hope we can do much more. another focus area is biosimilar competition. later this spring, along with my colleague senator tim kaine i , will reintroduce the biologic transparency act to prevent drug manufacturers from gaming the patent system. time is money and it comes to thwarting the competition. there are reports that the manufacturer of humira filed 247 patent applications for this drug and one that could have protected the medicine for up to 39 years from any competition. the price of humira increased by an additional 6.2% in january of
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2019 to offset price reductions from biosimilar drugs overseas. mr. chairman, in the last congress, three committees, health, finance, and the judiciary committee all advanced bipartisan bills to reform our broken drug pricing system. i was a cosponsor of a bill in the last congress as were several members of the subcommittee. hhs secretary and i spoke about drug prices at length during his nomination process. let's bring this bill to the senate floor as separate legislation so we can have full and open debate and amendments to come up with the best solutions. we want new medicines to reach consumers and for pharmaceutical companies that invest in the research and take the risk necessary to
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develop these drugs and see a fair return on their investment. but we must do more to ensure these essential medicines are more affordable and their prices transparent. i hope today's hearing will help us craft policies to strike that balance. thank you, mr. chairman. sen. sanders: thank you, senator collins. we have an outstanding group of panelists. let me welcome our first panelist, dr. aaron kesselheim. he is a faculty member in the division of pharma copan -- at bruggeman will -- brigham and women's hospital. he created a program on regulation of therapeutics and law and a research program focusing on prescription drugs and medical devices.
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he has authored over 450 publications in peer-reviewed medical and health policy literature. thank you very much for being with us. >> thank you, senator sanders, ranking member collins, and members of the committee. we are here because the u.s. spends more on drugs and any -- than any other industrialized nation. high u.s. prices driven by spending on brand-name drugs, most of which have been on the market for several years. they are subject to price increases. drugs have accounted for medicaid part b spending and -- we compared with japan, switzerland, germany, and the u.k., and found prices up to 60% lower in those places. how is this possible? the u.s. allows drugmakers to
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set prices after fda level at -- approval at any level they want and they require medicare to pay. secondly they allow , manufacturers to raise those prices beyond inflation. manufacturers extend third, expressivity by building patents to delay generic entry. other industrialized nations inn payers in the u.s., have strategies to address these issues. the first is to address excessive drug prices to evaluate and negotiate. the defense department isn't forced to buy at every price raytheon conceives of. the approach and other countries begins after regulatory approval with health technology assessment, in which independent organizations determine a fair price based on how well the new drug performs.only if the drug provides more benefit to patients should accost more than other options. the u.s. needs to establish a
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publicly funded body to determine a price for a drug based on clinical benefits. in germany, drug evaluation and negotiation occur in a drug's first year when a nonprofit, nongovernmental research organization assesses benefits. in a review of outcomes in that market, we found no drugs providing important benefits left the german market, while cancer drug prices substantially declined. states like new york and massachusetts have initiated a review process for medicaid programs. my second recommendation is to limit drug price increases. in the u.s., there was a list price of $26,000 a year and increase to more than 120 thousand dollars a year in 2016. many brand-name drugs provide rebates to commercial payers in medicaid part d plans, but that only offsets some price increases. by contrast, and other countries, agreements between the government and payers restrict price increases. we found spending for a cancer
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drug increased from 2010 to 2018 for about $400 a unit to nearly $700 a unit, while during the same period in france, it decreased to $202 a unit. one model would be to extend drug price inflation rebate penalty currently in place for medicaid. deals were introduced in the prior congress with bipartisan support for this plan as ranking member collins mentioned. a final component would be to arrange for more efficient transition to a competitive market. generic or similar entry is often delayed in the u.s. because of patent tickets -- here, lessons on how to improve and experience in the u.s. could come from other countries. . results from foreign patent offices suggest the u.s. patent office to reduce the number of wrongly issued patents by allocating greater resources to ensure quality. in addition, we could leverage the appeals board set up by the 2001 america invents act to lead out -- weed out invalid patents
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before they get caught up in litigation, by reviewing patents lifted -- listed by the fda. there's my prescription, informed by successful policy initiatives in other countries and u.s. states. independent therapeutic evaluation leading to price negotiation limits all price increases and efficient generic entry at the and of market exclusivity. any drug price for duchenne -- reduction need not decline innovation. to ensure new therapeutic insights, we must augment supports of the nih. transforming this often results in transforming drugs. in reality, these policies are likely to actually improvement in full intervention. in the last decade, only one third of new drugs in the u.s. were rated by one of these
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international independent organizations as having even moderate therapeutic benefits. if drug prices more radically -- adequately reflected the clinical benefits, this would incentivize more meaningful innovation and there would be less investment in making trivial changes to existing products, and more investment in meeting unmet medical needs. generous rewards would still be provided for creating important new medicines. most important a, policymakers can rest assured more patients would be able to access vital products at an affordable price. thank you very much. sen. sanders: dr. kesselheim, thank you very much. our next witness is dr. neff resort -- is dr. persaud, a staff physician and scientist at st. michael's hospital in unity health toronto, where he provides care to patients and
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leads studies as part of the m ap center for urban health solutions. thank you so much for being with us. dr. persaud: thank you, and good morning. in canada, per capita, drug spending is $879 versus over $1200 in the united states. per capita spending is about 40% higher in the u.s. largely because of patented drug prices by the canadian patent review board. it's approximately three times lower in canada. the review board is slated in july to drop the united states from its list of countries to compare to, because prices are shockingly high in the u.s. compared to other countries including the united kingdom. the market in the 19 90's boosted per capita spending disproportionately in the u.s. the rise was partially due to
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patented opioid products like oxycontin, illegally patented, on the rise than less expensive alternatives.pharmaceutical companies continue to profit from the crisis that continues to kill 85,000 americans in the twelve-month period ending in may 2020. multiple government reports over decades have recommended, including medicines in canada's publicly funded single-payer system, to improve fair access and save billions each year, but this has not happened, so we continue to pay high prices that comfortable countries like norway and australia don't pay. inequities persist in canada. america is a superpower that has not shown his strength against pharmaceutical companies that rip off americans. my colleagues and i have conducted a randomized
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controlled trial of distributing essential medicines, as per international guidance from the world health organization, for people not able to afford drugs. we found improvements in control of blood pressure and diabetes, and total health care savings that averaged more than $1000 per patient per year. the biggest benefit was the ability to make ends meet or afford basic necessities like rent and food.only 29% in the usual access or control group could make ends meet, but 86% of those who did not have to pay out-of-pocket for medicines could afford necessities. a farmer in that study, for example, was better able to grow food when he had his asthma drugs. this is already working at the united states veterans administration. since its creation in 1997, the v.a. national has led to improvements in care and negotiating power has led to price reductions. the approach at creating a list of medicines and then using the message to negotiate prices
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works with international's a model that could be adapted to a larger scale in the united states. there are three key elements of government action to reduce drug spending while promoting access in equitable care. one, punish abusive pricing of patented medicines by creating a new bureau. create a new bureau to set price ceilings and give that bureau the resources to keep prices low and empower them to issue compulsory licenses when companies price patented medicines and reasonably. they should be able to cut annual drug spending by at least $100 billion. two, use negotiating power to secure low prices on a defined set of essential medicines as per international guidance. negotiating power can help ensure equitable access to needed medicines including off patent or generic medicines. three, use existing legislation and additional political will to discipline companies currently bloated by high medicine prices that illegally market products. there is a need for urgent
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action. americans are getting ripped off by more than $100 billion per year, and this money in the wrong hands is used to illegally market medicines that kill americans. thank you. sen. sanders: thank you very much, dr. persaud. next, we have ms. leo bates who was diagnosed with type 1 diabetes when she was 18. the associated costs have transformed her into an advocate for lower drug prices and better health care. thank you so much for being with us. ms. spates: thank you. my name iselia, -- my name is elia, i was diagnosed with diabetes and quickly my parents and i had a crash course. right now it takes over $2000
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out-of-pocket per month. the rise i've seen in this price out of 23 years is astronomical. from 2002 to 2013, the cost of insulin tripled. when you pay over $800 per month for an individual and pay an additional $2000 per month until your deductible is met, your family starts to feel a financial pinch. the only way you see to cut back is to cut back on insulin and before you know it, your diabetes is out of control, your blood sugar spikes dramatically, seizures happen, and you are found unresponsive. it is time to treat this disease seriously. the financial side of diabetes is as much or more of a burden than the disease itself. i'm certainly not the only diabetic out there who has rationed insulin to help stem off a steadily accumulating debt. in fact, 45% of diabetics at one time or another will compromise their care to cut cost.
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however, what's happening is those who are not as fortunate land themselves in the hospital. in traumatic circumstances, they may even die. 7.5 million americans rely on insulin. 1.5 million of those are type one diabetics. a few years ago, my doctor suggested going to canada. i live just four miles from the canadian border, so this is logical. until you give it one ounce of thought, i pay over $10,000 a year in insurance premiums so i can go purchase my insulin in another country and it doesn't count toward my deductible. it is completely asinine to think i would go to another country to buy inexpensive medication and yet pay for health care plan and my own country that is only compounding my problems. twice, i have arrived at the pharmacy to pick up medication that was prescribed by my doctor and both times i was told my insurance company would no longer cover that brand without prior authorization. however, they were happy to cover another suggested brand that was similar, but not
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bioequivalent. with this medication, it had taken me over a year to get it approved by the insurance company and i was finally having success using it. now it was being disallowed? it is infuriating to know that in one fell swoop, your perfect combination can be undone by the companies that produced the medication, and the pharmacy benefit -- benefits managers who market to insurance companies, who now give a preferred status. just six months later, and insulin i had been on for over four years became no longer an option. once again, it needed a prior authorization, but there was a similar medication i could have. had this been the difference in brand name to generic, i could have understood. however, this was from one brand name to another. in fact, it was five dollars more out-of-pocket for me. it doesn't take a genius to figure out this was happening because of how the money passes between the hands of the producers of the insulin, the pbm's, and insurance companies.
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i would appreciate being a part of a good business deal when i see one, and as a woman in business, and understand supply and demand. i was raised in the humanitarian principles of achieving success, doing things ethically, and watching the bottom line to make a profit is essential. it is however, unethical, unscrupulous, and completely wrong to gouge people, particularly so at the expense of their health. to think we are outpacing our own citizens in virtually -- and virtually holding out of reach of scientific marvels to those who need it is an embarrassment. we have seen a 300% rise in our cost of insulin in just a matter of years. in the same amount of time, canada has seen virtually no rise in cost at all. three major producers of insulin have all had the same price hikes over that time. it is interesting that pharmaceutical companies provide amazing rebates on these products, yet the bulk are cashed in by the pbm's and not consumers. this provides preferred status on the insurance companies
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formularies, hardly an arm's-length transaction. rebates alone have risen from 2% in 2013 to 56% in 2018. 100 years after the invention of insulin, there are of course generic insulins out there that were formulated. my understanding is they sit on a dark and dusty shelf in the back of the room titled "pay for delay." this is that plan in which big pharma companies pay off generic companies to delay release of product. big pharma gets to keep the largest part and the generic company makes even more than if they put it out on the market, and i continue to pay top dollar. and middle school student working their vocabulary list can tell you that is a perfect prescription for collusion. there are days that it's almost impossible to contemplate the unethical, immoral, american health care environment of pharmaceutical system created out of greed. i have to believe those who perpetuate it probably have not been burned by.
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it is more than likely they don't feel the initial pressure of the extreme premium because they don't have to pay them. those participating probably don't drop thousands in deductibles either. i am certain they don't show up at the pharmacy counter to find out than medication that had finally put them in good health is now not allowed because their insurance company had a different option, one not discussed with them or their doctor. those perpetuating this travesty are probably also benefiting from some of big pharma slice of the financial pie. so when we ask the question why does the u.s. pay the highest price in the world for prescription drugs? the answer should be given by elementary school children because it is that simple. it is simply because of greed. we are fooling ourselves and the citizens of this country by behaving like we don't know why we pay more. we all know. the question becomes who is going to fix it? who is going to put themselves out there? who is going to take the high road and not the handout? who will save lives at stake, and for once put yourself in
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those shoes and do what you would want done for you, your parents, your wife, your brother, your son, your daughter? this is a bipartisan issue. make it one. do what's right and do it quickly. sleep well at night knowing you help the people who buy voting and trusted you with their well-being. thank you. sen. sanders: ms. spates, thank you very much for your remarks. our last panelist is mr. alex brill, a resident fellow at the american enterprise institute and -- a public policy think tank in washington, d.c. previously, he served as chief economist and policy director for the house committee of ways and means and on the white house counsel of economic advisors. he has an ma in mathematical finance from boston university and ba from tufts university. thank you very much for being with us. mr. brill: thank you very much,
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chairman sanders. i must confess the power went out in my office and i hope this connection on my cell phone works. i appreciate the opportunity to appear before the committee to testify on this important topic. as you mentioned, i'm a resident fellow at the american enterprise institute. my recent testimony has been submitted to the committee for the record. it offers three broad observations and a series of policy recommendations that i will briefly summarize. first, perhaps predictably, the importance of innovation in the pharmaceutical sector. pharmaceutical innovation plays a critical role in improving health and well-being and never has that been more important and more evident than today, as multiple highly effective coronavirus vaccines being brought -- were brought to the market in short order. the vaccines were the result not only of work that began after march 2020, but decades of
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research funded by public and private investment and of course, extraordinary support by the fda. policies to curb u.s. drug costs must ensure adequate reward for future innovation. this is not an endorsement of the status quo, but a recognition of the importance of new medicines. second, with respect to drug spending, u.s. prescription drug spending was $368 billion in 2019, nearly 10% of national health expenditures. it is important, however, to note the drivers of this cost. biologics are driving much of the increase in national drug spending. in inflation-adjusted per capita terms, biologic drug spending increased from less than $300 to over $400 per capita from the period 2014 to 2018, while traditional, small molecule drugs and pills fell under inflation-adjusted per capita basis in the same time. notably, out-of-pocket spending,
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the patient cost, as a share of total drug spending, has declined significantly over the last two decades from roughly 28% to roughly 14% in 2019. out-of-pocket costs for those with the highest expenses who are low and moderate income actually fell and out-of-pocket costs for those patients rose for those with higher income. of course, however, these broad trends are important to recognize, but they can also mask high financial burdens experienced by some patients, as we have heard already this morning. third, the importance of balance. the success of the u.s. pharmaceutical market is a result of a dual mandate embodied in a landmark 1984 legislation known as hatch waxman. this sought to allow meaningful
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rewards for innovation. today, we have the pharmaceutical innovation i referenced a moment ago and a generic industry that fills 90% of all retail prescriptions yet represents just 20% of overall drug spending. . that average co-pay is just seven dollars. our peer nations are not as successful. across the oecd, over half of all prescriptions are filled with generic medicines. there are, however, important opportunities to further foster competition and realize additional job -- drug savings. my written testimony notes six areas where i believe bipartisan cooperation can ensure more timely entry of generics without discouraging risk-taking without medicines. let me highlight just three. first, they have already roughly $37 billion but more can be
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done. one approach would be to align the incentives of prescribers with payers and patients. this can be achieved with the proposal for the finance committee or the demonstration operated for medicare part b. second, the importance of complex generic medicine and approvals in the united states. congress should ensure the fda has the resources and incentive to review and approve complex and generic applications. i have estimated seven such products not available here but are available in canada re: dutch or europe, bringing them to the united states can save $1.3 billion a year annually. finally, patent thickets. innovative drug companies are building patent thickets around lucrative products but obtaining myriad overlapping patents. to deter generic challengers is the intent of these efforts.
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without policy reform, these tactics will become a playbook for all innovator companies in the future. thank you for the opportunity to testify. i look forward to your questions. sen. sanders: thank you very much, mr. brill. let me start off the questioning, let me ask a very simple question. i recall about a year and a half ago, i took a trip from detroit, michigan into ontario with a number of folks from the midwest who were diabetic. we purchased insulin, the same product made by the same company, for 1/10 of the price. 10% of the price. somebody jumped in, dr. kesselheim, dr. persaud, why is it that in canada, tell us
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simply, you can purchase the same exact widely used product for 1/10 the price that it costs in the united states? dr. kesselheim: you are the canadian. dr. persaud: thank you. to the question, two reasons. first, patented medicines have prices regulated in canada. because there will not be competition, if you want to pay a reasonable price for patented products, you have to regulate the process, that occurs in other countries -- no sen. sanders: i apologize for interrupting you, is there any other country that one way or another regulates the price of the drugs or allows the company to charge any price they want? is there any other country other than the united states that allows that? dr. persaud: no. sen. sanders: ok.
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dr. kesselheim, did you want to jump in? dr. kesselheim: sure. no, there is no other country that does that. we are unique in the world that allows pharmaceutical companies to charge whatever they want. as a result, the only intervention in the u.s. market that lowers prices is the availability of interchangeable generics, which unfortunately for insulin, we don't have any, and as a result, prices have not fallen because there is no pressure, no governmental pressure at all for pharmaceutical companies to lower prices to the same extent there is in canada. sen. sanders: let me ask the doctors another question. it is estimated one out of four americans cannot afford the prescription drugs doctors prescribed.
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what does this mean for the health of the american people? if i am sick and i go to the doctor and he writes a prescription i cannot fill, what impact does that have on the u.s.? dr. kesselheim: there are numerous studies showing the high price of drugs can lead to nonadherence which is when patients don't fill their prescription or use less of the medicine in ways that are ultimately harmful. studies led by people in our group show that when people are prescribed higher cost medicines instead of equally effective lower cost medicines, that can lead to worse patient outcomes. it is truly something that is problematic for patients and something we can fix. sen. sanders: let me ask you this, dr. persaud, you may have done a study on this. tell me what i'm missing here. if i cannot afford my medicine and i get sicker than i should
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be, may i end up in the emergency room, maybe in the hospital, is it possible in fact that we end up spending more on health care because people simply cannot afford the medicine they need? dr. persaud: yes, senator, that's exactly what we found in our study. when provided medicines to people who cannot afford them, there were savings of more than $1000 per year per patient. that was due to avoided emergency room visits. we are talking about lifesaving medicines we know work, treatments for high blood pressure and diabetes. when people are able to take medications, they are healthier. we found people find it easier to make ends meet to afford their rent and food and other things like healthy housing, healthy food that people need to be healthy as well. sen. sanders: so what you're are saying is that the high cost of prescription drugs results in
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people getting sicker than they should, and in fact, costing health systems more money than we should be expending? dr. persaud: yes, you are paying at least twice. once the higher price for medicine and second when people and up at the hospital with a heart attack or stroke. sen. sanders: which could have been prevented? dr. persaud: absolutely preventable. sen. sanders: senator collins. sen. collins: thank you, mr. chairman. before i begin my questions, i would ask unanimous consent that a statement from senator burr be submitted to the record. sen. sanders: without objection. sen. collins: thank you. mr. brill, you mentioned the role of patent thickets in blocking access to more affordable biosimilars. you talked about how biologics are very expensive and are
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consuming an increasing amount of the cost of prescription drugs in this country. even though there are several bio similars for the best-selling drug in the world, humira, and they have an in the -- been on the market in the european union since 2018, american patients must wait another two years for them to be available here due to the manufacturers that grab the patent thicket strategy of overlapping and late file patents. another strategy is called a drip feed strategy were knowledge broadly disclosed in early patent applications is defined much more narrowly and specifically in subsequent patent applications, and they are using this strategy for a
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cancer drug that it has. how should congress ensure we are recognizing the innovative science versus rewarding and innovative legal strategy that is designed to block more affordable competitors by gaming the patent system? mr. brill: thank you, senator, for your question. the issues of patent thickets and strategies employed by some innovated countries -- companies should be very concerning to policymakers. i think we are in the early innings of what will become an evolving set of tools that many innovator drug companies may be engaged with to protect assets. this runs completely counter to the objective of competition for biosimilars.
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we have these pathways through the fda to create and foster generic competition and the patent system is getting in the way. i know you have introduced in the past legislation with senator kaine, senator cornyn, and senator blumenthal focused on addressing these issues and finding ways to protect core patents and appropriate patents, but to block or prevent the ability of innovators to stack patents on top of each other and create undue, unnecessary, excessive monopoly powers for their products. sen. collins: thank you, i think this is an area that cries out for reform. dr. kesselheim, the veterans administration has authority to negotiate favorable pricing and deeper discounts.
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but we also hear complaints that they have a national formulary and we get complaints in my state offices from veterans who need drugs that are not available on that formulary. how to become up, if we move to a broader use of negotiation by the federal government while still ensuring there is patient choice of medications? that their physicians can still prescribe, and they can still get reimbursed under the terms of their insurance for the medications best suited for them? dr. kesselheim: thank you you, senator collins. that's a great question and an important the principles i was one.
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outlining her principles about negotiating on that basis and not necessarily about restricting access to the products, but providing coverage to products that are extremely effective and not providing the same level of coverage to products that don't offer the same -- don't offer additional benefits. that's the model some states have used like new york and massachusetts are starting to employ, to negotiate prices better for the medicaid programs. it involves evaluating the utility of a drug as compared to the standard of care and paying for the drug as it offers more, but not providing similar coverage if it doesn't offer any additional benefits. those organizations have found substantial success so far in implementing that kind of a model. sen. collins: thank you, mr. chair. sen. sanders: thank you, senator collins. senator casey? sen. casey: mr. chairman, thank
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you for having this hearing. i want to commend you for having the hearing, and you and the ranking member for doing this. when so many of us go home and talk to our constituents, one of several big bags of rocks on the shoulders of families is the cost of prescription drugs. we hear it all the time. the other bags of rocks on their back or shoulder are the cost of childcare or higher education or health care generally. we have an obligation to act. i have heard it from folks all across pennsylvania, just by way of one quick example, a constituent of mine, barbara, from rural ridge, pennsylvania, she testified before the aging committee hearing senator collins shared in 2019. barbara pays as much as $500 a month for multiple medications
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to manage leading ulcers, -- bleeding ulcers, high blood pressure, and more. so people like barbara across the country expect us to take action. i have supported, and i know it's true of a number of senators have legislation to , take steps in the right direction. whether it is legislation to allow medicare to use purchasing power to negotiate prescription drug prices, or legislation like senator sanders as to allow for the importation of prescription drugs from countries like canada that have similar regulations in place to ensure drugs are safe and effective. i also have legislation i have authored to expand low income protections for seniors and people with disabilities to make sure they can afford medicare premiums and out-of-pocket costs. with regard, i will direct my question to dr. persaud,
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with regard to senator sanders' legislation allowing america to purchase drugs from a place like canada, can you tell us, do you believe prescription drugs sold in canada are safe and effective? dr. persaud: thank you, senator. yes, they are safe and effective. they are the type of medicines america the superpower should be able to negotiate reasonable prices for. canada is a relatively small country, a population around 37 million. the u.s. can implement measures to regulate prices for other medicines and negotiate prices. between canada and the u.s., there is only one superpower and it should be canada hiding behind the u.s. when it comes to taking on pharmaceutical companies.
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sen. casey: one follow-up to that. in terms of the type of controls in place, the policies in place the canadian authorities have to prescription drugs are safe and make sure effective for consumers if you could walk , through that. dr. persaud: health canada regulates every product here and has the power to inspect facilities, including overseas facilities, where many medications consumed in canada are produced. the standards would be similar to countries like the u.s. in and other high income countries like the united kingdom and countries in europe. sen. casey: thank you very much. thank you, mr. chairman. sen. sanders: thank you, senator casey's. . senator murkowski. sen. murkowski: thank you, mr. chairman.
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this will be a question to dr. kesselheim. it stems from a story we heard from a constituent in wasilla, not too far north from fairbanks. they have indicated they have paid $683 for a three-month supply of her inhaler. the price increased in january for the third year in a row. like so many, they just don't get it. why do we keep seeing these price increases? so dr. kesselheim, in your experience with this year-to-year price hikes on prescription drugs, and your view, what is prompting it? does usually result from changes or improvements to the drug efficacy? i think if it was going to improve the drug, we can understand why that might be. or is it because they are resulting from increased many factoring costs or r&d?
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what do you tell someone like this constituent? dr. kesselheim: it's a very challenging issue, and no, it does not arise for any of those things. it arises because pharmaceutical companies have investors that they need to maintain their profit margins for. one of the ways they can do that is if they have an approved product, by raising the price on that year after year. unfortunately, in the case of the inhalers, we have a lot of the same issues with insulin where manufacturers are able to get new patents not on the underlying medicine itself, but on the inhaler device. those patents prevent the fda from approving interchangeable versions of the product that might lower the prices. of course, we also just don't do any negotiation with manufacturers over the prices that they charge for their products. as a result of all of those things, that gives manufacturers
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substantial freedom to raise prices far beyond inflation on a year-over-year basis and leads to problems like you are describing for your constituents. sen. murkoswki: do we have any way to determine whether these price hikes are justified, what you just outlined it to me, i don't think that will be satisfactory to this individual in wasilla. how can we know whether or not whether you have reformatted the device for the inhaler, that that somehow or other increases efficacy? is there anyway way to determine how these price hikes are justifiable? dr. kesselheim: one of the ways you might do that is conduct a clinical trial where you test the new version against the old and show that it is superior. most pharmaceutical companies do not fund that effectiveness research. instead they rely on marketing to promote the new and improved
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product. i would say if we did have a publicly funded, independent organization that evaluated the effectiveness of products and helped negotiate prices, if in fact a product was substantially improved by virtue of a change in manufacturing, theoretically the pharmaceutical manufacturer could submit that to the organization to be fairly reviewed and the price could be increased if it was fair to do so. sen. murkowski: mr. chairman, we hear these stories all the time. it's the reason we have this hearing this morning. senator baldwin and i have reintroduced what we call the fair drug pricing act which would require manufacturers to provide some kind of a justification when we see these substantial in crisis -- increases to the list price of medications. i think we recognize people want to see some level of transparency and accountability
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when you see these really sometimes incredible price hikes year-over-year. so i would hope we would be able to advance provisions like what senator baldwin and i are trying to do along with a leadership on this committee. i thank you. sen. sanders: thank you very much. now we go to senator baldwin. sen. baldwin: thank you, chair sanders. i want to jump in just where senator murkowski dropped off with regards to the fair drug pricing act. i also want to share a constituent experience first. i hear all the time from wisconsinites who cannot afford prescription medication. people like jackie from mosquito, wisconsin, who has terminal cancer. she wrote me that the drug that keeps "mia love is also driving
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my family towards bankruptcy. it costs me $15,000 to $21,000 out-of-pocket per share. my husband is worried enough about being left alone, and i worry about having to start over financially in his 60's after a lifetime of savings being wiped out from one drug. the price of this drug has increased over 20 times. stories like this one are the inspiration for the bipartisan fair drug pricing act, which i am reintroducing today with my colleagues, senator murkowski, senator smith and senator brown. the bill requires manufacturers to submit a transparency and justification report 30 days before they increased the price of a drug by more than 10% in
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one year or 25% over three years. this is a first step and it is a really important one. for the first time, it gives taxpayers and patients advance notice of price increases but it brings basic transparency to the market. dr. kesselheim, why is it important to require manufacturers to publicly justify their price increases, including by accounting for things like researching development costs and the process to the drug, and marketing and advertising spending, and what is the impact of transparency requirements when it comes to list prices of medications? dr. kesselheim: thank you, senator. one of the reasons it is important to require a company to disclose information to a board or other means is to give them the incentive to generate
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information that would justify the price increase. right now, pharmaceutical companies can raise prices without any justification or doing research and it would require some kind of disclosure. you can incentivize them to generate high-quality research information to provide more usefulness. another thing such a measure could do is dissuade companies from increasing prices when they don't have that information or justification, or if they don't want to provide insight into their marketing budget, and so could actually prevent these price hikes from happening in the first place, unless they are truly justified by some kind of change in the supply chain or manufacturing practices.
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sen. murkowski: thank you. i want to continue in this vein, from 2010 to 2019. the fda approved 356 drugs. recent -- sen. baldwin: thank you. i want to continue in this vein. from 2010 to 2019, the fda approved 356 drugs. it was a cost to the taxpayer of roughly $230 billion. in spite of this contribution, the nih is listed on only 27 of those patents. this suggests that while taxpayers provide funding for the bulk of the early-stage research, they do not get patent protection, supposedly secured by the act. in essence, american taxpayers are paying the highest prices in the world for drugs they already
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paid to help develop. dr. kesselheim, our american taxpayers getting a fair dear al for this research investment, and how should we be looking at examining the taxpayer contribution, and what would this mean for drug prices if we got it right? dr. kesselheim: i think americans getting advantages with the products that are developed by public funding and a bleeding two important new treatments -- end up leading to important new treatments like the covid-19 vaccines or other transformative drugs. research from our group has shown that by far transformative drugs are much more likely to come out of public funding and nih resources. i think what this shows is, first of all it shows the , limitations of the patents as a way of assigning credit for where products come from. you cannot get a patent until
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you are closer to the final stages of development. even for those drugs, we don't end up providing a lot of recognition of the public's support for those products in the prices they provide. as a result, some people argue that patients are paying twice for the drugs, first to know research leading up to their discovery, and second in the superhigh prices that we pay , because we don't have any control over the prices in the u.s. market. sen. baldwin: i yield back, mr. chairman? >> thank you so much , chairman. i want to emphasize that both sides of the aisle agree on the same goal, that we want to figure out affordable access to all prescriptions for all people
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, and just bring some of my insight as a physician to this committee. i want to talk about insulin for a second and i appreciate the testimony on this. this is a prescription i've written thousands of times, and it's part of this opaque game. i call it the opaque game. there is a list price and a net price. the list price of insulin has gone up thousands of times, and percent, and that is what the out-of-pocket is based upon. the person that testified today, the medicare patient, they are paying out-of-pocket based on the list price. but the net price in many instances have gone down since 2007. this is where the opaque process happens. as far as i know, this is the only business in america that is allowed to have legal kickbacks. there are legal kickbacks from the middlemen to big pharma, as well as insurance companies, and we don't know who else. that's the opaque process. there are clawbacks from community pharmacists and we are
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losing more community pharmacies than ever before. there are two simple solutions. the first one is transparency. in my parents' 83 years of age living in the home i grew up in ,, balancing the checkbook every day and don't have a credit card, if they saw where the kickbacks are going, they wouldn't stand for it. i think if all of congress could see that and i think the second step is to eliminate kickbacks, that these kickbacks have to stop and all rebates should go to the patient. those are the two solutions i hope we can agree to work upon. i want to turn and talk about innovation and how innovation is important as well. of all of the top 10 drugs in the world today over the last four or five years, were all discovered and made in america. this goes to my point on process. inhalers is another example. inhalers, i have written thousands of prescriptions for.
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about five or six years ago, i was writing a prescription. it was a patient who came back and she said i think you gave the wrong prescription, and went from to $168. $28 i said that the generic, your pharmacist must of make a -- must have made a mistake, let me pick up the phone and talk to him. sure enough we found out the epa , had decided all the dispensers but one were not environmentally friendly and it gave one person control of that entire market. i said, certainly someone will break on to the scene and make a new dispensing unit, i found out it would take five to 10 years and $1 billion to get that certified. there are multiple opportunities to improve that process. i know some of my colleagues have legislation that would do that. i think it's important that we protect innovation and my question will go to mr. brill.
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as i think about the miracles of covid, in january 2020, i reached out to the cdc to tell them my concern about the covid virus. they were not quite as concerned as i was. so i immediately turned to the private sector. as the cdc failed rolling out testing, i asked the private sector to start working on testing, on therapeutics, and vaccines knowing this was going to be a world problem very, very soon. thanks to those folks, a miracle occurred and we were able to develop the vaccine in months, what typically takes five or 10 years, they did in months. we implemented many processes that were improved, the fda process of approval that should be looked at long term. there is this balance between innovation, encouraging innovation and not stifling them with government price controls versus not allowing innovation to occur.
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mr. brill, i will let you speak about balancing innovation and the cost of medicines and price controls. what would price controls due to innovation in america? mr. brill: thank you, senator, for your question. policymakers are interested in both of these objectives. both ensuring new and innovative medicines and vaccines that are becoming more and more available every day are the clearest example of that. this science was developed over years of public and private investments together. we want to make sure to nurture and promote and facilitate this research and investments over time. quite frankly, the credit goes not only to those manufacturers who have successfully brought products to market, but to all researchers working on vaccines including those whose efforts have failed. that is the innovative process that we want to foster.
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how to balance that with the desire to keep prices is a challenge. in my view, the answers are best met by finding ways to create more competition rather than price controls in the market. that means more generics, not just a generic, but multiple generics to compete and making sure those are out on the market in a timely fashion. the other important piece is brain to brain competition that does not have the kind of effects we would see on list prices, but can have the kind of positive effect that we are hoping for on net prices. sen. marshall: i yield back. sen. sanders: thank you, senator marshall. senator kaine? sen. kaine: thank you, mr. chair for holding this hearing. i want to begin by thanking ms. spates. i hope i pronounced her name
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correctly. i was not here for your verbal testimony because i was in other hearings, but i read your written testimony that was extremely powerful. your conclusion that we pay more than other nations because of greed i think is partially accurate. i think the other reason we pay more is because of us, congress. if we have a set of rules, people will operate under the rules as they exist and they will maximize the money that they can make. we might wish it were otherwise, but we can't pretend it is otherwise. that puts the burden on our shoulders to come up with the rules that will lead a person like you a lot -- not look five miles across the border and see people with similar health conditions to you who are not taxed to the edge of their resources to deal with diabetes as you are, living near the canadian border. thank you for encouraging us to do things to get this right. i'm happy to have worked with senator collins on legislation
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trying to get biosimilars to the market because i think there are cost savings if we can do that right. let me do a couple of things. forgive me, mr. chair, if i may have missed questions like this when i was at the other hearings. i want to act dr. kesselheim about international reference pricing. i raised with the previous administration the notion that we pay more than other nations do, and many nations in negotiating for pricing prescription drugs used international benchmarks as the basis of negotiation. i thought that was one of the things that the trump administration attempted to do that i thought was a really good idea. we don't have to pay the same price that a third world nation does. i understand the notion of discounting prices and -- pricing to nations with a lot of poor people so they don't have access to medicines. we pay dramatically more than other developed nations and i think the international reference price is a good idea. dr. kesselheim, could that be helpful as part of a broader pharmaceutical price reduction strategy?
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dr. kesselheim: certainly, senator kaine. i think that when you engage in international reference pricing, you are looking at other countries and asking, what are the prices they are paying for the exact same drug you are paying for? in those cases, what the countries are doing is assessing clinical benefits of the drug and determining what a fair price should be. when you do international reference pricing, you are doing the same thing i recommended we do upfront, which is evaluate and negotiate. except we would not just be doing it, we would rely on other countries doing it and piggybacking on the conclusions they made, so i think international reference pricing might be a good way of setting parameters, but i think the u.s. could and should be able to make those same kinds of assessments
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and negotiations ourselves. sen. kaine: and dr. kesselheim, i see that pharmaceutical companies oppose this. to me, the notion of international reference pricing is kind of like capitalism, why wouldn't we want to negotiate or look at the prices others are paying and try to negotiate? i was a lawyer for years and you would negotiate a provision in a contract. if you offer a lower price to somebody, i get it. that seems to be base of bargaining 101. why wouldn't the u.s. engage in basic negotiating tactics in the way other countries do? dr. kesselheim: i think you are absolutely right that they should do that and the u.s. should, given that it is such a large market, should be able to leverage the size of its market to be able to get lower prices. i think that raises an interesting point and another concern i have about international reference pricing , which is that pharmaceutical companies often give other countries secret discounts on top of list prices. so the list price we see in another country might not
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actually be the real price that country pays. we would be international reference pricing off of maybe not the price of the product, which suggests that while international reference pricing is a good model, we should really do those same pricing negotiations in the u.s. sen. kaine: while we are on the topic, i have always been struck by the fact that the u.s. does not negotiate for prescription drug pricing under medicare part d. but we do allow the v.a. to negotiate prices of prescription drugs. how much might we save in medicare part d if the medicare program was able to use the same negotiation strategy that the v.a. uses? dr. kesselheim: great question and we've done a number of studies in our group to look at what the difference might be. and he found, in looking at influence -- insurance prices,
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-- insulin prices that medicare could save billions of dollars each year if medicare was able to negotiate and use its leverage in the same way that the v.a. is able to do that. sen. kaine: that will be billions of dollars in the budget for deficit relief or whatever it would be but it would also be substantial consumer savings? dr. kesselheim: that is just one drug for one year. so imagine how much that would be for all the drugs on the market for multiple years that have reached high prices. yes, that would also translate to improved consumer savings, lower prices for lower health care premiums, which might translate to higher wages. i think it would affect the entire economy. sen. kaine: thank you. thank you, mr. chair. sen. sanders: thank. senator cassidy. sen. cassidy: hello, folks. mr. brill. sen. cassidy: the orphan drug act was supposed --
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sorry, i have a glare behind me. the development of drugs for people for conditions at or below prevalence. we have some drugs that will start off for those that are below prevalence -- [laughter] you're getting a tour of my kitchen. they end up, for other conditions, but the same high price and exclusivity for the orphan drug, then translates over to the more common condition, what thoughts do you have on how we can address that, we don't want this kind of arbitrage where it introduces a higher price than it should be. mr. brill: thank you, senator cassidy. as you may know, i think, seven out of the top 10 drugs being sold in the united states today were granted orphan drug exclusivity's, and as you mentioned, the underlying principle here is desirable. there are rare diseases for which there may be underinvestment in r&d for
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products to treat those conditions. some existing medicines may help in those smaller patient populations. however the current structure , created this very strong incentive to pursue orphan drug designation and thereby extending the monopoly power across the sales of all drugs. policymakers need to think about this in careful balance, what is the appropriate amount of incentive to provide manufacturers and researchers to make sure they know if their products are effective in small populations, without extending the monopolies over a large -- sen. cassidy: what's my legislation going to read, how do we thread that needle? mr. brill: the actual solutions, i would say we want to think about the standards for which those exclusivity's are granted. for meaningful progress,
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meaningful treatment, and we can think about engaging with the fda and helping to make those determinations. sen. cassidy: dr. kesselheim, you had mentioned the federal government negotiating with manufacturers, but this would basically, in some cases the , united states government would be a purchaser of 99% of the drug produced. think a perspective alzheimer's drug. this so-called monopoly power , a single purchaser. it would basically be the federal government buying no one else. it seems to me that could have a chilling effect upon a company's willingness to invest in a drug if they thought the federal government was going to be able to unilaterally set the price. if a president bernie sanders decided we are going to go to negotiating drugs, who would invest in developing an
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alzheimer's drug, knowing that the return on the investment for medicare would be so poor. dr. kesselheim: there are a lot of scientists out there trying to find treatments and effective cures for alzheimer's disease. treatments that we do not have -- and diseases that we do not have treatments for. their work will continue, but i would also say that a publicly funded but independent board that evaluates new products. sen. cassidy: that's not my question. my question is in the venture capital and the people that fund that transitional research from the bench of the clinical trial, which zohar -- so far has been very fruitless and very extensive, they are expecting a return on investment. what return where they expect again if bernie sanders was president and you were chief negotiator, yes you could have somebody do an independent
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evaluation, but often times government puts its finger on the scale. how do we avoid that trap of squelching innovation when the federal government would be expected to give a poor return on investment. -- investment? dr. kesselheim: i don't think the federal government would be expected to give a poor return on investment. if there was a new drug, especially for a drug like this, and it offered an extremely substantial benefit to people with alzheimer's disease i would , think under this current system we would pay a lot of money for that drug because it would help reduce so much excess spending -- sen. cassidy: i will dispute a little bit. there's a new york times article who says we should march on drug companies technology to make the covid-19 vaccine. which is to say they have put out so much to invest in the vaccine so quickly. now we are going to force you to share your technology with others. there is always the popular impulse to give something away for free. are you saying that would not operate if there were a drug for alzheimer's?
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dr. kesselheim: it does not have to operate. we see in places like germany they are able to negotiate and get drugs out into the market for prices where pharmaceutical companies make a substantial profit in that market, and be able to come to valid negotiations without having to go to the extreme circumstance of having to march and or do whatever else. i think there is a lot of opportunity to identify what an evidence-based, valid price for a product should be and that product and that price would provide substantial incentives for investment, because in cases of diseases like alzheimer's disease, where there is substantial medical need, that price could be quite high. but the system could end up affording the high price for that important drug because we are not paying for all of the eighth or ninth products for rheumatoid arthritis that don't offer any advantages over what
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products we already have. we will save money on those ends, and as a result, we will be able to pay more money for meaningful new innovation like the kind you are describing. sen. cassidy: i think you underestimate a politicians pre-tendency to give things away for free, particularly when they belong to other people. the germans have been criticized for having such a strict clinical benefit aspect and that is just not fair. that said, we pay too much for drugs, i'm certainly in agreement with that. with that, mr. chairman, i yield. sen. sanders: senator hassan -- sen. hassan: thank you for true, -- thank you mr. chair, thank you for true and clear, and therefore compelling testimony, and for being willing to talk about your own personal
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situation. it makes a real difference. mr. chairman i appreciate your , work on this issue over the years, including on importation and allowing the federal government to negotiate medicare drug prices. i believe there is bipartisan support in the senate for legislation that meaningfully lowers the cost of prescription drugs and we need to take action this year. i want to ask questions to you, dr. kesselheim, following up on senator baldwin's line of questioning. drug companies often try to justify high prices by saying they use this revenue to fund innovation for future breaks and medications and we all support innovations that effectively treat and cure diseases, but we also know that american taxpayers subsidize a significant portion of the research that leads to these innovations. dr. kesselheim who makes the majority of investments in the research that leads to breakthrough therapy treatments for unmet health needs, drug companies or the american taxpayer? dr. kesselheim: well, i think it
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is, there is usually a combination of factors that go into these kinds of discoveries. so, our studies have shown and other studies have shown that a substantial amount of basic and translational science, the vast majority of translational science is funded by publicly funded systems. privately funded entities come in later in the development process through clinical trials and the regulatory approval process. it is a bit of a combination of both forces. sen. hassan: i am going to stop you because i want to get to other questions as well. it is a substantial amount of this innovation funding comes from the american taxpayer? dr. kesselheim: yes. the origins of transformative drugs often come from publicly funded sources even through proof of concept and some of the clinical testing of them. sen. hassan: let's move on to a
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broader topic here, drug companies receive taxpayer support at just about every step of their business model, from the time a drug is developed to the time of pharmacy dispenses it to their patient. we are the only country to subsidize these companies the way we do, yet according to a recent study, we are paying -- from the time a drug is developed to the time of -- that they run on television, online and in print. have these led to lower drug prices are innovation for patients? dr. kesselheim: no. now drug companies also established charities that promote the drugs that they sell and receive tax deductions when
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they donate to those tears -- charities. a recent report found that every $1 million a drug company donates to these charities for up to $1 million in increased revenue. if you can, why are drug companies choosing to put billions of dollars into these charities, instead of simply lowering the price of these drugs? dr. kesselheim: it's to help people who have high out-of-pocket costs and have no other choice but to take that drug. as a result of helping individual patients with their high out-of-pocket costs, drug companies are making a lot of money on the payments that insurance companies make that are behind the scenes and will be able to sustain high prices so they can charge high prices. sen. hassan: if they lower their prices overall that would make a difference to the patients. dr. kesselheim: we do have some transparency through the medicare open payments database into payments drug companies make to prescribers. in 2019 companies gave away $2.3
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billion in cash payments, free meals, and speaking fees, an average of over 3700 dollars for each prescriber who received a payment and research shows these payments influence prescribing. dr. kesselheim, why are companies choosing to spend billions of dollars each year on payments to prescribers instead of putting the money towards lowering the price of their drug? dr. kesselheim: those prices actually increased drug prices because they go to encourage physicians who were prescribed the high-priced products over lower-priced generic drugs because generic manufacturers don't advertise their products. sen. hassan: thank you, dr. kesselheim. these are just a few examples of the uniquely american tools that the drug industry has at its disposal. it should be no surprise that the cost of prescription drugs in america are uniquely high. thank you again, mr. chairman, i look forward to continuing this important work with you and our
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colleagues. sen. sanders: senator rosen? sen. rosen: thank you for holding this very important hearing today. and the witnesses for sharing your perspective on drug pricing. we have to do some work in this area, for sure. i would like to continue to talk about innovation and competition and transparency that all of my colleagues have been discussing in some form or fashion, because nevada is home to smaller pharmaceutical firms, we are developing new drugs and medical devices not only in our state, but of course, across the country. in southern nevada one company is working on an oral drug to treat lung cancer. northern nevada another company is working on a drug to prevent parkinson's and other neurologic diseases. and we know, again, research development and clinical trials that can take 10 years or more. start up costs remain a significant barrier, but new drugs on the market will
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increase competition and help reduce cost. dr. kesselheim, what more can congress do or should do to support our smaller, local startup pharmaceutical firms that are taking on significant risk to develop these new innovative drugs and devices that may eventually help increase access and lower costs not to mention saving lives or improving lives. dr. kesselheim: thank you for the question. there are a number of things government could do. the example we have seen in the -- i think a lot of small companies will suggest that they
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can't get these drugs approved through concept because the incentives are not necessarily there to support really important, new products. one of the things we can do is provide more upfront support for that. but in those cases, we also need to make sure that when those products do become available for , they are made available at a fair price for consumers. sen. rosen: thank you, i'm interested in the lung cancer drug. my mother passed away from lung cancer and i would not wish that on anyone else so i hope that we do see some movement forward on that. i'm interested in our nonprofit pharmaceutical company model. can you talk about your understanding of this relatively newer model and some of the challenges of bringing a drug to market as a nonprofit, and how can the success we have seen so far in congress from this, what can we do to support it and how
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fast can it grow the nonprofit sector. dr. kesselheim: the most prominent nonprofit drug development model is the drugs in the initiative in europe. and what they have been able to accomplish in getting new effective treatments for neglected diseases in countries around the world for relatively meager support, just shows how effective pharmaceutical development can operate on a limited budget and these numbers we are hearing about, the cost of drug development are overinflated for a number of different ways. based on the success of models like that, there have been some efforts in the united states to develop nonprofit drug manufacturers. mostly those kind of organizations operate to meet, to address drug shortages or
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older, off patent products for which manufacturers have stopped manufacturing and we are starting to see some success. that is an effective model for potentially an important new drug that could not get the private funding it needs to bring that product to market. sen. rosen: i would like to move on, and the click time that i have left the drug discount , program that is critical to nevada and we have a diverse population. hundreds of thousands of people living in rural communities across our state. can you talk about the importance of the drug discount program and how it helped increase access and affordability. dr. kesselheim: the program is a complicated system that we have to try to provide certain drugs at a relatively low cost to safety net hospitals. and it has provided a lot of useful drugs to low income patients. it has expanded over the years
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beyond what was originally intended and there have been some discussions about to what extent certain hospital should qualify. there's no doubt that the 340 b pricing is among the best pricing we offer for certain high cost drugs. sen. rosen: thank you, i really appreciate you being here today. i yield back. sen. sanders: thank you, senator rosen. senator braun? sen. braun: thank you, senator -- chairman sanders. i am really glad we are having this talk, specifically on high drug costs. everybody in our country, sooner or later, comes across a prescription that they wrestle with, and have no idea how to attain the price in the first place, in terms of a fair price. the lack of transparency, that is systemic throughout our
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health care system is, in my opinion, the main reason why we are here today. building a burisma's -- business over the years, if i had the ability to tell my customers what they were buying after the fact, it would be a lot different dynamic than what it would be with the free market, where you've got and engaged consumer, the other thing we don't talk about, health consumers have grown. don't blame it on them it has evolved that way to where they want no skin in the game. it's unaffordable in so many cases. once you do confront the health care system, it's a mess across the board. my question is going to be in a moment for dr. kesselheim. i wrestled with it before i got to the senate and there is no other sector of our economy that has less transparency, less competition, more barriers to
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entry, and a disengaged consumer. one alternative is to bring government into play. to be honest i think many ceos , that don't run health care companies are going to be for that. because the industry is dug in, resisting reform that i think needs to take place before you bring more government into play. it's clear we have a broken health care system that costs way too much and we need to figure out how to fix it. if the industry is not going to take on some of the reforms, you will get what you deserve and that is probably the heavy hand of government because you are like an unregulated utility when it comes to the way you operate. dr. kesselheim, i'm hoping i have the right information here, but when it comes to transparency, i think you have been quoted in that you might get more than what you ask for, that transparency would actually be a negative.
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i think that is so bizarre, and a sense, that any other aspect of our economy where you have everything i talked about, engaged consumer and robust competition in full transparency no barriers to entry, things , work. lasix surgery and things within the medical field prove that. why would you have that point of view that it could stymie price competition if you put more transparency into the mix? that seems to be counterintuitive, i would love to hear your response to that. dr. kesselheim: if all you do is include transparency but don't do anything else you risk raising prices. because, right now, though secret backroom deals that are arranged is the only system that we have in our country for
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lowering prices. if you take that away and make everything fully transparent without doing anything else, then you take away one of the only tools that are effective negotiators in our system, which are insurance companies, or trying to lower prices. i would be very much in favor of transparency. if you marry it with evaluation and negotiation. then, you can just have what a fair price is, and you can offer that to private companies, and the value of the pbm, the value of the secrecy that they operate in, plummets. i would say we could have transparency if we married it with some of the proposals that i suggested. just transparency alone i think that you are taking away the only strategy we currently have for lowering market prices. sen. braun: i'm glad to hear you say that, because i agree with you. when you have transparency you don't have the other tools to go
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along with it. that would be the employers across the country as well as government, to stakeholders and paying the bills need to be able to negotiate with more bargaining power. if we get that right, it happens everywhere else where government is able to negotiate, they hide behind the disguise that they are a free market. they are not a free market until they do the things i said earlier. we are talking about including ploy or -- not how we bring drug prices down and that may be prices cascading down across the system of pharma, hospitals, insurance, and even practitioners. sen. sanders: senator murphy? sen. murphy: thank you. thank you for this hearing. this is a question to either doctors.
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a 2019 study in the journal of american medicine's association looked at 15 years of medical marketing in the u.s. and found that there was a 70% increase in health care marketing from 1997 to 2016, including a massive increase in direct to consumer advertising and promotion to physicians. clearly this enormous surge in marketing and advertising provides a benefit to the company. they would not do it unless it led to the sale of more product. other parts of the story with respect to the increase in price because there has been this incredible surge in marketing and advertising spending. but my question is, is it a benefit to the health care system, as physicians, through
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your conversations with colleagues, does direct to consumer advertising provide the kind of benefit to patients that the companies would have us believe, or is it just a benefit to their bottom line, and a contributor to the increase in cost? dr. persaud: it does not benefit the public or patients. there have been studies whether or not marketing is associated with better prescribing's of medicines or more appropriate use of medicines. and there are no studies that indicate that marketing improves the care patients receive. it's something patients are paying for and we are all paying for and in the end it is driving , in some cases prescribing , towards more expensive medicines. we have paid for it multiple times and there is not a demonstrated benefit of a pharmaceutical company providing information directly to the consumers or prescribers. sen. murphy: dr. kesselheim?
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dr. kesselheim: i agree with dr. persaud. i think that one of the things direct to consumer advertising does, and i can tell you as a primary care doctor, it brings people to the office asking about medicines they saw on tv, and usually the medicines being advertised are the most expensive and they may not offer improvements over other therapies that are not being advertised. while direct to consumer advertising can avert people to the existence of drugs, it does drive prescribing practices in ways that are not evidence driven. sen. murphy: to give a sense of how much of the cost of the drugs may be determined by the advertising spend for these companies, another study suggests for the big pharmaceutical companies as much as $.19 of every dollar, nearly 1/5 of all of their spending,
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goes into advertising and marketing. in my remaining time, dr. kesselheim, i was intrigued by the time that you spent in your written testimony on the question of comparative effectiveness and i wondered if you might give us some suggestions as to how the united states can do a better job of being sure that we are getting a true bang for our buck, other countries spend a lot of time making sure they are only paying for drugs that are substantially better than other products on the market. you know this issue is fraught with peril, because for many folks a 5% increase in effectiveness or the promise of a potential 20% increase in effectiveness, they are going to one that, they are not going to want the government deciding whether or not they get access
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to these drugs. it's an enormous amount of money that we all pay for when some drugs are only getting tiny, incremental increases in quality or effectiveness, what is your recommendation for how we proceed on this topic? dr. kesselheim: this is an extremely important issue and in -- and unfortunately, in the u.s. system, we do not invest nearly enough in doing the type of comparative effectiveness studies we need to determine which drugs are better for which patient. this is the best way to empower patients to make decisions about their care. to say, look, we have done the studies and we know this drug works x amount better. here are the side effects you have to weigh, and between you and your physician you can make a decision about the best way forward. unfortunately, we don't have enough of that. what i suggest we do is invest more money upfront in the same way we invest money in basic science in generating this information because it will save money on the backend.
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because, pharmaceutical companies leverage the lack of information in their promotional practices to encourage high cost drugs when lower cost products may be just as effective. and then, what we do is, we pay many times more on the back end. if we have more comparative effectiveness research and evidence upfront, then we would be able to guide prescribing practices in the best way forward for patients. sen. murphy: it doesn't have to lead to drugs doing this, just informative for prescribers that may end up in better care with better practices. appreciate answers from both of you. sen. sanders: thank you, senator murphy. i believe that ends our hearing. we have heard from many , many senators, and i want to thank dr. kesselheim, dr. persaud, elia spates, and mr.
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brill. i think what you have heard from virtually all senators, regardless of their party or political persuasion, as they continue to hear from their constituents who are sick and tired of paying the highest prices in the world for prescription drug prices, in many cases they cannot afford. what you have heard is that when people cannot afford the medicine they need, they will get sicker, sometimes they will die, sometimes they will end up in the hospital at great cost to the health care system. you have also heard today that we have been talking about the issue of the high cost of >> there is all kinds of legislation that has been offered. yet at the end of the day, the pharmaceutical industry continues to march along, earning huge profits every year,
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paying their ceo's exorbitant compensation packages, and they continue to provide hundreds and hundreds of lobbyists, make all kinds of campaign contributions. the conclusion i reached from this hearing is that the time is long overdue for the united states congress to summon up the courage to take on perhaps the most powerful special interests in the united states, and that is the power of the pharmaceutical industry. our people are hurting. they want us to act, and now is the time to do that. with that, let me conclude this hearing and thank you, again, everybody, for participating. this hearing has ended. then people will have time to submit questions for the record and testimony as well. thank you.
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>> that is it everybody. thanks. [indiscernible]
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>> c-span is c-span's new online store. go there to order a copy of congressional directory, with contact information for every member of congress. also contact information for state governors and the biden administration cabinet. order your copy at tonight on "q&a." journalist elizabeth becker tells the story of female vietnam war correspondence at a time when covering the war was a male dominated profession. >> there was no embedded like we had now. there was no military censorship per se. it was probably the first and last uncensored american war.
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the south vietnamese had censorship in their telegraph, but for women, it was a gift. because it was only because of this lack of codification, this openness that women could get through what had been the biggest barrier that you are not allowed on the field. >> tonight at 8:00 eastern on "q&a." you can also listen to it as a podcast where you get your podcasts. >> treasury secretary janet yellen and federal reserve chair jerome powell testified before the house financial services committee about the state of the economy about the federal response to the pandemic. this is following secretary ellens confirmation in january. it was a little less than 2.5 hours.


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