okay um the senate committee on health education labor and pensions will come to order uh today is a busy day as we all know um a very important votes going to be taking place and Republicans Democrats will be meeting in their caucuses so people are going to be coming uh in and out uh I also think that this hearing is important enough that we extend the time for questioning from the usual five minutes to seven minutes if that's okay with folks um let me Begin by welcoming the CEOs of Bristol Myers squib uh Chris Chris Verner we thank you for being here uh CEO of MK Robert uh Davis we thank you for being here uh and the CEO of Johnson and Johnson Wen D for being with us this morning thanks very much there is a lot of discussion uh in our nation about how divided our people are uh on many issues and that is absolutely true but on one of the most important issues facing our country uh the American people whether the Democrats Republicans and the dependence conservative Progressive could not be more united and that is the need to substantially lower the outrageous price of prescription drugs in this country according to a recent poll 82% of Americans say the cost of prescription drugs is too high and 73% say that the government is not doing enough to regulate drug prices as a nation we spend almost twice as much per capita on health care as do the people of any other country $113,000 every man woman and child and one of the reasons that we spend so much is the high cost of prescription drugs in our country the outrageous cost of prescription drugs in America means that one out of four of our people go to the doctor get a prescription and they cannot afford to fill that prescription how many die as a result of that how many suffer unnecessarily nobody knows but my guess is it is in the millions and I have talked to many of them in Vermont and around the country meanwhile our insurance premiums are much higher than they should be and Hospital costs are sing because of the high cost of prescription drugs further the cost of prescription drugs in this country is putting an enormous burden on taxpayers and seniors by raising raing the cost of Medicare and Medicaid Medicare alone spends at least $ 135 billion a year on prescription drugs this is not only a personal issue it is an issue of the federal budget meanwhile as we pay by far the highest prices in the world for prescription drugs 10 of the top pharmaceutical companies in America made over10 billion dollar in profits in 2022 they are doing phenomenally well while Americans cannot afford the cost of the medicine they need and the CEOs in general receive exorbitant compensation packages this morning we're going to hear a lot from our CEO panelist about how high prices are not their fault and that the pbms are forcing Americans to pay much higher prices than they should be paying but let us be clear in 2022 Johnson and Johnson made nearly $18 billion in profit paid its CEO over 27 million in compensation and spent over 17 billion on stock BuyBacks and dividends that same year MK made 14 A5 billion in profits handed out over 7 billion in dividends in their uh to their stockholders and paid its CEO over $52 million in compensation and Bristol Meers scribs made 8 billion in profits last year while recently spending over 12 billion on stock BuyBacks and dividends and giving its CEO over $41 million in compensation now why did a majority of members of this committee invite these three pharmaceutical CEOs to testify today and the answer is pretty simple Mr burner we will want you to to explain to the American people why Bristol Myers squib charges patients in our country $7,100 a year for elquist when that same exact product can be purchased for just $900 in Canada and $650 in France Mr dado we're going to ask you why Johnson and Johnson charges Americans with arthritis $79,000 for Aro when that same exact product can be purchased for just 20,000 in Canada and just 12,000 in France Mr Davis please tell us later while MC why MC charges Americans with cancer $191,000 a year for Kuda when that same product can be purchased for $12,000 in Canada and $91,000 in France and let's be clear Johnson Johnson MK and Bristol Myers scrib are not just charging higher prices in the United States compared to other countries they are also charging Americans much higher prices today than they did in the past even accounting for inflation from 2004 to 2008 the median price of innovative new drugs sold by these three companies was just $144,000 inflation accounted from 2019 to 2023 where we are today the median price of new drugs sold by these three companies was $238,000 and other words Americans are forced to pay higher and higher prices for the drugs they need to survive and let's be clear the overwhelming beneficiary of these high drug prices is the pharmaceutical industry how do we know that well that is precisely what they tell their investors according to their own shareholder reports Bristol Mario squib made $3 34 billion selling the blood thinner elquist in the United States compared to just 22 billion in the rest of the world combined make their money in the United States in other words the US accounts for nearly 2/3 of all Global sales of eloquest not a single dollar of this revenues going to pbms 100% of it is going to Bristol Myers SB Johnson and Johnson has reported to its shareholders that it made over 30 billion in Revenue selling the arthritis drug stera in the United States since 2016 more than twice as much as the rest of the world combined nothing to do with pbms MK has reported to a shareholders that it made 43.4 billion selling the cancer drug kruder in the United States compared to 30 billion in the rest of the world combined now our CEO panelist from the drug companies will tell us this morning how much it costs to develop new drugs and how often the research that they undertake for new cures is not successful and they are right we appreciate that but what they have not told us in their written testimony is that 14 major pharmaceutical companies including Johnson and Johnson and Merc spent $ 87 billion more on stock BuyBacks and dividends over a recent 10year period than what they spent on research and development more on stock Buybacks in dividends than in research and development in fact Bristol Meers squib spent 3.2 billion more on stock BuyBacks and dividends in 2022 than it spent on research and development Johnson and Johnson spent $46 billion more more on stock BuyBacks and dividends than it spent on research and development since 2012 in other words these companies are spending more to enrich their own stockholders and CEOs than they are in finding new cures and new treatments now the average American who hears all of this is asking a very simple question how does all of this happen what's going on how could Dr companies charge us in some cases 10 times more than they charge Canadians or people around the world for the same drug how do they get away with this when so many of our people cannot afford the high price of the drugs that they need how can it be uniquely among industrialized countries that these companies not just these companies but the pharmaceutical industry in general can raise prices anytime they want to any level they want want to raise double prices do it any any way they want how do they get away with all of that and 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 that is the sad State of Affairs in a corrupt political system over the past 25 years the pharmaceutical industry not just these companies the entire industry spent over $8.5 billion on lobbying and more than 745 million on campaign contributions and let me be Fe Fair here don't want to missp speak they are bipartisan they give to Republicans they give to Democrats and I am especially impressed by the fiser drug company fiser is not here this morning contributing a million dollars to the Republican party in Kentucky to expand its headquarters named after Republican leader Mitch McConnell but again it's not just just Republicans it's Democrats as well unbelievable this is an astounding fact last year drug companies had over 1,800 well-paid lobbyists here in DC to make sure that Congress did their bidding there are 535 members of Congress and 1,800 well-paid lobbyist over three for every member of Congress so if you want to know why you're paying the highest prices in the world America that's why now here is some good news in the midst of all that we are beginning beginning to take on the greed of the pharmaceutical industry as a result of the inflation reduction Act passed several years ago Medicare for the first time ever is beginning to do what every major country on Earth does and what the ver Veterans Administration has been doing for over 30 years and that is to negotiate the lower prices of drugs including uh Genovia stera and eloquest let me conclude uh by saying this uh I am proud of what this committee up to this point has accomplished last year as you'll all remember the CEO of madna committed during a help Committee hearing that his company would make certain that no one in America would have to pay for their vaccine out of pocket we appreciated that in a separate Heth Committee hearing last May the CEO of Eli Lily committed that his company would not raise prices on existing insulin products after having in fact lowered them but let's be clear much more needs to be done I look forward to hearing from our CEO panelist this morning as to how they are going to go forward to substantially lower the cost of prescription drugs in this country Senator Cassidy uh you're now recognized for an opening statement thank you thank you chair Sanders let's let's just be clear everybody on this panel cares about the high cost to prescription drugs and wants to work work on real solutions to address this but it's also clear that this hearing is not about finding legislative Solutions it's kind of following a formula we publicly attack we publicly attack private well I don't but others publicly attack private citizens for being successful under capitalism we grossly over oversimplify a problem and blame corporations we demand CEOs come before the Committee for Public verbal stoning we reject the offer to send top Executives with subject matter expertise and responsibility regarding the issues at hand and threaten a subpoena when CEOs are suspicious that they won't get a fair shake hold the hearing get sound bites then pick another set of CEOs for a show trial but we don't pass meaningful legislation if that sounds familiar it's been the hearing with Starbucks founder Howard Schultz madna CEO Stefan bansel and now this hearing with the same formula I would have gladly joined the chair and exploring solutions to address the high cost of prescription drugs I'm a doc I worked in a public hospital for the uninsured for 25 years I did my best to get care to those who otherwise would not have received I am aware of this I'm also aware of the perverse incentives um the kind of like my gosh it shouldn't be high but it is high Bad actors game the system and we need solutions that benefit patients and improve access but the majority was not interested in working with this side of the Das to hold a serious hearing to inform serious legislation they didn't seek Republican input the goal was to haul you guys in to cry capitalism and blame these corporations for the high cost of drug prices now by the way of course drug companies play a role and hopefully we'll get answers today to legitimate questions about how how drugs are priced but the problem is far greater and more complex than individual companies or even a set of companies within an ecosystem which is incredibly complex while why do Americans pay more for certain drugs and patients in other countries to understand we need to have a serious effort to navigate the network of perverse incentives throughout the Health Care system I lived in it for 25 years I'm very kind of aware of it taking a substantiative look at insurance benefit design price transparency regulatory barriers intellectual property barriers the perverse effect government discount programs have upon prices charged to commercial patients Etc one example just say again a little bit of complexity here the 340b drug program resulted in a 54 billion in drug discounts in 2022 but we actually don't know if those discounts lowered prices for the patient who bought the drug there are reports that patients paid cash when the intermediary took the full price even though 340b should have lowered it that is a serious investigation being conducted by this side of the Das that the other side of the Das was not interested in participating in that is an understanding of an ecosystem I understand there's no one more eloquent than Cher Sanders on Medicare for all and we can cherry-pick examples of how other countries are doing something better I can cherry-pick the opposite Canada is struggling just just to show you that there's a complexity here let me just take an example Canada is struggling with Specialty Care in May of last year the Canadian government began to send 4,800 Canadians from British Columbia to Washington State to quote ensure people have faster access to life-saving radiation treatment end quote they can afford their system because we're right next door relatedly to this hearing and to that Allison deuso a Canadian woman paid for her own treatment in the United States after the provincial health authority in British Columbia denied her access to life-saving chemotherapy Canada had a lower cost drug so low they didn't carry the chemotherapy so she she paid for it out of pocket in the United States so she could have life-saving chemotherapy the United States is not perfect but if we cherry pick from other countries we have to do a more thorough investigation to see is there a balance there now let's return to prescriptions Canadians pay more less than we do let's figure out why but let's also point out the public health insurance in Canada only covers 21% of newly developed drugs now maybe that's a trade-off but I can tell you you tell an American that they can't have access to a life-saving court a life-saving drug they're going to see you in court uh they're going to sue and they're going to say I want that access the UK only covers 48% of newly available drugs Americans just would not tolerate that it's fair to say that Miss deuso are those radiation treatment patients are those not getting the newly developed life-saving drugs as quickly might die in those countries that don't have access to the same treatments as do do we in the US these are serious questions one more time I'm a doc uh I am aware of this but we need to fully consider all these issues and then maybe bring you in at the end uh but we'll bring in with a context which is complete as opposed to isolated as I said at the start it would be best if this were a genuine exercise I am so willing to do the work on this as are my colleagues we've shown that that willingness on work on PBM reforms and generic drugs um and even though the chair and I got off to IR rocki star we did some pretty good work on that Mr chair uh I think we've got some good bipartisan leg legislation so this committee I agree with you can accomplish that but I don't want the committee to devolve into a CEO whack-a-mole ends up with no serious legislation as a result further proof of what I consider the unserious and cynical nature of this hearing is that the minority asked the chair to have a witness on the panel that could actually explore some of these issues side by side these CEOs that was turned down we wanted an academic expert in drug pricing who could provide unbiased and substantiative input to the issues at hand our witness was not allowed he'll be on the next but the way this works is this is gets all the publicity and the next one gets crickets and so we've not had that opportunity um and I'll also point out we didn't split the majority and minority Witnesses into different panels during several hearings which promoted kind of labor union issues I can think of no reason to not allow our witness to be here now uh except perhaps ruining the Optics as I said at our last markup what ends up being hollow messaging gives DC a bad reputation folks want real answers they want relief from high prices it is in part what we're going to hear today but it will be separated from a context that would have made it a lot more productive if you're telling voters you're going to do something when you know at the get-go you'll have no legislative solution which emerges and that's why folks don't trust so um if we're just looking for a social media clip then I suppose we've accomplished something but let's make a difference for the people whom we represent for those patients in hospitals where I once treated who otherwise would not have access to care we have the ability to craft meaningful legislation let's do it with that I yield thank you Senator cidy uh our first witness will be Wen dwat uh chairman and CEO uh of Johnson and Johnson Mr D has served as Johnson and Johnson's chairman since 2023 and chief executive officer since 2022 Mr D thanks very much for being with us chairman Sanders ranking member CID and members of the committee thank you for the opportunity to be here today Johnson and Johnson has collaborated with this committee over several decades to advance Healthcare solutions for patients including on diversity on clinical trials nursing and Healthcare Workforce pandemic preparation mental health and Regulatory Pathways for Noel cell and Gene therapies I applaud this committee for your commitment to such critical priorities I have been with J&J for more than 35 years and have held roles in Europe and in the US I understand the global challenges and complexities of Healthcare in Innovation and delivery and today I look forward to discussing our approach to pricing and the work we do to Advance Health Care for all Americans fundamentally our decision making is Guided by the value set forth on our Credo which states that our first responsibility is to the patients our drag pricing decisions reflect our commitment to Bringing forward Innovative medicines for patients today and for patients tomorrow first our prices are based on the value our medicines bring to patients the Health Care system and Society we take into consideration that our medicines improve patients quality of life and survival rates while often reducing health care costs and for context in 2022 the average net price of our medicines declined for the six year in a row by 3.5 percentage points over those six years prices have declined by almost 20% and the real inflation adjusted price de line was more than 40% second we price our medicines to support patient access in 20122 alone we paid $39 billion in rebate discounts and fees almost 60% of the average leas price of our drugs with the intent that patients benefit from this substantial cost savings we also support patient affordability and access by funding patient Assistance programs in 2022 these programs helped more than 1 billion and 1 million underinsured patients and we donated $3.8 billion in free medicines and other support to help patients with no insurance finally we price our medicines to meet our commitment to innovate and develop differentiated and Noel medicines for patients the investment required to do so is massive the average cost of bringing a drug through clinical trials in our industry is more than $2 billion however more than 90% of the drugs that enter clinical trials do not make it to patients consequently our R&D investment is enormous and totally totals near 78 billion since 206 despite the tremendous investment required to bring drugs to patients drug costs in the US have not increase significantly as a percentage of total overall healthcare costs in fact drug spending in the US is about 14% of healthcare spending slightly below the average for the rest of the world while total us Healthcare spending is higher than other developed Nations this spending allows American patients to receive Cutting Edge Health Care earlier than any other country in the world however the burdensome coopay obligations imposed in the US are hard for patients to meet and undermine access and Health Equity remarkably the GAO found that patient coopay obligations often exceed payer costs for their drugs this means that patients sometimes pay more for their medicines than their insurers clearly this part of the system is not working as intended we support proposals to reconcile this inequity and to ensure patient access as outlining my testimony Congress should stop middlemen from taking for themselves the assistance that pharmaceutical companies intend for patients and finally it is essential that we reject the price caps and controls that exist in other countries which stand Innovation our nation's robust biopharmaceutical industry was created by policy choices that prioritize earlier patient access to breakthrough medicines and incentivize investment in medical Innovation thank you for the bipartisan efforts of this committee and for the opportunity to engage in today's discussion I look forward to your questions thank you very much Mr D our next witness will be Robert Davis chairman and CEO of MK Mr Davis has served as mk's chairman since December 2022 and CEO since 2021 thank you very much Mr Davis for being here chairman Sanders ranking member Cassidy and members of the committee thank you for the opportunity to be here with you today as the CEO of MC I'm here to offer concrete policy suggestions to address the barriers American patients May encounter as they attempt to access our medicines and the current pricing system will also ensuring MC may discover and develop the next generation of life-saving medicines and vaccines based in raway New Jersey our company is one of the world's most advanced research intensive biopharmaceutical companies an organization at the Forefront of providing Innovative Health Solutions that Advance the prevention and treatment of disease in people and animals I've worked in the healthcare industry for the entirety of my 34-year career I joined MK 10 years ago in large measure because the company was on the precius of its first approval for katuda a revolutionary oncology treatment at the time people close to me were battling cancer and unfortunately they were not able to benefit from this amazing Discovery following that first approval MC has demonstrated the efficacy of katuda in 39 indications and reached nearly two million patients with many of the most widespread cancers affecting Americans the impact of katuda and other recent advances is difficult to overstate with a recent American Cancer Society report finding that cancer mortality in the United States has fallen 33% from 1991 to 2021 representing an estimated 4 million Americans whose deaths have been averted and our work continues as we advance cuded into even more tumor types and earlier stages of cancer remarkable progress like this does not come cheaply for katuda alone between 2011 and 2023 MC has invested 46 billion dollar in development and we expect to invest another $18 billion into the 2030s and enology is just one of MC's many areas of Discovery right now we have nearly 20,000 researchers seeking breakthrough treatments for immune disorders infectious diseases Alzheimer's and other ailments threatening the health of millions of people to advance this critical work we've invested more than $159 billion in R&D since 2010 including 30 billion in 2023 alone and have invested more than 10 billion in capital in the form of both investments in manufacturing and R&D over the last 5 years in the United States creating more jobs for Americans we do not hesitate to make these Investments because they are necessary to further MC's mission to serve patients at the same time many Americans are struggling to afford Healthcare including prescription medicines and we're eager to find solutions to these access and affordability challenges that's why we supported changes to the Medicare Part D program to create an out-of pocket cap that allow beneficiaries to pay their cost over time we've also publicly disclosed our us pricing data including the average rebates and discounts we provide in addition we offer coupons and support a patient assistance program for those who cannot who cannot afford the medications they need in the past five years this program has helped nearly 800,000 patients to obtain Merc products free of charge with an estimated value of $7.8 billion but the reality is that mk's efforts alone are far from sufficient they do not and cannot address the underlying systemic and structural issues underpinning our system as more power and control has been concentrated into the ever smaller number of vertically Consolidated players their negotiating strength has increased dramatically in contacting with them MC continues to experience increasing pressure to provide even larger discounts and the gap between list and net price continues to grow and patients are not benefiting from the Steep discounts we provide these problems could be addressed if other actors revenue streams were Del from list prices thereby removing incentives for the system to favor high list prices this would also ensure that less value in the system flows to these metalen who do not create these medicines who do not disc discover or develop or manufacture them in addition the substantial savings provided by MK and other manufacturers should be required to be passed through to patients to lower their out-of-pocket costs we firmly believe that reforms like these will create a drug pricing system that incentivizes the discovery of new and important medicines while at the same time ensuring patients can afford those life-saving men medicines and Innovations future treatment breakthroughs hinge on what we do now we must hold on to a us pharmaceutical Market that is free competitive and predictable one that encourages and rewards investment one that drives the American economy and creates jobs and one that continues to deliver Innovation and new treatment discoveries I'm here today to pledge our support and cooperation in these efforts thank you for your time and your consideration of these important perspectives thank you very much Mr Davis our third witness will be Chris burner CEO Bristol Meers swib Dr burner has served as CEO CEO of Bristol May squib since November 2023 thanks for being here Mr burner chairman Sanders riking member cassedy and members of the committee thank you for having me here today I'm proud to be representing Bristol Meer squib an American company that is committed to transforming patients lives through science I've spent more than 20 years in this industry the majority in smaller science-driven biotechnology companies I join BMS because we have a similar focus on driving Leading Edge scientific innovation and our scale allows us to bring more medicines to more patients faster to help illustrate the type of work that we've been doing for more than 150 years at BMS let me provide two illustrations of how our Innovative medicines have helped patients and provided tangible benefits to society our work in HIV AIDS transformed this disease from a death sentence into a chronic condition similarly our pioneering immuno oncology treatments obdo and urovo harness the body's immune system to fight cancer and can have contributed significantly to improved outcomes across a number of tumors including metastatic melanoma where the combination of these two medicines has changed the median life expectancy from less than 9 months to over 6 years I'm proud that our record of innovation continues today we've invested more than $65 billion in research and development over the past decade this has resulted in truly novel and transformational medicines like chemos in cardiovascular disease our cell therapy platform in cancer and we are working toward bringing to patients the first medicine for the treatment of schizophrenia in 30 years these medicines are but a few examples of the Innovation that results from an American Health Care system that not only accounts for the majority of new medicines launched each year but also one that delivers those medicines to us patients faster than anywhere else in the world this isn't by Chance 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 this is in stark contrast to many systems outside of the United States which while they may deliver lower prices carry an often overlooked tradeoff that patients often wait longer for new medicines that are sometimes never approved or reimbursed for example Canadian patients have access to approximately half of the medicines available in the United States and patients in other countries face a Sim similar reality despite its benefits we know our American system is far from perfect patients bear the brunt of a complex us system that results in increasing health care cost and a lack of affordability we have to make the system work better for them after all Innovation that does not make it to patients is no innovation at all while prescription medicines account for a relatively small portion of overall Healthcare spending we believe we have an important role to play in prioritizing the development of medicines that will bring savings to the Health Care system and as an industry we should set a higher bar for doing just that similarly we have a role to play in addressing affordability and stand ready to partner with Congress and others to address this issue for patients in a holistic manner but in developing those Solutions we should not abandon our system for one that denies us patients the broad and Rapid access to vital medicines that they appreciate today you support policies that lower patient out-of- pocket costs without ultimately harming Innovation the need to strike this balance should not be abstract I expect many of us in this room have lost a loved one to cancer or another devastating disease in my case it was one of my best friends and it happened as he awaited a medicine that I believe could have saved his life this is an almost daily reminder to me that making patients wait for weeks months or years can be the difference between life and death thank you again for having me here today on behalf of BMS and the more than 30,000 employees who share my passion for delivering new medicines for patients I look forward to answering your questions Mr burner thank you uh very much uh before I uh begin the first round of of questions uh let me remind our Witnesses uh that while the help committee does not swear in uh witnesses as a general rule federal law at 18 us code section uh 101 prohibits knowingly and willingly making any fraudulent statement to the Senate regardless of whether a person is under oath uh I would also say in response to many of your testimonies we are aware of the many important life-saving drugs that your companies have produced and that's extraordinarily important I think as all of you know those drugs mean nothing to anybody who cannot afford it and that's what we're dealing with today that millions and millions of our people cannot afford the outrageously High Cost of prescription drugs in this country now uh my time and the time of all of the members is limited so we're going to just uh I'm going to ask wait are we starting so my time is limited so I'm going to start by asking all of you uh a number of questions and I would appreciate it if you could respond uh with yes or no answer uh it turns out that in our dysfunctional and extraordinary expensive Health Care System hundreds of thousands of Americans have gone to GoFundMe in order to raise money to pay for their health care needs uh and for their prescription drugs um let me ask Mr Davis if I might uh have you ever searched on GoFundMe for your cancer drug uh Kula no I have not okay uh we have I and my staff have and we have found uh over 500 stories of people trying to raise funds to pay for their Cancer Treatments uh one of those stories is a woman named Rebecca a school lunch lady from Nebraska with two kids who died of cancer after setting up a GoFundMe page because she could not afford to pay for Kuda Rebecca had raised $4,000 on her gofund me page but said the cost of Cuda and a cancer treatment was $25,000 for infusion every three uh weeks Mr Davis and please yes or no is it true that the LT price of katuda is $191,000 a year in the United States uh that is close to being true yes thank you is it true that that same exact drug can be purchased in Canada for $12,000 a year and $44,000 a year in Japan generally yes Mr Davis even though the price of katuda is one quarter of the price in Japan compared to the United States does uh your company does Merc make a profit selling katuda in Japan we do so what I understand is you make a profit selling Kuda in Japan for one quarter of the price that you sell it for in the United States my question to you is a pretty simple one will you commit to lowering the price of katuda in the United States to the price of Japan well Senator I I think um first I acknowledge the prices in the United States are higher uh than they are in many of the countries you said and not for all drugs but from many drugs and that 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 we have 39 indications for katuda across 17 tumor typ tyes in the United States if you look across Europe it's in the 20s if you look across Japan it's in that number a little bit less so there is a reason why the prices are different and we need to be careful because we are also seeing in those markets that they are unwilling to support the Innovation and we are very hardly working hard to try to get them to understand the need to help it fund The Innovation I apologize for cutting that's fine there are two other but I did want to make this point uh again we all appreciate the Breakthrough and important drugs that you and other companies have produced that save lives no debate about that but I do want to point out that after all is said and done and after all the money we spend on prescription drugs and healthc Care in general the life expectancy in Japan is nine years longer than it is in the United States uh Senator Cassidy talked about Canada the life expectancy in Canada is six years longer than in the United States life expectancy in Portugal is six years years longer life expectancy in the UK is four years longer um let me ask the last question to Mr Davis as I understand it you made $52 million in total compensation in 2022 will you commit to not accepting a single dollar more in compensation until there is not a single GoFundMe page for Kuda well I can tell you Merk we are very much sensitive to what's happening with patients that's why we have very important patient assistance programs we commented on the fact that we have over 800,000 patients benefiting where we provide free drug for those who can't afford it as well as other Assistance programs that help with co-pay and others so we are very committed as a company to doing what we need to do to try to help alleviate the CH the challenges patient space that you're focusing on and that's my focus as the CEO okay thank you Mr Bur uh with Bristol me squib uh Carolyn from Florida says that she cannot afford eloquest and so she will quote stop taking it though I need it to prevent the risk of having a stroke end quote uh Mr burner uh again yes or no please the list price of elquist is $7,100 a year in the United States Dr Melissa Barber an expert at Yale University has estimated that it cost cost just $18 to manufacture a year supply of eloquest $7,100 what we pay $1,800 to manufacture is it true that the same exact drug eloquence can be purchased in Canada for $900 a year Senator that's roughly correct uh let me ask you this even at 133% of the cost in the United States does Bristol Myers make a profit selling eloquest for $900 a year in Canada uh Senator we do make a profit all right so you're selling the product for 133% of what in Canada of what we pay in the United States and obviously you sell it there because you make money so Mr burner will you commit today that Bristol miles swib will reduce the list price of eloquest in the United States to the price that you charge in Canada where you make a profit Senator we can't make that commitment primarily because the prices in these two countries have very different systems that prioritize very different things in Canada medicines are generally made less available and it takes often times considerably longer for those medicines to be available on average rough I apologize I do apologize I just life expectancy in Canada is six years longer than it is in the United States um Mr burner your company spent over 122 billion on stock Buybacks in 2022 given that reality can you tell Carolyn why you can't lower the price of elois First Senator let me say no patient should have to go through the types of choices that the patient you just described go through it is our commitment to continue to bring down the price of medicines in the US and I would love the opportunity to bring down the price of eloquence in the US our net prices what we are compensated have actually Over The Last 5 Years declined at that same time the list prices have increased why is that because of the complexity of this system and the billions of dollars in rebates that we have provided to intermediaries that unfortunately do not go to lowering the price of medicines like the patient you just described again I apologize I want to get very briefly to Mr dto who's with Johnson and John johs son uh Mr dto is it true that the list price of stera is $79,000 a year in the US is that roughly right it's roughly right but it's also true that the average discount of estellar in the US is 70% all of that we've dealt with pbms and we're going to get to that I'm sure in this this morning is it true that while charging 79,000 in the United States that the exact same product is sold in Spain for $118,000 I don't know the price in Spain uh I can tell you that the average discount in the US is 70% so the price that you quote is 30% of that okay Mr dto is it true that it costs less than $15 a year to man manufactur Saro the manufacturing cost is only a component that goes into our pricing when we price our medicine we're looking at the value that the medicine brings to the healthare system our ability to continue to invest in research we invested $15 billion last year and also we look at affordability uh the average co-pay if they use our copay assistance programs in the US for a patient using EST Stelara is1 to15 per month I apologize I'm over my time I'm going to give Senator Cassidy the same time that uh I had thank you all uh Mr D uh the um in 2021 joh Jansen constructed an exclusionary contract with their pbms to protect ricade their Blockbuster drug a treatment for Ula of colitis very familiar with it a wonderful drug changed the outcome for people with UC but this deal protected uh Remicade from competition by new biosimilar in flectra which was launched at a 16% lower cost than Remicade now I understand this is confidential in terms of the settlement with the courts but and by the way let me just say this this involves a rebate wall so for the sake of those who are watching a rebate wall is an anticompetitive tool which can be used to restrict a competitor's entry into a formulary a manufacturer would offer more significant rebates to a Health Plan through a PBM for access to the formulary contingent upon the p be unblocking a biosimilar now we have been discussing the promise of biosimilars to lower the cost in a market oriented competitive way so if we're not going to have government regulation we've got to have a market uh situation and the market would be a biosimilar but this sort of arrangement blocked the biosimilar fering so um uh so in the full support of a market oriented uh approach do any of your current contracts employ rebate walls to prevent lower cost biosimilars from for formulary access we welcome biosimilars and genetics we believe it's an integral part of the system as a matter of fact in the US 90% of the prescriptions are biosimilars on generics and that's one of the reasons pharmaceutical expenses have remained flat or increased single digit during the last uh years uh we believe that biosimilar and generic Foster patient access and we care deeply about that and we don't let me ask because my specific question do any of your current contracts employ rebate walls our current contracts do not employ any technique to avoid biosimilars and genetics to have uptake in the market okay thank you now I think at least two of you maybe all three of you are working on gene therapy I've been concerned that we don't really know how we're going to price those and I think one of the concerns is that there will not be a Market Force to lower the cost of initial gene therapy which are incredible it's amazing the lifetime of benefit that gene therapy can can um create but I was speaking to a medical director of uh Medicaid CMO and he was telling me that the pharmaceutical cost related to Medicaid it's now 35% where formerly it was like 25 or or 30% and he says it's being driven by gene therapy and when Sickle Cell comes widely spread it's it's going I don't know how it's going to be priced but my state has a lot of sickers I don't know how my State's going to be able to afford giving it to everybody who should have access so very concisely how are we going to show restraint on the price of some of these new Gene therapies which already is driving up Medicaid so again 35% of Medicaid is now pharmaceutical cost H Mr burner I'll start with you Senator we actually don't work in gene therapy oh then let me go to Davis Mr Davis we actually do not working Oh I thought I saw you at a press release that y'all were doing so you had a vector or something no we're uh well we're doing some very basic research but we have nothing in advanced stages Mr we do have a gene therapy serve for treating inherited retinal diseases and we support legislation in order to be able to do value based contracts in the case of gene therapy so we welcome legislation in order to be able to have value based contracts that's a really that's good value based Contracting will be important but it still doesn't address the opening cost uh because if the opening cost is Sky High you still you see where I'm going with that uh what would you give to us who believe in markets uh a solution to an opening price that would be so much it would be difficult for society to afford the gene therapy and and I could fit I could put in any other drug but let's just start with gene therapy we we have to look at the value of this uh therapies and the fact that gene therapy for inherited retinal diseases may affect only uh less than a, people in the world so we have to understand that and you can rest assured that if we are fortunate enough to bring this solution that people that has diseases that can lead to blindness we sit now and evaluate very thly our pricing in order to make sure that patients all patients that need this therapy are able to afford it I think I recall a couple years ago there was a study that was shown respected uh you probably know it better than I that $2 million for gene therapy for ultra rare diseases was a reasonable a reasonable sort of it would cover the cost it would create the incentive to produce more and that would be for the ultra rare where presumably you wouldn't have the ability to produce more you know obviously the more you produce you get a little bit extra profit you know what I'm going with that so um um but that shows restraint if you will on the on the behalf of the manufacturer um now we want to create incentive but we want to be able to provide access and without access it's as if the drug has never been invented so is there any other thoughts you have on how Society um if if that's ultra rare $2 million presumably if it's not ultra rare it' be less how can we have a market oriented approach to this because I truly am concerned about the ability of a Medicaid Program to be able to afford some of these Gene therapies we care deeply about uh our medicine getting to the patients that needed especially in these as you have mentioned ultra rare diseases that have uh therapy can have life-changing consequences so we will always uh sit down and make sure that the way we price is reflective of the value of the medicine but also importantly it enables affordability and it makes it possible that every patient that's needed in America now the affordability though we're defining affordability for the patient so if Medicaid covers it it's by definition affordable for the patient or if insurance does but then that doesn't necessarily make it affordable for society uh and society's got to pay for it and obviously Medicaid is taking more and more of a state's budget and frankly more and more of the federal budget I'm not sure there's an answer there but but let me just challenge you because we want Market oriented Solutions uh um uh and we want to create incentives so that good companies like the three of you and others are making these new things but if my state goes bankrupt paying for a new gene therapy then my State's the taxpayer we all are tough you in tough shape uh let me just go to one more thing um there's evidence that pharmaceutical companies will do life cycle management kind of to prolong the sort of exclusivity of a drug um and some have argued that that actually defeats Innovation because as opposed to making profit from Innovation you can make profit from life cycle management any thoughts about that Mr burner Senator I think life cycle management if you think about the extend ition of new indications for a product is incredibly important to really being able to deliver additional benefits to patients obviously the patents associated with any product will dictate when a generic enters we have been in favor of a robust generic entry primarily because our focus is on Innovative products but think for example in cancer where typically you start the treatment of cancer very Laten disease learn more about how the drug Works show it safe but ultimately you can bring that into early stage cancer where you have the potential to potentially cure patients now that takes quite a bit of time but that's an example of life cycle management where you are actually showing the true potential of a medicine I would hate for us to cut off the opportunity to show those benefits at the same time we should be as an industry welcoming of generic competition because ultimately our Focus as a company is to take resources as we get close to generic entry and focus those resources on the next wave of new product Innovation which is where I think we ultimately want to go for patients Mr Davis you got 20 seconds ma'am how would you do it well the short answer is uh as I look at it one we very much support uh generic drugs biosimilar drugs I think it's the core of how our system works we have a a period where we're protected we are able to recoup our investment and then Society benefits and perpetuity beyond that um as we look at life cycle management we always are asking are we bringing value to the patient I'll give you a live example if you look at katuda katuda now as I mentioned is in 39 indications across 17 tumor types it is revolutionizing the care of patients facing cancer the reality of it is still only 30% of people show overall response so as great as it is patients are still suffering and what we are doing is investing in combination therapies to be able to extend and go beyond that 30% which means much better benefit and value to the patients that will ultimately use those drugs thank you Senator Murphy uh thank you very much Mr chairman thank you for holding this really important uh hearing um Mr datato um I'm looking at your arthritis drug and we've talked already a little in this hearing about the difference in price between the United States and other countries annual cost around $80,000 in the United States $20,000 in Canada $112,000 in France are the prices that you receive from a country like Canada or France which look to me to be about one quarter of the price that you get from the United States are those prices covering your costs yes they do to clarify Senator the price in the US is discounted by 70% so the appropriate comparison would be 25,000 in the case of estela if you are considering that price are the prices you're receiving from these other countries so let's let's say France let I'll give you the benefit of your argument France is still 20 it's still 50% of the US cost that you're claiming are those countries prices covering your costs they do the difference is that for example in Canada which was the first country you quoted uh Stelara which is mainly indicated for inflammatory bowel disease cron disease and alterative Colitis not for arthritis is not yet reimbursed in the public system so Canadian patients that want to access estela they cannot do it in the in the public system because eight years eight years later is not J reimbursed there so you don't identify any free rider syndrome today in which the United States is paying higher prices allowing other nations to receive lower prices I agree with you that the prices in the US uh are generally higher for medicines more aligned than what you are describing as the rest of the of the Health Care system prices are the percentage of pharmaceutical expenses over Total Healthcare expenses in the US is 14% And that is lower than most of the advanced economies 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 if the United States were to restrict the prices we paid would that create a different negotiating dynamic in countries that right now for instance are paying 50% of what the United States pays would it allow you in your negotiations to get higher prices from other nations that right now are paying far less than the United States we believe that price caps uh are not the way that Innovation is going to be fostered uh we have work with the UN trade Department and with US embassies around the world to try to reject the price caps that some countries as the one you're mentioned impose and we welcome the support of the US government in avoiding that these governments are ultimately imposing c cap price caps on us that are not benefiting their patients neither what do you say to Americans who look at the way that you allocate revenue and wonder why in your case for instance you are spending $6 billion on stock BuyBacks 11 billion on dividends and $4 billion on research and development you spend all of your advertising time talking about the research and development spend but I think most Americans would be pretty surprised given how much the industry talks about research and development that you are actually spending more money shelling out money to investors and buying back stock than you are on research and development what do you say to folks who look at that and come to the conclusion that you care much more about keeping your investors happy and keeping your uh Executives happy than you do in researching and development the next class of drugs it's going to help we care we care deeply about patient Senator and we care deeply about being able to discover the next medicines that are going to address major problems like Alzheimer a I'm not but but but but but explain to me how you justify that division of dividends and stock BuyBacks versus research development you could just choose instead of using $6 billion to buy back stock to put that into more research and development but you don't our level of R&D investment in the two years that refer to the six billion program buyback which were 2022 and 2023 is six times higher so in that period we invested $30 billion in R&D and $6 billion in a St in a stock buyback so we spent six times more in developing cures for patients that we did in STO buyback well I'm looking at 2022 profits and spending by Johnson and Johnson and it shows me 11 billion in dividends $6 billion in stock BuyBacks $45 million in executive compensation and $4 billion in research and development can you understand let me ask you a different question can you understand that you know one of my constituents in Connecticut would look at those numbers and think that you care more about patting the pockets of the folks that um work for you and invest in you than in research and development our priority is investment in R&D we have spent uh 777 billion since 2016 and just we have to pay dividends because it's the only way that the company can remain operational and sustainable other otherwise if we are not operational sustainable we are not able to fulfill our mission of developing medicine for patients and making them affordable Mr Bor you talked in your testimony about the United States has a Health Care system that prioritizes the important role of patient choice I just want to present you with the case of one of my constituents and ask you about the choices that she faces so I have a constituent who needs eloquest this is a blood thinner that is critical to her survival she has priced a Medicare plan that gets her the best possible price and that price is $350 a month the average social security benefit in Connecticut is about $1,700 a month and of course somebody who's on eloquest is likely on other drugs as well so here's her choice her choice is to pay the $350 and go without food or pay her rent late or not take the drug and risk heart attack or stroke is that the choice you're talking about when you refer to a Health Care system that prioritizes the important role of choice Senator absolutely not and in fact I would say on behalf of all of our employees at Bristol microscope that is a choice no patient should have to make but but she but she makes it she makes it because you have chosen to price a drug at a point that is unaffordable Senator we have priced eloquest in the US in our in our estimation in fact we try to do this for all of our medicines consistent with the value it brings and we're very happy with the fact that eloqua is the leading anti-stroke drug why not take why not you you you you put 8 billion into stock BuyBacks why not do 4 billion and instead take the rest of the money and bring the price of the drug down okay um I'm going to keep people to seven uh Senator tuberville thank you Mr chairman uh thanks for being here today it's pretty well known where our chairman chairman stands on this uh his worldwide view pretty clear that uh he believes you guys are setting drug prices and it's all about corporate greed I'm a True Believer of capitalism I believe that we have the be best health care system in the world problem is we've got the federal government involved in it and it's not implemented the way probably it should be that being said um I just got a few questions here on a couple of things Mr Davis can you explain me something uh the Biden Administration has two huge priorities dictate prices of prescription drugs specif specifically small molecule drugs and cure cancer can you walk me through how those priorities might be in direct contradiction of each other well Senator uh and I think what you're referring to is U what is called the pill penalty that's correct uh underneath the IRA and what that does is effectively uh at says that at nine years post your first approval uh your price or your drug will be negotiated and if it's a small molecule it's 13 if it's a large the issue um that that raises is that it disfavors small molecule development and the reality of it is if you look across the majority of cancer treatments they are still small molecules and uh as as Chris pointed out earlier the development of cancer drugs usually starts in a phase starting at the at the very most sickest patient the last stage of disease and then you work forward into earlier stages of of disease where in fact you can start to maybe talk about cure to do those studies in early stage disease often called agement or Neo agement care and we have nine approvals in that space those studies can take seven to nine years to do so obviously if at nine years I have to significantly reduce the price of that drug to a point that it is potentially you know at basically no profit my incentive to do those follow-on studies is is not there and that is our worry that if you look at Cancer Care you're going to see patients suffer because we can't get to really talking about cure which is an earlier stages disease I'd also point out you didn't ask about um Alzheimer's and Neuroscience diseases but most CNS diseases also require small molecules because large large molecules biologics can't penetrate the bloodb brain barrier so we are um disincentivizing some of the largest areas of sickness and chronic need in our society through that pill penalty you referred to thank you Mr Boehner um we hear a lot about how health care costs are ridiculous High I think all of us would agree to that to some degree uh I want to peel back the onion here a little bit uh today we're being led to believe that these costs are due to corporate greed I want to know if we're going to talk about some additional drivers of health care costs when the federal government dump trillions into various Industries during co uh we upended our markets and drove prices through the roof you know when I talk to healthcare folks back in Alabama uh labor cost is one huge problem but there are other costs including supplies and raw materials you what impact are these having on the drug development and high drug cost certainly Senator when we look at the cost basis for us doing what we do as a company which is to bring forward new medicines for patients we have to factor in all of those costs I'll give you an example in cellular therapy which is really transforming very lat line hematologic diseases these are very complex medicines you're taking patient cells manufacturing them and re-engineering them to really Target and hone in on cancer cells and then you re-inject them in the patients this is really a first generation technology unfortunately it has very high labor cost because this is one that's very manual it's a multi-step process to manufacture these products their transportation cost their raw material cost all of those factors go in to a cost of these first generation medicines now we're very focused on trying to innovate to get to a second and third generation quickly so we can bring those costs down not only because it's important for us to be able to funnel additional Research into development but also so that we can bring ultimately the cost down to patients so they are absolutely a factor Senator thank you uh Mr R uh I'm going to ask you this with your accent in mind we'll probably have a tough time but uh I know you're probably aware in 20121 you weren't the CEO I don't think at that time but the bid Administration announced a mandate that US troops and personnel must take the covid vaccine in order to serve in the military are you familiar with that I'm familiar sir thank you are you Ware that more than 8,400 troops were kicked out of the military for for declining to take the covid vaccine these were mostly young healthy Americans for whom covid risk was low are you aware of that no I was not aware of that sir thank you uh did you or did anyone at Johnson and Johnson encourage the Biden Administration to mandate this covid vaccine to the military are you familiar with that we did not sir okay how much did Johnson and Johnson benefit financially from the administration's military covid vaccine mandate could you have any kind of guess to that our effort in the covid vaccine that we collaborated with the government it was a time of a global emergency so we thought that as a healthc care company that cares for patients we needed to collaborate with the US government that was entirely non for-profit do you think the soldiers who were expelled from the military was a right thing to do and should they be reinstated I I was not aware of the situation sir uh I am not aware of these circumstances so I cannot comment on that thank you thank you Mr chairman thank you Senator Senator Murray thank you very much Mr chairman and thank you all for being here we really appreciate it I think you know we hear from our constituents constantly um and frighteningly about the cost of some of the drugs that they take so this is really an important hearing and I I continue to hear as many have said um that Sky High drug costs are forcing many people including in my home state of Washington CH to choose between filling their prescription and paying for other things they need Essentials like groceries or rent and I often talk to people who are skipping their prescription altogether because they can't afford it and it puts their life at risk so I really believe that Congress does need to do more here I have for a long time and I also think pharmaceutical companies need to do much more to put Patients First and that doesn't mean that private compan compies can't make a profit and I think we all have a really sincere appreciation for The Cutting Edge research that happens at each of your companies but when you say you're in the business of saving lives and C curing disease you have to think about putting patients over profits because as we all know life-saving drugs don't do anyone any good if people can't afford them so I want to ask you about a affordability and and I've heard the numbers I was listening in my office Mr dado um a your drug company makes uh a product to treat arthritis Stellar it costs 79,000 annually here in the US 12,000 in France Mr Davis your company makes a drug to treat cancer Kuda you've been talking about it annually the cost here is 191,000 44,000 in Japan and Mr burner your company makes a drug eloquence to treat the risk of stroke that costs $7,100 in the year and $770 in Germany so I mean either you think that the same prescription drugs so sold around the world work better here in America or uh we're getting something more for it I you know I don't think that's the case but I wanted to ask each one of you um explain to us why it costs more in terms that we can tell our constituents and they understand uh and uh Mr jard let me talk to you we share your concerns about uh What patients have to pay at the pharmacy counter for medicines in the case of estellar that you mentioned uh the net price in the US is 70% lower than the price that you refer so it would be $24,000 that's still higher than in France but it's more align than here the difference is that patients with uh inflammatory bowel disease which is the main indication with est Stelara were able to afford theara years earlier than they did in other countries as a matter of fact in Canada after 8 years that estara was approved estara is not rainburst in inflammatory bubble disease nor in Cron's disease or ulcerative collides what are we doing for that we are we have strong patient Assistance programs a patient that has commercial insurance pays 10 to $15 a month for EST Stelara and if they are not insure or under insure we have free medicine program we distributed 3.9 billion do in free in 2022 Mr Davis so if you look at uh at katuda and the example you bringing up between the US and Japan first of all U like all of us we are trying to focus on making sure that patients everywhere in the world get access to our medicines each market operates differently um Japan is is a unique Market in that the way they price their drugs um and we have been working hard to get this to change and I think maybe we have successfully gotten some of it to change is that after you initially launched your drug for every indication that comes afterwards they treat it as a different drug and in addition if a competitor launches a drug then you also still take a price decrease because of the competitor drug and we're in a strange situation and one that's a very concerning situation to me in Japan where in in reality we as the most Innovative we have the most indication we were we were driving the market fastest we have by far the lowest discounted price in Japan and the levels in Japan would not be sustainable to support the 40 you know6 billion $ 48 billion we spent on katuda so we are working hard to help those markets and we could use government help there to understand that we need to Across The Globe share in making sure we can invest to support Innovation what would Congress do that would make a difference to lower prices here I think well on on one hand it's a different question on lowering prices here I think that's a question I'm assuming we're going to get to but this is how do we focus on what is the really large discrepancy between the list price and the net price which I believe we we need to focus on is the out-of-pocket cost to the patient that is really the core um we need to address that but in addition we need to continue to work together on we can work on trying to drive Innovation Clauses into trade agreements we've had some success with that to to also help us in those markets outside the United States as well Mr prer Senator there's no doubt that patients are going to pay less for our drug eloquest or frankly most of our drugs outside of the US than in the US that unfortunately comes at a fairly significant cost for those patients outside of the US in Canada patients Will Wait roughly three and a half to four years to get access to a medicine that is available in the US you see similar sort of stats in virtually every European country and in Japan what we can do more in the US to do is try to bring out of pockets down out of- pocket cost down for eloquest for example the average out of pocket is roughly 5055 in the US most patients will pay less than $40 however there are still patients for whom this drug is absolutely not affordable that's not acceptable Medicare in particular is a space where we can't provide those types of copay support programs that we do in the commercial setting so we would love to work with Congress on that but probably the most important thing and elois is a great example of this that we can do is try to bring down the list cost of eloquest so do you set the list price so we set the list price but that list price for eloquest is driven up by the incentives of intermediat and let me give you an example of order of magnitude over the last 5 years we have as a company paid almost 100 billon billion dollar in rebates and discounts to intermediaries the majority of those were on eloquest and our ability that's unfortunately What patients pay is a co-pay on that list price we would love to work with Congress to bring that down Senator Marshall all right thank you Mr chairman Mr Berner I'll start with you Bristol Meyers um makes this new miracle drug ELO relatively a miracle drug and when I was in residency treating patients I was using kumaden Hein and then cumin it might take three or four days to get someone heiz and then we switch them over to cuminum they might be in the hospital for 10 or 14 days so in its own right eloquest you know saves money it saves that length in the hospital and prevents hospitalizations as well so I want to point that out and as we think talk about rationing care we've discussed how we're rationing care in foreign countries but I want you to speak about rationing care in this country how do pbms rash and care when they take a drug- likee eloquest and don't allow it on their formulary does that ever happen Senator I'm glad you raised that point um we have had absolutely that case happen on multiple drugs we've had it happen on eloquest we've had it happen where when we have not been able to reach an agreement with an intermediary on a rebate that they've taken eloqua off of formulary and when that happens those patients no longer have access to elois and they have to go on to another branded or in in many cases they may go on to warfront as you say eloquence is the number one product in the oral anti-coagulant space okay so I'm going to S so so they have to go back to warer the cuman the drug that I was using in medical school in the in the 1980s a drug with significant complications uh hassle Factor the patient has to go get blood testing done you know maybe twice a week as as well but with your drug you know the miracle one of the miracle parts of it is a they don't bleed into their brains anymore and and two they don't have to go get their blood testing done once a week as well so you know it's a huge amount of innovation and it's just it amazes me how much power these pbms have obtained let's go to Mr Davis next I want to talk about delinking and you have a at the time a pretty a miracle drug of your own to treat diabetes with and there's a list price how much of that what percentage of that list price does typically um MC get at the end of the day so Senator if you look at Genovia which is the drug you were speaking to uh the list price is is $6,900 per year for year per per year uh for for MC we recognize $690 on that drug per year so of the list price you're only getting 10% it's a 90% discount 90% discount where does the rest of that money go uh into the into the middlemen into the system as a whole if if if if we had the time and the energy and a chalkboard would you be able to explain to me and show me all the little places that goes I could but I I I I think you appreciate it is highly complex and so complex that at times uh even learned people who play in the space can't understand well certainly I can't explain it and that's my point is it so non-transparent we don't know where this money is going but certainly um we know that Pharmacy benefit managers are taking 50 to 75 cents of of that dollar and you're only getting 10% of it I would like to know where the rest of it goes then I'll go back to Mr burer similarly uh with with your drug with eloquest what type of what percent of that list price do you think that you all are taking home Senator it's a it's a relatively smaller percentage as I mentioned before we've paid over the Last 5 Years about a hundred billion dollar in rebates and discounts and the majority of that go to one product and that's elois okay um go back to Mr Davis let's talk about you you all have an antiviral drug that's been been approved um how many drugs did you did you go down is when Co hit you were trying to develop multiple drugs how many have made it across the fish line what did you spend on R&D as you look at those all together yeah so we when uh when the co situation hit we uh drove two or four Key Programs two in vaccines uh two in antivirals um only one of those succeeded which is the drug Grio uh the total spend across uh those four programs is a little over $25 billion she spent $2 and5 billion dollar you got one across the Finish Line an antiviral is that being used in the United States um very little it has emergency use authorization it never got to full approval and so we're actually seeing it being used much more outside the United States so in actuality you spent $2 and a half billion dollars and got none of significant market share in the United States despite that uh Mr W I'll talk to you for a second um in my 25 years taking care of patients we were always able to find a solution for their drugs that they needed 340b programs um rebates um there's always exceptions to the rules but what type of efforts do John J&J make to work with 340b programs and to help help some of these people that need help thank you sh we we we care deeply about patient affordability but also we care about the sustainability of the uh rural hospitals and small hospitals that take care of patients that uh are underserved so we believe that the 340b program it's an important program to support those hospitals and we are fully uh fully looking forward to collaborate with them uh in any way we can to support P patient access on those hospitals and I'm going to point out once again it's just not rural hospitals it's our community health centers are taking greatest advantage of the 340b program as well trying to make sure that every patient in America has access to Primary Care true affordable access to Primary Care Plus having access to Affordable drugs as as well um I might make a couple quick points the people of Kansas sent me here to save Medicare to save Medicare I need a miracle drug to treat Alzheimer's it seems to me that Americans bear the burden of most of the R&D in this world and other countries benefit from it and that impacts the price in in many ways as well Mr Davis Am I Wrong do why does it feel like to me that Americans are peeling most of the BR to the R&D cost or is that not accurate I don't know well I think Senator it gets down to as you look across the the globe um different markets and and I appreciate what the US does I think the US favors Innovation it values it it values access for our patients Fast Access most access many markets around the world um don't do that what they focus on more is their budget and how do they meet meet those budget needs and we appreciate the budgetary constraints that everyone faces but as a result of that often patients aren't getting access to meds they don't get them as fast which we've commented on today and it's harder to see how you can support the Innovation we need to do in that situation thank you so Senator Baldwin Senator Casey thanks so much Senator Balman for for allowing me to Jump Ahead Mr chairman thanks for the hearing I want to start with with a a sense that I have back home when I talk to people in Pennsylvania and a lot of your companies have a lot of interest in Pennsylvania I hear over and over again this problem the cost of prescription drugs it's like a it's a like a bag of heavy rocks it's been people have been carrying this around on their shoulders every day year after year and they're tired of it and they don't they don't believe that any any player in this is doing enough um there I think they're most pennsylvanians were happy that uh that I could vote for a bill in 2022 that allowed Medicare to negotiate for lower prescription drug costs and that we could cap the cost of insulin 35 bucks a month for for Medicare Part D beneficiar they're happy that we could cap the out- of pocket cost that'll go into effect about a year from now but but they're not happy they're they're not satisfied that even Congress is doing enough house or senate or either party but they're certainly not happy with the the U the level of work that that you've put into this uh look I hear all this talk about rebates and and and uh you know cost reductions you're trying to put in place but it's not cutting it's not cutting back home and when I talk to people that that see what pbms are doing they know that they're not not meeting the obligation that they they would expect them to so uh there's no question that that your companies and and big pharmaceutical companies are playing a role in this you bear a measure of responsibility in this and um I wanted to ask you a couple questions about that first and foremost tell me what concrete steps very specific steps that each of you are taking and your companies are taking to make sure that we can get these costs down and and even even by way of repetition you may have already said it I don't not worried about you repeating yourself but we need to know specifically what you're doing to lowering cost so that no one especially someone who needs a life-saving intervention a life-saving treatment is going to be denied that solely solely because of cost and I'll start on the left Mr dado going left to right thank you Senator cidy we absolutely want to be part of the solution we understand that copay obligations for us patients and burdensome and it does create Health inequities what are we doing for that we have a very extensive patient assistance program that for commercial patients enables them to be able to pay low co-pays 5 to $15 per month we supported more than 1 million patients in 2022 with our coopay assistance programs if a patient is underinsured or not insur we provide free drag we gave $3.9 billion in free drag in 2022 but I think we can do more and we can work together in order to lower outop pocket cost for patients even in Medicare as you mentioned because that's a real need that we are committed all our employees are committed in order to make sure that our medicines get to the patients that they deserve it Mr Davis well Senator very much like uh J&J we have um tiered levels of patient Assistance programs because we want to make sure that patients who need our drugs can access them if you have insurance uh but you fall below uh certain means where you're not able to handle your co-pay we will give co-pay assistance to those patients through a program we run if you're someone who doesn't have insurance is not able to qualify for government programs we have a patient assistance program that apply that basically provides the drugs for free uh so we are very much focused on this and making sure that we can do everything we can and we're investing uh a lot of money on it but something I'd like to add because I think it's important to the discussion we're we're focusing on prices today but we also need to think about Innovation as a way to fix the problem and something we're focusing on on as a company is a new technology called macrocyclic peptides that allow us to potentially take what historically has been large molecules difficult to make expensive drugs difficult to deliver and we're starting to show the capability to convert those into cheaper small molecule forms oral forms if we're able to do that we have one in late stage development now called an oral pcsk9 which is for heart disease but we're looking to do that for others we're investing millions billions behind that effort so I think we need to also think about how can Innovation solve the problem we need to address the price challenges today we have to lower out of pocket costs but in Innovation like ultimately is what's going to help us fix this sure Senator maybe I would highlight three things first um we obviously have a very robust on the commercial side co-pay assistance program that brings out a pocket cost down in in many cases for certainly our oral oncologics for example almost to zero they're complex at times so we are working very hard to make those more universally available that's step one step two we would like to work with this Congress to find ways in which we could apply the same sort of programs in Medicare there's some complexities we want to make sure we're not diverting from the use of generics for example but we think there are potential ways that we could do that and we would love to explore those opportunities with Congress to bring out a pocket cost down for Medicare patients the second thing I would say is we are looking at doing more Innovative work Innovative Contracting work where we can for example if our drug works we get paid if it doesn't work we get paid less and in some cases maybe even got not get paid at all there are technicalities in the US that prohibit us from doing that more in the US we want to work to get those removed the third thing just building on what what Rob was saying is we do believe that Innovation plays a role here cellular therapy well not gene therapy for the previous question those are expensive therapies we have got to bring those costs down and the way we will do that is we will innovate to the Next Generation which hopefully is way less complex than what I described previously well ibly submitting some some more follow-up questions for the record thank you Mr chairman thank you um senator Paul I'm not an apologist for big Pharma in fact when corporations manipulate government to their advantage crony capitalism I'm an unfettered critic but in defense sense of capitalism I am a consistent Unapologetic Advocate Milton Friedman once wrote that if you want to create a shortage of tomatoes just pass a law that retailers can't sell tomatoes for more than two cents instantly you'll have a tomato shortage I might also add that that's true of prescription drugs virtually every shortage of drugs that we've seen in the last few years involves price controls that drive out production of the drug one reason the United States needs in pharmaceutical Innovation is because while the US adhered to more a more market-based pricing and rewarded innovators Europe adopted stringent price controls in the 1980s and 90s it's not surprising that we lead the world in Innovation and Europe does not but unfortunately this committee and this hearing is not here to celebrate American success instead the majority drags us to conduct a show trial to Harang companies challenging the inflation reduction acts price controls in court they've simply brought forward people who question their partisan legislation 10 years ago the fiveyear survival rate for patients diagnosed with Advanced lung cancer was 5% terrible since Merc introduced the cancer drug Kuda in 2014 the survival rate has grown nearly fourfold 5% to 20% we should be celebrating that instead of castigating people and telling them how to run their business and why don't you why are you buying your stock back I have a friend with a genetic predisposition to cancer he's alive today because of guda we should be celebrating that Johnson and Johnson's Remicade was the first monoclonal antibody approved for treating chronic conditions like Crohn's disease and rheumatoid arthritis since its approval Remicade has revolutionized treatments for inflammatory disease made remission reality for patients with debilitating conditions and paved the way for development of other autoimmune treatments when I began in medicine virtually all patients with the r rheumatoid arthritis you could see from a distance had crippling disfiguring arthritis in their hands now today it's rarely seen because of the advances of American companies under an American system that allowed profit to occur in 1987 MC pledged to not to donate the entire stock of its drug iberin to those suffering from river blindness nearly 37 years later iberin donation program treats 300 million people annually with over 11 billion treatments to endemic countries this is Charity my friends from capitalism you don't get this under socialism because there is no profit under socialism they have no money to give they make extraordinary profits do they keep some up for their investors yeah that's what they're supposed to do but they also have some left over for charity and you don't get that under socialism because of MC's donations seven countries eradicated the transmission of the number one cause of blindness in the world pharmaceutical innovation has improved cancer rates Cur cured hepatitis C doubled the life span of patients living with cystic fibrosis it goes on and on we've tried price controls in general here we did it in the 1970s under a Republican president under Nixon it was a disaster and it led to lines at the gas pump it was an ultimate disaster a study at the University of Chicago found that 254 or fewer drug approvals over the course of 18 years would happen under price controls under communist they knew this socialism communism under the economic system of socialism from P from Price CR it became a running joke in Poland during the Soviet era there was a story of the guy went to the store he was looking for eggs and he asked the clerk is this the store with no eggs and they said no this is the store with no toilet paper the store with no eggs is across the street that's the story of socialism that's the story of price controls secure scarcity and empty shells are the inevitable result of price controls those who understand and appreciate capitalism do not need a show trial to dupe them into forgetting that price controls have never worked and never will let's get back to profitability I don't think you guys did a very good job on answering this did you add into your estimate of whether it's profitable in Canada whether or not it cost you $2.6 billion on average to develop it you're talking about manufacturing cost you're talking about how much it cost to make kud and how much you sell it for to say you have a profit in Canada do you think it would still be a profit Mr Davis if you added in all the R&D the 2.6 billion to get it through this system all your the apparatus of your company and you divided all of that out for profitability would it still be profitable in most of these other countries I have not done that analysis but I would say that the profitability um would be marginal at best do you think you'd have as much R&D if the whole world were Canada do you think you'd be developing dozens of new drugs every year if the whole world were Canada no I do not so this is what we're arguing against you know sure you can make it for pennies now but it didn't start that way and then people were like oh my it cost so much in the beginning that's capitalism that's the way it works in capitalism Joseph Schumer talked about this and he said this is an old anote but he said the miracle of capitalism is not that Queens have silk stockings but that factory girls ultimately do but in the beginning only the queen has Silk Stockings rich people get stuff in the beginning rich people drive The Innovation the first calculators that came out $300 for adding subtracting and dividing machine now they're like pennies or free but you have to allow the price to be higher in the beginning and the market brings it down as you have more widespread Market that's capitalism we don't know what the correct price is there is no moral price there is no moral amount of profit there is no business of any of y'all telling them how much stock to buy back their job is to make a profit it's actually against the law for them not to maximize their profit for to for you to sit in Judgment of how much profit they should make Mega how they should run their companies you know nothing of running companies you know nobody up here maybe some but almost nobody up here has run big companies billion dooll companies and you presume somehow to say you're going to tell these people how to run their company list price versus Net price list price means absolutely nothing I charged $1800 for cataract surgery the government paid me 600 2third of it nobody stole that it disappeared because it never existed so if I build a million dollars in charges I really was only building 300,000 because that's what I was getting paid but because of the confusing nature of the system the list price is much different than the net but to quote list price and then compare it to net price in other countries is completely and profoundly unfair the list price means absolutely nothing all of these fallacies need to be addressed before we begin har ranging American CEOs thank you thank you for your questioning Senator Hassen oh I'm not well thank you Mr chair um uh Senator Baldwin I'm sorry she I yielded to Senator Casey I know but I was oh all right okay no right Senator hasson go and then Senator uh thank you um so I just wanted to say uh at the outset that the last time I checked when a buyer and seller negotiate for a price that's capitalism uh and I wanted to uh talk with all three of our distinguished Witnesses today because one of the things that strikes me that we are struggling with is I think at various times in each one of your statements you talked about your price reflecting uh the value of your product and the thing is human health and life is priceless so if that's the metric here you will always have an excuse for charging increasing prices for these life-saving drugs and what we are trying to do here is figure out how you can continue the Innovation that senator Paul just so eloquently spoke about I would suspect that every member up here has a family member whose life has been saved by innovation Innovative medications um or greatly improved but at the end of the day we have to find a way to allow you all to innovate but also to make sure that the market here and the system here works for the very people whose lives you are helping to save so I want to start with a question to you Mr Davis while families in New Hampshire and across the country struggle to afford these life-saving medications pharmaceutical companies are doing everything that they can to keep their prices and their profits skyh high and I know you've all talked about that not being the case but let's just look at one thing here one way that companies do this is by filing dozens even hundreds of frivolous patents that lock in their exclusive right to sell their drug for decades by playing games like this with the patent system companies block lowcost Alternatives like generics from coming to Market Mr Davis the list price for MC's cancer medication katuda is as we've talked about $190,000 per year per year can you tell us how many patents have been filed on this medication I don't have the exact number um but I would focus you on probably the the most important patents which are the composition of matter patents in addition to that we have formulation and Manufacturing patents there is one Suite of of of composition of matter patents that we have and those are what allow us to continue you to have exclusivity well well I don't think it would surprise you to learn that I do know how many patents uh you currently have it's 168 this is what this looks like sheet after sheet after sheet patent office records show uh that not only do you have 168 but half of them relate to the process MC uses to manufacture the drug not the way that the drug is used to treat patients MC is using patent gimmicks and loopholes to Del delay other companies from selling lower cost versions of this medication all while raising the price of katuda in the US year after year so it would be good if MC would just stop blocking patient access to lowcost medications by using the patent system in this way it's clear that MK and other pharmaceutical companies You Are Not Alone won't stop abusing the patent system to keep their prices high so it's clear we also need to take action on that that's something we can do uh Braun and I have a bill called the medication affordability and patent Integrity act which would help break up these patent walls and I would urge my colleagues on both sides of the aisle to support that now Mr datato in your testimony you mentioned that Johnson and Johnson provides financial assistance to uninsured patients in the United States however the barriers to access these programs are unreasonably high for an expensive medication like your company's arthritis drug Stellar what does a patient have to do to get assistance from the Johnson and Johnson program thank you we care deeply about patient access and we put a lot of work in developing uh well and wide patient instance programs and we have mechanism for patients to connect with us via um um mechanism like a website called Jansen care paath in which patients can access uh patient assistance we supported 1.1 million people with patient cop assistance last year well let me just talk a little bit about that the initial application which I have here is six pages long and it requires pages of additional documents for income verification in the fine print this document even requires the patient to consent to a credit report check and other Financial disclosures Mr dado everyone on this dis wants you to charge a fair price for your company's medications but if someone does need assistance paying for their medications this process has to be streamlined and easily available to anyone who qualifies so I would urge you to look personally at this application when somebody is dealing with a serious illness the last thing they need to do is read the fine print and decide that they have to disclose a credit report the relevance of which kind of escapes me um Mr burner and Mr dado we could also increase competition by making it easier for generic drugs to get approved Mr burner let's turn to the BMS stroke prevention drug eloquence the list price as we've talked about is $7,100 per year how many generics of this drug could a patient in the United States get at the pharmacy today senator in the US there are not yet generics available right there are zero generic versions of elquist available to patients even though the original patents on the medication began to sunset in 2019 because your company has sued to block two approved generics from the US market until 2028 at the earliest isn't that right Senator we have um allowed for generic entry in 2028 that's correct right so we have two generics ready to go your original patent is well passed expired but you still are actively trying to prevent generics from coming to Market uh Mr D the list price of Johnson and Johnson autoimmune arthritis medication sta is nearly $80,000 annually similar to eloquest there are currently zero lowcost biosimilar versions of Stila available to us patients there are zero biosimilars for Stila available in the United States today because Johnson and Johnson has also sued to delay the launch of a lowcost biosimilar drug so we need you know you have all talked about the need to have speed of access and Mr chair wrapping right up speed to of access getting drugs to Market but then you are actively working to block the less expensive biosimilars and generics to come to Market and that's something we should address thank you Mr chair Senator Romney thank you Mr chairman and appreciate uh these Executives uh taking time away from your UH responsibilities at your respective companies to to be here and to inform us and in some cases to get bered by us and and give us an opportunity to pontificate on our various topics which I'm about to do uh one one is that that um I I uh I fully concur with uh with Mr Paul or senator Paul uh indicated just a moment ago ran Paul um and that is that a free enterprise system works marvelously and I know we keep asking you you know what are you doing to try and reduce the prices of your products the answer is that's not what happens in Free Enterprise in cap capitalism I hope it doesn't come as a shock to my colleagues in capitalism if you're running an Enterprise where you have a fiduciary responsibility to your owners you try and get as high a price as you can that's what you try and do you try and make as much profit as you can That's How Free Enterprise works you think Chevrolet sits back and says gosh how could we get the price of the Chevrolet down no it's like how high price can I get and maximize the profit for my shareholder what price do McDonald's charge for a sandwich as high a price as they can get but the amazing thing about free enterprise is that someone figured out that if everybody does that and you have competition among all the players that somehow the prices come down and the quality goes up and the access to the product is broader it's the Marvel it it doesn't seem to make a lot of sense but it's the Marvel of capitalism now obviously wise companies say well you don't just raise prices to the roof uh and and and do things that are going to harm your credibility and the Trust In The Marketplace and have your employees not want to work there because they're going to figure they're working for bad people so wise Enterprises don't just do all the things I just mentioned they also say we're going to do other things and care for the poor and care for people who want to come work in our company we do those things too but recognize free enterpris is about Enterprises battling each other with higher prices in many cases and then they get pushed out by people develop new products and put them out of business it's it's how it works but let me turn to and I know as senator Paul indicated there's some who like price controls there's some who like socialized medicine and it's like have you seen what that produ it produces it doesn't produce new drugs it doesn't produce cures it it sounds great we're GNA set out price controls is just another name for capitalism excuse me socialism light our system works but there are ways to improve it and I'm very concerned that this disparity between list price and what you actually get paid is a problem and I I don't know why it's a problem or what we can do about it but do you have pbms and uh getting prices and discounts like this in other countries that you compete in yes Mr yeah um Senator we do not this is a unique element of the US Healthcare System is that true for you also M that is true for us as well and Mr C is that also true this is unique the inequity that exists in the US is because of that we have higher aop pocket cost for patients than anywhere else in the developed world so I hope we focus on this we may not have the right bad guys here all right these are the guys developing cures and helping people solve disease diseases but but we have something here they don't have in the rest of the world these pbms that want higher and higher list prices because they get paid based on how high the list price is because they get a percent of the list price I'm not sure where all the money goes some of it goes back to patients some goes to the companies if they're self-insured I don't know where it all goes but I think that's the issue so let me ask each of you um if you were in our shoes knowing what you knew no what what should we be doing to try and get the cost of products down to our uh to the people of the country and to the country at large to the government that buys a lot of a lot of good Goods a lot of drugs what what should we be focused on and and I I know that you sell to PBM so you got to be careful not to step on their toes too hard because they might punish you but but what what advice would you give us what should we be looking at where's where's the problem in this uh in this m we start start here Mr burner um maybe three things I would offer up Senator first um to the complexity that you just described number one dink profits from intermediaries from the list price of the drug and the Reb rather that are provided if you could dink that that would be important and alternatively um require that those rebates be passed on to lower out a pocket cost for patients that's number one number two I I firmly believe we have the ability to help lower out of patient cost in Medicare if we could provide the same types of co-pay support that we do on the commercial side to Medicare patients that would be a second thing and the third thing we've referenced it before we do innovative Contracting outside of the us where we get paid if our product works there are constraints on our ability to do that in the US I would like to see those removed that would be very helpful right thank you Mr Davis I would say that I Chris basically covered all of the things we would also look to to do great thank you yeah I three things as Mr burner I would make sure that the rebates and discounts that we pay to pbms go back to patients to reduce aop pocket costs I will make sure that as we are trying to do and I know this committee is looking into that would delink the compensation of the pbms from the lease price and finally I would sit down to see what we can do to provide a patient assistance program for patients in Medicare Part D but also look to further lower the outo pocket cost for patience that the IRA is bringing thank you you didn't mention the fact that the pbms are largely owned by the insurance companies so sometimes as we think pbms are going to be lowering our costs as an employer let's say and you hire a PBM to lower your cost but it it might lower your cost but then then it's passing on their profit to the insurance company is that a problem is the fact that the pbms are owned by the insurance companies is that a problem here uh is that something we need to look at as well do any of you have any comment on that the the three pvms are owned by the three largest insurance companies and together they control about 80% of the market of the prescriptions in the US yeah I'm a big believer in in free enterprise as you can tell by my opening comments at the same time I'm concerned that we've got some structures here that are anti-competitive and make markets less effective and we probably ought to focus on some of those thank you appreciate your testimony thank you Senator Baldwin thank you um it's been very interesting to listen to uh the back and forth uh Senator Romney uh uh your points about uh uh you know support of the free market but understanding that there are times when there's Market failures we also have an obligation I think to oversee because uh uh our committee with the FI along with the finance committee um oversee need to have good stewardship of Medicare and Medicare dollars um but I the point that um Senator Romney just made about basically I don't know I can't follow the dollars and it's complex is a real issue um I want to start just by sharing uh some of my constituent struggles um I have a constituent who literally turns down the heat in the winter because that's how she is able to afford the prescription drugs she needs for her Wellness um I there are um choices that people are making uh people are rationing their medication people are foro their medication because of affordability um I think we need more transparency and I think we need more transparency uh to inform the policies that we uh adopt I was pleased this last May that this committee Advanced my bipartisan Fair drug pricing act which I lead with Senator Braun our bill would require basic transparency from your companies at any juncture in which you want to raise the price uh uh list price of a a prescription drug by more than a certain amount a certain percentage asking questions like what is the cost to manufacture the product what do you invest in R&D something we really support how much are you spending on marketing and advertising what are you doing in terms of stock BuyBacks is there excessive executive compensation I agree that we also have to have that transparency within the pbms um I remember remember uh uh under the last uh president um when we were having our confirmation hearing for the uh his secretary is uh secretary AAR who came out of the pharmaceutical industry and I shared uh with him I a a letter from a constituent who has two diabetic Sons just talking about the costs every month not just the insulin but the test strips Etc and I said what do I tell this Dad about the high cost which had just by the way increased significantly and he just responded it's complicated I can't tell my constituent well we can't address this because it's complicated I remember uh when uh when this is years ago now when uh the epip pen doubled in price overnight went from $100 basically to $200 my constituents uh certainly told me what a burden that was I asked if you could show me follow the money a chart follow the money nobody could we need additional transparency to inform our uh our policies so Mr U the the price of Stellar in the US is $779,000 a year um by the way in Wisconsin the median household income is 72,000 your company has made twice as much uh selling this uh arthritis treatment in the US than it did in the rest of the world combined this is going back to 2016 under the fair drug pricing act you would need to account for this exceptionally high cost so just to look at one component of what I'm talking about how much does Johnson and Johnson spend on marketing and advertising for this particular drug Senator thank you for the question we publish every year since six years ago uh a report that we call it transparency report and we explain our pricing practices and we give transparency also to the different intermediaries that play into the model we disclose our advertising expenses and our R&D expenses what I can tell you is that in 2022 which was the last year that our report was published and is available we spent double in R&D 11 110% more in R&D that we did in sales and marketing um do you know what that dollar figure is for sales of I don't have it top on my hand but I will sure to follow up with you to give it to you but it was double the amount in R&D than we did to spend in sales and marketing well um let's uh let's look at uh Mr borer um the price of eloquest is in the US has increased by $4,000 since its launch in other countries the cost of this drug is decreasing how much did your company spend on R&D last year our company spent just over $9 billion last year on R&D and then how much did your company spend on stock BuyBacks dividends and executive compensation last year I don't have that exact figure Senator um but we 12.7 billion sound right from the help study that's that's roughly correct okay um for the first time uh thanks to the inflation reduction act Medicare will negotiate the price of drugs including elquist and stellar and this is really welcome news for families in Wisconsin but the truth is it's really not enough and my constituents should not be forced to decide if they should turn the heat on in Winter or buy the medication they need all while uh companies are raking in literally tens of millions of dollars or billions uh uh we have more work to do thank you Senator Collins thank you very much Mr chairman I think all of us could agree that when a doctor prescribes a needed medication that CA should not be an insurmountable barrier to the patient using it yet for more than half of the adults in my state according to a survey it is a barrier they're worried about affording the cost of prescription drugs and in the last year nearly one out of three main adults reported skipping a dose of medicine cutting pills and have or not feeling a prescription because of cost I talked to a young woman with type 1 diabetes who after she aged out of her parents um Insurance started cutting back on her insulin she ended up in the emergency room and was Gravely ill because of that she felt she just couldn't afford it and took a very unwise chance so this is a huge problem but another aspect of this discussion is that many new medications represent true breakthroughs disease modifying therapies or even cures and the other part is that literally billions of dollars are invested in developing drugs that end up to not be successful so I think we have to balance all of these concerns these new drugs often cost more but if they have the potential to reduce the number of unnecessary hospitalizations and lead to better patient outcomes they may be worth it for disorders like Alzheimer's the Breakthrough drugs can help keep patients healthier and active longer benefiting society as well as their families for example I've heard of a patient being diagnosed with mild cognitive impairment early enough that the patient was able to benefit from a newly available treatment and actually return to the workforce that's quite an accomplishment now last year the chairman criticized uh the this particular company for a list price of $26,500 per year even after the company in a really unprecedented fashion issued a lengthy analysis of the process by which they arrived at the price still sticker shock around lists prices and speculative claims that certain therapies will bankrupt the Medicare program have contributed to restrictive coverage policies patient confusion and limited uptake so I would like uh Mr Davis you to discuss how we can balance the need to have affordable medications without hampering Innovation and how access to the next what would be the impact on access to the Next Generation of medications if price controls like those in Europe are implemented how do you see a solution to the balance between affordability and Innovation yes so Senator thank you for the question you know I would start with you know at at Merkin what are the principles we apply when we think about how we price drugs um because I think it also gets to some of the other questions have been asked about what stops you from just raising your price and I can tell you that as a company and this goes back to the core of who we are over 130 years and and is truly the purpose we live by and that is we look at several elements we look at what is the benefit to the patient but equally we do look at what is the benefit or the cost to the system we look at access and affordability and I can tell you for instance when we launched uh katuda we launched at parody to market price even though we knew we had a better uh product in part because we wanted to ensure access um and so we look at all of that and then we look at what does it take to absorb the cost of all the fail drugs we know 90% of all drugs we will bring into the clinic fail the reality of it is the drugs that make it have to fund that failure in the case of MC it's just interesting I think to point out since 2014 the minority of drugs we have launched have actually even returned their cost of R&D the minority uh I'm sorry the majority have not returned their cost of R&D so it means that when you do get the rare drug that succeeds it has to help cover that so that's what we're we're facing in the system but as we look at how can we fix this I think we have to get to the out-of pocket cost and we have to find a way to really U Drive that down and then continue to find ways to bring better access through the types of access programs we've all talked about here whether it's um through patient assistance programs co-pay assistance all of the ways we can help the individual person address that affordability challenge which we all know someone who's faced that and I don't want to see anyone face that NIH uh provides a lot of assistance and the research that in some sometimes partners with pharmaceutical companies how is the fact that there has been Federal help for example in the development of the covid vaccines uh how does that factor into the pricing well you know and obviously as we look at the system the ecosystem we live in um it is important to understand that all players are important so the role of the NIH is important the the NIH basically uh does the basic research if you will they provide uh the lock uh but they don't have the key we we provide the key we take that basic research we sculpt it into a molecule we we were able to say now that we know a target of disease to go after how do we do it and then we spend our resources in the most expensive part of the development and the riskiest part which is the clinical development to ensure safety and efficacy to bring the drug to Market so we need all players in the ecos and if I could ask you to start to wrap up for Senator Smith um I it's important that we do that and so I think as you look in the covid vaccine situation um we didn't have we did not receive any federal funding for what we did we've spent all of our own resources at risk uh we commented was two and a half billion we did that at risk um but one of the programs we did do leabo did have um some basis from the NIH and they were compensated for that on behalf of the chairman Senator Smith thank you Mr chair thanks to all of you for being uh with us here today I appreciate it um I'm going to start with you Mr Davis um could could you tell us how much MC spends on Advertising every year so if you look in the United States um our direct to Consumer advertising is about $350 million and then also direct to Medical providers I don't have that I wouldn't know that we can come back to you on that one okay I think it's approximately two2 billion dollar um overall is what I think is what worldwide that's worldwide number pardon me for that I don't recognize that number but we can come back to you okay okay and so um you know one thing I bet most of us on this panel could agree with is that um nobody likes that advertising doctors don't like it patients don't like it um apparent I know that the American Medical Association has called for a ban on direct to Consumer advertising so could you just address this issue and I think it's also true that you sued to prevent regulations that would require you to to disclose the list prices in that advertising could you address that yes I'm happy to do that Senator so you know direct consumer advertising um serves an important purpose there's been studies that have shown that it drives better adherence it drives patients to understand the use of their medications and it and it overall will bring benefits to the health system so I do believe there's a valid educational piece to direct to Consumer advertising and I also believe we need to be full and fair and transparent and helping people understand the cost of drugs the reason we um brought suit the one you're referring to was our concern that the specific request that was in that was that you show the list price of the drug and our concern based on all the conversations we've had here this morning is that that can often be very misleading and in fact could cause patients not to seek the drug when in reality take genui as an example if we put on an advertisement that it's $6,900 when in reality if you take the total in the system it's $690 I would hate to think someone doesn't doesn't show up to get that medicine because they don't understand the price what we supported instead which is what we do today in all of our direct consumer advertising we drive you to a site that gives our list price it gives all of the rebates we provide so that you can see it and we give further information and education we think that is a more effective tool and a more accurate tool to stop the misperceptions that exist that's why we raise that that concern one of the things that I think is really confusing for patients is to try to figure out what you know how you know how much things cost in the health system overall including in prescription medications and um so let me just ask you and I'm gonna um ask you about this um Dr burner how much would acute myoid leukemia patient how much would that patient pay every month for your drug um adifa the cancer treatment that if let's say they had a a 20% Co Insurance responsibility Senator I don't have that exact figure off the top of my head what I can say is that for most of our oral oncologic drugs we are able as on the commercial side to bring co-pays down to a very low amount and in many cases to zero now to a point that was raised earlier we have to do more to make that more widely available in an easier process to actually get into those programs and we're working on that we've been doing that since I became CEO in November and that's something we're committed to and again I'd like to be able to provide that same benefit on the Medicare side so but if you have a list price that is and and I get what you all are saying about the list price is just the list price that isn't necessarily what people pay but if you have a list price and you have a co- Insurance responsibility that's a percentage of the list price that could still be quite a significant amount of money I mean I think it could be you know in this case um you know $6,800 a month for this medication Senator what you're pointing out is absolutely why we believe we've got to also look at ways to bring that list price down we've been discussing at length this sort of the complexity and the intermediaries play in this system that lead to incentives to drive those list prices up but unquestionably because out of pocket costs and co- insurance for example are typically tied to that list price we have to find ways to bring that list price down well I would agree with that I think that that um is a really significant issue particularly as I think some of my colleagues have pointed out that when you um get to these patient assistance programs they're um they're quite confusing and hard to um hard to navigate through and I think that um sometimes that's only available if you have commercial insurance and if you don't have Commercial Insurance then you could really be flat out of luck Senator that's correct and in fact I referenced that since I became CEO one of the things we've done on the commercial side is really begun to look at how how how many Hoops do patients have to go through to get access to these co-pay support programs you know we've provided $2.5 billion dollar in copay support programs over the last five years as a company provided 122 billion in free product um but we've got to make it easier and more universally available for commercial patients to get access to that again there are some constraints to us being able to provide those services on the Medicare side there's some very legitimate concerns to providing those on the Medicare side because you don't want to obviously be diverting patients from for example generic products onto these as a result of the onto branded products as a result of this but we would love to work with members of Congress to find ways to do this constructively and is it is it uh true that um the cost of those patient Assistance programs you can then turn around and deduct on your taxes to lower your tax liability Senator I don't know the answer to that but I can follow up okay um I want to get at the question I just have a minute left and so let me see if I can do this really quick quickly um one of the challenges that we have are some pretty often pretty severe shortages in medications and um I have heard so many stories about this from Minnesota um folks who um there's they have a preferred treatment for a a disease and then the um drug is not available so I want to ask you all um just I'll cut to the chase on this um Senator Collins and Senator marowski and I have a piece of leg ation that would require reporting of supply chain disruptions that could lead to shortages um in medications and I'd like to know whether you all would support that um concept to help people understand where these shortages are and where their the the the root chemicals for their medications are coming from we work very excuse me we work very closely with the drug shortage office at the FDA and we are constantly doing all efforts to dual Source the entire supply chain of our medicines so there's no dis continuations in our supply yeah and I'm not familiar with the specifics of the bill but I would say in general the more we can continue to help understand what are the shortage issues we should address that but I think we got to get at the fundamental issues of why do we have a shortage in the first place I can tell you in our example uh we make a drug called Ty and again you're over time so could could you take those answers for the record I would be happy to Senator K great uh on behalf of the chair Senator Brun thank you I'm going to start with Mr Davis um what would your definition of a free market be uh one where uh you are able to bring goods and if those goods um bring value and the system sees value in them you're able to bring those that a value you think is fair and reasonable and negotiate with the other size in in in a world where you have free competition so right there you said negotiate uh most free markets are typified by this and I'd like you all to listen to this because I think the big uh challenge if I were in your seat running your companies is that it's not a free market a free market means you've got a lot of choices you've got vibrant competition no barriers to entry and you've got an Engaged consumer now do any of those apply to your business I think all of those apply but I think one thing we need to understand in our in the way our business functions for a period of time we have exclusivity that's during the patent protection period thereafter and in that period we must reap a return on the Investments we make to fund the R&D we do thereafter drugs are freely available and there is total competition in that space but yet you would sue to keep transparency in terms of what the consumer price would be or the list price or you do things like tweak patents that doesn't happen anywhere else and you're not alone there hospitals and insurance companies do all this stuff behind closed doors as well so I would think if I were in your shoes you've got maybe a few years before so none of that stuff really applies to you guys as I listed it you might try to spin it that way but it's not the case I fixed it in my own business back in oh probably 15 16 years ago by creating healthc care consumers by trying to avoid the system through wellness and prevention which you don't hear much about but when you do need it it's got to be to where you've got a lot of options and I understand you're a little different in terms of the R&D that goes into it then many years ago you created a monster called the PBM that now is sucking all kinds of money out of the market why can't you fix that in terms of doing alternative ways that would just smother the market with transparency get it into a different channel of distribution you got a guy like Mark cubin that's trying to start a company at Cost Plus uh you're going to probably need to find things like that or you're going to be appearing more often here and it's going to be where you're going to be regulated like an un like a utility would be because in my opinion you operate more like an unregulated utility you know kind of cloak yourselves behind free enterprise and now it's up to 18 19% of our GDP something's got to give Senator Sanders talked earlier about uh things costing uh 10% to 25% overseas and I think think I heard the excuse was well they have price controls well I think I'd be smart enough to know that sooner or later that will occur here it's going to be up to the industry to fix it and you're probably just 15 to 20% of the problem you could fix the part that you get the most heat for by maybe trying to get more uh customers like the business Mark cubin is putting out there that's based upon transparency if not you're going to get all the people that don't own healthc care businesses finally saying we're not going to pay through the private side the insurance system three to four times what it costs through government and I'll let you complete the logical chain you're going to have government as your business partner so um why would you persist in a paradigm that looks like you're going to be headed towards what you definitely don't want and that's doing more business with the federal government Mr Davis well I I don't want to speculate on on the systems as a whole I think what I focus on is what do we need to do to drive the mission of our company which is in the near term bring access and affordability make sure that when we bring affordability we don't sacrifice access and often patients lose access when we try to address affordability and that we fund Innovation and and that's whatever ultimately we come to as a solution if we can protect those elements I think we will both help patients of today and we can make inv have you ever looked at having some other system of distribution like almost any other manufacturer would have when you make something you do a pretty good job making the pill you completely default on how it gets from where you make it to who uses it you're putting Independent Pharmacies out of business because of pbms and other kind of peculiarities in the industry have you thought about at least in the place where most people confront the Health Care System uh with a prescription about trying to restructure that smother it with transparency and options to where people can get their stuff and then apply that to biologics and the entirety of the spectrum and don't tweak the patents and try to preserve a broken system yeah so you know we have considered should we look at going direct the reality of it is is a single company when you have now today three pbms controlling 80% of the lives in this in this country the ability to do that takes a portfolio uh of characteristics that um we don't currently have and I don't believe any one company uh can do that that's why we continue to believe we need free market but we I bet if you collectively got together with the other drug companies and encouraged others like uh a Cost Plus that Mark Cuban has done to where you're going I think you've got it under your control not to perpetuate uh a bad situation it was created by you I mean you make it you don't have to necessarily use pbms why don't you encourage an alternative structure at least show us that you're wanting to compete because all I can tell you is that if you don't take it take the bull by the horns do something different you're going to be like all other countries you're going to be dealing with the federal government and as a regulated entity and I think you could we could lose some things but in the meantime Senator Sanders pointed it out it costs a lot more here the health care outcomes are better there and Pharma hospitals and insurance better figure it out before it's too late Senator hick first I'll Echo what Senator Brun said second I'll thank each of you for for taking the time out I know how busy you are and appreci appreciate you uh coming and answering questions uh you know I grew up like most of us I think looking at um our our pharmaceutical companies as Treasures as companies in America could be rightfully proud of as innovators uh but that's that's slipping away uh when I'm back in Colorado uh I hear a much let's just be generously let's be gracious and say a wider dis diversity of opinion according to a recent yugov survey more than a third of Americans reported that cost has prevented them from filling a prescription they need um a separate Kaiser Family Foundation poll uh this one just from last year said that 83% of Americans rated profits made by pharmaceutical companies as the overwhelming contributing factor to the high cost of prescription drugs um you've all talked about the R&D The Innovation which there's can be no question about that uh but what is the value of these you know cuttingedge drugs and therapies if if so many people can't afford them and I think that widespread belief that Americans feel your companies are too focused on profits it it damages your credibility I think the the culture of your businesses the and the culture of your customers so I want to see how how you feel about that in terms of the importance of of people believing in your mission again or believing as strongly that you are you are good leaders of the mission why we start with you Mr D thank you Senator I can assure you that the 50,000 employees of Johnson and Johnson in the US wake up every day thinking what they can do for patients and I can represent proudly that sentiment uh what can we do to address uh the real inequity that exist in the US which is that seniors and patients that need the medicines the most pay higher outof pocket costs in my view that's the real problem there are other things that are positive in the US Healthcare System like the access to breakthrough Cutting Edge treatments earlier than any other country in the world but it's true we have a real inequity there I think we have to work together in order to address that inequity and there's multiple ways that we can uh work on that one is to make sure that just give me one because I want to make sure I've got a couple more questions one is to make sure that the discounts and rebates we pay $39 billion in 2022 that we pay to the middle are passed to the patient so we can lower the outop pocket costs got it that's a good one so Senator I appreciate the question and I can tell you at MC we've lived by uh the statement our our founder put out that medicines are for the patients not for the profits but so long as we've remembered that the profits follow and it really says we can both do good and do well for our shareholders together and there's a balance and I think what you're talking about is where is the balance and we are always trying to find that balance and I'm very much focused on it as the CEO of the company because the legacy of Merc uh the the the pride of our 70,000 employees and what we do matters to me uh and a strong belief in the mission of the company it's why I came to the company and it's why I'm in this industry so we are very committed to that but I do think uh the challenge we continue to face is the structural issues in the system that are creating the problems heard that I get it yes Senator the the challenge that we're facing in this committee today and what we've been discussing is how do we ensure affordability today without sacrificing tomorrow's Innovation that's what we're focused on we've got to make sure we do what you've heard from all of us are bringing highly Innovative medicines to patients but we also have to do a better job of ensuring that we're bringing drugs like eloquest to Market which save the Health Care System money for every 100,000 patients on eloquest WE estimate we save the the Health Care System $5 billion we've got to place a high bar on the medicines we bring to patients and stick by that as an industry right well and I appreciate that and I do health is so precious to people that they'll pay almost anything if it's serious so that in a funny way sometimes we see increasing costs based on that calculus of how much money are we avoiding which I'm think can be a false pathway sometimes but certainly as a user of eloquest um uh and grateful recogniz in what the old system was and how better Elis is I I salute that uh the the higher cost and other the lower cost in other countries you've all answered that I understand there's some price setting there but I think the solution I mean we're paying double even when you take out the the pbms and the uh list price from the from the net price we're we're paying double what what Europe or Canada and Australia are paying and and somehow that's got to be a negotiation that the rest of the world probably has to pay more and and you guys are going to have to figure out a way to do that not saying it's easy um but it's it's one of those things I want to it's one of those things we have to address as a as a as a country and as an industry um I want to ask earlier there's some mention of river blindness of of issues in in uh under served countries I want to see if each of you have a just a quick example of something where your company has gone in there um obviously we've heard of about MC but the uh and done something in a country like that where it really was philanthropic thank you thank you we dedicate uh billions of dollars every year to treat diseases uh that are do not have an economic counterpart for example uh one of the diseases that we have contributed to it's treatment and eradication is intestinal warms you know we donate billions of pills every year in order to treat intestinal warms we have programs to support Frontline healthcare workers in the developing world that have supported more than a million from Land healthcare workers and we develop a medicine for multidrug resistant tuberculosis which is widely used in every single protocol in which we are not enforcing our patents as we speak so we we made significant contributions that's impressive but we most people don't know about that stuff uh uh Mr Davis well you mentioned the mechaz xan donation where we 4.6 billion I would add another one we did you know recently we we were very focused on Co now we forget about e and the the scourge of Ebola that hit in 2014 2016 in in Western Africa we actually uh at no at no profit to us developed an Ebola vaccine have distributed that continued to distribute that drug to to address that devastating disease U Mr bar uh Senator we had as a reference to a large presence in HIV and I'm incredibly proud that in the late 90s our foundation worked with governments and local communities to set up the core infrastructure to deliver HIV medicines to subsaharan and Africa focusing on children the president of batswana recently congratulated the the or thank the BMS foundation for saving a generation from his from Extinction his words we are now leveraging that same infrastructure partnering with Baylor College of Medicine to reverse something in childhood can ber thank you I'm sorry that his time has expired apologize anyway thank you all and I think those stories need to get out but we also have to solve this issue of of the price disparities Senator King thank you since I have seven minutes I'm going to do two minutes to celebrate Innovation and then five minutes to go after this the cost question on the Innovation um side there's an article that came out in health Affairs uh journal in September of 2020 and I'd like to put it in the record contributions of Public Health Pharmaceuticals and other Medical Care to us life expectancy changes 1990 to 2015 and and the article looked at the fact that between 1990 and 2015 life expectancy in the US increased by 3.3 years and the authors of the researchers and authors of the study were able to say 44% of that increase was because of Public Health measures 35% of the increase was attributable to pharmaceutical Innovation and 133% of the increase was ATT tributal to other improvements in medical care with 7% unknown but the fact that Pharmaceuticals led to nearly more than a third of that increase in life expectancy is something that we need to acknowledge as a context to this discussion and a Virginia example Mr Davis you'll know this example very well in Elton Virginia there's a plant that produces gardisil which your company developed and began to Market in the mid 2000s 2006 2007 and it is a it is a vaccine against a virus the HPV virus that create that leads to a lot of cancer especially cervical cancer and other as well and that's just been revolutionary in terms of cervical cancer the the we were one of the first states to put a vaccine mandate in place for HPV vaccine um and cervical cancer among vaccinated populations has dropped 70 plus perc just in the last 15 years I mean it's truly remarkable and I've been to that plant and I know how proud people are to work there and believe that they've been at the Vanguard of a revolution that has helped so many Americans but people all around the world so that's the good side okay now we got to get to the reality for the hearing which is people here still pay too much out of pocket together with my colleagues here who voted for the inflation reduction act we we said for a long time that we ought to be negotiating on prescription drug prices and and we did it and it passed by only one vote in the Senate so each of us who voted for it we were the deciding vote um and I know not everybody likes that but it's it's working um we we put the cap the out- of pocket cost cap on seniors under Medicare we did the $35 insulin for seniors under Medicare and and thank goodness that sent such a strong Market signal that many of the companies that were reducing insulin cost to $35 a month said we'll just do it for not just Medicare patients but others and they wouldn't have done that had we not taken that step in the ira um but but there is more that we can do and I really want to focus on one thing because I think it's just right before us um this committee took strong bipartisan action about nine months ago on this PBM Reform Bill that is sitting on the floor of the Senate right now and I don't expect you to be the masters of all the details of that bill but if we were to pass a meaningful PBM Reform Bill and much of the conversation today has been about this weird difference between list prices and and actual net prices if we were able to pass a meaningful PBM Reform Bill what would that do to the cost that um American patients are paying out of pocket for pharmaceuticals please and I'll ask each of you to address that Mr duano thank you thank you Senator and thank you for recognizing the value for patients of pharmaceutical Innovation if we were able to pass meaningful reform meaning a reform that would uh delink the uh revenues of the PBM and insurance companies from the leas price and that would pass rebates and discounts to the patients I would anticipate two things one it would affect lease prices two it would significantly reduce the outof pocket cost for the patient so I welcome the bipartisan efforts of this committee to go through PBM reform it's a Lynch pin of lowering the cost for patients Mr Davis yes you know I also believe that the provisions that are in the bill at least some of the big ones around transparency and also dinking are definitely steps in the right direction I think we need them they're a lot of what we've all been focusing on in our testimony and in the question and answers and I do think it will it can benefit patients if we move in that direction so I'm very supportive of what you're trying to do Mr burner Senator if we could do that and we could reduce the significant amount that we are paying in rebates to intermediaries who are not passing those rebates on to low out of pocket cost speaking on behalf of Bristol Meers squib we could work almost immediately to begin to bring down list prices and I would welcome the opportunity to work with this committee to do that well I know that in in conversations with the chair the intent is to move on that bill pretty soon potentially with some other health items as well and I think that the opportunity is right before us the bill passed out a committee overwhelmingly bipartisan I think it was an 18 to3 vote and that tells us that we would have some Amendment on the floor the dinking provision was not in the bill the the the chair and ranking were supportive of the concept but at the time we marked it up the CBU hadn't given us the score and so we agreed that we would wait on that until we got uh on the floor but the CBO has now scored the dinking bill that Senators Marshall Capo Braun and I uh and tester have co-sponsored and the CBO says that it would save about $650 million over 10 years and that's in addition to the savings for patients so I know we would try hopefully on the floor to add that in um the my my colleagues have all talked about the reality of what they hear from constituents and I hear the same thing and I know I think the complexity of the system and the the the fact that list price is different than net price and the fact that we have re rebates quote rebates that never show up in people's pockets and then you have programs to try to assist folks who can't afford medicines but they have a six-page application form and and both a sticker price might scare them off or a six page application might share them off we just have to simplify this and cut out a lot of the middlemen in this instance I I'm I'm have long said to the chair that I'm very concerned about pbms because we might fight with you about whether you're researching enough or should your research be more than your stock BuyBacks 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 that are scooping up the most of money that's just sloshing through the system right now so I hope we can address that soon thank you Mr chair Senator Lan thank you Mr chairman uh thank you to everyone who's who's here today um biosimilar competition is one way to drive down drug costs for patients and increase access would you all agree with that yes yes yes appreciate that now one of the concerns I have is we often see see competition stifled in this particular area with biosimilars and the concern that I have is tactics And Delay that lead to entry of the lower cost bio similar drugs keep patients from often having a a choice but also being able to afford their prescription drugs now Mr Davis yes or no will you commit to not blocking other drugmakers from entering the market when the primary patent on Kuda expires well senator um Merc and we we do believe that biosimilar competition and generic competition is core of the system we need the patent protection and then we need a robust biosimilar generic market and I can tell you that um when the composition of matter patents expire uh on uh on our drug katuda I fully expect and I will not try to stop a biosimilar IV version of katuda coming on to the marketplace is that a yes that's a yes I appreciate that Mr burner yes or no will you commit to not blocking Other Drug makers from entering the market when your primary patent on eloquest expires Senator we have um a number of patents on eloquest and we have um certainly anticipated that when the patents that are most relevant for that product expire we will have generic competition in this case not biosimilar but generic competition um and that would be around 2028 when the primary pack expires on Alquist will you commit to not blocking Other Drug makers from entering the market Senator I I don't I'm not a patent attorney so I'm not entirely you're the CEO Senator I would I would say that when the most important and most relevant patents expire on eloquest we will welcome generic competition so is that a yes or a no that's a yes Senator Mr Boehner I have the same question on obdo yes or no will you commit to not blocking Other Drug makers from entering the market when your primary patent expires when when the most relevant patents for obdo expire we would fully expect biosimilars to enter the market yes so your answer is yes when the words you're using are relevant patents not the primary patent is that a clarification that I can yes Senator I'm just not certain exactly what the most um what what you're referring to as the primary patent but when we when those patents expire we welcome generic competition primary the initial one the one that was filed when you when you got this drug done look I'm not a lawyer I'm not a CEO I don't work at all if I'm not using the wrong words please help me a little bit you know what I'm talking about here yeah when the compos generally it's when the composition of matter patent expires that is doesn't sound like a yes I I I hear what you're saying I I I'm going to move on Mr U we know that J&J entered into settlement agreements to delay the launch of some stera biosimilars in 202 25 this will prevent competition in the drug market and Medicare negotiation the way I read it will you commit to lowering the price of stara in 2025 Senator uh thank you for the question I anticipate that the price of estara will actually uh be lower in 2025 as it has been been lowering during the past decade the P of Stellar has been a steady decline in the net prices and I anticipate that the biosimilars in 2025 will further uh decrease the price of estellar are you answering yes to my question yes I appreciate that now we've heard over and over that Medicare drug pricing negotiations will kill Innovation um Mr burner I want to get a few things clear yes or no is it bms's position as stated in its lawsuit against the health and human services that quote the Ira's real victim is innovation and in turn the millions of patients who are counting on the pharmaceutical industry to develop new therapies will save lives and improve health and well-being Senator we have serious concerns about elements of Ira um specifically the the the fact that this isn't an actual negotiation um we obviously like some elements of Ira notably the out-of-pocket cost but I appreciate that but do you stand by this statement that was filed in the last year to um the United States Health and Human Services Department we have very serious concerns about the implication of Ira you stand by the statement yes sir yes or no is it also true that you said in your Q4 earnings called quote we see a legacy portfolio of wellestablished products facing headwind such as IR through this portfol or though this portfolio is declining it is expected to continue to generate strong cash flows to enable investment in our future growth drivers do you stand by that yes we we actually have a legacy product portfolio that will continue to provide the necessary funds to innovate um and bring the next wave of innovation to Market yes sir So based on that can I interpret that cash flows were generated even though the IRA went to place and they're sufficient to support new Innovations as was reported to the investors Senator we don't yet have Ira having been fully implemented negotiation that that process is ongoing but we we are generating cash flows off of our existing products to fund Innovations the the statement in the same filing to Health and Human Services with that case said this portfolio though the portfolio is declining it is expected to continue to generate strong cash flows to enable investment in our future growth drivers so it's is it generating cash our Legacy portfolio products is continuing to generate cash yes sir so even in the face of Ira you're generating cash again Senator we we haven't actually finished negotiation yet on our first drug which is I I'll move on I I appreciate that very much this is one of look I grew up on a small farm in Northern New Mexico when a cow does its business in the barn there's a pile of stuff I've got to go clean that's what it is it's manure it has other lot of other languages but that's what it is I don't understand why this is so complex the people in the room make these darn things so complex so no one understands them I'm beside myself Mr chairman that when a question was asked can you break down of where the money goes on this particular drug the answer is well it's complicated I we don't know I'm I'm hoping it's included in the filings for investors that people know where the money well I'll follow up with more questions I have several Mr chairman but y'all help me and other laymen across the country and around the world to be able to understand what the heck is going on um you all have some good lawyers maybe one day I'll go to law school and try to get a gig with one of you all I don't know but this is just frustrating thank you Mr chairman uh Senator Mary uh thank you Mr chairman very much uh researches medicin Field of Dreams from which we harvest the findings that give hope to families that um a cure can be found for the disease which has been running through their family's history that's what it's all about that's what we all hope for that's what what I represent in Boston in Kendall Square 2 miles from my house and I've been for 47 years in Congress trying to help that industry to be able to grow and to be able to um get the resources from NIH other the resources to make the breakthroughs to give hope to ordinary families um like my father who drove a truck for the hood milk company and the companies have done great work over the years but that funding which I was on the health committee in the in the house for 36 and a half years and I fought very hard for NIH funding and those NIH dollars delivered results for example between 2010 and 2016 every drug approved by the FDA was in some way based on biomedical research funded by the NIH U and my father the truck driver at the hood mil company one mile from Kendall Square he paid his taxes to make sure that the funding would go to NIH so that the research could be made in order to make the breakthroughs uh that would help him and help his families um and mk's former president and you've already quoted him Mr Davis he said we never try to forget that medicine is for the people you know my father it is not for the profits and Merk's website states that this philosophy is embraced by their leaders and the employees to this day so FDA approved the cancer drug K truda in 2014 based on NIH research that my father helped to pay for as a truck driver at the hood not company and last year the list price was $191 $1,000 for this cancer drug that helps patients with lung cancer and other cancers $191,000 a year uh and the annual meeting and proxy statement 20203 um says that it brought in $21 billion in revenue for the company and it was driving key growth for merc's business and at the same time patients are also straining under insurance premium struggling to afford this drug taking on debt or skipping treatments altogether so Merk has now filed 168 patents on this cancer drug K truda uh and as we know from this early discussion you know when we discuss this we can be talking about primary patents are secondary patents and what I heard earlier was the the Witnesses in general just want all the secondary P patents to also be exhausted now to a very large extent of course 168 patents then bring at least 168 lawyers into the room you know how do we use this patent in order to thwart another smaller company hundreds of smaller companies from now making the breakthroughs did Advance even further the breakthroughs innovating discovering 168 new patents extend further using lawyers you know the time at which there can be a lower pric drug made available to people so that they can get the treatment which they need for lung cancer so yeah we believe in competition and we really believe in m in competition in Massachusetts we believe in darwinian paranoia inducing competition but when there's a monopoly on a drug which is the key drug there is no competition there is no paranoia if 168 patents just extend and extend the ability to have new companies smaller companies smarter new scientists to make the new additional breakthroughs and that's the play we understand the play That's How lawyers get into it not scientists you keep the lawyers keep the smarter new 25-year-old out with the new insight just by extending and extending so I do believe in research um Adam Smith hated monopolies it was the number one thing he hated the most monopolies and so in in this particular instance my father died from lung cancer and my father um was drove a truck so the list price for K truda is more than his entire pension that's what he got from the hood milk company so one year of his entire pension would have paid for one year and he died from lung cancer and I don't think did Judge MK really intended that that that would be what the result of resear search ultimately did so Mr Davis um would it have been consistent with George mk's philosophy to take research funded by my father's tax dollars to invent a life-saving lung cancer drug charge him hundreds of thousands of dollars of his hard-earned retirement for it manipulate the market using patent law to block out competition that could have brought in New Scientist that could have improved it and lowered the cost uh and as a result the costs are unaffordable and then use the income you got from him to brag to your investors about the drug as a key growth area for your business do you think that's what Jorge MK intended uh when he had that high-minded philosophy which he um used to describe Merks in 17 seconds are you looking for the answer now yes okay well I would say uh the quote was medicine is for the patients not for the prophets but so long so long as we've remembered that the prophets have always followed and what he was capturing was if you focus on believe bringing new medicines to benefit patients today and make sure you have an investment and a return to bring me medicines for the future which we are a biopharmaceutical research company research as who we are Innovation is the lifeblood of our company then we can deliver for the mission to the patients and I can tell you at MC and I'm very proud of this we always put patients at the center and we always look at ways to do that and that will continue to be what we do so I do think actually what we're doing is consistent because it allows us to be sustainable for the long term to deliver for patients into the future I just thank you I just think it's turned into medicine for the shareholders and not medicine for the like my father uh let me that's the last uh line of questioning let me thank our three panelists for being here today and all the Senators who participated we're now going to uh turn to our second panel thank you all very much gentlemen thank you very much thank you one than okay thank you all very much for being here um we have three very knowledgeable guests panelists uh on prescription drugs and pricing our first witness will be Peter mayber mayber uh who is the director of access to medicines program at public citizens he's a lawyer who was advocated for stronger price regulation and stronger Public Health Protections in patent law in the US and around the world uh Mr May berck thanks very much for being with us chairman Sanders ranking member of Cassidy members of the committee thank you public citizen is a national public interest organization we have 500,000 members and supporters and for 50 years we've advocated with success for health and consumer protections drug prices are high because of Monopoly power leading to the rationing of treatment and preventable suffering one in three Americans has failed to take medicine as prescribed due to cost like Lois Chisum of Fort Worth who tells us of merc's diabetes drug I need Genovia to control my blood sugar but I can't afford it while on social security Robert chavano of lovelin Colorado and his wife both trying to afford J&J zerto why do we have to pay so much we are 90 and 81 on Social Security does anyone care about the elderly Keith K Lafayette Louisiana I'm paying for Alquist and other pricey meds from BMS so what do I do I ration them so that I can eat and pay rent patients for affordable drugs has compiled 34,000 such stories from people struggling to afford their medicine and that's a tiny fraction a mere sample of the heartbreaking problems out there high prices cost people their health they can cost lives they force impossible family budget decisions we all pay for high prices whether we are patients or not whether out of pocket or through higher insurance premiums and wasted tax dollars Medicare Medicaid spent nearly $200 billion doll on prescription drugs last year Americans pay the highest prices in the world three times what other countries pay that's net price is not list to the point of the last panel we three times more in net prices the real prices we also do the most to support research and development the world's largest biomedical research fun is a public funer the National Institutes of Health and we should be very proud of it contributing more than $45 billion dollar a year and laying groundwork for many if not most new medicines plus public support is now indispensable to the late stage development of one in4 drugs also we the people drive Innovation together so Americans first pay for the SE Arch then contribute to the development and then on top of it when a drug comes to Market pay the highest prices in the world other countries broadly negotiate prices to protect their people but here Pharma has acred tremendous influence in our politics spending hundreds of millions a year in lobbying outranking every other industry now our government provides patent protection and exclusivity on medicines in theory this should support Innovation but in practice drug corporations write the rules extending Monopoly power sometimes for decades blocking competition far longer than this body intends Senators it is not a market in the way that you may believe respectfully the corporations testifying here today claim any price relief would compromise their ability to invest in new medicines no that framing erases the millions of Americans rationing treatment it erases the tens of billions of dollars that taxpayers invest in R&D for real Health priorities and it erases the hundreds of billions of dollars that industry spends on self-enrichment last year drug makers selected for Medicare negotiation spent 10 billion dollars more on stock BuyBacks dividends and executive compensation than they spent on R&D J&J and BMS each spent three billion dollars more on these self-enriching activities and over the prior decade MC's BuyBacks and dividends also exceed R&D by three billion J&J spent an impressive $43 billion more on BuyBacks and dividends than R&D over this period of course drug makers do not set prices according to R&D costs instead the price of a patented drug is simply the most that we as a society are willing to pay to care for our sick and loved ones where Monopoly power blocks affordable Alternatives blocks Market competition and we have little Choice today perhaps for the first time our country is making progress challenging ing high prices and rationing including through price negotiation and countering price spikes and we commend the committee's attention to this problem but the problem is getting worse much worse and more action is needed we should negotiate prices from the moment a drug hits Market not wait a decade as we are today which cost taxpayers tens of billions of dollars we support legislation before your committee to strengthen Market competition and transparency and accelerate generic entry ultimately we will have to confront Monopoly power that is the rotten Foundation allowing drug makers to project influence to game the law and keep prices High other real challenges including providing patient assistance and challenging middlemen who take advantage real problems but these flow inevitably from the patent monopolies that make it so lucrative and so easy to rip off patients we can we must do better for health for access to medicines thank you for your time please count us with you in this fight thank you our next Witness will be to here mean CEO Initiative for medicines access and knowledge a nonprofit organization working to address inequalities and our medicines are developed and distributed thanks very much for being with us chairman Saunders ranking member Cassidy and members of the committee it is my honor to be invited here to share with you a root cause of why the US pays by far the highest prices in the world for prescription drugs that root cause is how the pharmaceutical industry manipulates the patent system to lengthen patent prot protection and its Market Monopoly in order to block competition all while increasing prices so I qualified as a UK uh attorney in intellectual property and I've have been in the field for 30 years I spent my first decade of my legal career practicing as an attorney at international law firms and for multinational companies including American companies through this work I learned both the legal and business side of intellectual property and its importance to inventors investors and companies I also learned how to use loopholes to gain the system these loopholes enabled me to invent intellectual property rights so companies could obtain and maintain a monopoly in the market while continuing to extract maximum profits it was the reason why I co-founded iMac and left the commercial World America is in a severe drug pricing crisis more than one-third of Americans say they are not able to fill a prescription for medication because of its cost black Americans are most heavily impacted as they are more likely to require medication for chronic conditions and earn less now prescription drug spending on retail and non- Retail drugs is po poised to grow 63% this decade to $917 billion and branded prescription drugs which are under patent protection account for 84% of that spending these price hackes correspond with a dramatic increase in patent patenting activity in the pharmaceutical sector now we have analyzed some of the top 10 selling drugs in the United States and we have found a total of 1,429 patent applications have been filed as of 2022 741 patents have been granted on these drugs on average that is more than 140 patent applications filed per drug and 74 patents granted per drug that's 66% of those patents are filed after the drug is approved by the FDA now if we look at some of the drugs that on the discussion today with the companies that were here k truds m elquist Stellar Johnson and Johnson also in braa which is ABY Johnson and Johnson between them there's a combined of 494 patent applications filed on them of which three 235 were were granted patents I just want to dig a little bit deeper into Merk and particularly Senator Lewan's questioning of whether MC would sort of allow biosym competition uh while once the primary patent expires you have to remember kruder actually represents 47% of Merk's total pharmaceutical Revenue now as of June 2002 we've counted 180 patent applications of which 78 are granted they have patent protection at least until 2039 which is in total 37 years of patent protection since they fil their first patent which is 2002 you're supposed to get a patent for 20 years remember market and media analysts are currently reporting that we should see biosimilar competition in 2028 to Senator Lewan's question I put myself on record here today we will not see biosim competition until 2034 they will litigate the hell out of it and they will use every scent that they can to kind of not leave a hundred billion dollars on the table which is what those patents are worth to them and all this talk of R&D and you know new indications these patents are already disclosing their earlier patents that should be expiring in 2024 Bristol Meers SB same problem Bristol Meers has actually increased the price of elois uh by 124% since its induction in 2012 that's higher than the general rate of inflation they have filed more patents here in the United States 2.4 more times than in Europe in fact the patents that uh the CEO from BMS was talking about the relevant patent those were actually invalidated in Europe and that's why we have generic comp competition in Europe but those patents are actually preventing competition here in the United States and it's going to cost us $48 billion in branded eloquest so this committee should recognize that the use of patent tickets to extend the market Monopoly period on a product is not a case of a few bad actors it's endemic if you want to get to the heart of the problem the first and most important thing Congress can do is solve the problem is raise the bar for what classifies as an invention that deserves a patent it's an enormous Monopoly power that should that in in a single hands of a drug maker and we shouldn't leave it to the market and litigation to resolve these issues so the penting activity goes well beyond time the time limited Monopoly that the constitution required lawyers uh exploit sophisticated legal marketing Jedi tricks that they use under the guise of innovation we need to actually not get sidetracked by this Innovation talk most of these patents are tweaks deliberately for the financialization of profits and that's what the pharmaceutical industry does today I've been in the business and I know what it's about thank you thank you very much Senator Cassidy pleasure to introduce our our witness uh dasas Lala currently the quintiles chair and pharmaceutical development regulatory Innovation at uh University of Southern California man School of Pharmacy and pharmaceutical scientist Sciences he also serves as director of research for the USC schaer Center for Health policy and economics a partnership between the man school and the USC price School of Public Policy he received his PhD in economics from the University of Chicago as a renowned researcher and thought leader in health economics and health policy which obviously impacts us today thank you sir thank you chairman Sanders ranking member Cassidy and honorable members of the committee thank you for the opportunity to testify today about drug prices and the assessment of medical Technologies my name is dasas loala I'm an economist and a professor at the USC man School of Pharmacy and pharmaceutical sciences and USC price School of Public Policy I'm also the director of research at the USC Schaefer Center for Health policy and econom omics the opinions I offer today are my own and don't represent the views of the University of Southern California or the USC schaer Center I'd like to start with a story in December of 1984 a young boy from Indiana named Ryan White was diagnosed with AIDS a result of a transfusion with infected blood in the immediate wake of his passing in 1990 Congress passed the Ryan White Care Act ensuring affordable care for HIV AIDS patients the value of this program was fully realized five years later when highly active anti-retroviral therapy emerged as a life-saving treatment for patients with HIV today nine out of 10 patients receiving care through the Ryan White program enjoy viral loads so low that they're no longer infectious thanks to Breakthrough Medical Innovation and to forward-thinking public policy that made Innovative HIV therapies affordable to many HIV positive patients can now expect to live well into their 70s and Beyond but increasing patient access through bold expansion of Affordable Care means little when there are no valuable cures or treatments to access and Breakthrough Medical therapies provide little value if high cost sharing pushes them out of patients Reach This is the fundamental trade-off we're here to address today this trade-off between Innovation and affordability has played out in different approaches taken across the globe there's little doubt that us consumers access newer drugs sooner and more often than their overseas counterparts and this increased access to the latest treatments matters schaer Center research suggests that introducing European style pricing policies would ultimately reduce Innovation and cost American consumers just over half a year of life expectancy about what would be lost if all American surgeons suddenly forgot how to perform heart bypass surgery yet there's no denying the sentiment that us consumers unfairly pay higher drug prices than their peers overseas the deteriorating accessibility of prescription drugs in recent years threatens to derail the access advantages and health gains American consumers have so far enjoyed and is one component of this growing sentiment even patients with good insurance are struggling to access the therapies their doctors prescribe plans frequently employ co- insurance requirements and utilization management tools that severely restrict access these changes likely harm Health since the link between increasing out-of pocket costs and worse patient adherence is well established surprisingly coverage has deteriorated even while the average manufacturer net prices of brand drugs the amount manufacturers receive after rebates and discounts have declined in each of the Last 5 Years schaer research analyzing the flow of money spent on insulin found that while net prices fell by 31% total expenditures remained nearly constant because intermediaries were pocketing the additional rebates and price concessions instead of passing them on to Consumers transparency and pricing throughout the pharmaceutical distribution system would be a major step towards ensuring that drug prices reflect the actual value provided to patients and don't simply enrich intermediaries rewarding drugs that do provide value promotes investment in the right kind of therapies and ensures good health will be increasingly within the reach of American patients for generations to come Decades of economic research demonstrate that where innovators predict higher returns Innovative effort and Discovery follow outside the US many countries adopt pricing approaches that either fail to measure value to patients or make it hard to predict future returns to Innovation the UK Australia and Canada employ relatively transparent and predictable methods that nonetheless rely on quality adjusted life years which discriminate against vulnerable patients on the other hand France and Germany avoid qualies and focus on rating clinical benefits in a way that often fails to correspond to the eventual price these tradeoffs also underscore the risks of so-called reference pricing approaches that would tie American prices to those charged by other countries in so doing Americans would be forced to live with the agies of pricing systems designed and implemented elsewhere around priorities that may differ from ours ultimately the right policies for American patients need to focus on the affordability of good health affordable and generous health insurance transparent and predictable pricing and an emphasis on value to patients provide the ingredients for a better approach that secures the health of American families now and for generations to come thank you much um let me start the questioning uh by saying that I've heard some of my Republican colleagues talk about free market capitalism uh Mr MD duck uh isn't the entire pharmaceutical industry based on government granted Monopoly power and Mr Amir you may uh may want to also speak to that what does that have to do with free market capitalism if the government is guaranteeing uh Monopoly for many many years well precisely Senator um prices are high because drug makers have monopolies over products we can't just substitute a patient can't just say I'll take uh I'll I'll I'll take uh this alternative the patents block them from having affordable access so that is a monopoly uh not a market system American taxpayers stand up the world's largest and most productive funer a medical R&D and NIH and it's we the people that found the risk that we the people that support the risky early stage research that has led to such significant medical breakthroughs the areas of Mr uh cancer heart disease gene therapy in other words government has played a very active role in the entire process Mr me what about free market capitalism Monopoly well I mean it's uh the Constitution grants Congress the power to promote the progress of Science and useful Arts securing for limited times a right to their inventions what we have now is a system where the patent system is not a limited time it's a monopoly that gets extended extended extended and when we think about the free markets and the principles of capitalism it's interesting senator Paul mentioned Milton fredman in fact the neoliberals actually didn't like Monopoly power and they they really did actually believe in the free market but the fact that the intellectual property system patents has been corrupted by the the modern pharmaceutical system to kind of extend those monopolies actually goes against the principles of free market so in a sense they're not living up to the bargaining of a free market okay uh Mr Lala what do you think about free market capitalism and government protection of monopolies thank you chairman well truly free markets exist only on the whiteboard in my classroom at USC first of all but it's also true that without patent protection there would be no innovation that's a result that's been known in economics for for centuries um so the real question is how do we balance patent protection which induces Innovation against the value of new Innovations and being able to broadcast them more widely after the end of a patent and that trade-off can be tricky although in the case of pharmaceuticals we have a useful instrument which is health insurance and that allows patients to access drugs at much lower prices than what manufacturers receive even during the patent period and that's an opportunity for us to ex expand you accessibility even during the patent protection period thanks very much all right my last question for all three of you is I believe you all heard uh the CEO's testimony and response to questions um what would you say uh briefly about their responses uh did they in fact effectively address the issue as the why we pay by far the highest prices in the world for prescription drugs and why one out of three people can't afford for the medicine the doctors prescribed just sir well Senator we heard some wild stuff up here this morning including a lot of blaming middlemen for the problem of high prices look drug makers 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 if you break up the market if you look at where the re Vue is drug makers capture 2/3 $323 billion Pharmacy benefit managers are a small slice 23 uh billion dollars 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 which is the Monopoly power what's that mean I agree with what Peter says and I would just add that um some of the answers that the uh CEOs gave for example the Merk CEO about ali bios SAR competition in uh when their primary patterns and I believe that is not going to happen I think if you look at all the patterns that they've stacked up they know what their game plan is you just have to look at what happened with Huma and ABY similarly uh I I believe you just look at what's happening with these weight loss drugs we're looking at the patents on those now these are potentially going to become one trillion doll drugs okay Dr l d pardon me food no problem no problem um I think an important point that maybe is is often missed is that net prices of pharmaceuticals have been falling for the past 10 years very consistently CMS recently released its National Health expenditure accounts data and it confirms this fact as well we have to reconcile that with rising cost for consumers and so I think intermediaries are actually playing a bigger role than it might appear about 40 cents of every dollar spent on Pharmaceuticals goes to intermediaries and unlike pharmaceutical firms they're not engaging in Innovation that ultimately improves Health good thank you very much Senator Cy thank you well um Mr mayik um I think it's made very persuasively by the way clearly patents are part of the free market system is the way that you protect intellectual property and you incent creativity now whether it's being abused is another issue and you mentioned the patent tickets which is actually legislation sponsored by John Corin to do away with them so that's recognized but I think without protection of intellectual property we would not have this Innovation why would you why would you put the time into it let's just make that point but but Mr mardik Dr lah makes I think persuasive point that without the profit incentive you will not get the Innovation um are you disputing that I am not so you're just kind of the degree of the profit taking if you will I'll point out by the way that the three examples you gave seem to be all Medicare patients and there is legislation out there which will cap the out-of-pocket exposure to uh for Medicare patient to these expensive drugs I think it'll be $2,000 in June of 2025 and the catastrophic portion is going away now but Dr l l deala uh that said Somebody's paying yes insurance is making it more affordable Medicaid is making it more affordable Medicare is making it more affordable I can go down but somebody is paying in my state I was recently told that pharmaceutical costs for the Medicaid Program are now 35% of the total um and so um yes maybe we could do and value based purchasing that's a lot of money though that's a huge program that's not hospitals and doctors that's a pharmaceutical cost um so I think Mr Mayar would say listen they've got enough profit to innovate um what we're really talking about is more than the profit required to incent would you disagree with that well I think the question is really how much whether we want to decrease profits or not and we know that whenever you decrease profits you get less Innovation um and those research that we've done gets to exactly that question if you were to reduce prices and profits what would the net result be you'd certainly save money but you would also lead to fewer new drug discoveries and so are we at The Sweet Spot now or could we do something to make drugs a little bit more affordable to the Medicaid Program for example because I'm looking at this gene therapy and obviously how they're initially priced is only based upon the Restraint of the company but if you have a compelling gene therapy they could almost name their price and it's going to be very difficult for a Medicaid Program not to cover so but this could bankrupt taxpayers so thoughts on that yes so I don't think we are at a spot where lowering prices makes us better off but for Gene therapies I absolutely agree there's a significant problem and the issue is that the prices are all paid upfront when there's the most uncertainty about whether the gene therapy is going to work in the long run no value based purchasing could obviously play a role here um but if you do value based purchasing you still have a how do you negotiate The Upfront cost I come up with a drug for uh gene therapy for a sickle Cale I treated a lot of sickers you want to treat them and you charge $20 million a person um I can't believe they would get that but but you see the only thing that would stop them from asking that may be the sticker shock so how do you negotiate that first out of the gate price because I think that's a kind of a question that's kind of hanging out there and you're the free market guy so I'd like your opinion on the Whiteboard yes that's true the white gu it's it's actually not the case that you should negotiate the actual price UPF front instead a value based price would mean that the price will respond over time so imagine a situation where Gene therapies were paid for an installments and the and believe me I've written about that in stat in stat if you ever wish to dig up something out of stat behind a pay wall uh but it still means that if you've got an initial high price no matter what your value based purchasing Arrangement is it could still be something something which society could not afford uh what do you think of the German model uh Dr Baker I think came up with that in which there is uh you know you can ask whatever price you want for the first two years but then after that there's going to be some sort of negotiation based upon real world data yeah I think the the challenge with the German model is it's actually very hard to predict the outcomes that if you look at the ratings that the Germans um produce of the benefits of drugs they're not well correlated with negotiated prices so if I'm an innovator trying to figure out what I'm going to get paid in Germany it's really hard and if you can't predict your returns then they're not going to work as Financial incentives Mr mean have you had a chance to evaluate the bill that's working its way through Judiciary Committee it might be included in a yearend package as to its Effectiveness in addressing uh patent tickets yeah press your button ma'am Senator Blumenthal and uh Corin bill I think it will potentially cap for biologics patents that can be enforced to about 20 I've actually uh uh given some technical advice on that bill I don't think it's going to result olve the problem you don't think it's going to resolve the problem no I see um okay well thank you all very thoughtful all right thank you all very good discussion appreciate you being here that is the end of our hearing today and I want to thank all of our Witnesses for the participation for any Senators who wish to ask additional questions questions for the record will be doing 10 business days February 23rd at 5:00 p.m. finally ask unanimous consent enter the record three statements from stakeholder groups and experts about the cost of prescription drugs with that the committee stands journ thank you from Brazil thank you thank you app all right yeah really like compared to just you know I think they did a lot
