Big Pharma Taking Heat on Drug Prices as Senate Hearing Opens

(Bloomberg) -- Drugmakers placed much of the blame for high drug prices on other health-industry players, falling back on a frequently used explanation that’s likely to be challenged by lawmakers.

Senior executives from seven pharmaceutical giants appearing before the Senate Finance Committee on Tuesday proposed far-reaching changes to how drugs are paid for in the U.S., including incentives to increase use of cheaper versions of costly biotechnology treatments and more financial help for patients.

In prepared remarks, the officials also reiterated a familiar grievance -- that pharmacy-benefit managers and health insurers keep negotiated discounts on prescription drugs for themselves rather than pass them to patients, according to written testimony submitted to the committee.

The industry’s strategy sets up a possibly contentious session with lawmakers. Senator Chuck Grassley, the Iowa Republican who chairs the panel, warned drugmakers that he wasn’t interested in hearing about why companies other than pharmaceutical manufacturers were responsible for high drug prices.

“We don’t want these executives today to point fingers at someone else,” Grassley said in an an interview with Bloomberg TV on Tuesday. In a written version of his opening statement, the chairman said now is the “time for solutions.”

The executives offered other suggestions they say could lower drug costs. Merck & Co. Chief Executive Officer Kenneth Frazier said the company would support eliminating the use of some coupons brand-name drugmakers use to keep patients from switching to generics.

Frazier and Sanofi CEO Olivier Brandicourt also backed a bill that would prohibit brand-name drugmakers from thwarting generic-drug development by withholding samples necessary for testing to gain Food and Drug Administration approval. The measure is one of Grassley’s legislative priorities.

Insulin Outrage

Sanofi, under fire from the committee for soaring insulin prices, said the average net price after rebates and discounts of its most popular insulin, Lantus, has fallen more than 30 percent since 2012. At the same time, average out-of-pocket costs, such as co-pays and deductibles, for patients with commercial insurance and Medicare have risen 60 percent.

“In this case, not only are discounts apparently not being passed on to patients, but patients are in fact being asked to pay more when PBMs and health plans are paying less for the medicine,” Brandicourt said in written testimony. “This situation defies logic and should not happen.”

Pfizer CEO Albert Bourla estimated that if rebates were passed on to patients, seniors in Medicare would save on average $270 a year. Other executives echoed that sentiment and pushed for Medicare to include caps on out-of-pocket spending.

Bourla said that if the same requirement on passing rebates on to patients were applied to the commercial insurance market, Pfizer would commit to lowering list prices.

Biosimilar Support

The pharma companies also suggested tying prices to how well a drug works, a proposal the industry has pushed for several years with limited success. They also offered more support for biosimilars, generic versions of newer and more expensive complex biologic drugs. Many brand-name companies see the potential to make money in biosimilars, which are expected to have higher prices than conventional copycat medicines.

More than a week ago, Grassley told reporters he wants to hear how drugmakers might strike a deal rather than continuing to oppose price-cutting measures.

Democrats have sought, unsuccessfully, to allow the U.S. government to negotiate drug prices under Medicare, the health program for the elderly and disabled. Republicans have opposed such a move, but President Donald Trump’s administration last year proposed basing what Medicare pays for some drugs on the lower prices paid by other countries with national health systems.

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