Reduce drug prices or we’ll do it for you, senators tell Big Pharma execs, including Merck CEO

The U.S. Senate Finance Committee hauled in seven Big Pharma executives for a hearing Tuesday about the high cost of prescription drugs, and it wasn’t pretty.

Lawmakers talked about people having to ration out their medicines to make them last until the next paycheck, and having to choose between buying prescriptions and putting food on the table. Some senators referenced the illness and death in their own families — as well as the confusing prices that they, too, encountered at the pharmacy.

The bipartisan hearing was an unusual show of lawmaker strength against an industry known for its lobbying might. And although the committee repeatedly stressed that this session was only the beginning of an examination of drug prices, and demanded follow-ups in writing from CEOs, senators did not elicit assurances that any one company would bring down prices on its own.

Sen. Ron Wyden, a Democrat from Oregon and the committee’s ranking member, doled out a list of honors no one would want to win: To Johnson & Johnson, he awarded “the record for flip-flopping” — a reference to price hikes the company announced in January, days after J&J’s CEO said the industry needed to self-police on prices.

“Merck gets second prize for emptiest pricing gesture of 2018,” Wyden said (Pfizer got first in that category).

“It made sweet-sounding promises after coming under criticism, but it cut prices for drugs that provide essentially no revenue to the company,” Wyden said in his prepared remarks. “Left untouched were the cash cows, Keytruda and Januvia, which account for more than a quarter" of revenue for Kenilworth, N.J.-based Merck.

Throughout the hearing, Merck CEO Kenneth Frazier and other executives in the hot seat touted their multi-billion dollar investments in research and development, and warned against European models of negotiating drug prices — even though some conceded that Americans shoulder the costs of pharmaceutical innovation, as other countries pay less for prescriptions.

But the question of how, exactly, to address list prices set by manufacturers remained a sticking point of the three-hour hearing.

“I think you and others in the industry are stonewalling on the key issue, which is actually lowering those list prices,” Wyden said to Pfizer CEO Albert Bourla.

Wyden called out AbbVie for raising the price of a 12-month supply of Humira — a multi-tasking drug that treats arthritis and other conditions — from $19,000 to $38,000 over a six-year period. Wyden said it was “troubling” to see, in AbbVie regulatory filings, that “a portion of CEO Richard Gonzalez’s multi-million dollar bonus was directly tied to sales of Humira.”

Last week, Wyden and Iowa Republican Sen. Chuck Grassley, who chairs the Senate Finance Committee, launched a bipartisan investigation into insulin prices, citing price increases up to 585 percent for the medication used to treat diabetes. The senators have requested information from Eli Lilly, Novo Nordisk, and Sanofi, whose CEO also appeared at the hearing Tuesday.

The companies present also included Wilmington-based AstraZeneca, and Bristol-Myers Squibb.

Sen. Bob Menendez (D., N.J.) offered what he called a “friendly warning” that “it’s time to be proactive." If the industry does not take meaningful action to reduce prices, “policymakers are inevitably going to do it for you,” Menendez said.

Menendez asked the executives whether any of them used part of their corporate tax breaks to reduce prices. Frazier, whose company is headquartered in Menendez’s state, gave one of the more direct answers. “Senator, our effective tax rate went up from 19.1 to 19.8.”

Sen. Tom Carper (D., Del.) relayed that his wife’s mother died when she was a child, and said the loss still hurt. “For all of us, this is personal and it’s political, and it’s economic,” he said.

He said he was looking for consensus on points such as increasing industry-wide transparency for how drug companies set prices, and eliminating the rebates paid to pharmacy benefit managers — a cost that drug makers often blame for driving up prices for consumers.

Both Frazier and Johnson & Johnson executive vice president Jennifer Taubert said they would support such measures.

As the hearing wrapped up, Wyden said he’d heard “a lot of happy talk” — for example, about getting rid of rebates — but that “no firm commitments have been made to lower list prices.”

"If rebates go away, will you support a black letter law that requires that you reduce list prices by the amount of the rebate,” Wyden continued. He said he wanted an answer in writing within 10 days.

A few minutes later, Frazier said he could understand “why patients are frustrated,” but stressed that the “system itself is complex and it is interdependent."

“No one company can lower list prices,” he said.