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Senator compares drugmakers to Gollum from Lord of the Rings

As several industry executives testify, lawmakers turn up the heat

Chairman Charles Grassley, R-Iowa, right, and ranking member Sen. Ron Wyden, D-Ore., talk before a Senate Finance Committee hearing in Dirksen Building on Tuesday titled “Drug Pricing in America: A Prescription for Change, Part II.” (Tom Williams/CQ Roll Call)
Chairman Charles Grassley, R-Iowa, right, and ranking member Sen. Ron Wyden, D-Ore., talk before a Senate Finance Committee hearing in Dirksen Building on Tuesday titled “Drug Pricing in America: A Prescription for Change, Part II.” (Tom Williams/CQ Roll Call)

Seven drug industry executives appearing before the Senate Finance Committee on Tuesday blamed a large part of the drug price problem on the way health insurance is designed, even though lawmakers warned the industry to focus on its own actions rather than those of other companies.

“We’ve all seen the finger pointing,” said Finance Chairman Charles E. Grassley of Iowa. “Like most Americans, I’m sick and tired of the blame game.”

Grassley’s warning was restrained compared to the committee’s top Democrat, Ron Wyden of Oregon, who went witness by witness to criticize executive compensation packages and highlight ways that drugmakers had extended monopolies, raised prices on old drugs, and broken promises on pledges to keep prices down.

The executives were here, Wyden said, “because the way you’ve been doing business is unacceptable.” He continued: “Drugmakers behave as if patients and taxpayers are unlocked ATMs full of cash to be extracted, and the shareholders are the customers that they value above anybody else.”

Watch: Drugmaker protects Humira exclusivity ‘like Gollum with his ring’

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AbbVie, which makes rheumatoid arthritis and Crohn’s disease treatment Humira, the top-selling drug in the U.S., has managed to extend its patent to 2023 as cheaper competition waits to go on sale. The company, Wyden said, “protects the exclusivity of Humira like Gollum with his ring.”

The executives didn’t strike back at Wyden’s criticisms and delivered polite, measured opening statements, acknowledging pricing problems that are unsustainable for patients.

The industry officials told senators they wanted to be constructive partners in lowering prices before insurance kicks in. Many told senators that if the Trump administration finalizes a proposal to require rebates paid to insurers to be passed on to consumers at the point of sale, it would lower the initial prices.

Drugmakers highlighted their research and development investments, their restraint in taking price increases, and the money saved elsewhere in the health system when a new drug represents an alternative to a surgery or improves upon a less effective treatment. Many noted the difference between list price increases and decreases to the net prices paid by insurers and consumers after discounts and rebates.

Grassley tried to pre-empt the assertion that the list prices of their products don’t matter. He noted that list prices raise costs for seniors on Medicare’s prescription drug benefit — who pay a percentage of each drug’s price — and more out of pocket for the growing number of individuals on high-deductible insurance plans.

Despite Grassley’s admonition to avoid pointing fingers, drugmakers repeatedly said that insurance design was a reason that patients pay more.

Patients pay a greater share of the cost of a drug than they would have to pay for a hospital procedure the drug could help avoid, several executives noted in their testimony.

“The reality is that our health coverage system simply wasn’t built in anticipation of medicines that treat diseases previously only treated with surgeries, hospitalizations and other complex interventions,” Jennifer Taubert of Johnson & Johnson’s Janssen Pharmaceuticals said in prepared remarks.

The executives also almost uniformly pointed to the billions offered in discounts or paid in rebates to middlemen such as insurers and pharmacy-benefit managers as a problem. While some noted the importance of rebates in securing insurance coverage, they said the discounts should be passed on directly to patients, like the Trump administration proposed in January.

“The current system is built on high list prices coupled with rebates. This is not sustainable and all of us have a role to play,” AztraZeneca’s Pascal Soriot told the panel.

The executives pointed to some common solutions in their testimony. Those included adding an out-of-pocket spending cap for patients in the Medicare Part D drug program, or paying for drugs based on their “value” or the outcome of a treatment.

Some pledged to limit their price increases. Merck’s Kenneth C. Frazier said the company’s average price increase across its portfolio wouldn’t exceed the rate of inflation. Sanofi’s Olivier Brandicourt said the company’s price increases wouldn’t exceed the growth of national health expenditures, which the administration last week estimated to be 5.5 percent.

Four of the drugmakers also endorsed a bipartisan bill that would deter branded drugmakers from blocking the sales of samples to potential generic competitors. While the drugmakers’ support was notable given broader industry opposition to the proposal, both noted they want some changes to the bill as written.

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