Drug Price Hearing

Last Tuesday the Health Subcommittee of the Committee on Energy and Commerce held a hearing titled, “Negotiating a Better Deal: Legislation to Lower the Cost of Prescription Drugs." The main focus of the hearing was U.S. House bill H.R. 3, the "Elijah E. Cummings Lower Drug Costs Now Act" but there were seven other bills, all dealing with drug prices and access in some manner, that were referenced in the hearing. This was the first hearing on drug prices in this congressional session. Historically, hearings are held in special hearing rooms on Capitol Hill with limited seating for the public, but with camera coverage for off site viewing. Due to COVID-19, this was a virtual hearing with all participants connecting on a YouTube live stream. The hearings are led by the committee chair, in this hearing that was Democrat Anna Eshoo of California, in concert with the ranking member of the subcommittee, Republican Brett Guthrie of Kentucky. A letter from the full Energy and Commerce Committee chairman, Frank Pallone, was available prior to the hearing.

This hearing followed the format of these type of hearings, with statements by the chair and ranking member followed by statements by witnesses who are invited to testify.  The witnesses in this hearing were a patient, a caregiver and three experts in the pricing of prescription drugs. Democrats and Republicans each choose people to testify. After the witnesses make their opening statements, the hearing is left open for questions from committee members, who each have five minutes to ask the witnesses questions.

The hearing lasted just over four hours and I watched every minute of it! By my count there were 40 members who asked questions. This hearing was longer than most, especially considering it was a conducted by the subcommittee. Click here if you would like to listen to the entire hearing. Rather than trying to review and summarize each statement and 40 series of questions, which would make this a very long and probably boring blog, I’ll try to capture the essence of the hearing and identify the salient points. If you don’t already know from my previous blogs, I don’t think H.R. 3 is the right approach to lowering drug prices. It quickly became apparent that all of the Democrats were supportive of H.R. 3 and all the Republicans were against it, although there were parts of the bill that the Republicans liked. There were some questions asked about the other seven bills included in the hearing; they dealt with specific aspects of the prescription drug supply chain and business model and ways to make them more efficient or lower costs. As time goes on some of these bills may have hearings of their own or be included in a larger bill. The vast majority of the time was spent on H.R. 3 and that’s where I will focus my comments.

H.R. 3 seeks to substantially change the way prescription drugs are priced and paid for. These changes will have huge impacts on patients and hearings like this one are conducted to identify this impact. It’s not a small bill but there are really three main parts of H.R. 3 that were the main focus of the hearing:

• Lowering the out-of-pocket costs for patients.
• Restricting the amount an existing drug’s price can be increased year over year.
• Allowing government “negotiations” for drugs.

Lowering the out-of-pocket costs for patients – This part of the bill gained the most bipartisan acceptance. It propose a yearly out-of-pocket cap for prescription drug costs. The amount discussed was $2,000 but there were some questions and discussions about the amount and how it should be applied. There was also some discussion about how the increased cost of the cap should be split between the drug manufacturers, insurance company and the government. There were some questions concerning rebates and whether some of the money retained by middlemen in the supply line could be used. This proved to be a popular approach for both Democrats and Republicans, but the Democrats repeatedly indicated in their questions and statements that this was just one part of the solution.

Restricting the amount an existing drug’s price can be increased year over year – This part of the bill would limit the amount an existing drug’s price could be raised each year to the percentage indicated in the consumer price index (CPI), which measures the average amount of inflation year-over-year. There were many questions and statements on this approach, some by the expert witnesses and some by the patient witness. There did seem to be a few Republicans that thought this was a problem, though they weren’t convinced that a blanket solution of tying the increase to the CPI was a viable solution. I know that some increases are due to the increased cost of some ingredients or increased manufacturing costs. There were questions asked concerning some of the other bills that dealt with this problem in other ways, like identifying the “bad players” and their use of loopholes to increase prices. It was evident that this part of the bill will be discussed further.

Allowing government “negotiations” for new drugs – This part of the bill garnered the most discussion and questions. It dealt with the government getting involved in (negotiating) the price of selected drugs. The government would use the average price charged in six foreign countries – Australia, Canada, France, Germany, Japan, and the United Kingdom – as the basis for their negotiations. If a manufacturer was not willing to accept this price, they would be charged anywhere from 65% to 95% of their gross sales to continue to sell the drug in the U.S. There were many statements and questions from the Republicans on whether this was really negotiation. No drug manufacturer could continue to sell their product if they had to pay 65% of their gross sales to the government. One Republican said that this was not negotiation but a take it or leave it ultimatum which reduced the negotiations to simply price fixing. A Democrat made the point, which some Republicans agreed with, that America shouldn’t bear the cost of the research and development of new drugs. A Democrat made the statement that free market advocates should embrace the concept of negotiations with the Republicans indicating that price fixing is not a valid part of the free market. One member brought up the point that this approach may not be constitutional.

There were statements that some of the 6 countries used quality adjusted life years (QUALY) to ration healthcare and to negotiate drug prices. Republicans were nervous that this approach would make its way into America’s healthcare system. They pointed out that some patient groups had written letters to Congress stating that using this international pricing approach would help promote the use of QUALY which they deemed discriminatory to both the disabled and to the older population.

The biggest discussion on the use of these pricing approaches centered on their impact on the discovery of new medicines. The counterpoint to these approaches was the fear that they would greatly reduce the amount of money investors would be willing to risk on new drug discovery if the return on their investment was limited. It was pointed out that 9 out of 10 drugs discovery failed at some point in their development, making investment in drug research a risky endeavor. The proponents of H.R. 3 indicated that the decline in the number of new drugs would be minimal. One of the expert witnesses made an interesting statement He said, in essence, why limit drug research and development when we’re at the dawn of the golden age of health changing discoveries. Other members pointed out that the research and development business would move from the U.S. to other countries costing the loss of tens of thousands high paying jobs.

This hearing produced many comments and interesting questions and answers. The issue of drug prices has been at the center of many political campaigns, Presidential Executive Orders, demonstration projects and proposed legislation. This is not a new issue. H.R. 3 was proposed in an earlier Congressional session but was never advanced. Now, holding the majority in the House, the Democrats are working to advance the bill. One interesting thing that caught my attention was some statements by Republican members that they were convinced that this bill, even if it passed the House, would not pass the Senate. They wondered why the committee was wasting time on this bill rather than sitting down and working out compromises that would produce a bill that could pass the Senate. I’m convinced that there will be much more talk and more hearings on this subject.

One last thing. . . as you know, I’m a fan of instituting a yearly cap on patient’s out-of-pocket prescription drug costs. People shouldn’t go bankrupt or not have access to prescription drugs because of cost. We need to fix this part of our healthcare. Using international prices to fix the price of drugs is not the answer. The question I ask is, what better place should we spend our money than finding life changing and lifesaving medicines that could save your life or the life of your loved one? The government has spent trillions of dollars to help us through a pandemic that was caused by a virus that was first contained by a vaccine that used a new method for creating vaccines. This new method was discovered because research was funded years earlier, enabling it to be brought to bear in a short period of time to combat this life taking and economy crippling virus. Why wouldn’t we be willing to spend money to continue to make these types of discoveries? The drug manufacturers understand there’s a problem, and they have indicated they want to be part of the solution. More government involvement is not the solution. At least that’s my opinion.

We’ll keep you informed as these bills move forward, keeping you informed, highlighting their effect on you and your health. As always, I’d appreciate your opinion. Take the opportunity to leave a comment.

Best, Thair