Jared S. Hopkins and Peter Loftus
Executives for some of the biggest pharmaceutical companies will visit Capitol Hill on Tuesday to face tough questions in a Senate hearing on the rising cost of medicines.
The executives lead companies with some of the highest-grossing drugs in the world, and have routinely raised prices on many of their products. Scheduled to testify are chief executives from AbbVie Inc.; Bristol-Myers Squibb Co.; Merck & Co.; Pfizer Inc.; AstraZeneca PLC; and Sanofi SA. Johnson & Johnson , the world’s largest health-care company, is sending an executive who oversees its drug division.
Members of the Senate Finance Committee, chaired by Sen. Chuck Grassley (R., Iowa), are expected to question the executives on their pricing practices and how the companies can reduce costs for patients, according to people familiar with the matter. They are also likely to face questions about their strategies to fight off cheaper generic alternatives, according to the people.
The hearing could inform bipartisan legislation this year to target high drug prices. Sen. Grassley and Sen. Amy Klobuchar (D., Minn.) have introduced bills to legalize personal importation of lower-priced medicines from Canada, and to curtail patent-infringement-litigation settlements in which makers of brand-name drugs pay generic manufacturers to delay competition.
Americans continue to grapple with the rising cost of health care, including out-of-pocket costs for prescription drugs. In Washington, drug pricing may be one of the few issues that President Donald Trump and the Democrats could find common ground. While the pharmaceutical industry has for years been a major lobbying player, its critics are also spending millions of dollars to influence lawmakers.
On Tuesday, when senators ask about high list prices for drugs, expect the companies to respond by saying the prices aren’t meaningful because they don’t include discounts and rebates that companies give to pharmacy-benefit managers in order to gain plan coverage, said Ira Loss, senior health-care analyst at research firm Washington Analysis.
“The drug industry is going to come in and blame the pharmacy-benefit managers for the problems and say, ‘It’s not our fault,’ ” Mr. Loss said.
Industrywide, net prices have been falling as list prices rise, according to data from SSR Health. Few patients pay “list” prices, which don’t take into account rebates, discounts and insurance payments, but some pay the full price at times, such as when they haven’t met their deductible.
AbbVie’s rheumatoid arthritis treatment Humira is the top-selling drug in the world, and the company said that both volume and pricing fueled the drug’s growth during the fourth quarter. AbbVie raised the drug’s list price by 9.7% in January 2018 and then 6.2% more last month.
AbbVie has pledged to limit its overall drug-price increases to less than 10% annually, and only once a year, which the company says would be offset by rebates and discounts paid to insurers and other industry middlemen.
AbbVie Chief Executive Richard Gonzalez also may face questions about the company’s patent strategy. Humira’s main U.S. patent expired in 2016, but the company has fought off generic competition with a series of other patents and is expected to hold exclusive U.S. marketing rights until 2023.
New York-based Pfizer, which had regularly increased prices over the years, temporarily put off raising prices last year amid pressure from President Trump, but resumed increases on about 10% of its portfolio this year. Chief Executive Albert Bourla, who began leading the company in January, said on its fourth-quarter earnings call that Pfizer’s growth won’t be driven by price.
Bristol-Myers Squibb has been heavily criticized for how it prices its drugs. It will acquire costly multiple myeloma drug Revlimid, should it close its January agreement to acquire rival Celgene Corp. for $74 billion. Revlimid is Celgene’s top-selling drug, and has regularly gone up in price. In 2007, a 10-milligram dose cost $247.28. This year, on the day of the planned deal between the two companies, the price went up 3.5% to $719.82.
The hearing comes as the Trump administration pursues its own proposals aimed at drug prices. One, opposed by the industry, would tie the price of some Medicare drugs to prices in foreign countries where drugs are cheaper. However, the drug industry has supported the administration’s proposal limiting the rebates that drug companies pay to middlemen in federal pharmacy programs. The move doesn’t directly limit drug manufacturers’ pricing power, although the administration hopes list prices will fall and savings will be steered to consumers.
The drug industry has been proactive the past few years amid criticism of prices. Some including Allergan PLC have pledged to take just one price increase each year, and by less than 10%, while others have made similar proclamations. Companies increasingly are touting how their net prices are staying the same or falling. Last year, Merck cut the cost for some of its medicines and promised to limit its net price increases. Nevertheless, the drug industry continues to raise list prices on many of its medicines.
Senators may also ask about the growing cost of insulin. Sanofi’s chief executive, Olivier Brandicourt, could be questioned on the rising cost of insulin, a treatment for diabetic patients. The drugmaker sells the world’s top-selling insulin, Lantus.
While the hearings might not lead to substantive legislation, they will allow the senators to showcase themselves, Mr. Loss said. “Get your popcorn,” he said.
Sen. Grassley hasn’t always sided with the pharmaceutical industry. He has long supported re-importing drugs from other countries, such as Canada, which the industry opposes. He also helped write legislation that requires disclosure of gifts from drugmakers to doctors and hospitals.
Last year, Sen. Grassley introduced bipartisan legislation mandating that television commercials for drugs include list prices. The measure didn’t pass the House, but the industry’s lobbying group said companies would voluntarily include price-related information in television ads by directing consumers to websites where they can find information on list prices and costs. This month J&J included its list price in a television ad for blood thinner Xarelto.