Pharmaceutical Executives Questioned by Senate Over Drug Prices

-Craig Idlebrook

Executives from seven pharmaceutical companies, including the insulin-maker Sanofi, were questioned by members of the Senate Finance Committee about high drug prices on February 26th. While the hearing lacked the emotional fireworks of a similar House Oversight Committee hearing held in late January, it did showcase lawmakers’ bipartisan frustration over the rising cost of prescription drugs.

Here are five takeaways from the hearing:

1. Yes, the issue is complicated, but lawmakers say that’s no excuse for inaction.

As drug prices have risen rapidly, pharmaceutical companies, insurance companies, and pharmacy benefit managers have all blamed each other for the rising costs. While Senator Chuck Grassley (R, IA) said that the hearing wasn’t to scapegoat one group over another, he also said that the complicated nature of the healthcare system is no excuse for inaction.

“We’ve all seen the finger pointing; every link in the supply chain has gotten very skilled at finger pointing,” Senator Grassley said. “Most members of Congress are sick and tired of the blame game.”

Senator Ron Wyden (D, OR) was not as measured in his view of the issue, saying that the high costs of prescription drugs did not happen because of some systematic accident. He also said the current situation was unsustainable.

“The brakes have come off pharmaceutical pricing and American families are hurtling along in the passenger seat about what comes next,” Senator Wyden said.

2. Insulin was given a special focus.  

Insulin was brought up twice in the opening statements, and in several other instances throughout the hearing.

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Sanofi CEO Olivier Brandicourt said he felt it necessary to acknowledge the anger and confusion over insulin pricing. Senator Wyden said that the vital medication was a good example of the failure of the drug pricing system, noting how a vial of insulin that had a list price of $20 in 2010 now was listed at $300 today.

“Considering the landmark breakthrough on insulin came early in the roaring twenties, nothing could justify this sudden price hike nearly a century later,” Senator Wyden said.

3. Pharmaceutical executives called for systemic change

Much of the discussion in the hearing centered around the difference between list price (the price a pharmaceutical company sets for a drug) and net price (what a consumer ultimately pays after rebates and discounts). Merck CEO Ken Frazier said that companies cannot unilaterally lower list prices without running into financial problems because of the complicated nature of the drug pricing system. Sanofi CEO Brandicourt agreed, saying doing so would threaten his company’s drugs placement in formularies.

“We couldn’t [lower our list prices] independently of major reform because we would lose formulary placement if we were doing that in isolation, especially in very competitive areas…I’m referring to the insulin markets,” Mr. Brandicourt said.

Mr. Brandicourt called instead for a holistic fix to drug pricing that addressed all parts of the pharmaceutical supply chain.

4. Lawmakers said pharmaceutical companies were exploiting patent protection loopholes

Senator John Cornyn (R, TX) took Abbvie CEO Richard Gonzalez to task for how Abbvie handled its patent protection for Humira to keep it from facing generic competition. The two bantered to arrive on the figure that the drug has 136 patents.

Senator Cornyn said that at some point, exclusivity of patent protection on a drug has to end. Senator Wyden may have had the most quotable line of the hearing, saying in his opening statement that Abbvie protected its patents like “Gollum with his ring.”

5. Lawmakers were concerned drugmakers were using U.S. customers as underwriters for global drug development.

Senator Sherrod Brown (D, OH) was able to get CEOs to agree, with caveats, that U.S. consumers pay the highest average list prices for drugs. Senator Wyden asked AbbVie CEO Gonzalez whether the company is turning a profit in countries with more heavily regulated healthcare markets, like Germany and France, and Mr. Gonzalez said the company did. Senator Wyden then asked the executives how the the higher list prices charged to U.S. consumers didn’t constitute price gouging.

More hearings are expected in the coming months on the issue of high drug pricing, and several presidential candidates have talked about the need to lower drug prices in the opening days of the 2020 presidential campaign. It will remain to be seen, however, if actual legislation will be passed that will provide new regulations on drug pricing.

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