Big Pharma CEOs grilled on Capitol Hill over drug prices: 4 key takeaways

Lawmakers confronted CEOs over executive compensation and stock buybacks.

February 8, 2024, 3:56 PM

Senators grilled chief executives from three top pharmaceutical companies over prescription drug prices during an hourslong committee hearing Thursday on Capitol Hill.

Members of both major political parties bemoaned drug prices they consider too high, but liberals and conservatives revealed differences in their views of the role played by the pharmaceutical companies.

The three CEOs -- Robert M. Davis of Merck, Joaquin Duato of Johnson & Johnson and Christopher Boerner of Bristol Myers Squibb -- said drug prices account for the considerable cost of research and development, as well as the ready availability of treatments in the United States.

Here are the four biggest takeaways from the CEOs' testimony before the Senate Committee on Health, Education, Labor and Pensions:

Liberals confronted the pharmaceutical CEOs over prices, executive compensation

The testiest moments of the hearing came when liberal lawmakers challenged the pharmaceutical executives over what the senators said they viewed as high prices, invoking anecdotes of patients forced to choose between purchasing medicine or paying for essentials such as rent or food.

The senators pointed to millions of dollars in executive compensation and billions in stock buybacks and dividends as areas where the companies could trim costs and put the savings toward price reduction.

In one heated exchange, Democratic Sen. Chris Murphy from Connecticut challenged Duato, accusing Johnson & Johnson of prioritizing shareholder returns over drug development.

In 2022, Murphy said, the company spent a combined $17 billion on stock buybacks and dividends compared to $14 billion on research and development.

“Can you understand that one of my constituents in Connecticut would look at those numbers and think that you care more about padding the pockets of folks who work for you and invest in you than in research and development?" Murphy said.

In response, Duato said, “Our priority is investing in R&D.”

“We have to pay dividends because it’s the only way the company can remain operational and sustainable,” Duato added. “Otherwise, if we’re not operational and sustainable, we are not able to fulfill our mission of developing medicines for patients and making them affordable.”

Joaquin Duato, CEO of Johnson & Johnson, testifies before the Senate Health, Education, Labor, and Pensions Committee at the Dirksen Senate Office Building, on Feb. 8, 2024, in Washington, D.C.
Kevin Dietsch/Getty Images

Senators grilled the CEOs on why the same drugs cost more in the U.S. than in other countries

Liberal lawmakers repeatedly criticized the relatively high cost of drugs in the U.S. compared to other wealthy countries such as Canada, France and Japan.

In 2022, prices for brand-name drugs in the U.S. were at least three times higher than those in 33 other wealthy nations, according to a report this month commissioned by the Department of Health and Human Services.

For instance, Bristol Myers Squibb charges patients $7,100 per year for blood-clot drug Eliquis in the U.S., while the same product can be purchased for $900 in Canada and just $650 in France, Vermont Sen. Bernie Sanders, an independent, said.

“Does Bristol Myers Squibb make a profit selling Eliquis for $900 in Canada,” Sanders asked Boerner, the company’s CEO.

“Yes, we make a profit,” Boerner said.

“Will you commit to reducing the list price in the U.S. to the price in Canada?” Sanders asked.

In response, Boerner said, “We cannot make that commitment.” He cited the relative accessibility of drugs in the U.S. compared to Canada.

“In Canada, medicines are generally made less available and it takes oftentimes considerably longer for them to be made available,” Boerner added.

Republicans shared the concern about prices but defended drugmakers

Republican senators on the committee echoed the concern about high drug prices but largely avoided faulting the pharmaceutical companies and their executives.

“Let’s just be clear, everybody in this panel cares about the high cost of prescription drugs and wants to work on real solutions to address this,” Republican Sen. Bill Cassidy of Louisiana said. “I don’t want the committee to delve into a CEO whack-a-mole that ends up with no serious legislation as a result.”

Kentucky Sen. Rand Paul, a Republican, defended the profits delivered by pharmaceutical companies in recent years, lauding their breakthrough drugs and philanthropy. Paul criticized, meanwhile, the line of questioning taken up by Democrats, who make up the majority on the committee.

“Unfortunately, this committee isn’t here to celebrate American success, instead the majority wants to drag us here to conduct a show trial to harangue companies,” Paul said.

Pharmaceutical CEOs pointed to high research and development costs, middlemen

For their part, the chief executives acknowledged the elevated price of drugs in the U.S.

However, the CEOs placed the blame on cost-intensive research and development, as well as industry middlemen known as Pharmacy Benefit Managers, or PBMs.

“Right now, we have nearly 20,000 researchers seeking breakthrough treatments,” said Davis, of Merck. The company has invested almost $160 billion in research and development since 2010, including $30 billion in 2023, Davis said.

All three CEOs aimed their ire at PBMs, third-party administrators hired by large employers and other institutions to set prices in negotiations with drugmakers.

PBMs undermine pharmaceutical companies’ efforts to ease the costs borne by patients, said Duato, of Johnson & Johnson.

“Congress should stop middlemen from taking for themselves the assistance that pharmaceutical companies intend for patients,” Duato said.