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 very much.

education healthcare advocates of research now testify on the cost of prescription drugs before the senate health education labor and pensions committee. this is about half an hour. >> thank you all very much.

we have three knowledgeable >> thank you all very much for being here. we have three very knowledgeable guests, panelists on prescription drugs and pricing. our first witness will be peter , who is the director of access to medicines program and public citizens. he's a lawyer who has advocated for stronger price were galician and stronger health protections in the u.s. and around the world. thank you very much for being with us. >> members of the committee, thank you, public citizen is a national public interest organization. we have a 500,000 members and supporters and for 50 years we have advocated with success for health and consumer protections. drug prices are high because of

monopoly, power, leading to the rationing of treatment and preventable suffering. one in three americans has failed to take medicine as prescribed due to cost, like lois of fort worth who tells of of merck's diabetes drug. i needed to control my blood sugar but i cannot afford it while on social security. or robert of colorado and his wife, both trying to afford xarelto. what we have to pay so much? we are 90 and 81 on social security. does anyone care about the elderly? keith, lafayette louisiana. i'm paying for 2011 and other icy meds. what do i do? i question them so that i can eat and pay rent. patients for affordable drugs have compiled a 4000 such stores from people struggling to for the medicine. that is a tiny fraction, a mere sample of the heartbreaking problems out there. high prices cost people their health. they can cost lives.

they force a possible family budget decisions. we all pay for high prices whether we are patients or not, whether out-of-pocket or through higher insurance premiums and wasted tax dollars . medicare medicaid spent nearly $200 billion on prescription drugs last year. americans pay the highest prices in the world three times what other countries pay. that's net prices, not list. three times more in net prices, the real prices. we also do the most to support research and development. the world's largest biomedical research funder is a public funder, the national institutes of health and we should be very proud of it. , contributing more than $45 billion a year and laying groundwork for many if not most new medicines. public support is now indispensable to the light- sensitive element of one in four drugs also. with the people drive innovation together. so, americans first pay for the research, then contribute to development and then on top of it when a drug comes to market,

pay the highest prices in the world. other countries broadly negotiate prices to protect their people, but here, pharma has accrued tremendous influence in our politics, spending hundreds of millions in lobbying outranking every other industry. our government provides patent protection and exclusivity on medicines. this should support innovation, but in practice, drug corporations write the rules extending monopoly power sometimes for decades blocking competition far longer than this body intends. senators, it is not a market in the way that you may believe, respectfully. the corporations testifying here today claim any price relief would compromise their ability to invest in new medicines. no. that framing erases the millions of americans rationing treatment. the rest of the tens of billions of dollars that taxpayers invest in r&d for real health priorities and it erases the hundreds of billions of dollars the industries spent on self-enrichment. drugmakers

selected for medicare negotiation spent $10 billion more on stock buybacks, dividends, and exhibit of compensation that they spent on r&d. each spent $3 billion more on the self enriching activities and over the fire decorated, merck said buybacks and dividends, also exceed r&d by 3 billion. j&j spent $43 billion more on buybacks and dividends that r&d over this period. of course, drugmakers do not set prices according to r&d costs. instead, the price of a patent drug is simply the most that we as a society are willing to pay to care for our sick and loved ones where monopoly power blocs affordable alternatives, blocks market competition and we have little choice. today, perhaps for the first time, our country is making progress challenging high prices and rationing including through price negotiation and price spikes. we commend the committee's

attention to this problem, but the problem is getting worse. more action is needed. we should negotiate prices from the moment a drug hits market, not wait a decade as we are today, which costs taxpayers money. with support legislation before your committee to strengthen market competition and transparency and accelerate generic entry. ultimately, we will have to confront monopoly power. that is the rotten foundation allowing drugmakers to project influence to game the law and keep prices high. other real challenges, including patient assistance, challenging middlemen who take advantage, real problems but these flow inevitably from the patent monopolies that make it so lucrative and so easy to rip off patients. we must do better for health for access to medicines. thank you for your topic please count us with you in this fight. >> our next witness will be ceo access and knowledge a nonprofit organization working

to address inequalities and how medicine is developed and distributed. >> chairman sanders, ranking member cassidy and members of the committee, it is my honor to be invited to share with you a root cause of why the u.s. is by far the highest prices in the world for prescription drugs. that root cause is how the pharmaceutical industry medicates the patent system to lengthen patent protection and its market monopoly in order to block competition. all while increasing prices. i qualified as a uk attorney in a natural property and i have been in the field for 30 years. i spent my first decade of my legal career practicing as an attorney at international law firms and for multinational companies, including american companies. through this work i learned both the legal and business side of intellectual property and its importance to inventors , investors, and companies. i also learned how to use loopholes to game the system.

these loopholes enabled me to invent intellectual property rights so companies could obtain and maintain a monopoly in the market while continuing to extract maximum profits. it was the reason why i cofounded imac and left the commercial world. america is in a severe drug pricing crisis, more than one third of americans say they are not able to fill a prescription for medication because of its cost. black americans are most heavily impacted as they are more likely to require medication for chronic conditions and unless -- unless. spending on retail and nonretail drugs is poised to safety to present this decade to $917 billion. branded prescription drugs which are under patent protection account for 84% of that spending. these price hikes correspond with dramatic increase in patenting activity in this pharmaceutical sector. we have analyzed the top 10

selling drugs in the united states and we have found a total of 1429 patent applications have been filed as of 2022. 741 patents have been granted on these drugs. on average that is more than 140 patent applications filed for drug and 74 patents granted for drug. 66% of those patents are filed at the after the drug is approved by the fda. if we look at some of the drugs on the discussion today with companies that were here, eliquis, keytruda, johnson & johnson, between them and the combined 494 patent applications filed on them of which 235 were granted patents. i want to dig a little deeper into merck and the questioning of whether merck would allow buyers -- biosimilar competition once the patent expires. you have to remember, keytruda represents 47% of merck's

total pharmaceutical revenue. as of june 2002, we have counted 180 patent applications of which 78 are granted. they have patent protection at least until 2013 nine, which is in total 37 years of patent protection since they filed the first patent which is 2002. were supposed to get a patent for 20 years. market analysts are reporting which at the biosimilar competition in 2028. i put myself on record here today, we will not see biosimilar competition until 2034. they will to get the out of it and they will use every cent that they can to not leave $100 billion on the table, which is what those patents are worth to them. all this talk of r&d new indications, these patents are disclosing their earlier patents that should be expiring in 2024. bristol-myers squibb, same problem. they are increasing the price

of eliquis by 124% since an induction in 2012. that's higher than the general rate of inflation. they have filed more patents in the united states, 2.4 more times than in europe. the patents that visio for dms was talking about, the relevant patents, those were actually invalidated in europe and that's why we have generic petition in europe. those patents are preventing competition here in the united states and 20 kostas $40 billion in branded eliquis. this should recognize that -- it's not a case of a few bad actors come it's endemic. if you want to get to the heart of the problem, the most important thing congress can do is solve the problem raise the bar for what classifies as an invention that deserves a patents. is it an enormous monopoly power that single-handedly drugmaker and we shouldn't limited the market and litigation to resolve these issues. the panted activity goes well beyond the time limits of

monopoly of the constitution required, lawyers exploit sophisticated legal market jedi tricks that they use under the guise of innovation. when you to not get sidetracked by this innovation talk. most of these patents are tweaked for the financial edition of profits and that's what the pharmaceutical industry does today. i've been in the business and i know what it's about. >> senator cassidy? >> , the chair and pharmaceutical development regulatory innovation at universal some event california sciences. he also serves as director of research for the usc shafer center for health policy and economics partnership between the school and usc price school of public policy. he received his phd in economics from the university of chicago as a renowned researcher and thought leader in health economics and policy, which impacts us today. thank you. >> thank you.

chairman sanders, ranking member cassidy and members of the committee. thank you for the opportunity to testify today about drug prices and assessment of medical technologies. my name is -- lakdawalla. i'm a professor at the u.s. eight-man school of pharmacy and pharmaceutical sciences and usc price school of public policy. i'm also the director of research at the usc shafer center for health policy and economics. the opinions they offer are my own and don't represent the views of the university of southern california or shafer center. i would like to start with the story. in december of 1984, a young boy from indiana named ryan white was the most with a.i.d.s. . a result of a transfusion with infected blood. in the immediate wake of his passing in 1990, congress passed the ryan white care act ensuring affordable care for hiv a.i.d.s. patients. the value of this program was fully realized five years later when highly active antiretroviral therapy emerged as a life-saving treatment for patients with hiv.

nine out of 10 patients receiving care through the ryan right program enjoy viral loads solo they are no longer infectious. thanks to breakthrough medical innovation and forward thinking public policy, hiv-positive patients can expect to live well into their 70s and beyond but impressing patient access to expensive affordable care means little when there is no cures or treatments to access. breakthrough medical therapies provide little value if high cost-sharing pushes them out of patients reach. this is the fundamental trade- off we are here to address. this trade-off between innovation and affordability has played out in different approaches taken across the globe. there's little doubt that u.s. consumers access newer drugs sooner and more often than overseas counterparts, and this increased access to the latest treatments matter. shafer center research suggest introducing european-style pricing policies would reduce innovation and cost american consumers over have a year of

life expectancy. about what would be lost if all americans surgeons forgot how to perform heart bypass surgery. there is no denying the sentiment that u.s. consumers unfairly a higher drug prices than their peers overseas. the deteriorating accessibly for drugs and recent years threatens to derail the access advantages in health gains american consumers have so far enjoyed and as one component of this growing sentiment. even patients with good insurance or struggling to access the therapies their doctors prescribe. plans frequently employee coinsurance and management tool that severely restrict access. these changes harm health since the link between increasing out- of-pocket cost and patient adherence is well-established. surprisingly, coverage is deteriorating even while the average manufacturer net prices of branded drugs, the amount manufacturers receive after rebates and discounts, have declined in each of the last five years. shafer research analyzing the flow of money spent on insulin

found that net prices fell by 31%, total expenditures remained nearly constant because intermediaries were pocketing the additional rebates and price concessions. instead of passing them on to consumers. transparency in pricing through the pharmaceutical distribution system would be a major step towards ensuring the drug prices were reflecting the actual value provided to patients and don't simply enrich intermediaries. rewarding drugs that do provide value promotes investment in the right kind of therapies and insurance good health will be increasingly within the reach of american patients for generations to come. decades of economic research demonstrates that were innovators predict higher returns, innovative effort and discovery follow. outside the u.s., many countries adopt pricing approaches that either fail to measure value inpatients, or make it hard to predict future returns to innovation. the uk australia and the employee relatively transparent and predictable methods that nonetheless rely on quality adjusted life years, which

discriminate against vulnerable patients. france and germany avoid qualities and focus on ridding critical benefits in a way that often fails to correspond to the eventual price. these trade-offs also underscore the risks of so- called reference pricing approaches that would tie american prices to those charged by other countries. in so doing, americans would be forced to live with the vagaries of pricing systems designed and limited elsewhere around priorities that made different from ours. the right policies for american patients need to focus on the affordability of good health. affordable and generous health insurance transparent and predicable pricing and emphasis on valued two patients provide ingredients for a better approach that secures the help american families now and for generations to come. thank you. >> let me start the questioning. i have heard some of my republican colleagues talk about free-market capitalism.

mr. maybarduk, isn't the pharmaceutical industry based on government granted monopoly power? mr. amin may also speak to that. what does that have to do with free-market capitalism if the government is guaranteeing monopoly for many years? >> senator, prices are high because drugmakers have monopolies over products. we can't just substitute. a patient can't just say i will take this alternative. the patents block them from having affordable access. that is a monopoly, not a market system. american taxpayers stand up the world's largest and most productive funder of biomedical r&d at nih and we the people found the risk that -- we the people that support the risky early-stage

research that has led to such significant medical breakthroughs in areas of mrna, cancer, heart disease, gene therapy. >> the government has played a very active roll in the entire process. >> well, the constitution grants congress the power to promote the progress of science and useful arts securing for limited times are right to their inventions. what we have now is a system where the patent system is not a limited time. it's a monopoly that gets extended but when we think about the free markets and the principles of capitalism, it's interesting. that neoliberals actually didn't like monopoly power and they really did believe in the free market, but the fact that the intellectual property system has been corrupted by that modern pharmaceutical system to extend those monopolies, it goes against the principles of free-market. in a sense, they are not living up to the bargain of the free market. >> okay.

mr. lakdawalla, what you think about free-market capitalism and government protection on monopolies? >> thank you, chairman. free markets exist only on the whiteboard in my classroom at usc, first of all. it's also true that without patent protection, there would be no innovation. as a result it has been known in economics for centuries. the real question is, how do we balance patent protection, which induces innovation against the value of new innovations and being able to broadcast them more widely after the end of a patent? that trade-off can be tricky although in the case of pharmaceuticals, we have a useful instrument, which is health insurance and that allows patients to access drugs at much lower prices than what manufacturers receive, even during the patent period, and that is an opportunity to expand accessibility even during patent protection read. >> my last question for all three of you, i believe you all heard the ceos testimony and

response to questions. what would you say briefly about their responses? did they in fact effectively address the issue as to why we pay the highest prices in the world for prescription drugs and why one out of three people cannot afford medicine the doctors prescribe? >> we heard some wild stuff this morning, including a lot of blaming middlemen for the high prices. drugmakers high prices are the whole reason we have a middlemen problem. it's because we have exceedingly high prices at the outset that there is an attractive market for middlemen to enter. the fish rots from the head. if you break up the market and look at where the revenue is, drugmakers capture two thirds, $323 billion pharmacy benefit managers are a small slice.

$23 billion. you can't fix the problem of the pharmaceutical industry by going off middlemen who are trying to skim off the top. you have to get to the root of the problem the monopoly power. >> i agree with what peter says and i would add that some of the answers that the ceos gave him a for example, merck ceo about by a similar petition when the patent, that is not going to happen. i think if you look at all the patents they stacked up, they know what their game plan is. you have to look at what happened with you mira and abby. i think you can look at what is happening with these weight loss drugs. we are looking at the patents on those now. these are going to become one trillion dollar drugs. >> dr. lakdawalla? >> net prices of pharmaceuticals have been falling for the past 10 years very consistently. cms recently released its national health expenditure account data in a confirmed fact

as well. with reconcile that with rising costs for consumers and so i think intermediaries are playing a bigger roll than it might appear about $.40 of every dollar spent on pharmaceuticals goes to intermediaries and unlike pharmaceutical firms, they are not engaging in innovation that improves health. >> thank you. senator cassidy? >> thank you all. mr. maybarduk , it's been made persuasively. clearly patents are part of the free-market system as though you intellectual property and you and sent creativity. whether it is being abuse is another issue. you think it is legislations sponsored by john cornyn to do away that. i think without intellectual property we would not have this innovation. why would you? what would you put the time into it? dr. lakdawalla makes a persuasive point that without

the profit incentive, you will not get the innovation. are you disputing that? >> i am not. >> the degree of the profit- taking, if you will? i will point out the three examples you gave seem to be all medicare patients and there is legislation out there which will cap the out-of-pocket exposure to -- for medicare patients. i think it will be $2000 in june of 2025 and catastrophic portion is going away now. but, that said, somebody is paying. yes, insurance makes it more affordable. medicare is making it more affordable, but somebody is paying. in my state, i was told that pharmaceutical costs for the medicaid program are now 35% of the total. and so, yes, maybe we can do some value-based purchasing. that's a lot of money though. that the huge program. that's a few mystical cost. so i think mr. maybarduk would

say they have enough coffee to innovate. what we are talking about is more the carpet is profit required to incense. >> i think the question is really how much whether we want to decrease prophets are not. we know that whenever you decrease prophets, you get less innovation. those researches that we done that that question. if you were to reduce prices and profits, what would the net result be? you would certainly save money but you would also lead to fewer new drug discoveries. -- >> are we at the sweet spot now or could we do something to make drugs more affordable to the medicaid program? i am looking at this in gene therapy, their initial price is based upon the restraints of the company. if you have a compelling gene therapy, they almost name the price. it would be difficult for a medicaid program not to cover. but this could bankrupt taxpayers. thoughts?

>> i don't think we save lowering prices makes us better off, but for gene therapy, there is a significant problem and the idea, the prices are paid upfront when there was the most uncertainty about whether the gene therapy will work in the long run. >> value-based purchasing could play a role. but, if you do value-based purchasing, you still have -- how do you negotiate the upfront cost? i come up with a drug for sickle-cell, you want to treat them you charge $20 million per person. i can't believe they would get that, but the only thing that will stop them from asking that may be sticker shock. how do you negotiate that first out of the gate price? that is a question hanging and you are the free market guy. >> i am the white board, yes. true. not the case that you should negotiate the actual price

upfront. instead, the value-based priced means the price will respond over time, imagine a situation where gene therapies were paid for in installments. >> i get that and have written about that. but it still means, if you have an initial high price, no matter what that value-based purchasing arrangement is, still could be something society cannot afford it. what do you think of the german model, dr. baker came up with that? you can ask whatever price you want for two years, but after that, there will be a negotiation based upon real- world data? >> the challenge with the german model, hard to predict the outcomes. if you look at the ratings the germans produced of the benefits of drugs, they are not well correlated with negotiated prices. if i am an innovator trying to figure out what i will get paid in germany, it is really hard and if you can't predict returns, they will not be financial incentives. >> have you evaluated the bill

working to the judiciary committee and may be included? addressing patent tickets? >> i think it will potentially cap the biologics patterns that can be at 20. i have given some technical advice on the bill but i don't think it will resolve the problem >> okay. thank you all. very thoughtful. >> a very good discussion. i appreciate you. that is the end of our hearing and i want to thank all of their witnesses. for senators who want to ask additional questions for the record, they will do in 10 business days. i will ask unanimous consent, three statement from stakeholder groups and experts for the cost of prescription drugs. with that, the committee is adjourned.

thank you. >> earlier today, the senate environment and public works committee examined consumer packaging and ways to reduce plastic waste. watch the entire hearing tonight at 8:45 p.m. eastern on c-span2.

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