tv Abb Vie Pharmaceutical Co. CEO Testifies on Drug Prices CSPAN July 29, 2021 10:34am-2:15pm EDT
>> yeks we hear from the ceo of the drug company abbvie richard gonzalez. he spoke of the drug prices humira and umbruvica. many lawmakers criticized the pharmaceutical company for humira's price increase through the years and its lower cost abroad. this hearing is a little more than three hours and 30 minutes. >> the committee will come to order. without objection, the chair is authorized to declare a recess of the committee at any time. i now recognize myself for an opening statement.
for more than two years, this committee has engaged in one of the most comprehensive and in-depth investigations of pharmaceutical pricing practices ever conducted by congress. this investigation was launched by my predecessor, the late chairman elijah cummings. and i have been proud to carry forward this critical work. last fall, the committee held two hearings with drug company ceos and released five staff reports detailing our findings. this morning we released a sixth staff report describing our findings on abbvie which sells two blockbuster drugs, humira. and umbruvica. our work has continued what patients in this country have known for a long time. drug prices in the united states are unfair, unsustainable and just plain wrong.
this investigation also reveals something even more distressing. drug companies are actively targeting the u.s. for price increases while cutting prices in the rest of the world. they are doing this by taking advantage of flaws and loopholes in our system, most importantly, the law that prevents medicare from negotiating directly with drug companies for lower prices. finally, our investigation has revealed that the justifications the pharmaceutical industry offers for why they need to raise prices simply do not hold water. today we will hear from richard gonzalez, the ceo of abbvie. we appreciate his attendance at today's hearing. unfortunately, this hearing was delayed because it took more than a year and the threat of a subpoena before abbvie agreed to voluntarily comply with this committee's investigation.
abbvie has repeatedly raised the prices of humira which is used to treat rheumatoid arthritis and other autoimmune diseases. and ebruvaka, a drug to treat different forms of cancer. abbvie charges $77,000 a year for a year supply of humira. that is 470% more when the drug was launched in 2003. humira is the highest grossing drug in the united states due in large part to these horrendous price increases. it started out at $500 for a is a ring it's now at $2,984 just for a syringe. abbvie and its partner jansen biotech charged even more.
$181,000 for a year supply of embruvica. that is 74% more than when the drug was launched in 2013. experts estimate that by 2026. it will be the fourth best selling drug in the united states. these prices are outrageous and unfair. even more outrageous is that americans are the only one paying them. in 2015 a single syringe of humira was priced over $1,000 higher in the united states than in countries like canada, japan, korea and the united kingdom. even as they hike the prices in the united states, it has actually been dropping its prices in other countries. in one internal presentation
from 2016, abbvie executives described this disparate as, and i quote, positive price in the u.s. and negative price overseas, end quote. abbvie's price increases have paid off for the company's bottom line. last year alone abbvie collected $16 billion in u.s. net revenue for humira. and abbvie and jansen collected $4.3 billion for umbruvica. that is more than $20 billion from american patients and taxpayers for just two drugs. and you see the massive price increase, up to $16 billion from $200 million. our investigation also uncovered evidence that abbvie has
exploited the u.s. patent system and engaged in anticompetitive practices to extend its monopoly pricing. the committee has obtained internal documents showing that abbvie's own executives projected its top-selling drug, humira, would face competition from lower-priced versions of the drug known as biosimilars beginning in 2017. but abbvie used legally questionable tactics to block lower-prized biosimilars from reaching american consumers until at least 2023. those tactics made abbvie a fortune. but cost americans dearly. based on these findings, i sent a letter. i sent this letter to the ftc today along with committee chairman of the judiciary, chairman nadler, and antitrust
subcommittee chairman cicilline asking for a formal inquiry into weather abbvie's anti-competitive practices violated the law. finally i want to emphasize that drug companies make essential life-saving products. if the last year has taught us anything, it's that we're all indebted to the scientists who pioneer new cures, therapies and vaccines. so we want drug companies to be successful. but abusive, unfair pricing and anticompetitive practices mean these medications are out of reach for too many americans. and instead of investing in new innovations, drug companies like abbvie are dedicating significant portions of their research budgets to coming up with new ways to suppress competitive products. that means americans are paying
more, but we are getting less innovation. if we want to make a difference for patients and taxpayers, we need structural reforms like hr-3 which would finally allow medicare to negotiate for lower drug prices like the rest of the world does. congress must pass this commonsense reform and others so that patients and families can afford these prescriptions. i want to close by playing statements from patients who want to share their experiences with us about these two drugs. please watch. >> hi, my name is kathryn and i'm from washington. i'm a former computer consultant, but more importantly, i'm a proud mother of three and a grandmother of
five. unfortunately, my ability to enjoy my grandkids has been diminished because of my health. i suffer from debilitating pain and reduced mobility caused by psoriatic arthritis. to treat my condition, my doctors prescribe me humira injections week. humira's price is $5,900 for a pack of two pens. even as a medicare beneficiary on a fixed income, i still have to pay nearly $1,200 out of pocket every single month. i can't afford this. i don't know any average person who can. the excessive humira prices forces me to choose every month whether to eat or fill my prescriptions. many times, i must get my humira doses. the impact is unbelievable pain in my joints, especially in my hands and feet. i shouldn't have to play russian
roulette with my health. this is why i'm sharing my story with you today. this drug company's price gouging needs to stop. we need change. i urge you to consider patients like myself as you take action to lower the drug prices. thank you. >> my name is jacqueline and i'm a 19-year-old college student from austin, texas. last year i was diagnosed with an autoimmune disorder that primarily affects my spine and has spread to most of my major joints. without expensive medications my spine could fuse and leave me unable to walk by the time i'm out of school. after my diagnosis, i was prescribed humira which is priced at almost $6,000 for a month's supply. even with a coupon from my doctor, my first prescription cost me $350 out of pocket and that's money i don't have as a college student.
right now, i'm studying political science and i want to go to law school, but it's threatened by having to constantly worry about affording my medication because i'm going to have to take it for the rest of my life. committee members, as you pursue solutions for drug prices, i hope you will remember the millions of young people with conditions who are facing a lifetime of treatment prices at the hands of companies like an vees. thank you.. b. b. v. i. e. thank you. >> my name is lynn and i live in new york. i'm a retired nurse. i've worked with cancer patients as a nurse navigator for the last decade of my career. in 2012, i became a cancer patient myself when i was diagnosed with leukemia and later with lung cancer. my journey has not been easy. it's required surgery and expensive treatments. for my leukemia, my oncologist
prescribed the oral chemotherapy umbruvica. although i have medicare the monthly cost of umbruvica is over $13,000. i don't have the financial resources to pay for it and not many do. i have secured short-term assistance to cover these prohibitive costs. sadly, my help runs out at the end of the year. my inability to afford imbruvica's price once my assistance runs out would certainly expedite my death. i spent the last years of my nursing career working to ensure my cancer patients had the best treatment possible. now i'm terrified i won't be able to obtain those same resources for myself. instead of enjoying my retirement and focusing on my health, i carry around the overwhelming burden of imbruvica's price tag. you have the power to change
that by reining in the greed of the drug companies. thank you for listening to my story. >> these patients' stories show why we need immediate reform. we need to pass hr-3 this year to allow medicare to negotiate lower drug prices for americans like other foreign countries do. i now recognize -- first i thank every -- these patients for their testimony, their very moving testimony, and i now recognize the distinguished ranking member mr. comber for an opening statement. >> thank you, madam chair. over the past year we've seen the massive importance of research and development in vaccines and treatments. operation warp speed, one of the greatest public/private partnerships in american history resulted in the federal government partnering with
private companies to invest hundreds of millions of dollars to develop and manufacture covid-19 vaccines. the result, despite constant vilification by the democrats, was the fastest vaccine development in history with the first vaccine approved in less than 12 months from the first discovery of covid-19. since then, two more vaccines have been approved with two more awaiting approval by the fda. in addition, there have been numerous pharmaceutical treatments and medical devices innovated to treat covid-19. as a result of these vaccines and therapies, cases and fatalities have plummeted and our nation is on the road to recovery. the catalyst behind these innovations have been intellectual property protections here in the united states. america's robust patent system enables enormous investments in the research and development of new medications.
more generic drug competition and new technologies to promote patient adherence. the research funded by these investments results in treatments and cures for countless diseases enabling americans to live longer and healthier lives. yet today, the democrats on this committee decry our country's intellectual property protections as the root of all evil in the pharmaceutical space. this is simply not true. certainly, there are companies that have abused our patent system. seeking hundreds of patents to prolong their ability to control the market for a particular treatment. but many seek patents simply to protect their intellectual property so they can recoup their investments while seeking hundreds of patents on a medication or vaccine is not illegal under our existing testimony, it can be anticompetitive and result in higher costs for patients. republicans in the house and senate have sought to right this
wrong through legislation that would stop pharmaceutical companies that seek to abuse the patent system and extend their control of the market and prevent the use of settlement agreements to pay generics to delay entry into the market. th and democratss have proposed hr-3, a massive government takeover of the pharmaceutical market to result in significantly fewer treatments and vaccines from coming to market. we should not destroy the very system that has made the united states the world leader in medical innovation. like our democrat colleagues propose. republicans want to protect innovation and consumers. this congress, republicans introduced hr-19, a collection of bipartisan reforms to introduce anti-competitive behavior and require
pharmaceutical rebates to be included at the point of sale so that patients receive the benefits instead of pharmacy benefit managers or pbms. while democrats were impeaching this president, republicans were working to decrease the cost of prescription drugs for all americans. now, nearly two years later, democrats have nothing to show for it, and are attempting to attack yet again another pharmaceutical company rather than help americans across the country. we must act, address rising prescription costs, because our costs are hurting american families everywhere. republicans presented a real plan to lower out of pocket costs and present innovation for cures, and the american people need relief, but speaker pelosi has instead sought to present a partisan plan and destroy intellectual protection that our founding fathers wanted and we
must put people and not partisan ship back. i yield back the remainder of my time. >> the gentleman yields back and i would like to introduce our witnesses. our first witness today is dr. aaron kesselheim who is a associate professor at harvard medical school and he also testified at our committee's very first hearing in january of 2019, and then we will hear from craig garthwait who is the herman research professor at hospital and research hospitals at northwest university. and next from tahir a min who is the co-founder and executive director from medicines and access knowledge, and finally from richard gonzalez who is the chairman and ceo of abbvie. the witnesses will be unmuted so we can swear them in.
please raise your right hands. do you swear or affirm that the testimony that you are about to give will be the truth and nothing but the truth so help you god. >> i do. >> i do. >> i do. >> let the record show that the witnesses answered in the affirmative. thank you, and without objection, your written statements will be part of the record. with that, dr. kesselheim, you are now recognized for your testimony. dr. kesselheim. >> chairman maloney, ranking member kohler and members of the committee, i am honored to talk to you about curbing the abuses of the market for the exclusive ti of the drugs. the patents enables innovators to profit from the inventions and then continue to profit
after that period is gone. it is costly for the other companies to continue to test. and other federal laws like the orphan act for exclusivity for seven years and for biologics for 12 years after this approval. drugs will routinely get 14 1/2 years of market exclusivity by -- biologics get 14 1/2 years. alone in industrialized world, the u.s. lets drug makers set any price they want for patented product, and then the patent product lets them set prices whatever they want. and that allows them to skip doses, and worse market outcomes. when that ends the real competition is to begin, and then the generics can become the lowering the price for 70% or more, and others are to enter
the market, but other bioentrant is subject to abuses as many manufacturers try to delay the entrant and there is a thicket of hundreds of dozens of pat tens and secondary dozens like intermediate compounds and tertiary compounds cover injection pen or inhaler. the proportion of tertiary patents tripled in 2016. some firms use this time to introduce new versions of their product with little to no clinical benefit. so a firm may switch from a capsule to tablet. many of the tertiary patents are bad that lack novelty or cover minor obvious changes to the drug. one analysis revealed that legal challenges seeking to overturn the primary patent succeeded 8% of the time, and challenges to
other patents were successful 67% of the time. other patents take years and millions of dollars to complete. all of these issues can be but litigation to overturn patents can take years and millions of dollars to complete and in recent years, many have settled litigation to keep bad patents in place and not introduce their competitors in exchange for benefits. all of these issues can be observed by a drug that was acquired from a german company in 2000 before it reached the market in 2003. as the primary patent was set to expire in 2016, litigation over its patents led to settlements blocking u.s. market entry until 2023. so what can you do? we need to protect and reward innovation. yet ensure timely competition after a reasonable period of market exclusivity. first, bad patents must be limited and other patent offices around the world issue fewer bad
patents bish shoeing more time after review. in addition to granting more resources to the u.s. patent office, congress should instruct it to develop new guidance on patenting starts to trivial modifications would not be patented, while others would remain. another step would be to provide greater opportunity for administrative review prior to litigation via the already existing patent trial and appeals board. it should be required to review patents. you can also take steps to ensure that manufacturers cannot use other market exclusivity periods to delay competition. the seven-year orphan drug exclusivity should be curtailed. and the 12-year regular tear exclusivity should be shortened to match small molecule drugs because biologic drugs have
larger times. you need to pass hr-3 to give the government the power so we can make clear which modifications help patients and which are useless intending to extend exclusivity. the government should be able to regulate the prices. in conclusion the system was intended to provide a reasonable limited period after fda approval during which brand-new manufacturers can earn fair and generous revenues from their products. strategies with that and other cases upset this balance and make it more lucrative for a company to fend off competitors rather than coming up with important new discoveries. ensuring that competition can occur within a timely fashion will have little effect on meaningful drug innovation, but would reduce overall health care spending, make medications more affordable, and promote improved patient outcomes.
thank you very much. >> thank you. you are now recognized for your testimony. mr. garthwaite. >> thank you, chairman, and ranking members for allowing me to testify today. as you described in your opening statement, it's well known that the process of developing novel pharmaceutical drugs is expensive and risky. products is expensive and risky. they must make large investments to create the knowledge necessary to create the new jobs. it's largely a public good. absent government intervention, it would be harder for firms to protect the property and stop competitors from copying the innovations and competing away any potential products. firms you said this and they would be unwilling to invest in drug development. this would cause an economic condition known as holdup where valuable investments are not made. to avoid holdup, governments provide various types of intellectual property protection
that allow firms a time-limited period in which they can enjoy enhanced market power. it involves a difficult trade-off where we accept some amount of reduced access today provide the incentive. i don't say this lightly. i understand that high prices can decrease access to medications and consider policies as i detail in my testimony that limit that harm. but, frankly, there are no easy or simple answers here. weakening existing property protections or using government power to set low prices will decrease innovation and lead to its own access problems. you see, while it's clearly true that patients today paying high prices can suffer decreased access to medication, we must also acknowledge that those patients do enjoy a significant benefit that should not be overlooked. there is an existing drug that can treat their condition, for those suffering from conditions where there are no treatments, there's no drug available at any price.
and we only focus on access problems related to prices, we ignore this other fundamental lack of access. simply because these missing innovations and their affected patients are harder to identify and not available for photo opportunities doesn't make them any less real. that said, we must remember that everything about the existing parameters of this tradeoff is simply a policy choice. there's nothing magical about our current 20-year patent length and the very fact that this patent is constant across products and markets suggest it's not the result of some finely tuned calibration or economic model. as the market change, it is reasonable as this committee is doing to revisit the policies related to both access and innovation. in doing, so i would argue that we should focus on two broad areas as our goals. we should focus as a government to welfare losses where possible
while possible while drugs are covered by patents and ensuring that periods of market exclusivity are expressly time limited and followed by competition from generic entrants. while losses can be limited by promoting competition between branded products and ensuring the continued operation of well-functioning insurance markets. i outline several policies in my testimony to accomplish these goals, it includes reforms, the system for part b, improving information disclosure and most interesting given the videos is decreasing onerous cost sharing for pharmaceuticals and the cost sharing is as much about the price of the drug as there is about the insurance of the cost of the drug that we have and in particularly in part d, and for many people and the poor buying expensive medications. once they've reached market exclusivetivity, they should support the entry of vigorous competition.
if market structures don't allow for meaningful market structures to emerge, there is a clear role for regulation to create competitors or restrict pricing. when thinking about policies in periods of high prices being time limited, it's easy to recognize giving the witnesses here today that the committee is obviously concerned with the use and potential open use of patents. often critics have existing property -- the existing protection system will cite the sheer number of patents of evidence of nefarious behavior. the number of patents is an nefarious evidence of incomplete metric modern products, but modern products involve meaningful intellectual property related to the production and additional uses in other medical conditions and we should examine that -- we should examine that up to can and including more resources for the patent and trademark office. they've called for it in the form of limits patents to one
per product. that -- those reforms are overbroad and i -- while i understand it's tempting to cave to sort of the crass calculus to that increased access today and allow for more innovation going forward, that is not true. we will suffer less innovation if we return the returns on drugs and debate the nature of that reduced return on innovation in our policies. thank you very much for your time today. >> thank you. you're now recognized for your testimony. >> members of the committee, it's my honor to testify before you today. i spent the first decade of my legal career working as an attorney in the private sector securing and protecting ip. many of my clients were american companies. i learned both the legal and business side of ip and it's importance. i also learned how to use loopholes to game the system.
these loopholes enabled me to invent ip rights so companies could maintain a monopoly in the market. while continuing to extract maximum profit, so i speak to you today as someone who has seen both sides of issue. i want to state up front that this conversation is not about the death knell of innovation, but it is about bringing equity to the system, and how well this system incentivizes a system. 34 million american adults know one friend or family member who died in the past five years because they could not afford treatment. that is double for people of color. sadly, that's not surprising. u.s. prescription drug spending has increased by 76% from 2000 to 2017. these price hikes correspond with an increase in patenting activity. they not only have a drug price crisis, they have a drug patenting problem. that week, the uspto issued its
11 millionth patent. it has taken less than one-fifth of that time to issue the next 6 million. have we really become more inventive in the last 30 years or got better at inventing patents because our patent system no longer is stringent enough. the number of pharmaceutical patents granted in the u.s. more than doubled between 2005 and 2015. my organization has been analyzing the top drugs in the u.s. and it found a total of 1310 have been filed, 692 patents had been granted. on these drugs in total and on average, that is 131 patent applications and 70 granted per drug and on average 63% of these patents are filed after the first approval for marketing. that gives the average monopoly protection of 38 years. and between 2014 and 2019, on
average, we have seen a 71% price increase on these drugs. two of the best-selling drugs belong to abbvie, humira and imbruvica. abbvie has filed 422 patent applications on these drugs alone. 90% of the 422 patent applications of the drug humira were filed after the drug was first approved in 2002 and it was am massed 130 granted patents for humir, and a staggering 39 years of protection. despite litigation by nine different companies, agreements have allowed abbvie to keep competitors out of the u.s. market until 2023. it means the u.s. will have spent an estimated 77 billion before competition enters. a similar story with imbruvica. 165 patent applications have been -- and 88 have been granted so far. that's about one patent filed every month for the last 13 years. granted patents give abbvie a monopoly protection for nine years more than the usual period. during that extended period,
americans will spend an extra $41 billion on branded imbruvica. again, one of the arguments you'll here today, abbvie uses it because the drug treats several different drug innovations. the patents on these drugs protect my of the indications setting out a strategic road maps for getting future patents. they made minor changes a decade later by combining them with existing drugs. they've been able to do so because the system allows it. how do we solve this problem? before we get to the solutions, i want to raise the issue that humira is about to be trumped and the additional years that the other years, it's going to cost americans 137 billions. we're talking about humira and imbruvica, but if congress fails to act, tomorrow we'll be
talking about other drugs. the solutions to the problem lie in raising the bar for what gets patented. too many patents are granted that are too weak. we also need to change the incentives and the culture that is there basically patents are granted to earn revenue and we need to create financial incentives that works outside of that. also, we need to reduce the cost of challenges patents. american ingenuity is a source because of that it is easy to lionize the patent system.
today's system has become less an engine for real invention. more of the lawyering system to use jedi tricks to make real money. just because you invest in money mean you've invented something. congress has the ability to return the patent system to not a vehicle for unprecedented profits, but an engine for discoveries that are truly unprecedented. thank you. >> thank you. mr. gonzalez, you're now recognized for your testimony. mr. gonzalez. >> i'm richard gonzalez. i'm the chief executive officer of abbvie, a company with approximately 48,000 employees dedicated to developing new innovative medicines for some of health care's most challenging diseases. the global pandemic of the last year highlights the critical role that the bio pharmaceutical industry plays in driving science and innovation to tackle the most significant diseases facing our society. our industry invests over $80 billion per year in research
and development to meet those challenges and our company alone has invested approximately $50 billion since 2013 and has produced cures for diseases like hpv and therapies that are changing and prolonging the lives of patients suffering with cancer, rheumatoid arthritis and other serious diseases. as we tackle the issues of drug pricing and access, it's important that we focus on what's working and what needs to change to make sure that patients get the medicines they need. the united states has the most advanced health care system in the world. it doesn't ration care or restrict access to therapies and it's a leader in advancing science to provide cures to deadly diseases like cancer. the united states is also -- developed country when it comes to the use of generic drugs,
over 90% of prescription buy-in is prescription drug buy-in with low out-of-pocket costs. most americans have access to affordable medicines and pharmaceutical companies such as abbvie provide a number of forms of assistance for those who can't afford their medicines, through co-pay support or free drug. the single largest patient group that lacks access to affordable medicines are standard medicare part “d” patients where the program design has put a significant cost burden on them. for these patients, reducing drug prices alone will not alleviate the challenge of access and affordability. last fall the house committee on oversight and reform held two days of hearings to examine the prices of prescription drugs and certainly drug pricing is important and the industry has taken steps to reduce drug pricing in recent years. in fact, since 2017, the overall
contribution of price to abbvie's business has been negative. in the category of what's working well here in the u.s., the medicare part “d” program has been highly cost effective. the market-based structure encourages aggressive price discounts and yielded significant savings to the government since the part “d” program was published. despite a 70% increase in enrollment, the compounded annual growth rate in drug spending adjusted for the increase in enrollees is 1.8% or roughly in line with inflation. and it's been basically flat since 2015. the aggressive price rebates negotiated by plans have also kept patient monthly premiums flat at roughly $33 since the program began in 2006. this data clearly demonstrates the overall cost effectiveness of the part “d” program.
so what's not working in part “d”? is it some patients must bear too much of the out of pocket and there's no cap on drug spending. unlike other commercial forms of insurance, part "d" enroll lees cannot access co-pay support. they cannot purchase insurance to defray these costs and they must pay open-ended drug expenses. the average out-of-pocket cost is almost 100 times higher for a medicine like humira than any other u.s. patient group. no other prescription drug insurance program puts so much cost burden on the patient. we see the impact of the part “d” design flaws most clearly in abbvie's patient assistance program where almost 40% of all medicare part “d” patients on humira or 1 out of 3, are seeking assistance and receiving free medicine. this stands in contrast to
commercially insured humira patients where 1 out of 100 sought assistance. medicare part “d” patients out-of-pocket costs is the single biggest issue when it comes to drug affordability. additionally, while the overall cost in part "d" is well controlled, government spending is increasing more rapidly than overall spending. it's another area that needs to be addressed. industry, government, and health care plans should come together to significantly reduce out-of-pocket costs for patients and reapportion the cost in the catastrophic phase so that spending will be well controlled. thank you. >> and i now recognize myself for five minutes for questions. abbvie has raised the price of humira 27 times since launching the drug. at the same time, abbvie has actually lowered the price of
this drug in the rest of the world. mr. gonzalez, has abbvie been raising humira prices in the united states while lowering them internationally? >> madam chairwoman, the system that you described is how it actually does work. certainly outside the u.s., there is always pressure on price and prices do come down somewhat. outside the u.s. once a product is launched. in the u.s., you have the ability to be to raise price. the key point is what is the net price that companies like ours actually achieve and what is done with the difference between gross and net pricing. i think that's an important debate that we should have. >> reclaiming my time. abbvie's internal documents prove that you did raise prices in the u.s. even while you were lowering them internationally. i want to put up exhibit 23.
this is an abbvie board of directors presentation from 2016. mr. gonzalez, please turn to page 3 in the exhibit. the heading of this slide says, and i quote, humira has been positive price in the u.s. and negative price overseas, end quote. in other words, abbvie raised the price in the u.s. while lowering it in the rest of the world. this document also shows that the company had a plan to continue hiking the price of humira in the u.s. for several more years. mr. gonzalez, please turn to page 10. this page shows that abbvie planned to raise the price of humira for americans in 2016, 2017, 2018, 2019 and 2020. while cutting international prices each year. mr. gonzalez, did abbvie
actually go through with price increases on americans during each of those years? >> madam chairwoman, we would have had price increases on those years, that's a forward-looking long-range planning document. i can't confirm for you whether or not it was those price increases. it's also important -- >> reclaiming my time. the answer is yes, abbvie raised the price of humira in the u.s. even more than it planned. for example instead of the 9.9% increase for 2016, abbvie actually raised the price by 18.9% in that year alone. let me turn to second drug imbruvica.
mr. gonzalez, is it true that abbvie charges more for imbruvica in the u.s. than any other -- than in other countries. >> imbruvica is marketed through our partner outside of the u.s. so i'm not familiar with the pricing. >> we looked at the data. i want to show you another graph comparing the list price of imbruvica around the world in 2018. as you can see in this chart, americans pay far more for this drug than people in other countries. this is unfair. in 2018, the price of a tablet of imbruvica in the u.s. was roughly double the price charged in france, germany, and the uk. medicare part “d” provides prescription drug coverage to more than 45 million americans. yet it is prohibited by law from negotiating lower prices on behalf of the patients it covers. mr. gonzalez, do you know how much abbvie made for medicare and net sales of humira and
imbruvica between 2014 and 2018? >> it would have been approximately $2.3 billion for humira and approximately $2.9 billion for imbruvica. >> well, the documents we have, abbvie's internal data shows that the company collected nearly 12.5 billion, as in "b," dollars from medicare during this five-year period just for these two drugs alone. and this number counts for any rebates that abbvie paid to medicare. no wonder the drugmakers target the u.s. for price increases. they know that unlike the rest of the world, our medicare program is prohibited from negotiating directly for lower prices. this data demonstrates clearly
why congress must pass hr-3 to grant medicare the power to negotiate lower drug prices for patients. we must pass this bill this year. i now yield to the distinguished ranking member mr. comer. no, ms. foxx, from north carolina. she's now recognized. >> thank you, madam chairman. my question is for mr. garthwaite. i want to share a recent story. it is from the information relay foundation. scientists at walter reed conducted initial research and put out a request for a private company to work with them to develop a vaccine for the zika virus. only one company respond and reached an agreement with the u.s. army in june 2016. upon leaning of the agreement, senator bernie sanders demanded that the army require reasonable pricing language, also known as
price controls, in the deal. in response, they noted, we can't undermine the price of a vaccine we haven't made yet and said that it's premature to consider or predict zika vaccine pricing at this early stage of development, end quote. santa fe also said that it noted the proposed license would require it to make royalty payments to the government and its exclusive license would not prevent other companies from developing competing vaccines. following the relentless media attacks, they announced it would not continue development of or seek a license to develop a vaccine. there is still no vaccine for the zika virus. the taxpayers funded the research that identified the vaccine candidate, a private company agreed to take the risk of testing and manufacturing it, but this whole effort failed due to these progressive attacks. thanks to these attacks, we may never know how many lives could have been spared by this vaccine.
mr. garthwait, if the threat of price controls on one potential product killed that innovation, what could happen if we threaten the entire industry with this type of socialist pricing like the ones that democrats are proposing with hr-3? >> i think the economic evidence is clear that if we're going to decrease the potential revenues of a product, we'll see fewer investments in research and development. and so very large price increases we would worry would lead to declines in innovation. your question is, how do we think of u.s. government research into drug and is how should that affect pricing? i know there's a lot of concern that the nih research shows up in the document of new drugs and that's true in the example you gave, nih does a lot of basic science research and that's what we want the government to do. given that we spent the money to do that, we want private firms to take that research up and be willing to develop new products. if you put price controls or restrictions on it, about specific returns or fair pricing clauses or anything like that,
you will likely decrease the take-up of government intervention and society is no better off. that way we want to think about our government investments as compliments to the research done by private risk capital. we want people to use the nih research as much as possible and i worry that price regulations of the nature in hr-3 would more broadly conversations at the nih, are going to decrease the returns we get on the investments in the nih. >> thank you very much. mr. gonzalez, in your opening statement you described the competitive nature of the medicare part "d" program and how improvements would help seniors in my district lower their out-of-pocket costs.
now the democrats are telling us that the only way forward on part d is to have the government take it over so they can determine what medicines are worthwhile. can you help educate us on how the current part “d” program is already a competitive market and then how we need to improve it so that seniors are not facing higher costs? >> i would tell you that in my experience -- and i've got a tremendous amount of experience in this business, the medicare part “d” program is negotiated aggressively by the plans. and i'll give you an example. medicare, of course, humira, gets a discount that is 3% higher, or a rebate, that's 3% higher than the commercial side of the business. it gets that rebate despite the fact that it's roughly one-sixth the volume. normally when you think about discounting, a product that -- consumer that has six times the volume would get the lower price. but in this case, it's the opposite end of that. the government is getting the lower price. i would tell you that if you look at the medicare part “d” plan, it is the structure of the plan that ultimately dictates the affordability issue for
patients. you can tick any other kind of patient in the united states and they will pair for humira around $120 a year. a medicare patient has to pay over $5,800 a year for humira. an excessive amount. you have to remember, these patients on average make $28,000 a year. there's no ability to be to support or subsidize the out-of-pocket costs because of the anti-kickback laws. so the only thing that we're left to do for a company like abbvie where we want patients to be to get their drug is we have a patient assistance program where we provide drug for free, a full year of drug for free for those patients who can't afford it, and we subsidize essentially the medicare system. and think of it this way, for every ten medicare humira
patients, we're providing free of charge humira to four of those patients. >> thank you very much. dr. fauci has said -- >> your time is expired. >> thank you, madam chair. >> the gentlewoman from the district of columbia, ms. norton, you are recognized for five minutes. mrs. norton. >> thank you, madam chair, for this important hearing. in 2003, abbott laboratories launched humira at a price of $522 per 40 milligram syringe, or just over 6,200 dollars annually. over the course of the next decade, abbott raised the price of humira 13 times.
by 2013, and remember we started in 2003, a single 40 milligram syringe of the drug was priced at $1,024 and started at $522. that's nearly double when it was -- what it was ten years earlier. abbvie spun off its own company in 2014, taking humira with it. mr. gonzalez, that's when you became ceo, isn't that correct? >> yes, that is correct. >> since that time, the increases in humira have only accelerated. i would like to show a graph and i hope that that graph can be put up now, madam chair. showing the price of a 40 milligram syringe of humira, how
it has grown from 2003 to today. and the graph is up for everyone to see. you'll notice that price increases really ramped up after 2013, the year abbvie spun off and the year you became ceo. abbvie has raised the price of humira 14 times in just eight years. and those price increases were not small. in just the ten months between march 2015 and january 2016, abbvie increased the price of humira by a total of 30%. that's a year -- in about a year. today, the list price of a single syringe of humira is
$2,984, a 470% more than its price at launch. that means that a year's ply of humira now costs over -- get this number, $77,000. humira's net price or the list price minus all rebates, discounts and fees, have also increased over time. in fact, the net price increased by 110%, more than doubling between 2009 and 2018. dr. kessel balm, what does this drastic increase in net price say to you about the role, if
any, of rebates in driving up humira's price over time? >> it says to me that the drug price increases have increased both in a gross scale, in terms of list prices and in terms of net prices, that rebates, while they might have increased over that time, definitely have not increased enough to offset the substantial price increases that abbvie has been allowed to get away with. >> thank you. the data is clear, the price increases of humira have had costs over -- to our health system with billions of dollars and are unsustainable going forward.
i believe we need structural reforms like hr-3 if we're going bring any relief above the price increases i have offered in my questioning. i thank you and i yield back. >> thank you. the gentle lady yields back and i agree with her, the gentleman from georgia, is recognized for five minutes. >> we saw one of the greatest public/private partnerships in the history of our country and it was led by president trump's administration despite the villainization of operation warp speed by democrats, the federal government and private companies invested hundreds of millions of dollars to develop and manufacture covid-19 vaccines and candidates thereof not knowing whether or not those attempts would be approved. the result was that first vaccine was approved in less than 12 months from the
discovery of covid-19 and three vaccines were ultimately approved with others still waiting in line. and many are now actually praising operation warp speed and frankly they're incorrectly giving the biden administration accolades for the brevity of the program when in fact when this administration is not responsible for spearheading this whatsoever. the subcommittee coronavirus exhibited skepticism of operation warp speed. in fact, the democratic member who chairs that subcommittee sent a letter to alex azar regarding operation warp speed and maded this quote -- the development of a transparency of coronavirus vaccine, especially on an accelerated time line
could lead to the growth of anti-vaccination sentiment, end quote. this type of rhetoric, frankly, nearly -- certainly could have -- and i think it did. it undermined one of the greatest achievements, medically, in our country's history. fortunately the trump administration did not bow to that kind of outrageous posturing by the democrats but, once again, our country demonstrated how incredible our people are as our greatest minds literally came together at one of the darkest times in recent history, but now the united states may again not -- now i should -- let me put this way. now, we might never again be a leader in pharmaceutical innovation like we were with operation warp speed if the biden administration continues to pander to some of its most
progressive members and like you did in endorsing an intellectual property waiver to the world trade organization. listen to that. he supported and endorsed an intellectual property waiver. that's dangerous. that's thinking that -- is incomprehensible to me. waiving intellectual property for covid vaccines or any other type of medicine will make the united states and the world more reliant on countries like china and india for pharmaceuticals and that's frightening when you look at and consider that their vaccines right now for covid are far less effective than are ours. frankly, it puts the future of drugs and vaccines that were created under a program like operation warp speed at
tremendous risk. then you have countries like south africa and india, they would like a resolution that would force pharmaceutical companies to share their covid vaccines and therapy ip with developing countries so they fall right in line with this type waiver endorsement. look, this is supported not only by our current administration, but it is supported by other low-income countries and progressive groups and more than 100 congressional democrats right here serving today. why do these countries want to end patent protection? that question has to be answered. well, they say they want to expand access to vaccines, but access for lower income countries is already available. there was an article in the "wall street journal" in april
where merck announced such a thing. fortunately we have european countries and friends who are smart enough to realize the importance of intellectual property. in fact germany chancellor angela merkel rejected this idea of waiving covid vaccine patents because she said that in the first place, it would not make more vaccines available, and it would weaken innovation in the future, and so madam chair, it is very important that we protect those who are innovative inventors of medications, certainly those who abuse the rights that we should deal with, but we have to protect the ability for these to recoup. i yield back. >> the gentleman yields back, and the gentleman from tennessee mr. cooper is recognized for five minutes. madam chair, i pass at this time. >> the gentleman passes.
hank johnson is now recognized. hank johnson. >> thank you, madam chair, and i want to thank you for holding this very important committee meeting. and, mr. kesselheim, i would like to address the misconceptions of rebates are the cause of skyrocketing drug prices. can you briefly explain what a rebate is? >> sure. the system that we have in the u.s., the drug companies are free to set whatever price they want and the negotiating tool that the payers use in our system is negotiating, you know,
rebates that are provided as an exchange for placement of the drug on the formulary or different utilization management strategies being implemented or not and so those rebates reduce the price -- for different drugs by different amounts. >> okay. in testimony before the senate in march, you noted that rebates, quote, do not keep pace with list price increases, end quote. what does that mean to the everyday person who is just trying to afford their life-saving medication? >> sure. well, so, first of all, over the last decade, overall drug prices have increased by 160% at the list level and they've increased at a net level by 60%. so both of those are much greater than the price -- than the change in inflation over that same period of time.
but what that generally means to the individual person is that a lot of people are pay pg out-of-pocket costs that they are based on the list prices that they experience and that can mean a much higher out-of-pocket costs for individual patients, increased net prices, though, also mean increased premiums that people pay for insurance overall because those prices are reflected as well in the premiums that pay as well as the individual out-of-pocket costs. >> okay, so i want to ask you about net price, the amount a drug company collects after subtracting the rebates and discounts. if a drug's list price increases and if that -- those increases had in fact outpaced rebates, would you expect the net price of a drug to also increase over time? yes or no. >> yes. >> thank you. mr. gonzalez, i would like to turn to you. your company provided data on the average net price of humira
between 2009 and 2018. i would like to display a graph created using this data. and this data, this graph shows the annual net price for a weekly dose of humira. can we have that exhibit, please? >> i guess we're having some technical difficulties. >> it is up, and we can all see the humira annual net price. >> we can all see the humira annual net price bi-weekly dosing. >> okay. mr. gonzalez, as you can see the net price of humira increased every single year between 2009
and 2018, in fact, the net price of humira increased by 110%. it increased even more by 151%. dr. kesselheim, what do these trends depict on this graph, or what do these trends depicted on this graph tell us about the rebates abbvie was providing to the pbms during this time. >> those rebates -- although they may have been increasing the list prices, the increases were far beyond -- were increasing at a rate far beyond these list increases. the net price is overall increasing. >> mr. gonzalez, the committee also received rebate data for your cancer drug imbruvica. in the medicare and commercial channels, the rebates that you gave to pbms and insurance plans
averaged between 4 and 11%, in contrast, you've raised the price of imbruvica by 82% since it came to market. the data is clear, pbms are not the primary driver of the dramatic price increases of abbvie drugs. abbvie is the primary driver of dramatic price increases. would you agree with that, dr. kesselheim? >> yes, i would agree with that. drug prices are set by the pharmaceutical manufacturer and, pbms and other insurers use rebates as a negotiating tool but drug prices are generally set by the manufacturer. >> so we should not allow pharmaceutical companies to distract us with the argument that pbms are responsible for the explosive increases in drug
price, in drug prices? it is actually the pharmaceutical industry, itself? >> the gentleman's time has expired. the gentleman's time has expired including mr. grossman. >> thank you, i'm going to start off with mr. gonzalez. i'm going to ask you a little bit about insulin and biosimilars. i have a bill that would cause a -- would transition to a bla classification, require the fda to regulate newly approved biologic products as biosimilars rather than brand name biologics which would get more of these products to market and presumably save people a lot of
money, if they need insulin. there are rumors that your company would be opposed to that sort of thing. could you comment on that? >> congressman, we're not in the insulin business. i would tell you it's not a market that i know a lot about. so i don't really have a point of view on it. >> okay, i'll ask you. do you have an idea why it seems to be difficult to getting biosimilars to market for some competition in the insulin arena? >> i think that -- i don't know the specifics of your bill, so i want to be careful how i answer this. if we're worried about getting biosimilars to market, i think we want to think -- and i detail this in my testimony -- a bit more about the relationship between rebates and market entry for buy logic products and the idea that we might think of those -- the rules about rebating need to be different. and this is primarily related to the fact that it's very hard for a new entrant to compete for the
existing stock of patients that are medically stable on their product. given that and given the way that exclusivity works, it might be harder for them to come in and compete their way on. on to the formulary, and i think that contracts, rebate contracts for biologics and they say they can't be on the same tier of the formulary as us, should be looking at antitrust authorities the as a way to increase entry. >> can you comment on getting them to market to lower the price of insulin. >> it's important to get biosimilars onto the market. what we really need for insulin is competition from more manufacturers and manufacturers -- >> i don't mean to cut you off. can you tell me why we don't do it? why do you believe we don't do it if it seems like an obvious thing?
>> well, actually until recently, insulin was regulated as a small molecule product, and although the fda has switched that over now in the last year or so, and now you can actually get insulin on to the market through an abbreviated bla. hopefully we will see insulin, biosimilars on the markets and hopefully some of them will be interchangeable so we can get competition to lower the prices of insulin biologic products. unfortunately, to this point, there have been problems with, with sort of getting -- with there's been litigation over insulin patents and a lot of patents have been issued on insulin pens and other peripheral aspects of the insulin product which has made it challenging for other potential biosimilars to get on
the market and that required litigation, and now at least we have a regulatory pathway to make it happen and we will see it soon, but the fact that we have not seen it until now is a major, major flaw. >> and i will ask you, why do you think that is? >> i think it is, again, a multi factorial reason. first of all, a lot of the insulin manufacturers have obtained patents on peripheral aspects of the products, even though insulin itself has not changed much in the last couple of decade, there are patents on the pens and the delivery devices that have blocked entry of new products and led to litigation is one aspect of it. >> okay. we'll ask one other question, a general question. it does alarm me that people in other countries pay so much less for drugs than this country. just flat-out, that should be wrong. could you give me a quick summary as to how you feel we can get around that problem?
i have a lot of sympathy with hr-3, it's an extreme bill. it seems ridiculous on its face that americans have to pay so much more for drugs than other countries. can you kind of respond? >> i agree, also. i find as an american citizen, some combination of annoying and offensive that we pay so much for drugs and european countries don't. i think that the question is why the european price is the correct price that we should be thinking about. they are choosing to free ride on the innovation caused by american profits. i think attempting to adopt european prices in the united states would be an abrogation of the responsibility of lawmakers. i certainly don't think that i would like us to see us adopt the policies of paris, london and berlin in the united states. i think we also have to be honest that if we want to
negotiate prices in that way, we've got to be willing to say no to both existing and future innovation. i want to be clear, i'm not saying, we should have no conversation about reducing prices -- >> the gentleman's time has >> thank you. the gentleman from maryland, mr. raskin, is now recognized for five minutes. mr. raskin. >> thank you. congress passed the drug act in 1983 to promote the development of treatments for rare diseases which were defined as conditions that affect 200,000 people or fewer than that. and congress understood that certain diseases could effect a population so small in the country that big pharma would not see a financial incentive to invest in the research for developing therapies and cures for them. it provided an incentive for companies to get into this research by granting seven additional years of market
exclusivity for drugs that have received the orphan designation. dr. kesselheim, is humira the type of drug that congress was envisioning when it passed the act? >> no. humira is a blockbuster product that makes tens of billions of dollars a year and is extremely profitable. the orphan drug act was designed to provide an incentive for companies to take up unprofitable products for extremely small patient populations. >> in fact, it's the best-selling drug in the world. mr. gonzalez, humira is approved to treat a painful skin condition, hs, your company has obtained a drug designation to use humira as a treatment for that. >> that is correct. >> would you have researched humira as a treatment for hs if it were not for the orphan drug act?
>> certainly the orphan designation, we qualified for it, and normally there's a faster regulatory path if you -- >> let me just short circuit to get to the right answer here. according to an internal memo from your company, from october 2008 obtained by the committee, you determined that the hs patient market would be profitable even without orphan drug act incentives, isn't that right? >> that is correct. >> yeah. so despite internal evaluations and expanding into the market would already prove profitable, corporate executives still pursue the additional market exclusivity through the orphan drug designation. mr. gonzalez, your company applied for and received two separate drug approvals for hs, one for moderate to severe and another for patients 12 years
and older. did you apply for both of these orphan approvals at the same time? >> i don't know the answer to that. >> well, as i understand it, no, you didn't. the first of these applications was approved in september 2015. the second approved in october of 2018. dr. kesselheim, why might abbvie have delayed seeking the approval to treat hs in pediatric patients? >> what this seems like a common practice in the pharmaceutical industry called salami slicing, where they try to get as many different of these additional exclusivesivity protections as possible. >> they enjoyed a ten-year period of exclusivetivity and by spacing them out this way, they got three years longer under the act. due to the three-year delay. pediatric patients were denied access to treatment due to insurance companies being less likely to reimburse the drug
without formal approval. so the company claims the commitment to bringing the best science and therapies to patients, but here we have a clear case in which they were actively choosing to delay patients access to treatments and to block competitors simply for the sake of increasing their profits. congress must act immediately to put a stop to these anticompetitive behaviors, including abuses of the orphan drug act. do you agree with that, mr. kesselheim? >> i do. >> is this a question of one or two bad apple companies or are these structural problems that we're seeing throughout the sector? >> as i said, i think the behavior and tactics and
strategies that you're seeing in the humira and imbruvica cases around orphan drug act, those are common practices and we've heard about them with respect to the orphan drug act and obtaining the oregon fin drug act for drugs that don't deserve it. one of the treatments for the pandemic got protection at the beginning of the pandemic situation last year. we see this all across the industry and i think it's time to reconsider the -- trying to make the act apply to the drugs that it was originally intended to. >> thank you very much. we need structural change here and i yield back to you. >> thank you. the gentleman from ohio is recognized for five minutes. >> thank you, madam chair. first of all, i want to mention, i have a bipartisan bill cosponsored with the representative from new york,
hr-4629 which is the biosimilars act. it would help amend -- it would require hhs to evaluate medicare advantage plan based on whether biosimilars are available to medicare enrollees. so i just wanted to bring that to your attention. the other side of the aisle is talking about hr-3 that needs to be passed. one of my concerns i have is, is how they price the drugs and if they didn't like what the drug companies priced the drugs, there would be severe penalties. do you think hr-3 would stifle innovation in research and development in this country if it were to pass? >> i think given the projections of what we see that result from hr-3 which is the intended goal of the legislation, the evidence is clear we would see reduced investments in innovation and
clinical trials by firms and that's something we saw the reverse off when we founded medicare part “d” and we saw an increase in innovation and research activities. >> mr. gonzalez, would you concur that hr-3 -- let me say, madam chair, last congress, former chairman from oregon introduced hr-19 that was the lower cost act. i would like -- i think it's going to be reduced again. i think we need to take a serious look at that. on hr-3, do you think it would stifle innovation and research and development in this country? >> i think if you depress forward revenues, it will depress the ability to be able to do innovation.
i think the cvo report that recently came out reinforced that point. >> also, you talk about 4 out of 10 at your company subsidies or makes drugs available free to patients that can't afford them, is that in this country or overall? >> that's 4 out of 10 in the medicare part “d” plan. >> okay. so -- okay, so what's happening in -- say, in europe, in the eu, is there -- the prices are lower, but is there subsidies not going on? what's happening in the foreign countries, then? >> we donate some product. it's relatively limited in socialized medicine systems. we donate -- >> i'm going to stop you right there. is it safe to assume that a lot of our pricing is quite -- we're paying the whole cost for r&d and the rest of the world isn't? >> that is absolutely true. >> i'm going to yield my two minutes to you, mr. gonzalez, to answer any questions that maybe you didn't have a chance to
answer from previous questions. i yield my time to you. go ahead. >> i think i would like to highlight a couple of the points that were made earlier with some specific information. there was a lot of discussion about what impact would the rebates really have on list price and net price. i'll use humira as an example because it's the one that i think keeps coming up here. if i look at humira from 2017 and 2020, the gross price went up 7.9%. the net in the u.s. went up 2.6%. the difference between that was the increase in the running back. managed care and pbms aggressively negotiate for
increased rebates. those rebates are returned to the government in the form of lower costs or lower premiums back to the patient, the insurance premiums. i saw a report recently that said 99.6% of the rebate is returned to the government. so it's a different way of getting a discount. when you negotiate for a position as a company like ours, you're obviously trying to get that formulary position, you're negotiating what rebate you have to give in order to be able to get that, you're trying to
capture a little bit of net, positive impact, to offset inflationary costs and increases in r&d and the other statistic that i will give the committee which i think is relevant, if you look at abbvie since 2013 when we were formed, our net price impact was about 0.3% on a compounded basis or roughly $62 million a year in net price. to give you a flavor for where does that go, we've increased r&d on average $652 million per year. so the short answer is, yes, we invest more than that in increases in r&d. >> thank you, i yield back. >> thank you. the gentleman from virginia is now recognized for five minutes. >> i thank the chairwoman and thank you for this hearing. mr. gonzalez, there are six companies with fda approval to sell bio similar versions of humira, is that correct? >> i believe so. >> are there any of those biosimilars decides yours on the market here in the united states currently? >> congressman, we're not bio similar, but i don't believe any
of -- >> right. none. that's a little surprising because in your own internal documents obtained by the committee, your company anticipated lower price biosimilars to enter the u.s. market no later than 2017 four years ago as is demonstrated in page 9, exhibit 14 in your materials. according to the slide, abbvie expected 3 to 5 bio similar competitors by 2017. the bottom of the slide identifies a few of those competitors by name. the bio similar received fda approval in 2016, five years ago. rather than allowing the bio similar to enter the market, however, abbvie sued them for patent infringement. on september 28th, 2017, abbvie entered into a settlement. mr. gonzalez, abbvie's own assessment of the strength of its patent portfolio determined it could only prevent bio similar entry until 2017 rather than allowing amgen's biosimilar into the market, abbvie sued amgen for patent infringement. in september 2008, they entered into a settlement agreement in
which amgen agreed not to enter the pharmaceutical market until 2023. the patent said they could only hold off amgen until 2017. so why would amgen agree to wait until 2023? >> i don't agree with the point of view. -- that our patent assessment said it would end in 2017. in 2014 the estimate was 2017. we updated that as we continued to move forward. obviously our patent portfolio played an important role in that. >> thank you, mr. gonzalez, i have limited time. and reminding you that you're under oath. was there any discussion of transferring any item of value, monetary or otherwise, to amgen in exchange for staying off the market through 2023? >> there was none and they paid us royalties for our patent when they come to market. >> but you had other settlement
agreements with other competitors. abbvie now entered into a total of nine agreements with biosimilar manufacturers to stay off the market until 2023, six years after the entry date abbvie projected, although you call that an internal planning document. let me ask you again, during any of these settlement agreements, was there any discussion of abbvie transferring any item of value, including monetary value, to competitors in exchange of staying off the u.s. market? >> there does not. all of those competitors agreed to pay royalties to access that patent portfolio. >> during that same period, however, six biosimilars entered the european market in 2018 when reduced the price of humira in europe by as much as 80%. why would the european market be so radically different with respect to reported patent infringement and royalty payments compared to that of the
united states where there is only you? >> because they're in different patent portfolios around the world. the u.s. market has a set of patents that the u.s. patents issues, and in the european system, there are different patents. >> according to your own internal projections, the u.s. market would have saved $19 billion, and instead the u.s. patients will not have access to lower-priced biosimilars until 2023. why would you account for the 80% difference in the price of humira between europe and the united states, other than lack
of competition? by the way, unlike what ms. fox suggested, it's about competition in the market. >> we wanted to recoup our investment. the u.s. patent system is designed to give you time to recover that investment. important thing to remember is, like many industries but certainly in this industry, the products that are on the market today pay for the products of the future. we invest roughly $7 billion a year in research and development. it is the humiras and these other products -- >> the gentleman's time has expired. please wrap up. thank you. >> may i add something to this conversation, please? >> with the indulgence of the chair. >> yes, absolutely. >> yeah, i think it's important to recognize, i mean, mr. gonzalez talks about a patent document being in 2014. by our findings, a number of patents were filed after 2014, so obviously the planning was to try to prevent the competition from coming in in 2017. it's also worth noting that a number of the eu patents were actually revoked or withdrawn because they weren't up to strength in order to get a
patent in europe. so despite what mr. gonzalez is saying about the u.s. patent getting a time of exclusivity, the patent was over exclusivity and you can keep filing patents over a drug's life. that is why we have settlement agreements, and by some litigations, some 75 patents were thrown at investors and they couldn't litigate through it. it just wasn't possible. >> i thank you for your consideration. i yield back. >> the gentleman yields back. the gentleman from louisiana, mr. higgins, is now recognized for five minutes. mr. higgins. >> thank you, madam chair. let me jump into hr-3 and get it out of the way. my opinion is massive federal overreach. professor garthwaite, regarding federal ability and access to
new treatments and cures, as someone who looks at this from the medical and business perspective in your work at northwestern, what concerns do you see in government overreach without private sector consideration or input as it impacts pharmaceutical prices in america? >> i worry that using the power of government to set prices and push them down, and we should be clear that hr-3 often described as a negotiation is not a negotiation. this is a pricing of drugs, and we should call it what it is and debate the validity of that. i worry it's going to decrease innovation. i worry about people getting access to drugs today and in the future. i think a lot of the conversation we are seeing today in the hearing and about drugs is about the cost sharing that insurance is putting on people much more than it is just about
the price of the drug. in particular, medicare part d which has extremely onerous cost sharing on patients. >> agreed. agreed. and thank you for your clarification. in the interests of time, i'm going to move on. mr. gonzalez, i find myself very much aligned with my colleagues across the aisle, which i'm hoping that my friends will mark the calendar. you've been under tremendous pressure today, and, sir, it's about to get worse. how can you defend american prices of pharmaceuticals overseas versus prices on drugs in the nation that you love? you enjoy the protections and the benefits of america. you benefit from the tax cuts and jobs that i worked very hard on and that my party pushed
through. but your answers to the chair were evasive at best and appeared to be obviously written by attorneys. please just explain to america, how the hell can you explain the prices overseas of the drugs you manufacture in america, develop in america, that are so much higher for american citizens and patients than they are overseas? as briefly as you can. >> congressman, it's an excellent point. the short answer is outside the united states, they have socialized health care systems. >> let's talk about europe. 30 years ago europe was a center of the global pharmaceutical industry. in 1986, europe led the united states on pharmaceutical research and development by 24%. after the imposition of socialist health care policies, they fell behind.
by 2015, they were lagging in the united states about 40%. you're right, socialist policies don't work. but you're an american company making american money and your market is global. american citizens should benefit from your love and commitment to the country wherein you live ask -- and work in, sir. i'm going to move on because i'm going to give you the opportunity to explain the patent modifications. the gentleman referred to them as trivial modifications in your company. you've been accused of threatening patent litigation. the claim basically is that your patent portfolio and a threat of patent litigation to seek favorable settlements with biosimilar manufacturers to delay their entry into the market. explain to america how you can prove the legitimacy of your patents, please.
>> our patents go through a rigorous process at the u.s. patent office that looks at prior art, obviousness. the patent office narrows claims to make sure they're not really broad. and to the point the other gentleman raised a few moments ago, what i would tell you, if you thought they were frivolous patents. we do patents all the time. >> they're frivolous. making minute changes to your
product and to expand your protection periods, we don't appreciate -- look, i'm no enemy of big business. you support your freedoms. you make new pharmaceuticals, most of which never come to market. one in ten come to market. so you have the right to earn an honest profit, but it's the question of whether it's an honest profit, and madam chair, my time has expired, but bless you for holding these continued hearings. >> thank you, thank you. the gentleman yield back. mr. rocona, you're recognized for five minutes. >> thank you, madam chair. i appreciate mr. higgins' questions in a bipartisan way and want to pick up there. mr. gonzalez, can you tell us who invented the fully human anticlonal antibodies? >> you know what he had to say about humira? he said, i must not be a very good businessperson because i didn't make the billions. all the other people made the billions. you stand there saying you're
for all this innovation, you believe in innovation, and you don't even know who the nobel laureate was that invented the drug you're profiting from. isn't there some disconnect there? >> what we focus our attention on is trying to create new innovation that helps patients. >> how can you say you create new innovation when you don't even know the nobel laureate who came up with the innovation? does that say you're just doing business? that's be honest and not say you're doing an innovation when you don't know the person who made the drug you're profiting on. let me ask you this. the patent that expired in 2016, obviously you talked about extensive patent line and you seem to understand what's needed. can you explain two concepts and how you understand them in terms of a new patent, and that is of
novelty and nonobvious? what does it mean for something to be novel, what does it mean to be nonobvious, as you understand it? >> the patent office looks at the invention you have, and they ask the question, someone skilled in the art, would they have used this? >> what about novelty? >> novelty i can't speak in such detail. >> common sense, what would you think is novel? >> novel theory, right, novel approach. >> you can't define the term with a term but basically something new, something people haven't thought of. something new sgchlt people didn't think of. the new patent, you filed it. congressman higgins feels it's frivolous, though i'm not going to characterize it.
one of the ideas was that you had humira, and on your own marketing material you said, here's the dose you should prescribe it at, and then you filed a patent to say the dose that's on our marketing material that we should have a patent on doctors prescribing that dose. but by your own definition, what is non-obvious. you said if a skilled person in the arts and craft knows it, then it's obviously it doesn't qualify as non-obvious. how would say between the three, this is your opportunity to explain to the country how we want to get a patent of what we're putting on the market material. >> what are you thinking is the case? you wouldn't say let's get a
patent on brochures and that type of thing. you thought, what a great idea. let's get the patent. i just want to understand the thinking. >> we pack elevation that we think is meaningful and -- >> what did you think was so meaningful and administrative that a dose a doctor is already prescribing, anyway, what would be the innovation. >> well, i don't know that i would agree with the premise of what you said. but then you sit here blaming that innovation. you don't even know who the person is who invented your drug, and you're unable to explain what's so novel about where you're getting that. >> the gentleman's time is inspired.
questioning -- >> it needs a molecule of its type to be able to go through that? >> did you have to go through an fda remodeling of doing trials to get there. >> hundreds of trials, including dosing trials. i heard it took time, but did it take money? >> $16,000. and went through the idea of this. >> did you have to purchase
anything from the, quote, innovator? so you were trying to say earlier that the federal government was prohibited negotiating the price. i'd like to disagree with that, but what does take place in neglect a price that you've already put $16,000? >> actually, the federal government on average gets a discount on anything at a
certain price. did they set the discount or did you? >> it is negotiated aggressively by the plans on behalf of the federal government. >> so it was negotiated and you said, okay, we'll get you a 64% reduction. >> on average. >> on average. okay. if you had not done this, what would be the medical things that might be -- i'd like to call it a cost benefit analysis, but what would the other answer in
the marketplace be for people who would use this product if you were not there, and what is that general cost and outcome? >> there is a class of drugs that treats these types of diseases so there are some alternatives available. one of the important things to remember in this class is patients are required through their formulary to fail lower class therapies before they get access to these therapies.
>> so, really, you are -- whoever the -- the way the thing works is they start one, they go to the next, they go to the next. presumably it would work for a certain percent. you get down to the percent that it doesn't work so well. you're the last chance. you're the alternative when there is no b option. you become the "a" option. >> when alternative lower class drugs have failed, my therapy is the one those patients end up on. >> we saw in the very beginning, the chairwoman very thoughtfully
put several people up who indicated they did need products that seemingly made their life better. were they in reference to you? >> those patients were referring to our products. one of the things we are very committed to at abbvie is ensuring there is a safety net in place to cover all patients who need our drug whether they can afford it or not. and we have a very extensive safety net in place for uninsured, for medicare part d patients, for underinsured patients. and i would say, as an example, an uninsured patient, we approve 99% of the applications we get, and an uninsured patient, you can get humira for free up to an income of $388,000. so it's quite generous. >> i appreciate your time.
madam chairwoman, i yield back my time. >> congressman davis is recognized for five minutes. >> thank you, chairwoman, and thank you for holding this very important hearing. mr. gonzalez, let me appreciate the fact that abbvie has such a strong presence in the state of illinois where i live and where i come from. i also want to appreciate the tremendous scientific achievement as well as the
efforts toward diversification and the work that you've done to assist in making sure that we're able to fight the coronavirus. but let me ask, a moment ago i heard you talk about possibility of negotiating discounts. of course, i understand that the pharmacy benefit manages entities that negotiate the price of medication for insurance companies. did i understand you to suggest that negotiation could be beneficial to insurance companies in terms of the prices that they would ultimately pay? >> the way the system works is we compete for a formula position, formulary position.
as part of that negotiation, we negotiate with the managed care organization, or the pbm, what discount or rebate we will provide to get on that formulary. so yes, there is a negotiation that occurs. >> would it be advantageous to the beneficiaries to whom payments are made by governmental entities if negotiations took place for those groups of individuals? >> i think that occurs to a great extent already, if i understand the question correctly. >> it's my understanding that the government, the united states government, cms, they were pretty much prohibited from negotiating drug prices? that's been my understanding. but let me just ask you, i understand that abbvie applied for four more patents with countries outside the united states than inside or with the patent office in the u.s.
is there a reason for that differential? >> there are countries all around the world that you can apply for patents. they have different approaches. i would say the u.s. is the most rigorous and thorough area of patents and tends to be the area where much of the innovation is originally created. >> dr. garthwaite, the case has been made to me that we're paying way too much for pharmaceutical drugs. i say we. that means me, lots of other people, you.
but we're also paying more than our counterparts in other countries, and not to suggest that any other country has reached a level of perfection. why do you think we're paying so much more than they are? >> i think they're paying less because we're paying more. a lot of european countries have more freedom to not have to think about how it influences their country. pharmaceutical companies are thinking about how much they can earn in england, but they think very carefully about how much they can earn in the united states. one of the downsides of being the largest global economy is we have an outside presence -- or
in profit to the sector. or they have different patent rules, and we should think about how we want them reforming our patent roles in the united states. there is a role for government to do that. patents, after all, are a grant from the government to try to balance drug innovation. we should include reforms and the incentives of the patent examiner themselves. we should be focusing on the patent office sometimes more than the private firms. >> may i add a comment to this point? >> very briefly. >> i would say working with different countries on the patent systems, i would disagree that the u.s. is the most rigorous. i think it's the easiest system to getting a patent.
in fact, by some studies, one can never get a patent reject, so you can. to mr. garthwaite, i kind of disagree that the u.s. is hard to get a patent. >> the gentleman in pennsylvania is recognized for five minutes. >> the u.s. is a global leader for prescriptions. professor garthwaite, american companies have greatly contributed to the $182 million invested globally by the private industry into pharmaceutical development initiatives. can you explain the relationship between investment and incentives in the pharmaceutical space. >> to do. later twroept main. so firmds are acutely aware of the potential market size, but
that's. -- we have novel products coming out of hong kong and shanghai. but all of it is driven by the same incentive, which is getting that by assessment, but most of that product is done here in the united states. >> how would price controls affect the price and availability of prescription drugs. >> i think the goal of hr-3, and if you look at the models, it would greatly reduce prices. a result of that would be a reduction in innovation. we should have that debate as to what we think is going to be the acceptable hours of innovation. i would ask the company to not look just at the price of the
it could be what we want to do. it just gets lost in the question here, though. these are secondary packets. they've been much aligned in this testimony. i am happy to see that a drug called humira, that we have seen the indication. i don't think he should go to some that's a naive view of modern drug development, but we should have a rigorous review at the patent trademark office as to whether things truly represent obvious and
lower cost/more cures act to get them to market fast, improve competition and make sure there is access to affordable medicine. >> the gentlewoman from florida, debbie wasserman schultz, is recognized for five minutes. >> the company's shared decision making and profits does commercialization include setting prices in the u.s.? >> it does, yes. >> thank you. as a breast cancer survivor, the exceptionally high cost of cancer drugs is an issue where the policy is very personal for me. i want to put on the screen a graph showing how the list price of the drug has changed over time. it was priced at $91 per tablet.
abbvie took a 7% increase in each of the last two years as millions of americans were struggling with the coronavirus pandemic. the current price is 165 per tablet. i'd like your help dispelling two myths that pharmaceutical companies continually perpetuate about drug pricing. first, they insist that no one actually pays the so-called list price of a drug. is that true? >> that is not true. we just published an article led by my colleague dr. rome showing that when prices go up patients that have high deductibles or
other kinds of limited insurance can feel substantial increases in prices. >> isn't it true that unemployed patients pay the list price, patients' out-of-pocket costs are tied to the list price. the whole notion of cost shifting is that when you go to the hospital and you are a patient that doesn't have coverage, you are charged the full list price. that cost shifting occurred because those uninsured patients are unable to pay the list price. then the cost goes up for all of us. and that would include the cost of prescription drugs, am i correct? >> yes. >> drug companies claim they are forced to raise prices because pharmacy benefit managers apply larger and larger rebates.
the price of the drug after subtracting all rebates, discounts and fees rose by approximately 60%. what does that say about whether rebates are driving price increases? >> price increases are being set by abbvie itself. we don't allow the government to negotiate drug prices based on their value. if a drug company is trying to meet expectations of shareholders about revenues, then it's going to do what it can by raising prices on currently available drugs as it can. >> thank you. they bear responsibility for current prices of cancer drug affordability.
42% of cancer patients deplete their entire net worth. i've talked to countless of them. within the first two years of treatment, in part due to high drug prices. we can have both innovative treatments and affordable drug prices. congress should act now to rein in the greed of the pharmaceutical companies. if you are facing a life or death condition, you should not be faced to bankrupt yourself in order to stay alive. >> the gentleman from arizona mr. biggs is recognized for 5 minutes. >> i thank you, chair, and i thank the witnesses for being
here today. >> what we see is that many folks have observed this around the world, but other nations are free riding on american consumers particularly in the pharmaceutical area. if we jump from the frying pan to the fire if we had european type price controls that stifled innovation by pharmaceutical companies. sure we'd enjoy lower prices in the short run but we'd have fewer life saving drugs in the future. close quote. this past year we've seen the remarkable innovative ability of american companies. operation warp speed allowed people to receive three covid-19 vaccines in less than a year. this achievement could not have been accomplished without world leading american companies. what can we do to replicate the success of operation warp speed for other cures? >> we should not over generalize
the success of operation warp speed. we have a specific product we want to develop and we're going to allocate massive government funds to do that. i think if we're going to give people public dollars all the way up through clinical trials like we did with moderna, we should probably think more about some type of pricing clause. i would really caution against the idea that we would generalize from the attempt to address one specific problem to some type of abuse of government by trying to solve all drug development. the capital markets are really good at allocating the most specific success scientifically. most modern drug companies are using small firms to do their early research.
>> that's a great lesson to learn. i agree with everything you just said with regard to capital formation, et cetera. anything regarding the regulatory side of things that we should learn? >> one thing that's nice about the fda during this process is they've stood up for rigorous review. we need to believe in the products and the fda solves an important metric problem where they validate the success of these products. i know we can quibble about how long reviews took and people want them to be shorter. it's good to see the fda maintaining a place for regulatory review. >> mr. gonzalez, can you explain how price controls might prevent companies like abbvie from providing more life-saving medications?
>> i think with price controls or revenue pricing, you're going to drive down the amount of revenue going forward and that's going to reduce the investment you have in r&d. i think it's accurate in the way it described it. i think you would be trading off a short-term benefit for a long-term problem. >> and, so, mr. gonzalez, abbvie has been able to grow into one of the most successful drugs bringing in over $136 billion since it went to market in 2003. can you explain to us how the money has been invested at abbvie in the development of additional medications? >> absolutely. i mean, i think if you look at product like humira, the on-market products pay for our r&d of the future. we have invested $48 billion in
r& d since 2013. out of that investment, we've created a higher survival rates of blood cancers significantly and now we've created two immunology assets that have demonstrated superiority to humira. they're in the process of being launched in the marketplace. all of those things help patients tremendously. it is that on-market product revenue that pays for r&d going forward. the system can't work without that. >> thank you both. i appreciate the time. madam chair, i yield back. >> the chair now recognizes one of the authors of hr-3. the gentleman from vermont, mr. welch, is now recognized for five minutes. >> thank you, madam chair. mr. gonzalez, you have a business model, as does all of
pharma, that starts with patent protection provided by the federal government, is that correct? >> that is correct. >> that is supposed to be a limited time and you do everything in your power to extend it beyond the original grant. is that correct? >> we develop innovation, if we believe that innovation is worthy enough -- >> the answer to that is yes, right? you did a memo as executive vice president about ten years ago or less talking about product enhancements, and that included things like changing the size of the needle, correct? >> that is correct. >> and you do constant analysis internally within the company to anticipate competition that may result in lower prices or price competition, correct? >> we constantly look for ways that we can innovate a product
that we can protect and grow its position by making a better product for patients. >> what that means is extending patent protection and maintaining pricing power through the monopoly that pricing confers, is that correct? >> it can result in that, yes. >> when a biosimilar product was introduced in europe, the price of your product, humira, went down about 80%, is that correct? >> the average reduction in revenue is about 50%. 48, i believe, is the last number. >> so the point here is competition works, correct? >> that is correct. >> your executive pay is related and has been for a period of time to increasing revenues and hitting revenue targets. is that correct? >> we will set a plan for what we believe our revenue will be for the following year, and that
is one of the incentives, yes. >> and revenue is set at the amount you sell and the price at which you sell it, correct? >> it's affected by that and the costs that you obviously incur in the business, such as increases in r & d. >> let's just go through this. immediately when that incentive plan came into effect, there were three major price increases, about 30% in one year for humira. is that correct? that's according to documents you provided to this committee. >> if i look at abbvie's price from 2017 forward, our net price was negative. >> 2013 is when this went into effect. the records you provided to this committee indicate that the compensation of the top executives increased. by the way, your income last year, or your compensation was about $24 million? >> that is correct.
>> and between 2013 and 2020 it was $170 million? >> i would have to add it. >> well, it's a big number, and compensation for all the top executives was about, what, $480 million? is that correct? >> it would average about $60 million a year for the top five executives. >> the bottom line here is you had a system within abbvie where executive compensation was tied to hitting revenue targets, revenue targets were enhanced by increasing prices in sales, correct? >> congressman, i don't agree with that. if you want to talk about a time period of 2013 forward, a price for abbvie 2013 forward --
>> i'm going to run out of time. the i way you did that was reaching agreements with competitors that they didn't bring their product out, number two, shadow pricing with amgen with respect to their product enbrel, number three, patent tickets. filing for hundreds of patents here when you only did six in filing for hundreds of patents here when you only did six in europe, and so-called enhancements which were things that made virtually no difference to the patient other than that they had to pay more to get a smaller needle. so the business model here starts with the government providing a patent, the government providing payers through medicare and medicaid, and then what i can see, rampant abuse on the part of your company to essentially extend that monopoly pricing power and
abuse it at the expense of patients. it's got to end. it's got to end. i yield back. >> the gentleman yields back. the gentleman from georgia, mr. clyde, is now recognized for five minutes. mr. clyde. >> thank you, madam chairwoman, for holding this important hearing today. in the four-plus months that i've held office, one of the top issues to repeatedly arise in one of my meetings with the ninth judicial district is the high cost of prescription drugs, many of which are lifesaving medicines. this is an issue that many of us on the committee have the desire to address. i think patients should have more choices when it comes to accessing lifesaving medications. however, to achieve this goal we must be very wary for stifling innovation. it would be detrimental to lower costs. not only would the woes of hr-3 be felt by the big
manufacturers, but i believe they would be felt by the small businesses and start-ups as well. i'm extremely confident that would be the end result. because as a small businessman by trade, i fully understand how stifling it is to be strongarmed by federal bureaucrats. i'm determined to look for solutions that work, not only to bring convolutedness, but the price for patients. my first question is for mr. gonzalez. is abbvie engaged in any early stage partnerships with smaller biotech companies, and i'm not looking for names or anything like that of the companies, and if you are, can you please elaborate a bit on how government price setting like
what we see in hr-3, how government price setting might impact your investments in those companies and those partnerships, sir. >> well, we invest significantly in small biotech companies in partnership arrangements or other types of co-licensing arrangement. i think the fundamental issue with something like price controls is it would take the riskiest areas and it would make you much more hesitant to invest in those areas, but yet those are the areas that have the greatest opportunity for -- to improve society. areas like new treatments for alzheimer's or treatments for parkinson's disease or treatments -- better treatments for some of the solid tumors and cancer that we haven't made significant improvements. so you're going to take the risk in higher areas and you don't invest so much in there. i think that's what we have to
deal with if we were to implement that kind of approach. >> okay. thank you very much. i appreciate that. my next question is for mr. garthwaite. in your testimony you describe the importance of inefficient value-destroying policies. would you think they push aside covid-19 vaccines, and if yes, could you elaborate a little bit, please? >> i have really strong concerns about waiving ip and waiving ip where we believe the product has so much value that we need to access it to the world. i think we need to find ways to give vaccines to the rest of the world. and right now moderna and pfizer, their ability to sell this vaccine to the world, is in
line with the vaccine capacity. i worry about the next pandemic, and in particular, i worry about one that's going to require perhaps a small molecule treatment oz, if what will ultimately happen is whatever they create will be transferred to other parties. i really believe instead of waving or to bring back in the rest of the world either the transient vaccines we have in storage or continue to pay the high prices. coming from our page, it would be in our self-interest to pay for those vaccines. >> thank you for that response. i think it's dangerous that we would allow china to steal investments that these companies have made in rnr technologies and capability. but then to turn around and let them profit from it, too.
to add to what my good friend congressman hisis said, i have added my name to a list that discusses how waiving that keeps drugs from being delivered in a timely letter. i think focusing on the proprietary chain, we can take advantage of the proprietary products. ms. chairwoman, i yield back. >> congresswoman porter for five minutes. >> do you know what the standard was of taking 20 pills a day in 2013?
>> $130,000. >> we ever $90,266. what about today for those same three pills? >> i think it's 169,000. >> we have 181, but we can agree there was a significant increase. roughly, in the amount of eight years, abbvie more than doubled the price. mr. gonzalez, how much money did abbvie put directly into the research and development costs of imbruvica before it hit the market in 2014? >> we acquired imbruvica before then, so it would be the company we acquired. >> abbvie itself didn't make the
drug. you bought it, correct? >> we paid for it, yes. >> abbvie then doubled the price, presumably justified by its $2.4 billion investment in r&d. are there fewer side effects now for patients than there were in 2013? >> we developed significant indications -- >> are there fewer side effects, sir? >> no, it has the same side effect profile. >> mr. gonzalez, do people need less of this message, imbruvica, to treat lymphoma now? >> no. >> you bought it knowing it would be profitable. you hiked the price to pay for r&d, but you haven't made the drug any better even as you doubled the cost. i wrote an entire report on what is essentially the imbruvica story.
big pharma gobbles up small, innovative company. does nothing to improve the drug but jacks up the price. you told us you spent $2.54 billion for rmb, imbruvica. really, it was for all these innovations. you filed 160 patents for imbruvica to keep others off the market. how much did you pay in settlements between 2014 and 2018? >> let me correct one thing i think you just said. it is not true we did not invest in other development. we received approval of graft or host disease --
>> reclaiming my time. mr. gonzalez, how much did abbvie spend between 2013 and 2018? >> we don't have that number offhand. >> 1.6 billion in litigation settlements. what about marketing and advertising? how much does abbvie spend on that? >> marketing and advertising, we spend about 4.7. >> so about 1 billion. what was it between 2014 and 2018? >> it's probably about 3 billion a year. >> try 4 billion for size. how much did they sell stock buybacks in 2013 to 2018. >> if you looked at stop-buy banks and dividend. i would have to come back with a number.
you're spending all this money to make sure you make money rather than spending money to invest in, develop drugs and help patients with affordable life-saving drugs. you charge twice as much for an energy-approved doug, then you lie to those justice of fairy tale ring is that the farmer's and the fact that you're not honest about this, with patients, with policymakers, that you're feeding us lies. we must pay astronomical prices is lost. i yield back. >> the gentlelady's time is expired. the.
>> madam chairwoman, i want to thank you for holding this hearing which helps the american leader understand why that leadership position saved countless lives, speeding generic drugs to market and reduce out of pocket costs. while everyone can agree americans pay too much on certain prescription drug, democrats have been unwilling to work with partisan societies in
innovation, to work across the with both republicans and democrats willing to work across the aisle, and to do what is achievable. lowering the cost of some high-priced drugs while maintaining choice for americans and not harming robust r&d funding which has spurred ground breaking innovation in vaccines and therapies for covid-19. just like our national defense, the only safe place is first place when it comes to our nation's health care. especially as it pertains to the creation of vaccines and medical therapies. and this has never been truer than during this pandemic. in 2018 it's estimated that pharmaceutical companies spent estimated 228. prices have increased just as it had for 259th as a whole. across all industries are less for the pharmaceutical.
which in turn led to u.s. worldwide leadership and the development of innovative life treatment, including three covid-19 vaccines, with more on the way. according to the economic advisers report, under the democratic lifesaving methods. unlike developing nations in europe such as the u.k. where citizens had access to only 60% of new medicines, this isn't by accident. while i believe there is more that can and must be done in our effort to lower drug prices, i am confident that my constituents back home in kansas are not interested in giving up life-saving drugs especially for cancer and hepatitis c. i urge congress to focus on
i can't think of a time when the value of public/private partnerships has been more evident to the general public. even dr. fauci said he kaeblt think of a vaccine, even whun the government provided resources, that was brought to the goal line without private industry. jet some of the proposals discussed today which changed the parameters of current ip protections in the u.s. is it wise to send i object no vaters the clear message that the larger the health crisis, the less we'll protect your ip? >> no, it's not. it's very important to our industry. >> i appreciate that very much. some of our industries believe congress should take over drug industries. can you speak to the drug innovations just more broadly? >> obviously we put a tremendous
amount of capital at risk, and that's built around the premise that you'll have the opportunity to recoup that investment, and reach further in r&d as time goes on. that's a further benefit and we have made tremendous progress in curing cancer, curing hiv, in covid-19s. that will damage this industry. >> thank you. i appreciate it, mr. davis. i yield back, mr. gentlewoman. >> the ranking member miss spear is recognized for five minutes. >> let me make note that our colleagues on the republican
side have talked about this phenomenon of getting three vaccines in less than a year. it is a phenomenon, but it has everything to do with the fact that the federal government negotiated the price of these drugs. let's not forget that in the course of this discussion. abbvie is my subject, but i also feel responsible for their practices and i want to make sure we continue to have innovation and medical advancement, but i also want to protect the consumers. humira has been on the market for 18 years but it's still under patent protection. first i'd like to put exhibit 19, a presentation you delivered to investors in october 2015. as you look there, it shows that the actual ingredient for humira expired in 2016.
did i read that right? >> i believe you did. >> as this slide shows, however, abbvie filed for scores of additional patents on hue measure a, 22 patents on treatment, 24 patents, up quote, created what this decide projects. i understand your obligation is to your shareholders and not to the consumers, mr. gonzalez, but tell me, how much did you pay in taxes last year? >> we paid about a billion dollars, or $6.4 billion since tax reform. >> so a billion dollars.
and your revenue was how much? >> taxable revenue over that same period. we had about $21 billion of taxable revenues over that period of time. >> so 21 billion for your patent situation, you have now 256 patents for. my question so mr. amin. you're the patent expert. did abbvie really need 256 separate and new patents? do they have 256 inventions. >> it's 256 but a little more than half.
look at the initial patent. that sets out the stress for the -- we're already highlighted and protected in the initial package that was expiring in 2016. so what we see is the system that the u.s. patent system encourages, and this is not just what every company does. >> so they don't need all these patents, but it's a great
strategy to keep too many at a time and just focus narrowly on patent abuse. >> i would raise the bar for real discoveries and treatment. they're already getting water for that. >> i guess what abbvie paid was 5% in taxes last year when most of us were paying 35%. i yield back. >> miss herrell is now recognized for five minutes. >> thank you for our hearing as
>> i didn't understand the question. >> would that have a direct impact on what consumers are paying for their prescription drugs? fwoerks is your question? >> would those have a direct impact on away we're paying for prescriptions? >> as i indicated, the government today does negotiate and you look at an example for hew meet ra, the average discount is 64%. >> so that does impact the consumers' prices? >> that's one of the challenges of the discussion today. the medicare part d system is relatively insensitive to the price of the drug. >> so wougd it be better or
worse for the consumer if there was less government involved in the price negotiations? >> it would be better for the medicare part d consumer in this case if we work together to be able to restructure the out of pocket costs. because lowering the price alone will not allow you to get to a point for these patient can afford their medicines. >> thank you. i justed to ask a question. 38 fewer cures would be developed in the next 20 years if hr 3 became law. how does hr-3 stifle innovation? >> so the modelling, it's bye-bye a long time, but you probably don't talking about positives then if it's that model. they are relating the fact that when you see this decrease in revenue and expectation, firms
like that are going to reduce investment in ra and d. and we have lots of evidence that suggest that effect. a big decrease in that could have a fundamental effect on innovation. they wanted to say that we have this ability to both cut cries and keep innovation at the same level. that's really more hope than science. i think evidence is clear we'll see a decrease in innovation. instead of promising to people we'll get the same, we should have an honest debate about how many drugs we're willing to give up if we're going to see prices go down. that would be a much more productive and honest talk. >> so do you feel under the trump administration headway was being made to lower prescription drug costs and help availability or accessibility?
>> i can't think of meaningful efforts that the trump administration put in place that would have done that. >> at the end of the day, with free markets, with collaboration, with both industry, government and consumers, we can find a way to maybe revisit the standard medicare and medicaid and push the price down to cob assumers? >> medicaid is not an issue. but medicare part d is an insurance program that's crying out for reform. it creates the incentive it raise prices and generate more rebates to lower premiums for healthy customers. it really takes advantage of the customers that require expensive metd indications. i strongly encourage congress to look at reforms in that sector. >> just very quickly. earier you were asked about the 30% increases in that 10-month
time period from march 19 to january 20. can you help us understand why this significant increase? >> over that specific timeframe, i can't specifically talk about that. but there's two drivers to this. as i said a moment ago, if i look at the overall impact of net price since 2013, it's very modest. if i look at shorter periods of time, just in the u.s. as an example, a net price since 2017 in the u.s. only was 1.8%. so price is not contributing significantly to the overall performance of the company. now many different factors drive the price. i would say increasing rebates plays. rebates have increased significantly over that period of time. >> thank you. i yield back.
>> the lady yields back. the gentleman from missouri is now recognized for five minutes. >> thank you, dam chair. as a nurse, i repeatedly saw the harms that outrageously high prescription drug price hs our patients. i saw our health care system prioritize profits over my patients. i saw drug manufacturers lined their pockets with cash while my pashlts suffered. we can't continue to let them get rich on life-saving medicines that people need to survive. we're talking about survival of humans. hew my ra is the top-selling drug in the united states and the world. in 2020, hew my ra's net revenues were roughly double that of the of the second highest selling drug in the united states.were roughly doub of the second highest selling drug in the united states. what share of the sales revenues comes from humerahumera?
>> about 40%. >> according to an article published earlier this year, it accounts for 60% of the sales. two-thirds of the revenue or $107 billion has come from the u.s. market alone even though humera is the top-selling drug in the world due in large part to the price increases. a study from 2017 found that in the u.s., humera is three times more expensive than the drug in germany and four times more, pensive than in switzerland. is there any difference between the brand drug here very us is in different countries? >> there's not a significant difference. they are manufactureed in
different kinds of facilities. a u.s. drug would be manufactured in an fda-regulated facility. there was an fda regulated. but the general is the same. >> so the difference is a matter of what facility manufactured it, so that changes the price of three or four times. >> i'm sorry. i didn't mean for you to conclude that. what causes the differences in price is essentially socialized health care systems mandate what price you're allowed to sell the drug at. and as a manufacturer, you only have two choices. you either accept that price or you deny the population of that country the benefits of your medicine. and that's an impossible choice. you imagine cancer drug not provided to a population of a country because you don't like the price. but that's the fundamental challenge with socialized
medicine systems. that does force the u.s. to pay far more of the innovation costs of our industry. that's a reality. >> so we're picking up the slack. you sell the same drug elsewhere for a fraction of the price, there's no reason that people should be forced to pay high prices. let me put up a graph on the screen. this graph shows the net revenue from 2003 to today. as the graph shows, each year a new record was set for revenue in the united states. the profits are staggering. we have someone who it would cost nearly a million dollars. it's not because the insurance plan.
it would have repeatedly gone bankrupt because of your predatory prices had he not been ensured. the same is true for the other block busting drug. i'd like to show another graph. since 2013, they have generated from more than one quarter of this amount came from sales in 2020 alone. during that period alabama visit raised the price nine times. has the drug improved nine times, yet you could yes or no that question.
will you commit to lowering the price of the drug? yes or no? >> no, i can't commit to that. if you'll allow me one more minute, if you're aligned and want to be part of the shugs to lower costs, out of pocket costs for patients, when i look at medicare part d, i'm using this as an example. to make it affordable to patients on medicare part d, it's 50 times more out of pocket cost on medicare than any other insurance vehicle. to make it affordable under the current structure, you would have to lower the price by 98%. 98% to make the out of of pocket affordable. what that tells you is the structure of out of pocket is not built for these kinds of
medicines. >> the jept the lady's tienl is expired. the gentleman from south carolina is now recognized for five minutes. >> thank you, madame chairwoman. if pharmaceutical companies are based on list price, at the patient's expense they are making more money. fpz insurance is supposed to help patient who is are buying drugs such as insulin. what common sense solutions should we as members of congress do to try to bring down this cost? >> i would encourage you to look at regulations around cost sharing that require that it's based more on the net or the post rebate price opposed to just the list price. i think you're right that when we ent up having individuals
purchase expensive medicines, it appears that part of the motivation of the plans is to generate high cost-sharing patients that they don't capture as profits themselves, but they use to lowerer premiums for the rest of the market. that's transferring resources from sick to healthy patients and unwinding some of the benefit of insurance and the idea of community rating that was very popular among policymakers and consumers when you don't pay more. we should look at things around not vs. cost sharing. you should also look at improving the flow of information between sponsors. the report on insulin pricing was very interesting to read through issues related to administrative fees and other non-rebate funds flowing. and i think it would be important to have more information about the flow of funds to negotiate an effective
set of prices, rebates and replacements. >> would you agree that to get the contracts that they have, getting the actual language to delve into it. would you agree? >> i'm concerned about that there are such strong requirements for sponsors if they want to look at the revenues they are generating. pz while there are concerns about confidentiality, regulation around who can be an auditor, how many contracts they can see and they should be reviewed in paper at the facility, these are all things congress could look into in the spirit of improving information. the market works best when information is common among the negotiating parties. >> i would like any solutions that you can get to help us to this, the price of drugs, particularly those that have been around for years that
haven't changed as far as improvements, we need to know and take action. i'm tired of just talking about it. to get another committee to talk about it, but anybody that has any kind of empathy needs some direct things that we can do. so anything you can do, i would appreciate it. mr. gonzales, it excludes certain drugs from the form lairs in favor of other drugs that maybe interior at best. what kind of actions like this have driven up drug prices in the market as a whole that you can cite? >> congressman, generally, speaking, my experience with pbms and form lairs is they try to design the plan in a way to be able to cover a broad set of patients. so humera is an example.
it's the average number of competitive products. that gives enough flexibility to able to alternate between different drugs to find the right drug for the patient. in some cases, maybe different delivery vehicles. so there's a broad set of products that are available. but as far as the form lairs from pricing, we need to see the contracts that are going by to make the companies abide by. would you agree? >> yes, i would agree with that. >> madame chairwoman, i yield back. >> the gentleman yields back. the gentlewoman from illinois is now recognized for five minutes. >> thank you, madame chair, one of the primary competitors is an
expensive brand name sold in a functional competitive market. you'd expect companies to price their products below their competitors to gain market share. so in the case of abbvie would be expected to compete and the result would be lower prices for humera. is that what we see in the pharmaceutical sector? >> definitely not. the pharmaceutical sector for brand name drugs it's to avoid a kpettive market. so we see particularly with brand name competition, there's not a substantial price lowering when new products hit the market in the u.s. >> i'd like to put a graph on
the screen which shows the pricing for a year of humera and elm bro from 2003 to 2021. the lines are so close together it's a little difficult to tell which is which. that's what shadow pricing looks like. almost two decades they consistently followed each other's price increases. in that time the price of humera has increased 470%. according to internal company documents obtained by the committee, the price increases were viewed as cover for its own price creases. you received an me a earth mail in 2012 of another company executive says it was a great weekend. this e-mail is exhibit 9 in your pack the. as i hope everyone can see.
did you view it as a positive development to raise the price of? just out of curiosity. >> just give me one moment to read it. >> i view this as someone sending me an e-mail that just alerted me to the price increase. and then saying have a great weekend. ien don't tie those two together. >> do you believe the price increases get abbvie the right it increase the price of humera? >> no, but one of the things that does happen in this industry that is somewhat you anemic because of the way rebate pools work, when a competitor raises their price, you don't know what the rebate is that the competitor has, but what you do
know is you will be at a disadvantage if you don't raise your price, you will be at a disadvantage of how much rebate dollars you'll be be able to contribute. so you have seen that there has been some correlation between companies. it's driven by this how rebate pools work. where you adopt want to put yourself at a competitive disadvantage. >> it does seem like increasing the price is exactly what happened. in july you raised humera's price to $26,632, less than three weeks later, a.m. again raised it again. e-mails like this one uncovered by the committee's investigation seem to demonstrate that that's not true. and i just want to go back to my
colleague. i'm not trying to do got yous. but we feed to come to some type of solution. this is ridiculous. people have to chooses sometimes life and death. they can eat or not eat. we all care about making sure that our citizens, people in the united states can afford drugs. and we do have a problem and i would think you think we have a problem too despite the innovation and research and development. you have to believe there's a problem. >> congresswoman, i absolutely believe, especially in medicare part d, there's a significant problem with the out of pocket cost approach for those patients. i would tell you that we have tried to set up a broad safety net that ensures that any patient who needs our drug,
regardless of their ability to pay or ability to have insurance, can gt our drug. that don't mean we don't miss people, but we cover the vast majority. we dlif away $4.3 billion worth of drug every year. we approve 99% of uninsured people who come to us. we give them free drug. in the case of humera, you can have income as high as 388,000 and still qualify for free. >> in all the things that you guys are doing is there still a problem. >> thank you, the gentleman from kentucky is recognized for five minutes. >> thank you. despite the vilification of warp
speed, the private companies invested hundreds of millions to manufacture of covid-19 vaccine candidates with no guarantee those vaccines would be approved. the first was approved in less than 12 months from the discovery of covid-19. would this have been done without private companies? >> i think it's quite simple to say we would not have gotten the vaccine as fast as we did without private company expertise, but it is important and fair to note, since we wouldn't have gotten without a strong involvement of the government in terms of direct financing for some of the clinical trials in the case of moderna and the advanced market commitments that they would buy any product. that is referred to as the market risk of developing a drug. and it little nated some of the scientific risks.
>> what would congress do to build on the momentum of operation warp speed to continue investing in treatments and vaccines for other diseases? >> this is a really great question. i think that a lot of us want to put the pandemic behind us. we have the vaccine. we're trying to move forward in the united states and globally. maybe we want to come to a solution for this. it would be a real shame if we kwaunder the sort of momentum and information we had about the importance of investing in vaccines, but also on other therapeutics related to that. if congress wants to work in this area, we need to come up with a solution for next gent antibiotics and pay for their marketability. we knew that prior to the pandemic. we want to know the next disease burden might not be a virus. and we need to focus on developing treatments for the next pandemic, but realize the next pandemic might look
different from covid. >> in today's innovations, less than 10% of drugs get approved. how much investment goes into each drug prior to seeking fda approval? >> there's a wide range of estimates of bringing a drug to market. the important thing to think about is how we get drugs in the pharmaceutical market. i disagree on how we think about innovation. if we were at the strategy class and teaching companies to pay attention it what they are good at and do that. early stage companies are good at developing and innovating drugs. later stage companies are good at clinical trials, dealing with the fda and sales and marketing. they occupy a very valuable place in the supply chain along with the early stage research investments.
we have seen a specialization not buzz of worry about anticompetitive practice, but because we want them to invest. so you only look at the winners, you're doing a disservice to this conversation. you also have to look at the losers. >> thank you, my last question for mr. gonzales. abbvie received 130 patents on humera. these patents include intellectual property related to the uses, improvements and manufacturing processes of these medications. can you explain why so many patents are necessary for these drugs? >> if you look at humera's classic example, we were approved for the first indication in 2013.
we developed disease states and indications along the way. all that took research and development and clinical trial. working on dosing and technical challenges and we learned and invested in innovation along the way. we applied for patents. the other thing is i think everyone gets somewhat hung up on the number of patn'ts. and that's partially a function of the patent office in the u.s. tries to narrow pat ebts so they are not overly broad. so sometimes you'll have an innovation and that's five different things. go back and break them up. the more important thing is this it. i could have one patent and if no one can work around that patent, that's all it would
take. real innovation is what ultimately gives you the ability to have value in a patent. if you have meaningless patents, i can file an ip at the patent office and have them rereview and they take down a large number of patents. it's not expensive or hard to do. and ultimately, competitors did that with our portfolio. we prevailed a vast majority of the time. we work around patents all the time. it they are not foundational, you try to work around them. if you believe they are invalid, you invalidate them. you only pay royalties that you believe are fundamental to your ability to create the product. and what is very evident here is we have highly sophisticated companies, they are just like abbvie. they made a decision that it was
worth licensing our portfolio. unless they believe they are valid and meaningful ween don't do it. that's the best validation to the level of innovation and the importance of the portfolio. and in the u.s. system, if you create something that's inventive, you deserve the right to get protection. and remember one other thing. the license players 11 years before the last patent expire. >> the gentleman's time is expired. the gentleman from maryland is recognized for five minutes. >> thank you, madame chair. i appreciate the opportunity. i want to take a moment to address an argument i keep hearing from the other side that hr-3 and these other structural
reforms that we are seeking would hurt future innovation. we all know the drug companies produce life-saving therapies and vital medications. that's critical. but we also know that the current situation is untenable. that's with so much of the testimony we receive, the stories we hear from our constituents and families across the country. it indicates nearly 1 in 3 americans say they are unable to take their medications as prescribed because of the cost. 1 out of 3. innovative medications are worthless if people can't afford them. we have to keep that in mind. and drug manufacturers argue the current prices are necessary to drive innovation and discover new treatments, but that's not true. as the committee's investigation revealed, much of the research these companies are investing in isn't innovative. it's simply meant to preserve
their pricing anomalies. according to 2017 report by the gao, novel drugs, meaning those republic newsed as meeting a previously unmet need, were significantly advancing public health only accounted for 18% of all drug approvals between 2005 and 2016. it's important to note that after hr-3 passes, and it pass, drug companies will still make a healthy profit. so help me out here. do drug manufacturers still make money on their drugs abroad despite the fact these countries negotiate for lower prices? >> they absolutely do. and i agree with you. i think this is one of the big misperceptions i have heard around hr-3. it's about trying to negotiate prices with respect to brand name drugs better and to more
efficiently make the market in the united states work to try to ensure that if a drug is not a new or important drug, then we won't pay a high price for it. right now, drug companies set prices at whatever level they want and the u.s. and medicare and medicaid is required to pay those prices, for really important useful new drugs for treating alzheimer's disease, we would still expect to pay a high price to make those drugs very profitable to the companies that bring them forward. what they will do is give the u.s. just like other countries do. and this drug is worth us paying a a high price and this is not worth us paying the high price. that's what other countries do and able to lower prices on the drugs they pay for. that's not away we do.
>> that's excellent. you're describing a value proposition here. is the value of that drug worth paying for the market is going to reflect that when medicare goes into the market to that's all we're trying to accomplish here. what's bye-bye done in other places around the world. the other thing i will just mention is the government research plays a huge role in drug development. is taxpayers are investors here. so taxpayers are investing on the front end a lot of the time when it doms to the trajectory of these medications and drugs. but then having to pay again on the back end because of all these maneuvers at the industries manage to embrace. so i'll just close with this. i don't really expect mr.
gonzales or other farm pseudocall executives to behave any differently than they are. there's a profit making incentive here that is guiding them. sadly, an executive compensation is laid bear by the congresswoman and congressman and others is operating to drive a lot of this behavior and conduct and not a lot welcome do about that. so they are going to behave the way they are. what we can do is what we are trying to do. which is to allow the medicare program to negotiate on the price of drugs. it's the american thing to do. we ought to do it. we ought to pass this bill. thank you for the opportunity and for this year ago. i yield back.
>> the gentleman yields back. the gentleman from california is recognized for five minutes. fpz. >> thank you so much for this hearing. i feel the predecessor i am a survivor of cll. i have your product here. this costs about $15,000. my treatment for one pill a day costs about $500. in australia it costs $30. when i asked my oncology team why that was, they said it's because they can. it's upsetting to know in your business model that americans subsidize people in other counties. i'm obviously grateful for the research and twomt that kept me alive with this drug, but i would like to know how it came about and how sustainable it is.
and the number one increase in bankruptcies are because of medical bills. so in addition to have to struggle with co-pays on from product, people have to worry about losing their home or going in bankruptcy. and if the trade off for you and executives to make more pun, i think that's a question that the american public should be aware of in addition to the fact of why are they subsidized australians in this incident. i want it ask about humera. in 2018 abbvie began selling a high concentration of citric-free formulation of humera, which you marketed as a reduced pain version in 2018. is that correct? >> that is correct. >> i want to put up a 2011 strategy presentation of paying by the committee. this is exhibit 8 in your trls. if it you turn page 11, you'll
see it. this chart identifies the benefits of various research products abbvie was engaged in and benefits for humera high concentration formulation of the presentation identifies defense as one of the benefits. biosimilar defense, mr. gonzalez, is another way of saying you're protecting from competition from them getting into the marketplace. is that an unfair characterization? you said page 8, correct? >> no. i said exhibit 8, page 11. while you're looking for that, i'll continue because i want my five minutes. >> i have it now. >> so that was the question of biosimilar defense. that means, as i understand, you have an obligation to your shareholders and your investments. you're trying to defend against
biosimilars getting into the market sooner and then taking away market share. >> i don't believe that's what that means. what it means is we were working on a formulation which would reduce pain upon injection. there were multiple aspects of that. a smaller needle, high concentration, and removing the citric buffer. i believe that would be a differentiated product for patients. >> i apologize for interrupting. it is the five-minute rule. i would love to take more time. let's put up another presentation. this time from the board of directors in 2015. this is exhibit 17. the first slide. if that's up, the presentation states, quote, our defense strategy remains the same. and the second bullet below defending intellectual property says, quote, gain approval eu/us of humira high concentration formulation. end quote. in both of these slides, there
is no designation for reducing patients' pain. now earlier you confirmed that abbvie introduced my concentration formulation in 2018, correct? >> correct. >> fda approved it in 2015. why did you wait three years to bring the product up? >> we had to build up the manufacturing capacity. it required a different manufacturing capacity. we actually introduced it first in just pediatric patients because that's where the need was the greatest to reduce pain and then we moved forward from that to offer it in a more broad scale market. >> some skeptics would say the reason for the delay was to wait until biosimilar manufacturers had already invested significant resources in developing biosimilar versions of the original formulation.
so shifting patients to high concentration formulation, this anti-competitive strategy is commonly referred to product upping. is that an unfair description of what was happening here? >> i think it is an unfair description of what was happening here. to your point a moment ago, congressman, when we launched in europe, the majority of biosimilars had biocitric products. it is not like this did anything to inhibit their ability to do that. the second thing i would say is, both products are still on the market in the united states. so that won't change any ability for a biosimilar to come to the marketplace. ultrapatly we licensed all that we had. so there would be no difficulty for biosimilars to come forward in the marketplace with a product like this. >> again, i apologize.
they spent a lot of time on this. cancer survivors caucus. we just like to see your books. to see how much money goes into innovation and development and how much goes into financial innovation. i yield back. >> the gentle lady from massachusetts. miss pressley is recognized for five minutes. >> thank you, madam chair. patients taking number one drug humira are battling inflammation, fatigue and other symptoms of rheumatoid arthritis. the ironic thing is it is men to help people, to alleviate their hurt and pain. due to the steady price increases, abbvie is causing greater physical pain, mental hurt, and financial hardship as well. the cost of prescription drugs is causing strife and suffering for families across the nation and as fatigued as you may be by
hearing these sobering, gut wrenching accounts, people are even more fatigued by living them and experiencing them daily. i've heard from people throughout my district who are cutting, forced to cut pills in half to make them last. people who are paying medication costs that are the equivalent of a college tuition, state college, and at times, even exceeding that. heart-wrenching, unjust choices. people are making simply to survive. and they are not outliers. according to a 2013 research study from the university of north carolina, 22% of individuals with arthritis were forced to spend less on basic necessities as a result of high drug prices, and one in five reported taking fewer medications than prescribed due to cost. madam chair, i would like to enter that 2013 research study from u of nc into the record.
>> without objection. >> doctor, from your experience serving families in my district, how can tradeoffs like these impact the patients' overall health? >> very substantially. i think a lot of patients struggle with high drug prices and come looking for ways of trying to address those when they come into my office. and you know, sometimes i can send them to patient support groups. but a lot of times, unfortunately, they may not qualify or there may be a lot of hoops they have to jump through. or those kinds of charity, that charity only lasts for a certain amount of time and then it ends. so i think this is a major issue and it leads people to stop taking their medications or to have to make difficult decisions about other spending in their lives as well.
>> thank you. >> you know your company's pricing decisions have very real impacts on patients' lives. the committee reviewed approximately 400 complaints from patients and caregivers begging to you lower the price of humira. yet your company repeatedly does the opposite and denies desperately needed relief for these patients. although your primary patent expired in 2016, there is no market. as part of our investigation on page 9, of exhibit 14, abbvie executives predicted that humira would have three to five biosimilar competitors in the u.s. by the first quarter of 2017. mr. gonzalez, did that prediction come to pass? yes or no. >> no. >> it did not. that's right. using a variety of anti-competitive practices, abbvie has suppressed alternative drug options in the u.s. market until 2023. that will allow your company to
continue to exploit patients and to rake in astronomical profits. mr. gonzalez, will you admit the lack of competition means the government has to pay more and patients have to make greater sacrifices, yes or no. >> madam chairman, i would like to address -- >> yes or no, mr. gonzalez. are patients having to pay more and make greater sacrifices? abbvie's own documents estimate the delay cost the u.s. health care system at least an additional $19 billion. and for patients, it will cost them their physical, psychological and financial help. we live in the richest country in the planet. yet drug prices are so high that people can't afford to live happy, healthy longer lives. the people demand, deserve and require better from abbvie and all other price gouging drug
companies. thank you and i yield back. >> the gentleman from california, vice chair gomez is recognized for five minutes. >> thank you, madam chair. i wanted to focus in on a part of mr. gonzalez' testimony that he mentioned that abbvie's use of the program which we examined last fall. before i go on to mr. gonzalez, dr. kesselheim, is it correct to say that manufacturers like abbvie benefit from third party patient assistant foundations? yes or no. >> yes, they do. >> thank you. and one of those third party foundations is the patient access network, or pam foundation. mr. gonzalez, your company makes donations to the pan foundation, correct? >> correct. >> i would like to display a november 2017 email from mr. dan
kline to abbvie's director to patient access program. this is exhibit 27 in your packet. in this email, he is seeking a donation from your company to help offset the costs of the drug humira. he wrote, quote, we know these patients would be much more likely to start and stay on treatment if they were not stymied by high, out of pockets costs. mr. kline is essentially saying by making a donation to his foundation, abbvie will be able to attract and retain more humira patients. are donations, mr. gonzalez, donations to patient assistant foundations part of the strategy to maximize sales or the use of your product? >> no. they're not. we do it as a donation because we feel that it is appropriate. we do it by disease state. the foundation is not required to use our drug. >> thank you so much. >> let me reclaim my time. mr. gonzalez. i would like to switch gears.
i understand that abbvie co-promotes your cancer drug with jansome pharmaceuticals. so that means your company jointly markets the sale and marketing strategy for this drug, right? >> that is correct. >> but abbvie's subsidiary leads u.s. commercialization and sales, correct? >> that is correct. >> in 2017, abbvie and janson executives met to evaluate optimal spend to maximize growth and existing and new indications. this is exhibit 24 in your packet. a chart on page 22 of the presentation breaks down the proposed spending for the next fiscal year. the chart includes a line item for foundations.
but the proposed collaboration spend of $55 million in fiscal year 2017. this is the largest single proposed increase of any spending item. collaboration spent is the amount two companies would spend together, correct? >> i'm not familiar with this document but i would assume so, yes. >> so let me ask you again. are donations to patients assistant foundation part of strategy to maximize sales, yes or no? >> no. >> mr. gonzalez, you also said, you also said that you provide your patients assistant programs provide one-year free drug costs, correct? >> that is correct. >> what happens to the patient after that one year? >> they reapply and rerefund it.
>> the reason i'm asking this, we understand that a lot of the investment, everything from research to marketing, also the donations to these foundations is all taken into the price of the drug. it might appear that it is a, that it is something that is alteristic, but you get tax write-offs and other benefits. i'm one of the few on this committee who also serves on the ways and means committee, the tax committee. a lot of the program that you're talking about is just a way to get people hooked on these drugs that are high cost in the long term. and that they also are not meant to really, it subsidizes the patient but that's not who you're going after. the drug companies are going after the spend from the
insurance companies. increasing the number of people on the drug but also increasing the amount of money that you're receiving. one of the things we need to do, we understand the system is broken. everything from the drug companies to the insurance companies to now the patient assistant programs that all jack up the price of pharmaceutical drug prices in this country. with that i yield back. >> the gentleman yields back. i thank him for his statement. before we close, i would like to offer the ranking member for any closing remarks. you are now recognized. >> thank you, madam chair. i want to be very clear what the republican position is. we strongly support the patent system that encourages innovation. however, we certainly don't want to see a patent system that is abused. and they're always going to be
bad actors and those bad actors need to be held accountable. but to be completely candid about this conversation and the democrat proposal that has been mentioned several times today, the biden administration, the house democrats have lost a lot of credibility when we talk about the patent system, when the biden administration announced its effort to give our pharmaceutical intellectual property with respect to the covid vaccine to china. a country that still has a lot of questions to answer about the origination of the covid-19 vaccine. so we've got some credibility issues on the other side of the aisle with respect to the patent system. nobody wants to see cross gouging. nobody want to see excessive ceo pay on the backs of hard working americans that have to make a decision on whether to pay for their medicine or put food on
the table. we all know the horror stories. we all know people that have had terrible experiences in trying to buy medication. i think there's a way that we can come to terms and protect our patent system because it takes investment, private sector investment, to come one the cures for all the diseases that we want cured in america. but at the same time, we have to make sure that the patent system isn't abused. so i'll look forward to working with members of congress that feel this way and that will respect our patent system. but hold those accountable who choose to abuse the patent system with. that, i yield back. >> thank you. the gentleman yields back. before i close, i would like to enter into the record several letters and statements for the record. the committee received a leading up to today's hearing.
these statements include professor robin feldman at uc hastings law. protect our care. families usa. the american economic liberties project, the health advocacy summit, the maryland citizens health initiative, treatment action group, and many more. i ask unanimous consent that these materials be entered into the record, the official hearing record. so ordered. at the beginning of today's hearing, we heard from patients, their stories of people who struggled to afford abbvie's products, including humira and others. abbvie ceo mr. gonzalez thought to cast blame on others for abbvie's high prices. but the facts show that abbvie
raised prices on americans for one simple reason. greed. this morning we released a staff report based on our review of over 170,000 pages of abbvie's own documents and data. these documents show abbvie intentionally targeted the u.s. for higher prices as it cut prices in the rest of the world. and mr. gonzalez admitted today that his company charges higher drug prices in the united states because other countries are doing such a good job of negotiating lower prices for their citizens. every american should be outraged. abbvie's internal data show that medicare would have saved billions of dollars had it been able to negotiate directly with
the company. the documents also showed that the financial assistance for patients that abbvie provides are not actually charity. they make abbvie more money by keeping more patients using their products. abbvie has also claimed that it needs to charge high prices to stimulate innovation. but the company's own internal documents show that much of its research budget is actually dedicated to suppressing competition. abbvie also employed potentially illegal anti-competitive tactics to delay lower price biosimilars from coming to market. those tactics led to higher prices and less innovation for americans. but more profits for the executives at abbvie.
enough is enough. congress has an opportunity and i would say a responsibility to ensure americans no longer have to choose between taking their life-saving medication or paying their rent and putting food on their table. we must pass hr-3 which would finally empower medicare to negotiate lower prices, just like the defense department and the v.a. hud already do. and foreign countries, they do. we must pass legislation to crack down on abbvie's anti-competitive abuses, so that market competition can drive down prices. i urge my colleagues on both sides of the aisle, especially those on the other side of the aisle, who have acknowledged the harm caused by skyrocketing drug prices, to join me in pushing for these reforms. this should be a bipartisan issue. i hope we can all agree that no
person should go without potentially life saving treatment in this country. now, let's act together. let's do something about it. let's help the american people. i thank everyone who participated and i particularly want to thank our panelists for their remarks. and i want to commend my colleagues for their important contributions, their questions for participating in this important conversation. all member have five days to submit extraneous materials and to submit additional questions for the witnesses to the chair which will be forwarded to the witnesses for their response. i ask our witnesses to please responsibility as promptly as they are able to. i also want to thank the staff of the oversight committee for what i would call a labor of love and deep commitment. and you can see that in reading
sunday, c-span series january 6th views from the house continues. three more members of congress share stories of what they saw, heard and experienced that day. including representative rodney davis of illinois who served as a teller for the electoral vote count on that day. >> there were a lot of freshmen there that i got to know during orientation. this was their first experience as a member of congress. we were kind of watching them and talking to my fellow colleagues about what we could do to try to stop this. >> what were those conversations like? tell us about them. >> i remember a conversation i had with marjorie taylor green. she was a freshman. she was very active during the
orientation. and she was very upset about what was going on. and her and i chatted. she said what can i do? i said how about you go back to the cloak room, sit on social media and if you have any influence over anybody out there, tell them to stop. she did that. >> this week you'll also hear from democrats madeleine dean of pennsylvania, and zoe lofgren of california. january 6th, views from the house. sunday at 10:00 p.m. eastern on c-span, c-span.org or listen on the c-span radio app. on the senate floor, democratic senator kirsten gillibrand asked unanimous consent for the senate to take all that bill that would make changes to the military justice system by removing the chain of command from serious crimes, including sexual assault. the republican senator dan sullivan rejected it saying it