JUNE 15, 2017
U.S. Senate Health, Education, Labor and Pensions
Committee Holds Hearing on Prescription Drug Prices
The Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on June 13 to discuss
the rising cost of prescription drugs. The full committee hearing, titled “The Cost of Prescription Drugs: How
the Drug Delivery System Affects What Patients Pay,” was announced shortly after a bipartisan group of
Senators sent a letter to HELP Committee Chairman Lamar Alexander, R-Tenn., and Ranking Democratic
Member Patty Murray, D-Wash., specifically requesting a hearing on this subject. The letter was signed by
Sens. Al Franken, D-Minn.; Bill Cassidy, R-La.; Tammy Baldwin, D-Wisc.; Susan Collins, R-Maine; Sheldon
Whitehouse, D-R.I.; Lisa Murkowski, R-Alaska; Bernie Sanders, I-Vt.; Shelley Moore Capito, R-W.Va.;
Elizabeth Warren, D-Ma.; and Mike Enzi, R-Wyo.
Hearing witnesses included Dan Mendelson, president of Avalere Health; Allan Coukell, senior director of
health programs at the Pew Charitable Trusts; Paul Howard, senior fellow and director of health policy at the
Manhattan Institute; and Gerard Anderson, professor of medicine at Johns Hopkins University School of
Medicine.
At the hearing, committee members addressed a number of drug pricing issues and proposals, including
drug rebates, changes to the 340B program, measures to address pay-for-delay, government price controls
and importation. Notably, a number of the committee’s Democratic Senators used much, if not all, of their
time during the hearing to express disappointment with the lack of transparency in connection with Senate
Republicans’ plans to repeal and replace the Affordable Care Act (ACA). For example, Sen. Chris Murphy,
D-Conn., refused to ask questions related to the hearing in protest of the Republican strategy to replace the
ACA. Sen. Murray began her opening statement by acknowledging the importance of reducing the cost of
prescription drugs but dedicated the rest of her statement to expressing her disappointment with the
closed-door approach Republican Senators are using to consider the American Health Care Act passed by the
House on May 4.
In his opening statement, Sen. Alexander stated that four billion prescriptions are written every year and
many of these medications are truly miracle drugs. He emphasized that this was the first of three hearings
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the committee planned to hold on prescription drug costs. Chairman Alexander further explained that this
hearing was focused on building the committee’s understanding of drug pricing issues and basic facts, such
as who pays for prescription drugs and where that money goes. He said that in July the committee will hold a
second hearing on the drug development process and the costs at each stage. In the fall, he added, a third
hearing will consider a report produced by Norm Augustine at the National Academy of Sciences entitled
“Ensuring Patient Access to Affordable Drug Therapies.” Sen. Alexander finished his remarks by discussing
the HELP committee’s history of successful bipartisan efforts to reduce the cost of healthcare.
At the end of June, however, about two weeks after the June 13 hearing, Sen. Alexander indicated that he
was cancelling the drug pricing hearings previously announced for July and September of this year, stating
that he was doing so because Democrats on the committee had used the mid-June hearing largely to criticize
Republicans’ approach to seeking repeal and replacement of the Affordable Care Act.
After opening statements at the June 13 hearing, each witness briefly addressed certain options to reduce
drug costs. Proposals from the witnesses’ statements and from the Senators’ remarks and questions are
summarized below.
Generic Competition. Several witnesses and Senators from both parties expressed a desire to further
explore bolstering generic drug competition as a way of controlling drug costs. The witnesses appeared to
agree with Democratic Sen. Michael Bennet of Colorado’s assertion that it would take three or four generic
drugs to be sufficient competition to lower the cost of treating a condition. Witness Dan Mendelson argued
in his testimony that generics should receive expedited approval to help generate competition, which would
drive down drug prices. He also posited that second and third branded drugs in a class should receive faster
approval to increase competition and encourage price concessions from manufacturers.
Importation. Sen. Franken stated that the United States should be able to import drugs from Canada and
should further explore drug importation as possible means of generating competition. He and Sen. Sanders
also argued that Medicare Part D should be able to negotiate drug prices.
Limited Distribution Chains. The committee discussed proposals to prevent drug manufacturers from
using limited distribution chains. Dr. Anderson argued that limited distribution chains are a tactic that
allows a manufacturer to avoid competitor access to their drug, thus limiting competitors’ ability to establish
generic equivalence or biosimilarity for a new drug and, ultimately, stifling competition.
Value-Based Purchasing and Bundled Payments. Many Senators and several of the witnesses
discussed moving toward a value-based contracting model for drugs that would shift the focus from paying
for volume to paying for value. Dr. Anderson explained that most drugs are paid for on a fee-for-service basis
and noted that this should change. Dr. Howard also urged the Centers for Medicare & Medicaid Services and
the Food and Drug Administration to issue guidance on how to experiment with innovative purchasing
models. Dr. Anderson, Dr. Howard and Mendelson all suggested that value-based purchasing arrangements
(such as bundled payments and accountable care organizations) would allow physicians to be in charge of
the process and would hold hospitals accountable to ensure that the performance of the medicine or
treatment provided has a positive real-world outcome.
Risk Evaluation and Mitigation Strategies (REMS) Program. Reforming the REMS program was
discussed throughout the hearing. Several Senators asked the witnesses to elaborate on how the REMS
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program is abused to limit competition in the market. Coukell explained that pay-for-delay agreements and
the REMS program enable manufacturers to limit competition.
340B Program. Dr. Howard argued that Congress should reform the 340B program and restore it to its
original purpose. He stated that the intent of the 340B program was to help hospitals serving indigent
patients, he said, but added that the program now covers about half of infused oncology therapies. He argued
that hospitals are acquiring these deeply discounted drugs at rate that represents a small percentage of the
allowable charges they receive in reimbursement, resulting in huge margins for the hospitals. This
encourages hospitals to buy outpatient oncology practices, he said, which can result in higher copays for
patients.
Additional Issues and Proposals
•
Coukell suggested modifying the Medicare Part D “six protected classes” policy, stating that the
policy limits Part D plans’ ability to leverage better prices.
•
Coukell also suggested that the current Medicare Part B structure creates a perverse incentive for
providers to choose higher-priced treatments in exchange for greater reimbursement.
•
Several Senators expressed skepticism and concern about the extent to which manufacturers spend
money on advertising versus research and development.
•
Sen. Cassidy stated that he would like to see greater transparency throughout the drug pricing
process so patients and the public can have a better idea of what happens.
Other congressional committees also may seek to address the costs of prescription drugs over the coming
months. For example, on June 9, Democratic members of the House Energy and Commerce Committee sent
a letter to Chairman Greg Walden, R-Ore., requesting that the majority hold similar hearings to address high
prescription drug costs. Chairman Walden has not said whether the committee will do so.
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