Big pharma defends rising cost of drugs, lawmakers say they are gaming the system

PHOTO: Sen. Ron Wyden, D-Ore., left, gestures while asking questions as Sen. Chuck Grassley, R-Iowa, right, chairman of the Senate Finance Committee, looks on during a hearing with drug company CEOs on drug prices, Feb. 26, 2019, on Capitol Hill.PlayPablo Martinez Monsivais/AP
WATCH Drug CEOs defend high prices to Senate panel

In a rare show of bipartisan consensus, Republican and Democratic senators on Tuesday grilled seven top executives from the world’s biggest drugmakers on why prices remain historically high.

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The most heated exchanges came from Democratic Sens. Ron Wyden and Sen. Maggie Hassan, with several Republicans signaling they, too, were prepared to regulate the industry if it didn’t agree to drive down prices.

The testimony from several drug industry CEOs is the first of its kind following President Donald Trump’s promise last year that the industry would agree to “massive” pricing cuts. Appearing before the Senate Finance Committee were the CEOs of AbbVie, AstraZeneca, Bristol-Myers Squibb, Pfizer and Sanofi, and a top executive for Johnson & Johnson.

None of the executives promised dramatic cuts to their pricing as Trump suggested, although they agreed to work with Congress to find a solution. The focus, they said, should be on fixing a shadowy system reliant on rebates and discounts that are spread unevenly across patients. Each of the drugmakers swung behind a proposal by the Trump administration to allow drugmakers to offer rebates directly to consumers instead of going through benefit managers, testifying that the move would likely encourage lower list prices.

The CEOs said they weren’t solely to blame for historically high drug spending and warned that heavy-handed regulation would backfire by crippling research on ailments that are hardest to treat, like Alzheimer's disease and cancer.

“I understand why patients are frustrated because they need these medicines and they can’t afford them,” Merck CEO Kenneth Frazier told the panel.

“I would pledge to do everything that we could, but I would urge you to recognize that the system itself is complex and it is interdependent, and no one company can unilaterally lower list prices without running into financial and operating disadvantages.”

Wyden, D-Ore., swiftly rejected arguments by the drugmakers that others were to blame for high prices.

"I think you and others in the industry are stonewalling on the issue," Wyden said.

Hassan, D-N.H., accused Johnson & Johnson of aggressively selling opioids to the American public and promoting addition.

Jennifer Taubert, the head of the company’s pharmaceutical division, said opioid-based drugs represent less than 1 percent of the company's drugs and called the company’s handling of those pharmaceuticals was “very appropriate and responsible.”

Hassan snapped back: “It is hard for me to take the industry’s goal here as promoting good health seriously when its behavior to maximize sales of opioids created an epidemic.”

PHOTO: Chief Executive Officers of pharmaceutical companies testify before the Senate Finance Committee on Drug Pricing in America: A Prescription for Change, Part II, Feb. 26, 2019, in Washington D.C. Win McNamee/Getty Images
Chief Executive Officers of pharmaceutical companies testify before the Senate Finance Committee on "Drug Pricing in America: A Prescription for Change, Part II," Feb. 26, 2019, in Washington D.C.

Sen. Charles Grassley, the new chair of the Senate Finance Committee, took aim at tactics that brand-name drugmakers use to keep cheaper generics off the market. One practice, documented by the U.S. Food and Drug Administration, is for drugmakers to block access of samples of their brand-name products so that generic developers can’t do the required testing. Another is for companies to make trivial changes to drugs shortly before their patent ends in a bit to extend exclusive rights to the drug.

“We’ve all seen the finger pointing. Every link in the supply chain has gotten skilled at that,” said Grassley, R-Iowa. “But, like most Americans, I’m sick and tired of the blame game. It’s time for solutions.”

Overall, drug spending has risen rapidly in recent decades as pharmaceutical companies churn out new, groundbreaking drugs with high price tags that industry executives say are needed to recoup research costs.

Last week, Grassley and Wyden said they were launching a joint investigation into the price of insulin, a hormone used to treat diabetes for an estimated 30 million Americans. Sanofi, headquartered in Paris, is one of three major insulin-makers in the U.S. The senators said they wanted information on how prices shot up by 500 percent or more when the drug has been on the market for nearly a century.

According to a committee letter to Sanofi, the price of Lantus insulin increased from $244 to $431 between 2013 and 2019, an approximate 77 percent increase.

PHOTO: Chairman Sen. Chuck Grassley takes his seat at a Senate Finance Committee organizational meeting and hearing in Washington, Feb. 2, 2019. CQ Roll Call via Getty Images, FILE
Chairman Sen. Chuck Grassley takes his seat at a Senate Finance Committee organizational meeting and hearing in Washington, Feb. 2, 2019.

The goal of lower drug prices has emerged as common ground in a deeply divided Congress, but policymakers have yet to develop a long-term comprehensive plan. At one point last July, Trump aimed his famed Twitter account at Pfizer, the biggest drugmaker in the U.S. that has developed such drugs as Viagra and the high-cholesterol pill Lipitor.

“Pfizer & others should be ashamed that they have raised drug prices for no reason,” he tweeted.

Pfizer agreed to temporarily roll back price hikes, but by fall, then-Pfizer CEO Ian Read told analysts in a conference call that the company would return to “business as normal” in January.

The administration has proposed some new regulations, too, although they are still working their way through the rulemaking process and aren't in effect yet. One proposal would prohibit drug makers from offering discounts or rebates to "pharmacy benefit managers” that administer drug plans. Instead, the manufacturers would be encouraged to provide rebates directly to consumers. Democrats have said they are skeptical as to whether it would drive down costs and expressed concerns it could wind up raising prices instead.

Another proposal, announced last fall, is to limit what it pays for certain drugs for Medicare recipients by tying the price for some drugs to prices paid overseas. The measure, which would be phased in over several years, would only apply to certain types of drugs via Medicare that are administered by a physician. The drug industry has opposed the move and said it would discourage innovation. ABC News' Mariam Khan contributed to this report.