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[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]

                  EXAMINING THE ACTIONS OF DRUG COMPANIES 
                    IN RAISING PRESCRIPTION DRUG PRICES

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                          OVERSIGHT AND REFORM
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                            JANUARY 29, 2019
                               __________

                           Serial No. 116-01
                               __________

      Printed for the use of the Committee on Oversight and Reform
      
      
      
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]      

                  Available on: http://www.govinfo.gov
                    http://www.oversight.house.gov or
                        http://www.docs.house.gov
                        
                        
                             ___________

                  U.S. GOVERNMENT PUBLISHING OFFICE
                    
36-509 PDF                 WASHINGTON : 2019                      
                        
                        
                        
                        
                        
                   COMMITTEE ON OVERSIGHT AND REFORM

                 ELIJAH E. CUMMINGS, Maryland, Chairman

Carolyn B. Maloney, New York         Jim Jordan, Ohio, Ranking Minority 
Eleanor Holmes Norton, District of       Member
    Columbia                         Justin Amash, Michigan
Wm. Lacy Clay, Missouri              Paul A. Gosar, Arizona
Stephen F. Lynch, Massachusetts      Virginia Foxx, North Carolina
Jim Cooper, Tennessee                Thomas Massie, Kentucky
Gerald E. Connolly, Virginia         Mark Meadows, North Carolina
Raja Krishnamoorthi, Illinois        Jody B. Hice, Georgia
Jamie Raskin, Maryland               Glenn Grothman, Wisconsin
Harley Rouda, California             James Comer, Kentucky
Katie Hill, California               Michael Cloud, Texas
Debbie Wasserman Schultz, Florida    Bob Gibbs, Ohio
John P. Sarbanes, Maryland           Ralph Norman, South Carolina
Peter Welch, Vermont                 Clay Higgins, Louisiana
Jackie Speier, California            Chip Roy, Texas
Robin L. Kelly, Illinois             Carol D. Miller, West Virginia
Mark DeSaulnier, California          Mark E. Green, Tennessee
Brenda L. Lawrence, Michigan         Kelly Armstrong, North Dakota
Stacey E. Plaskett, Virgin Islands   W. Gregory Steube, Florida
Ro Khanna, California
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan

                     David Rapallo, Staff Director
    Susanne Sachsman Grooms, Deputy Staff Director and Chief Counsel
          Elisa LaNier, Chief Clerk and Director of Operations
                          Amish Shah, Counsel
               Miles Lichtman, Professional Staff Member
                     Laura Rush, Deputy Chief Clerk
               Christopher Hixon, Minority Staff Director

                      Contact Number: 202-225-5051
                         
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on JANUARY 29, 2019.................................     1

                               Witnesses

Dr. Catherine Alicia Georges, National Volunteer President, AARP
    Oral Statement...............................................     7
Dr. Aaron Kesselheim, Associate Professor of Medicine, Harvard 
  Medical School
    Oral Statement...............................................     8
Ms. Antroinette Worsham, Mother of Two Insulin-Dependent 
  Daughters
    Oral Statement...............................................     9
Dr. Gerard Anderson, Professor of Health Policy and Management, 
  Johns Hopkins University
    Oral Statement...............................................    10
Mr. Avik S.A. Roy, President, The Foundation for Research on 
  Equal Opportunity
    Oral Statement...............................................    12

The written statements for witnesses are available at the U.S. 
  House of Representatives Repository: https://docs.house.gov.

                           Index of Documents

                              ----------                              

The documents entered into the record throughout this hearing are 
  listed below, and available at: https://docs.house.gov.

* Association for Accessible Medicines Statement for the Record, 
  submitted by Rep. Cummings

* American Medical Association Statement for the Record, 
  submitted by Rep. Cummings

* American Society of Health-System Pharmacists Letter to 
  Chairman Cummings and Mr. Jordan, submitted by Rep. Cummings

* Statement from the Campaign for Sustainable Rx Pricing, 
  submitted by Rep. Cummings

* Statement from Patients for Affordable Drugs Now, submitted by 
  Rep. Cummings

* Letter from the Pharmaceutical Care Management Association, 
  submitted by Rep. Cummings

* Statement from Public Citizen, submitted by Rep. Cummings

* Support Letter from the American College of Physicians, 
  submitted by Rep. Cummings
* Questions for the Record (QFRs): Responses from Dr. Catherine 
  Alicia Georges, Mr. Avik Roy, Dr. Aaron Kesselheim, and Dr. 
  Gerard F. Anderson

 
           EXAMINING THE ACTIONS OF DRUG COMPANIES

              IN RAISING PRESCRIPTION DRUG PRICES

                       Tuesday, January 29, 2019

                   House of Representatives
                          Committee on Oversight and Reform
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 11:49 a.m., in 
room 2154, Rayburn House Office Building, Hon. Elijah Cummings 
(chairman of the committee) presiding.
    Present: Representatives Cummings, Maloney, Norton, Clay, 
Lynch, Connolly, Krishnamoorthi, Raskin, Rouda, Hill, Wasserman 
Schultz, Sarbanes, Welch, Speier, Kelly, DeSaulnier, Khanna, 
Ocasio-Cortez, Pressley, Tlaib, Jordan, Amash, Massie, Meadows, 
Hice, Grothman, Comer, Cloud, Gibbs, Higgins, Norman, Roy, 
Miller, Green, and Armstrong.
    Chairman Cummings. Without objection, the chair is 
authorized to declare a recess at any time. Welcome to the 
first hearing of the Committee on Oversight and Reform for the 
116th Congress. Before I begin, I want to thank Ranking Member 
Jordan and his staff for agreeing to accommodate this hearing. 
I know that we are taking a lot of time today, but I truly 
believe this is one of the most important issues facing our 
constituents, and it is one that demands immediate, immediate 
attention. I will now recognize myself for an opening 
statement.
    Today we will examine the actions of drug companies in 
raising prescription drug prices in the United States, as well 
as the effects of these actions on the Federal and state 
budgets, and on American families.
    Before we begin, I acknowledge that there is a lot going on 
right now here on Capitol Hill and across the country. Until 
last Friday, the Federal Government was in the midst of the 
longest shutdown in United States history. Hundreds of 
immigrant children and possibly many more are still separated 
from their families. The latest of President Trump's long-time 
advisors has been indicted on criminal charges.
    But today, for our first hearing, I wanted to focus on one 
of the biggest problems facing American families across the 
country. The actions of drug companies that have been 
aggressively increasing prices on existing drugs and setting 
higher launch prices for new drugs, all while recording 
windfall profits.
    Two weeks ago, the committee launched an investigation into 
the prescription drug prices to determine why drug companies 
are increasing prices so dramatically, how drug companies are 
using the proceeds, and what steps can be taken to reduce drug 
prices.
    Our first witness today is not President Trump's personal 
lawyer, Michael Cohen. No, it is not Michael Cohen. It is not 
someone from the White House or even someone from the Trump 
administration. Contrary to what some have claimed, that never 
was planned.
    The first witness to testify before the Oversight Committee 
is Antroinette Worsham. Ms. Worsham is a working mother--listen 
up--whose daughter died, 22-year-old daughter died, tragically, 
when she could not afford to pay for the insulin she needed to 
treat her diabetes, and instead began to ration her medicine. 
It would have cost $1,000 for three months of insulin. She 
died. And I know Ms. Worsham will share her story, and it is 
not easy to testify, but as I said to her, I thank her for 
taking her pain, turning it into her passion to do her purpose.
    I also want to thank you for being here to share your 
family's story with us. You are not alone. Researchers at Yale 
University recently found that one in four patients with type 1 
or type 2 diabetes, and I quote, ``have reported using less 
insulin than prescribed,'' end of quote. So when you testify 
here today, you are representing thousands upon thousands of 
your fellow Americans who are suffering from the same worsening 
problem.
    I also want to thank our other witnesses for being here 
with us today. We are grateful to have Dr. Catherine Georges of 
AARP to speak on behalf of America's seniors. And I want to 
thank all the members of--I asked my staff who were all those 
people in the red, and I am glad to see you all.
    We also value the expert testimony of Dr. Gerry Anderson 
and Dr. Aaron Kesselheim, and Dr. Avik Roy, for being with us 
today.
    I have been waiting a very long time to hold this hearing. 
For the past decade, I have been trying to investigate the 
actions of drug companies for all sorts of drugs, old and new, 
generic and brand name. We have seen time after time that drug 
companies make money hand over fist by raising the prices of 
their drugs, often without justification, and sometimes 
overnight, while patients are left holding the bill.
    The pharmaceutical industry is one of the most profitable 
in the world, and one of the most powerful. Fourteen drug 
companies each made more than $1 billion in profits just in the 
third quarter of 2018, and they have the best lobbyists money 
can buy.
    Let me be clear: There are powerful interests here that do 
not want us to interfere with those massive profits, but there 
is a strong bipartisan consensus that we must do something, 
something meaningful, to rein in the out-of-control price 
increases. Even President Trump has said that drug companies 
are, quote, ``getting away with murder,'' end of quote. But 
tweets are not enough; we need real action and meaningful 
reforms.
    We all recognize that research and development efforts on 
groundbreaking medications have made immeasurable contributions 
to the health of Americans, including new treatments and cures 
for diseases that have affected people for centuries. But the 
bottom line is that the ongoing escalation of prices by drug 
companies is simply unsustainable.
    This is a matter literally of life and death, and we have a 
duty to act now. Our constituents are demanding it, and I am 
grateful that we are finally starting down the road with this 
hearing.
    Before I go on, I would like to enter in the record--yield 
to the--before I yield to Mr. Jordan, I would like to enter 
into the record letters the committee has received in recent 
days from a variety of organizations, including the American 
Medical Association, the American Society of Health-System 
Pharmacists, and the Association for Accessible Medicines.
    All of these groups have written to express their concerns 
about the impact of high prescription drug prices on their 
members and the American healthcare system. I ask unanimous 
consent that these letters be entered into the record. So 
ordered.
    Chairman Cummings. I now recognize--I am about to recognize 
the gentleman, Mr. Welch, but let me just say this. I talked 
about when I was in the hospital, Mr. Ranking Member, but when 
I was in the--I will never forget. On my third week, when I was 
about--when a lady that had been in the hospital with me, and 
she was an elderly lady, and she was about to get out of the 
hospital. And I said, ``You leaving today?'' She said, ``Yes, I 
am leaving today. I said, Oh, Miss Mary, you should be happy 
that you are leaving today.'' And then she started crying. This 
is at Johns Hopkins. I said, ``Why are you crying?'' She said, 
``I am crying because they had to treat me at Hopkins, but now 
when I am leaving, I can't afford the cure. I can't afford the 
medicine.'' And so, I will never forget her, and we will fight 
for her.
    Mr. Welch, I yield to you for two minutes.
    Mr. Welch. Thank you, Mr. Chairman. Mr. Chairman, Pharma 
justifies its highest prices in the world by perpetuating two 
myths: First, they warn in very solemn tones that if we 
negotiate prices, it will result in price fixing. Mr. Chairman, 
we already have price fixing. Pharma fixes the prices whenever 
they want, as high as they want, and as often as they want.
    Second, Pharma claims that the high prices are essential to 
innovation. If that is so, Mr. Chairman, why is it, why is it 
that Pharma spends more on advertising than research? Why is it 
that Pharma spends more on stock buybacks than it does on 
research? And why is it that Pharma spends more on mergers and 
acquisitions than they do on research? And the sad truth is 
that Pharma, for all the good it does with life-extending and 
pain-relieving drugs--and my family has benefited from that--is 
holding all of our good constituents hostage to the universal 
desire each of us has to help a loved one through an illness or 
to cope with a chronic condition.
    Mr. Chairman, consider some of the disgraceful tactics that 
Pharma has employed to fix high prices. Renting a patented drug 
to a Native American Tribe to assert sovereign immunity to 
block generic competition, imposing a gag rule on our local 
pharmacists so they can't tell a customer that it is cheaper to 
pay cash than to pay the deductible. Evergreen, the practice of 
making the ever smallest cosmetic change to extend the patent 
monopoly. Paying generic manufacturers to keep their lower cost 
product off the market so they can extend their monopoly.
    The maneuvers are endless, they are relentless, and they 
are unconscionable. And our mission, Mr. Chairman, both sides 
of the aisle, restore competition, restore transparency, and 
lower prices.
    I yield back.
    Chairman Cummings. I want to thank the gentleman for his 
statement.
    I yield to the distinguished ranking member of our 
committee, Mr. Jordan.
    Mr. Jordan. I thank you, Mr. Chairman. And I want to 
welcome our witnesses as well. I have had numerous 
conversations with Dr. Roy. Dr. Anderson has been in front of, 
in the previous Congress, the Subcommittee on Healthcare, has 
been in front of our committee. We appreciate you being here 
today with us.
    And then, of course, Ms. Worsham, we appreciate you coming 
from the Buckeye state and what your family has been through. 
And we look forward to hearing from all of you here in just a 
few minutes.
    There are few issues more in need of the committee's 
attention than this one. One thing that the chairman, President 
Trump, and I all have in common is that we are committed to 
finding reforms that will improve access and affordability with 
respect to prescription drugs. I hope that Chairman Cummings 
will view us as partners in this endeavor.
    But I am concerned. I am concerned. Earlier this month, the 
majority launched an investigation into pharmaceutical 
companies' pricing models without minority consultation, and 
without any indication of their scope or plans other than 
saying that they would be dragging in pharmaceutical CEOs in 
the coming months for testimony. I feel this does not signal a 
willingness to find answers, but an attempt to score political 
points.
    Democrats wrote to 12 pharmaceutical companies asking for 
detailed information about their pricing structures and supply 
chain management. Once again, it seems the Democrats are eager 
to blame the private sector when the answer, I think, is far 
more complicated. The greatest healthcare innovations in the 
last 100 years happened in America, and they happened not 
because of government dictates, but as a result of tireless 
individuals having the freedom to experiment and compete and 
improve all of our lives.
    The problem is not that the free market has failed us; it 
is that government interventions in the market have distorted 
incentives, created barriers to competition, and left things in 
a mess. The Democrats' last grand idea for fixing healthcare, 
ObamaCare, was a colossal failure that we will be trying to 
repair for the foreseeable future.
    We were told all kinds of things about ObamaCare. I call 
them the eight lies of ObamaCare. Like your plan, keep your 
plan. Remember that one? Like your doctor, keep your doctor. We 
were told premiums were going to decline. The President of the 
United States at the time told us premiums would decline, on 
average, $2,500. We were told deductibles would decline. 
Remember this one? We were told the website was going to work. 
We were told the website was secure. We were told that these 
co-ops that were created, 22 of them, were going to be the 
grand all, be all, and yet every single one of them, with the 
exception of one, went bankrupt.
    Rather than trying to pretend that more bureaucracy is the 
answer, we need to take a hard look at government's role in 
rising prices. We must rethink regulations distorting prices 
and ensure that adequate competition happens in the 
marketplace. We also need to reevaluate the manner and scope of 
the monopolies the government grants to pharmaceutical 
companies in the form of patents and FDA exclusivities.
    What was envisioned by our Founders as a limited guarantee 
to profit from your invention has been distorted into an 
evergreen right to broadly exclude others from selling similar 
drugs.
    For the past two Congresses, I chaired the subcommittee 
with jurisdiction over healthcare. This is an important 
subject, and I look forward to digging into it. At the 
subcommittee, we did important work on waste, fraud, and abuse 
in public health programs like Medicaid and Medicare. This work 
should and must continue. And I hope, I hope that it can 
proceed on a bipartisan basis. We will never succeed in 
delivering reforms to the American people if all possible 
solutions are not on the table.
    Mr. Chairman, I look forward to this hearing, and I hope 
that, going forward, we can work together to make progress on 
this important issue. I yield back.
    Chairman Cummings. I want to thank the ranking member for 
his statement. I guarantee you that we will act in a bipartisan 
way, because we have made a commitment to our constituents to 
address this problem. We don't want to see anybody else die 
needlessly. We don't want to see anybody else suffer. So I 
promise you, you have got my word on that.
    All members will have 10 legislative days in which to 
submit opening statements for the record.
    Today we welcome five witnesses to the committee. Ms. 
Antroinette Worsham is the mother of two insulin-dependent 
daughters who has traveled from Cincinnati, Ohio, to share her 
story with us.
    Dr. Catherine Alicia Georges is the national volunteer 
president of the AARP, and a registered nurse who is the chair 
of the Nursing Department at Lehman College, the City 
University of New York. And Dr. Georges, I must tell you that 
having spent some time in the hospital, I have gained a new 
appreciation for nurses, and I am serious about that.
    Dr. Aaron Kesselheim, an Associate Professor of Medicine at 
Harvard Medical School and a primary care physician at Brigham 
and Women's Hospital.
    Dr. Gerard Anderson is a Professor of Health Policy and 
Management at Johns Hopkins University. Johns Hopkins is 
located smack-dab in the middle of my district. I am glad to 
have you here.
    And Dr. Avik Roy is the president of the Foundation for 
Research on Equal Opportunity, a think tank that focuses on 
expanding opportunities for those with incomes below the U.S. 
median.
    And pursuant to committee rules, all witnesses who appear 
before us today must be done under oath. I now ask each of you 
to stand and raise your right hand to take the oath.
    Do you solemnly swear that the testimony you are about to 
give will be the truth, the whole truth, and nothing but the 
truth? Thank you very much. You may be seated.
    Let the record reflect that each witness answered in the 
affirmative. I will now recognize each witness to present oral 
testimony. I remind you that your entire written testimony will 
be included in the hearing record. We, therefore, ask that you 
limit your testimony to approximately five minutes. You will 
each notice a clock in front of you. After four minutes have 
elapsed, the green light will turn yellow, indicating that you 
have one minute. When the light turns red, five minutes have 
expired, and we ask that you conclude your statement.
    I now recognize Ms. Worsham to begin oral testimony, and I 
thank you.

    STATEMENT OF ANTROINETTE WORSHAM, MOTHER OF TWO INSULIN-
                      DEPENDENT DAUGHTERS

    Ms. Worsham. Good morning, everyone. Thank you for having 
me today. Again, my name is Antroinette Worsham, and I am the 
mother of two type 1 diabetics. My older daughter, Antavia, was 
diagnosed at the age of 16 and only lived six years with this 
disease, due to the high cost of insulin. She started rationing 
her insulin in 2016 when she was kicked off of BCMH, Bureau for 
Children of Medical Handicaps. It's an Ohio program. She was 
kicked off due to her age. My son found her deceased in her bed 
one morning. She wasn't answering her phone. He went over to 
where she was living, and he found her. How detrimental is that 
to happen to anyone, especially a sibling, to find their sister 
passed away.
    My youngest daughter, Antanique, she was diagnosed at the 
age of 12. She is now 18 years old. She attends the University 
of Toledo. She is studying law right now while battling type 1 
diabetes. I fear the same is going to happen to her in two 
years. She'll be 21, and she'll get kicked off of BCMH as well.
    I am wondering how pharmaceuticals think that college 
students are supposed to afford high drug costs on top of high 
tuition, room, and board. Healthcare is an essential right for 
U.S. Americans. We are asking for a change now. Type 1 
diabetics need--they need insulin to live, or they will die 
like my daughter and other Americans have. We have seen it. 
Insulin is not a cure. It is definitely a life support.
    High drug prices are forcing patients to be noncompliant. 
When type 1 diabetics ration their insulin or stop taking it, 
it causes them to go into DKA, which is diabetes ketoacidosis, 
and that is what happened to my daughter. I feel type 1 
diabetics do not get the attention they deserve.
    Many Americans are forced to purchase their insulin out of 
the country and are forced to buy from the black market, all so 
they can live a longer life. The rise of drug costs has 
impacted so many Americans, and again, we are demanding a 
change now. The copays, deductibles, and coinsurances are so 
high, that too has a huge impact on affordable insulin.
    In 2018, in November, I protested outside of Sanofi, held 
in Boston, Mass, alongside Right Care Alliance Institute, 
demanding to lower their drug costs. Just this year, insulin 
manufacturers are still raising the cost. I have received so 
many calls and emails from type 1 diabetics needing help paying 
for their insulin. The insulin manufacturers are telling us 
that they have programs to offset the cost. One type 1 diabetic 
recently told me it could take two weeks for approval. Another 
one was told that he was over income restrictions. We, as 
consumers, are the reason businesses are successful, and we 
need to see affordable healthcare for all now, not just for 
those living below or above poverty. What about the middle 
class as myself and as my daughter when she graduates school?
    In conclusion, I am not an expert but a mother of two 
diabetics, two type 1 diabetics who is affected by the rising 
cost of insulin. Again, in two years, my daughter will be 21 
and no longer be eligible for BCMH. I am crying out and asking 
Congress to review the pharmaceutical drug price gouging and 
make affordable healthcare for all. Antanique is a very smart 
young lady who is trying to be successful in the U.S., and 
feels it is hard dealing with chronic illness, on top of 
wondering if she can afford insulin as she ages into adulthood. 
Thank you very much.
    Chairman Cummings. Ms. Worsham, thank you very much. You've 
set a wonderful example. You were able to get yours in in less 
than five minutes.
    Ms. Worsham. Thank you.
    Chairman Cummings. Thank you very much.
    Ms. Worsham. You are welcome.
    Chairman Cummings. Dr. Georges.

    STATEMENT OF CATHERINE ALICIA GEORGES, ED.D., RN, FAAN, 
               NATIONAL VOLUNTEER PRESIDENT, AARP

    Ms. Georges. Good afternoon, Chairman Cummings, Ranking 
Member Jordan, and members of the committee. My name is Dr. 
Catherine Alicia Georges, and I am the national volunteer 
president for AARP, a nonpartisan, nonprofit, nationwide 
organization with nearly 38 million members in all 50 states, 
District of Columbia, and the U.S. territories.
    For more than 40 years, I have been a nurse involved in 
academic nursing, both teaching, practicing, and developing 
courses. Thank you for the opportunity to talk about rising 
prescription drug prices and their impact on older Americans. 
Prescription drug prices are high priority for AARP and its 
members. Last year in AARP's 2018 voter issue survey, 92 
percent of voters, age 50 and older, told us that candidates' 
positions on lowering drug costs was important to them with 74 
percent saying very important. That is because older Americans 
struggle to afford needed and life-saving medications.
    Most Medicare beneficiaries live on modest incomes with an 
annual median income of just over $26,000, and one quarter of 
them have less than $15,000 in savings. This is not a 
population that has the resources to absorb rapidly escalating 
drug prices. It is hardly surprising that our members 
consistently tell us that they cannot afford the medications 
they need, and are forced to make difficult choices as a 
result.
    Take the story of Joyce Domintano, an AARP member from 
Florida, diagnosed with gastrointestinal cancer. Joan was 
prescribed Gleevec, one of the drugs this committee is 
investigating, hoping to prevent her cancer from returning. 
After spending approximately $60,000 on this drug, Joan made 
the wrenching decision to stop taking it and risk her cancer 
returning rather than go bankrupt. Joan lives on a fixed income 
and simply cannot afford to drain her retirement savings to pay 
for medication.
    No one should be asked to make that kind of choice. AARP 
has been tracking the prices of widely used prescription drugs 
since 2004. Our most recent prescription drug price watch 
report focused on brand name drugs and found that their retail 
price increased by an average of 8.4 percent in 2017, four 
times the rate of inflation. We also examined how drug company 
price increases add up over time, and found that annual costs 
of one brand name drug therapy, now around $6,800, would have 
been just under $2200 in 2017 if retail price changes had been 
limited to general inflation between 2006 and 2017.
    The average annual price increases for these drugs has 
exceeded the corresponding rate of inflation every year. This 
problem goes beyond a few bad actors. Virtually all of the 
manufacturers we tracked have consistently raised their prices 
over the past 12 years. Our adults, older adults, are 
particularly vulnerable to these strains. Medicare part D 
enrollees take an average of 4.5 prescription drugs per month, 
and over two-thirds have two or more chronic conditions. High-
end growing prices are affecting all Americans in some way. 
Their cost is passed along to everyone with health coverage 
through increased healthcare premiums, deductibles, and other 
forms of cost sharing. We have recently seen massive increases 
in Medicare spending on drugs.
    In conclusion, current prescription drug prices trends are 
simply not sustainable. Drug companies are still working very 
hard to try to shift the blame to others in the healthcare 
system, leaving them free to set incredibly high prices and 
increase them with little restraint. As a result, we Americans 
continue to pay the highest brand name drug prices in the 
world. It is long past time for Congress to take action to rein 
in high drug prices. Thoughtful efforts to help reduce 
prescription drug prices could save tens of billions of dollars 
for patients, taxpayers, and other healthcare systems. We will 
help ensure that all Americans have affordable access to the 
drugs they need to get and stay healthy. Thank you, and I look 
forward to your questions.
    Chairman Cummings. Dr. Kesselheim, you are recognized.

   STATEMENT OF DR. AARON S. KESSELHEIM, M.D., J.D., M.P.H., 
    ASSOCIATE PROFESSOR OF MEDICINE, PROGRAM ON REGULATION, 
         THERAPEUTICS, AND LAW, HARVARD MEDICAL SCHOOL

    Dr. Kesselheim. Okay. Thank you, Chairman Cummings, Ranking 
Member Jordan, and members of the committee. My name is Aaron 
Kesselheim, and I run the program on Regulation, Therapeutics, 
and Law at Brigham and Women's Hospital, one of the largest 
independent research groups in the country focused on 
pharmaceutical policy topics. And as you are aware, U.S. drug 
prices have risen rapidly over the last decade, and now exceed 
prices in comparable countries. The key policy dilemma is that 
although the drugs cost a lot to develop, increasing drugs 
prices can make important breakthroughs unaffordable to 
patients leading to bad consequences because you can't get 
benefits from a drug you can't afford. The main driver are 
brand name drugs which make up about 10 percent of 
descriptions, but over three-quarters of spending.
    High prices arise from three complementary forces: First, 
the government gives patents and other market exclusivities to 
brand name manufacturers, and lets them charge whatever the 
market will bear. Second, the purchasing market that is 
expected to provide a counterweight is extremely inefficient, 
since various laws and other factors prevent payers from 
effectively negotiating. And third, manufacturers often extend 
their exclusivity rights through value strategies and use their 
substantial lobbying power to block sensible political reforms.
    I am going to try to address these three problems and talk 
about some solutions. During the drug's branding market 
exclusivity period, which lasts 12 to 14 years on average, 15 
for first-in-class drugs, and even longer for biologic drugs, 
limits on public and private payers, prevent them from pushing 
back against the prices set by manufacturers. For example, 
Medicaid must cover all FDA approved drugs while part D plans 
have to cover all approved drugs in six protected drug classes. 
And it is hard to negotiate an effective price if an insurer 
must cover the drug.
    Doctors and patients also suffer badly because many drugs 
are used for years without information about how well they work 
compared to other drugs or non-drug treatments.
    The only type of competition that consistently and 
substantially lowers drug prices comes from interchangeable 
generic drugs that emerge after this market exclusivity period. 
However, this transition can be delayed and prolonged because 
manufacturers get dozens of additional patents on the use or 
formulations of their products. And this is part of the reason 
why older pharmaceutical products can suddenly become expensive 
if packaged in a new delivery device, such as with EpiPen for 
which the manufacturer raised the price from $50 to $600, even 
though epinephrine was isolated over 100 years ago.
    Generic manufacturers can try to sue to cut through this 
thicket of patents, but the litigation can lead to settlements 
in which the generic manufacturer agrees to drop the lawsuit 
for some valuable consideration. These issues are addressable 
with rational policymaking that can get us back to a more 
optimal competitive marketplace, while still allowing drug 
manufacturers to earn reasonable profits on true innovation.
    To improve competitive price negotiation during the market 
exclusivity period, we could authorize Medicare to create a 
program-wide formulary and negotiate drug prices. The process 
could be designed in way to maximize the chance that the final 
price falls within a particularly, widely accepted range of 
value for the money that approximates the benefit that the 
drugs provide to patients rather than whatever the manufacturer 
wants to charge, irrespective of the drug's actual value.
    Other incremental steps that may not require legislation 
could also lead to some prices savings, and I have a memo 
listing some of them here, and also in my written statement.
    Another major policy that should be enacted to help cut 
through are those that should help cut through the patent 
thickets that block timely or efficient entry to generic drugs. 
For example, whenever a new patent is listed with the FDA, it 
could be subject to automatic review by the Patent Trial and 
Appeals Board, an administrative body created by Congress in 
2011. Many of those patents would be overturned.
    We could also provide specific guidance to help the FTC 
exclude problematic brand generic legal settlements. The goal 
should be to ensure that manufacturers are not able to 
indefinitely extend their exclusivity periods beyond what the 
patent laws intended.
    Changes made to rationalize U.S. drug prices along these 
lines will not substantially reduce drug innovation. First, 
studies show that most of the most important drug innovation 
occurs from publicly funded research paid for by the NIH and 
occurring in government or academic laboratories or startups 
spun out of these institutions before investments from 
manufacturers at a later stage. As long as the U.S. Government 
continues its decades-long commitment to investing in drug 
development through the NIH, there will be a consistent supply 
of potentially transformative approaches, targets, or even 
compounds.
    Second, the recommendations will address the fact that the 
current system actually encourages the wrong kind of innovation 
because in the existing marketplace, the incentives are 
misaligned with patient or public health goals where even 
marginally effective drugs or incremental improvements can lead 
to outsized revenues. Substantial drug spending in the U.S. 
goes to many cost-effective products, and bringing U.S. drug 
prices closer in line to their actual clinical value means that 
in many cases, prices will be higher for drugs that offer 
substantial gains in clinical outcomes over existing 
treatments, and that is appropriate. But Medicare and Medicaid 
and other U.S. payers will be able to afford to cover such 
products for patients who need them if they aren't wasting vast 
sums of money on drugs that do not offer such advantages as 
they currently do.
    I am glad that this hearing has been pulled together and is 
a great sign that Congress is moving in the direction of trying 
to engage these kinds of changes, and I'm happy to be here to 
share my thoughts and continue working with the legislators 
here to try to craft sensible solutions. Thank you very much.
    Chairman Cummings. Thank you.
    Dr. Anderson.

  STATEMENT OF GERARD F. ANDERSON, PH.D., PROFESSOR OF HEALTH 
POLICY AND MANAGEMENT, BLOOMBERG SCHOOL OF PUBLIC HEALTH, JOHNS 
                       HOPKINS UNIVERSITY

    Mr. Anderson. Thank you, Chairman Cummings, Mr. Jordan, and 
members of the committee. When I testify, I try to----
    Chairman Cummings. Can't hear you.
    Mr. Anderson. When I testify, I try to wear a tie that is 
related to my testimony. Today, it is Leonardo da Vinci's left-
handed backward writing in Latin. I think that is pretty much 
appropriate for this hearing. It's a discussion of drug pricing 
to try and keep everything secret. I am a professor testifying 
on behalf of myself as a professor, not on behalf of Johns 
Hopkins University. At Johns Hopkins, I lead a team of about 20 
faculty members from the Johns Hopkins Medical School, Public 
Health School, Business School and Hospital, studying a variety 
of drug pricing issues.
    The reason why I'm so excited to testify today is that 
research that we try to do on many drug products requires 
confidential data. In my testimony, I will try to explain what 
we've learned from existing data, and then try to tell you 
where I think the oversight investigations are particularly 
important.
    In my written testimony, I outline seven areas where I 
think the committee should pay attention. First of all, why do 
branded drug companies justify, and how do they justify their 
recent price increases? Why does it cost so much to develop a 
new drug? Why do PBMs, PBPs place the most expensive drug in 
preferred positions on formularies? Why do some blockbuster 
drugs also have an orphan designation? How do PDPs manipulate 
direct and indirect remuneration to increase cost in the 
Medicare program and to Medicare beneficiaries? How do drug 
companies attempt to influence the patient assistance programs 
that they finance financially? How do drug companies attempt to 
influence the patient advocacy groups that they support 
financially? Because I only have five minutes, however, I just 
want to focus on the first two.
    In the U.S., branded drug companies are much more likely to 
increase prices than lower prices. According to a recent 
Associated Press analysis, drug companies announced 96 price 
increases for every price decline in 2018. In other countries, 
the prices of branded drugs tend to go down. According to 
economic theory, research is a fixed or sum cost and cannot be 
used to justify subsequent price increases. Once the drug 
company has spent the money to develop the drug, there are no 
additional research costs that can justify price increases.
    The production costs of most drugs are relatively small, 
often pennies per pill. Inflation is still low, so most drug 
prices cannot be justified by higher production costs. The 
House Oversight Committee should ask the branded drug companies 
to explain why they have increased their prices.
    The second question that I want to talk about is why does 
it cost so much to develop a new drug, and what's included in 
those research costs? Drug companies, as everybody said, 
justify their high prices based upon the amount of clinical 
research that they do. The problem is that we just don't know 
why it costs drug companies so much to conduct clinical 
research. A drug company says they spent X billion dollars on 
clinical research. It is important to know how much of that 
research cost is used to pay salaries of clinicians and 
researchers, purchasing equipment to conduct the research. 
Maybe some of that money that they call research is really not 
spent on things that you and I might call research.
    Perhaps it's even more important to understand how other 
drug company research is actually financed. I think the model 
most of us would have in our heads is that there's a team of 
researchers working in the lab, developing new products, 
conducting experiments, doing clinical trials. While this is 
true for many drugs, it's also increasingly common for the 
initial drug research to be done in academic medical centers, 
places like Johns Hopkins or the Mayo Clinic, with funding from 
the National Institutes for Health. Drugs to treat hepatitis C 
are one of the major breakthroughs in recent years. Researchers 
at Emory University started working on that drug to treat 
hepatitis C with considerable funding from the National 
Institutes for Health.
    Gilead, the company that bought the drug to the market, 
purchased the research from the academic medical centers, and 
then Gilead immediately doubled the price the researchers were 
going to charge for the drug. The only reason why we have these 
facts is that the Senate Finance Committee conducted an 
investigation of the development of Gilead's drugs. Drug 
companies have teams that look for promising research. Often 
the drug companies are not doing that initial research 
themselves. The drug companies--the House Oversight Committee 
should examine what drug companies define as research costs, 
where the research was initially conducted, and who financed 
it. Thank you very much.
    Chairman Cummings. Thank you very much.
    Dr. Roy.

   STATEMENT OF AVIK S.A. ROY, PRESIDENT, THE FOUNDATION FOR 
                 RESEARCH ON EQUAL OPPORTUNITY

    Mr. Roy. Chairman Cummings, Ranking Member Jordan, and 
members of the House Oversight and Reform Committee, thanks for 
inviting me to speak with you today. I'm Avik Roy, and I'm the 
president of The Foundation for Research on Equal Opportunity, 
a nonpartisan, nonprofit think tank focused on expanding 
economic opportunity to those who least have it.
    When we launched in 2016, our first white paper showed how 
universal coverage, done the right way, can advance both 
progressive and conservative values at the same time, expanding 
access while reducing Federal spending and burdensome 
regulations. As you know, reducing the cost of prescription 
drugs is critical to ensuring that healthcare is affordable for 
every American. In my following remarks, I am going to focus on 
two excuses we often hear about extremely high drug prices.
    The first is that high prices aren't set by manufacturers, 
but rather by middlemen like pharmacy benefit managers; second, 
that rising prices are necessary to fund medical innovation; 
and finally, I will describe market-based principles that can 
help restore affordability to prescription drugs. Manufacturers 
have been advancing the theory that high drug prices aren't 
their fault. Instead, they argue, they're forced, quote 
unquote, ``to charge higher prices to make up for rebates to 
PBMs.'' To use the technical term, that's balderdash. Nobody 
forces drug companies to charge high prices. Seventy-five years 
of Federal policy has made patients insensitive to the price of 
the drugs they consume. Patients don't always understand how 
their premiums keep rising on account of rising drug prices, 
especially in the employer-sponsored market. As a result, in 
the absence of competition, manufacturers often charge the 
highest prices they can.
    Let me explain why drug makers voluntarily offer rebates to 
PBMs. Private insurers enlist PBMs because PBMs have shown 
themselves to be good at what's called formulary management. 
Let's say you're a type 2 diabetic, and you have the option of 
treating your condition with high cost brand drugs, or 
clinically equivalent low cost generic drugs. PBMs will 
structure the insurer's formulary such that if you choose the 
low cost generic drug, you'll have a 0 or $5 copay. If you use 
the high cost drug, you might have a $30 copay. In this way, 
PBMs help reduce the cost of prescription drugs.
    Indeed, America leads the world in the use of low cost 
generics. Nearly 90 percent of all prescriptions written in the 
United States are for unbranded generic drugs. Drug makers get 
around the system by offering rebates to PBMs. Sometimes in 
exchange for the rebates, the PBMs put a high cost drug on the 
zero copay tier alongside the generics. This may sound good on 
the surface, but by needlessly increasing the use of high cost 
drugs, rebates drive up the cost of health insurance for 
everyone.
    Drug makers also use rebates to suppress competition. Last 
October, Merck and Samsung announced that they would be 
abandoning Lusduna, their competitor to Sanofi's Lantus, even 
though they invested hundreds of millions of dollars in gaining 
FDA approval. A common practice in such situations is for the 
incumbent brand to offer deep rebates to the PBMs, effectively 
dumping their drug onto the market to wipe out new competitors.
    PBMs genuinely add value in the way they manage drug 
formularies, but Congress should eliminate rebates to restore 
transparency and accountability to high drug prices.
    An oft-repeated cliche is that high drug prices are 
necessary to fund medical innovation. One test of this cliche 
is to apply it to other sectors of the economy. You would never 
hear Sony or Vizio say that high television prices are 
necessary to fund innovation in the TV market. They know that 
if their TVs are too expensive, no one will buy them. In 1996, 
Biogen launched Avonex, a multiple sclerosis drug, for $8700 a 
year. Twenty years later, they were charging $81,000 a year, 
nearly 10 times more. Imagine if Sony charged you $81,000 for a 
20-year-old TV claiming that the high price was necessary for 
innovation. You would laugh them out of the room.
    There are two giant holes in the high price for innovation 
theory. The first is that increasingly, the business model of 
drug makers is to focus on ultra rare orphan diseases where R&D 
costs are low due to the limited supply of patients for 
clinical trials, while still charging extreme prices edging 
toward $1 million per patient per year.
    The second is that virtually all of the increase in 
prescription drug spending comes from price hikes on older 
drugs like Avonex. If a patient with multiple sclerosis is 
well-controlled on Avonex, it's considered bad clinical 
practice to switch that patient to a different drug, even if 
that other drug is cheaper. Companies take advantage of 
patients with chronic disease dependence on their drugs to 
drastically increase the price of all their drugs year over 
year.
    So what's the solution? I delve into this topic in my 
written testimony. The core idea is this: In areas where there 
is robust competition, especially with generic drugs, prices 
are extremely affordable, even in America. Where there are 
monopolies, legitimate or artificial, prices are high. In the 
past, Congress and the FDA have sometimes worsened the problem 
of artificial drug monopolies. This Congress has the 
opportunity to enact bipartisan reforms. I look forward to 
discussing these ideas with you in more detail. Thank you.
    Chairman Cummings. Thank you very much for your opening 
statements. Each member will now have five minutes to ask 
questions. I yield to the gentlelady from the District of 
Columbia, Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman. I take Dr. Roy's 
suggestions at heart, but what we have heard here today and 
some of them could have been--could be--would need Congress in 
order to go into effect, and none of us, all of us believe that 
competition is part and parcel of the problem.
    I want to focus on patients. As you've heard so much about 
the industry, the excesses of the industry are legendary. One 
wonders why those excesses are given the profits that this 
industry makes continue. Now, the Federal Government spends 
almost $100 billion on Medicare part D. That's a lot of money. 
You would think that would do it, unfortunately, and yet, we 
continue to hear that patients are hurt by the pharmaceutical 
sector.
    Dr. Georges, to focus on patients for the moment, in light 
of all the money that's been spent by the Federal Government on 
Medicare part D, how does the price of a drug impact or affect 
seniors for their out-of-pocket for medications? Why so many 
complaints coming from seniors for what they pay out of pocket?
    Ms. Georges. Congresswoman Norton, in 2015, seniors spent 
over $27 billion in their out-of-pocket costs for their drugs. 
In my oral testimony, I referred to the fact that the average 
income of a Medicare beneficiary is only $26,000. That's why 
the increase in drug prices have become unsustainable for this 
group of people.
    Ms. Norton. Well, breaking down your number that seniors 
spend, I have been given a number of at least $2,000 out of 
pocket for drugs doubled in just four years from 2011 to 2015, 
that those who paid $2,000 now, that number has been compared 
to what the average Medicare beneficiary earns as a median 
income at $26,200, so you can imagine that much coming out of 
your--out of not your salary, out of your income.
    Dr. Georges, you, perhaps, have a valuable perspective 
because you are a registered nurse, so what has been your 
experience of how these prices have affected seniors at this 
income level? Do they buy their drugs? How do they accommodate 
these drugs?
    Ms. Georges. I'll give you a perfect example. One of my 
faculty members was on the line in a pharmacy this past week. 
One of her neighbors--they live in Harlem in New York City. One 
of her neighbors who is on a fixed income was talking to the 
pharmacist and saying I can't--this drug I won't have this 
month. It costs too much. I will only be able to take these 
drugs. As we said, what the effect is on our members and older 
Americans, they're making choices over should they ration, 
should they not adhere to treatment because they can no longer 
afford it?
    Ms. Norton. Dr. Georges, this is a problem that I see we 
have, the notion that people who worked all their lives have to 
perhaps decide whether they are going to live on an ongoing--
based on the drug that they have taken. And I'm very concerned 
that the older we get, the worse it gets, that a quarter of 
older Americans, 65 to 69, need at least five prescription 
drugs, and half of those, 70 to 79. So when we talk about the 
cost of these drugs, they multiply as people get older. So 
we're pricing people out as they grow older, and we've got to 
understand this and make some accommodation to that. And I 
thank you, Mr. Chairman.
    Chairman Cummings. I yield to the ranking member.
    Mr. Jordan. I'm sorry. I yield the balance of my time to 
Congressman, Mr. Green.
    Chairman Cummings. I yield to Congressman Green.
    Mr. Green. Thank you, Mr. Chairman and Ranking Member 
Jordan. Thank you for addressing this very important issue. 
First, I would like to take a second of my time and just share 
my credentials to speak on the subject. As an Army physician, 
I've been a medical provider in a 100 percent government 
system, and as a patient in the VA, I am in universal 
healthcare. As a civilian physician, I've seen patients in both 
for-profit and not-for-profit hospital systems. I even ran two 
free healthcare clinics in our state in Tennessee. I founded a 
healthcare company and served as its CEO, operating in 11 
states and 52 hospitals, emergency medicine, the front lines of 
healthcare. And Mr. Chairman, I'm a cancer survivor. Like you, 
I've had to contemplate both my life and my death. I remember 
going from chemotherapy back to the Tennessee State Senate 
right from a treatment to cast a vote in the Tennessee State 
Senate. Very interesting times. I've been on both sides of the 
stethoscope.
    The cost of pharmaceuticals are concerning, and certainly 
we need to look at some of the practices that are out there, 
but the concerns that we--that I have are really concerns that 
are more broad, that impact our entire healthcare system.
    Let me put this into perspective. All of our pharmaceutical 
costs are around $333 billion a year in a healthcare system 
that's $3.5 trillion. That means pharmaceuticals are about nine 
percent of the total cost of healthcare. That doesn't mean just 
because it's nine percent, we shouldn't look into this issue. 
But the forces that are driving increased costs of 
pharmaceuticals are also the forces that are driving 
significant cost problems throughout healthcare. I'd say they 
are wreaking havoc on our healthcare system, and these problems 
are structural. The very infrastructure of our healthcare 
system is the problem.
    For example, if you look at 100 percent government payer 
system, the demand will always exceed the supply. It's simple 
economics, and that's why in Canada, it takes six months to get 
an MRI. However, when government fixes the price below the 
market price, what happens is cost shifting. We cost shift to 
the third-party payers, and for non-paying patients, that cost 
shifting is even greater. And what then happens is the price 
for the payer increases, the cost for the payer increases so 
they have to increase their prices, which means fewer people 
can afford it, which means they have to raise their prices 
which means fewer people. It's the death spiral in healthcare 
in America right now. It's what's killing our system.
    What happens is a huge gap between price and the actual 
charge to the patient or the payer. And if cost shifting 
produces--it produces this negotiation between the provider and 
the payer, and it winds up with a price that's different than 
what the cost and it makes for a significant complex problem 
that can't be fixed without structurally changing what we are 
doing in our healthcare system, and other structural issues, 
not just cost shifting, but things like reversed incentives, 
masked prices, governmental restrictions that prevent 
competition, no free market.
    You ask, would a free market work in healthcare? 
Absolutely. Look at Lasik eye surgery. When it came out, it was 
thousands of dollars an eye. Now, I saw an ad the other day, 
Mr. Chairman, for 250 bucks for a Lasik eye procedure. That is 
because there's no--that cost shifting scenario with third-
party payers doesn't exist. The ophthalmologists are competing 
for the dollar. Technology has gone up, and price has 
plummeted.
    Those are the structural issues that are affecting all of 
healthcare, and they are clearly impacting the price of 
pharmaceuticals. If we don't--and there's lots of little issues 
that we can drill down on in pharmaceuticals, but if we don't 
fix those structural problems in our healthcare system, we 
can't fix this issue, either.
    I do have a question for Mr. Roy, though. You mentioned 
monopolies that are created out there and that that's driving, 
the big driver in this cost issue. How is government creating 
those monopolies?
    Mr. Anderson. So in my written testimony, I elaborate on 
this quite a bit. There are a lot of different policies that 
both Congress and the FDA and in the case of drug pricing 
instituted that established monopolies. One example is that the 
Biologics Price Competition Innovation Act of 2009, which was 
part of the Affordable Care Act, mandated that biologic drugs 
that have no intellectual property, be given 12 years of market 
exclusivity after FDA approval, despite the fact that they have 
no actual patents. For a small molecule drug, that's five 
years. There is an arbitrary difference that makes no sense, 
and that's a government-created monopoly, not one that private 
industry created, though private industry certainly advocated 
for it.
    Mr. Green. I have some other questions, but I think I'm out 
of time, Mr. Chairman.
    Chairman Cummings. Thank you very much.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman. I want to thank all the 
witnesses for your willingness to come here and testify, 
especially you, Ms. Worsham. I really do appreciate your 
powerful testimony and really putting a human face and a human 
family behind this problem.
    Mr. Chairman, as you know, we've been working on this issue 
for a long time, and the two systems that we deal with more 
often on this committee are the Federal Employees Health 
Benefit Plan, which I know, Mr. Anderson, you're familiar with, 
and the VA health plan. And the difference between the FEHBP, 
the Federal Employee Health Plan, is that they negotiate their 
drug prices through a pharmacy benefit manager. Theirs is CVS 
Caremark. But we just did--we just had a study done by the 
Teamsters Union and the SEIU, and one of the things that they 
discovered was unbelievable, in my estimation. They found that 
when a Federal employee goes in to buy their pharmaceuticals, 
they pay more than a person just walking off the street and--
and signing up for a discount program with CVS that has no 
insurance, and that troubles me greatly.
    So here you have a member of a--a healthcare plan that has 
9 million participants, and they walk in with their insurance 
card, and they pay more than the person who walks in off the 
street, God bless them, with no insurance and just signs up for 
the discount card. All right. That's a plan that's negotiated 
through a PBM, a pharmacist benefit manager.
    Now, let me give you another example. I have three big VA 
hospitals in my district. We have a huge number of veterans in 
my district, and my veterans, when they go to the VA pharmacy 
program, they pay either $8 or $9, and they argue about what 
they should be paying, and they're not happy--they used to pay 
$7.50, so they're not happy with me right now. Even if the drug 
cost 800 bucks, they pay $9. They pay $9 or $8. They get to 
negotiate directly. The VA gets to negotiate directly with the 
drug manufacturers. Those are the two types of systems that we 
deal with here, so Mr. Anderson--Dr. Anderson, I'm sorry, and 
Dr. Kesselheim, help me with this. Would it not be better, you 
know, rather than getting very complicated and deep in the 
weeds, why don't we just let Medicare do for our senior 
citizens what the VA is doing for our veterans? Let the 
Medicare program negotiate directly, directly with the 
pharmaceutical companies. Would that--would that help? Help me 
out.
    Mr. Anderson. So--it's a great question. So when you look 
at the VA, there is two things to notice. The first one is they 
have access to most every drug in America, whereas if you're a 
Medicare beneficiary or you're an FEHBP, you probably have 
access to about half the number of drugs on the formulary that 
the typical VA person has. So you have much better access as a 
Medicare--as a VA person.
    Mr. Lynch. Why is that, though?
    Mr. Anderson. Because they essentially have put a lot more 
drugs on the formularies. They negotiate prices.
    Mr. Lynch. We can do the same thing, though, for--for 
Medicare.
    Mr. Anderson. Yes, you could do that, absolutely, but--but 
we have--the programs that are the PBMs want to negotiate a 
much more restrictive set of----
    Mr. Lynch. Right, but what I'm saying is clear them out----
    Mr. Anderson. Okay.
    Mr. Lynch [continuing]. and just allow Medicare to 
negotiate directly. It's simple. It's clear. Maybe it won't be 
$8 or $9. Maybe it will be 15 or 20, I don't know, but--but it 
just seems to me that the lack of--of transparency here. We 
can't even figure out what the insurance company--what the drug 
companies, what their costs are. We went to court with them. 
They would not tell us what it cost them to make their drugs 
because we wanted to give them a fair profit but not--not gouge 
senior citizens, and we--the judge ruled against us. We 
couldn't--we couldn't get that information as astounding as 
that seems, but please.
    Mr. Anderson. So the other thing that you mentioned is that 
you can get a lower price when you actually pay cash than when 
you do it through your--through your plans, and the Congress 
last year passed allocation called the Gag Rule which 
essentially meant that the pharmacist could say to you as a 
patient, you pay--if you pay cash, you would pay less. So 
Congress actually did something very important last year in 
passing the Gag Rule to make that a much better thing for the 
patient.
    Mr. Lynch. Thank you.
    Chairman Cummings. We're going to recess until 1:30. We 
have a vote. 1:30. All right. Thank you.
    Chairman Cummings. We are calling the committee back to 
order now.
    Mr. Massie is recognized for five minutes.
    Mr. Massie. Mr. Chairman, I want to thank you for having 
this meeting.
    The drug pricing system is sick and it is failing. The 
prices are unnecessarily too high. But all doctors take an oath 
to first do no harm, and I think we have the same oath here in 
Congress. We should take it, if we don't. And I'm worried that 
we may have come up with a misdiagnosis or part of the 
situation is diagnosed improperly.
    I want to read from the Constitution: The Congress shall 
have power to promote the progress of science and useful arts, 
by securing for limited times to authors and inventors the 
exclusive right to their respective writings and discoveries.
    So, you know, I challenge anybody to walk into a hospital 
and say, I only want the drugs and the medical devices and the 
procedures that were developed at the NIH and public 
institutions. Your lifespan would be cut by 10 years at least 
by just uttering those words. It's the patent system that 
incentivizes inventors, scientists, engineers, and doctors to 
come up with these life-extending, life-improving, life-saving 
drugs and medical devices.
    So with that in mind, Avik Roy, Dr. Roy, I believe you and 
I overlapped at MIT, we just discovered. You were course seven 
and I was course six, molecular biology and electrical 
engineering. But I noticed in your written testimony, you talk 
about four--at least four different problems that we have 
trying to get generics to market after the patents have 
expired. A lot of people think patents are to blame for this, 
the high drug prices, but the patents are the incentive that 
cause people to develop new drugs and new medical devices.
    So could you talk about the morass that companies encounter 
or some of the problems that we run into when they try to 
develop the generics after the patents have expired? Which by 
the way, our Founding Fathers never wanted a patent to go on 
forever. The charge to us in that phrase in the Constitution is 
for a limited period of time to promote, develop it, not 
forever and not for one minute, but for a period of time that's 
optimal. So can you talk about how they get bogged down after 
the patents expire?
    Dr. Roy. Well, since we have three minutes and 45 seconds, 
I'll----
    Mr. Massie. That's very generous.
    Mr. Roy [continuing]. this very complex problem. And, 
again, I would encourage everyone to look at the written 
testimony which explores this question in a lot of detail.
    One example that I will give that I think is of--that 
should be of urgent attention not just to this committee, but 
to Congress as a whole is the problem of so-called biosimilars. 
So there is a new wave of drugs that have been developed 
through recombinant DNA and molecular biology technology that 
are not simple pills or simple molecules. They're protein 
therapeutics, often monoclonal antibodies, there are other 
drugs that have very complex molecular structures. And because 
they have complex molecular structures, the FDA and Congress 
have decided to regulate those drugs in a different way than 
traditional drugs. They're regulated through the Public Health 
Service Act and through the Biologics Competition Price and 
Innovation Act of 2009.
    The bottom line is that this different set of regulations 
has meant that when those biologic drugs go off patent, the 
earliest biotech drugs now are starting to go off patent 
because they were developed 20, even 30 years ago. We're not 
seeing the same flood of generic competition that comes in and 
lowers the prices down to commodity prices, the way we saw, for 
example, when Lipitor, a best selling cholesterol lowering 
drug, went off patent a few years ago. We are not seeing that 
with biosimilars.
    In fact, in Europe, there are about 50 biosimilars that 
have been approved by the European equivalent of FDA, but only 
about nine or 10 by the FDA. And, again, part of that is 
because the way Congress has authorized the FDA to regulate 
these drugs is very different. The FDA also historically has 
been slow in getting its act together in the way it regulates 
biosimilars.
    But the end result is it is extremely expensive and 
extremely risky for competitors to develop these so-called 
biosimilar drugs. And when they even get approval from the FDA, 
as I noted in my opening testimony, sometimes they're withdrawn 
because the price they have to charge to justify their cost is 
too high. So this is a huge problem because, as a share of 
overall drug spending, biologic spending is rising. It's 
basically doubled in the last eight years and it's going to 
continue to rise as these biotech drugs become a bigger, bigger 
portion of the pie, and so addressing that problem is of urgent 
importance.
    Mr. Massie. Can you talk about another one of the ways that 
these products don't come to market after the patent is 
expired? I noticed in your testimony, you mentioned off-patent 
drugs with specialized delivery devices.
    Mr. Roy. Yes.
    Mr. Massie. The EpiPen has about 25 cents of epinephrine in 
it, if you were a veterinarian and bought epinephrine.
    Mr. Roy. Yes.
    Mr. Massie. So why is it $600? The EpiPen, the patent 
expired on it. And I think people have a misunderstanding that 
somehow that original EpiPen patent got extended. That's not 
the case. There's a new patent and then the regulatory morass, 
but can you talk about some of the other drugs or delivery 
devices?
    Mr. Roy. Yes. As one of my colleagues noted, epinephrine 
was discovered over 100 years ago. And the key issue here is 
that the delivery device that Mylan developed has patents 
around it. And the FDA has required that any potential generic 
competitor exactly replicate Mylan's device. Well, if you 
exactly replicate Mylan's device, you're violating Mylan's 
patents around its device. When in fact what the FDA should do 
is say any other device which has the same clinical effect in a 
patient, with the same dosage and the same, you know, treatment 
of the disease, that should be allowed.
    And the FDA, under Scott Gottlieb, I will say, has begun to 
do that, but, again, Congress could help the FDA by creating a 
statutory pathway for complex generics to be approved more 
rapidly.
    Mr. Massie. Thank you for shedding light on that.
    I yield back, Mr. Chairman.
    Chairman Cummings. Thank you very much.
    Mr. Connolly.
    Mr. Connolly. First of all, Ms. Worsham--I'm sorry. You 
think I'd know that by now.
    Ms. Worsham, I want to join the chairman in expressing our 
deep condolences. I can't imagine, and like many of us in this 
room, I have close--people close to me who are diabetic and are 
insulin dependent. And the thought that they have to make that 
kind of terrible choice is just unacceptable, and I think 
highlights why we're here. At any rate, our hearts go out to 
you and your family.
    Ms. Worsham. Thank you.
    Mr. Connolly. And hopefully--and I want to thank the 
chairman for having this hearing and the ranking member for 
joining with us.
    This is an issue that touches every family. And in some 
ways, it's getting only worse. You know, we raise prices on 
drugs that have been around for a long time just because we 
can, and we maximize profit. And there's nothing wrong with 
profit, unless the choice is human health and safety versus and 
exorbitant profit I don't really need. And at some point, the 
ethics of that do come into play in terms of public policy, and 
thus this hearing. And I am so proud of the chairman for making 
this the first hearing of his chairmanship in the new majority. 
I think it really underscores the importance we put on this 
issue.
    I'll put this question to the middle part of the panel. Why 
is there such a difference in drug pricing, same drug, between 
the United States and most other industrialized countries? What 
accounts for that price differential?
    Dr. Kesselheim. Well, I think that there are a couple of 
different factors at play. In many other countries, there is a 
negotiation on behalf of the country to where the country is 
able to use its power as a monopsony buyer to try to, you know, 
whether--about whether or not the drug gets into the--is 
allowed to be on the country's formulary and allowed to be 
given to patients there.
    I think that also a lot of other countries use evidence 
related to the comparative effectiveness and cost effectiveness 
of the drugs to determine--you know, to help negotiate, and 
through that negotiating process, determine a fair price for 
the drug depending on what it's value is. And so a lot of other 
countries use these value-based determinations to try to assess 
a fair price and to use that as a basis for the negotiating 
process. I think that both of those things contribute to the 
differences.
    Mr. Anderson. Well, I think the most important thing to 
recognize is that, in the United States, once a drug is 
launched, the prices go up, and in other countries the prices 
go down. So what we now see is, for established drugs, there's 
a three to four to one difference between the price in the 
United States and the prices in other countries.
    Mr. Connolly. An example of what you're saying, Dr. 
Anderson, Humira.
    Mr. Anderson. Correct. No. 1 seller in America.
    Mr. Connolly. No. 1 seller in America costs $2,669 in this 
country, costs $822 in Switzerland.
    Mr. Anderson. Correct. And it might actually cost less than 
that in Switzerland. You don't always get all of the discounts 
reported.
    Mr. Connolly. We're talking about insulin. Insulin's been 
around since 1921. Can you think of any reason why the prices 
of insulin, a commonly used drug for 100 years, has skyrocketed 
so much?
    Mr. Anderson. Well, I mean, it is--you know, the insulin 
that we use today is a little bit different than the insulin we 
used then. There have been some changes to the molecule over 
the time. But in general, a lot of the issue has to do with 
patents on--at least right now, patents on the delivery devices 
as opposed to the product itself. So, you know, if the pen 
clicks this way or clicks that way, then companies are able to 
get new patents on them that give them another 20 years and 
another 20 years. And because there's not good effective 
competition between drugs that have those kinds--when they have 
those kinds of patents, that it can make it difficult to try to 
bring in competitive products and to get true competition that 
leads to lower prices.
    Mr. Connolly. If Medicare were allowed to have that true 
competition, would it drive down prices significantly?
    Dr. Kesselheim. I think it would drive down prices closer, 
again, to what the values of the drug really are and closer to 
what, you know, in other countries are able to negotiate, you 
know, to try to evaluate the utility of the drug for the 
patient. I think that we could use those kinds of strategies to 
try to get a fairer price that still provides sufficient 
profits for the manufacturer but is a fairer reflection of the 
drug's value.
    Mr. Connolly. Thank you, Mr. Chairman.
    Chairman Cummings. Thank you very much.
    Mr. Meadows.
    Mr. Meadows. Thank you, Mr. Chairman, for calling this 
hearing. And I have a personal note that I wanted to convey to 
you from the President of the United States. He wanted to make 
sure that you knew that on this particular subject, not only is 
he serious, but he's serious about working in a bipartisan way 
to lower prescription drug prices. And when I spoke to him last 
night, he wanted to make sure that I conveyed that to you.
    Chairman Cummings. Would the gentleman yield just for 30 
seconds?
    Mr. Meadows. Sure.
    Chairman Cummings. I just want you to convey back to the 
President that we are willing, ready, and able to work with him 
to get it done. And thank you.
    Mr. Meadows. I thank you, Mr. Chairman.
    Dr. Roy, let me come to you. Obviously, the Trump 
administration has made some recommendations in terms of 
whether it be the percent of commission paid to physicians on 
prescriptions or a comparable amount that can be charged based 
on either the EU or other areas. What kind of effect do you 
think that those two Trump administration proposals would have 
on drug prices?
    Mr. Roy. So you're referring, just for everyone else's 
interest and knowledge, to some of the reforms that the 
President and Secretary Azar have proposed for the Medicare 
part B program----
    Mr. Meadows. Part B, that's correct.
    Mr. Roy [continuing]. which is physician administered drugs 
and drugs that are usually delivered through intravenous 
infusions and injectables.
    Mr. Meadows. Right.
    Mr. Roy. The one big distortion that was introduced by the 
Medicare Modernization Act was the so-called ASP plus 6 where 
doctors get a 6 percent commission. That incentivized the use 
of higher priced drugs and not low cost generics. And so that's 
an example of where a reform system that the administration has 
proposed and is modeling and demonstrating through CMMI would 
be very helpful in aligning doctors' economic interests with 
giving patients the lowest cost drug, which is not the case 
today, an important area of market distortion as you imply.
    The second piece, in terms of having an international 
benchmark to compare Medicare part B prices and align Medicare 
part B prices to that, we just published a paper at my think 
tank, at freopp.org, that argues that the 15 countries that are 
in the international benchmark that the Trump administration 
proposed are the wrong countries to compare to the United 
States, because they don't necessarily have market-based 
approaches to either health insurance or prescription drug 
prices.
    Mr. Meadows. Which countries would best be in that pool 
of----
    Mr. Roy. So we suggested--I'll emphasize, the countries 
that we think are the most worth benchmarking Medicare part B 
to are Switzerland, the Netherlands, Singapore, and Denmark. 
Those are the countries that either have more market-based 
health insurance systems, like Switzerland and Netherlands, or 
in the case of, for example, Denmark, they have unregulated 
drug prices. Companies can charge whatever they want, just like 
they can in the United States, but the difference is, in 
Denmark, the insurers or the insurer offers a specific price 
that's aligned to the lowest cost drug in a particular 
category, that if you choose that lowest cost drug as a 
patient, the drug is free, you are subsidized by the 
government. If you choose a higher cost drug, you have to pay 
that difference out of pocket. And what that has done is 
created a market-based incentive for drug companies to charge a 
low price.
    Mr. Meadows. Sure.
    Mr. Roy. In fact, Denmark has the lowest prices for 
prescription drug spending in all of Europe using that model.
    Mr. Meadows. It's amazing how the free market will put 
pressure on profits and corporations.
    So, Dr. Anderson, let me come to you, because one of the 
areas that I'm concerned about is the difference and everybody 
saying, well, if we just get the government involved, 
everything will work out. But I went to my local pharmacist and 
I looked at one particular drug, and there's four different 
prices. There's a cash price, there's a Medicaid price, there's 
a Medicare price, and there's a private insurer price. And 
they're not anywhere close. In fact, the Medicaid price was 
higher than the other prices when we looked at that.
    And so that would not necessarily suggest that government 
intervention is going to lower prescription drug prices. So how 
do we reconcile that, Dr. Anderson?
    Mr. Anderson. You do have a whole variety of different 
prices out there.
    Mr. Meadows. And why? I mean, I would assume that the risk 
associated with getting a patent, manufacturing, it does not 
normally look at the end consumer on--it doesn't cost more to 
produce a drug for a Medicaid patient, does it?
    Mr. Anderson. No. It is the exact same cost of production 
and exact same research, but it's different market powers. And 
some places have more market power than others to negotiate 
prices.
    Mr. Meadows. Yes, I thought that was the case, but I 
started looking at that and that's not actually necessarily 
always the case. And, quite frankly, when you look at--we're 
talking about negotiating--some of the big private companies 
that provide insurance have a whole lot more market power in 
terms of the number of people that they protect than some of 
the other programs. And so there's not a linear correlation 
that I can find.
    Mr. Anderson. No, there isn't, but essentially--and I think 
a lot of it is because the PBMs and the PDPs are keeping a lot 
of those profits into the system, so that's why you see these 
large differentials.
    Mr. Meadows. So you would recommend getting rid of PBMs and 
PDMs?
    Mr. Anderson. I think either getting rid of them or, more 
importantly, changing the incentives that they have so that 
they don't have incentives to fight over the rebates that lead 
to higher list prices.
    Mr. Meadows. I yield back.
    Mr. Cummings. Thank you, very much.
    Mr. Krishnamoorthi.
    Mr. Krishnamoorthi. Thank you, Mr. Chairman, and thank you 
for your leadership on this very important issue. This is like 
the first time we've had kind of a rather informed free-
wheeling discussion on both sides of the aisle on this issue. 
And thank you for your leadership.
    I think that most of us would agree that patents and other 
intellectual property protections can play an important role in 
incentivizing innovation and helping companies recoup the 
sizable investments they make in developing new drugs. However, 
when these protections are too generous, they can restrict 
competition and ultimately harm consumers. One area of 
particular concern is biologics, which are pharmaceutical 
products made from living organisms. Biologics currently 
represent only two percent of all prescriptions, but they 
account for 26 percent of total consumer spending. By 2025, 
over 70 percent of drug approvals are expected to be biologics.
    Since a living organism cannot be patented, manufacturers 
of these biologics are granted an exclusivity period which 
currently lasts for 12 years. Now that Democrats and 
Republicans alike are making drug prices a priority, shortening 
this exclusivity period is one of several options under 
consideration. However, the recently signed U.S.-Mexico-Canada 
Agreement, the USMCA, the renegotiated version of NAFTA, 
includes a provision that would sync up exclusivity periods 
across all three countries. This would mean that no single 
country could shorten this period, this exclusivity period, 
without the approval of the other two countries. We should not 
allow this treaty or any other treaty to prevent us in Congress 
from taking action to lower drug prices and making it easier 
for affordable biosimilars to come to market.
    So I have a question for Dr. Georges of the AARP. Ma'am, 
you wrote a letter to the U.S. Trade Representative Lighthizer 
expressing concern over any provision in the renegotiated 
NAFTA, that is the USMCA, that could limit the market or lower 
the exclusivity period. And so can you talk a little bit about 
why you wrote that letter?
    Ms. Georges. Well, I--I don't have in front of me all the 
details of the letter. But I will say to you that one of things 
that we in AARP are concerned about is the length of 
exclusivity, you know, for these high priced biologics. And in 
that one of the things that we're now looking at and will be 
able to spend more time is looking at this whole NAFTA-2 
agreement. We are going through an analysis now through AARP 
and taking a look at that.
    Mr. Krishnamoorthi. Thank you.
    Dr. Kesselheim, what would be the impact of locking the 
U.S. into a certain exclusivity period for biologics? And how 
would it limit our ability to address the issue of high prices 
in these--in this class of pharmaceuticals?
    Dr. Kesselheim. Well, I mean, I think it would be a problem 
because one of the--the reason that that 12-year exclusivity 
period was set originally is because there was some thought 
about how long it might take manufacturers to recoup the cost 
of development for their biologic products. And if it turns out 
that over time we had miscalculated on that and it should 
actually be shorter than that, then doing that kind of locking 
in the United States policy in that way would be a bad idea 
in--without allowing us to have the flexibility to make 
changes.
    Although I do want to point out that there are dozens and 
dozens of patents covering biologic products in addition to 
that exclusivity period that the BPCIA provides and, in fact, 
some of those patents have gotten in the way of getting lower 
cost--potentially lower cost biosimilar products on the market. 
I still think it would be a bad idea to lock the United States 
in in that way to be unable to adjust that number in the 
future.
    Mr. Krishnamoorthi. Dr. Anderson, can you comment on that?
    Mr. Anderson. So I think the key thing is one is the 
international, but more importantly is domestic. And 
domestically, we essentially have allowed them to have a whole 
series of patents that we can't even find if you wanted to. For 
small molecule drugs, you can go on the FDA site and you can 
find it. For biologics, you can't go on the FDA site and find 
all the patents. And so if I'm a drug company that wants to 
develop a biologic, I can't find all the patents, I'm probably 
going to go up against one of those drugs--those patents and 
I'm going to run into a problem. So I'm not even going to start 
the activity.
    On a reimbursement side, the biologics have a different set 
of codes than the biosimilars do. So you can't interchange 
them, whereas for generic drugs you can. So we've made it much 
harder to, essentially, copy the biologics and maybe 
biosimilars.
    Mr. Krishnamoorthi. Got it. Thank you so much.
    Thank you, Chairman.
    Chairman Cummings. Thank you very much.
    Mr. Hice.
    Mr. Hice. I thank the chairman.
    You know, it seems like we're hearing a lot these days, 
probably more than we have in quite a while, from many on the 
other side of the aisle that the answer to rising drug costs is 
more government involvement. I strongly disagree with that. 
Case in point would just simply be the so-called Affordable 
Care Act was signed into law about 10 years. And since that 
time, we've seen drug costs skyrocket in excess of 40 percent, 
despite the fact that President Obama over and over, as has 
already been cited today, said if you like your plan, you can 
keep your plan, all this kind of stuff. We're still seeing the 
out-of-pocket costs skyrocket, as well as the cost of drugs 
themselves.
    So, Dr. Roy, let me begin with you. Can you please explain 
the connection between higher drug costs and ObamaCare in 
particular?
    Mr. Roy. There are two particular policies--well, there's 
three particular policies, I'd say, in the Affordable Care Act 
that have driven up, in my view, prescription drug pricing and 
spending. The first is what we mentioned before, the BPCI Act, 
which regulates biosimilars, and how, as a result, biosimilars 
have not been getting out of the market.
    The second is the changes to Medicare part D, which reduced 
the amount of cost sharing in the Medicare part D program, the 
so-called coverage gap or donut hole. While there are 
meritorious reasons to want to reduce out-of-pocket spending 
for seniors, the end result of that left lower price 
sensitivity was massive price increases by manufacturers 
because they knew that seniors wouldn't care whether the prices 
were high or low, the taxpayer was on the hook for those extra 
prices. So we've seen Medicare part D spending skyrocket as a 
result.
    The third area is in the Affordable Care Act exchanges 
where there are mandates that have been--that were issued by 
the Obama Administration to require that plans participating in 
those changes cover a bunch of drugs, branded drugs, even if 
those branded drugs had no economic value, that is to say they 
were generic drugs that could do the job just fine. That's 
resulted in a higher than necessary pharmacy cost in Affordable 
Care Act based plans.
    Mr. Hice. So based on what you're saying, let me just throw 
out a somewhat loaded but sound like a simple question. Would 
the repeal of ObamaCare lower drug costs for Americans?
    Mr. Roy. It would lower overall prescription drug spending. 
It may, in certain cases, raise out-of-pocket spending for some 
individuals who are buying Affordable Care Act subsidized 
insurance plans, but overall spending would go down.
    Mr. Hice. Again, it just seems to me there's a whole lot 
more involved to this whole thing of rising drug costs than 
what meets the eye. It is a complicated issue and there's a lot 
of factors involved. It's certainly more than just greed of the 
pharmaceutical companies; there are a lot of factors.
    Dr. Anderson, let me go to you. Can you provide a basic 
brief overview of the drug supply chain? And specifically what 
I want to know is who pays what price at what point in the 
chain. Is there any way to do that briefly?
    Mr. Anderson. I will do my best.
    Mr. Hice. Okay.
    Mr. Anderson. So it essentially starts with the drug 
company announcing a price, called the list price, and then 
they negotiate with the PBM over the price that they actually--
the PBM will pay for the drug. And it could be all of that 
price or most commonly a significant reduction of that price. 
Then the PBM keeps some of that money, but not all of it. And 
we don't know how much of that money they in fact keep, because 
that's all confidential. Then it goes to the pharmacy, and they 
buy the drug essentially from the PBM and they get a price for 
it. Again, we don't know what that price is. And then the 
consumer goes to the pharmacy and buys the drug.
    They pay the price based upon the list price, the price 
that the drug company originally set, and that's why the major 
reason why the prices for consumers have gone up, because those 
list prices keep going up. The reason why the list price is 
going up is because the PBMs are saying if you give us a higher 
list price, we will more likely put your drug on a formulary.
    Mr. Hice. And then you add into that, as I understand it, 
the rebates. So the rebates have--when you factor the rebates 
in, the cost of the drugs have somewhat been kept under control 
to the consumer. Is that an accurate statement?
    Mr. Anderson. Well, they could be, but we don't know 
exactly how much because we don't know how much the PBMs are 
keeping and how much the drug companies are getting and how 
much the consumer is paying. So we just don't know that 
information. So we think that's true, but we don't know.
    Mr. Hice. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Chairman Cummings. Thank you very much.
    Mr. Rouda.
    Mr. Rouda. Thank you, Mr. Chairman. And thanks to all of 
you for providing testimony here today.
    Drug pricing is the largest driver of healthcare costs in 
our country. We spent over $333 billion last year on drugs, of 
which the Federal Government, through Medicare, Medicaid, and 
VA spent approximately $150 billion. And while I recognize that 
it often takes years of research and development to bring new 
drugs to market, we cannot have Americans rationing or 
abandoning life-saving medication due to the bureaucracy, 
inefficiencies, and greed.
    Patients can't reap the benefits of pharmaceutical 
innovation if they're forced to choose between their drugs or 
rent. A hardworking American shouldn't pay the highest price 
for healthcare in the world and receive, for some, inadequate 
care at best. Like most things in life, the reality of drug 
prices is always more complicated than the sound bites we hear. 
List prices get all the attention, but they don't really tell 
the full story. The real cost to patients is opaque to even the 
most seasoned health policy expert such as yourselves. It might 
as well be a foreign language to patients.
    We deserve and we ought to demand transparency through the 
entire drug supply chain, the manufacturing process, the R&D, 
and the rest of the entire healthcare system. That includes the 
true prices other stakeholders pay and charge for the 
healthcare they provide. The rebates thrown around the system 
to hide the truth need to be presented as well. Hospitals, 
device companies, doctors, pharmacy, benefit managers, 
insurers, transportation providers, billing managers, everyone 
needs to provide transparency and accountability.
    And, yes, drug companies need to be held accountable too 
for their role in our increasing costs and the massive spikes 
in drug prices. We shouldn't allow companies to abruptly raise 
the price of a drug when that drug has been on the market for 
years, especially when there's been no innovation, no R&D to 
justify a new price for an existing medicine.
    Bad actors that hinder competition shouldn't be able to 
delay patient access to generic and biosimilar medicines by 
slowing down the generic approval process. And it's, of course, 
understandable that these companies want to reap a profit from 
their innovation. However, it's unjustifiable to cutoff 
patients from the care they so much deserve.
    I believe we can find a balance between protecting IP and 
access to care. We can start by maintaining rational IP 
standards, ending market abuses, and providing more innovation 
and competition. And with that, I'd like to focus my time on 
how certain pharmaceutical companies are gaming our patent 
system to prevent competition and maintain high prices.
    Dr. Kesselheim, I know you have a lot of experience in this 
area, and I'm hopeful that we can get from you testimony on 
specific companies, specific examples where we have seen a 
specific drug or a specific company gaming the patent process 
to extend their control and opportunity to really gouge the 
public to make these types of profits that we're so concerned 
about.
    Dr. Kesselheim. Sure. And I provided some of those examples 
in my written testimony, but, you know, there are a number of 
examples where companies are able to use, you know, the patent 
system and weak or inappropriately granted patents to extend 
the market exclusivity of their products. They can--for 
example, there were--there's examples of companies that have 
patented single isomer versions of their product and then sold 
those single isomer versions as new brand-name products, even 
though they're not, you know, clinically any different from the 
original product. But in shifting their promotion to the new 
product as the older product's going generic, have shifted the 
market in a way that they're using that product, et cetera, 
even pulled the old product off the market.
    As we talked about before, there are ways that companies 
can patent aspects of new formulations of their product or uses 
of their product, and in doing that try to prevent generic 
manufacturers from coming on the market. And, ultimately, if 
the generic manufacturers then sue to try to get those patents 
thrown out of court, then the brand-name company can offer 
consideration to the manufacturer to settle those claims and to 
keep--to prop up those weak patents.
    Mr. Rouda. So what are the two or three things you would 
change if you could to address this issue?
    Dr. Kesselheim. Sure. I mean, I think that there are a 
couple of things that you can do. I mean, we can reexamine, you 
know, how the U.S. Patent and Trademark Office grants patents 
in these cases, what the rules are about how one obtains, you 
know, a patent on a pharmaceutical product and what is novel 
and nonobvious and how the rules are applied to pharmaceutical 
products. I think that we can do a more--we can have more 
systemic reexamination of those patents by administrative 
bodies like the Patent Trial and Appeals Board, and we can make 
it harder for companies to list certain noninnovative, you 
know, slightly incrementally changed patents with the FDA in 
order to put a block on generic entry.
    So I think that we can act at the level of the patent 
office, we can act at the level of reexamination, or we can act 
at the level of the FDA listing process.
    Mr. Rouda. Thank you very much. I yield back.
    Mr. Cummings. Thank you.
    Mr. Comer.
    Mr. Comer. Thank you, Mr. Chairman.
    Mr. Meadows and Mr. Hice touched on the subject of more 
government intervention in all of this. I want to add to the 
conversation and talk a little bit about the consequences of 
more government involvement in healthcare.
    A recent proposal of Medicare for All is likely to devolve 
into complete government control of our healthcare. What effect 
would a government-run system like Medicare for All have on 
prescription drug prices?
    Mr. Roy. Well, we have some example--I assume this question 
is directed at me?
    Mr. Comer. Yes, Dr. Roy.
    Mr. Roy. We have some examples actually within the Medicare 
program itself, which is the irony. When people talk about 
Medicare for All, they generally mean fee for service, public 
option, quote/unquote, government part A, part B Medicare. They 
don't mean Medicare Advantage, the part of Medicare that's 
administered by private plans. And the reason I bring that up 
is because Medicare part C, the Medicare Advantage program, 
actually does a much better job of delivering the Medicare 
benefit at a lower cost to both seniors and the government, and 
with additional benefits at times, relative to Medicare part A 
and part B combined.
    So that's one example of many I could offer of how private 
insurers are delivering coverage more efficiently than the 
Federal Government does in the Medicare program. That's why 
I've advocated for universal coverage on a private basis where 
private insurers are shopping their plans to individuals 
purchasing health insurance as we do for any other form of 
insurance. If we had that kind of a system, we'd have less 
spending, more choice, and higher quality.
    Mr. Comer. Okay. Let's stay on part D, but let me ask this 
question of Dr. Anderson. You know, politically in this 
environment, everyone is frustrated with the rising cost of 
drug prices, myself included. I can assure you that. But the 
proposal for the HHS Secretary to negotiate prices for part D 
drugs is--you know, it's very popular, but practically 
speaking, how would HHS manage that task?
    Mr. Anderson. So that would be a challenge, in my opinion, 
to negotiate the prices for every single drug. So what you 
would have to do is at least start out negotiating the prices 
for a limited set of drugs. And the ones that I would start on 
are the drugs where Medicare pays 80 percent of the cost, which 
are the most expensive drugs, because the way the Medicare part 
D program was set up, once you enter the catastrophic phase of 
Medicare, Medicare pays 80 percent of the cost and can't 
negotiate anything. And so that's where I would start the 
negotiation and then move in--and if that works, expand it 
beyond that amount.
    Mr. Comer. Dr. Roy, and this is a proposal that a lot of 
people on the left keep talking about that it sounds great. 
Again, there are consequences. One of the good things the drug 
companies do is research and development. If the government 
continues to go on the path of taking over medicine and 
specifically prescription drugs, what effect will that have on 
research and development? I mean, is the government going to 
successfully invest in research and development? And how 
efficient is that? And what will the drug companies do from 
this point on with respect to research and development?
    Mr. Roy. Let me just answer quickly in terms of your last 
question, because the Centers for Medicare and Medicaid 
innovation actually rolled out a demonstration project just 
last week to allow for private insurers to negotiate that 80 
percent catastrophic part D benefit on behalf of Medicare is 
something I suspect would be very impactful. CBO has scored, by 
the way, the government taking over part D is not saving any 
money relative to what PBMs negotiate on behalf of Medicare.
    To your question about R&D and how that could be affected 
if the government took over R&D, we actually have experience 
with that. So academic medical centers, the National Institutes 
for Health do conduct clinical trials using NIH money 
appropriated by Congress, and those clinical trials almost 
always fail to have the rigor and technical standards necessary 
to get a drug over the finish line in terms of FDA approval, 
because the FDA standards are so specific and the data that 
they need is so specific in order to ensure that a drug is 
efficacious and safe.
    So I have zero confidence that government-run clinical 
trials or government-sponsored clinical trials will have those 
technical standards that private companies have delivered up to 
this point.
    Mr. Comer. Thank you, Mr. Chairman. I yield back.
    Chairman Cummings. Thank you very much.
    We're going to go to Ms. Hill, but before we go there, as 
I'm listening to all of this, I just want to remind all of our 
witnesses and to all of us, I want to know some solutions. I 
have a fear that we will talk and talk and talk and talk, and 
people will die while we're talking and it will only get worse. 
So I just want to just keep that, I mean, as you're answering 
questions, help us to figure out where do we go from here. 
Because I don't--I just think the urgency--we can debate and 
debate and debate and nothing happens, and I think that's what 
America is kind of upset about right now. Okay?
    All right. Ms. Hill.
    Ms. Hill. Thank you, Mr. Chairman. And I want to thank you 
for focusing the committee's first hearing this Congress, the 
first hearing of my congressional career, on the escalating 
cost of prescription drugs. I'm also very excited about how 
much common ground we have with our Republican colleagues on 
this issue. It makes me very hopeful that we might be able to 
make some real progress on this issue that affects every single 
American. And I completely agree with your desire to focus on 
real solutions.
    I'd like to talk about one issue in particular, one area in 
particular. As the gentleman from Kentucky mentioned, the 
argument that we always hear when we talk about lowering drug 
prices is that drug companies need high prices in order to 
recoup their investments and develop the next breakthrough 
cure. But the fact is drug companies spend a lot more on other 
expenses, like marketing and payments to shareholders, than 
they do on research and development.
    First, we know that drug companies spend billions of 
dollars to advertise their drugs to consumers. We've all seen 
the fun commercials on television. And we are one of only two 
countries that allow this. I was shocked to learn that drug 
companies spend $5.6 billion on direct-to-consumer advertising 
in 2016. That's a number, 5.6 billion, that's hard to forget, 
given the recent conversations.
    Pfizer alone spent $1.19 billion. What's more, drug 
companies are allowed to take a tax deduction for the money 
they spend on this type of advertising, which is particularly 
horrifying to me.
    So, Dr. Kesselheim, as a practicing physician, has it been 
your experience that direct-to-consumer advertising improves 
health outcomes?
    Dr. Kesselheim. Well, I mean, I think that it is the case 
often that people will come in to my office and say, oh, you 
know, I saw this drug on television, I saw that drug on 
television. And I think it is the case that direct-to-consumer 
advertising drives prescribing of higher cost products, because 
generic drugs generally don't advertise. And so all we see on 
television are advertisements for the highest cost brand-name 
products. Usually drugs that are really good also don't need to 
be advertised, so it also potentially can be for drugs that 
don't offer, you know, substantial improvement over what's 
already available.
    So the existence and the prevalence of direct-to-consumer 
advertising definitely increases pharmaceutical spending by 
driving patients and physicians toward higher----
    Ms. Hill. Thank you. I appreciate it.
    And, Dr. Georges, let me turn to you now. In response to a 
request for information issued by HHS, AARP said the following, 
and I quote, given that the effects of DTC advertising, direct-
to-consumer advertising, are still subject to debate, we 
strongly encourage HHS to also consider studying the effects of 
DTC on consumer choice, cost, and clinical outcomes in order to 
determine whether the potential benefits of DTC advertising 
outweigh its potential harms.
    What does AARP view as the potential harms of direct-to-
consumer advertising?
    Ms. Georges. Well, AARP is concerned that the price of the 
drug is never advertised. So that alone gives our members, the 
older American is not sure of what it is that may be a cost to 
them, again because the drugs that--the information that comes 
through to DTC may not be clear enough for our consumers to 
really understand what may be the potential effects or side 
effects of the drug. And so we think transparency, transparency 
is the key in the DTC.
    Ms. Hill. Thank you. I appreciate that.
    Another area where drug companies spend a lot of money is 
that they spend hundreds of millions of dollars in payments to 
physicians and hospitals. From 2013 to 2016, drug companies 
made a total of $9.1 billion in disclosed payments to doctors 
and hospitals. AstraZeneca alone spent $189 million.
    Dr. Kesselheim, in your view, what is the objective of 
these payments?
    Dr. Kesselheim. Well, there is a lot of different reasons 
why drug companies might have financial relationships with 
physicians. You know, there is a lot of research that 
physicians can conduct in partnership with pharmaceutical 
manufacturers, but it is also the case that pharmaceutical 
manufacturers spend billions and billions of dollars 
advertising their drugs to physicians, you know, through 
speakers bureaus and providing food and providing, you know, 
money for attending CME courses. And there is, you know, 
decades and decades of research showing that those kinds of 
promotional relationships also drive prescribing of high cost 
drugs and increased spending----
    Ms. Hill. Thank you.
    And just because we're almost out of time, I just want to 
close this out by asking Dr. Anderson, in your opinion, is this 
any relationship between the price of a drug and the amount a 
company spent on research and development?
    Dr. Kesselheim. We can find no evidence that that is true.
    Ms. Hill. Thank you so much. I yield back.
    Chairman Cummings. Thank you very much.
    Ladies and gentlemen, we have four votes on the floor. I 
hate to tell you this, witnesses, but we're going to be gone 
for about close to an hour because we have four votes. It may 
be a little less than that.
    But to the committee, 15 minutes after the last vote, in 
other words the last minute of the vote, we'll be back here and 
we'll finish up this hearing. And I don't expect any more 
interruptions after that. Just hang with us. This is a very 
important hearing. We're here to save lives and make people's 
lives better.
    With that, we recess.
    [Recess.]
    Chairman Cummings. Mr. Gibbs.
    Mr. Gibbs. Thank you. Thank you, Mr. Chairman, and thank 
you for the witnesses for sticking around.
    I think we can all agree that we have lots of challenges 
overall, and I think Representative Green earlier today talked 
about the structural changes in his comments and questions, and 
he's absolutely right.
    And I've got a couple tracks I want to go down. One is I'm 
really concerned about research and development. You know, 
there's no doubt that the pharmaceutical drugs are extending 
people's lives, quality of life. I think we're all in 
agreement. The United States, of all the total dollars spent on 
R&D for pharmaceuticals, 2-1/2 years, about 52 percent. I was 
surprised the next country is Japan at 16 percent, and then 
everybody else is down below 10 percent. Canada is only at one 
percent.
    And I asked Dr. Roy at the break, because he had to leave, 
and he agreed with those numbers because we're a big country, 
you know, blah, blah, blah. And I said, the next question is 
how about, are we over 50 percent of developing these drugs, 
and he said the biologics, we are at the beginning, but then it 
takes--they're usually smaller companies and they end up having 
to get venture capital, a lot of Switzerland and Japanese 
companies, but we're still the innovators.
    So I guess my comment I just want to make on this, and you 
can tell me if you disagree or agree, but we've got to make 
sure we don't go down the path where we disincentivize R&D, 
because we will see life expectancies, quality of life, because 
we're doing so much stuff with drugs now, preventing surgeries 
and everything else. And that's my big concern. You see these 
countries that have a centralized governing system. They're not 
really doing much R&D. And so I don't know if you--Dr. 
Anderson, if you want to comment on that, my synopsis of that.
    Mr. Anderson. I think--in terms of the data, I think you're 
absolutely correct. And I would agree with Dr. Roy and you that 
those numbers are pretty much correct, most of it. Now, a lot 
of that is because the research and development starts with the 
NIH in the United States. I mean, we probably also spend 50 
percent or more of the R&D funded by the government, and so--
and also, the best scientists tend to be in the United States. 
So that's where the research is going to be developed, because 
that's where the infrastructure is.
    Mr. Gibbs. I think you said--I think it was you that said 
in your earlier testimony that it takes the private capital 
money to get more across the board, to move it on, right?
    Mr. Anderson. Correct. So, essentially, what often happens 
now is it starts at a place like Johns Hopkins or Harvard or 
something. They develop the thing mostly funded by NIH, and 
then venture capital jumps in when they see an opportunity, 
when something pretty cool happens. And they put in another 
$200 million or something like that. And then if it really 
turns out to be a drug that they think--the big drug companies 
think makes sense, then they come in and they pay a lot of 
money for that.
    So the researcher does very well who develops that, but the 
question is, is it the research that the drug company is doing 
or are they essentially buying the research?
    Mr. Gibbs. I just want to be careful. You concur with me 
that we need to be careful whatever we do in the regulatory 
aspect that we don't disincentivize the incentive to develop 
drugs?
    Mr. Anderson. As a researcher, we definitely want that. I 
think what we're concerned about is, once you develop the drug 
and you've gotten your patent time, that should be enough.
    Mr. Gibbs. Yes.
    Mr. Anderson. And what we're seeing is all these games to 
keep that patent alive.
    Mr. Gibbs. I want to get into the games a little bit. 
Orphan drugs. You know, I've had constituents come in and 
they've got some disease, a problem that's not common, and 
they're orphan drugs. And then my understanding is we have a 
provision and policy to help the pharmaceutical companies with 
that, as long as it's under 200,000 people. And then my 
understanding, over 200,000, some of these drugs can used for 
both, and they go back to orphan waiver or whatever you want to 
call it, so that's one issue, right.
    Another issue I have is the risk evaluation mitigation 
strategy, REMS, can act to restrict getting genetics--generic 
drugs on the market. Is that correct?
    Mr. Anderson. So let me do the orphans and then the REMS.
    Mr. Gibbs. Okay.
    Mr. Anderson. So the orphans--if I look at the top 10 best-
selling drugs in America, six of them have orphan status, 
including the top three. In no way would you consider any of 
those to be orphans. They have, through a loophole or through 
something that was unintended in the Orphan Drug Act, have now 
developed an orphan on the side, and that gives them a lot of 
power with pharmacies and with PBMs. And so that's the problem.
    With respect to REMS, REMS is to make sure that the drug is 
safe, and that's very important. The FDA does a reasonably nice 
job of doing that. What's happened with respect to research and 
development is they've taken the REMS idea, and what they have 
done is say, I'm not going to sell that product to a generic 
drug company, and therefore, you can't get it because of this 
REMS rule.
    Mr. Gibbs. Okay. And I'm just about out of time, but the 
PBMs. In Ohio, we've got CVS is buying--they just bought a 
local family of pharmacies, about 20 stores. They've finally 
given up. I worked with them for 20 years, and articles about 
what's happening in Ohio with the Medicaid program, so I think 
there's lots of problems with how the PBMs are operating. So if 
we address the orphan issue, the REMS, and the PBMs, we'd make 
a lot of progress, I think, without overregulating and not 
disincentivizing and let the market function.
    Mr. Anderson. That would be a huge undertaking, and it 
would be great.
    Mr. Gibbs. Okay. I yield back.
    Chairman Cummings. Ms. Wasserman Schultz.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman.
    Ms. Worsham, I really want to thank you for your courage 
and your leadership that you displayed today in being here on 
behalf of your daughters and on behalf of, really, all patients 
everywhere.
    Type 1 diabetes is a devastating disease, and it's one that 
has an astonishing, really dizzying number of complications 
that individuals deal with throughout their lives, and it is 
their medication, their insulin, that keeps them alive. And 
what the travesty is that we're dealing with here is that just 
like not having health insurance, the very fact of someone not 
having health insurance is a cause of death. Not having health 
insurance can kill you. Having your prescription drugs be too 
costly by itself can kill you. And I'm so sorry for your loss, 
and it just makes it that much more important that you're here 
today to illustrate and put a human face on the impact of these 
high cost drugs.
    Another human face that I can put on is the number of times 
that--you know, obviously I represent the state of Florida. We 
have a disproportionate number, the highest percentage per 
capita population of elderly in the country, and I have stood 
behind seniors in my district who I watched have five 
prescriptions come to the counter and they can only take three 
home, or they ask the pharmacist to--I've witnessed this. This 
is not second-and third-hand stories. Or they ask the 
pharmacist to score their pills, because they want to break 
them in half so they can double the length of time that the 
prescription lasts because it's unaffordable.
    And as Ms. Worsham has pointed out, previously, the cost of 
insulin could be $1,000 per month when you're considering all 
the supplies that it takes for a diabetic patient to survive. 
My daughter's best friend since she was four years old has Type 
1 diabetes. Her younger brother, four years later, was 
diagnosed with Type 1 diabetes. Imagine a family dealing with 
two children with Type 1 diabetes.
    These price increases continue despite little evidence that 
the products themselves are changing. For example, insulin has 
not changed much since its development in 1921, yet in a five-
year period, the cost of insulin has almost doubled. We don't 
see the same price hikes for an iPad from one year to the next, 
for a pen from one year to the next, for this bottle of iced 
tea from one year to the next, because it's just not that many 
changes, like there hasn't been that many changes for insulin. 
So why the astronomical price increases?
    And even more alarming is that you have just three firms--
Eli Lilly, Novo Nordisk, and Sanofi-Aventis--account for the 
entire diabetes market in the U.S., and 90 percent of the 
market around the club--around the globe. I want to know, how 
can drug companies justify price increases for products like 
insulin with minimal modifications to the medications 
themselves?
    Dr. Anderson, isn't that just that they are padding their 
price to pad their bottom line?
    Mr. Anderson. So as I said in my opening statement, you 
know, it's not the prices of the products that they're buying 
are going up. It's not--once you've developed the research, 
there is no additional cost, because you're not doing any 
additional research. So there is no real justification that I 
can see for raising your price repeatedly over time. It just--
you know, but that's something that this committee should take 
a look at and ask the drug companies, why have you done this? I 
can't do that. You have that ability.
    Ms. Wasserman Schultz. That's right. I've just not heard 
any practical, legitimate, detailed explanation today about 
what the possibility is that would be justifiable for these 
kinds of price increases.
    Another question I wanted to ask you, Dr. Anderson, is drug 
companies are also setting higher and higher launch prices for 
their new drugs. One study looked at a launch price for 58 
cancer drugs approved between 1995 and 2013. I'm a breast 
cancer survivor, so it's a little personal for me. And they 
found that drug companies increased launch prices by 10 percent 
annually or an average of $8,500 per year, even after taking 
into account inflation and the estimated survival benefits of 
the drugs.
    So in your opinion, why are drug companies setting 
astronomical launch prices for new prescription drugs?
    Mr. Anderson. Well, now you get into the issue of Medicare 
part B, and Medicare part B, as we heard, pays the physician an 
initial 6 percent of the cost of the drug. So if you have two 
drugs, one which costs $10,000 and one which costs $100,000, 
and you get 6 percent of that difference, you'd rather have the 
$6,000 than the $600. And so we have a system set up to 
encourage the drug companies to raise their prices so that the 
physicians who prescribe the drug make more money.
    Ms. Wasserman Schultz. Revolting.
    I yield back. Thank you, Mr. Chairman.
    Chairman Cummings. Doctor, how do you deal with that? Dr. 
Roy, I mean, is that your answer?
    Mr. Anderson. So, essentially, it's better than it was 
before. Before, the drug company would set a very high price 
and the doctor would essentially make the difference between 
the high price and the price that they could get it. So they 
limited that profit to 6 percent. And now I think it's time to 
go down and say no profit, because there's no other doctor that 
gets paid additional money when they prescribe something.
    Chairman Cummings. Thank you.
    Questions, Mr. Grothman?
    Mr. Grothman. Okay. A couple of questions. I noticed 
recently that the number of generics that are being approved by 
the FDA each year has gone up. I think in the first--in the 
most recent calendar year, it jumped up to 791. Just a few 
years ago, were going up about 500 a year. I know a lot of 
that--I don't know if a lot of it's coincidence, but I know 
President Trump promised to stand for the pharmaceuticals and 
get more of these generics approved.
    Could you comment on the increase in the number of generics 
that have been approved recently by the FDA, and does that have 
an effect on the overall cost approach in this country?
    We'll take you, Dr. Anderson. We'll start with you, either 
one of you.
    Mr. Anderson. So the answer, it's great that we have more 
and more generics because generics are absolutely much less 
expensive than the brands. What we now have to do, and I don't 
want to bash the PBMs all day, but essentially the brands are 
now paying the PBMs to keep the brand on the formulary and to 
give it a very favorable placement. So we have to take that 
into account now, so we--it's great that we have the generics 
available; we just need to have them on the formularies in a 
very good placement.
    Mr. Grothman. It's important, though, that we keep the 
turnout of new generics up. That overall helps society, right?
    Mr. Anderson. That absolutely does, and there's a whole set 
of things that are making it hard to do so the way the drug 
companies operate. So we--the key thing----
    Mr. Grothman. It's gone up, though, significantly. And like 
I said, under this administration's first year, it was 970, I 
think, and the recent background was only 500 a year. So 
something good is going on over there.
    Mr. Anderson. Something great is going on there. And one of 
the things I testified about three years ago is to do expedited 
review of these drugs, because where there's no competition, 
this was sort of the anti-Martin Shkreli thing that we talked 
about in this committee about three years ago, and that was to 
make sure that generics could be into the market when there was 
no competition, and the FDA has followed up on that.
    Mr. Grothman. Okay. I'll give you kind of a related thing. 
We have these biosimilars. Okay. I want to talk about them a 
little bit. I know some states have passed legislation kind of 
restricting the degree to which biosimilars can be used. I know 
my own state of Wisconsin passed legislation last year signed 
by former Governor Walker to facilitate dispensing and 
substitution of biosimilar products at the pharmacy.
    First of all, I'd like to know, do you know about how many 
biosimilars we have in the United States approved, and could 
you comment, is this a good trend as we make it easier to 
prescribe the biosimilars?
    Mr. Anderson. So I think, unfortunately, we only have three 
or four biosimilars that are active on the market right now, 
and in Europe, they have almost 50. So I think we have a 
serious problem with getting the biosimilars, first of all, out 
in the market, and then when we get them out in the market, for 
the drug--for the PBMs to put them in favorable placement. So I 
think you've got two problems here.
    Mr. Grothman. Do you agree with that, Dr. Kesselheim?
    Dr. Kesselheim. So the FDA has approved about 12 or 13 
biosimilars, but only, as Dr. Anderson said, only about three 
or four are out on the market, and that's because a lot of the 
other biosimilars are being backed up as a result of litigation 
over the patents on them and settlements between the brand name 
and the biosimilar manufacturer that are keeping the 
biosimilars on the market. But I do think that getting 
biosimilars out on the market will help reduce prices a little 
bit.
    Again, there's evidence that they are able to reduce prices 
in Europe. I don't think you're going to see biosimilars reduce 
prices as much as we see generic drugs reduce prices because 
they're not interchangeable in the same way, at least not yet.
    Mr. Grothman. Just like I said, in Wisconsin, they're 
pushing to allow pharmacists to sell more biosimilars, and I 
understand in other countries--in other states around the 
country they're going the opposite way, you know, making it 
more difficult for pharmacists to prescribe them. I wonder if 
you would comment on the political pressures, you know, why 
some politicians like in Wisconsin are pushing more, why some 
would be lobbying against allowing pharmacists to sell more 
biosimilars.
    Dr. Kesselheim. Well, I mean, I think that part of what's 
going on in other states is there is concern about 
automatically substituting biosimilars in the same way that we 
automatically substitute small molecule generic drugs, because 
there are concerns about whether or not that's safe for 
patients to go in that direction.
    Mr. Grothman. Okay. You're being very kind. Just one other 
comment. Somebody said we all agree that more--more 
pharmaceuticals are--are good for our health. I'm not sure that 
our--our life expectancy compared to Europe is that high. I'm 
not sure that necessarily spending all this money is causing us 
to live longer. So that's not an automatic assumption, but 
thanks much.
    Chairman Cummings. Thank you very much.
    Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. And I want to thank 
the witnesses for being here today and staying as long as you 
have.
    Ms. Worsham, first of all, thank you for being here. You've 
taken the pain you've experienced, and as many have said, 
channeled it to a crusade on behalf of others, and we thank you 
for that. I'm curious. Do you feel like the pharmaceutical 
companies, the industry has too much influence up here in 
Washington over how the policy gets made because of the money 
and special interests peddling, and all the rest of it that 
they get to do? I want to get your perspective on that.
    Ms. Worsham. Again, just being a T1D mom, I'm not an expert 
in that area, but again, I'm just asking for a change.
    Mr. Sarbanes. Yes.
    Ms. Worsham. Help, help Americans live, you know, a 
healthy, longer life by reducing the cost of prescription 
drugs, by price transparency. Let us see what's going on 
behind--behind closed doors. Why are the drugs so expensive? 
Knowing one does not bring in that annual salary of how much a 
drug cost. I personally don't myself, even though I have a 
degree, I still don't make that much money. Just again, help 
us, you know.
    Mr. Sarbanes. And we're going to try to do that. One of the 
reasons it is difficult to do that is because these industries 
have a lot of influence on how policy gets made, and when they 
see these changes coming down the road, they--they rev up that 
influence machine, and it has an impact.
    And I want to just give some statistics to the committee 
and to you that I think reflect this. According to the Center 
for Responsive Politics, the pharmaceutical industry spent more 
on lobbying than anyone else, any other industry last year, 
$280 million. In the 2018 election cycle, the industry donated 
over $41 million to Federal candidates and committees. Big 
Pharma had over 1,400, 1,400 lobbyists last year, according to 
the Center for Responsive Politics. So that's three lobbyists 
for each Member of the House. And they're doing their best to 
protect the interest of their clients. I mean, I don't blame 
them. That's what they do, but that's not helping the public 
interest out at all.
    And so I don't think it's any surprise that it's taken so 
long for us to get this right, because when we go to try to fix 
the law, that influence gets in the way and the money gets in 
the way. And I think many of our constituents would say that, 
too often, Congress is leaning in the direction of the big 
money and the special interests and away from the interests of 
the broad public. So we need to do something about it.
    And it's not because people are bad people. People serve 
here, want to do the right thing. But if you develop as an 
institution certain dependencies on money and influence, then 
it's just human nature that you'll start leaning in that 
direction. So we need to try to address that and break those 
dependencies. And you may know, the Democrats are leading an 
effort here in the House to try to strengthen our democratic 
institutions and make them more resilient to the money and the 
special interests so that we can carry out the will of the 
public. And I'm just curious. Do you think we're on the right 
track with that? Do you think that's a good approach, to try 
and reduce the influence that comes from that money that the 
special interests have, the pharmaceutical industry has, and 
try to lift up the influence and the voice of everyday 
Americans like yourself?
    Ms. Worsham. I do agree. I believe that bringing this to 
the forefront is the start. At least it's on the table and 
we're able to see what's going on. Now it's time to--to go 
another step and to enforce price transparency. It's time to 
see, you know, who's getting paid, who can be cut out, the 
middleman, so that we can save more lives.
    Mr. Sarbanes. Thank you for your testimony today. Rest 
assured we're going to keep doing our best----
    Ms. Worsham. Thank you.
    Mr. Sarbanes [continuing]. to try to deliver the right 
results and solutions for people like yourself.
    Thank you, and I yield back.
    Chairman Cummings. Mr. Roy.
    Mr. Roy of Texas. Thank you, Mr. Chairman.
    I want to say thank you to Ms. Worsham. Thank you for 
coming here and telling us that personal story and putting a 
face on something I know is very close and personal to you, so 
thank you for taking the time to do that.
    To all the witnesses, I'm sorry I don't get to question Dr. 
Roy. We live a couple miles apart in Austin, Texas. He might, 
you know, could be my twin brother except, you know, he's not. 
But he's a good friend, and so I wish we could have gone back 
and forth.
    This is an issue that's important to me. It's very 
personal. I, like my colleague who just explained is a breast 
cancer survivor, I'm a survivor of Hodgkin's lymphoma. Seven 
years ago last week I was finishing chemotherapy at M.D. 
Anderson, and I've been cancer free for seven years. I was the 
beneficiary of a great trial drug at the time that, 
brentuximab, which goes in and targets the cancer cells and 
injects antibodies and the poison--rather than carpet-bombing 
your body with poison.
    I say that only to say that--and I think, I assume 
everybody here agrees--you know, we want to make sure that we 
have an environment where pharmaceutical companies are able to 
still go out and engage and do what they do to create the drugs 
that are making our lives a heck of a lot better, whether it's 
the Neulasta shots that were helping my white blood cell counts 
or any of the improvements in drugs that are helping people's 
lives.
    I've got a few questions, if you don't mind, for Dr. 
Georges. Can I ask you how many members AARP has? I have 38 
million. Is that a rough estimate?
    Ms. Georges. Yes, it is, sir.
    Mr. Roy of Texas. Thank you, ma'am. And am I correct that 
AARP as an organization was--opposed the passage of the AHCA a 
couple years ago, the proposal to replace ObamaCare, arguing 
that it would make older Americans have higher premiums and 
smaller tax credits. Is that fair, did you all oppose that?
    Ms. Georges. Sir, what we were very clear on is that it 
included an age tax, and we were concerned that older Americans 
should not be taxed because of their age. And so, of course, 
that is why we did not support it.
    Mr. Roy of Texas. Thank you for that. Just a question. Can 
you confirm that AARP has made approximately $4.5 billion in 
revenue since 2009, the rough time since ObamaCare was passed?
    Ms. Georges. I can't confirm it. I don't have anything in 
front of me, but it is public information, anything that you 
would like to see on the 990's that are filed with the IRS.
    Mr. Roy of Texas. Okay. Thank you. And would you be aware 
that--if you go back to 2011, the information I have is that 
AARP made $458 million in health insurance revenue and it would 
rank its organization as the sixth most profitable health 
insurer. Do you know what that would look like in 2018 data?
    Ms. Georges. Well, first of all, AARP is not a health 
insurer.
    Mr. Roy of Texas. Right. But if you compared it to it in 
terms of the amount of revenue it provides, and I'll get to 
that here in a second, but if that $458 million number--I'd 
like to see the updated 2018 number, if we can.
    According to reports, AARP makes a large royalty percentage 
from United Healthcare, which sells AARP-branded Medigap plans. 
In a 2011 House Ways and Means report, AARP received 4.95 
percent of revenue off Medigap coverage. So essentially we're 
looking at a 4.95 percent royalty for every Medigap policy they 
sold to seniors. Is that accurate, and is that still the case?
    Ms. Georges. I do not have those figures in front of me, 
Mr. Roy, but again, our information about our relationship with 
UnitedHealth is public information.
    Mr. Roy of Texas. Okay. And then are you aware that 
ObamaCare exempted Medigap insurance plans from its reforms, 
including preexisting conditions, leaving about 8 million 
people in that gap? Is that an accurate statement?
    Ms. Georges. I cannot comment on that.
    Mr. Roy of Texas. Okay. And then is it accurate to say 
that--that the AARP in 2016 lobbied, I believe the number was 
somewhere around 77 bills it lobbied, and not one of those is 
in favor of Medigap reform?
    Ms. Georges. I don't have that exact number----
    Mr. Roy of Texas. Okay.
    Ms. Georges [continuing]. about the Medigap.
    Mr. Roy of Texas. Okay. Well, I think one of the reasons 
I'm raising these questions, and we can look at it, is just a 
concern about the extent to which we have a lot of 
conversations in this body about preexisting conditions, and 
what we're talking about here is a significant gap, and with 
respect to the Medigap coverage. And if you look at it and you 
say, well, what has AARP been doing with the amount of money 
it's made over the last decade and how that might have been 
used, I believe AARP was said to have said it would like to 
send every dime it has in order to make sure people are 
covered. There's a pretty big hole there with a significant 
number of people who are left in that gap in the preexisting 
existing conditions coverage.
    So if we're talking about that, I'd just like to have a 
little bit more understanding about the profits that AARP is 
making in its engagement in the healthcare arena and what that 
means for that particular population.
    That's all I have, Mr. Chairman. Thank you.
    Chairman Cummings. Thank you very much.
    Before I go to Mr. Welch, I understand, Ms. Worsham, that 
you have to catch a plane. Let me take a moment to--I know 
every member of this committee would repeat the very words I'm 
about to say to you. Are you listening?
    I thank you so much for taking your pain and turning it 
into a passion to do your purpose. Pain, passion, purpose. As I 
said to you a little bit earlier, the idea that $333 a month 
could have saved the life of your 22-year-old is incredible. 
And I can't imagine as a father, my kids, to imagine one of 
them leaving this earth because of $333 a month.
    And some people could just go out and, after mourning and 
after going through difficult moments of grief, could just 
stand on the sidelines and do nothing. But you've taken your 
pain and you brought it here, and I promise you we will do 
everything in our power. You hear a lot of people talking up 
here about a lot of things. Some of you--I know--I'm sure you 
spent a moment asking, what does this have to do with my 
daughter? My daughter's not here. She's not here anymore. She 
was 22 years old. And I know that every birthday that comes 
along you mourn. Every Christmas you mourn. Every time you hear 
about somebody having a baby, you say, oh, my daughter might 
have been having my grandchild by now.
    We understand, and we feel your pain, and so I just want to 
thank you for coming. And the thing, you know, that really gets 
me, Ms. Worsham, is when you told me that you've got another 
daughter that could face the very same thing. But I'm going to 
do everything in my power, and we will do everything in our 
power to make sure that we save her life. We do not know what 
gifts your daughter who passed would have brought. She had 
gifts to bring, but those gifts got snuffed out. And so now we 
must concentrate on the living, and I promise you, I promise 
you, we'll give it everything we've got, okay?
    Ms. Worsham. Thank you.
    Chairman Cummings. You may leave if you need to. I don't 
want you to miss your plane. No, I don't want you to do that. 
And I know that the chairman who was from Ohio, he had to leave 
for a minute, would agree with me. We want you to get back to 
Ohio, all right?
    Ms. Worsham. Thank you.
    Chairman Cummings. May God bless you.
    Ms. Worsham. Thank you. Likewise.
    Chairman Cummings. Mr. Welch.
    Mr. Welch. Thank you. Mr. Chairman, you did speak for all 
of us. And, Ms. Worsham, thank you.
    Ms. Worsham. Thank you.
    Mr. Welch. We'll let you get a minute to gather yourself 
and make that plane.
    Ms. Worsham. Thank you. I just want to say thank you to 
everyone. I just want to say thank you to everyone. I know 
there's rules and there's regulations and there's policies, but 
we want to save more lives. It can be done, and you are the 
people to make it happen. I'm just a voice for people, as well 
as having another daughter who is enduring the same thing, and 
she's scared. And me speaking is making her scared. But just 
figure out how we as American people can live longer and 
healthier lives. That's all we need to figure out.
    Mr. Welch. Thank you.
    Ms. Worsham. God bless you all.
    Chairman Cummings. God bless you.
    Mr. Welch?
    Mr. Welch. Thank you. First of all, Mr. Chairman, thank you 
very much for this hearing. And, Ranking Member Jordan, thank 
you as well.
    I just want to make a quick observation. There's two issues 
that we've been talking about. One is about trying to bring 
down the cost of prescription drugs that are high because of a 
broken down market. A subtext here has been relitigating some 
of the disputes we've had about ObamaCare, and that will 
continue, but my hope is that we'll be able to work together, 
Mr. Chairman and Mr. Ranking Member, on these broken market 
elements that have been brought up by both people on both sides 
of the aisle, because what's happening with Pharma is that, 
you've explained very well and Dr. Roy explained, the market is 
broken and is being exploited by those who are in a position to 
raise prices without any restraint.
    Just a couple of things. I want to just reiterate--it's 
late--on some of the things we can do to bring down prices that 
don't in any way affect innovation. One, stop evergreening. Any 
disagreement there? No. 2, stop pay-for delay. Any dispute 
there? No. 3, stop this bogus transfer of a patent to a Native 
American tribe so they can assert sovereign immunity. Any 
problem there? No. 4, stop this abuse of the redistribution 
network so that generics don't get access to the product in 
order to come up with a generic alternative, something that Mr. 
Gibbs talked about. Any disagreement there?
    Next, getting rid of this exploitation of the orphan 
designation that results in the congressional grant and 
incentive for orphan drugs to be used for non-orphan drugs. Any 
reservation about us acting on that? And then finally, what 
about price negotiation, letting the purchaser who buys 
wholesale not have to continue to pay retail? Any problem with 
that?
    All right. Now, transparency. I want to go to the PBM. The 
PBM creates a formulary, and that's a list of drugs that are 
preferred, correct? Is there any transparency about what drugs 
are in that formulary? I'll start with you, Dr. Anderson.
    Mr. Anderson. No, there is not. I mean, well, we know after 
the fact which drugs are in the formulary. So if you go on the 
Medicare website and you look at a PDP, you can see what they 
are. You don't have any idea why those were chosen.
    Mr. Welch. Let me interrupt here, because one of the 
concerns people have raised, Pharma companies have raised about 
price negotiation, including a formulary, is that that would 
limit access. But isn't it the case that if you have a 
formulary that is determined by a PBM and their interest is 
maximizing their profits, the prospect of their formulary 
limiting access far exceeds the public interest formulary?
    Mr. Anderson. Well, I think what you've got to look at is 
the VA formulary which negotiates prices. And you compare it to 
the typical Medicare formulary which has the PBM or PDP 
involved, and they're about half as large as the VA 
formularies. So the VA formularies has more options, twice as 
many options, as the typical Medicare beneficiary has.
    Mr. Welch. That's great.
    Dr. Kesselheim, how about you?
    Mr. Kesselheim. Yes. I think that more--I mean, I think 
that getting on the right page about what the formulary should 
be and which drugs should be on the formulary and which drugs, 
you know, perform the best and why drugs should be on there and 
not be on there, I think that that's--that is the kinds--those 
are the kinds of decisions and issues that PBMs look at, and I 
think that that's also something that government payers when 
they set the formularies like the VA also look at.
    Mr. Welch. All right. Then the final question. Is there any 
other government that you're aware of that doesn't play a role 
in protecting consumers, taxpayers, and employers from the 
pricing practices of the pharmaceutical industry?
    Dr. Kesselheim. I know in other countries the government is 
involved in determining what is a--what is a reasonable price, 
and actually, throughout Medicare too, I mean, without--
throughout all of Medicare, Medicare sets a reasonable price or 
negotiates a reasonable price for all services, physician 
services, x-rays, all services, colonoscopies. Drugs is the 
only part that they don't actually do that.
    So even within our government, our government is involved 
in setting prices for everything. Nobody talks about like, you 
know, R&D deficits in colonoscopies or whatever, right. So I 
think that it's both not only in other countries, but actually 
in ours too.
    Mr. Welch. Well, I thank you. My time is up, but I want to 
compliment the panel on an excellent presentation.
    Chairman Cummings. Mr. DeSaulnier.
    Mr. DeSaulnier. Thank you, Mr. Chairman. Thank you, Mr. 
Ranking Member, for this hearing. Sorry. I think for all of us, 
we wanted to be here for this hearing and this amazing panel.
    So Mr. Welch did the really detailed stuff. I'd like to 
talk about three areas that are much broader but have 
historical context. So it all is based on how the culture has 
changed. There's a wonderful book from 2008 by Melody Petersen, 
I think, Our Daily Meds. And in that book she describes how the 
culture of the pharmaceutical industry changed from the fifties 
and sixties where it used to be a researcher became the CEO. A 
physician was--physicians were on the board of directors if 
they were publicly traded.
    And then her history shows that, like a lot of investments 
in our country, when venture capitalists came in, and I'm not 
against venture capitalists, but the rate of return was 
expected to be higher, and it's changed, and then we went into 
the marketing. So we haven't always allowed this level of 
marketing. It used to be illegal to do television ads. I think 
New Zealand and we are the only two countries, and Canada has 
it, so we know that they spend billions of dollars on that.
    If that was redirected back into a portion of research and 
development, it would still attract a return on investment, and 
it seems like this is just marketing. I had a bill when I was 
in the legislature that was copied on a successful bill in 
Washington state, where in Washington they had the state health 
officer and the Washington--University of Washington post on a 
website what their interpretation of the accuracy of TV ads for 
pharmaceuticals were. I couldn't get that passed even in a 
democratically controlled statehouse in California because of 
the influence of the pharmaceutical industry.
    So transparency, strikes me, would be helpful here both for 
the physicians but for the customers. Dr. Kesselheim, could you 
talk about transparency both from a physician standpoint, but 
also from a client standpoint?
    And the other part of my comments here is personal. I have 
a form of noncurable leukemia. Fortunately, 15 years ago, 
medical researchers in the Department of Defense and at NIH 
came up with treatments, so I take a pill every day and it 
keeps me alive, and it costs about $10,000 a month, and I have 
good health insurance. It's not because I'm a Member of 
Congress, I should add. So it's both personal--and trying to 
negotiate with my physician and my oncologist understanding why 
these things were happening was a challenge for me.
    So how do we help the client and the physician and still 
attract a reasonable rate of investment that I think is 
exaggerated right at this point?
    Dr. Kesselheim. Well, I mean, I think that certainly the 
pharmaceutical industry has been among the most profitable 
industries in the United States, you know, throughout the last 
few decades. And so the rate of return they're getting is 
quite--has been quite sufficient.
    But I mean, I think your point on transparency is well 
taken. I think that the most important thing that patients and 
physicians need is transparency about how their drug works and 
what they expect to see with their drug, what side effects they 
expect to see with their drug. Why their drug costs so much is 
another aspect of transparency. And I think that that's what 
this committee is doing by trying to get information from the 
pharmaceutical industry and try to answer these questions as to 
why drugs are priced the way they are and why drugs increase in 
price, and, you know, how these decisions are made, and then 
that can help us figure out how to, you know, try to, you know, 
ensure that there is appropriate--you know, the appropriate 
competition and appropriate markets and that the decisions are 
made in the appropriate way, and where they aren't, then there 
are ways maybe that Congress can get involved.
    Mr. DeSaulnier. So what's the rate of return, you think, in 
the sweet spot if you were--if you were a market enthusiast 
like Dr. Roe? I want private sector investment, but I don't 
want it so extreme, especially when I know, for instance, my 
medication, the most of that work was done with public taxpayer 
dollars. So I have asked this and have worked with the National 
Academy of Science and others to try to figure out what's a 
reasonable rate of return to get investors to invest, because 
we want them to do that but not so much that they obscure the 
efficiency of a marketplace, a mixed marketplace.
    And then last, it strikes me that we didn't always like--we 
didn't always allow stock buybacks. We could at least in this 
field, say, restrict it so that at least a portion of it goes 
back to research and development.
    Dr. Kesselheim. Right. I mean, I think, you know, so the 
large pharmaceutical companies make about, you know, a 20, 22 
percent profit margin as opposed to the average Fortune 500 
company makes more like a 7 percent profit margin. So again, I 
think it is an open question as to what exactly the right rate 
of return should be. I think that ultimately what we should be 
doing is asking about where the return should go. And right 
now, the pharmaceutical market is set up such that, you know, 
small changes, not valuable products can get out in the market 
and can--and pharmaceutical manufacturers can make more money 
in selling those products because there's less risk in the 
development of them. And we want to try to incentivize the 
pharmaceutical manufacturers and venture capitalists and 
whoever is investing to invest in the products that we need the 
most for patients in the public health.
    Currently in our system, in our broken system, we don't 
really do that because it's so--it can be so easy to just make 
a small tweak to an already existing molecule and make outsize 
profits on that.
    Mr. DeSaulnier. And just to conclude--thanks for the 
indulgence, Mr. Chairman--in my case, I'm told that my disease, 
which is the most common blood cancer, they have field trials 
right now that can cure it, but the market, it sort of seems to 
be counterintuitive. If somebody's making $10,000 a month off 
of keeping me alive but not curing it, why would be the 
incentive to cure it? So anyways, thank you.
    Thank you, Mr. Chairman.
    Mr. Anderson. Hopefully it's a different company that will 
come up with that.
    Mr. DeSaulnier. I'm hoping for that.
    Chairman Cummings. Mr. Khanna.
    Mr. Khanna. Yes. Thank you, Mr. Chairman. Thank you for 
your moral leadership and having this panel. I'm pleased to 
follow Representative DeSaulnier and his powerful personal 
story and sharing that.
    My colleague, Representative Comer, said earlier today that 
he's concerned that government would have more of a role in 
medicine, and his concern is that if government has more of a 
role in medicine, it may hurt, as he put it, our innovation. 
I'm hoping, Dr. Kesselheim, that you can put him at ease with 
facts, because as I understand it, my colleague, if he cares 
about innovation, should actually be cheering for government to 
have a bigger role.
    I know you're familiar with the study that shows that 
between 2010 and 2016, of every drug, all 210 drugs that were 
approved by the FDA were funded by the NIH or public money. Dr. 
Kesselheim, can you speak, because you're such an expert in 
this area, about the role of public dollars in innovation and 
your judgment about whether the public investment is more 
responsible for innovation or the private pharmaceutical 
companies?
    Dr. Kesselheim. Well, I mean, so the study that you're 
referring to is an important one, and it showed that all drugs 
that come out of the market in some way can be linked to NIH-
funded research that helped, you know, understand the enzymatic 
pathway or understand the mechanism of action of the drug, you 
know, and do some of this basic research and this translational 
research that occurs in the laboratories. And I think that 
that's an incredibly important role that the U.S. Government 
plays in funding that research, and that helps float all boats. 
All drugs come out of those.
    There are some drugs in which the U.S. Government 
investment even goes further, and there's development and 
isolation of the compound by NIH-funded research. Usually, 
though, at some point in this translational process, the 
pharmaceutical manufacturers get involved as well at a later 
stage and then a lot of--there's a lot of investment in the 
pharmaceutical manufacturers as well for a number of products 
at the later--at a later stage as well. I think the most 
important thing is both to make sure--to understand that the--
that the public investment, you know, expands throughout the 
entire pharmaceutical space, but also that the--that private 
industry plays an important role as well, and we need to make 
sure that there is appropriate balance between the two and 
recognition of the public role, particularly as it relates--and 
we did the study showing particularly as it relates to 
transformative drugs and the most important new drugs that it 
tends to be public funding that takes those products, you know, 
all or sort of much of the way through the development.
    Mr. Khanna. Would it be fair to say that most of the 
foundational research is being done with public dollars and 
that--I mean, this is just sort of common sense. If you know 
the people who go do their M.D., Ph.D.s and want to win Nobel 
prizes, they tend to go to universities, not becoming general 
counsels or vice presidents at pharmaceutical companies. I 
mean, is that not your experience?
    Dr. Kesselheim. Yes. And actually, I think that's happening 
more and more. It used to be the case that a lot of large 
pharmaceutical companies had really big research arms. But in 
recent years, a lot of those companies have divested from those 
research arms and instead are looking for the research that's 
coming out of the academic settings.
    And I want also to bring back to what other people have 
said earlier in this hearing about the need for a financial 
incentive. And actually, a lot of these people at Harvard and 
at Johns Hopkins, you know, a lot of these scientists go to 
work every day, and their incentive is to try to cure disease 
and to make people better and to progress--and to, you know, 
develop the progress of science and, you know, they're not 
thinking about whether or not they can become a billionaire or 
whatever. That's the incentive.
    Mr. Khanna. What an odd concept, right? I mean, like 
Members of Congress, I mean, don't you think here most people 
would think they don't want to make just a billion dollars, 
they're in it for the public good? What an odd concept that 
someone else may have a similar view.
    Let me just digress one comment that Dr. Roy made and then 
have the panel address it. I was a little perplexed because Dr. 
Roy said that the FDA comes up with these difficult standards 
and that government then is unable to meet those standards. 
It's like saying a high school calculus teacher is capable of 
making a high school exam but wouldn't be capable of passing 
that exam. How can government be competent enough to come up 
with the standards and then you're arguing that government 
isn't competent to meet those standards? Was it something I was 
missing in that argument or is it just defies common sense?
    Dr. Kesselheim. I mean, you know, the FDA is doing its best 
to try to make sure that when drugs are approved, they're as 
safe and as reliable as possible. And, in fact, the FDA is the 
fastest drug regulatory agency in the world. So to--you know, I 
think that--I don't think that it's right to blame the FDA. The 
FDA is there to help and is actually helping drugs get to the 
market but want to make sure that when those drugs get to the 
market, that patients and physicians can rely on them being 
interchangeable and can rely--you know, to rely on them to help 
the conditions that they need.
    Mr. Khanna. Thank you. I see my time has expired.
    Chairman Cummings. Thank you.
    Ms. Ocasio-Cortez.
    Ms. Ocasio-Cortez. Thank you, Mr. Chairman, and thank you 
all as our panelists here for lending your expertise and your 
insight to help us better legislate, and especially thank you 
to Dr. Georges as a professor at Lehman College for 
representing the Bronx so well here in this body.
    I have a question I wanted to continue a little bit on my 
colleague from California's line of questioning about public 
investments in research and development. You know, I guess you 
would say that this is--would it be correct, Dr. Kesselheim, to 
characterize the NIH money that is being used in development 
and research as an early investment?
    Mr. Kesselheim. Yes.
    Ms. Ocasio-Cortez. So the public is acting as an early 
investor in the production of these--in the production of these 
drugs. Is the public receiving any sort of direct return on 
that investment from the highly profitable drugs that are 
developed from that research?
    Mr. Kesselheim. No. In most cases, there is--when those 
products are eventually handed off to a for-profit company, 
there aren't licensing deals that bring money back into the 
coffers of the NIH. That usually doesn't happen.
    Ms. Ocasio-Cortez. So the public is acting as early 
investor, putting tons of money into the development of drugs 
that then become privatized, and then they receive no return on 
the investment that they have made?
    Mr. Kesselheim. Right.
    Ms. Ocasio-Cortez. Dr. Anderson, I have a question. Since 
you studied comparative insurance systems, are there models 
where the public--where the public does receive returns on 
investments in other insurance--in other insurance models 
across the world?
    Mr. Anderson. There are a few, but they're relatively 
uncommon.
    Ms. Ocasio-Cortez. And how does that tend to work?
    Mr. Anderson. So, essentially, if the places at the U.K. or 
some place like that have invested money in it, they will get 
some rate of return on those investments, but that, again, is 
relatively uncommon.
    Ms. Ocasio-Cortez. I also have one question for Dr. 
Georges, and please stop me if my--if I'm going out of the 
scope of your expertise. As a nurse, in your experience as a 
nurse, do you have knowledge of the VA, general knowledge of 
the VA and how the VA works?
    Ms. Georges. I have some knowledge.
    Ms. Ocasio-Cortez. And in your experience, is the VA as a 
public owned and operated--operation, rather, are the drug 
prices in the VA lower or higher or the same as what we see----
    Ms. Georges. Well, that I can't speak to. I don't have that 
kind of knowledge.
    Dr. Kesselheim. They tend to be much lower than in other 
places in the country.
    Mr. Anderson. About 31 percent lower than what Medicare 
pays.
    Ms. Ocasio-Cortez. So the VA tends to be lower. And can you 
explain why, anyone on the panel, why that is?
    Dr. Kesselheim. Well, in part because the VA gets some 
automatic statutory rebates based on the drugs that it buys, 
but also because the VA negotiates on behalf of all of the 
members of the VA and is able to use its marketing power to try 
to negotiate that. And also because it takes a very thoughtful 
approach to developing its formulary and can use inclusion on 
its formulary as another way of trying to negotiate a fair 
price for the product.
    Ms. Ocasio-Cortez. So you would--so you would say, and am I 
correct in saying, that the VA is using collective bargaining 
power in the market to lower the price of drugs as a counter to 
some of the for-profit or profit motive pressures, upward 
pressures from the cost of pharmaceuticals?
    Dr. Kesselheim. Right. Yes.
    Ms. Ocasio-Cortez. Okay. Great. And I guess one last 
question in my remaining time. If you all could ask us, you 
know, to act, as Members of Congress, and do one thing, one 
action, what would that action be?
    Mr. Anderson. So I think, for me, it's external reference 
prices, and that's something that President Trump has proposed 
in Medicare part B, to pay 126 percent of what the other 
countries do. I'm not sure I would agree with the countries 
that he chose, but essentially to pay 123 percent. If right 
now, you know, in the Medicare part D, which is most of the 
money, we pay about three to four times what other countries 
pay for the same drugs. I don't think we can bring it down to 
what they pay or 126 percent of it, but we can bring it down a 
lot.
    Dr. Kesselheim. I tend to think external reference pricing 
is not a good idea, and I think that what we should do is 
actually get our own house in order and negotiate and try to 
evaluate the value and comparative and cost effectiveness of 
drugs better in the U.S. and try to determine what the right 
prices for U.S. patients, rather than relying on what the 
prices are in other countries. But so if I could say one thing 
that we could do, I think it would be to, again, try to develop 
a system where the government could try to identify what the 
fair price is for a drug and what are reasonable prices for the 
drug based on the value that the drug provides to patients and 
then use that to negotiate with the pharmaceutical manufacturer 
to try to get a more effective price that we provide.
    Ms. Georges. We in AARP would like you to have HHS be 
allowed to negotiate lower drug prices on behalf of Medicare 
beneficiaries.
    Ms. Ocasio-Cortez. Thank you. Thank you all so much.
    Mr. Chair, I yield my time.
    Chairman Cummings. Thank you very much. Thank you.
    Ms. Pressley.
    Ms. Pressley. All right. Thank you, Mr. Chairman. It is a 
testament to you, Mr. Chairman, that the first matter on our 
docket, the priority of this committee was to lift up lived 
experiences, the struggles, the perspectives, or the expertise 
of real people. Although Ms. Worsham had to leave for her 
flight, I do very much appreciate your centering our first 
hearing squarely on her lived experiences and struggles.
    Yesterday, a number of my colleagues, in fact, Rep. Tlaib 
and some others, we had a conference convening on the state of 
mamas, and based on Ms. Worsham's testimony, it is a reminder 
that there are many mamas that are worried about their babies. 
And we mourn the loss of Antavia. And there are millions more 
like her whose health is threatened and whose lives hang in the 
balance because of a tiered for-profit healthcare system 
because of greed. We have the right to healthcare, to afford 
life-saving medications. To remain alive, it seems, is up for 
debate.
    This is the Oversight and Reform Committee. Our chairman 
reminds us that we are here to seek the truth. Today we have 
heard it. And one of the most common hardships that we've heard 
throughout the recent shutdown of the Federal Government is 
that so many people are already living in the margins and on 
the precipice because of the fight for a living wage, because 
of stagnant wages and rising rental costs. They're already 
struggling to meet basic needs. And on top of that, cannot 
afford insulin, EpiPens, blood pressure medication.
    What we need is a complete reframe of our infrastructure, 
and we need to commit to more than just health insurance but 
true healthcare, and that includes access to affordable life-
saving medications. But until that day, I look to this panel 
for your continued expertise and your insight and observations. 
The gentlelady of New York asked my question, which was to seek 
your prescription other than our brewing transparency and 
rooting out the pervasive greed which is in abundance in this 
industry. There's no denying that.
    So if, indeed, the role of this committee is to root out 
the truth, soon enough, we'll know whether or not we are 
willing to do the bold work necessary to realize--to live out 
our truths, our ideals as a Nation.
    Ms. Pressley. So my question, since we heard from patients, 
and we talked about the companies, the drug companies, is I 
want to talk about the impact on providers. And in turn, what 
is that impact on patient care? I represent the Massachusetts 
7th. There are 15 community health centers in my state. There 
are 52 community health centers. And so they serve the most 
vulnerable, low-income, communities of color. And so, I was 
wondering if you could speak about what that impact is. And we 
will start with Dr. Kesselheim, who is in my district. I thank 
you very much for your incredible issues. And so could you 
speak to the impact on providers?
    Dr. Kesselheim. Sure. I mean, I think that it is a really 
important issue. I think, unfortunately, providers don't know 
enough about the costs of the drugs that they prescribe. But in 
many cases, you know, the drugs that they might prescribe, and 
they set a treatment plan for a patient, and then the patient 
goes to formulary and the drugs are unexpectedly high, the 
prices of the drugs are unexpectedly high, and the patient is 
not able to fill the prescription, and then as a provider, 
you're stuck, and you need to then work again with the patient 
on a different mechanism to try to treat their condition. And 
that can make things very difficult for the patients who you're 
trying to take care of.
    Ms. Pressley. And since they are serving our most 
vulnerable is this exacerbating and contributing to existing 
health disparities? And also, is it resulting in reduced 
staffing levels, which is also impacting patient care?
    Dr. Kesselheim. Absolutely it does. I mean, it takes time, 
it takes additional nurses, it takes additional pharmacists 
onsite at these places to try to deal with all these issues, 
and to try to understand, why this drug costs this much? And 
how are we going to get this patient the drugs that they need? 
What systems are there that we can rely on? What backups to 
those backup systems? And it is a very complicated and very 
challenging process for patients and then providers are doing 
the best they can to help patients through that.
    Mr. Anderson. Let me tell you a story about Maryland 
hospitals, we have a rate-setting commission. We can't grow 
more than three percent per year in Maryland in terms of 
hospital spending. And as a result of that, when the drug 
companies increase their prices by eight or 10 percent, we have 
to find some other way to live within that three percent. So we 
have to let off nurses, or we have to do something else in 
Maryland in places like Johns Hopkins in order to combat the 
higher prices for pharmaceuticals.
    Ms. Pressley. Thank you. I now have a question for you, Dr. 
Georges. Could you just speak to any--sort of antidotally, to 
any other, what you've seen on the front lines in terms of 
tough choices that older Americans are making?
    Ms. Georges. Yes. What older Americans are doing are making 
choices between food and drugs. And that's a shame. They've 
lived long, they've worked hard and that's--the price is 
unsustainable, the drug prices. As Dr. Kesselheim also said, 
one of the issues that we find then, add nonadherence to the 
medical regime setup, which, in turn, slows down any recovery, 
any restoration or any maintenance of their health. So what 
we're doing is we're looking at choices: Do I live in a more 
healthy life? Do I need to eat? Who's going to pay my rent? And 
those are unacceptable for us in America today. We cannot 
continue these unsustainable prices.
    Ms. Pressley. Something I heard, I'm sure you've 
experienced this, but in my district, that not only were people 
scoring medications, but they were also sharing medications, 
which is incredibly dangerous. Is that something that you're 
hearing as well?
    Ms. Georges. Right. And what people are doing not knowing, 
because they are not the physician, they are not the primary 
care provider, so they don't know for sure that the medication 
they are going to share is really--has the efficacy that the 
physician is expecting for that patient. But people are 
desperate.
    Chairman Cummings. Thank you very much.
    Ms. Pressley. Thank you.
    Chairman Cummings. Ms. Tlaib.
    Ms. Tlaib. Thank you so much, Mr. Chairman. I would like to 
thank you so much for your leadership, leadership with 
compassion. And to repeat what my colleague from California 
said, your moral leadership. This is so critically important. 
As you know, I think all of us, as we were hearing rumors about 
the possibility of Mr. Cohen testifying before us, I've got to 
tell you, it was incredible that our first person to speak 
before this, my first official committee hearing, is to have a 
mother like myself, Ms. Worsham, who is facing such a crisis 
right now in regards to access to insulin for her only living 
child.
    According to the report from the Centers for Disease 
Control and Prevention as of 2015, more than 100 million 
Americans had diabetes or prediabetes. And the American 
Diabetes Association says that about 1.25 million people have 
type 1 diabetes. And there are over 400,000 adults, Mr. 
Chairman, 21 years old and older that live in Wayne County, 
Michigan in my district, that are high risk for diabetes. And 
in Detroit, the number is over 150,000.
    People with type 1 diabetes, therefore, depend on insulin 
to live. I'm so sorry to see Ms. Worsham leave and I wanted to 
talk to her more, but for those that are here, thank you. I 
just wanted you to know that when I read that three companies, 
Norvo Nordisk, Eli Lilly, and Sanofi-Aventis, hold 99 percent 
of the global market for insulin, and there is no generic 
version. We've seen insulin prices nearly triple from 2002 to 
2013 and drug companies have continued to raise prices since 
then.
    Dr. Anderson, I know that you work with your colleague at 
Hopkins, Dr. Jeremy Greene, who has done a lot of work in this 
area. In your opinion, why have drug companies taken this 
dramatic price increase for insulin? I know my colleague from 
Boston pretty much called it corporate greed. That would be my 
answer. But I'm here to learn, and possibly maybe you have a 
different answer, but I'd enjoy to know what that is.
    Mr. Anderson. So you have a market of 112.5 million people, 
and you want to continue that market. And, you know, if the 
drug becomes a generic, you lose that market. So you're going 
to do everything you can in your power as a drug company to 
continue that market, and they do patent things, they do orphan 
drug activities. They do a whole variety of things that the 
Congress could stop them from doing, if they took appropriate 
action. So there's a number of things that you could choose to 
do, if you did, and make those drugs for diabetes available 
much--in the generic form and much quicker.
    Ms. Tlaib. One of the things--I have the 13th congressional 
district in Michigan, third poorest congressional district, 
very diverse. The majority of my residents being Black 
Americans in this country, and which we know research shows 
over and over again that almost twice as likely to be diagnosed 
with diabetes. Dr. Kesselheim, you're a primary care physician, 
I believe, correct? How are the high insulin prices affecting 
the patients that you treat, in particular, patients that come 
from communities of color?
    Dr. Kesselheim. Yes, it's a really important issue. More 
and more people are struggling with the prices. And I think the 
story you heard from Ms. Worsham is terrible and heartbreaking, 
but it's repeated in many different practices where people are 
noticing that patients are struggling with the prices of 
insulin.
    I would point out that we actually have a study out this 
week in JAMA where we looked at a health system that 
substituted older human insulins for the newer versions, and 
found that patients did just as well and spent a lot less 
money. And it just kind of shows you that substituting older 
products that maybe aren't in vogue because they don't have all 
the bells and whistles of the new products, but they work just 
as well clinically, could be a really good alternative.
    And I know that there was a bill in Congress last year 
about setting up a government system to produce insulin for 
patients who need them and then to sell it at cost. And if 
there was a system in place, to try to fill that market niche 
of these potentially older products, that might work just as 
well, but could be available at a cheaper price, I think a lot 
of patients would benefit from it and a lot of physicians would 
use it because they are observing what you're saying, which is 
this, you know, issue where a lot of people are struggling with 
the cost of the product.
    Ms. Tlaib. Thank you so much. This is a question that's a 
little different, but, you know, this is the first time that 
I'm hearing that there's tax deductions for ads run on TV for 
drugs. I'm a little taken aback by that. Do you know what the 
rate there is? How much can we save by taking away that tax 
deduction?
    Mr. Anderson. I do not know, but we can find that out for 
you.
    Dr. Kesselheim. Absolutely.
    Ms. Tlaib. Thank you, Chairman. I yield my time.
    Chairman Cummings. Thank you very much.
    As we go to Ms. Maloney, I want to thank our freshmen for 
embracing Ms. Worsham. I thank you. I--if my knee wasn't bad, I 
would have been down there. But thank you, because so often, 
people see government as distant from them, and when they feel 
that you have the humility to touch them, and that they can 
touch you, it makes a big difference.
    With that, Mrs. Maloney.
    Mrs. Maloney. Thank you so much, and I share your same 
sentiment. It was really wonderful to see the enthusiasm, and 
the warmth, and the caring of our new freshmen, and for staying 
and participating and being so supportive to Ms. Worsham. And I 
want to thank you, Mr. Chairman, for calling this incredibly 
important hearing, and all of our panelists, especially Dr. 
Georges, who is from the great city of New York, which I have 
the honor of representing a portion of it. And we're very proud 
of your professional career and your testimony today.
    I found Mrs. Worsham's testimony really a national scandal 
that a child could die because they could not afford the 
insulin, or they did not get the insulin they needed, 
particularly since it's been around for 100 years. And the 
creator, Dr. Frederick Banting, he sold it for $1, because he 
wanted it to be affordable. And I want to go to your point that 
you made, Dr. Kesselheim, that we should go back to the 
original products, they work. Maybe they are not as good as the 
new brand names, but if you can't afford the brand names, then 
it could save lives.
    This past weekend, I was at a conference at Mount Sinai 
with doctors in my district, and they told me that insulin is 
not available, the generic insulin. And they say it works, they 
want it, they want access to it. It's not available in New York 
City. The only place they can find nearby selling it is 
Walmart. They are selling insulin. But all of the pharmacies 
are not selling it. And the doctors aren't prescribing it. Now 
you could argue the new brand is better, but if you can't 
afford the new brand, the old brand works, just the point that 
you said. So how can we get the insulin that works and is 
affordable, the generic brand, out there to the people in the 
pharmacies? And Dr. Kesselheim or Dr. Anderson, if you could 
both answer that.
    To me, I find it scandalous that the generic is available, 
but people can't get access to it. And the doctors in New York 
are saying, Can you tell us how we can get it? Is it 
affordable? We want the generic, but the drugstores are not 
selling it. Can we require them to sell it? How can we get this 
lifesaving insulin out in an affordable way to people that need 
it?
    Dr. Kesselheim. So I would say not only that, the study 
that I was just talking about that came out in JAMA today shows 
that the older insulin actually does work just as well.
    Mrs. Maloney. That's what the doctors were saying, so why 
isn't it available?
    Dr. Kesselheim. It's not. So one of the reasons it's not 
available is that people aren't producing it and making it as 
available. And so as I just had said a few minutes ago, one of 
the things that the government could do is try to step in and 
produce the product itself, given the fact that this is such a 
widespread problem and a major public health crisis, this 
market failure where there isn't enough product of this--of 
this sort of older----
    Mrs. Maloney. Dr. Anderson.
    Dr. Kesselheim [continuing]. off patent being available, 
maybe that's one mechanism to try to address the issue.
    Mr. Anderson. Another mechanism we have is really a private 
sector response, and that's something that we are doing with a 
number of hospitals, and it's called Civica Rx, and what it is 
is a nonprofit drug company that's being established, started 
at Intermountain Healthcare, but about 10--1,000 hospitals who 
have joined up, and they are going to start making things like 
the insulin out there to compete against it. Because the 
problem that you have right now is that if you competed against 
it, somebody will lower the price and your initial investment 
doesn't make sense. But if you can get a guaranteed market by 
these hospitals, they will make the drug.
    Mrs. Maloney. Well, according to this article in The New 
York Times on the insulin wars, it says the three drug 
companies are now under a lawsuit because of price fixing, 
running the prices up, not making affordable drugs available. 
This is outrageous that this is allowed to happen in this 
country. And I hope the chairman will call all three of them in 
for a hearing to testify on why they are not making insulin 
available at an affordable price. And this goes on. What is 
going on, it sounds like the wild west. There are no rules, no 
regulations. They can raise prices higher than the hospitals 
can. They can do whatever they want, these drug companies. And 
I haven't heard any type of responsibility. Can you give me 
some understanding on why three drug companies can fix prices, 
take off affordable items that can save lives? Doctors, all 
three doctors? Does anyone have any answer to that?
    Chairman Cummings. This is her last question to you. Does 
anyone have an answer to that?
    Dr. Kesselheim. It shouldn't be--I mean, again, this is 
something the FTC should look into if there is evidence of--you 
know, you can see actually if you look at the historical 
insulin prices from the three companies, that they do kind of 
go up in lockstep over time. And so, you know, I think that's 
something for the committee to look into.
    Mrs. Maloney. Now another question, when you were 
testifying that PBM that they came out with their formulas, and 
they're formulating things that they put out there, why can't 
you require that insulin be part of those formulating things 
that they put out, doctors?
    Mr. Anderson. Well, they are part of it, but----
    Mrs. Maloney. But not the generic.
    Mr. Anderson. Not the generic. So----
    Mrs. Maloney. But can't we require them that the generics 
be part of it?
    Mr. Anderson. You could.
    Chairman Cummings. Thank you very much.
    Mrs. Maloney. Thank you. I yield back.
    Chairman Cummings. Ranking Member Jordan.
    Mr. Jordan. Dr. Anderson, are prescription drug costs are 
too high?
    Mr. Anderson. I think from affordability point of view, 
yes. The fact that Ms. Worsham and others can't afford those 
drugs----
    Mr. Jordan. How about healthcare costs in general? Are they 
too high?
    Mr. Anderson. Yes, they are.
    Mr. Jordan. And have they trended--like, if you look at the 
last decade, is the trend up on both prescription drug costs 
and overall healthcare costs, insurance costs, hospital costs? 
Are they all turning up?
    Mr. Anderson. Unfortunately, they are all going up.
    Mr. Jordan. All trending up.
    What was the single biggest change to the American 
healthcare system over the last decade?
    Mr. Anderson. Probably the Affordable Care Act.
    Mr. Jordan. Probably the Affordable--I would probably get 
rid of the word ``probably.'' I would say the Affordable Care 
Act, right? And yet, every single thing in healthcare continues 
to go up?
    Mr. Anderson. Correct. And it was going up before. We were 
number 1 in terms of----
    Mr. Jordan. I'm asking about before. I am asking in the 
last day--how long ago was the Affordable Care Act passed?
    Mr. Anderson. It was passed in 2010.
    Mr. Jordan. I believe it was March 2010. Is that right?
    Mr. Anderson. Yes.
    Mr. Jordan. March 2010. So nine years ago, and everything 
continues to go up. How can that be?
    Mr. Anderson. Well, what I look at and I wrote a paper that 
just came out in the Journal of Health Affairs and looked at 
what's the trend over last 10 years.
    Mr. Jordan. No. I mean, how can that be in light of what we 
were----
    Mr. Anderson. Let me explain.
    Mr. Jordan [continuing]. in light of what we were told, Dr. 
Anderson, because we were told this was the cat's meow, this 
was the end-all, be-all, greatest thing in history. How can 
they all--everything in healthcare continued--the price 
continued to go up. When we were told they were all going to go 
down. Premiums were going to decline, Dr. Anderson.
    Mr. Anderson. I hear you.
    Mr. Jordan. You liked your plan, you were going to get to 
keep your plan, Dr. Anderson.
    Mr. Anderson. And I have.
    Mr. Jordan. If you liked your doctor, a doctor like Mr. 
Kesselheim--Dr. Kesselheim, excuse me, you were going to get to 
keep your doctor.
    Mr. Anderson. So let me explain what I see is the major 
trend over the last 10 years, and that is, the private sector 
prices have increased about twice as fast as the public sector 
prices. So in 2010, the Medicare program and what the private 
sector paid for hospitals, and physicians, and drugs was about 
the same. Now, the private sector is paying 50 percent more on 
average than what the----
    Mr. Jordan. Because the market's all messed up, right?
    Mr. Anderson. But it's the private sector market where the 
prices are going up.
    Mr. Jordan. So Dr. Anderson, do you know the name Jonathan 
Gruber?
    Mr. Anderson. Sure.
    Mr. Jordan. And do you remember Mr. Gruber, what he was 
called when it came to the Affordable Care Act, the ObamaCare? 
Do you know what Mr. Gruber's title was?
    Mr. Anderson. He was an independent consultant. He----
    Mr. Jordan. I'm talking about what The New York Times 
called him. The New York Times called him the architect of 
ObamaCare. And why is Dr. Gruber somewhat famous, particularly 
around the Halls of Congress? Any recollection?
    Mr. Anderson. I think you'd have to answer that question.
    Mr. Jordan. Well, because he was caught on tape lying to 
us. Actually he was caught on tape telling the truth about the 
fact that he lied to us, right? He is the one who said, Oh, you 
can pull it over on the American people. We can't tell the 
American people the truth about ObamaCare. So might that have 
something to do with the high cost of medicine today? The high 
cost of insurance? And as we are talking about this hearing 
today, the high cost of prescription drugs?
    Mr. Anderson. Well, except that in 2009, we were also the 
most expensive country in the world. So it's no different. So I 
wrote this paper back in 2003, we were the most expensive. I 
rewrote the paper----
    Mr. Jordan. Are you advocating, Doctor, a bigger role for 
government in all of healthcare? Mr. Khanna talked about the 
role that government plays in development of drugs at the NIH 
just a few minutes ago. Do you advocate a bigger role for 
government in all aspects of healthcare?
    Mr. Anderson. I think there is certain places where the 
private sector works well, and there are certain prices where 
the public sector works well. And I think we just have to take 
a look at where we are getting the best value for our dollar.
    Mr. Jordan. And so you would say--well, I don't want to put 
words in your mouth, but you would say maybe when it comes to 
quality of the research done, it's--that's where government 
involvement is good, but maybe not in access, maybe not in 
affordability, maybe not in other areas. Where would you draw 
the line?
    Mr. Anderson. Well, I think affordability. As I said, the 
private sector is paying 50 percent more for the same services 
the public sector is. So in terms of affordability, I would 
give the points to the public sector, not----
    Mr. Jordan. Doctor, do you support single payer?
    Mr. Anderson. No.
    Mr. Jordan. Dr. Kesselheim, do you support single payer?
    Dr. Kesselheim. I think--I mean, yes, I think that 
there's----
    Mr. Jordan. Do you want the government to run it all?
    Dr. Kesselheim. Well, no. As Dr. Anderson was saying, I 
think that there is some role for private sector in different 
parts of it, but I do think that in the case of 
pharmaceuticals, we could be getting--we could be using 
government negotiation to get better prices for the part that 
the government pays for right now.
    Mr. Jordan. Yes, but that's not--but you said you support 
single payer, but then you just limited it to prescription drug 
and buying negotiations----
    Dr. Kesselheim. So the question today is about prescription 
drugs, and are we getting the best value for our money for 
prescription drugs? And I think that clearly the government is 
not, because the government doesn't use its power to pay the 
appropriate price for the drugs that it's buying. So in that 
sense, I think that we should be using the power of Medicare to 
try to evaluate what the right price is for the products that 
the government is buying.
    So I do think that that--in terms of other parts of the 
healthcare sector, that's not my area of expertise, but I think 
that there is a role for a government option that people can 
use.
    Mr. Anderson. In terms of--public option makes way more 
sense to me than single payer, allowing people to buy into 
Medicare if they so choose.
    Mr. Jordan. Dr. Georges, I'm sorry I didn't get to you, but 
my time is out, but thank you for coming and to all our 
witnesses.
    Chairman Cummings. I want to thank all of our witnesses for 
being here today. As I said a little bit earlier, my major 
concern is that we will debate, and debate, and debate and end 
up doing nothing. One of my colleagues, Mr. Delaney, has a 
saying that I wish I had invented it. He says, ``the cost of 
doing nothing is never nothing.'' The fact is that people are 
dying.
    The story that Ms. Worsham told is being repeated over, and 
over, and over, and over, and over again, but still we debate. 
I think Mr. Welch laid out a number of things that we need to 
be doing, and you all have laid them out. The question is will 
we do them? We have to do them. You know, when I think about 
listening to things about Affordable Care Act, you know, 
today's hearing offered the committee a meaningful opportunity 
to examine issues that are affecting millions of American 
families each and every day. It's unfortunate that my 
Republican colleagues are using this time to instead continue 
their extreme partisan attacks against the Affordable Care Act.
    The ACA expanded coverage for nearly 20 million Americans 
through Medicaid expansion in exchanges. To that extent, the 
greatest spending on healthcare can be attributed to the 
healthcare law. It is because more Americans have been able to 
access high quality affordable healthcare than ever before.
    But I take you back to the story that I told from the 
beginning, the lady who said I can get the operation at 
Hopkins, but I can't afford the cure. That makes absolutely no 
sense, none. Can get the operation, the surgery, but can't 
afford the medicine, you know, you have to have followup, am I 
right, Docs? You have to have followup, Madam, Dr. Georges, you 
know that. No followup, what good is the operation? As a matter 
of fact, you might be worse off. So we have--you've heard the 
questions, you've given your best. And now we've got to move 
forward with it. We want to try to pull the curtains back on 
Dr. Georges why these--the costs are going up. Trying to pull 
the curtains back on, is it really R&D that these profits are 
being used for, is it buybacks? And then we went to know how we 
get to the bottom line to reducing the price of this medicine.
    I'll never forget Shkreli, Shkreli--yes, he came in here, 
and after jacking up prices sky high, and he basically as he's 
walking out the room after he refused, he took the Fifth, if I 
recall correctly, and called us imbeciles. That's what he said. 
He called us imbeciles. And yet, and still, he was responsible 
because of what he did or failed to do for a lot of people 
dying. And I guess that's what I want us to keep in mind, the 
bottom line, that people are suffering.
    I mean, think about what Ms. Worsham said, for $333 a 
month, $333 a month, if her daughter had $333 a month to pay 
for that insulin, she'd still be alive. That's a 22-year old. I 
mean, just think about that. This is America, this is United 
States of America, and I am convinced that we are better than 
that. And what we have to do now is synchronize our conscience 
with our conduct. We have got to have synchronization. One side 
talking about, Oh, I don't like this, I don't like that. Okay, 
if you don't like it, work out something that does work, and we 
do it in a bipartisan way, but we've got to do something. And 
this is bigger than us. This is bigger than us. And it's not 
about us. It's about generations yet unborn.
    You heard DeSaulnier talk about he had a situation, a 
cancer situation where I assume at one point it may have been a 
fatal situation, but now apparently, it's chronic. Why? Because 
of research, because of medicine. And he said--you hear what he 
said? Was it $10,000 a month, was it a month? He can afford the 
$10,000 a month, I guess. $10,000 a month, just to stay alive. 
There's something wrong with that. Part B, when we talk about 
the President's proposal, I'm hoping that we can get that done, 
I'm hoping we can do a Medicare negotiation. We need it do 
probably a combination of things. But the American people are 
watching this right now, they are watching us right now trying 
to figure out how I'm going to make it? How am I going to be 
there for my daughter's wedding? How am I going to celebrate my 
next birthday? Am I going to be here for two more Christmases 
because they cannot get the medicine, cannot afford it? And so, 
I am determined and I'm going to paint Ms. Worsham's face in 
the DNA of every cell in my brain to try to make sure that her 
other daughter who's facing the same thing does not die.
    And with that, we call this hearing to an end. Thank you.
    [Whereupon, at 5:09 p.m., the committee was adjourned.]

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