The Senate Health Education Labor and Pensions (HELP) committee, chaired by Senator Bernie Sanders (I-VT), held its highly anticipated hearing, “Why does the United States Pay, by far, the highest prices in the world for prescription drugs?”, featuring the CEOs of Johnson & Johnson, Merck and Bristol Myers Squibb. The common description of the day, including from outlets like STAT and POLITICO, was “theater.”

The Senators and CEOs had a back-and-forth about whether corporate greed and profit motivations were the root cause of high drug prices, or if prices result from the complexity of the U.S. healthcare system.

Typical points criticizing the industry

Pricing of medicines is much higher in the U.S.

Bernie Sanders opened the hearing by acknowledging that life-saving medicines are extraordinary. However, Sanders stated, “ all of you know, those drugs do nothing for anybody who cannot afford it." He proceeded to then call out the differences among the list prices for the same drug sold in different countries. For example:

Blocking generics

Additionally, Senators accused pharmaceutical companies of abusing the patent system to block generics from entering the market. Sen. Maggie Hassan (D-N.H.) pointed to Merck’s drug, Keytruda, which has 168 patents currently on file.

CEOs tell a more complex story

The CEOs of all three companies made three key arguments:

  1. Americans have access to life-saving medicines years before patients living in other countries;
  2. List (sticker) price is not meaningful, it’s the net price that matters;
  3. Due to complexities in the U.S. healthcare system, you cannot directly compare list price from country to country AND you must account for the distribution system and middlemen.

Specifically, there was agreement among the CEOs that pharmacy benefit managers (PBMs) are unique to the U.S. system and disrupt rebates from being passed on to patients. Johnson & Johnson CEO Joaquin Duato called for “Congress [to] stop middlemen from taking for themselves the assistance that pharmaceutical companies intend for patients.”

Senators Mitt Romney (R-UT) and Tim Kaine (D-VA) agreed with this claim, Romney stating “We might not have the right bad guys here,” and Kaine adding “PBMs aren’t doing a single bit of research. They’re not producing a single product and yet they seem to me to be the ones scooping up the most money that’s just sloshing through the system.”

However, Peter Maybarduk, the director of the Access to Medicines program at Public Citizen, who spoke after the CEOs had left the discussion voiced, “Drugmakers’ high prices are the whole reason that we have a middlemen problem.”

Considerations for manufacturers: 

  • Hearings like this, even absent concrete legislation, will continue. To ensure the conversation is not one-sided, manufacturers should revisit and communicate their pricing philosophy – or develop one if it does not exist.
  • When launching a new product to market, especially if it will be available in multiple markets, have a strategic approach to pricing communications regarding the list price and reinforce that what a patient pays is ultimately determined by their insurance design.
  • Consider this hearing when developing language for your annual transparency report. For companies who do not release an annual transparency report, consider doing so for your company to have a public reference on its pricing and access.

About the Author:

Kate is a member of the Corporate Affairs team specializing in risk and reputation management with a focus on value, access and pricing within the biopharma & life sciences industry. She is based in New York.