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27–116 PDF 2017

EXAMINING THE IMPACT OF VOLUNTARY RESTRICTED DISTRIBUTION SYSTEMS IN THE 

PHARMACEUTICAL SUPPLY CHAIN 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTHCARE, 

BENEFITS, AND ADMINISTRATIVE RULES 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MARCH 22, 2017 

Serial No. 115–33 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://oversight.house.gov 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

Jason Chaffetz, Utah, Chairman 

John J. Duncan, Jr., Tennessee 

Darrell E. Issa, California 

Jim Jordan, Ohio 

Mark Sanford, South Carolina 

Justin Amash, Michigan 

Paul A. Gosar, Arizona 

Scott DesJarlais, Tennessee 

Trey Gowdy, South Carolina 

Blake Farenthold, Texas 

Virginia Foxx, North Carolina 

Thomas Massie, Kentucky 

Mark Meadows, North Carolina 

Ron DeSantis, Florida 

Dennis A. Ross, Florida 

Mark Walker, North Carolina 

Rod Blum, Iowa 

Jody B. Hice, Georgia 

Steve Russell, Oklahoma 

Glenn Grothman, Wisconsin 

Will Hurd, Texas 

Gary J. Palmer, Alabama 

James Comer, Kentucky 

Paul Mitchell, Michigan 

Elijah E. Cummings, Maryland, Ranking 

Minority Member 

Carolyn B. Maloney, New York 

Eleanor Holmes Norton, District of Columbia 

Wm. Lacy Clay, Missouri 

Stephen F. Lynch, Massachusetts 

Jim Cooper, Tennessee 

Gerald E. Connolly, Virginia 

Robin L. Kelly, Illinois 

Brenda L. Lawrence, Michigan 

Bonnie Watson Coleman, New Jersey 

Stacey E. Plaskett, Virgin Islands 

Val Butler Demings, Florida 

Raja Krishnamoorthi, Illinois 

Jamie Raskin, Maryland 

Peter Welch, Vermont 

Matt Cartwright, Pennsylvania 

Mark DeSaulnier, California 

John Sarbanes, Maryland 

Jonathan Skladany, Staff Director 

Rebecca Edgar, Deputy Staff Director 

William McKenna, General Counsel 

Natalie Turner, Counsel 

Kiley Bidelman, Clerk 

David Rapallo, Minority Staff Director 

SUBCOMMITTEE ON HEALTHCARE, BENEFITS, AND ADMINISTRATIVE RULES

Jim Jordan, Ohio, Chairman 

Mark Walker, North Carolina, Vice Chair 

Darrell E. Issa, California 

Mark Sanford, South Carolina 

Scott DesJarlais, Tennessee 

Mark Meadows, North Carolina 

Glenn Grothman, Wisconsin 

Paul Mitchell, Michigan 

Raja Krishnamoorthi, Illinois, Ranking 

Minority Member 

Jim Cooper, Tennessee 

Eleanor Holmes Norton, District of Columbia 

Robin L. Kelly, Illinois 

Bonnie Watson Coleman, New Jersey 

Stacey E. Plaskett, Virgin Islands 


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C O N T E N T S 

Page 

Hearing held on March 22, 2017 ............................................................................ 1 

WITNESSES 

Janet Woodcock, M.D., Director, Center for Drug Evaluation and Research, 

U.S. Food and Drug Administration 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 7 

Mr. Bruce Leicher, Senior Vice President and General Counsel, Momenta 

Pharmaceuticals, Testifying on Behalf of the Association for Accessible 

Medicines 

Oral Statement ................................................................................................. 12 

Written Statement ............................................................................................ 14 

Gerard Anderson, Ph.D., Director, Center for Hospital Finance and Management, and Professor, Johns Hopkins Bloomberg School of Public Health 

Oral Statement ................................................................................................. 25 

Written Statement ............................................................................................ 27 

Mr. David Mitchell, President and Founder, Patients for Affordable Drugs 

Oral Statement ................................................................................................. 33 

Written Statement ............................................................................................ 35 

APPENDIX 

Questions for the Record for Dr. Janet Woodcock, submitted by Ms. Plaskett 

and Mr. Welch ...................................................................................................... 52 


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EXAMINING THE IMPACT OF VOLUNTARY RESTRICTED DISTRIBUTION SYSTEMS IN THE 

PHARMACEUTICAL SUPPLY CHAIN 

Wednesday, March 22, 2017 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH CARE, BENEFITS, AND

ADMINISTRATIVE RULES

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 2:00 p.m., in Room 

2154, Rayburn House Office Building, Hon. Jim Jordan [chairman 

of the subcommittee] presiding. 

Present: Representatives Jordan, Walker, Grothman, Mitchell, 

Krishnamoorthi, Kelly, Watson Coleman, and Plaskett. 

Also Present: Representatives Cummings and Welch. 

Mr. JORDAN. The Subcommittee on Health Care, Benefits, and 

Administrative Rules will come to order. 

And without objection, the chair is authorized to declare recess 

at any time. 

And I ask unanimous consent that all members of the Committee 

on Oversight and Government Reform be allowed to participate in 

today’s hearing. 

Without objection, so ordered. 

I want to do a brief opening statement and then our ranking 

member will do his opening comments as well, and then we’ll get 

right to it. 

I do want to thank our witnesses for being here, especially the 

FDA. I know you’ve testified a number of times in a very short period of time. So we do appreciate, Doctor, you being with us, and 

all of our witnesses being with us today. 

The nature of this week is kind of hectic around here, so we will 

try to get your testimony and maybe a few questions. But it’s an 

important subject and I don’t want to shortchange it, but I just 

want to kind of give you some context as you all know what’s going 

on here on Capitol Hill this week. 

The subject of today’s hearing affects Americans across the country: The rising costs of all patent drugs that lack generic competition. To facilitate competition in the pharmaceutical market, the 

Hatch-Waxman Act created an accelerated pathway for approving 

generics, while maintaining incentives for companies to invest in 

developing new innovative products. Hatch-Waxman continues to 

promote the development of low-cost generics. 


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According to a recent report, generics are only 27 percent of the 

total drug costs in the United States, yet fill 89 percent of prescriptions. Last year, however, we saw that there are some medicines 

with increasing prices, and even though those medicines are not 

protected by remaining patent life or regulatory exclusivity, they 

lack lower-cost generic equivalents. The big one, of course, was 

Turing Pharmaceuticals. 

Turing acquired the drug Daraprim and quickly increased the price about 5,000 percent from $13 a pill to over $750. Even though 

the FDA approved Daraprim in 1953, over 60 years ago, there remains no cheap generics for competition of this particular pharmaceutical. What is not as well known as the exorbitant price is the 

manipulation of the regulatory framework. Not only did Turing increase the price of Daraprim, but the company also adopted a strategy to block generic competition, thereby frustrating the intent of 

the law. 

Strategy is simple. Generic manufacturers are generally not required to submit full clinical trial data to establish safety and efficacy, they instead rely on FDA’s previous finding of safety and effectiveness for the approved medicine. 

For the generic applications, generic manufacturers obtains samples of the approved medicine and demonstrates their product as 

bioequivalent to that approved product. Simple enough. But then 

enter bad actors. Turing thwarted the generic competition by blocking generic companies access to samples of Turing’s pricey product, 

inhibiting generic manufacturers from conducting the bioequivalence testing for the generic application. Indeed, Turing testified— 

Turing testified admitting to this blocking strategy to try and block 

the generic competitor for at least 3 years. 

Companies should not be able to use the system to block generic 

competition. Such abuse is leading to debilitating drug costs. At the 

same time, however, distribution restrictions oftentimes serve important purposes, such as ensuring the safe use and distribution of 

medicines with heightened safety concerns. 

In 2007, Congress gave the FDA authority to order risk evaluation and mitigation strategies, programs for medicines with heightened safety concerns. REMS, this REMS program ensured that the 

benefits of medicine with a known or potential safety concern outweigh the risk of the medicine. FDA can mandate that certain distribution restrictions are part of the REMS program. 

This hearing will distinguish between the good actors and those 

companies like Turing that self-imposed restricted distributions for 

medicines with no apparent reason other than to block the competition. 

The panelists today will help us examine the scope of the misuse 

of this restricted distribution system to block generic competition 

and help to identify solutions. This Congress needs to find a way 

to help the FDA spur the interest of generic competition into the 

market. This hearing is designed to help us move towards that 

goal. 

Finally, I’d like to thank our ranking member for his interest in 

this issue. There’s a good chance that we aren’t going to agree always on what may be the solution, but I am pleased that our staffs 

have been able to work together on this issue so well. 


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And with that, I would like to recognize Mr. Krishnamoorthi for 

his opening statements. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Chairman, for holding 

this very important hearing today. And thank you to our witnesses 

for taking time out of your precious schedules to be here as well. 

The topic of today’s hearing is restricted distribution systems in 

the prescription drug market. This is a very important issue. When 

drug companies use restricted distribution systems and other anticompetitive practices to prevent potential generic competitors from 

coming onto the market, they drive up prices and impose added 

costs on our healthcare system. 

Even more importantly, these anticompetitive practices harm patients. One such patient is here to testify today. David Mitchell has 

multiple myeloma, an incurable blood cancer. For over 5 years, Mr. 

Mitchell took the drug Revlimid, which is made by Celgene. 

Celgene has come under fire for using a restricted distribution system to prevent generic competitors from getting access to the drug 

samples they would need to bring a generic version of Revlimid to 

market. 

As Mr. Mitchell will testify, over the 5 years he took Revlimid, 

his copays increased by 500 percent. During this period, Celgene’s 

revenues from Revlimid also steadily increased, without facing any 

competition from generics, from $2.5 billion in 2010 to almost $6 

billion in 2015. This was an increase of 132 percent. 

Given these figures, it’s no wonder that some drug companies 

take extraordinary steps to prevent potential generic competition. 

But it is important to acknowledge that the challenges we face in 

the prescription drug market go beyond just restricted distribution 

systems. For instance, we are seeing incredible price increases for 

decade’s old drugs. Most recently, Kaleo pharmaceuticals increased 

the price of its autoinjector version of naloxone, a lifesaving drug 

first approved in 1971 to reverse opioid overdoses, from $690 in 

2014 to $4,500. 

The opioid epidemic is ravaging my home State of Illinois, as it 

is many parts of the country. It is wrong for a drug company to 

raise the price of a lifesaving overdose antidote by more than 500 

percent in a span of just 2 years. That’s 500 percent in the span 

of 2 years. And although we absolutely rely on new breakthrough 

therapies to treat the most challenging diseases, new drugs are 

being introduced at higher and higher prices that our healthcare 

system simply cannot support. Some of these drugs are true clinical 

breakthroughs, but others add little clinical value over drugs that 

are already on the market. 

Lifesaving treatments only save lives when people can afford 

them. According to a 2014 survey, one in five Americans did not 

fill a prescription because they could not afford it. Prescription 

drug prices affect all of our constituents. This is an issue they desperately want us to address. And I am so thankful that Mr. Jordan, 

Congressman Jordan, has agreed to do this bipartisan hearing on 

prescription drug pricing. 

In fact, a recent Kaiser Family Foundation poll found that 60 

percent of Americans, including a majority of Republicans, think 

lowering prescription drug prices should be a top priority for President Trump and for Congress. And I’m glad President Trump has 


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actually made this a priority for his administration. According to 

this poll, more Americans want us to deal with rising prescription 

drug prices than repeal the ACA. 

Of course, we do not want to stifle innovation. We want drug 

companies to be able to earn a fair profit that allows them to recoup their research and development costs and invest in the next 

cure. But no company should be able to misuse public safety regulations to stifle competition and secure a monopoly advantage. 

I hope today’s hearing will allow us to begin a constructive conversation about what we can do legislatively, in a bipartisan way, 

to a handle on runaway prescription drug prices. Discovering a lifesaving drug is complicated, but lowering prescription drug prices is 

not. We know what the tools are. Among them are promoting generic competition in the market, increasing transparency in the 

pharmaceutical chain, and letting Medicare negotiate for a better 

deal on drugs. Congress has only to remove the legal hurdles to 

lower prices. 

I look forward to today’s discussion. I hope, with my colleagues 

on both sides of the aisle, to address this issue on behalf of our constituents. 

Mr. Chairman, I just want to do one last thing, which is I would 

like to allow Mr. Welch on my side 1 minute to talk about a bipartisan bill that is directly relevant to today’s hearing. 

Mr. JORDAN. Only for the gentleman from Vermont would we 

make such—no, we’re glad to do that. We’re glad to do that. 

Mr. KRISHNAMOORTHI. Okay. Thank you, Mr. Chairman. 

Mr. WELCH. Well, thank you very much. And I really want to associate myself with your statement. And, Mr. Jordan, it’s great 

you’re doing this hearing. 

If we can bring down the cost of prescription drugs, we’ve got to 

do it. I’ve got a REMS bill with Steve Stivers, and I think that’s 

going to help in one of the areas that would allow us to make certain that we’re not abusing a review process for the advantage of 

higher prices at the expense of consumers. 

I also had a chance to meet with President Trump with Elijah 

Cummings. And it was very clear to me that he gets it that Americans are paying more than we should be paying. And it’s not about 

getting in the way of research and development. You know, drug 

companies do good things. They create life-extending and pain-relieving drugs. That is a good, good thing, but they can’t kill us with 

the cost. 

And there are a lot of market failures, I think we get specific on 

this REMS being one of them, and work together to get the benefit 

of fair and accessible drug prices for all of our constituents. That’s 

the goal. 

So thank you both for allowing me to wave on to this hearing, 

and I look forward to working with you to get some things done. 

Mr. JORDAN. Without objection, we’ll let Mr. Welch be a part of 

the hearing. And I want to thank the ranking member and Mr. 

Welch for their statements. 

Let’s get right to our witnesses. The committee will hold open the 

record for 5 legislative days for any other members who would like 

to submit a written statement. 


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We want to recognize our witnesses. First, we have Dr. Janet 

Woodcock from the FDA. We appreciate you being here. As I said, 

I know you’ve testified several times in the last few days. 

Mr. Bruce Leicher. 

Mr. LEICHER. Leicher. 

Mr. JORDAN. I appreciate you being here. Senior vice president 

and general counsel for Momenta Pharmaceuticals, testifying on 

behalf of the Association for Accessible Medicines. 

And we have Dr. Anderson, director of the Center for Hospital 

and Finance and Management, as well as professor at Johns Hopkins Bloomberg School of Public Health. And Mr. David Mitchell, 

president and founder of Patients for Affordable Drugs. 

Welcome again to you all. And pursuant to committee rules, we 

actually swear you in. So if you stand up and raise your right 

hand. 

Do you solemnly swear or affirm that the testimony you’re about 

to give will be the truth, the whole truth, and nothing but the 

truth, so help you God? 

All right. Let the record show that everyone answered in the affirmative. 

And we will start with the gentlelady on my left. Dr. Woodcock, 

you’re recognized. 

WITNESS STATEMENTS 

STATEMENT OF JANET WOODCOCK, M.D. 

Dr. WOODCOCK. Thank you very much, Mr. Chairman and members. I’m really pleased to testify at this hearing on a very important issue. 

But first, I’d like to note for the record that appearing on this 

panel does not waive the Administration’s policy of not appearing 

concurrent with nongovernment witness, nor the Administration’s 

policy of not appearing with less than 2 week’s prior notice. I am 

appearing in the spirit of accommodation and comity. 

Mr. JORDAN. Thank you. 

Ms. WOODCOCK. Yes. So to move to the topic at hand, the generic 

drug program that we operate at FDA has been highly successful. 

Its estimated savings to consumers has been about $1.5 trillion in 

a decade. And as you said, about 90 percent of prescriptions in the 

United States now are generic, at much lower cost obviously than 

the innovators. However, sometimes the benefits to patients are delayed beyond the legal constraints of patent or exclusivity. 

Innovators may use various routes or maneuvers to delay availability of a competitor generic. And among these, although there 

are many others, but among these is the use of REMS or a voluntary restricted program that is set up by the manufacturer, not 

required by FDA, to keep competitors from getting access to the 

drug. 

Specifically, most generic applicants need a relatively small 

quantity of brand drug to use as a comparator when they do what’s 

called bioequivalence testing to make sure the generic is absorbed 

into the body the same way that the brand drug is. And, of course, 

anyone who gets filled a generic instead of the brand they prescribed, we’re guaranteeing to them it’s going to have the same efVerDate Nov 24 2008 10:15 Nov 08, 2017 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 H:\27116.TXT APRIL

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fects. So we want them tested to make sure they’re absorbed correctly. And some innovators have been refusing to provide drug for 

this bioequivalence testing. 

For REMS, which certain restricted distribution requirements set 

up by the FDA for safety reasons, what FDA has done to try and 

mitigate this is have procedures to review the generic drug bioequivalence protocol and notify the innovator drug in writing that 

we believe it is adequate and that the REMS restriction does not 

apply. So to remove that barrier and get us out of the way. Of 

course, that doesn’t really occur for the voluntary restricted programs because there is no barrier to simply providing that in the 

open market. In that case, no letter is needed. 

Nevertheless, sponsors do continue to withhold products. We’ve 

had around 150 inquiries from generic firms about difficulties that 

they have had obtaining product for bioequivalence testing. And I 

really would be happy to answer any questions you might have 

about this. 

[Prepared statement of Dr. Woodcock follows:] 


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Mr. JORDAN. Thank you, Dr. Woodcock. 

We go now to Mr. Leicher. 

STATEMENT OF BRUCE LEICHER 

Mr. LEICHER. Good afternoon, Chairman Jordan and Ranking 

Member Krishnamoorthi. Thank you for the opportunity to participate in this important hearing. I’m Bruce Leicher, senior vice president and general counsel of Momenta Pharmaceuticals, and chair 

of the board of the Biosimilars Council, a division of the Association for Accessible Medicines. We commend you for holding today’s 

hearing. 

Increasingly, patient access to affordable medicines is prevented 

by certain brand drug manufacturers’ use of restricted distribution 

programs, including FDA-mandated risk evaluation mitigation 

strategies, REMS, to limit generic and biosimilar development. 

Having worked in the biotechnology industry for over 25 years and 

the biosimilars industry since its inception, I’m concerned. These 

anticompetitive practices are contrary to the careful balance of the 

Hatch-Waxman and biosimilar laws and threaten generic competition from the emerging biosimilars market. 

For over 30 years, generic companies have safely purchased 

branded drugs on the free market to conduct testing necessary for 

FDA approval. But in recent years, certain brands have used restricted distribution schemes, including REMS, to block such purchase and testing. If brand products cannot be purchased, then affordable generic drugs and biosimilars cannot be developed. 

Momenta and the generic and biosimilar industry are committed 

to ensuring that Americans have access to safe, effective, and affordable medicine. We do not support policies that would endanger 

patients. We comply with the same rules administered by the FDA. 

Generic medicines are almost 90 percent of prescriptions dispensed in this country, yet account for less than 30 percent of drug 

spending. Generic drugs save hundreds of billions of dollars annually, $1.46 trillion in the last decade alone. And biosimilars present 

the same opportunity. 

Consider that branded specialty medicines are only 1 percent of 

all prescriptions, but more than 30 percent of total pharmaceutical 

spending. Their utilization is only expected to increase, making the 

competition promised by biosimilars even more important to patients and to taxpayers. The high price of many new biologics will 

only incentivize further abuse of these arrangements, if they continue, and create excessive spending for the healthcare system. 

The FDA recently reported that over 64 biosimilar programs are 

under review for over 23 different brand biologics. Momenta alone 

has seven biosimilar development programs, and that’s required us 

to more than double the size of our workforce. Various studies estimate savings for American taxpayers and patients between $42 billion to as much as $250 billion over the first 10 years following biosimilar market formation. But if we’re not able to access the product for development, this can’t happen. 

These brand restrictions take the form of self-imposed restricted 

distribution schemes with wholesalers or specialty pharmacies that 

mimic FDA REMS programs, hiding behind the veneer of patient 

safety. For instance, when we’ve sought to purchase brand products 


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from customary wholesalers in the supply chain, we’re now asked 

if we’re conducting generic or biosimilar studies. On multiple occasions, they inform us that their contract prohibits them from selling the brand product to us for that purpose. Ironically, when we 

attempt to purchase the same product for use in a comparative 

novel drug development program, where far less is known about 

product safety, we don’t encounter these refusals. 

It’s clear that this has nothing to do with safety, but everything 

to do with preventing competition. As a result, in our company’s 

development decision-making process, we’re now forced to consider 

how difficult it will be to obtain the brand product. In cases where 

access is restricted, we have not initiated some programs. 

Uncertain litigation is often the only remedy available, and some 

large companies with the necessary resources have been suing over 

access for years. However, litigation is too costly and time consuming for companies like Momenta. 

The bottom line is simple: A generic or biosimilar manufacturer 

is prevented from obtaining the brand drug, is unable to perform 

the required FDA testing, and patients will miss out on generic 

and biosimilars savings and access. These barriers to competition 

need to be removed and customary access restored. 

Mr. Chairman, the House is currently considering legislation 

that would study these abuses further, but I believe there’s no need 

for further study. My written statement mentions law firms promoting the use of these programs as a tool for profitability. Almost 

5 years ago, the Senate passed legislation that included language, 

at FDA’s request, to address REMS abuse and it was removed in 

conference. The House has considered similar legislation, Mr. 

Welch’s legislation, in the 113th and 114th Congress; will again 

this year. 

The FDA has testified about the problem repeatedly, most recently just yesterday before the Senate Health Committee, and Dr. 

Woodcock is here today, I can say now. Committees in both the 

House and Senate have discussed these abuses on numerous occasions. Some may tell you that this is too small of a problem to address legislatively, but the numbers and this hearing say otherwise. 

The Congressional Budget Office has estimated various reform 

proposals for saving billions of dollars for taxpayers. Experts and 

patient advocates have called for fixes to these abuses. A study will 

only further delay competition. It’s time to act on legislation. 

And I would be pleased to answer any questions after the statements. Thank you. 

[Prepared statement of Mr. Leicher follows:] 


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Mr. WALKER. [presiding.] Thank you, Mr. Leicher. 

Dr. Anderson. 

STATEMENT OF GERARD ANDERSON 

Mr. ANDERSON. Thank you. Members of the committee, thank 

you for inviting me today. Today I’m presenting, and it’s not as a 

member of the Johns Hopkins University, but as a faculty member 

of Johns Hopkins. So I’m not the corporate representative for Johns 

Hopkins. 

I’m working on the issue of drug pricing with a team of faculty 

at Johns Hopkins with funding from the Arnold Foundation from 

The Commonwealth Fund, and a variety of other entities. I don’t 

receive any funding from the pharmaceutical industry, wholesalers, 

insurance companies, or any other entities involved in the pharmaceutical supply chain. 

Last December, I had the opportunity to testify at the Senate 

Aging Committee about the rapid increases in off-patent drugs. 

Your committee had similar hearings with Martin Shkreli and others. I made a number of very specific suggestions on how to deal 

with the issue of rapid increases and the prices of off-patent drugs. 

These ideas are in my written testimony, but they are basically expedited FDA reviews on allowing compounding importation in very, 

very restricted circumstances. 

At the time of our testimony, we really didn’t understand exactly 

how Martin Shkreli and others were able to use limited distribution chains to stifle competition. It was only after the investigations 

of several congressional committees that we learned all the details 

of what they were able to do. 

Now, just a little bit of background. What happens in most cases 

is that the wholesaler takes the drugs from the manufacturer and 

brings them to the pharmacy or the hospital and they’re given to 

patients. The wholesalers compete against each other, and as a result, the cost of distributing drugs is very low. 

As Dr. Woodcock said, the FDA created the REMS programs, 

which required pharmacies, wholesalers to take special precautions 

in—for very specific drugs. Now, this is totally appropriate and 

very good medical practice. Drugs are put into these limited distribution networks for safety reasons. In contrast, what we’re hearing about today is companies that have put these drugs in limited 

distribution networks to stifle competition and raise drug prices. 

Safety is not their concern; it’s profits. 

As we’ve already noted, a problem is that they prevent generic 

drug companies from creating the bioequivalents. Without access to 

the drugs, a competing drug company just cannot submit an application to the FDA to manufacture the drug. There are other concerns as well. The fact is that putting it into a limited distribution 

chain allows the drug company to find out very detailed information about who’s taking that specific drug. Because there’s only one 

distributor, it’s possible to track every single patient using that 

drug. So patient confidentiality is very much compromised. 

There’s other problems as well. Working at a hospital, what I 

know is for most drugs you can get the drugs 24/7. All the wholesalers make them available. But when there’s a limited distribution 


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chain, that may not be true because they may not be working 24/ 

7. 

There is the lack of Federal guidance on when drugs can be put 

into one of these limited networks, if the decision is left to the 

pharmaceutical company, if it’s not part of REMS. And they’re 

doing it for financial, not safety reasons as in most cases. 

We at Johns Hopkins are assembling an inventory of drugs that 

are being dispensed in these limited distribution chains and the 

characteristics of them. We’re looking at whether or not the price 

increases when they’re put into a limited distribution network. And 

hopefully, in a couple of weeks, we’ll be able to provide the committee some more information. 

So we have three policy recommendations for the committee to 

consider: The first one is what Congressman Welch essentially has 

proposed, which is to limit the drugs placed in limited distribution 

networks to only the REMS drugs. If the Congress doesn’t think 

that this is appropriate, a second alternative is to require drug 

companies to sell their products to all competitors. And the third 

one is to have it announced when they’re putting it into a REM— 

into a limited distribution network when they put an application 

into the FDA. 

For me, the main problem, besides the issue of access, is the 

issue of confidentiality. 

We’re also looking at another alternative, and that’s creating a 

nonprofit drug company to compete against these activities. So they 

would only focus on drugs where there are no competition, and 

they would only focus on where there’s been very rapid price increases. The hospitals, everybody’s getting clobbered by this, and 

we need an alternative. 

I’m happy to answer any questions. 

[Prepared statement of Mr. Anderson follows:] 


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Mr. WALKER. Thank you, Dr. Anderson. 

Mr. Mitchell, we recognize you now for 5 minutes. 

STATEMENT OF DAVID MITCHELL 

Mr. MITCHELL. Mr. Chairman, members of the committee, thank 

you very much for inviting me here today. I’m David Mitchell. I’m 

founder of Patients for Affordable Drugs. We’re a national organization focused exclusively on policies to lower prescription drug 

prices. To maintain our independence, we don’t accept funding from 

any organizations that profit from the development and distribution of prescription drugs. We’re about patients first, last, and always. 

More importantly, for the committee, I’m a relapsed cancer patient with multiple myeloma. It’s an incurable blood disease. Drugs 

are keeping me alive, and because my cancer finds its way around 

drugs, I’m going to need new ones. So the importance of innovative, 

affordable drugs is not theoretical for me; it’s literally life and 

death. 

I hope to watch my youngest son graduate from high school in 

3 years, and to have one of my older kids give me a grandchild one 

day. I’m very grateful for the drugs produced by the science and 

research sector in our country. But lifesaving drugs have to come 

at prices that’ll bankrupt patients and ruin the lives of people who 

are struggling to maintain their health. 

Yesterday, I sat in an infusion room for almost 5 hours and I re- ceived a two-drug combination that costs more than $26,000 a 

month. Prior to this drug regime, I took Revlimid, made by 

Celgene, for 5–1/5 years, and I participated in a risk evaluation 

and mitigation program. 

I obtain my drugs only from specific specialty pharmacies. And 

each month, I received counseling on the dangers of this drug and 

I participated in a survey designed to remind me of those dangers. 

The counseling consisted of a nurse reading a list of cautions to me. 

The survey was an automated phone call, press 1 for yes, 2 for no, 

and the whole process took 5 to 10 minutes. It could easily have 

been duplicated by any generic manufacturer. It wasn’t rocket 

science. 

Of course, during the same period, Celgene was doing its best to 

delay generic versions of the drug by hiding behind its restricted 

distribution system and REMS, refusing to give samples to generic 

drugmakers. Here’s what that meant for me: My out-of-pocket cost 

for Revlimid went from $42 a month in 2011 to $250 a month by 

the time I had to stop taking it last year because of side effects. 

As you can see from this invoice, the retail price for one 4-week 

cycle of Revlimid is $10,691, more than $500 per capsule. Now, I’m 

lucky. At the time, I had good employer-provided insurance. I’m on 

Medicare now. But Medicare beneficiaries aren’t always so fortunate. They’re paying thousands of dollars out of pocket every year. 

It is the most expensive out-of-pocket Medicare drug. 

Members of the committee, that’s the impact of REMS abuse for 

real people, and it’s a part of the problem with drug prices in 

America. Patients are foregoing their medications, they’re spending 

their retirement funds and their kid’s college savings when a generic competitor sits right around the corner. 


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In 2016, Revlimid accounted for 62 percent of Celgene’s revenue. 

Revlimid is key to propping up its stock price. It’s clear to me that 

Celgene is gaming our system, or as the chairman said in his opening remarks, manipulating the regulatory framework. It’s using 

bogus pretext of risk evaluation mitigation to unlawfully deny samples to generic manufacturers in order to prevent them from developing a cheaper alternative. It’s blocking market competition. We 

need to reform the law and stop these abuses. 

But speeding generics to market will only address a fraction of 

the problem of high drug prices. The problem is that instead of a 

competitive free market for prescription drugs, we have a system 

of monopoly pricing by the drug companies through government 

policy. We have pharmacy benefit manager middlemen who process 

billions in drugs each year but who keep all their deals secret. 

As President Trump has said, and 82 percent of Americans 

agree, it’s time to allow Medicare to negotiate prices for drugs on 

an open market instead of allowing drug companies to act as monopolies. I also believe that requiring transparency into PBMs and 

into prices set when a drug is invented using taxpayer funding 

would go a long way to making drugs more affordable. And we 

should set prices based on the value they deliver to patients. 

I’m extremely encouraged that members on both sides of the 

aisle are focusing on drug prices. In my experience, the most enduring legislative successes in our country have come with bipartisan action. 

Thank you for your attention. 

[Prepared statement of Mr. Mitchell follows:] 


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Mr. WALKER. Thank you, Mr. Mitchell. 

Thank you all on the panel for being here today. 

I will at this time recognize myself for 5 minutes. I’d like to start 

with Mr.—is it Leicher? Is it the long A? 

Mr. LEICHER. It’s Leicher. 

Mr. WALKER. Leicher. Okay. All right. I missed it in two areas 

then. 

Mr. Leicher, in 2014, the trade association representing generic 

manufacturers commissioned a study showing that the annual cost 

of misuse of restricted distribution systems to delay generic market 

entry was about $5.4 billion annually. The estimated cost to the 

Federal Government was $1.8 billion. 

In the past few years, has Momenta Pharmaceuticals encountered more difficulty accessing samples or have they encountered 

less difficulty? Could you answer that, please? 

Mr. LEICHER. So we’ve encountered more difficulty accessing 

samples, because what I think has happened is companies have 

found that the law is not being enforced that exists today, and that 

the litigation that’s been brought against them for engaging in 

these activities has been able to delay access. 

Mr. WALKER. In your testimony, you said that at times when you 

have tried to purchase samples from wholesalers, they ask you if 

you are conducting generic or biosimilar studies. And when you respond yes, they tell you their contract prohibits them from selling 

samples to you. Do you then go to the manufacturer or try to obtain samples? And if so, how do they respond? Would you break 

that down, first? 

Mr. LEICHER. Yes, I’d be happy to. So we would go to a wholesaler typically to buy the product. And for many products, we’re 

able to buy the product, because there’s just certain companies that 

are engaging in these practices. We have chosen to go and develop 

other products in cases where we haven’t been able to purchase 

from the wholesaler, just because we had other options for development available given our size. 

It would be—we don’t believe that we would have—we believe we 

would have ended up in protracted negotiations if we had gone to 

the manufacturer, based on our experience with talking to other 

companies. 

Mr. WALKER. Just a couple more questions. Are these expensive 

products that have been off patent for a while? 

Mr. LEICHER. These are all products that we designed in the development program to launch when the patents expire. That’s the 

intent of the biosimilar law in Hatch-Waxman. You access the 

product near the end of the patent life to do the development, and 

then you prepare to launch at the time the patents are over. 

Mr. WALKER. Okay. Well, I think it’s pretty clear. I appreciate 

your articulation. I guess my last question would be how do we fix 

the problem? 

Mr. LEICHER. Well, we think the best way to fix the problem is 

to—and there are proposals in terms of the FAST Generics Act and 

the CREATES Act in the Senate—is to recognize more explicitly 

that a condition of an FDA approval is a recognition that products 

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similar companies so that we can fulfill the promise of Hatch-Waxman and the promise of the biosimilar law. 

Mr. WALKER. Thank you, Mr. Leicher. 

At this time, I’m going to yield 5 minutes to Mr. Krishnamoorthi. 

Are we getting closer? I know we’re still working on that. 

Mr. KRISHNAMOORTHI. Pretty close. 

Mr. WALKER. Okay. 

Mr. KRISHNAMOORTHI. Call me Raja. 

Mr. Mitchell, thank you again for appearing before the subcommittee and sharing your very personal experience with us. As 

we heard in your testimony, you’ve experienced rising prescription 

drug prices in a deeply personal way through your battle with cancer. You described your experience with one drug in particular, 

Revlimid, which is made by the drug company Celgene. Celgene 

has been accused of improperly using its restricted distribution systems to prevent would-be generic competitors from getting access 

to samples of Revlimid which they need to eventually get FDA approval. 

In fact, the FTC warned, in a 2014 amicus brief filed in a lawsuit 

against Celgene, quote, ‘‘If a brand firm can effectively block generic firms from accessing brand product for bioequivalence testing, 

it may be able to continue to prevent generic competition, even 

after its patents on these products expire.’’ 

So we’re really talking about a time period after the patents expire. The FTC also warned that this practice could, quote, ‘‘undermine the core principle of the patent system that patents have a 

limited duration.’’ 

Mr. Mitchell, what does the prospect of generic competition mean 

to you as a patient? 

Mr. MITCHELL. It means lower prices for drugs that will work 

just as well as the brand name drugs that are being given to me 

and other patients. 

Sticking with Revlimid, the Kaiser Family Foundation reports 

that the median out-of-pocket cost for a Medicare part D beneficiary on Revlimid is $11,500 a year. This is from a company that 

runs profits in the high 20s and paid its CEO almost $100 million 

over the last 3 years. So there’s room there to lower the price and 

continue investment in R&D, produce a good return for investors, 

but lower the cost for patients for a drug that will work equally 

well. 

Mr. KRISHNAMOORTHI. Well, the interesting thing about what you 

said is that your out-of-pocket expenses are almost $12,000 a year. 

Think of what it’s costing Medicare to provide these drugs to yourself. I mean, this is why Medicare is going to go bankrupt if we 

don’t get control of these prescription drug prices. 

Mr. MITCHELL. Well, and it’s not only Medicare; it’s employers—— 

Mr. KRISHNAMOORTHI. Right. 

Mr. MITCHELL. —who are trying to provide good health benefits 

to their employees. When they’re confronted with rising costs like 

this, it becomes increasingly difficult to provide the benefits that 

people need at prices that they can afford. 


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Mr. KRISHNAMOORTHI. Absolutely, you’re right. It’s going to 

bankrupt, you know, our healthcare system, these prescription 

drug prices rising as fast as they are. 

Dr. Anderson, I know you researched restricted distribution systems in-depth. In addition to blocking generic competition, how are 

these restricted distribution systems harmful to the drug market as 

a whole? 

Mr. ANDERSON. Well, essentially what they do for a patient perspective is that they gather all sorts of information about you when 

it’s on one of these restricted—so they know exactly what Mr. 

Mitchell’s circumstances are. So they have all the information they 

want to know about him. And you might think that is fine; I am 

actually very concerned about the privacy type of issues that are 

involved with this. 

And as a hospital, it’s very difficult sometimes to access these 

drugs. Most drugs are available very easily when you need them. 

And, you know, Cardinal is coming to Johns Hopkins, one of the 

big wholesalers, every day with truckloads of drugs. But when 

you’re on a limited distribution chain, you might not get it for several days. And if you need that drug on a Saturday, you might not 

get it. So there are patient safety issues in these concerns as well. 

Mr. KRISHNAMOORTHI. Dr. Anderson, can you estimate or do you 

have an idea, a ballpark estimate, of how many drugs are, you 

know, in this kind of bucket of drugs that are basically being— 

flowed through the restricted distribution systems in this kind of 

what I believe to be an anticompetitive fashion? 

Mr. ANDERSON. We don’t know an exact number, but we think 

it’s somewhere in the 150 to 250 range. And what we know is that 

the investment bankers know exactly who it is, and that’s where 

the Martin Shkrelis and other people are looking for these kinds 

of things where there are no, in fact, competitors and they’re going 

out and buying those particular activities. So it’s a market opportunity for the investment banking community. 

Mr. KRISHNAMOORTHI. Thank you, sir. Thank you very much. 

Mr. Chairman, I yield back. 

Mr. WALKER. Thank you very much. 

We usually would rotate back to the gentleman from Wisconsin. 

Mr. Grothman, would you be okay if I yielded time to our overall 

ranking member on the committee? We’ll come back to you after 

that and put you back into sequence. 

Mr. GROTHMAN. Well, it depends who the overall ranking member is. 

Mr. WALKER. It would be Mr. Elijah Cummings. 

Mr. GROTHMAN. Well, sure. 

Mr. WALKER. Mr. Cummings, you’re recognized for 5 minutes. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Mr. Chairman, the issue—and I want to thank the ranking member and you, Mr. Chairman, for this hearing. 

The issue of drug prices has been one of my top priorities for the 

past several years. As a matter of fact, just last week, Congressman Welch and I, along with the president of Johns Hopkins Hospital met with President Trump on this issue. And I appreciate 

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ner at the full committee level to address this issue, which affects 

all of our constituents. 

We all agree that innovation is key, especially when it comes to 

prescription drugs that save lives. We rely on drugs to help us fight 

disease, and we want pharmaceutical companies to develop the 

next cure. We also want them to make a reasonable profit. We also 

expect drug companies to make a profit. In fact, the pharmaceutical 

industry has been one of the most profitable industries in America. 

Mr. Mitchell, I thank you for your testimony. And I’m going to 

make sure that President Trump hears your testimony, because 

you’re right. I mean, he gets it, he really does. And I think your 

testimony is jarring, because there are a lot of people that are 

going through what you’re going through. And I thank God that 

you take your pain, turned it into a passion to do your purpose. To 

do your purpose. And I appreciate it. And I really mean that. 

But what have we seen year after year, investigation after investigation? Are drug companies exploiting the system and taking advantage of consumers like Mr. Mitchell, while making obscene profits at their expense? We’ve seen drug companies swoop into the 

market to buy old drugs and then jack up the price. 

Mr. Mitchell, Shkreli sat where you sat, where you’re sitting 

right now, and he basically called us imbeciles because we wanted 

to make sure that the American people could afford drugs that 

would keep them alive, keep them healthy. And then he took the 

Fifth and then, you know, sashayed out of here. 

So going back, no R&D, no commitment to patients, just a cold, 

pricing strategy, designed to take advantage of a temporary monopoly. But one of the things that, I guess, bothers me with all of this, 

and when I look at you Mr. Mitchell, I—it bothers me that our 

country and certain industries, certain folks in the pharmaceutical 

industry don’t mind something called collateral damage. In other 

words, people are unable to afford the drugs that they need. Why? 

Because of, in many instances, greed. 

Shkreli is a perfect example. I know everybody is not like 

Shkreli. I know that. But there are a lot of Mr. Mitchells. There 

are a lot of you. As a mater of fact, I just met some ladies getting 

off the elevator who had been in my office who told me that for a 

certain disease, they were here lobbying, they said for a certain disease, I can’t remember which one, she said 3 years ago it cost 

$8,000 a year, now it’s $85,000 a year. Come on now. We are a 

country that is better than that. 

And so we’ve obtained internal documents that exposes business 

strategy, and we have called drug company CEOs to come before 

the committee to justify their actions. But they never—this is the 

thing that gets me, Mr. Mitchell. You know what? They come, they 

do a song and a dance, they do the rope-a-dope, they talk about all 

these drug programs that they have for discounts, they sashay 

their way out of here, get on their planes, and they never lower the 

prices. Collateral damage. People left to get sicker. People left to 

die. 

So we’ve seen this time and time again. And then they get upset 

when the stock prices go down. Oh, the stock prices—they make 

millions, while people are sitting right now, watching us, with 

chemo dripping through their veins, trying to figure out how 


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they’re going to survive—not only how they’re going to survive, but 

how are they going to do their daily chores. So, again, I hope that 

we don’t just come, have a hearing, and then move on, because 

there’s too much at stake. 

With that, Mr. Chairman, I thank you for your indulgence, and 

I yield back. 

Mr. WALKER. Thank you to the ranking member, Mr. Cummings. 

With that, we’ll yield 5 minutes to the gentleman from Wisconsin, Mr. Glenn Grothman. 

Mr. GROTHMAN. Thank you. 

I’m not sure which one I’ll lead with. Maybe Mr. Leicher. I don’t 

know if I got that right. Just in general, you know, there’s a general perception out there, and I’m sure the government wouldn’t do 

a very good job if they had to come up with these new drugs, but 

a general perception that, to me, both sometimes drugs are overprescribed and sometimes you wonder about the price. 

I don’t think you guys have looked at financial statements, but, 

obviously, a drug company, like any company, has expenses. Some 

of those expenses are the literal production of the drug. Some of 

those expenses are the research and approval of the drug. Some of 

those expenses are sales and promotion of the drug. 

If somebody spends 10 bucks on a drug, do one of you folks give 

us a ballpark as to how much of that 10 bucks went into research, 

how much went into sales and marketing, how much went into administration, that sort of thing? 

Mr. ANDERSON. So if you were talking about a brand company, 

not a generic company, then it’s about 17—$1.70 for what goes into 

R&D and about $2.50 that would go into marketing, about $2.50 

would be profit. Very little would actually be manufacturing, and 

the rest would be a variety of other things. 

Mr. GROTHMAN. You still have 33 percent to go. Do you want to 

take a crack at the other 33 percent? 

Mr. ANDERSON. Essentially—I’d have to come back to you on 

that. 

Mr. GROTHMAN. Okay. Anybody else have a crack? 

Mr. LEICHER. I’m not sure I can give better numbers than that. 

But what I would add to that is that from a generic and biosimilars 

business perspective where marketing is not a significant factor, 

and all the activities associated with commercialization are not a 

factor, that’s what provides the opportunity for, in the generics 

business, up to an 80 percent reduction in price when there’s multiple competitors entering the market when patents expire and, you 

know, estimates of, you know, initially, a 30 percent and perhaps 

more reduction of price for biosimilars. 

Mr. GROTHMAN. And maybe you guys don’t know. You say 25 

percent is marketing. Do you know what that is compared to, say, 

the cell phone industry or the automotive industry? It doesn’t have 

to be this high, but is it high? 

Mr. ANDERSON. It is higher than most other industries, but I 

couldn’t give you an exact number for all of those. 

Mr. GROTHMAN. Okay. We’ll fire away with some of the other 

more expected questions. 


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Dr. Anderson, what lessons have you learned from examining 

drug shortages that could be used to help address egregious situations like Turing? 

Mr. ANDERSON. So, essentially, what you see is generally a twopronged approach. One is a shortage occurs and it’s very hard to 

get access to a drug. And then following that, what you see is a 

fairly steep price increase. So they take advantage of when there’s 

a shortage. Often, it is when there are two companies that are 

manufacturing a drug and one of them stops manufacturing that 

drug, either because it’s not profitable for them to do so anymore 

or they run into some production problem, and therefore they can’t 

manufacture it. And what we’re seeing is a lot of mergers in the 

generic space. And those things are cutting down the amount of 

competition. And so you’re seeing that as a third problem. 

Mr. GROTHMAN. Okay. What can we do to encourage more competition among generics? 

Mr. ANDERSON. Well, essentially, what you need to do is to try 

to get them to—you’ve got to stop the mergers, is the first thing. 

And the second thing is to make it easier for them to—when there 

is no competition, to enter the market. And so that’s why I proposed the expedited review by the FDA, which the FDA is starting 

to do now. So make it easier for a competitor to enter the market. 

Mr. GROTHMAN. You said stop the mergers. 

Mr. ANDERSON. Yep. 

Mr. GROTHMAN. It does—in all industries, compared to when I 

was a child, it seems like everything is mergered into a few industries, but how many major drug manufacturers are operating now 

in the United States? Like if there should be a market for a new 

pharmaceutical, how many drug companies are out there who have 

the ability to develop the generic and market it? 

Mr. ANDERSON. There are still a number, but what we saw last 

year is the number one generic firm acquired the number three generic firm in the United States. So we’re seeing some mergers of 

very large generic companies occurring. 

Mr. GROTHMAN. And when number one swallows number three, 

or vice versa, do you notice an increase in price? 

Mr. ANDERSON. Well, you don’t notice an increase in where there 

are not competitive drugs. 

Mr. GROTHMAN. I mean, what I’m saying is I assume sometimes 

if one swallows three, that there now is no competition. I guess 

that’s what I’m trying to get at. 

Mr. ANDERSON. That’s what I’m saying. You know, the generic 

industry works incredibly well when there are three, four competitors in the market. It looks less well when there are two, and it 

doesn’t work at all when there’s none. 

Mr. GROTHMAN. Okay. I guess I’m well past my time. So thank 

you for the indulgence, Mr. Chairman. 

Mr. WALKER. Thank you, Mr. Grothman. 

At this time the chair yields 5 minutes to Ms. Kelly. 

Ms. KELLY. Thank you, Mr. Chair and ranking member. 

Mr. Mitchell, thank you so much for joining us today and for 

your testimony. You represent the voice of many of our constituents 

on both sides of the aisle, that they are the financial burden that 

is the consequence of companies’ anticompetitive behavior. And in 


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your testimony, you stated that your prescription went up nearly 

600 percent, in essence, doubled since 2011 when you stopped taking it due to side effects. And the company that manufactures 

Revlimid, Celgene, reported $1.6 billion in 2015, which accounted 

for 62 percent of that revenue Revlimid did. 

Mr., and I’m going to say, is it Leicher? 

Mr. LEICHER. Leicher. 

Ms. KELLY. Leicher. Okay. Are you aware of any companies that 

have benefited in such a great manner from anticompetitive behavior, and how common is the practice? 

Mr. LEICHER. I’m not sure we’re experts on how common that 

practice is because it’s not something we seek to engage in, certainly at my company. But we’re aware of the scenarios that you’ve 

described, the Daraprim scenario, and the fact that they were 

using restricted access programs as a way to prevent competition. 

Those are largely what was just described, efforts by companies to 

purchase what may even be an old generic drug in a shortage situation rebranded and launched it as a branded product with a very 

high price often when the patents have expired. 

And what we see as the real solution here is to reduce the barriers to entry. And one of the big barriers to entry is what this 

hearing is all about, is if we can’t obtain reference product from a 

brand company to test and develop a generic, we won’t have generic or biosimilars to compete and actually use the most effective 

tool available, which is competitive competition to bring the prices 

down. 

Ms. KELLY. It’s just amazing to me. Do they think that, you 

know, people aren’t going to notice or not say anything? I know 

you’re not a psychiatrist, I don’t think you are, but I don’t get it. 

Mr. LEICHER. You know, it’s amazing to me too, because what 

they’re doing is they’re waiting to see if they’re going to lose the 

litigation. The larger companies—you know, that’s what I mean by 

a barrier entry. We can’t afford to litigate for 3 years to purchase 

some samples at a fair market value from a company and then 

start development 3 years from now. So they’re using that delay of 

litigation to prevent us from entering that business. 

And, you know, it answers the question that was asked earlier, 

you know, what about all the mergers? Well, Momenta is an example. We’re not the only one. We’re an example of a company that’s 

a new entrant into this business in the last 10 years. We’re providing very significant competition. We developed generic 

enoxaparin, which was a very significant cost reduction in the 

country. We developed a generic version of Copaxone. We’re working on seven biosimilar programs. But if we can’t access the referenced product, none of that can happen. 

Ms. KELLY. So you see that as the main—— 

Mr. LEICHER. We see that as—I’ve put that as number one on 

our list of barriers. 

Ms. KELLY. And what’s two and three? And if anybody wants to 

join in. 

Mr. LEICHER. Two and three? 

Ms. KELLY. If you have a two and three. 

Mr. MITCHELL. Barriers to generic drugs or barriers to lowering 

prices? 


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Ms. KELLY. Well, barriers to assess, and what are the barriers 

to lowering the prices? What can we do? What are best practices 

we can implement? What can we do to change this? 

Mr. ANDERSON. So, I mean, I guess we need a little more help 

from you in terms of we can do it in brand space, we can do it in 

the generic space. Those are very different spaces so—— 

Ms. KELLY. Well, I guess what can Congress do to help you? 

Mr. ANDERSON. Right. So one of the things about Revlimid and 

others is the whole issue of negotiation. What you heard was 

$11,000 in out-of-pocket expenditures for a Medicare beneficiary. If 

you’re making $22,000 on Social Security, $11,000 is just prohibitive. 

What you’ve got to recognize is who’s paying most of that cost. 

Eighty percent of the cost is paid for by the Medicare program. 

Medicare cannot negotiate those prices one little bit when it’s paying 80 percent of the cost in the Medicare catastrophic amount. 

I helped design the Medicare Catastrophic bill. We did not antici- pate drugs that cost $75,000 on it. It was designed to help the person who had multiple chronic conditions that was taking a lot of 

very inexpensive drugs, but a lot of them, and they would enter the 

catastrophic amount. The drug companies looked at this and said, 

oh, if I charge $80,000 for a drug that a Medicare beneficiary might 

take, Medicare is going to pay $64,000 of that. And the beneficiary 

will end up paying a fair amount too, and the PDP, the Medicare 

drug plan only pays 15 percent. 

So it wasn’t designed for what’s happening today. And this is 

something, you know, now 14 years later, we need to revise. 

Ms. KELLY. Thank you. I know my time has run out. 

Mr. WALKER. Thank you, Ms. Kelly. 

At this time, we’ll recognize Mr. Mitchell for 5 minutes. 

Mr. MITCHELL OF MICHIGAN. Thank you, Mr. Chair. 

Dr. Woodcock, can you please help me understand a few things 

here. Can you explain the role that the FDA currently plays in ensuring timely and full access to generic medications? 

Dr. WOODCOCK. FDA—what FDA does is approve—try to approve 

those generics at the time all patents expire and exclusivity expires. So as is already explained, the way the system is set up, people can file before that—— 

Mr. MITCHELL OF MICHIGAN. Right. 

Dr. WOODCOCK. —or do their development—not file an application, but do their development process, and then they can file and 

then they can get approved right at the time or even tentatively 

approved prior to, a little bit prior to, so they know they have a 

path to market. 

Mr. MITCHELL OF MICHIGAN. In the last year or two, can you 

share with the committee how many complaints you’ve received 

from generic manufacturers that they aren’t able to access approved medications in order to proceed with research and production? 

Dr. WOODCOCK. Well, overall, we’ve received over 150 inquiries. 

And we don’t—about their inability to access the reference listed 

drug, and that’s in the generic space. We have not—we don’t have 

it nailed down in the biosimilar space, which is a new program 

where—— 


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Mr. MITCHELL OF MICHIGAN. What’s your distinction between an 

inquiry and a complaint? 

Dr. WOODCOCK. Oh, okay. 

Mr. MITCHELL OF MICHIGAN. I come from a very simple world 

here. 

Dr. WOODCOCK. Well, we wouldn’t call—we hear about them, all 

right. And obviously, they’re complaining. They inquire if we can 

get the drug somehow or something like that, and I’ve explained 

what we do. If there is a real FDA-imposed REMS program that 

actually restricts the drug, we have a way we go. We send a letter—after reviewing the protocol, we send a letter to the reference 

listed drug holder saying that it’s safe to provide that drug and 

that the REMS doesn’t apply. But that doesn’t mean they’re going 

to go and give the drug. 

Mr. MITCHELL OF MICHIGAN. Why does it not mean they’re going 

to give the drug? 

Dr. WOODCOCK. Because we don’t have the authority to order 

them to do that. We simply are telling them that the REMS restrictions, which means they can’t just give the drug out to anyone because of safety—— 

Mr. MITCHELL OF MICHIGAN. I understood that. 

Dr. WOODCOCK. —doesn’t apply in this situation, and that we 

have actually reviewed the generic protocol to make sure that it 

doesn’t make any safety risks. 

Mr. MITCHELL OF MICHIGAN. So the FDA’s position currently is, 

well, we’ll waive REMS or—but if you—if the manufacturer of the 

brand name drug doesn’t want to provide access, they’re left to litigate. Is that the best answer that they have? 

Dr. WOODCOCK. We also have referred all these circumstances to 

the FTC. 

Mr. MITCHELL OF MICHIGAN. And what’s happened at the FTC, 

for entertainment purposes? 

Dr. WOODCOCK. I do not know the answer to that. We can get 

back to you. 

Mr. MITCHELL OF MICHIGAN. I think the committee would be interested in that. 

Mr. Chair, can we request that information? Is that feasible? 

Anybody else want to weigh in on this question? It seems to me 

that we send them a letter, say, gee, it would be nice if you sent 

the medication. If they choose not to, you can, you know, gain yourself—bring on some attorneys and sue. 

Mr. MITCHELL. I do know from preparing for the hearing, Mr. 

Mitchell, that the FTC has filed amicus briefs in cases, including 

the case involving Celgene and Revlimid, saying that Revlimid— 

Celgene’s behavior is anticompetitive and arguing that the REMS’ 

excuse is just that, a pretext. 

Mr. MITCHELL OF MICHIGAN. And how long has that—as an example, how long has that case been going on? 

Mr. MITCHELL. I believe that case has been going on since 2014. 

Mr. MITCHELL OF MICHIGAN. Any solutions side on that that 

you’ve seen, or we’re still in appeals process? 

Mr. MITCHELL. No, sir. I’m not a lawyer. 

Mr. MITCHELL OF MICHIGAN. Well, neither am I, sir. 


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Mr. LEICHER. What I could add to that is the FDA has done an 

effective job in documenting that generic and biosimilar companies 

have the safety capability to handle these products when asked. 

But the FDA does not have authority to regulate competition 

among competitors, and that’s really where the issue is. 

And that’s where some of the statutes, you know, Mr. Welch’s bill 

is directed, which is—goes to the core of what Hatch-Waxman said 

and what the biosimilars law said, which was that you need to 

have access to the reference product commercially. They don’t give 

us samples. It’s described as samples. We purchase them at full 

price. 

Mr. MITCHELL OF MICHIGAN. Well, see, I don’t see it as regulating the competitions. It’s, in effect, allowing the sale of the drug 

that they would to any other party. 

Mr. LEICHER. Exactly. 

Mr. MITCHELL OF MICHIGAN. It’s not like they’re trying to just 

provide the drug at the same retail price anybody else pays. 

Mr. LEICHER. I stated it backwards. It’s regulating the anticompetitive prevention. 

Mr. MITCHELL OF MICHIGAN. Okay. Maybe that—okay. 

I’ll yield back. Thank you very much, Mr. Chair. 

Mr. WALKER. Thank you, Mr. Mitchell. 

Mr. Welch, looks like they have called votes, but I believe we 

have time, not normally on the subcommittee, but we yield you 5 

minutes for your questions. Thank you. 

Mr. WELCH. Thank you very much. 

First of all, I want to thank Mr. Mitchell for his questions, because I think they really do go to the heart of the issue. It’s not 

a safety issue; it’s an anticompetitive issue. And ideally, we would 

have the drug made available for research and then the patent 

holder of the drug has the full benefit of that legal patent for the 

period of time of protection. 

So the patent holder here—and tell me if you disagree—is basically trying to extend the life of the patent, i.e., the monopoly beyond the legally protected timeframe. Is that correct? 

Mr. MITCHELL. Yes. 

Mr. ANDERSON. Yes. 

Mr. LEICHER. Yes. 

Mr. WELCH. Well, that doesn’t sound right. So, I mean, this is 

where there’s some, I think, reason why there’s some bipartisan 

support here, because I think most of us up here support competition, and we also oppose gaming the system. I mean, it’s a very significant legal benefit to an owner of intellectual property, whether 

it’s a patent—whether it’s a pharmaceutical drug or something 

else, to get something that can only be given by law, and that is 

a period of exclusivity where, essentially, they have market dominance and are able to then profit on that company. And none of us 

here in this legislation are suggesting an attack on that scheme. 

But I think all of us in support of this legislation are opposed to 

gaming that. 

Mr. Mitchell, I want to just say, I agree with Elijah Cummings. 

And I want to say to all the witnesses, you don’t know what a 

breath of fresh air it is to have folks coming in here that aren’t 

asking for some special advantage and are trying to help us on a 


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bipartisan basis understand what we can do public policywise to 

help a lot of Americans who just want to live their lives, but do 

need medication along the way. So this is like unusual for us, okay. 

And thank you. 

Dr. Anderson, could you just go through just the specifics again, 

because I think it’s helpful for all of us to hear about it, about how 

the obstacles are put in the way of the generic companies to get 

the sample that they need in order to do the research required to 

then have Momenta put a generic drug on the market. 

Mr. ANDERSON. So it’s pretty simple. You basically create, and 

most of these companies are creating their own specially distribution networks or they’re working with some existing thing to do it, 

and then they’re very much restricting access to these drugs. 

It’s true both in the brand side, which Mr. Leicher has been talking about mostly, but it also turns in the off-patent activities as 

well, where this drug has been around for 50 years. But only in the 

case of Turing Pharmaceuticals, there’s only about 5,000 of those 

drugs that are being distributed every year. 

So the company knows exactly who’s buying it and can say, you 

know, Mr. Welch, you don’t have that disease, you’re not entitled 

to that drug, because then you can’t give it to Mr. Leicher for him 

to make it. So, essentially, what they’re doing is keeping that access to that drug and then they can’t apply to Janet Woodcock. 

Mr. WELCH. Okay. You mentioned the legislation. I’m a cosponsor with Mr. Stivers on the Republican side. Would that address, 

in your view, the issue that you’re speaking about? 

Mr. ANDERSON. No, I think it very much would. I mean, it’s a 

great piece of legislation, and I totally—I can’t endorse it as a faculty member, but I think it makes complete sense. 

Mr. WELCH. And I’ll just ask you this: Congressman Cummings 

was talking to his new best friend, President Trump—I can’t say 

that. But I was sitting there when President Trump was very enthusiastic about price negotiation. And the concern that I’ve heard 

from some opponents of negotiation authority for Medicare is that 

that would be the equivalent of price setting. And can you give me 

your reaction to that. 

Mr. ANDERSON. Well, essentially what you have, and especially 

in the Medicare program for these very expensive drugs, is Medicare is a silent partner paying 80 percent of the cost. So that 

makes absolutely no sense to me. 

So if I were to start in the price negotiation activity, it would be 

where Medicare is paying 80 percent of the cost and has no negotiating ability at all. You know, I think you could do broader than 

that, but I think if I had to start somewhere where I think there 

should be some level of bipartisan agreement on it, it should be 

where Medicare is paying 80 percent of the cost. 

Mr. WELCH. Okay. I thank you, all. 

And I yield back. 

Mr. WALKER. Thank you very much. 

With that, I’d like to thank certainly the FDA for showing up 

today, some last minute things, but we’re grateful. In fact, Dr. 

Woodcock, Mr. Leicher, Dr. Anderson, especially you, Mr. Mitchell, 

for having the courage today to come and share your story. That’s 

an honor for us to be part of listening to you and hearing you out, 


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really the importance of why this is so much—important, really for 

all of us. So thank you all. 

I would ask unanimous consent that members have 5 legislative 

days to submit questions for the record. 

Without objection, so ordered. 

If there is no further business, without objection, the subcommittee stands adjourned. 

[Whereupon, at 3:13 p.m., the subcommittee was adjourned.] 


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