House, Senate Hearings Address Pharmaceutical Prices

The House Oversight Committee and the Senate Finance Committee on Tuesday held hearings addressing the rising cost of prescription drugs, with both committees featuring mothers of insulin-dependent children, including one whose daughter died because of rationing due to the cost of insulin.

Senate Finance Chair Chuck Grassley (R-IA) and others stressed the need for an investigation into the rising cost of insulin.

“We need to continue to have a strong research engine to develop new treatments but we must also have a discussion about the affordability of these drugs,” Grassley said.

While noting that pharmaceutical companies declined to attend the Senate hearing, Ranking Member Ron Wyden (D-OR) said: “The drugmakers are going to have to show up ... This is not a one-off, this is the first in a series of hearings.”

In terms of policy challenges, Wyden points to the middlemen -- pharmaceutical benefit managers (PBMs) -- as taking a “big cut” and “inflating the prices.”

“We need to pull back the curtain to see who benefits, as it doesn’t look to me like it’s the families or taxpayers,” Wyden said.

Discussions between the witnesses and senators centered on various issues, including ways the government can better negotiate with Medicare to lower prices, the use of coupons, capping drug prices in Medicare and value-based pricing systems.

On pricing, Peter Bach, director of the Memorial Sloan Kettering Center for Health Policy and Outcomes, said that a value-based system would be a much better way to align incentives than the current system, particularly for launch prices.

On biosimilars, Bach noted: "If you wait for this biosimilar process to play out, you'll be perpetually unsatisfied by what it achieves. Even for large market drugs, we will not see the kind of price declines we could if we drove those prices down to marginal costs." He advised the committee to examine taking a more aggressive stance on the prices of biologics when the monopoly or patent period ends and directly intervene on that price.

On the government more broadly negotiating competitive prices, Mark Miller, VP of Health Care at the Laura and John Arnold Foundation, explained how the government would have to understand the administrative burden and complexity of the range of drugs that would have to be negotiated. Where there’s little competition in Medicare, that might be a better place to start, and where the government can bring in value-based pricing or binding arbitration.

Douglas Holtz-Eakin, president of the American Action Forum, added: “You don’t want to look for a one-size-fits all solution, not all drug prices are a problem. There are some off-patent, sole-source drugs priced exorbitantly.”

But Holtz-Eakin also raised some concerns about the administration’s proposal to price certain drugs based on an international price index. “If you look at the study they based this on, it’s based on 27 drugs in the US, and only 11 of those drugs are available in the rest of the countries.”

On the House side, Oversight Chairman Rep. Elijah Cummings (D-MD) said: “Let me be clear: there are powerful interests here that do not want us to interfere with those massive profits. But there’s a strong bipartisan consensus that we should do something meaningful to rein in the out of control price increases…this is a matter literally of life and death and we have a duty to act now.”

Ranking member Jim Jordan (R-OH) pointed to rethinking regulations, reevaluating the value and scope of patents and exclusivities. What was envisioned as a limited guarantee to profit from an invention has been distorted into an evergreen right to broadly exclude others from selling similar drugs, Jordan said.

As far as solutions to high prices, Aaron Kesselheim of the Program on Regulation, Therapeutics, and Law at Harvard Medical School, noted that Medicare could create a program-wide formulary to negotiate prices and ensure they fall within a value-based framework.