Big pharma execs are interrogated on stock dividends, buybacks, bonuses, and price hikes.
It wasn’t an easy session for many big pharma executives from AbbVie, AstraZeneca, Bristol-Myers Squibb, Merck & Co., Johnson & Johnson, Pfizer and Sanofi as they faced questions from members of the Senate Finance Committee regarding their decisions about stock dividends, buybacks, bonuses and price hikes. The execs volunteered to testify because the committee had already held one pricing hearing without seeking input from any pharma industry representatives.
The session started with the committee’s ranking member Sen. Ron Wyden stating that big pharma companies pursue “two-faced scheming and profiteering" but blame others for their pricing decisions –– and they need to “drop these excuses and take concrete action.” He also noted that “wasteful and secretive” pharmacy benefit managers would “have their day before the committee” too.
According to Merck CEO Ken Frazier, the supply chain favors high list prices, so bringing a drug to market at a low list price leads to no or little uptake. AbbVie CEO Richard Gonzalez indicated that prices are higher in the United States than in Europe in order to fund R&D activities.
When challenged that AbbVie has a “double standard” given that U.S. taxpayers fund much of the industry’s research efforts through the NIH yet pay higher prices than Europeans, who also have access to biosimilars that cannot be launched in the United States for several years due to patent restrictions, including for AbbVie’s Humira, Gonzalez said his company has “struck a reasonable balance,” and that biosimilars are generally launched within a year of patent expiry.
Senator Wyden requested that Gonzalez provide a written response within 10 days explaining whether his bonus would be smaller if the price of Humira was lowered.
Frazier noted that European countries negotiate very low prices because they know companies like Merck can’t “walk away” and abandon patients.
The executives did agree that rebates are a problem and that the current system is unsustainable. Most were supportive of the Trump administration’s plan to reform drug rebating but think the specific proposal needs additional work.
Other ideas proposed by the executives included value-based pricing as a strategy for fighting high drug costs, the need to boost the U.S. biosimilars market to reduce costs and the possibility of implementing a Medicare Part D out-of-pocket cap for patients.
With the Trump administration committed to making drug pricing a priority, the topic will be top of mind for many voters in the 2020 presidential election. More discussions can, therefore, be expected. It is possible that the time is right for government and industry to collaborate and identify bipartisan solutions that will help reduce drug costs for U.S. patients.