US Senator Bernie Sanders, who chairs the Health, Education, Labor, and Pensions (HELP) Committee, managed to assemble the CEOs of some major American pharma companies at a hearing of the committee to discuss high US drug prices. However, when confronted with Sanders’ tough questioning, the executives from the pharmaceutical companies offered little in the way of substantive responses.
Present at the event were Robert Davis, CEO of Merck, Chris Boerner, CEO of Bristol Myers Squibb and Joaquin Duato, CEO of Johnson & Johnson.
Related: Pharma CEOs Grilled by Senate Committee About High Prescription Drug Prices
Report Reveals Big Pharma Model of Corporate Greed
Ahead of the meeting, HELP Majority Staff released a scathing report about Big Pharma’s business model, which it said was based on “corporate greed.”
The report outlined the “rigged system that allows Big Pharma to charge Americans the highest prices in the world for prescription drugs.”
And prices have been increasing year after year, unchecked.
The report revealed that Johnson & Johnson, Merck and Bristol Myers Squibb are not just charging higher prices in the US compared to other countries but also charging Americans much more than they did in the past, said Sanders at the committee hearing.
For example, from 2004 to 2008, the median launch price of innovative prescription drugs sold by Johnson & Johnson, Merck and Bristol Myers Squibb was $14,000, which more than doubled every five years since, jumping to $238,000 between 2019 and 2023.
The report also accused Big Pharma of having “built patent thickets to extend their monopolies and delay low-cost generic competition,” according to the Drug Patent Book, a database compiled by patent lawyers.
Blame the PBMs
The pharma CEOs largely deferred to high R&D costs for creating new medicines and blaming pharmacy benefit managers (PBMs), pharma’s middlemen, for high drug prices in the US.
Scapegoating PBMs has been an industry default in attempts to explain exorbitant US drug prices. It is argued that while PBMs negotiate prescription drug benefits on behalf of insurers, they don’t always pass along the savings to patients.
When Senator Mitt Romney, R-Utah, questioned what lawmakers could do to lower the cost of drugs, Boerner targeted PBMs: “The rebates that are provided — if you could de-link that, it would be important and alternatively require that those rebates be passed on to lower out-of-pocket costs for patients.”
Senator Tim Kaine, D-Virginia, echoed the PBM talking point.
“We just have to simplify this and cut out a lot of the middlemen,” Kaine said. “PBMs aren’t doing a single bit of research. They’re not producing a single product and yet they seem to me to be the ones scooping up the most money that’s just sloshing through the system.”
Price Control Resistance
The US Chamber of Commerce backed Davis’ comments about superior access to treatment in the US, saying that price controls would lead to fewer new medicines and longer wait times for patients.
“We call on Chairman Sanders to abandon the political theatrics and refocus his efforts on real solutions,” said Chamber EVP and chief policy offer Neil Bradley. He said the hearing was a “heavy dose of partisan theatrics overshadowing a meaningful exchange of ideas.”
Senator Rand Paul, R-Kentucky, also blasted Sanders, giving love to the current US healthcare system and accusing Senate Democrats of conducting “a show trial to harangue companies (who are) challenging the Inflation Reduction Acts’ price controls in court.”
More Republican Senators criticized Sanders for beckoning pharma CEOs to testify before the committee, coming to their defense.
“We may not have the right bad guys here,” said Senator Mitt Romney, R-Utah. “These are the guys developing cures.”
Senator Bill Cassidy, R- Louisiana, the panel’s ranking member and a physician, called the hearing a “show trial” and “CEO whack-a-mole.”
He also cited the superlative access in the US to new drugs compared to countries like Canada where the public healthcare system only covers 21 percent of newly approved drugs, according to Cassidy.
After the CEOs had left the hearing, a panel of experts answered questions from the senators. Peter Maybarduk, the director of the Access to Medicines program at Public Citizen criticized the PBM blame game.
“We heard some wild stuff up here this morning, including a lot of blaming the middlemen,” Maybarduk said. “Drugmakers’ high prices are the whole reason that we have a middlemen problem. 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.”
He provided a breakdown of revenue and profits, explaining: “If you break up the market, if you look at where the revenue is, drugmakers capture two-thirds, $323 billion, and pharmacy benefit managers are a small slice, $23 billion. 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 which is the monopoly power.”
The US is consistently cited as having among the highest, if not the highest, prescription drug prices in the world.
According to Statista, drug prices in the US are higher by approximately 150 percent on average than in 32 other countries.
In addition to high research and development costs and PBM cuts that pharma companies default to as the main reasons for high prices, a lack of price regulation and the market dynamics of healthcare and pharmaceuticals in the country are largely to blame.
In countries with universal healthcare systems or strong price control mechanisms, such as many in Europe, Canada and Australia, prescription drug prices tend to be lower. These governments often negotiate prices directly with pharmaceutical companies or have regulatory bodies that set maximum allowable prices for medications.
The US is attempting a similar approach by allowing Medicare to negotiate drug prices as part of the government’s Inflation Reduction Act (IRA). All three pharma companies at the Senate hearing last week are suing the government over the negotiation program, calling it unconstitutional and which could jeopardize funding for R&D programs. As a response, the government said it was considering the use of march-in rights to help assess whether patent licenses could be relinquished when products developed with federal funding aren’t readily accessible to the public as a way to regulate drug pricing.
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