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this first portion is just under three hours. >> the senate committee on health education, labor, and pensions will come to order. today is a busy day. very important votes will be taking place. democrats will be meeting in their caucuses, so people are going to be coming in and out. i also think that this hearing is important enough that we extend the time for questioning from the usual five minutes to seven minutes. let me begin by welcoming the ceos of bristol-myers, chris verner, we thank you for being here. the ceo of merck, and the ceo of johnson and johnson for being with us this morning. thank you very much. there is a lot of discussion in

our nation about how divided our people are on many issues and that is absolutely true, but on one of the most important issues facing our country, the american people, whether they are democrats, republicans, independents, conservatives, progressives, could not be more united, and that is the need to substantially lower the outrageous prices of prescription drugs in this country. according to a recent poll, 82% of americans say the cost of prescription drugs is too high, and 73% say that the government is not doing enough to regulate drug prices. as a nation, we spend almost twice as much per capita on healthcare as do the people of any other country. $13,000 per man, woman and child, and one of the reasons

that we spent so much is the high cost of prescription drugs in our country. the outrageous cost of prescription drugs in america means that one out of four of our people go to the doctor, get a prescription, and they cannot afford to fill that prescription. how many die as a result of that? how many suffer unnecessarily? nobody knows, but my guess is that it's in the millions, and i have talked to many of them in vermont and around the country. meanwhile, our insurance premiums are much higher than they should be, and hospital costs are soaring because of the high cost of prescription drugs. further, the cost of prescription drugs in this country is putting an enormous burden on taxpayers and seniors, by raising the cost of medicare and medicaid. medicare alone spent at least

$135 billion alone on prescription drugs. this is an issue of the federal budget. meanwhile, as we pay, by far, the highest prices in the world for prescription drugs, 10 of the top pharmaceutical companies in america made over $110 billion in profits in 2022. they are doing phenomenally well while americans cannot afford the cost of the medicine they need, and the ceos, in general, receive exorbitant compensation packages. this morning, we are going to hear a lot from our ceo panelist s. and, americans are forced to pay much higher prices than they should be paying. let us be clear. in 2022, johnson and johnson made nearly $18 billion in profit, paid its ceo over $27

million in compensation, and spent over $17 billion on stock buybacks and dividends. that same year, merck made $14.5 billion in profits, handed out over $7 billion in dividends to their stockholders, and paid its ceo over $52 million in compensation. bristol-myers made $8 million in profit last year, while recently spending over $12 million on stock buybacks and giving its ceo over $41 million in compensation. now, why did a majority of members of this committee invite these three pharmaceutical ceos to testify today? the answer is pretty simple. mr. werner, we want you to explain to the american people why bristol-myers squibb charges patients in our country $7100 a year persky -- for

eliquis, when the same product can be purchased for $900 in canada, and $650 in france. mr. duato, we are going to ask you why johnson and johnson charges americans with arthritis $79,000 when the same product can be purchased for $20,000 in canada, and $12,000 in france. mr. davis, please tell us later why merck charges americans with cancer $191,000 per year for keytruda when the same product can be purchased for $91,000 in canada and france. let's be clear, they are not just charging higher prices in the united states compared to other countries. they are also charging americans

much higher prices today than they did in the past, even accounting for inflation. from 2004 to 2008, the median price of innovative new drugs sold by these three companies was just $14,000. inflation accounted. from 2019 to 2023, where we are today, the median price of new drugs sold by these three companies was $238,000. in other words, americans are forced to pay higher and higher prices for the drugs they need to survive, and let's be clear. the overwhelming beneficiary of these high drug prices is the pharmaceutical industry. how do we know that? well, that is precisely what they tell their investors. according to their own shareholder reports, bristol-

myers made $34 billion selling the blood thinner, eliquis, in the united states, compared to $22 billion in the rest of the world, combined. they make their money in the united states. in other words, the u.s. accounts for nearly two thirds of all global sales of eliquis. not a single dollar of this revenue -- 100% is going to bristol-myers squibb. they made over $30 billion in revenue selling the drug stelara in the united states. merck has reported to its shareholders that it made $43.4 billion selling the cancer drug keytruda in the united states, compared to $30 billion in the rest of the world combined. our ceo panelists from the drug companies will tell us this morning how much it costs to

develop new drugs, and how often the research that they undertake for new cures is not successful, and they are right. we appreciate that. but, what they have not told us in their written testimony is that 14 major pharmaceutical companies, including johnson and johnson and merck spent $87 billion more on stock buybacks and dividends over the recent ten-year period than what they spent on research and development. more on buybacks and dividends and research and development. in fact, bristol-myers squibb spent $3.2 billion more on stock buybacks and dividends in 2022 bennett spent on research and development. johnson & johnson spent $36 billion more on stock buybacks and dividends than it spent on research and development since 2012. in other words, these companies are spending more to enrich their own stockholders and ceos

than they are at providing new cures and treatments. the average american who hears all of this is asking a very simple question, why does all of this happen? what is going on? how could your company's charges, in some cases, 10 times more than they charge canadians and people around the world for the same drug? how do they get away with this? when so many of our people cannot afford the high prices of the drugs that they need, how can it be uniquely among industrialized countries that these companies, not just these companies, but the pharmaceutical industry in general, can raise prices anytime they want to any level they want. how do they get away with all of that? here, in my view, is the answer. the united states government does not regulate drug companies

, with very few exceptions, the drug companies regulate the united states. that is a sad state of affairs in a corrupt political system. over the past 25 years, the pharmaceutical industry, not just these companies, the entire industry, spent over $8.5 billion on lobbying and more than $745 million on campaign contributions, and let me be fair here. they are bipartisan. they give to republicans. they give to democrats. i am especially impressed by the pfizer drug company, contributing $1 million in kentucky to expand its headquarters named after republican leader, mitch mcconnell, but again, it's not just republicans, it's democrats as well. unbelievable. this is an astounding fact. last year, drug companies had over 1800 well-paid lobbyists

here in d.c. to make sure that congress did their bidding. there are 535 members of congress and 1800 well-paid lobbyists, so three for every member of congress, but if you want to know why you are paying the highest prices in the world america, that's why. now, here is some good news. we are beginning to take on the greed of the pharmaceutical industry. as a result of the inflation reduction act, medicare, for the first time ever, is beginning to do what every major country on earth does, and what the veterans administration has been doing for over 30 years, and that is negotiate lower prices on drugs, including stelara and eliquis. let me conclude by saying this. i am proud of what this committee, up to this point, has accomplished. last year, as you will

remember, the ceo of moderna committed during a health committee meeting that his company would make certain that no one in america would have to pay for their vaccine out-of- pocket. we appreciated that. in a separate health committee hearing last may, the ceo of eli lilly committed that his company would not raise prices on existing insulin products, after lowering them. let's be clear, much more needs to be done. i look forward to hearing from our ceo panelists this morning, as to how they are going to go forward, to essentially, lower the cost of prescription drugs in this country. you are now recognized for opening statements. >> thank you, chair sanders. let's be clear. everybody on this panel cares about the high cost of prescription drugs and wants to work on real solutions to address it, but it's also clear that this hearing is not about finding legislative solutions. it is following a formula.

we publicly attacked -- well, i don't, but others publicly attacked private citizens for being successful under capitalism. we grossly oversimplify a problem. we demand ceos, for the committee for public, verbal stoning's. we resect the offer to send top executives or subject matter expertise and responsibility of issues at hand, and threaten when ceos are suspicious that they won't get a fair shake. hold the hearing, get sound bites, then pick another set of ceos for a show trial, but we don't pass meaningful legislation. if that sounds familiar, that was the hearing of starbucks founder, howard schultz. the moderna ceo, and now, this hearing with the same formula. i would gladly join the chair in exploring solutions to address the high cost of prescription drugs. i'm a doctor. i have worked in a public hospital for the uninsured for 25 years. i did my best to give care, to

those who otherwise would not have received it. i'm aware of this. i'm also aware of reverse incentives, the kind like -- my gosh, it should be high, but it is high. bad actors game the system, and we need solutions to improve access, but the majority was not interested in working with this side of the dais to hold serious hearings. they didn't seek republican input. the goal was to call you guys into cry capitalism and blame corporations for the high cost of drug prices. by the way, of course, drug companies play a role, and i hope we will get answers today to legitimate questions about how drugs are priced, but the problem is far greater and more complex than individual companies, or even a set of companies within an ecosystem, which is incredibly complex. why do americans pay more for certain drugs than patients in other countries? to understand, we need a serious effort to navigate the network of incentives throughout the healthcare system.

i lived in it for 25 years. i am aware of it. take a look at insurance benefit design, price transparency, regulatory barriers, intellectual property barriers, the reverse effect government discount programs have on patients, et cetera. one example, just to say, a little bit of complexity, the 340 b drug program resulted in a $54 billion drug discount in 2020, but we don't know if those discounts lowered prices for the patient's who bought the drug. patients paid cash when the intermediary took the full price. that is a serious investigation being conducted by this side of the dais at the other side of the dais is not interested in participating in. that is the understanding of an ecosystem. i understand. there is no one more eloquent

than senator sanders on medicare for all, we can cherry pick examples of how other countries are doing better. i can cherry pick the opposite. canada is struggling to just to show you there is a complexity, canada is struggling with specialty care. in may of last year, the canadian government began to send 48 canadians to washington state to ensure people have faster access to lifesaving radiation treatments. they can afford their system because we are right next door. related to this hearing, a canadian woman paid for her own treatment in the united states after the health authority in british columbia denied her access to lifesaving chemotherapy. canada had a lower-cost drug, so low that it didn't cure the theme of carrot -- the united states is not perfect, but if we cherry pick from other countries, we have to do a more

thorough investigation to see if there is a balance there. let's return to prescriptions. canadians pay less than we do. let's figure out why. let's also point out that the public health insurance in canada only covers 21% of newly developed drugs. now, maybe that is a trade-off, but i will tell you, if you tell america -- american that they can't have access to a life-saving drug, they will see you in court. they are going to sue. they want that access. americans just would not tolerate that. that alice, those radiation treatment patients or those not getting the new develop life-saving drugs more quickly mai tai in those countries that don't have access to the same treatments as do we in the u.s. these are serious questions. one more time, i may doc. i aware of this but we need to fully consider all these issues

and then maybe bring in at the end, but we will fully consider all of these issues and then maybe bring you in at the end. we will have context complete. this would be best if this was a genuine exercise. i am willing to do the work on this, as are my colleagues. we are willing to work on ve reforms and generic drugs. even though the chair and i got off to a rocky start, we did some pretty good work on that. i think we did some good bipartisan legislation. this committee, i agree with you, can accomplish that. >> further proof of what i consider the serious and cynical nature is that the minority has to chair to have a witness on the panel that could explore these issues side-by- side the ceo. that was turned down. we provide unbiased input to

the issues at hand. our witness is not allowed? the way this works is this one gets all of the publicity and the next gets crickets. i will also point out that we did not split the majority and minority witnesses in two different panels during several hearings. i can think of no reason to not allow our witness to be here now, except for ruining the p, optics. as i said last night, what ends up being hollow messaging gives d.c. a bad reputation. folks want real answers. they want relief from high prices. it is in part what we will here today but it will be separated from context that would have made it a lot more productive. if you are telling voters you are going to do something when you know at the get go you have

no legislative solution which emerges, that is why folks don't trust. if we are just looking for a social media clip, i propose we have accomplished something. the patients in hospitals where i once treated would otherwise not have access to care. we have the ability to craft legislation. let's do it. with that, i yield. >> our first witness will be chairman and ceo of johnson & johnson. he has served as the chairman since 2023 and chief executive officer since 2022. thank you very much for being with us. >> members of the committee, thank you for the opportunity to be here today. i have collaborated to advance healthcare solutions for o patients including diverse clinical trials, nursing and

healthcare workforce with trepidation, mental health. i applaud the commitment to such critical priorities. i understand the challenges and complexities of healthcare innovation and delivery and today, i look forward to discussing our approach to pricing and the work we do for all americans. fundamentally, our decision- making is guided by the sources set force that state our first responsibility is to the patient. are drug pricing reflects tthe commitment for patients today and for patients tomorrow. first, we take into consideration that they were medicines while often inducing

healthcare costs. for context, in 2022, our americans declined for the sixth year in a row by 3.5 percentage points. over those six years, prices have declined by almost 20% with price decline more than 40%. second, we price our medicines to support patient access. in 2022 alone, we paid $79 million in rebates, discounts and fees, almost 60% of the price of our drugs with the intent that patients benefit from these substantial cost savings. we also support patient affordability and access by funding patient programs. in 2022, these programs helped more than 1 billion -- 1 million underinsured patients and we donated $2.8 million in free medicine in order to help

patients with no insurance. finally, we price our medicines to meet our commitments to innovate and develop for patients. the investments required to do t so is massive. the average cost of premium drugs for clinical trials in our industry is more than $2 billion. however, more than 90% of the drugs that enter into the trials do not make it to patients. consequently, the investment is enormous and totals near $78 billion in 2016. despite the tremendous investments required to bring drugs to patients, drug costs in the u.s. have increased significantly for total overall healthcare. drug spending in ithe u.s. is about 14% of healthcare spending, slightly below the average for the rest of the world. while total u.s. shaker spending and other developed

nations, we have american patients receiving cutting-edge healthcare more than any other country in the world. however, corporate obligations imposed in the u.s. are hard for patients to meet and undermine access. remarkably, the ceo found that patient obligations often exceed payer costs for the drugs. this means that patients sometimes pay more for their medicine and the insurers. clearly, this part of the system is not working as intended. we support proposals to reconcile inequities and to ensure patient access. as outlined in my testimony, congress has been taking for themselves, pharmaceutically companies. finally, it is essential that ha we fix the price gaps that exist in other countries. our

nation's robust pharmaceutical industry was created. thank you for the bipartisan committee and for the opportunity to engage in today's discussion. i look forward to your question. >> our next witness will be robert davis, chairman and ceo of merck. mr. davis has served as mark's chairman since december 2022 and ceo since 2021. thank you very much for being here. >> chairman sanders, ranking member cassidy and members of the committee, thank you for the opportunity to be here with you today. is the ceo of mark, i am here to offer concrete policy suggestions to address the barriers american patients may encounter as they attempt to access our medicine and current

pricing system while also ensuring merck may discover and develop the next generation of n life-saving medicines and vaccines. our company is one of the world's most advanced research intensive biopharmaceutical companies, an organization at the forefront of providing innovative health solutions that advance the prevention of disease in people and animals. i have worked in healthcare industry for the entirety of my 34 year career. i joined mark 10 years ago because the company was on the precipice of its first approval for a revolutionary oncology treatment. at the time, people close to me were battling cancer. unfortunately, they were not able to benefit from this amazing discovery. following the first approval, merck has demonstrated the efficacy of katrina and reached nearly 2 million patients with many of the widespread cancers reflecting americans.

with the recent american cancer society report finding that cancer mortality in the united states has fallen 33% from 1991 to 2021, representing an estimated 4 million americans whose deaths have been averted and our work continues at we advance keytruda into even more earlier stages of cancer. remarkable progress like this does not come cheap. for keytruda alone between 2011 and 2023, merck has th invested $46 billion in development and we expect to invest another $18 billion into 2030. oncology is one of merck's y.ma areas of discovery. right now, we have nearly 20,000 researchers seeking breakthrough treatments for immune disorders, infectious diseases thand other ailments threatening the health of millions of people. to advance the critical work, we have invested more than $159 billion since 2010 including $30 billion in 2023 alone and have invested more than $10 billion in capital in the form

of both investment and manufacturing over the last five years in the united states, creating more jobs for americans. we did not hesitate to make these investments because they are necessary to further the mission to serve patients. at the same time, many americans are struggling to afford healthcare including prescription medicine and we are eager to utfind solutions t the access and portability challenges. that is why we support the changes to the medicare part b program to create an out-of- pocket cap to allow beneficiaries to pay their cost over time. we have publicly disclosed our u.s. pricing data including the average rebates and discounts we provide. we offer coupons and support, a patient assistance program for those who cannot afford the medication that they need. in the past five years, this program has helped nearly 800,000 patients to obtain merck products free of charge with an estimated value of $7.8 billion. the reality is tthat mark's

efforts alone are far from sufficient. they do not and cannot address the underlying systemic and structural issues underpinning our system. more power and control has been concentrated into the ever sm smaller number of vertically consolidated players. their negotiating strength has increased dramatically. merck continues to experience increasing pressure to provide even larger discounts and the gap between lift and net price continues to grow and patients are not benefiting from the steep discounts we provide. these problems could be addressed if other revenue streams would remove incentives from the system to favor -- this would ensure that less value in the system flows who do not discover or manufacture them. in addition, it would be required to pass through patients to lower their out-of-

pocket cost. we firmly believe that reforms like these will create a dog -- drug pricing system that incentivizes discovery of new medicine while ensuring patients can afford those life- saving reticence and innovations. future treatment breakthroughs hinges on what we do now. we must hold onto the u.s. pharmaceutical market that is free, competitive, predicable, one that encourages and rewards investments, when the drives the american economy and creates jobs and when that continues to deliver innovation in the treatment. i am here today to pledge our support and cooperation with these efforts. thank you for your time and your consideration of these important factors. >> thank you very much. our third witness will be chris, ceo of fiscal mayur swift. thank you for being here. >> chairman sanders, ranking member cassidy and members of the committee, thank you for

having me here today. i am proud to be representing an american company that is committed to transforming patients lives through science. i spent more than 20 years in this industry, the majority in the smaller science driven biotechnology companies. i joined bms because we have a similar focus on driving leading-edge scientific innovation and our scale allows us to bring more medicines to more patients faster. to help illustrate the type of work we have been doing for more than 150 years at bms, let me provide two illustrations of how our innovative medicines have helped patients and provided tangible benefits. our work in hiv/aids ro transformed this disease from a death sentence into a chronic condition. similarly, our pioneering treatments harness the body's immune system to fight cancer

and have contributed significantly to improved outcomes across a number of tumorsrs including metastatic melanoma where the combination of these two medicines has changed the median life expectancy from less than nine months to over six years. i am proud that our record of innovation continues today. we have invested over $65 billion in research and relevant over the past decade. this has resulted in novel and transformational medicine like cardiovascular disease, our cell therapy platform and we are working toward bringing the patient the first medicine for the treatment of schizophrenia in 30 years. these medicines are but a few examples of the innovation that results from an american healthcare system that not only accounts for the majority of new medicines launched each

year but also one that delivers those medicines to u.s. patients faster than anywhere else in the world. this is not by chance. the united states has built a healthcare system that prioritizes patients and position -- position choice as well as the broad and rapid availability of cutting-edge un medicine. this is in stark contrast to many systems outside of the es united states. while they may deliver lower prices, gary an often overlooked trade-off that patients often wait longer for new medicine that are sometimes never approved or reimbursed. for example, canadian pays to have access to approximately half of the medicines available in the united states and a patients in other countries face a similar reality. despite these benefits, we know our american system is far from perfect. patients bear the brunt of a

complex system that results in increasing healthcare costs and a lack of affordability. we have to make the system work better for them. after all, innovation that does not make it to patients is no innovation at all. well while prescription medicines account for a relatively small portion of overall healthcare spending, we believe we have an important di role to play in prioritizing the development of medicine that will bring savings to the w healthcare system and an industry. similarly, we have a role to play in addressing affordability and stand ready to partner with congress and others to address this issue for patients and a holistic manner. in developing those solutions, we should not abandon our system for one that denies u.s. patient the broad and rapid access to vital medicines that they appreciate today. we

support policies that lower out- of-pocket costs without ultimately harming innovation. the need to strike this should not be abstract. i expect many of us in this room have lost a loved one to cancer or another devastating disease. in my case, it was one of my best friends and it happened to be a medicine that i believe could have saved his life. it is a daily reminder to me that making patients wait for weeks, months, or years can be the difference between life and death. thank you again for having me here today. on behalf of bms and the more than 30,000 employees who share my passion for delivering new medicine for patients, i look forward to answering your questions. >> boerner, thank you very much . before i begin the first round of questions, let me remind our witnesses that while

the health committee does not swear in witnesses as a general rule, federal law from u.s. code 1001 prohibits knowingly and willingly making any fraudulent statements to the senate regardless of whether a person is under oath. i will also say, in response to many of your testimonies, we are aware of the many important life-saving drugs that your companies have produced and that is extraordinarily important. as all of you know, those drugs me nothing to anybody who cannot afford it and that is what we are dealing with today, that millions and millions of our people cannot afford the outrageously high cost of prescription drugs in our country. my time and the time of all of the members is limited. i am going to ask -- my time is

limited. i am going to ystart by asking all of you a number of questions and i would appreciate it if you would respond with yes or no. it turns out that in our dysfunctional and extraordinarily expensive healthcare system, hundreds of thousands of americans have gone to gofundme in order to raise money to pay for their healthcare needs and for their prescription drugs. let me ask mr. davis, if i might. have you ever searched on gofundme for your cancer drug keytruda ? >> no, i have not. >> we have and we have found over p 500 stories of people e trying to raise funds to pay for their cancer treatment. one of those stories is a woman

named rebecca, a school lunch lady from nebraska with two kids who died of cancer after setting up a gofundme page because she could not afford to pay for the treatment. rebecca had raised $4000 on her gofundme page. the cost of keytruda and the cancer treatment was $25,000 for one infusion every three weeks. mr. davis, please yes or no, is it true that the list price of keytruda is $191,000 a year in the united states? >> that is close to being true, yes. >> is it true that that same exact drug can be purchased in canada for $112,000 a year and $44,000 a year in japan? >> generally, yes. >> mr. davis, even though the price of keytruda is one quarter of the price in japan compared to the united states, does your company, does mark make a profit selling keytruda

in japan? >> we do. >> what i understand is you make a profit selling keytruda in japan for one quarter of the price that you sell it for in the united states. my question to you is a simple one. will you commit to lowering thee price of keytruda in the united states to the price of japan? >> senator, first, i acknowledge the prices in the united states are higher than they are in many of the countries you said. not for all drugs but for many drugs. i think it is also important to point out that you get access in the united states after and more than anywhere in the worldi we have 17 tumor types in the united states. if you look across europe, it is in the 20s and in japan, even less. there is a reason why the prices are different and we

need to be careful because we are also seeing, in those markets, that they are unwilling to support innovation and we are working hard to try to get them to understand the need -- >> i apologize. i do want to make this point. again, we all appreciate the drugs that you and other companies have produced to save lives. no debate about that. i do want to point out that after all is said and done and all the money that we spend on prescription drugs and healthcare in general, the life expectancy in japan is nine years longer than it is in the united states. senator cassidy talked about canada. the life expectancy is tesix years longer than in the united states. life expectancy in portugal is six years longer. life expectancy in the uk is four years longer. let me ask a last question to

mr. davis. as i understand it, you may $52 million in 2022. will you commit to not accepting a single dollar more in compensation until there is not a single gofundme page for keytruda ? >> i can tell you that we are very much sensitive to what is happening with patients . that is why we have a very important patient assisted programs. we have over 800,000 patients benefiting where we provide free drugs or those who cannot afford it as well as other programs that help with co-pays and others. we are committed as a company to doing what we need to do to try to help alleviate the challenges patients face that you are focusing on. that is my focus as ceo. >> thank you. >> boerner with bristol myers squibb, carolyn from florida says that she cannot afford eliquis so she will, quote, stop taking it.

mr. boerner, again, yes or no. the list price is $7100 a year in the united states. dr. melissa barber, an expert at yale university has estimated that it costs just $18 to manufacture a year's supply of eliquis. $7100 but we pay $1800 to manufacture. is it true that this same exact drug, eliquis can be purchased in canada for $900 a year? >> senator, that is roughly correct. >> let me ask you this. even 13% of the cost in the united states -- does bristol- myers make a profit selling eliquis for $900 a year in canada? >> senator, we do make a profit. >> selling the product for 13%

of what we pay in the united states. obviously you sell it there because you make money. mr. boerner, will you commit today that bristol myers squibb will reduce the list price of eliquis in the united states to the price that you charge in canada where you make a profit? >> senator, we can't make that commitment, primarily because the prices in these two countries are prioritizing different things. in canada, medicines are generally made less available and it takes considerably longer for those medicines to be available. >> i do apologize. life expectancy in canada is six years longer than it is in the united states. mr. boerner, your company spent over $12 trillion on stock buybacks in 2022. given that reality, can you tell carolyn why you can't lower the price

of eliquis? >> first, senator, let me say no patient should have to go through the types of choices that the patient you just described go through. it is our commitment to continue to bring down the price of medicines in the us and i would love the opportunity to bring down the price of eliquis in the u.s. our net prices have, over the last five years, declined. at the same time, the list prices have increased. why is that? because of the complexity of that system and the billions ofd dollars in rebates that we have provided intermediary that do not go to lowering the price of medicine like the patient you just described. >> again, i want to get to this very briefly. mr. duato, is it true that the list price of solera is $70,000 in the u.s.? >> it is roughly right

>> 70%. we are going to get to that this morning. is it true that while charging $79,000 in the united states, that the exact same product is sold in spain for $18,000? >> i don't know the pricing. i can tell you that the discount in the u.s. is 70%. >> mr. duato, is it true that it costs less than $50 a year to manufacture stelara? >> that is only one component that goes into our pricing. we are looking at the volume that the medicine brings to the healthcare system, our ability to produce this with research. also, we look at the affordability. the average co-pay in the u.s.

for a patient using stelara is $10-$15. >> i apologize. i am over my time. i will give senator cassidy the same time i had. >> mr. duato, in 2021 , jansen constructed an exclusionary contract to protect their dr blockbuster drug. it change the outcome but the deal protected competition from new bio similar which was launched at a 15% lower cost. i i understand that this is confidential in terms of the settlement with the court -- by the way, let me just say this involves a rebate law.

for the sake of those that are c watching, it is a competitor tool that can be used to restrict a competitor inching in. a manufacture could offer more significant rebates for access to the formulary contingent upon the blocking -- we have been discussing the promise to lower the cost in a market oriented competitive way. we are not going to have government regulation. we have to have a market situation in the market would be bio similar. this sort of arrangement blocks it. in the full support of a market oriented approach, do any of your current contracts support rebate walls -- >> we welcome genetics. we have a part of the system. 90% of the prescriptions --

that is one of the reasons pharmaceutical expenses have remained flat. we believe that -- we care deeply about it and we don't -- >> let me ask. my specific question, do any of your current contracts employee rebate laws. >> our current contracts do not employ any techniques. te >> thank you. >> i think at least two of you, maybe all three of you are ll working on gene therapy. i have been concerned that we don't know how we will price those and i think one of the concerns is that there will not be a market force to lower the cost of the gene therapy, which is incredible. it is amazing the lifetime of benefits that gene therapy can create. i was speaking to a medical director of medicaid cmo and he

was telling me that the pharmaceutical cost related to medicaid is now 35% where formerly it was 25 or 30%. he says it is being driven by gene therapy. when sickle-cell comes widely spread -- i don't know how it will be priced but my state has a lot. i don't know how we will be able to afford, given that everybody should have access. very concisely, how are we going to show restraint on the price of some of these new gene therapies which already is driving up medicaid. 35% of medicaid is now pharmaceutical cost. mr. boerner, i will start with you. >> we don't work with gene therapy. >> let me go to david. >> we don't work with gene therapy. >> i thought i saw a press release. >> we have nothing in advanced stages. >> we do have a key set for

treatment. we support legislation in order to be able to do contracts in the cases of gene therapy. we welcome legislation in order to be able to have the contracts. >> that is good. value-based contracts could be important but it does not address the opening cost. the opening cost is sky high. what would you give to us in terms of market solutions to an opening price that would be so much that it would be difficult if they decided to afford the gene therapy? i could put in any other drug but let's start with gene therapy. >> we have to look at the value of these therapies and the fact that it may affect only less than 1000 people in the world. we have to understand that. you can rest assured that we are coordinating solutions with diseases of people that can lead to blindness.

we look at our pricing in order to make sure that all patients are able to afford it. >> i recall a couple of years ago there was a study that was shown -- you probably know it better than i. $2 million for gene therapy was a reasonable -- it would cover the cost. that would be for the rare where you would not have the ability to produce more. the more you produce, you get a little bit extra profit. you know where i am going with that. that shows restraint, if you will, on behalf of the manufacturer. we want to be able to provide access. without access, it is as if the drug has never been invented. is there any other thoughts you have on how society -- how

could we have a market oriented approach to this? i truly am concerned about the ability of the medicaid program to be able to afford some of these gene therapies. >> we care deeply about our medicines getting to the patients that need it. especially with ultra rare diseases where therapy could have life-changing consequences. we will always seek down and make sure the price is reflective of the value of the medicine but also, it enables affordability and it makes it possible that every patient -- >> we are defining affordability for the patient. if medicaid covers it, it is by definition affordable for the patient but that does not make it affordable for society. society is going to pay for it. medicaid is taking more and more of the state budget. we want to market oriented

solutions. we want to create incentives so that good companies are making these new things. if my state goes bankrupt, then the taxpayer -- we are all in tough shape. let's go to one more thing. there is evidence that pharmaceutical companies will do lifecycle management to prolong the exclusivity of the drug. some would argue that that defeats innovation any thoughts about that? >> senator, lifecycle management with the extension of new innovations are incredible to being able to deliver benefits. obviously, the patents associated dictate when -- we have been in favor of robust

entry primarily on innovative products. typically, you start the treatment very late in disease, learn more about how the drug works. ultimately, you can bring that a into early-stage cancer where you have the potential to potentially cure a patient. that takes quite a bit of time but that is an example of a lifecycle management where you are showing the true potential of the medicine. i would hate for us to cut off the opportunity to show those benefits. at the same time, we should be welcoming a generic competition because ultimately, our focus as a company is to take resources as we get closer to generic entry and focus those resources on the next wave of pa new product innovation where i think we ultimately want to go for patients. >> the short answer is, as i look at it, one, we very much

support generic drugs. it is the core of how our system works. we are able to recoup our investment and society benefits in perpetuity beyond that. as we look at lifecycle management, we always bring value to the patient. if you look at keytruda now, 39 indications across 17 tumor types. is revolutionizing carol patients facing cancer. the reality is, 30% of people show overall response. as great as it is, patients are still suffering. we are investing in therapies to be able to extend and go beyond that which means must better benefit to the patients who will ultimately use those drugs. >> thank you for holding this important hearing. we are looking at your i

arthritis drug. we have $20,000 in canada, $12,000 in france. are the prices that you receive from a country like canada or france, which looked to me to be about one quarter of the price that you get from the united states, are those prices covering your cost? >> yes, sethey do. the price in the u.s. is countered by 70%. >> are the prices you are receiving from the other countries -- let's say france. >> i will give you the benefit of the argument. france is 50% of the us cost e that you are claiming.

are those prices covering your cost? >> they do. stelara, mainly for inflammatory bowel disease it is not reimbursing the public system. canadian patients that go to access stelara cannot be in the public system because eight years later it is not there. >> you don't identify any free rider system today -- >> i agree with you that the prices in the u.s. are generally higher for medicine, more aligned with what you are describing. at the risk of the healthcare system, price is hard. 14% in the u.s. is lower than most of the advanced economies.

a real difference is in the u.s. where patients get access to therapy. >> if the united states were to restrict the prices we pay, would that create a different negotiating dynamic in countries that right now, for t example, are paying 50% of what the united states pays? would it allow you in your negotiations to get higher prices from other nations that right now are paying far less than the united states? >> we can use that price cut. we work with the department and try to get the price caps that some -- we welcome this report.

i am not benefiting either. >> what do you say to americans who look at the way that you allocate revenue and wonder why, in your case, for instance, you are spending $6 billion on stock buybacks, $11 billion on dividends and $14 billion on research and development? you spend all of your advertising time talking about the research and development but i think most americans would be pretty surprised, given how much the industry talks about research and development that you are spending more money shelling out money for investors and buying back stock then you are on research and development? what do you say to folks who look at that and come to the conclusion that you care much more about choosing -- keeping

your investors happy and keeping your executives happy in researching and development, the next class of drugs. >> we care deeply about being able to discover the next medicines that will help with alzheimer's. >> explained to me how you justify that division of dividends and stock buybacks versus research development. you could just choose, instead of choosing to buy back stock, you can put it back into research and development but you don't. >> we had 2022 and -- the $30 billion and 16 in the buybacks. we spent six times more in developing the locations than we do. >> i am looking at 2022 by

johnson & johnson and it shows me $11 billion in dividends, $6 billion in stock buybacks, $45 million in executive compensation and $14 billion in research and development. can you understand that one of my constituents in connecticut would look at those numbers and think that you care more about adding to the pockets of the folks that work for you and invest in you than in research and development? >> we have spent $77 billion since 2016. we have to pay dividends because this is the only way that the company can remain operational and sustainable. otherwise, we are not able to develop medicine for patients.

>> mr. boerner, you talked in your testimony about the united states having a healthcare system that prioritizes the important role of patient choice . i just want to present you with a case of one of my constituents and ask you about the choices that she faces. i have a constituent who needs eliquis this is a blood thinner that is critical to her survival . she has priced the medicare plan that gets her the best possible price. that price is $350 a month. the average social security benefit in connecticut is about $1700 a month. for somebody who is on eliquis, they are likely on other drugs as well. here is her choice. her choice is to pay the $350 and go without food or pay her rent. or, not take the drug and risk of heart attack or stroke.

is not the choice you are talking about when you refer to a healthcare system that prioritizes the important role of choice? >> senator, absolutely not. in fact, i would say on behalf of all of our employees at bristol myers squibb, that is a choice that no patient should have to make. but, she makes it. she makes it because you have chosen to price a drug at a point that is unaffordable. >> senator, we have priced eliquis in the u.s. in our estimation -- we try to do this for all of our medicines consistent with the value they bring. we are thankful they are the leading drug. >> you put it billion dollars into the stock buyback. why not bring the price of the

drug down? >> thank you for being here he today. it is well known where our chairman stands on this, his worldwide view is pretty clear that he believes you guys are setting drug prices and it is all about corporate greed. i am a true believer of capitalism. i believe that we have the best healthcare system in the world. the problem is, we have the federal government involved in it and it is not implemented the way it should be. that being said, i just have a few questions. mr. davis, can you explain is something? the biden administration has fo two huge authorities. they dictate prices of ma prescription drugs, specifically small molecule drugs and cure cancer. can you walk me through how

those might be in direct contradiction of each other? >> senator, i think what you are referring to is what is called the pill penalty. >> that is correct. >> what that does is effectively say that at nine years, post- first approval, your price or your drug will be negotiated into the small molecule -- the issue that that raises is that it disfavors small molecule development. the reality is, if you look across the majority of cancer treatments, they are still small molecules. as chris pointed out, earlier, the development of cancer drugs usually start in the phase starting with the sickest patient. the last stage and then cyou work forward into earlier stages. in fact, you can start to maybe talk about a cure. to do those studies, we have

nine approvals in that space. those studies can take nine years to do. if at nine years, i have to significantly reduce the price of that drug to a point that has no process, my incentive to do those follow-on studies is not there. that is my rworry that as you look at cancer care, you will see patients suffer because we can't get to talking about cure. i would also point out that we did not ask about alzheimer's and neuroscience diseases. these also require small molecules. large molecules can't penetrate the blood brain barrier. we are just incentivizing some of the largest areas of chronic need in our society. >> thank you. >> we hear a lot about

healthcare costs. i think all of us would agree to some degree. i want to go back on you a little bit. today we are being led to believe that these costs are due to corporate greed. i want to talk about a driver of healthcare cost. there were various industries during covid. we upended the market and drove prices through the roof. when i talk to healthcare folks back in alabama, labor costs is one huge problem. the other cost includes materials. >> certainly, when we look at the cost phases for us doing what we do as a company, which is to bring forward new medicines for patients, we had to factor in all of the costs.

i will give you an example. in a cellular therapy, it is really transforming hematologic diseases. these are very complex medicines through taking patient cells, manufacturing them and reengineering them to really target and hone in cancer cells and then you reinject them in. this is a first generation technology. unfortunately, it has very high labor costs because this is one that is very manual. they have transportation costs, raw material costs. ed all of those go into the cost of first generation medicines. we are trying to innovate to get to a second and third innovation quickly not only because it is important for us to funnel additional research end of element but also so that we can bring the cost down to patients. they are absolutely a factor. >> thank you. i am going to ask you this with my accent and yours, we will

have a tough time. i know you are aware in 2021 that the biden administration announced a mandate for u.s. troops and personnel to take the covid vaccine in order to serve in the military. are you familiar with that? >> i am familiar. >> are you aware that 8400 troops were kicked out of the military for declining to take the vaccine? these were mostly young, healthy americans. are you aware of that? >> i was not aware of that. >> did you or did anyone at johnson & johnson encourage the biden administration to mandate this covid vaccine for the military? >> we did not, sir. >> how much did johnson & johnson benefit financially from the covid vaccine mandate? did you have any kind of guess? >> it was a time -- we thought that the healthcare company,

patients that needed to collaborate was entirely not- for-profit. >> do you think the soldiers who were expelled from the military was the right thing to do? should they be reinstated? >> i was not aware of the situation, sir. i am not aware of the circumstances so i cannot comment on them. >> thank you. >> thank you very much, mr. chairman and thank you all for being here. we appreciate it. we hear from our constituents constantly about the drugs that they take. this is an important hearing. i continue to hear about the in skyhigh drug costs for many people including in my home state of washington who have to choose between filling their prescription and paying for other things they need like groceries or rent. i often talk to people who are

skipping their prescription altogether because they can't afford it and it puts their life at risk. i really believe that congress does need to do more here, i have for a long time and i think pharmaceutical companies need to do much more to put patients first. that does not mean that private companies can't make a profit. i think we all have a really sincere appreciation for cutting-edge research that happens at each of your companies. when you say you are in the business of saving lives and curing disease, you have to think about putting patients over profit. as we all know, life-saving drugs don't do anyone even -- anyone any good if people can't afford it. >> mr. duato, your drug company makes stelara. costs $79,000 annually. mr. davis, your company makes a drug to treat cancer.

mr. boerner, your company makes a drug, boerner, to treat the cost of stroke that costs $7100 a year here. >> either you think the same drug sold around the world work better here in america i don't think that is the case that i wanted to ask each one of you. explain to us why it costs more so we can tell our constituents and they understand. let me talk to you. >> we share your concerns about what patients have to pay at the pharmacy counter for medicines. stelara, as you mentioned, they make pricing. it is 70% lower . it is higher

than in france but more aligned than here. the differences that patients with inflammatory bowel disease, which is the main indication for stelara, in order to afford it, in canada, eight years after stelara was approved , conversations with colitis. we have strong patient programs. a patient that has commissioned students pays $15 a month. if they were not insured or underinsured, we would have similar problems. >> if you look at keytruda

and the u.s. and japan, like all of us, we are trying to focus on making sure that patients all over the world get access to our medicines. each market operates differently. japan is a unique market in that the way they price their drugs -- we have been working hard to get this to change and i think maybe we have successfully gotten some of it s to change. after you initially launch your drug, for every indication that comes afterward, they treat it as a different drug. in addition, if a competitor launches a drug, you still take a price decrease because of the competitor drug. we are in a strange situation. in reality, we have the most indications. we were driving the market the fastest. we have the most discounted price in japan. it would not sustain the $48 billion we spent on keytruda .

we are working hard to help those markets. we could use government help to understand that we need to, across the globe, share and making sure we can invest. >> what would congress do different to lower prices? >> on one hand, a different price. that is a question i am assuming we will get to. do we focus on the large discrepancy with the list price and the net price, which i believe we need to focus on. that is really the core. we need to address that. in addition, we need to work together on trying to drive innovation with trade agreements. we have had some success with that. >> senator, there is no doubt that patients will pay less for eliquis or most of our drugs

outside of the u.s. that comes at a fairly significant cost for the patient's outside of the usa and canada. patients will wait roughly 3.5 to four years to get access to a medicine that is available in the u.s.. you can see similar stats in every european country and in japan. what we can do more is try to bring out of pocket down. eliquis, for example, the average out-of-pocket is roughly $55 in the u.s. there are still patients for whom this drug is absolutely not affordable. medicare in particular is a space where we can provide those types of co-pays support programs that we do in a commercial setting. probably the most important thing we can do is try to bring down the list cost of eliquis.

>> do you set the list price? >> we do but that list price is driven up by the incentives over the last five years we have paid almost $100 billion in rebates and discounts to intermediaries? that is what patients pay as a co-pay on the list price. >> senator marshall? >> mr. boerner, i will start with you. >> bristol myers squibb makes this miracle drug . when i was in residency, i was using heparin. it could take three or four days. they might be in the hospital for 10 or 14 days. eliquis saves money.

it prevents hospitalizations as well. i want to point that out. as we talk about ratcheting care, we talk about how we are ratcheting care in foreign countries. i want to talk about care in this country. how do we ration care when they take a drug like eliquis and don't allow it on their formulary? does that ever happen? >> i am glad you raised that point. we have had this happen on multiple drugs. we have how do pbns care ration costs. >> those patients no longer have access to eliquis. in other cases they may go on to mofrin as you said.

eliquis is the most popular drug. so they have to go back to cuzmin, a trug that i was using in medical school in the 80s. . it amazes me how much tower. what percentage of that list price does typically merck get at the end of the day. >> if you look at jenuvia the

list price is $690. >> per year? >> per year. we recognize the $690. >> so on that drug you're only getting 20%. >> it's 10%. >> into the esystem as a whole. if we had the time and the energy and a chalkboard would ex you be able to explain to me and show me all the little places that goes? >> i could. but i think you appreciate it is highly very complex and so complex that at times even learned people mwho play in th space can't explain it. >> well, certainly i can't explain it. it's so transparent we don't know where this money is going. we know the pharmacy managers are taking $1.50 of that dollar. i would like to know where the

rest of that goes. i would like to go to mr. davis. you all have an anti viral drug that has been approved. how many drugs did you go down as when covid hit, what did you spend on rmv as you look at all of those together. >> when the covid situation hit, we drove two or four key programs two in vaccines. two in anti virals. only one of those succeeded an dollars. an >> 2 1/2 billion dollars and one across the finish line, an anti-viral. is that used in the united states? >> it's which is the drug logrevio.

>> is that being used in the united states? >> very little. it has emergency use. very little. we're seeing it used more outside the united states. >> so you spent $2 million. in my time working with patients, we were always to find a program. there's always exceptions to the rules but, what type of efforts does j & j make to work with 340b programs and to help some of these people that need help? >> thank you, sir. we care deeply about patient

affordability. and rural hospitals that take care of patients that are under served. we believe the program is an important program to support those hospitals and we are fully, fully looking forward to collaborate with them in any way we can to provide patient care. >> they're taking great advantage of the 340b program as well making sure that every patient in america has true affordable access to medical care and having access to affordable drugs as well. i may make a couple of fit points. the people of kansas sent me here to save medicare. to save medicare i need a miracle drug to treat alzheimer's. it seems to me that americans bare the burden. most of the rnv in this world

and other countries benefit from it. and that impacts the price as well. why does it feel to me that the americans are baring the brunt. >> i think the u.s. favors invasion, it values it, it values access for our patients. fast access, most access. many markets around the world don't do that. what they focus on more is their budget and how do they meet their budget needs and we appreciate the budgetary constraints everybody is facing. most cases, people don't get

the access to meds. >> thank you for allowing me to jump ahead. i want to start with a sense that i have back home. when i talk to people in pennsylvania, and a lot of your companies have a lot of interest in pennsylvania, i hear it over and over again. this problem, the cost of prescription drugs is like a bag of heavy rocks. people have been carrying this around on their shoulders, day after day, year after year. and they're tired of it. they don't believe any player in this is doing enough. i think most pennsylvanians are happy that, that i could vote for a bill in 2022 that allowed medicare to negotiate for lower prescription drug costs. and that we could cap the cost of insulin at $35 a month for medicare part d beneficiaries. they were happy that we could cap the out of pocket cost. that will go into effect about

a year from now. but, they're not satisfied that the congress is doing this, house or senate. but they're really not happy with the level of work you've put into this. i hear all this talk about rebates and cost reductions that you're putting in place but it's not cutting back home. when i speak to people who know what pbms are doing. they know they're not meeting the obligation they would expect them to. so there's no question that your companies and big pharmaceutical companies are playing a role in this. you bare a measure of responsibility in this. i wanted to ask you a couple of

questions about that tell me what concrete steps you're taking to get the costs down. we need to know specifically what you're doing to lower costs so that no one especially someone who needs a life saving intervention, a life saving treatment is going to be denied solely because of price. >> thank you, we absolutely want to be part of the solution. it does create health inequities. what are we doing for that? we have a very extensive patience program that for commercial patients enables them to be able to pay low copays. $5 to $15 per month. we supported more than 1

million patients in 2022 with our copay assistance programs. if a patient is under insured or not insured. we provide free drugs. we provided $3.3 million in free drugs in 2022. i think we can do more. we can work together to lower out of pocket costs to patients even in medicare as you mentioned because that's a real need that we are committed all our employees are committed in order to make sure that our medicines get to the patients that deserve it. >> mr. davis. >> senator, very much like j & j. we have tiered levels of patient assistance programs because we want to make sure that patients who need our drugs can access them. if you have insurance, but you fall below certain means, where you're not able to handle your copay we will give copay assistance to those patients through a program we run if you're someone who doesn't have insurance, is not able to

qualify for government programs, we have a patient assistance program that basically provides the drugs for free. so, we are very much focused on this and making sure that we can do everything we can and we're investing a lot of money on it. but something i would like to add because i think it's important to the discussion. we're focusing on prices today but we also need to think about invasion as a way to fix the problem. and something we're focusing on as a company is a new technology called microcyclic peptides which allows us to take difficult drugs to make and we're able to split those into a smaller form. we're investing million, billions behind that effort. i think we also need to think about how can invasion solve the problem. we need to address the price

challenges today. we have to lower out of pocket costs. invasion like ultimately is what's going to help us fix this. >> sure. senator maybe i would highlight three things. first, we obviously have a very robust on the commercial side copay assistance program that brings out of pocket costs down in many cases for certainly our oral oncologics. we're working to make those universally available. we would like to work with this congress to find ways in which we could apply the same sort of programs in medicare. there's some complexities we want to make sure we're not diverting from the use of generics but we think there's ways to do that and we would like to explore that with congress to bring costs down for medicare patients. the second thing i would say is we're look ing at doing more innovative work. if our drug works we get paid.

if it doesn't work, we get paid less and then some cases not get paid at all. there are technicalities. we need to bring the costs down the way we will do that is innovate to the next generation which hopefully is way less complex than what i described recently. >> thank you mr. chairman. thank you senator. i'm not an apologist for big pharma. i'm an unfeathered critic. but i'm a consistent unapologetic advocate. freedman once wrote that p --

that if you want to have a tomato shortage, pass a law that retailers cannot sell tomatoes and you will have a tomato shortage. one reason the u.s. leads in pharmaceutical legislation, while the u.s. has a more market pricing and innovators, europe passed price controls in 1990. it's no surprise that we lead in invasion. but this hearing is not to celebrate the u.s. success. they have simply brought forward people who question their legislation. 10 years ago the five year survival rate for patients

diagnosed with advanced lung cancer was 5%. terrible. since merck introduced the drug, it has double fold. we should be celebrating that. i have a friend with preliminary to cancer and he's alive thanks to keytruda. paved the way for development of other auto immune treatments. when i began in medicine basically all patients with rheumatoid arthritis you could see from a distance. had crippling arthritis in their hand now it's hardly seen

because of american companies and the american system that allowed the system. those suffering from river blindness, with over 11 billion treatments shipped to countries. this is socialism. you don't see that from other countries. because of merck's donations seven countries eradicated the transmission of blindness across the world. it goes on and on. we've tried price controls in

general here. we did it in the 1970s under a republican president, under nixon. it was a disaster and led to lines at the gas pump. it was an ultimate disaster. a study at the university of chicago found that 254 fewer drug approvals over the course of 18 years would happen under price controls. under communism they knew this. socialism, communism, under economic system of socialism. from price it became a running joke. in poland under the era there was a joke, a guy went to the store he was looking for e. eggs and he asked the clerk, is this the store with no eggs. they said no, this is the store with no toilet paper. the store with no eggs is across the street. those who with understand and appreciate capitalism do not need to show that duped them that price controls have never

worked and never will. let's get back to profitability. i don't think you guys did a very good job of answering this. did you add in to your estimate of whether it's profitable in canada whether it costs you $6.2 million. how much does it costs to make keytruda and how much does it cost you to make it. do you think it would make a difference if you added all the rnd and you added that all out for the profitability. would you still be profitable in other countries. >> i have not made that analysis but i would say that the profitability would be marginal at best. >> do you think you would be developing thousands of new drugs if the whole world were canada? >> no we're not. >> sure you can make it for pennys now but it didn't start that way. and people say, oh my it costs so much in the beginning.

that's capitalism. that's the way it works in capitalism. joseph schum er talked about this. this is an old profit. there is no business of any of y'all telling them how much talked of my back. their job is to make a profit. it's actually gets law for them to not to maximize their profit, for you sit in judgment of how much profit they should make analogies should run the companies, you know nothing of running companies. nobody it's not that the queen wears stockings, it's that. almost nobody up here has run big companies. billion dollars companies and

you presume somehow to say you're going to tell these people how to run their company. list price versus net price. list price means absolutely nothing. i charge $1,800 for cataract service. the government paid me 600. 2/3 of it nobody stole that. it disappeared because it never existed. so if i'm billed a million dollars in charges i really was only billing 300,000 because that's what i was getting paid. because of the confusing nature of the system the list price is much different than the net. but to quote list price and then compare it to net price in other countries is completely and profoundly unfair. the list price means absolutely nothing. all of these policies need to be addressed before we begin haranguing american ceos thank you. >> thank you for your questioning. senator hassen. >> thank you mr. chair.

>> i yielded to senator casey. >> oh. >> senator hassen. >> thank you. i just wanted to say at the outset that the last time i checked when a buyer and seller negotiate for a price that's capitalism. and i wanted to talk with all three of our distinguished witnesses today because one of the things that strikes me that we are struggling with is i think various times in each one of your statements you talked about your price reflecting the value of your product. and the thing is, human health and life is priceless. so if that's the metric here, you will always have an excuse

for charging increasing prices for these life saving drugs. what we are trying to do here is make sure that you can continue your invasion. i'm sure everybody up here has a family member that has been saved by innovative medications or greatly improved. at the end of the day we have to find a way to allow you all to innovate but also to make sure that the lives you are working to save. while families in new hampshire and across the country struggle to afford these life saving medications. pharmaceutical companies are doing everything they can to keep their prices and profits sky high. i know you've all talked about that not being the case. let's just look at one thing here. one way that companies do this

is by filing dozens, even hundreds of frivolous patents that keep others from selling them for decades. companies block low cost alternatives like generics from coming to market. mr. davis, the list price for merck's cancer medication keytruda is as we talked about $190,000 per year. can you tell us how many pat at -- patents have been filed on this medication. >> i don't have a number. but i would focus on one suite of composition of matter patents that we have and those are what allows us to continue to have exclusivity. >> i don't think it would prize -- surprise you that i know how

many patents you have. it's 168. this is what this looks like. sheet after sheet sheet. patent records show that you not only have 168 but half of them relay to the way the drug is used to make this. all while raising the price of keytruda in the u.s. year after year. so it would be good, if merck would just stop blocking patient access to low cost medications by using the patent system in this way. it's clear that merck and other pharmaceutical companies, you're not alone, won't stop abusing the patent system to have control of the price. the medication affordability and patent integrity act would help break up these patent laws. i would urge my colleagues on both sides of the aisle to

support that. now mr. duato, the barriers to access programs r-p unreasonable pwhreu high. for an expensive medication like your companies arthritis drug stelara, what does a patient have to do to get assistance from the johnson & johnson program? >> thank you, we care deeply about patient access and we put a lot of work in developing worldwide patient programs. we have mechanism for patients to contact with us through a website called johnson act. we assisted with assistance last year. >> the initiate application is six pages long and it requires

pages of additional documents for income verification. in the fine print this document everyone requires the patient to consent to a credit record check and other financial disclosures. mr. duato everyone on this wants you to help patients pay for their medication. this process has to be streamlined and easily available to everyone who qualifies. i would urge you to look personally at this application. when someone is dealing with a serious illness the last thing they need to do is read the fine print and find out that they have to release a financial report. mr. burner let's turn to the prevention drug eliquis the list price is $7,100 per year. how many generics of this drug could a patient in the united

states get at the pharmacy today? >> senator in the u.s. there are not yet generics available. >> right. there are zero genericking versions. because your company has sued to block two approved generics from the u.s. market until 2028 at the earliest, isn't that right? >> senator we have allowed for generic in 2028, that's correct. >> right. so we have two generics ready to go. your original patent is well past expired. but you still are actively trying to prevent generics from coming to market. mr. duato the list price of johnson & johnson auto immune stell era is $20,000. similar to eliquis there are currently zero low cost of stel

era available to u.s. patients. there are zero bio similars available in the united states today because johnson & johnson has also sued to delay the launch of a low cost bio similar drug. so we need, you all spoke about the need to have speed of access, getting drugs to market. but then you are actively working to block the less expensive bio similars to come to market and that's something we should address. thank you mr. chairman. >> senator romney. >> thank you mr. chairman and appreciate these executives taking time away from your responsibility at your representative companies to be here and to inform us and in some cases to get berated by us and give us an opportunity to pontificate on our various topics which i'm about to do. one is that i fully conquer with mr. paul, senator paul

indicated just a moment ago. rand paul, and that is that a free enterprise system works marvelously. and i know we keep asking you, you know. what are you doing to try and reduce the prices of your products. the answer is that's not what happens in free enterprise and capitalism. i hope it doesn't come as a shock to my colleagues. in capitalism if you're running an enterprise, you have a fiduciary responsibility to your owners you try to get as high a price as you can. that's what you try and do. you try to make as much profit as you make. that's how free enterprise works. you think chevrolet sets back and says, gosh how can we get the price of this chevrolet down. no how high a price can i get and maximize the profit for my shareholders. what prices mcdonalds charge for a sandwich? as high a price as they can get. the amazing thing about enterprise is someone figured out if everybody does that and you have competition among all

the players, that somehow, the prices come down. and the quality goes up. and the access to the product is broader. it's the marvel. it doesn't seem to make a lot of sense but it's the marvel of capitalism. now, obviously, wise companies say, well you don't just raise prices to the roof. and do things that are going to harm your creditability and the trust in the marketplace and have your employees not want to work there because they're going to figure they're working for bad people. why doesn't enterprises just do all the things i mentioned. they do other things and say we're going to take care of the poor and take care of the people that come to work for us. but enterprise gets pushed out by people who develop new products and push them out of business. it's how it works.

as senator paul indicated there's some that would like price controlled and there's some that would like, it price control is just another name for socialism light. our system works. but there are ways to improve it. and i'm very concerned that this disparity between list price and what you actually get paid is a problem. and i don't know why it's a problem or what we can do about it. but you have pbms and getting prices at discounts like this in other countries that you compete in? senator we do not. this is a unique thing of the u.s. health care system. >> is that true. >> that is true. >> we have higher out of cost for patients than any where else in the developed world. >> so i hope we focus on this.

we may not have the right bad guys here. these are the guys developing cures and help people solve diseases. but we have something here they don't have in the rest of the world. these pbms that want higher and higher list prices because they get paid based on how high the list price is. because they get a percent of the list price. i'm not sure where all the money goes. so if it goes back to patients. some go back to the patients if they're self-insured. i don't know where it all goes. but i think that's the issue. let me ask each of you. if you were in our shoes knowing what you know, what should we be doing to try to get the cost of products down to our, to the people of the country and to the country at large. to the government that buys a lot of goods, a lot of drugs. what should we be focused on. i know you sell the pbms so you have to be careful not to step on their toes too hard because

they might punish you. what advice can you give us. what should we be looking at. where's the problem in this mess? we will start with you mr. boerner. >> to the complexity you just described. the one dealing profits from intermediary. if you could link that that would be important. require those rebates be passed on to patients. number two, i firmly believe we have the ability to help lower out of patient cost through medicare if we could provide the same type of copay support that we do on the commercial side to patients. that would be the second thing. the third thing we referenced it before, we do innovative contracting outside of the u.s. where we get paid if our product works. their constraints on our ability in the u.s. i would

like to see those removed, that would be very helpful. >> mr. davis. >> i would say chris covered all the things we would also do. >> make sure the prices we pay to pbm go back to patients to reduce out of pocket costs. i would make sure that as we are trying to do and i know this committee is looking into that would delete the compensation from the list price. finally i would sit down to see what we can do to provide patient assistance programs for patients in medicare part d and look to further lower the out of pocket cost for patients that the ira is bringing. >> thank you. you didn't mention the fact that pbms are largely owned by the insurance companies. so we think pbms are going to be lowering our costs as an employer. it might lower your cost but then it's passing on their profit to the insurance company. is that a problem, is the fact that the pbms are owned by the insurance companies, is that a

problem here? is that something we need to look at as well, any of you have any comments on that. >> the three pm's are owned by the largest insurance company. and they control 80% in the u.s. >> i'm concerned that we have some structures here that are anti competitive and make markets less effective and we probably ought to focus on some of those. thank you, appreciate your testimony. >> thank you, senator bolding. >> it's been very interesting to listen to the back and forth. senator romney, your points about supporting the free market but understanding that there are times when there's market failures. we also have an obligation i think to oversee because our committee along with the finance committee oversee and

need to have good stewardship of medicare and medicare dollars. but i, the point that senator romney just made about basically, i don't know, i can't follow the dollars and it's complex is a real issue. i want to start just by sharing some of my constituent struggles. i have a constituent who literally turns down the heat in the winter because that's how she is able to afford the prescription drugs she needs for her wellness. there are choices that people are making, people are rationing their medication. people are forgoing their medication because of affordability. i think we need more transparency. i think we need more transparency to inform the

policies we adopt. i was pleased this past may that our bill would require basic transparency from your companies at any juncture in which you want to raise the price. list price of a prescription drug by more than a certain amount. a certain percentage. asking questions like what is the cost to manufacture the product. what do you invest in rnd. something we really support. how much are you spending on marketing and advertising. what are you doing in terms of stock buy backs. is there excessive executive compensation. i agree that we also have to have that transparency within the pdms. i remember under the last president when we were our

confirmation hearings for azar who was coming out of hearings. and i told him about a dad and his two diabetic sons. i said what do i tell this dad and he just responded it's complicated. i can't tell my constituent. we can't address this because it's complicated. i remember when, it was years ago now when the epi pen doubled in price overnight. went from $100 basically to $200. my constituents certainly told me what a burden that was. i asked if he could show me,

follow the money. a chart follow the money. nobody could. we need additional transparency to address our policies. mr. duato, the price of stelara in the u.s. is $79,000 a year. by the way in wisconsin the medium household income is 72,000d the median household income is $72,000. your company has made more than the world combined. this is going back to 2016. under the fair drug pricing act you would need to account for this exceptionally high cost. so just to look at one component of what i'm talking about, how much does johnson & johnson spend on marketing and advertising for this particular drug? >> senator, thank you for the question. we public every year since six years ago, a report that we call it transparency report and

we explain our pricing practices and we transparency also to the different intermediaries that come into the model. we disclose our advertising expenses and our rnd expenses. what i can tell you is in 2022 which was the last year that our report was published and is available, we have spent double in rnd, 110% more in rnd than we did in sales and marketing. >> do you know what that dollar figure is for sales? >> i don't have a total in my hand but i will follow up to give it to you. but it was double the amount in rnd than we did in sales and marketing. >> well let's look at mr. boerner. the price of eliquis has increased by $4,000 since its launch. in other countries the price of this drug is decreasing. how much did your company spend

on rnd last year. >> our company spent just over $9 million last year on rnd. >> how much did your company spend on stock buy backs, dividends and executive compensation. >> i don't have that number. >> does 12.5 billion sound right from the study. >> that's roughly correct. >> for the first time thanks to the inflation reduction act, medicare will negotiate the price of drugs including eliquis and stelara. it's really not enough. and my constituents should not be forced to decide if they should turn the heat on in winter. all while companies are raking in tens of millions of dollars, billions.

we have more work to do. >> thank you, senator collins. >> thank you very much mr. chairman. i think all of us could agree that when a doctor prescribes a needed medication, that cost should not be an insurmountable barrier for the person using it. yet, for the majority of the adults in my state according to a survey it is a barrier. they're worried about affording the cost of prescription drugs and in the last year, nearly one out of three named adults reported skipping a dose of medicine. cutting pills in half or not filling a prescription because of cost. i talked to a young woman with type i diabetes who app -- who

after she aged out of her parents insurance started cutting back on her insulin. she ended up in the energy room. and was gravely ill because of that. she felt she just couldn't report it and took a very unwise chance -- she felt she couldn't afford it and took a very unwise chance. this is a problem. another aspect of this discussion is that many new medications represent true breakthroughs. disease modifying therapies or even tariffs. and the other part is that literally billions of dollars are invested in developing drugs that end up to not be successful. so i think we have to balance all of these concerns.

these new drugs often cost more but if they have the potential to reduce the number of unnecessary hospitalizations and lead to better patient outcomes, they may be worth it. for disorders like alzheimer's, the breakthrough drugs can help keep patients healthier and active longer benefiting society as well as their families. for example, i heard of a patient being diagnosed with mild cognitive impairment early enough that the patient was able to benefit from a newly available treatment and actually returned to the work force. that's quite an establishment. now last year, the chairman criticized this particular company for a list price of $26,500 per year even after the

company in a really unprecedented fashion issued a lengthy analysis of the process by which they arrived at the price. still, sticker shock around list prices and speculative claims that certain therapies will bankrupt the medicare program have contributed to restrictive coverage policies, patient confusion, and limited up tick. so i would like mr. davis, you to discuss, how we can balance the need to have affordable medications without hampering invasion. and how access to the next, what would be the impact on access to the next generation of medications if price controls like those in europe are implemented. how do you see a solution to

the balance between affordability and invasion. >> yes, so senator thank you for the question. you know i would start with at merck and what are the principals we apply when we talk about how we price drugs. because i think, this is the other questions that have been asked about what stops you from just raising your price. and i can tell you that, as a company and this goes back to the core of who we are over 130 years and is truly the purpose we live by. and that is we look at several elements. we look at what is the benefit to the patient. what is the benefit or the cost to the system, we look at access and affordability and i can tell you for instance when we launched keytruda we launched a parity to market price even though we felt we had a better product in part because we wanted to ensure access. so we look at all of that and then we look at what does it take to absorb the price of all

the failed drugs. we know 80% of all the drugs we bring to clinic fail. the reality is the drugs that make it have to pay for those that fail. the majority of drugs that we have launched have not returned their price of rnd. when you get the rare drug that succeeds it has to help cover that. that's what we're facing in the system. as we look at how can we fix this, i think we have to get to the out of pocket costs and we have to find a way toll really drive that down and continue to bring ways to better access to the types of access programs we looked at here. whether it's through patient assistance program, copay assistance, all of the ways we can help the individual person address that affordability problem which we all know someone who faced that and i

don't want to see anyone face that. >> nhia applies a lot of assistance. partners with pharmaceutical companies how is the fact that there has been federal help for example in the development of the covid vaccines, how does that factor into the pricing? >> well, you know, and obviously as we look at the system, the eco system we live in. it is important to understand that all players are important. so the role at the nih is important. the nih basically does the basic research. if you will, they provide the lock. but they don't have the key. we provide the key. we take that basic research, we sculpt it into a molecule. we were able to see now that we have a targeted disease to go after how do we do it? then we spend our resources in the most expensive part of the

development and the riskiest part which is the clinical development to bring the drug to market. so, we need all players in. >> if i could ask you to start to wrap up. >> it's important we do that so i think as you look into the covid vaccine situation we did not receive any federal funding for what we did. we've spent all of our own resources at risk. one of the programs we did do, did have some basis from the nih. and they were compensated for that. can you tell us how much merck spends on advertising every year. >> if you look in the united states our directive consumer

is $150 million. >> and direct to medical providers? >> i don't have that. i wouldn't know that number. we can come back to you on that one. >> i think it's approximately $2 billion over all is what i think is what worldwide. that's a worldwide number. pardon me for that. >> i don't recognize that number but we can come back to you on that. >> i bet most of us on that panel can agree of, nobody likes that advertising. patients don't like it, doctors don't like it. i know the united states has called for a ban on directive consumer advertisement. i understand you sued to prevent regulations that would require you to disclose pricing on that advertising. >> direct consumer advertising serves an important service. there are studies that shows that it drives patients to understand the use of their

medications and over all will bring benefits to the health system. i think there's a piece to director consumer advertising. i also think we can be full and fair and transparent in helping people understand the price of drugs. the reason we brought suit. the one you're referring to is our concern that the specific request that was in that was that you show the list price of the drug. and our concern based on all the conversations we've had here this morning, is that that can often be very misleading and in fact, could cause patients not to seek the drug when in reality take jenuvia, if we put an advertising that is $9,600. if you take the total in the system it's $690 i would hate to think someone doesn't show up to get that medicine because they don't understand the price. what we supported instead which is what we do today. in all of our directive consumer advertising we drive you to a site that gives a list

price. all of the rebates we provide so you can see it. and we drive you to the information needed. >> one of the things that is difficult is how much things cost in the medical system over all. including prescription medications. i'm going to ask you about this dr. boerner. how much would an acute lymphoma the áf -- lymphoma pay for your prescription. >> i don't have that figure off the top of my head. what i can say is that for most of our world oncology drugs we're able on the commercial side to bring copays down to a very low amount and in many cases to zero. now, to a point that was raised

earlier, we have to do more to make that more widely available and an easier process to actually get into those programs. and we're working on that. we've been doing that since i became ceo in november. and that's something we're committed to. again i would like to be able to provide that same benefit in the medicare side. >> if you have a list price, and i guess what you all are saying about the list price is just the list price. that isn't necessarily what people pay. if you have a list price then you have a coinsurance responsibility that is a percentage of the list price that could still be quite a significant amount of money: i think it could be, in this case, you know $6,800 a month for this medication. >> senator, what you're pointing out is absolutely why we believe we've got to also look at ways to bring that list price down. we've been discussing at length sort of the complexity and intermediaries play in this system that lead to incentives to drive those list prices up.

but unquestionably because out of pocket costs and coinsurance for example are typically tied to that list price, we have to find ways to bring that list price down. >> well i would agree with that. i think that that is a really significant issue. particularly as i think some of my colleagues have pointed out that when you get to these patient assistance programs, they're quite confusing and hard to navigate through. and i think that sometimes that's only available if you have commercial insurance. if you don't have commercial insurance then you could really be flat out of luck. >> senator, that's correct. i referenced since i became ceo one of the things we've done on the commercial side is really begun to look at how many hoops do patients have to get through to get access to these copay support programs. we provided $2.5 billion in copay support programs over the last five years in the country. provided free product.

we have to make it easier and more universally available to get access to that. there's some constraints to us being able to provide those services on the medicare side. there's some very legitimate concerns to providing those on the medicare side because you don't want to obviously be diverting patients to generic products from branded products because of this. but we keep working to find ways. >> is it true that those patient system you can turn around and file it on your taxes: to lower your taxes? >> senator, i don't have the answer to that but i can follow up. >> i just want to get to one more question. some of the challenges we have is pretty severe shortages in medications. and i have heard so many

stories about this from minnesota folks who there's, they have a preferred treatment for disease and then the drug is not available. so i want to ask you all, i'll cut to the chase on this, senator collins and i have a piece of legislation that would require reporting of supply chain disruptions that could lead to shortages in medications and i would like to know whether you all would support that concept to help people understand where these shortages are and the root chemicals for their medications are coming from. >> we work very closely with the office at the fda and we're constantly doing all efforts to do outsource the entire supply chain so there's no decrease in our supply. >> the more we can continue to help understand what are the shortages we should address that. but i think we have to get at the fundamental issues of why do we have a shortage in the

first place. i can tell you in our example, we make a drug called. >> again, you're out of time. can you take those answers for the record. >> on behalf of the chair. senator brock. >> i am going to start with mr. davis. what would your definition of a free market be? >> one where you are able to bring goods and if those goods bring value, and the system sees value in them, you're able to bring those that a value that is fair and reasonable and negotiate the other side. and a world that has free competition. >> there you said negotiate. if i were in your seats running your company is that it's not a free market. a free market means you have a lot of choices, you've got

vibrant competition. no barriers to entry. and you've got an engaged consumer. now, do any of those apply to your business? >> i think all of those apply but i think one thing we need to understand in the way our business functions, for a period of time, we have exclusivity. that's during the patent protection period. thereafter and in that period we must reap a return on the investments we make to fund the rnd we do. thereafter, drugs are freely available and there is total competition in that space. >> but yet you would sue to keep transparency in terms of what the consumer price would be or the list price. or you do things like tweak patents. that doesn't happen any where else. and you're not alone there. hospitals and insurance companies do all this stuff

behind closed doors as well. so i would think if i were in your shoes, you've got maybe a few years before, see none of that really applies you guys as i listed it. you might try to spend -- spin it that way but it's not the case. i fixed it in my own business probably 15, 16 years ago by creating health care consumers, thugh wellness and prevention which you don't hear a lot about. but when you do need it, it's got to be to where you have a lot of options. i understand, you're a little different in terms of the rnd that goes into it. then many years ago, you created a monster called the pbm that now is sucking all kinds of money out of the market. why can't you fix that in terms of doing alternative ways that would just smoother the market with transparency.

get it into a different channel of distribution. you have a guy like mark cuban that's trying to start a company at cost plus. you're going to probably need to find things like that, or you're going to be appearing more often here and it's going to be where your going to be regulated like a utility would be. because in my opinion you operate more like an unregulated utility. you know kind of cloak yourself behind preenterprise and now it's up to 18%over something has got to get. senator sanders talked earlier about things costing 10% to 25% overseas and i think i heard that excuse was, they have price controls. well, i think i would be smart enough to know that sooner or later that will occur here. it's going to be up to the industry to fix it and

you are probably just 15 to 20% of the problem. you can fix the part that you get the most heat for by maybe trying to get more customers like the business mark cuban is out there, that is based upon transparency. . if not, you will get all the people that don't own healthcare businesses finally say, we are not going to pay through the private side, the insurance system, 3 to 4 times what it cost through government. i will let you complete the logical chain. you will have government as your business partner. why would you persist in a paradigm that looks like you are going to be headed towards, which you definitely don't want and that is doing more business with the federal government, mr. davis? >> well, i don't want to speculate on the system as a whole. i think what i focus on is, what do we need to do to drive the mission of our company,

which is in the near-term, bring access and affordability, make sure that when we bring affordability, we don't sacrifice access, and sometimes patients lose access when we try to address affordability. we find innovation. whatever we come to is a solution, if we can protect those elements, i think we will both help patients of today and we can make --. >> have you ever looked at having some other system of distribution, like almost any other manufacturer would have when you make something? you do a pretty good job of making the pill. you completely default on how it gets from where you make it to who uses it. you are putting independent pharmacies out of business because pbm and other peculiarities in the industry. having thought about it at least in the place where most people confronted the healthcare system with a prescription about trying to restructure that, smother it with transparency, and options to where people can get their stuff and then apply that to

biologics and the entirety of the spectrum, and don't tweak the patents and try to preserve a broken system. >> we have considered, should we look at going direct? the reality is, as a single company, when you have today three pbm's controlling 80% of the lives in the country, the ability to do that takes portfolio of character six that we don't currently have, and i don't believe anyone company can do that. that is why we continue to believe we need free market. >> i bet if you collectively got together with the other drug companies and encouraged others like cost-plus that mark cuban has done, where you are going, i think you have got it under your control not to perpetuate a bad situation that was created by you. you make it, you don't have to necessarily use pbm's. what you encourage an

alternative structure? show us that you want to compete because all i can tell you is that if you don't take the bull by the horns, do something different, you are going to be like all other countries. you are going to be dealing with the federal government as a regulated entity and i think we could lose some things. in the meantime, senator sanders pointed out, it costs a lot more here, the healthcare outcomes are better there, and pharma, hospitals, and insurance better figure it out before it is too late. >> senator hickenlooper. >> first, i will echo what senator said i know how busy you are and i appreciate you coming and answering questions. i grew up like most of us, looking at our pharmaceutical companies as treasures, as companies in america that could

be rightfully proud as innovators. but that is slipping away. when i'm back in colorado, i hear -- let's just be generously gracious and say, a wider diversity of opinion. according to a recent survey, more than a third of americans reported that kos has prevented them from filling a prescription they need. a separate kaiser family foundation, this one just from last year said that 83% of americans rated profits made by pharmaceutical companies as the overwhelming contributing factor to the high cost of prescription drugs. you've all talked about the r&d, the innovation, which there can be no question about that. but what is the value of these cutting-edge drugs and therapies if so many people cannot afford them? i think that widespread belief that americans feel your companies are too focused on profits, it damages your

credibility and i think the culture of your business and customers. i wanted to see how you feel about that in terms of the importance of people believing in your mission again, or believing as strongly that you are good leaders of the mission. why don't we start with you, mr. d'amato? >> thank you, senator. the 50,000 employees of johnson & johnson, the u.s. wake up every day thinking what they can do for patients. and i can represent probably that sentiment. what can we do to address the real inequity that exists in the u.s., which is that seniors and patients that need the medicines the most pay higher out-of-pocket costs. in my view, that's the real problem. there are other things that are positive in the u.s. healthcare system likely access to break through treatments earlier than any other country in the world, but it's true.

we have a real inequity there. i think we have to work together in order to address the inequity, and there is multiple ways we can work on that. one is to make sure that this. >> just give me one. revocable more questions. >> make sure that the discounts and rebates, we pay 39 billion in 2022, that we pay to the middlemen are passed to the patient so we can lower the out- of-pocket. >> that's a good one. senator, i appreciative the question and i can tell you at merck, we have lived by the statement our founder put out. medicines are for the patients, not for the profits. so long as we remember that, the profits follow. and it really says, we can both do good and do well for our shareholders together. and there is a balance and i think what you are talking about is, where is the balance? we are always trying to find that balance, and i am very much focused on it as the ceo of the company because the legacy of mark, the pride of our 70,000 employees and what we do matters to me.

and a strong belief in the mission of the company it's what i can to the company and its what i am in this industry. i do think the challenge we continue to face is the structural issues and the system that are creating the problem. >> senator, the challenge we are facing in this committee today and what would have been discussed is how do we ensure affordability today without sacrificing tomorrow's innovation? that's what we are focused on. we have to make sure we do what you have heard from all of us, bringing highly innovative medicines to patients. but we also have to do a better job of ensuring that we are doing drugs like eloquence to market, which save the healthcare system money for every 100,000 patients, we estimate we save the healthcare system $5 billion. we have to place a high bar on that medicines we bring to patient and stick by that as an industry. >> i appreciate that. health is so precious to people

that they will pay almost anything if it is serious. sometimes with the increasing costs based on the calculus of how much money are we avoiding? it could be a false pathway sometimes. as a user of eliquis and grateful recognizing what the old system was and how better eliquis is , i salute that. the higher cost, the lower cost in other countries have all answered that. there are some price setting there but i think the solution -- we are paying double, even when you take out the pbm's and list price from the net price, we are paying double what europe or canada or australia are paying and somehow that has got to be a negotiation that the rest of the world probably has to pay more and you guys will have to figure out a way to do that. not saying it is easy, but it is one of those things. we have to address that as a country and as an industry. i want to ask, earlier there was mention of blindness of

issues underserved countries. i want to see if each of you have a quick example of something where your company has gone in there. we heard about mark, but done something in a country like that or it was philanthropic. >> we dedicate billions to diseases that do not have an economic counterpart for example, one of the diseases we have contributed to its treatment and eradication is intestinal worms. we donate billions of pills every year in order to treat intestinal worms. we have programs to support frontline healthcare workers in the developing world that have supported more than 1 million frontline healthcare workers and we develop a medicine for which is widely used in every single protocol in which we are not enforcing our patents as we speak. we have made significant contributions.

>> most people don't know about that stuff. mr. davis? >> i would add another one we did recently. we were very focused on covid and we forget about ebola and the scourge of ebola that hit in 2014, 2016, and western africa. we actually had no profit to us. we developed an ebola vaccine, distributed that drug to address that devastating disease. >> senator, we have referenced a very large presence of hiv and i'm incredibly proud that in the late 90s our foundation worked with governments and local communities to set up the core infrastructure to deliver hiv medicines to some saharan africa focusing on children, president of botswana congratulated the bms foundation for saving a generation from his -- from extinction.

we are now leveraging the same infrastructure partnering with baylor college of medicine to reverse something in childhood suspect >> i'm sorry, time has expired. i apologize. >> thank you all and i think those stories need to get out but we also have to solve this issue. >> senator kaine. >> i'm going to do two minutes to celebrate innovation and then five minutes to go after the cost question. on the innovation, there is an article that came out in health affairs journal in september 2020 and i would like to put it in the record. contribution the public of pharmaceuticals and other medical care the u.s. life accent to see changes 1990 to 2015. the article looked at the fact that between 1990 and 2015, life expectancy in the u.s. increased by 3.3 years. and the authors of the research and study were able to say 44% of that increase was because of

public health measures. 35% of the increase was attributable to pharmaceutical innovation and 13% was attributable to other improvements in medical care with 7% unknown. the fact that pharmaceuticals led to more than a third of that increase in life expectancy is something we need to acknowledge as context to this discussion. and a virginia example, mr. davis, you will notice example very well. that is up plant that produces cortisol, which your company developed and began to develop in the mid-2000's. it is a vaccine against a virus , hpv virus that leads to a lot of cancers, especially cervical cancer. that is revolutionary. in terms of cervical cancel we were one of the first states to put up hpv vaccines.

cervical cancer among vaccinated populations is dropping 70+ percent just in the last 15 years. it's true really remarkable and i know how proud people are to work there and believe they have been at the vanguard of a revolution that has helped so many americans and people all around the world. that's the good side. now we have got to get to the reality for the hearing, which is people here still pay too much out of pocket. together with my colleagues here who voted for the inflation reduction act, we said, for a long time, we ought to be negotiating on prescription drug prices and we did. get past but only one vote in the senate so each of us who voted for it, we were the deciding vote. and i know not everybody likes that, but it is working. we put the cap, the out-of- pocket cost cap on seniors under medicare. we did the $35 insulin for seniors under medicare and

thank goodness that sent such a strong market signal that many of the companies that were reducing insulin cost to $35 said, we will do it not just for medicare patients but others and they would not have done that since we had not taken the step in the i.r.a. but there is more we can do and i really want to focus on one thing because i think it is right before us. this committee took strong bipartisan action about nine months ago on this pbm reform bill that is sitting on the floor of the senate right now. i don't expect you to be the masters of all the details of that bill, but if we were to pass a meaningful pbm reform bill and much of the conversation today has been about this weird difference between list prices and actual net prices, if we were able to pass a meaningful pbm reform bill, what would that do to the cost that american patients are paying out of pocket for pharmaceuticals? i will ask each of you to

address that. >> thank you for recognizing the value for patients of pharmaceutical innovation. if we were able to pass meaningful reform, meaning reform that would delink revenues of the insurance companies from the list price and that would pass rebates and discounts to the patient's, i would anticipate two things. one, it would affect list prices. two, it would reduce the out-of- pocket cost for the patient's. i welcome bipartisan efforts of this committee to go through pbm reform. it's a linchpin of lowering the cost for patients. >> mr. davis? >> i also believe the provisions that are in the bill , at least some of the big ones around transparency and delinking our -- they are steps in the right direction. we need them. they are what we have been focusing on in our testimony and in the question and answers but i do think it will benefit

patients if we move in that direction. i'm very supportive of what you are trying to do. >> mr. bernard. >> senator, if we can do that and reduce the significance amount we are banking rebates to intermediaries who are not passing those rebates onto lower out-of-pocket costs, speaking on behalf of bristol- myers squibb, can work almost immediately to bring down list prices and i can welcome the opportunity to work with the committee to do that. >> i know in conversations with the chair, the intent is to move on that bill pretty soon, potentially with some health items as well. i think the opportunity is right before us. the bill passed attic committee overwhelmed me bipartisan. 18 to three vote and that tells us we would have some on the floor. the delinking provision was not in the bill, but the chair and ranking were supportive of the concept, but at the time we marked it up, the cbo had not given us a score. we agreed we would wait on that until we got that on the floor. but the cbo has now scored the

delinking bill that senators marshall, braun, and i and tester have cosponsored. the cbo says it would save about $650 million over 10 years and that is in addition to the savings for patients. i know we would try to add that in. my colleagues have all talked about the reality of what they hear from constituents and i hear the same thing. i think the complexity of the system and the fact that list prices are different than net price and the fact that we have rebates that never show up in people's pockets and then you have programs to try to assist folks who can't afford medicines but they have a six page application form and both the sticker price might scare them off or a six page application might scare them off. we have to simplify this and cut out a lot of the middlemen in this instance. i have long said to the chair,

i'm very concerned about pbm's. we might fight with you about whether you are researching enough or should you research be more than your stock buybacks? pbm's are not doing a single bit of research. they are not producing a single product and yet they seem to me to be the ones that are scooping up the most money that is just sloshing through the system right now. i hope we can address the soon. thank you, mr. chair. >> thank you to everyone who is here today. biosimilar competition is one way to drive down costs for patients. one of the concerns i have is, we often see petition stifled in this particular area with biosimilars. the concern that i have is tactics and delay that lead to entry of the lower cost biosimilar jobs that keep patients from having a choice,

but also being able to afford their prescription drugs. mr. davis, yes or no, will you commit to not blocking other drugmakers from entering the market when the primary patent on katrina expires? >> senator, mark -- we do believe that biosimilar competition and generic competition is quote of the system. we need the patent protection and then we need a robust biosimilar engineering market and i can tell you, when the composition of patents expire on our drug, i fully expect and i will not try to stop a biosimilar i.v. version of its coming onto the marketplace. >> is that a yes? >> that is a guess. >> i appreciate that. will you commit to not draw blocking other drug makers from entering the market when your primary patent on 2011 expires? >> senator, we have a number of patents on eliquis and we have

anticipated that when the patents that are most relevant for that product expire, we will have generic competition in this and that would be around 2020. >> when the patent expires on eliquis will you commit to not blocking other drugmakers from entering the market? >> i'm not a patent attorney so i'm not entirely -- >> you are the ceo. >> i would say in the most important and relevant patents expire on eliquis, we will welcome generic competition. >> is a yes or no? >> that's a guess. >> i have the same question. will you commit to not blocking other drugmakers from entering the market on your primary patent when it expires? >> when the most relevant patents expire, we would fully expect biosimilars to enter the market. >> your answer is yes when the words you are using are relevant patents? not the primary patent.

is that the equivocation i can. >> i'm not certain exactly what the most -- what you are referring to as the primary patent. but when we -- when those patents expire, we welcome generic competition. >> primary, initial, the one that was filed when he got this drug. i'm not a lawyer or ceo. if i'm not using the wrong words, please help me a little bit. you know what i'm talking about. >> when the composition of matter expires. >> doesn't sound like a guess. i hear what you are saying. i'm want to move on. mr. duato. we know that j&j entered into settlement agreements to delay the biosimilars in 2025. this will prevent competition in the drug market and medicare negotiation. will you commit to lowering the price of still are in 2025? >> senator, thank you for the question. i anticipate that the price

will actually be lower in 2025 as it has been lower in the past decade. it has been steadily declining in prices and i anticipate the biosimilars in 2025 will further decrease the price. >> are you answering yes to my question? >> yes. >> i appreciate that. we have heard over and over that medicare drug pricing negotiations will kill innovation. i want to get a few things clear, yes or no, is it bms's position as stated in its lawsuit against the health and human services that quote, the i.r.a.s real victim is innovation and in turn, the millions of patients who are counting on the pharmaceutical industry to develop new therapies will save lives and improve health and well-being. >> we have serious concerned about elements of i.r.a. , specifically the fact that

this isn't an actual negotiation. we obviously like some elements of i.r.a., notably the out-of- pocket cost. >> do you stand by the statement that was filed in the lawsuit to the united states health and human services department? >> have concerns about the implications of i.r.a.. >> do you stand by the statement? >> yes. >> you said in your q4 earnings call, with the a legacy portfolio of well-established products facing headwinds such as i.r.a.. through this -- though this portfolio is declining, it is expected to continue to generate strong cash flows to enable investment in our future growth drivers. >> we actually have a legacy product for folio that will continue to provide the necessary funds to innovate and bring the next wave of innovation to market. >> based on that, can i interpret that cash flows were

generated even though the i.r.a. want to place and are sufficient to support new innovations as reported to the investors? >> senator, we don't yet have i.r.a. having been fully implemented in negotiation that process is ongoing, but we are generating cash flows of of our existing products to fund innovations. >> the statement and the same filing to health and human services with that case said, this portfolio, though the portfolio is declining, it is expected to continue to generate strong cash flows to enable investment in our future growth drivers. so, is it generating cash? >> our legacy portfolio products is continuing to generate cash yes, sir. >> even in the face of i.r.a. you are generating cash? >> again, we haven't actually finished negotiation yet on our first drug. >> i will move on. i appreciate that. i grew up on a small farm in

northern new mexico. when a cow does its business in the barn, there's a pile of stuff i have to go clean. that's what it is. it's manure. it has a lot of other languages. but that's what it is. i don't understand why this is so complex. of the people in the room make these darn things so complex so no one understands them. i'm beside myself, mr. chairman, that when a question was asked, can you break down where the money goes in this particular drug, the answer is it's complicated. we don't know. i'm hoping it's included in the filings for investors. that people know -- i will follow up with more questions. i have several. but, help me and other laymen across the country and world to be able to understand what the heck is going on. you all have some good lawyers but maybe one day i will go to law school and try to get a gig with one of you. it's just frustrating. >> research is a field of

dreams. we give hope to families that a cure can be found. for the disease which has been running to their family's history. that's what it's all about. that's what we all hope for. that's what i represent in boston, in kendall square, two miles from my house. for 47 years in congress i have been trying to help that industry to be able to grow and be able to get the resources from nih to make the breakthroughs. to give hope to ordinary families like my father who drove a truck for -- and the companies have done great work over the years but that funding , which i was on the health committee in the house for 36 1/2 years, and i fought very hard for nih funding. those nih dollars delivered results. between 2010 and 2016, every drop drug approved by the fda

was in some way based on biomedical research funded by the nih. my father, the truck driver, at the hood milk ebony one mile from kendall square, he paid his taxes. he made sure the funding would go to nih so that research could be made in order to make the breakthroughs that would help him and help his families. merck's former president, and we have already ordered him, mr. davis. he said we never tried to forget that medicine is for the people, my father. it is not for the profits. and merck's website states that this philosophy is embraced by their leaders and the employees to this day. so, fda approved the cancer drug katrina in 2014.

based on nih research. that my father helped to pay for as a truck driver and last year the list price was 190 one thousand dollars for this cancer drug that helps patients with lung cancer and other cancers. $191,000 a year. the annual meeting and proxy statement, 2023 says that it brought in $21 billion in revenue for the company and it was driving key growth for merck's business. at the same time, patients are also straining under insurance premiums, struggling to afford the drug, or skipping treatment altogether. so, merck has now filed 168 patents on this cancer drug

keytruda . as we know, from this early discussion, when we discussed this, we can be talking about primary patents or secondary patents. what i heard earlier was that the witnesses in general just want all the secondary patents to also be exhausted. to a very large extent, 168 patents then bring at least 168 lawyers into the loop. how do we use this patent in order to thwart another smaller company from hundreds of smaller companies from now making the breakthroughs that advance even further? innovating, discovering. 168 new patents extend further using lawyers. the time at which there can be

a lower price drug made available to people so that they can get the treatment, which they need for lung cancer. so, yeah, we believe in competition and we really believe in petition in massachusetts. we believe darwinian, paranoia inducing competition, but when there is a monopoly on a drug which is the key drug, there is no competition. there is no paranoia if hundred and 68 patents extend and extend the ability to have new companies, smaller companies, smarter, new scientists to make the new additional breakthroughs. that's the plate. we understand the play. that's how lawyers do it, not scientists. the lawyers keep the smarter, new, 25-year-old out with a new insight just by extending. so, i do believe in research.

adam smith hated monopolies, it was the number one thing he hated the most. and so in this particular instance, my father died from lung cancer, and my father was -- drove a truck. the list price for keytruda is more than his entire pension . that's what he got from the company. so when you're of his entire pension would have paid for one year. and he died from lung cancer. and i don't think the judge merck really intended that, that would be the result of research ultimately. so, mr. davis, would it have been consistent with judge merck's philosophy to take research funded by my father's tax dollars to invent a life-saving lung cancer drug,

charge him hundreds of thousands of dollars of his hard-earned retirement, manipulate the market using patent law to block out competition that could have brought in new scientists that could have improved it and lowered the cost and as a result, the costs are unaffordable, and then use the income you got from him to brag to your investors about the drug as a key growth area for your business. do you think that's what judge merck intended when he had that high-minded philosophy, which he used to describe merck's --. >> 17 seconds. >> are you looking for the answer now? >> yes. >> i would say the quote was, medicine is for the patients, not for the profits. so long as we remember that, the profits have always followed. and what he was capturing was,

if you focus on bringing new medicines to benefit patients today and make sure you have an investment and a return to bring medicines for the future, which we are at biopharmaceutical research company, research is who we are, innovation is the lifeblood of our company, then we can deliver for the mission to the patient's. i can tell you that mark, i'm very proud of this, we always put patients at the center. we always look at ways to do that and that will continue to be what we do. i do think actually what we are doing is consistent because it allows us to be sustainable for the long-term. to deliver for patients in the future. >> i just wanted to turn to medicine for the shareholders is that of medicine for -- like my father. >> i want to thank our three panelists for being here today. and all the senators who participated. we are not going to turn to our second panel. thank you all very much. >> thank you