Committee Hearings Highlight Critical Need for Legislation to Allow Federal Government to Negotiate Directly with Drug Companies
Washington, D.C. (Oct. 2, 2020)— This week, Rep. Carolyn B. Maloney, the Chairwoman of the Committee on Oversight and Reform, held two days of landmark hearings with drug company CEOs to examine their price increases for some of the costliest drugs in the United States.
The hearings updated the public on the Committee’s sweeping 18-month investigation, launched by former Chairman Elijah E. Cummings, and is still ongoing. To date, the Committee has analyzed more than one million documents and released five staff reports on the actions of Celgene and Bristol Myers Squibb, Teva, Amgen, Novartis, and Mallinckrodt.
The staff reports and back-to-back hearings exemplified the need for the Senate to pass H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, to give Medicare the authority to negotiate directly with drug companies.
The Committee’s investigation has revealed:
- Drug companies exploit Medicare’s inability to negotiate: Internal company data obtained by the Committee reveal that companies took advantage of Medicare’s inability to negotiate directly, costing patients and taxpayers billions of dollars. One company even identified allowing Medicare to negotiate as the greatest threat to its future revenue. If Medicare had received the same discounts as other government programs that can negotiate, Medicare would have saved:
- $3.5 billion on Amgen’s drugs Enbrel and Sensipar from 2013 to 2018
- $2.1 billion on Novartis’ drug Gleevec from 2011 to 2015
- $1.4 billion on Teva’s drug Copaxone between 2010 and 2013
- $656 million on Mallinckrodt’s drug H.P. Acthar Gel between 2015 and 2018
- Drug companies target the U.S. for price increases: Internal documents show that companies raise prices for U.S. patients while maintaining or cutting prices for the rest of the world. When confronted with these documents at the hearings, drug company executives acknowledged they charge U.S. patients more and were unable to provide any justification.
- One Celgene presentation described the U.S. as a “highly favorable environment with free-market pricing.”
- Another Teva presentation emphasized that one of its key strengths was its ability to “increase prices successfully,” which was “influenced heavily by US being allowed to hike prices.”
- Drug companies raise prices to reach revenue and earnings targets: Internal documents show that drug company executives routinely raised prices to meet revenue targets with limited or no discussion of research and development. On multiple occasions, company executives accelerated or increased the magnitude of price increases to meet revenue targets, which in turn led to the same executives being paid higher bonuses.
- Drug companies’ R&D and other justifications are inconsistent with internal documents:
- The hearings revealed that companies relied on federally funded research and the research of others to justify their price increases. In total, the companies’ research expenditures for the drugs were miniscule compared to their net revenue. For example, from 2002 to 2019, Teva spent only 2% of its U.S. net revenue from Copaxone on research related to the drug.
- Internal documents also revealed that companies viewed their patient assistance programs and charitable donations as “investments” to generate additional sales.
- Drug companies use anticompetitive strategies to keep prices high: Internal documents revealed that drug companies tried to keep generic drugs off the market and engaged in exclusionary strategies to protect market share once faced with generic competition.