America's top pharma CEOs are about to get grilled by Congress over the cost of their drugs

pharma drug prices congress 4x3Shayanne Gal/Business Insider

  • Seven top leaders of major pharmaceutical companies are testifying about high US drug prices on Tuesday as part of a congressional hearing.
  • The group of executives are seeking to justify prices by emphasizing the value that their medicines bring patients. They are also shifting blame to other parts of the US drug system, like middlemen.
  • But lawmakers will resist the blame game, and push the pharma executives on what they and their organizations can do to make change for patients.
  • "We've all seen the finger pointing, " said Chuck Grassley, the Republican senator from Iowa who's leading the hearing. "But, like most Americans, I'm sick and tired of the blame game. It's time for solutions."

High US drug prices have been top of mind for many Americans lately.

On Tuesday, lawmakers are trying to get some answers by grilling executives from seven top pharmaceutical companies at a congressional hearing in Washington. The seven drugmakers, which include Merck, Pfizer and Johnson & Johnson, collectively have a market value of $1.13 trillion.

The executives, in turn, are defending the value their medications bring in a wide range of severe and debilitating diseases. Drugmakers must invest massive sums into researching and developing new drugs, a notoriously expensive process, according to the executives' prepared remarks.

Many of the executives acknowledged that high drug prices affect patients' ability to afford treatments, even as they shifted blame for patients' costs to the wider US healthcare system.

Pfizer Chief Executive Officer Albert Bourla, for example, listed work his company has done in breast and lung cancer, leukemia, meningitis B, and to develop a promising non-opioid pain treatment.

A high-profile group heads to Washington

"All of these breakthroughs won't do anyone any good if patients can't afford them," Bourla said in his prepared remarks. "Our healthcare system is broken, and we need to fix it."

Read more: Here's why Big Pharma is cheering a new proposal from the Trump administration that's supposed to tackle high drug prices

Six of the seven companies sent their CEOs to Tuesday's hearing: Merck's Kenneth Frazier, Pfizer's Bourla, AbbVie's Richard Gonzalez, AstraZeneca's Pascal Soriot, Bristol-Myers Squibb's Giovanni Caforio, and Sanofi's Olivier Brandicourt. Johnson & Johnson sent Jennifer Taubert, an executive at the company's Janssen pharmaceutical unit. At least two medical doctors and one veterinarian/PhD were in attendance.

With such a high-profile cast, the healthcare industry has been abuzz about Tuesday's hearing for weeks. Drug pricing could also be a rare bipartisan issue this year, with Trump frequently raising it and the House Democrat majority making it a priority, too.

The group called to DC, like most pharmaceutical companies, has raised its prices over the years. Pfizer even got into a high-profile altercation over drug pricing with President Donald Trump last year, while under its previous CEO, Ian Read.

The US spent an estimated $344.5 billion on prescription drugs in 2018, and the figure is expected to rise to $576.7 in 2027, according to projections from the federal Centers for Medicare and Medicaid Services. The share of total US healthcare spending that goes toward drugs will increase from 9.4% tot 9.7% over that time, according to the projections. The advent of new drugs and a push to consistently treat patients with chronic diseases is projected to drive the growth.

How big pharma defends its prices

But the drugmakers on Tuesday emphasized problems in the healthcare system at large, including the role that discounts called rebates play in keeping drug prices high. Drugmakers pay these discounts to middlemen called pharmacy-benefit managers, which also benefit from high drug prices, and drug companies have sought to deflect blame to them in recent years.

Bourla and other executives alluded to this in describing "misaligned incentives" in the US health system that expose patients to high costs. Some of their suggestions for improvements on Tuesday included limits on the out-of-pocket costs seniors face in the government's Medicare Part D program, which covers prescription drugs.

Chuck Grassley, the Republican senator from Iowa who leads the Senate Finance Committee, indicated in his opening remarks that he's tired of efforts to deflect responsibility.

"We cannot allow anyone to hide behind the current complexities to shield the true cost of a drug," he said.

"We've all seen the finger pointing. Every link in the supply chain has gotten skilled at that, " he said. "But, like most Americans, I'm sick and tired of the blame game. It's time for solutions."

Read more: Congress will grill 7 top pharma executives over the high cost of drugs tomorrow. Here's how they're set to shift the blame.

Sanofi CEO Brandicourt used insulin, a lifesaving product for individuals with diabetes, as an example of broader problems with the healthcare system.

A lifesaving product gets scrutinized

The product has been of particular interest to patients and lawmakers. It was a focus of the Senate Finance Committee's prior drug price hearing, and of a bipartisan investigation launched on Friday by the two leaders of the committee, Grassley and Ron Wyden, an Oregon Democrat.

Insulins have been sold for decades and the market for the treatment should be competitive, with many drugmakers selling it. But that hasn't stopped prices from skyrocketing in recent years.

Sanofi makes the top-selling long-acting insulin Lantus, the price of which CEO Olivier Brandicourt defended on Tuesday, according to planned remarks. Though average patient out-of-pocket costs on Lantus have risen, Sanofi's own take-home has declined since 2012, he said. The drugmaker has said that discrepancy is due to the rebates it pays middlemen.

Read more: Big drugmakers are sitting on billions of cash - and top pharma executives are hinting about big M&A to come in 2019

Analysts at Cowen said that while the hearing "will likely be great theater," they expect little concrete action from Washington to bring down the cost of drugs.

A big drug pricing deal "gives President Trump a win on an issue Dems have called their own for more than a decade, particularly ahead of the 2020 elections," they said.


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