Pharma Executives Call for Reforms to Medicare, Rebate System in Senate Hearing

During the hearing on drug pricing held yesterday before the US Senate Committee on Finance, 7 pharmaceutical executives gave testimony in an effort to explain rising drug costs in the United States and offer solutions to lower them.

The hearing was attended by pharmaceutical executives representing some of the largest drug manufacturers in the world, including Richard Gonzalez, chairman of the board and chief executive officer (CEO), AbbVie; Kenneth Frazier, chairman and CEO, Merck; Jennifer Taubert, executive vice president, worldwide chairman of pharmaceuticals, Johnson and Johnson; Olivier Brandicourt, CEO, Sanofi; Pascal Soriot, executive director and CEO, AstraZeneca; Giovanni Caforio, MD, chairman of the board and CEO, Bristol-Myers Squibb; and Albert Bourla, DVM, PhD, CEO, Pfizer. However, at the end, Congress concluded the hearing without any definitive plan to address the cost of drugs.

“I’ve heard a lot of happy talk this morning, but what people are taking away from this hearing…no firm commitments have been made to lower list prices,” said Senator Ron Wyden, D-Oregon, ranking member of the Senate Finance Committee.

The hearing lacked any much-anticipated reckoning reminiscent of the 1994 Senate hearing with the 5 largest global tobacco companies, and instead the pharmaceutical executives largely stuck to previous talking points regarding the complicated nature of the supply chain, pharmacy benefit managers (PBMs) taking a larger piece of the pie than others realize, and the high costs of research and development (R&D), which allow for companies to charge more for medicines to cover the cost incurred.

“There is no question that researchers and doctors have developed treatments and cures for disease where there was no such cures or treatments. Such innovations take time and money… but we’re all trying to understand the sticker shock that many drugs generate,” said Senator Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee.

One of the more contentious points that came up in the hearing numerous times was the cost of and patent protection around adalimumab (Humira), the world’s best-selling drug developed and owned by AbbVie.

At the outset, Wyden compared AbbVie’s layered protection of patents for adalimumab with a character from Lord of the Rings, stating that “AbbVie protects its patents with Humira like Gollum with his ring.”

This line of questioning later continued with Senator John Cornyn, R-Texas, who probed Gonzalez about the number of patents AbbVie currently has protecting adalimumab.

“Humira has 247 patents protecting it, the last of which doesn’t expire until 2034. Is it your opinion that you should have an exclusive monopoly [on the adalimumab market]?” said Cornyn.

Gonzalez said no, but first corrected Cornyn, stating that Humira actually has 136 patents protecting it, though there are numerous pending patent applications bringing the total to 247. He went on to say that, “the number of patents don’t protect the drug,” to which Cornyn disagreed, stating that “the patent gives you an exclusive right during its term to produce the drug.”

In keeping with previous party lines, various other executives laid blame to the high cost of drugs on other culprits, such as insurers and PBMs. In his testimony, Soriot pointed fingers at the rebate system in the United States, stating that the “current system is built on high list prices coupled with rebates,” and that it is “unsustainable.” Although, he conceded that “we all have a role to play.”

Soriot also addressed many calls from Congress to lower a drug's list price by stating that, if rebates were eliminated in “both commercial and [Medicare] Part D, we are prepared to lower list prices.”

Furthermore, numerous executives pointed to biosimilars as a potential solution to the high cost of medicines. Soriot said that “a vigorous biosimilar market would help to reduce [drug prices],” explaining that in Europe, “biosimilars have gained up to 85% market share.”

Echoing support for this suggestion was Bourla, who called on the lawmakers to “knock down barriers to biosimilars.” He stated that in many cases, “insurance companies decline to use biosimilars in their formularies. I can’t think of a more concerning example of a broken system.”

There were moments throughout the hearing where the executives found common ground with law makers, such as by offering their support for the recently proposed rule that would do away with rebates drug manufacturers pay to insurers, as well as the CREATES Act.

Congressman Tom Carper, D-Delaware, asked if the executives support 3 items: eliminating rebates to PBMs, creating value-based arrangements, and increasing transparency industry wide in regard to how drug prices are set. Each executive overwhelmingly said they did support these items.

“All 3 elements would be transformational,” said Bourla.