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Pascal Soriot, chief executive officer of AstraZeneca Plc, from left, Giovanni Caforio, chairman and chief executive officer of Bristol-Myers Squibb Co., Jennifer Taubert, worldwide chairman of pharmaceuticals at Johnson & Johnson, Albert Bourla, chief operating officer and chief executive officer of Pfizer Inc., and Olivier Brandicourt, chief executive officer of Sanofi, await the start of a Senate Finance Committee hearing on drug pricing on Capitol Hill in Washington, D.C., U.S., on Tuesday, Feb. 26, 2019. Top executives from seven of the world's biggest drug companies are testifying before Congress to talk about drug costs, a long-awaited session that could kickstart legislation to rein in prices. Photographer: Zach Gibson/Bloomberg via Getty Images

Drug company CEOs admit prescription prices are too high. But will they change?

The CEOs of seven pharmaceutical giants gathered before the Senate Finance Committee on Tuesday to answer lawmakers’ questions about why U.S. drug prices are high — and rising.

Even in a polarized Washington, drug prices are a classic pocketbook issue that fires up lawmakers from both parties and resonates with voters in the lead up to the 2020 presidential election.

These pharmaceutical executives included Richard Gonzalez of AbbVie, Pascal Soriot of AstraZeneca, Giovanni Caforio of Bristol-Myers Squibb, Jennifer Taubert of Janssen Pharmaceuticals, Ken Frazier of Merck, Albert Bourla of Pfizer and Olivier Brandicourt of Sanofi.

Together, their companies earn billions of dollars treating the world’s maladies and operating under the premise that today’s profits will fund research and development for tomorrow’s cures.

During the hearing, senators argued the companies’ pricing practices are collectively exploiting Americans. Patients in the U.S. often pay more than their peers abroad, even for identical medications. Public outcry has risen in recent years (and congressional hearings followed) after. In one high-profile incident, the pharmaceutical company Mylan raised the price of EpiPens more than 500 percent over nine years.

“You charge more here because you can, and American taxpayers are subsidizing all of you to be able to have incredibly high profits,” said Sen. Debbie Stabenow, D-Mich., to AbbVie’s Richard Gonzalez. His company manufactures Humira, a medication prescribed to treat arthritis, psoriasis and Crohn’s disease.

In their prepared remarks, each executive acknowledged that pharmaceutical innovations are worthless if patients cannot afford to pay ever-rising prices for medication. To varying degrees, the executives backed the CREATES Act, a bipartisan bill first introduced in the Senate in 2017 to increase market competition and improve consumer access to cheaper generic and biosimilar medications.

Executives criticized drug rebate programs, run by third-party administrators, which lower costs through opaque negotiations that make it difficult to track actual savings.

“We recognize the need for change,” said Giovanni Caforio, CEO of Bristol-Myers Squibb, adding, “We must ensure patients have affordable access to new innovations.”

Despite these concessions, observers were left with one overwhelming question: What will actually force drug companies to offer relief?

Here are takeaways from Tuesday’s hearing and commentary from experts who’ve studied the challenge of lowering the dizzying cost of health care in the United States.

Drug companies tried to share the blame

In the hearing, pharmaceutical executives blamed drug rebates for muddling market prices and artificially inflating costs. They hammered the pharmaceutical benefits managers, often called PBMs, that negotiate these rebates for private insurance companies and Medicare prescription drug plans.

That’s only part of the story, said Edwin Park, research professor at Georgetown University McCourt School of Public Policy. He said drug company executives’ hands are not bound by these rebates.

“They claim that they would lower list prices substantially if they did not have to provide rebates,” Park said. But if rebates disappeared and list prices didn’t drop, the result “could just mean higher costs, while providing considerable windfalls to manufacturers.”

At the same time, benefits managers are not without fault, Park said, having been known to steer people toward costlier medications and drive up state Medicaid costs.

Drug companies signal willingness, but not specifics

After the hearing, pharmaceutical lobbyists who represent drug companies indicated they were open to change.

“Significant reforms aimed at changing the marketplace will be disruptive for our industry, but we believe they are necessary to improve patient affordability and lower costs,” Stephen Ubl, chief executive for lobby group PhRMA, said in a released statement.

What those changes might look like, or how they will be enforced, remains unclear. Shawn Bishop, vice president for Controlling Health Care Costs and Advancing Medicare at the Commonwealth Fund, called the suggestions made by the executives “low-hanging fruit” and wanted to know what “enforcement mechanism” would ensure their follow through.

In their testimony, the pharmaceutical executives all acknowledged their companies are responsible for setting drug list prices.

On the PBS NewsHour this month, Health and Human Services Secretary Alex Azar said drug companies need to be more transparent, and that rebates are a percent of list prices for medications.

Azar has devoted much of his political clout to lowering prescription drug prices. In his State of the Department address on Feb. 22, he said lowering prescription drug prices was one of his top four policy priorities for 2019, along with combating opioid overdoses and deaths, improving the individual insurance market and injecting value-based practices into the health care system.

These governmental moves to lower drug prices amount to smoke and mirrors when compared with other factors that inflate health care costs, such as insurance premiums, said Thomas Miller, a senior fellow with the American Enterprise Institute. Miller echoed Bishop in his criticism. Both suggested that Congress needs to lay out direct policy to hold drug companies accountable.

“We have seen versions of this orchestrated political drama before,” Miller said. “Committee members get to express their generic outrage without prescribing a specific brand of safe and effective solutions.”

Americans are left in limbo as politicians figure out how to hold drug companies accountable

Tuesday’s hearing fits into a broader push by Congress and the Trump administration to bring down prices for prescription drugs — a policy position with widespread voter appeal.

When asked how diligently Congress should work to pass laws that lower prescription drug prices, 52 percent of U.S. adults said such laws should be a top priority on Capitol Hill, according to a Kaiser Health Tracking poll released in March 2018. That outranked people’s preference for Congress to first address the prescription opioid crisis or repeal the Affordable Care Act among Americans who responded to the poll.

Last month, Kathy Sego, a choir teacher and married mother of two from Madison, Indiana, shared her family’s story before the same committee as the drug CEOs, in testimony submitted with the American Diabetes Association.

Her college-age son, Hunter, lives with type 1 diabetes and must take insulin to survive at a cost of $1,700 per month. She told the senators that at one point, Hunter secretly rationed his insulin, taking only a quarter of what he was prescribed, in an attempt to control how much his family paid for this medication. The move cost him his grades and health, and could have been fatal if his parents had not found out and intervened.

“Hunter’s life choices are contingent on his ability to pay for the medicine that keeps him alive,” Sego said.

Hunter is not alone. In 2016, a Kaiser Health Tracking poll found 21 percent of U.S. adults said they did not fill a prescription, and another 16 percent said they cut pills in half or skipped doses to extend the duration of their prescriptions. In the United States, people feel compelled to compromise their health to make ends meet. It remains to be seen if this week’s hearing of drug company executives will change that.

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