High drug prices in the United States are a sorely contested topic between consumers, lawmakers, and officials at pharmaceutical companies. The political pressure to lower drug prices is high and drug prices remain pharma’s biggest business and reputational risk.1
On Tuesday, February 26, 2019, officials from seven of the largest drug makers in the United States testified before Congress regarding high drug prices.2 Officials from Pfizer, Merck & Co., Johnson & Johnson, AbbVie, Bristol-Myers Squibb, Sanofi, and AstraZeneca appeared before Congress to defend their pricing and business practices before the Senate Financing Committee.3 The executives argued that high drug prices are required to offset a variety of production costs, such as research and development.
Several months ago, President Trump proposed changes to Medicare that would change how Medicare pays for certain expensive drugs.4 The Trump administration claims that Medicare is paying 80 percent more than other advanced industrialized nations for drugs.5 Under the proposed changes, Medicare would only pay 26 percent more.6 The new plan proposed by Trump could potentially reshape the pharmaceutical industry, from the types of drugs companies target in research and development to negotiations in price setting. Top officials at pharmaceutical companies opposed the Trump administration’s proposed changes to Medicare and argued that such changes would model price controls from other countries where coverage of expensive new drugs is costly or denied.7
Republicans and Democrats agree that something must be done to alleviate the hardship on American families from high drug prices. At the hearing before Congress, the executives argued that the high costs often cited were advertised prices, not prices consumers ultimately pay.[JL1] These executives were fighting for the freedom to set drug prices. [m2] The hearing could be the start of a bipartisan effort to address increasing healthcare costs that may impact more than just the pharmaceutical industry.
The biggest issue in creating new legislation to curb rising drug prices will be to determine which part of the drug making chain is most responsible for increasing prices and which area can withstand major changes without destroying jobs or profits.8 At the hearing, the executives remained steadfast in their position[JL3] that incentives such as rebates for drug-plan middlemen have affected the true price of prescription drugs. Each official answered “yes” when asked whether they would support a Trump administration proposal that would pass an estimated $29 billion in rebates paid to pharmacy benefit managers to consumers.9 Pascal Soriot, CEO of AstraZeneca, went on to say that “if rebates were removed from the commercial sector as well, we would definitely reduce our list price.”10 All the officials agreed that public perception was a factor when drug pricing is decided.11
Lawmakers also scrutinized patent issues in the pharmaceutical industry. Changes in patent law could be one way that Congress could lower drug costs. Sen. Cornyn had an exchange with Richard Gonzalez, CEO of AbbVie, regarding the fact that AbbVie holds patents for the drug Humira up until 2034 even though the drug was first sold in 2003.12 Sen. Cornyn was not satisfied with Gonzalez’s reasoning and followed up with a request for the Judiciary Committee to investigate the issue.13 While patent reform seems like a promising way to help reduce drug prices, it could carry broader implications. Patent laws which create limits to affect one technology area could have unanticipated effects on other areas of technology.
On March 4, 2019, Eli Lilly CEO Dave Ricks announced that his company would sell a cheaper version of their rapid acting insulin, Humalog.14 This demonstrates that there are solutions, but these solutions are only possible with the cooperation of various actors in the drug making chain. The tradeoff between regulation and a free market with regards to innovation and access to drugs will be at the forefront of any changes in the industry.
Ned Pagliarulo & Andrew Dunn, Pharma’s day in Congress: ‘A hearing not a show’, BIOPHARMA DRIVE (Feb. 26, 2019), https://www.biopharmadive.com/news/pharmas-day-in-congress-a-hearing-not-a-show/549279/. ↩
Id. ↩
Ken Alltucker, Big Pharma CEOs tell senators they won’t reduce drug costs without other reforms, USA TODAY (Feb. 26, 2019, 7:49 PM), https://www.usatoday.com/story/news/health/2019/02/26/senate-finance-prescription-drug-prices-pfizer-merck-abbvie-astrazeneca-sanofi/2987249002/. ↩
Tami Luhby & Lauren Fox, Trump leans into midterms with a pitch to un-rig Medicare drug prices, CNN (Oct. 25, 2018, 6:18 PM), https://www.cnn.com/2018/10/25/politics/trump-drug-prices/index.html. ↩
Robert Pear, Drug Makers Try to Justify Prescription Prices to Senators at Hearing, N.Y. Times (Feb. 26, 2019), https://www.nytimes.com/2019/02/26/us/politics/prescription-drug-prices.html. ↩
Id. ↩
Id. ↩
Id. ↩
Berkeley Lovelace Jr. & Angelica LaVito, Senators grill pharma execs for raising drug prices, protecting patents ‘like Gollum with his ring’, CNBC (Feb. 26, 2019, 3:57 PM), https://www.cnbc.com/2019/02/26/sen-ron-wyden-grills-pharma-execs-for-raising-drug-prices.html. ↩
Id. ↩
Id. ↩
Pagliarulo & Dunn, supra. ↩
Id. ↩
Michael Nedelman, Amid uproar over high drug prices, Eli Lilly introduces generic insulin at half price of brand-name Humalog, CNN (Mar. 4, 2019, 11:43 AM), https://www.cnn.com/2019/03/04/health/insulin-price-humalog-generic-eli-lilly-bn/index.html. ↩