Senate panel grills pharmaceutical CEOs on drug prices: ‘You bear a measure of responsibility’

By CNN

Published February 8, 2024 4:18 PM

CNN, POOL, KSL

By Jacqueline Howard, CNN

(CNN) — US senators and pharmaceutical CEOs faced off in a hearing Thursday about why prescription drugs have higher price tags in the United States than in other nations.

The chief executives of three major pharmaceutical companies – Johnson & Johnson, Merck and Bristol Myers Squibb – testified before the Senate Committee on Health, Education, Labor and Pensions, acknowledging that certain medications cost more in the United States but arguing that there are complexities behind the reasons why.

“Despite its benefits, we know our American system is far from perfect,” Bristol Myers Squibb CEO Chris Boerner said. “Patients bear the brunt of a complex US system that results in increasing health care costs and a lack of affordability.”

Ahead of Thursday’s hearing, the Senate committee noted in a news release that Merck’s diabetes drug Januvia costs about $200 per year in France, versus a list price of $6,900 in the United States, and the Johnson & Johnson arthritis drug Stelara costs about $16,000 per year in the United Kingdom but lists for $79,000 in the United States.

The Bristol Myers Squibb drug Eliquis, a blood thinner, costs about $650 in France, versus a list price of $7,100 in the United States, according to the committee.

“How do they get away with this when so many of our people cannot afford the high price of the drugs that they need?” Sen. Bernie Sanders, who chairs the committee, asked during the hearing.

“Here, in my view, is the answer: The United States government does not regulate drug companies. With very few exceptions, the drug companies regulate the United States government,” said Sanders, I-Vermont, who has long fought to lower the cost of medications and health care overall.

According to a poll conducted last year by the nonprofit KFF, 31% of adults reported not taking their medications as prescribed because of costs, and 73% said there is not enough government regulation when it comes to limiting the price of medications.

Thursday’s hearing came just days after the Biden administration began Medicare drug price negotiations. Under the Inflation Reduction Act, “Medicare now has the power to negotiate prescription drug prices directly with drug companies, similar to the US Department of Veterans Affairs and other federal agencies already negotiate drug prices.”

The pharmaceutical chiefs testified that prices are lower in other countries because the US health system operates differently.

“The United States has built a health care system that prioritizes patient and physician choice as well as the broad and rapid availability of cutting-edge medicines,” Boerner said. Many systems outside the United States “may deliver lower prices,” he said, but they “carry an often overlooked tradeoff: that patients often wait longer for new medicines that are sometimes never approved or reimbursed.”

Many other countries don’t cover as many newly developed drugs as those covered by insurance in the United States, Sen. Bill Cassidy, R-Louisiana, said in the hearing.

“Public health insurance in Canada only covers 21% of newly developed drugs,” said Cassidy, the committee’s ranking member.

“The UK only covers 48% of newly available drugs,” he said. “Americans typically don’t tolerate that.”

The pharma CEOs also said that US patients get access to prescription drugs much faster than those in other countries, and that it requires a lot of revenue to develop these drugs – and that innovation comes with high costs.

“The real difference is that in the US, patients get access to therapy, life-saving therapy, years before they do in the countries that you mentioned,” Johnson & Johnson CEO Joaquin Duato told the Senate panel.

Sanders noted that the list price of Merck’s cancer immunotherapy drug Keytruda is about $191,000 per year in the United States, versus $44,000 in Japan. He asked Robert Davis, Merck’s CEO, whether he would commit to making the US list price the same as the price in Japan.

“I acknowledge the prices in the United States are higher than they are in many of the countries you said and not for all drugs, but for many drugs, and that’s the reality we face, but I think it’s also important to point out that you get access in the United States faster and more than anywhere in the world,” Davis said.

“We have 39 indications for Keytruda across 17 tumor types in the United States. If you look across Europe, it’s in the 20s. If you look across Japan, that number is a little bit less,” he said. “So there is a reason why the prices are different.”

Pharma CEOs point to ‘the middlemen’

Other nations typically pay far less for medications in large part because their governments often determine the cost. In countries such as France, the government has a central negotiating power.

In the United States, medications are distributed through pharmacy benefit managers or PBMs, which negotiate discounts. PBMs are the third-party entities that administer prescription drug insurance benefits and work as intermediaries between insurers and drug companies and retailers.

Currently, the prices customers pay for drugs and the payments pharmacies receive are greatly influenced by PBMs, which serve as middlemen and negotiate rebates from drug manufacturers to insurers. The complex reimbursement formulas aren’t directly based on what pharmacies spend to purchase specific drugs.

Drugmakers often shift the blame for high prices to PBMs, and the executives did so again at Thursday’s hearing.

“Congress should stop middlemen from taking for themselves the assistance that pharmaceutical companies intend for patients,” Duato said.

The CEOs also said that their companies have patient assistance programs that offer discounts and rebates to help patients access medications.

And although pharmaceutical companies set the list prices for their drugs, those prices are driven up by the incentives of intermediaries, Boerner said.

“If we could reduce the significant amount that we’re paying in rebates to intermediaries who are not passing those rebates on to lower out-of-pocket costs, speaking on behalf of Bristol Myers Squibb, we could work almost immediately to begin to bring down those prices, and I would welcome the opportunity to work with this committee to do that,” Boerner said.

Sen. Bob Casey Jr. said pharmaceutical companies still have some responsibility to bear when it comes to high drug costs.

“There’s no question that your companies and big pharmaceutical companies are playing a role in this. You bear a measure of responsibility,” said Casey, D-Pennsylvania.

Drugmakers’ high price tags are the reason why “we have a middleman problem” in the United States to begin with, testified Peter Maybarduk, the access to medicines director at the nonprofit Public Citizen.

“It’s because we have exceedingly high prices at the outset that there’s an attractive market for middlemen to enter. But the fish rots from the head,” Maybarduk said.

“If you look at where the revenue is, drugmakers capture two-thirds, $323 billion. Pharmacy benefit managers are a small slice, $23 billion,” he said. “So you can’t fix the problem of the pharmaceutical industry by going off middlemen who are just trying to skim off the top. You have to get to the root of the problem.”

Medicare starts drug cost negotiations

Overall, prescription drug prices in the United States are more than 2.5 times as high as those in other similar high-income nations, according to a report released in 2022 by the US Department of Health and Human Services.

The United States spends more on health care than any other high-income country but still has the lowest life expectancy at birth and the highest rate of people with multiple chronic diseases, according to a report released last year by The Commonwealth Fund, an independent research group.

The government is taking first steps to start negotiating prices on high-cost drugs. Medicare has launched its first negotiations with drugmakers over the cost of 10 expensive medications, including Eliquis, Januvia and Stelara.

The prices charged in other countries are not a factor in the negotiation process, but the Biden administration, Sanders and others have repeatedly pointed to the differential as a major problem with the drug pricing system in the US.

CNN’s Tami Luhby contributed to this report.

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