Drug Makers Call for Rebate Reform and More Biosimilar Competition in Senate Hearing

In today’s second full committee hearing on drug pricing held before the US Senate Committee on Finance, executives representing 7 drug makers provided testimony on the high prices of their products.

Senator Chuck Grassley, R-Iowa, chair of the committee, opened the hearing by warning the witnesses that “We’ve all seen the finger-pointing. Every link in the supply chain has gotten skilled at finger-pointing” on the matter of high prices, and that Congress has grown tired of “the blame game” and seeks substantive answers to its questions.

Before turning to Richard A. Gonzalez, chairman and chief executive officer (CEO) of AbbVie, for his testimony, ranking member Senator Ron Wyden, D-Oregon, raised what he called “troubling information” about AbbVie’s Humira, noting that the company has increased its price for the brand-name adalimumab even as it tied its executives’ bonuses to Humira’s sales.

Gonzalez did not comment on the issue of Humira-linked bonuses in his prepared testimony, saying instead that the Medicare Part D benefit design is to blame for rising out-of-pocket costs for many seniors. High drug prices, said Gonzalez, must be part of a discussion about what patients pay for their drugs, but Part D, he noted, does not reflect the discounts that plans receive from drug makers.

During questioning from senators, Gonzalez defended Humira’s patent estate, saying that AbbVie’s portfolio evolved as the company discovered Humira’s applications in various disease states. “Humira is like 9 different drugs,” he said, given its broad range of therapeutic applications.

Gonzalez also called recent settlements with biosimilar developers a “reasonable balance” that will allow for market entry after patents on adalimumab expire. “We don’t block any biosimilars…We’ve given license to every biosimilar player but 1,” he stated.

In his testimony, Pascal Soriot, executive director and CEO of AstraZeneca, laid blame for high out-of-pocket costs on the current rebate system, which he called unsustainable. He called on the United States to move away from the rebate system and, if that proves to be impossible, to dedicate a portion of discounts and rebates to instituting caps on out-of-pocket spending for patients. He also said that biosimilars could create better competition, and he cited European biosimilar discounts of 40% to 80% as examples of what the United States could save.

Albert Bourla, DVM, PhD, CEO of Pfizer, said that he supports passing all rebates to patients. Currently, the rebates are “swallowed up by the supply chain,” he said, agreeing on the need to cap seniors’ out-of-pocket costs. He also joined Soriot in calling on Congress to “knock down barriers” to biosimilars.

Kenneth C. Frazier, chairman and CEO of Merck, voiced support for greater biosimilar utilization and generic competition, and added that the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act could help facilitate both. He also called on Congress to address regulatory obstacles to value-based contracts.

Several drug makers were united in their opposition to the Trump administration’s proposed International Pricing Index (IPI) plan, which would link drug prices in the United States to prices paid in other countries.

Giovanni Caforio, MD, chairman of the board and CEO of Bristol-Myers Squibb, called on policy makers not to “stifle” the market by implementing the IPI model. Olivier Brandicourt, MD, CEO of Sanofi, added that, “I understand the anger” over rising out of pocket costs, and said that Sanofi could support solutions that accrue savings to patients, but said that the government should not try to directly affect the price of drugs by “outsourcing price decision to other countries.” Finally, Jennifer Taubert, executive vice president and worldwide chairman of Janssen, added that she sees a need for an “American solution to an American challenge.”