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tv   Abb Vie Pharmaceutical Co. CEO Testifies on Drug Prices  CSPAN  July 30, 2021 4:52am-8:30am EDT

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in front of congress about prices. lawmakers asked why the company has raised prices on the drugs. >> 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.
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this investigation was launched by my predecessor, the late chairman elijah cummings. 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. 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
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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.
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and ebruvaka, a drug to treat different forms of cancer. abbvie charges $77,000 a year for a year supply of humira. 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 syringe, it's now at over $2,000 for a syringe. abbvie and its partner jansen biotech charged even more. $181,000 for a year supply of embruvica. that's 70% more than when the
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drug was launched in 2014. experts estimate that by 2026. it will be the fourth best selling drug in the united states. these prices are outrageous and unfair. 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. they describe this disparity as a positive price in the u.s. and
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negative price overseas, end quote. abbvie's price increases have paid off for the company's bottom line. last year, they collected $16 billion in u.s. net revenue for humira. and they collected $4.3 billion for the others. 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
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abbvie's own executives projected its top-selling drug, humira, would face competition from lower-priced versions of the drug known as bio similars beginning in 2017. but abbvie used legally questionable tactics to block lower-prized bio similars from reaching american consumers until at least 2023. those tactics made abbvie a fortunate. 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 whether the practices violated the law. finally i want to emphasize that
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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
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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
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and reduced mobility caused by arthritis. to treat my condition, my doctors prescribe me humira injections week. the 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 joint, 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.
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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 texas. last year i was diagnosed with an autoimmune disorder that affects may spine. 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 worrying to afford my medication because i'm going
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to have to take it for the rest of my life. committee members, as you pursue solutions for drug prices, remember the millions of young people with conditions who are facing a lifetime of treatment prices at the hands of abbvie, 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 imbruvica.
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it's 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
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why we need immediate reform. we need to pass it this year to allow medicare to negotiate lower drug prices for americans like other foreign countries do. i now recognize -- first i thank 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,
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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. the research funded by these investments results in treatments and cures for
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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 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
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agreements to pay generics to delay entry into the market. democrats have proposed hr-3, a massive government takeover of the pharmaceutical market that would 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 prevent anticompetitive behavior in pharmaceutical markets, bring more generics to market, incentivize innovation and research, 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 the president, republicans were
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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 help americans across the country. we must address rising prescription costs because our costs are hurting american families everywhere. republicans presented a real plan to lower out-of-pocket costs and protect innovation for new treatments and cures. the american people need relief but speaker pelosi has instead sought to pass a partisan plan and destroy intellectual property protection that our founding fathers even wanted. we must put people, not partisanship first. i yield back the reminder of my time. >> the gentleman yields back. i would now like to introduce our witnesses. our first witness today is
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dr. aaron kesslheim who is an associate professor of medicine at harvard medical school. he also testified at our committee's very first hearing on prescription drug prices back in january of 2019. we'll hear from craig garthwaite who is the research professor and hospital and health services at the kellogg school of management at northwestern university. next we will hear from tahir amin who is the executive director of the i really appreciate for medicines, access and knowledge. finally we will hear 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 and affirm that the testimony you're about to give is the truth, the whole truth and nothing but the truth so help you god. >> i do.
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>> let the record show that the witnesses answered in the affirmative. thank you and without objection, your written statements will be made part of the record. with that, doctor, you are now recognized for your testimony. >> chairman, ranking member, members of the committee. i'm honored to talk to you about curbing abuses of drugmakers raising the prices for these products and jeopardizing patient outcomes. the idea behind our system enshrined in the constitution is that a period of exclusivity allows them to profit and allows other to compete. in the drug market, this dynamic is important since medications are costly to create and test for efficacy and safety. in the u.s., drugs are covered by patents and other federal laws provides special excluestivety for rare disease
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drugs, for biologics for 12 years after approval. drugs routinely get an average of 14 1/2 years of exclusivity. during this time, manufacturers charge high prices. alone in the industrialized world, the u.s. lets drugmakers set any price they choose for patented products. the law allows manufacturers to raise prices each year well beyond inflation. it leads patients to skip doses and worse outcomes. generics can become the default prescription because they are be automatically interchanged lowering prices. we found that each bio similar reduces prices 4 to 10%. brand-new manufacturers try to delay effective competition. a common strategy is obtaining a
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thicket of patents. some patents cover the delivery mechanism such as an injection pen or inhaler. the patents listed with the fda tripped to 9% in 2016. some firms use this time to introduce new versions of their product. for example, a firm might switch from a capsule to a tablet that is not interchangeable. many secondary patents are bad patents that lack novelty or cover only minor changes to the drug. one analysis revealed that legal challenges seeking to overturn the primary patent succeeded only 8% of the time while challenges to secondary patents were successful 67%. 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
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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. bad patents must be limited. other patent offices around the world issue fewer bad patents. 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
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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 reveal patents. you can also take steps to ensure that manufacturers cannot use other market exclusivivity 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 buy logic drugs have large 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 about to regulate the prices.
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in conclusion the system was intended to provide a reasonable limited period after fda approval during which brand-new manufacturers can earn fair and 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 incur in 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
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the process of developing 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 it, 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.
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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 are harder to
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identify and not available for photo opportunities doesn't make them any less real. we must remember that everything about the existing parameters of this trade-off 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 changes, they were revisiting our 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 be focusing as a government on limiting welfare losses where 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
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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 -- the conversation there is as much about the price of the drug as it is about the insurance accurate that we have. in part d, for many people buying expensive medications. once they've reached market exclusivetivity, they should support the entry of vigorous competition. there's a clear role for regulation to create competitors or restrict pricing. when thinking about policies in
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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 incomplete metric. 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 calculus that we
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can increase access to and allow for more innovation going forward, that is not true. we will suffer less innovation if we lower the returns on drugs and we should debate the nature of that reduced 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. i speak to you today as someone who is seeing both sides of the
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issue. i want to state up front, this conversation is not about the death nail of innovation, it's about bringing equity to a system and how well the system incentivizes intervention. 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. last week, they 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
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inventive in the last 30 years or got better at inventing patents because our patent system no longer is stringent enough. the number of 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 grapted. on average, that's 70 granted patents per drug. 63% of these patents are filed after the first approval for marketing. and that gives an average protection of 38 years. between 2014 and 2019, 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
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applications on these drugs alone. 90% of the patent applications filed for humira were filed after the drug was first approved in 2002 and it has amassed 130 granted patents for humira 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
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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
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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 of pride. today's system has become less an engine for real invention. just because you invest in money mean you've invented something.
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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
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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, with low out-of-pocket costs. most americans have access to affordable medicines and pharmaceutical companies such as abbvie provide a number of forms
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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
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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
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and there's no cap on drug spending. part “d” enrollees 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 ensured humira patients where 1 out of 100 sought assistance. medicare part “d” patients
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out-of-pocket costs is the single biggest issue when it comes to drug affordability. additionally, while the overall cost 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?
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>> 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,
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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
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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. instead of 9.9% price increase for 2016, abbvie actually raised the price by 18% that year alone. let me turn to the 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
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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
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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
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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. 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
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pricing at this early stage of development, end quote. they also 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. if the threat of price controls on one potential product kill that innovation, what could happen if we threaten the entire industry with this type of socialist pricing like the one democrats are proposing with hr-3?
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>> 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 pricesing? 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
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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. in your opening statement you described the competitive nature of the medicare part “d” improvement 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 dr 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
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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
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$120 a year. a medicare patient has to pay over $5,000 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 antikickback 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.
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>> the gentlewoman from the district of columbia, you're now 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, a single 40 milligram syringe of the drug was priced at 1,024 dollars starting at
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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. >> sense 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
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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.
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that means that a year's ply of humira now costs over -- get this number, $77,000. internal data shows that 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. doctor, 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
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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 unsubstantialable going forward. i believe we need structural reforms if we're going to bring any relief about the price increases i have offered in my questioning. i thank you and i yield back. >> thank you. the gentle lady yields back and
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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 fwral government and private companies invested hundreds of millions of dollars in vaccines and candidates thereof. whether or not those attempts would be approved. the result was that the first vaccine was approved in less than 12 months after the discovery of covid-19 and three vaccines were ultimately approved with others waiting in line. and many are now actually praising operation warp speed
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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. the member who chairs that subcommittee sent a letter to alex azar regardless operation warp speed and made this quote, the development of a coronavirus vaccine, especially on an accelerated time line, could contribute 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
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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 came together in one of the darksest times in recent history, but now the united states may again not -- now i should -- let me put it 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 he did in endorsing an intellectual property waiver to the world trade organization. listen so that.
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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
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vaccines and therapy ip with developing countries so they fall right in line with this waiver endorsement. and, look, this is supported not only by our current administration, it's supported by other low-income countries, 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. 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, angela merkel rejected this idea of waiving covid
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vaccine patents and said in the first place, it would not make more vaccines available and it would weaken innovation in the future. so, look, madam chair, i just think it's very important that we protect those who are innovative inventors of medications, certainly those that abuse the rights we should deal with, but we got to protect the ability for these -- >> the gentleman's time is expired. >> i yield back. >> the gentleman from tennessee is recognized for five minutes. >> madam chair, i pass at this time. >> the gentleman passes. hank johnson is now recognized. hank johnson.
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>> 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
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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 means to the individual person, a lot of people pay out-of-pocket costs that are based on the list prices that they experience and that can mean a much higher out-of-pocket costs for individual patients, increased
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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
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the annual net price for a weekly dose of humira. can we have that exhibit, please? >> i guess we're having some technical difficulties. >> 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%. doctor, what do these trends
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depict on this graph, or what do the trends tell us about the rebates abbvie was providing to 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 running backs 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
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dramatic price increases of abbvie drugs. abbvie is the primary driver of dramatic price increases. would you agree with that, doctor? >> yes, i would agree with that. drug prices are set by the pharmaceutical manufacturer and, you know, pbms and other insurers use rebates as a negotiating tools but drug prices are generally set by the manufacturer. >> so we should not allow pharmaceutical companies to dissubtract tract us with the argument that pbm is responsible for the explosive increases in drug price -- in drug prices, it's actually the pharmaceutical industry itself? >> the gentleman's time has expired. the gentleman from wisconsin is now recognized for five minutes.
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>> thank you, i'm going to start off with mr. gonzalez. i'm going to ask you a little bit about insulin and bio similars. i have a bill that would cause a -- would transition to a bla classification, require the fda to regulate newly approved buy logic products as bio similars 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.
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do you have an idea why it seems to be difficult to getting bio similars 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 bio similars 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.
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i think contracts -- rebate contracts for biologics that say they can't be on the same tier of the formulary of us, should be looking at antitrust authorities as away to increase entry. >> can you comment on getting them to market to lower the price of insulin. >> it's important to get bio similars 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? >> until recently insulin had been regulated as a small molecule product, although i think the fda has switched that over in the last year so that now you can actually get insulin
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on the market through an abbreviated bla. hopefully we will see insulin, bio similars on the markets and hopefully some of them will be interchangeable so we can get competition to lower the prices of insulin biologic products. to this point, there have been problems with sort of getting -- there's been litigation over insulin patents and a lot of patents have been issued on insulin pens and other pa riff ral aspects of the product which made it possible for entrants to get into the market and require litigation. now we have a regulatory pathway to make that happen. hopefully we'll see that soon. the fact that we haven't seen it until now is a major flaw. >> i'll ask you, why do you
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think that is? >> i think it's -- again, i think, first of all, a lot of the insulin manufacturers have obtained patents on aspects of their products even though insulin itself hasn't changed much in the last couple decades. there have been patents on the pens and delivery devices that have blocked entry of new products and led to litigation. that's one aspect of it. >> okay. we'll ask one other question, a general question. it doeswt■ alarm me that people 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?
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>> 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. why would we think that the european price is the correct price that we should be thinking about? they're choosing to free ride on the innovation caused by american profits. i think attempting to adopt european prices in the united states would be anirresponsible 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 -- >> the time has expired.
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>> we should be honest about the trade-offs. thank you, chairman. >> 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
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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
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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
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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
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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
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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 bio similars act. it would help amend -- it would
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require hhs to evaluate medicare advantage plan based on whether bio similars 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
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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
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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
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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 anzd 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
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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.
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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 bio similars 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 bio similars 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
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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 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.
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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,
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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 humera 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
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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 humera 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
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the future. we invest roughly $7 billion a year in research and development. it is the humeras 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,
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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 cartwaite, 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
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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
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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
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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.
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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 country. you've been accused of 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
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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, 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
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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 humera? 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.
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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 say this. the patent that expired in 2017, you're talking about an extensive patent line and you seem to understand whaet 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
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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? >> novel he willty i can't speak had in such detail. it's a novel theory. it's a novel approach. >> you can't define the term with a term but basically 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 humera, and on your own
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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 saying a dos for hue marry frl noul noh ilse tooilgt you said let stuff out of the pack
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arnl -- 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 inno legislation.
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>> well, i don't know that i would agree with the premise of what you said. i'm certainly not ah habit of findingly rkts it's stag gring. mr.ly. but then you sit here dlaming that innovation. you don't even know who the person is who invented your drug, and you're unable to explain whaet so novel about where you're getting understand that. >> the gentleman's texas is inspired.
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>> madam chair, woman, thank you very much. . further, this line of 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. zpds hundreds of trilds, including dosing trimd. i heard it took time, but did it take moechb? prltly many. $16,000. and went through the idea of this. did you have to purchase
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anything from the, quote, invoernt." . so you're trug to a you riff chairly earlier that the federal government was prohibited negotiating the price. prohibited. 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
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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.
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>> 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
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works is they start one, they go to the next, they go to the next. presuaby 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
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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 humera 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 daifr 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
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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.
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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?
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>> 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
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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.
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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
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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 rejects, so you can. to greg gold hwaite, i kind of
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disagree that the u.s. as. >> 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 industrypharmaceutical development initiatives. can you explain the relationship between investment and incentives in the pharmaceutical
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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
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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 hourds of inno sdm -- innovation. i would ask the company to not look just at the price of the drug, but they do not match the market. >> another question, mr. garthwaite, patents are critical for safeguarding electric
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property. how wouldly they fight competition that would otherwise drive down drug prices? do you have a possible reform to the price. >> i think we should look a. it could be what we want to do. many it just get lost in the question here, though, but we very much do want firmds remember. these are seblgd dear packets. they've been much aligned in this testimony. i am happy to see that a drug called hue measure a, that we have seen the unindication. i don't think he should go to
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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 non-obvious innovations. >> as we once again have discussions about speaker pelosi's drug reform bill, the pharmaceutical market will only make specific drugs to access. i also look forward to discussing bipartisan pharmaceutical pro poechlz such as and p. get them to market fast, employee competition, and make sure --
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>> the gentlewoman from florida, debbie wasserman schultz, is recognized for five minutes. >> the company's shared decision making and profits does commercialization include special papers? >> it does. as a breast cancer survivor, the policy is personal to me. i want to put a drug on the screen on how to list price. astrazeneca was listed at $9:a talent. she has raised the price of the
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kroifrds pandemic. >> the current is around oornd. it's price uchld ld. dr. did he say sell heim, i'd like your taechbttle first that no one pays the direct price of a dind bug. doctor, is that sflu. >> that is not true and we just led a boom smoegly high deduct you believes or oy much. >>ly pausht out of pocket cost
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are tied to the list price. my familiarity, the whole notion of cost shipping 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 occurs because uninsured patients are not able to afford the price and then the price goes up for all of us. does that make sense? >> yes. >> they're forced to change prices because they argue while the prices rise, their profit don't. abbvie provides commercial plans from 2014 to 2018 that it raised 4% to 20%. but they also said the price of the drug, after discounting all
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fees, rose by about 6%. >> abbvie's price increases for embrovuca are being set by abbvie itself, and the reason prices are so low in this market is because we don't let the government value prices and set them however they want. if the drug company is trying to meet the expectations of a chairholders, they're going to do what they can by increasing prices available on drugs wherever they can. >> so despite what they want you to believe, there is a current crisis of cancer drug affordability. no one should be able to have life-saving medication. i talked with counsel, countless of them, within the first two years of treatment in part due to high drug prices. we can have both innovative
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treatments and affordable prices and we all deserve both. we shouldn't have to make the false choice. congress should reject that false choice and act now to rein in the era of the greed of pharmaceutical companies. we have to make sure that if you are facing a life or death condition that you are not faced with having to bankrupt yourself in order to be able to afford to stay alive. thank you, madam chair, for the privilege of participating in this hearing and i really commend your leadership. i yield back. >> the gentlelady yields back. the gentleman from arizona, mr. biggs, i recognize for five minutes. >> i thank the chair for having this hearing today. many folks have observed this around the world, but other nations are freeriding particularly in the
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pharmaceutical era. but if we jump from the frying pan to the fire -- i'm quoting. we would be jumping from the frying pan to the fire if we had innovations by other pharmaceutical companies. we would save on prices in the short run in the future. operation warp speed allowed the american people to receive three covid-19 vaccines in less than a year. this achievement could not have been accomplished without leading drug companies. >> i think we should be careful not to overgeneralize from the success of operation warp speed, which was really trying to address a very specific problem. we have an exact type of problem we want to develop and we're going to amass government capitol to do that.
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i think if we are 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, because this firm should not be -- but to tend away from one specific problem to the drug market. the capital markets are good at the most success scientifically. most modern drug companies are using those small firms to do that early stage research. nih took up that drug development which would really change the fundamental nature of that agency. >> 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?
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>> one thing that's very nice about the fda during this process is they did stand up for rigorous review. there was a lot of worry at the start of operation warp speed that there would be some type of political manipulation or some pressure to not take science seriously to speed things up. i really think the fda has tried to balance regulatory 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 wound up seeing them 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
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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 since 1993. 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 humera, the on-market products pay for our r&d of the future. we've invested $40 million in r&d since 2013. out of that investment, we've created a higher survival rates
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of blood cancers significantly and now we've created two immuneology assets that have demonstrated superiority to humera. 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
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limited time and you do everything in your power to extend it beyond the original grant. is that correct? >> we develop innoinnovation, i 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
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patent protection and a pricing policy that product concurs, correct? >> it can result in that, yes. >> when a biosimilar product was introduced in europe, the price of your product, humera, went down about 80%, is that correct? >> the average reduction in revenue is about 50%. 48, i believe, is the last number. >> so the conclusion 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 effects, yes. >> and revenue is set at the price you sell it, correct?
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>> and the costs you 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 humera. 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 wasmillion?
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>> 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 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. one way you did that was reaching agreements with competitors that they didn't bring their product out, number two, shadow pricing with amgen
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with respect to their product embrel, number three, patent tickets. 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
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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
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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
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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 turmds and -- 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.
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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
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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
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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.
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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 abruvica before it hit the market in 2014? >> we acquired abruvica 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
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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, imbrovuca, 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 embruvica 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
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billion for rmb, embruvica. really, it was for all these innovations. you filed 160 patents for abruvica 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 grafter host disease -- >> reclaiming my time. mr. gonzalez, how much did abbvie spend between 2013 and 2018? >> we don't have that number
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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
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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.
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>> 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 looifld. what vans. ly. speemd generic ds to market and reduce out of pocket costs. democrats have been unwilling to work with part sachb soettles while plaintiffs mr innovation.
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the big des of which to work across the board while maintaining and not spending r and v which is a breakthrough for covid-19. 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 trueer than during this pandemic. in 2018 it's estimated that pharmaceutical companies spent estimated 228. auto plark ds have increased yust as it had for 259th as a
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hole. across all industries are less 23457b% for the farm suital. 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 dem -- democratic lifesaving methods. unlike developing nations in europe such as the u.k. where
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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 legislation that is both doable and helpful to the american people, and not jeopardize ensuring access to the world's largest choice of affordable medications. now to questions. mr. gonzalez. i can't think of a time when the general drugs have not been able to the public.
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i can't think of one that was brought to the goal line with private industry. yet it would substantially. is it wise to send in -- >> 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
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to recoup that investment, and reach further in r&d as time goes on. that's a for row benefit and we have made tremendous progress in curing cancer, curing hiv, in covid-19s the. i think wp a fuel. 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 noelt 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
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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. humera 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 humera expired in 2016.
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did i read that right? >> i believe you did. >> as sh 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 skurmds, mr. gonzalez, but tell me, how much did you pay this 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 refr new over that
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same period. we had about $21 billion of taxable revenues over that period of time. >> so 21 billion ugdly your patent situation, you have now 256 patent 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
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than half. look at the initial patent. that sets out the stress she'd for the -- we're already highlighted and protected in the initial pack anyone that was expiring in 2016. so what we see is the system that the u.s. pratt he not system encourages, and this is not just what every company if. >> i have my. so they don't need all these patents, but it's a great strategy to keep the too many at sam zchlt just focus narrowly on
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patent abuse rpgs can you give me feel. >> i would raise the ball for real discoveries and treatment. they're already getting water for that. my main call is that we should and yesterday -- >> i guess what abbvie paid was 5% in taxes last year when most of us were paying 35%. i yelled back. on the. >> miss harris is now recognized
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for five minutes. >> thank you for our hearing as well and thank you for a clir. i just wanted to ask you, in the price sitting for your prescription drugs. >> the plans are made on behalf of the government and then the government votes directly in areas like dod, would that have a direct impact on what the patrolman. >> would that have a direct fof. >> negotiation is your question?
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would it. many. >> as i indicate, the government today sdrchlt sfvrmt and ah speck march juchb compared to any other part of the channel. >> so once the negotiations are done, that does impact
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-- i saw drug manufacturers like abbvie line their pockets with cash while they are suffering -- we can't let big pharma get rich on lifesaving medicines that people need to survive. we are talking about survival. humira is currently the top selling drug in the united states and the world. -- roughly doubled that of the second highest selling drug in the united states, which is it true to. mr. gonzalez, what's share of your company's overall sales rise new comes from humira? >> about 40% >> 40% now. okay. according to an article published this year in the journal nature, numeric counts for nearly 60% of abbvie sales.
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-- over 170 billion in revenue since launching in 2003. two thirds of that revenue, or 107 billion, has come to the u.s. market alone, even though humor is the top selling drug in the world. due in large part to abbvie's price increases for humorous. 30 of prices from 2017 found that in the u.s., humira is three times more expensive than the drug in germany, and four times more expensive then in switzerland. mr. gonzalez, is there any difference between the brand drug here between other countries? >> there's not a significant difference. they are manufactured in different kinds of facilities, the u.s. drug would be manufactured in an fda regulated facility, and the european drug could be manufactured and different facility, it was not at the a regulated, but the general drug is the same. >> the general drug is the
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same. so the difference is the matter of the facility manufacturing it, which changes the price three, four times -- >> no, i'm sorry. i didn't mean to you to conclude that. what causes the differences in price is essentially socialized health care systems mandating what price you are 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 can imagine a cancer drug not -- that drug because you don't like the price? but that's the fundamental challenge with socialism ellison systems. and that does force the u.s. to pay far more the costs of the industry. that is a reality. >> so that's what it is, that's what's picking up the slack.
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if you can sell the same drug elsewhere for a fraction of the price, there is no reason that people should be forced to pay high prices here, such high prices. but let me put up a graph on the screen, using data from abbvie's filing. this is the annual net revenue of humans from 2003 today. as the graph shows, each year, as we set a new record. each year, a new record, for humor or revenue in the united states. the profits are staggering! on my own, staff we have someone who uses humira, and has done so for six years. the medication would cost nearly 1 million dollars, for six years, if not for the insurance plan and his family have repeatedly gone bankrupt trying to keep him stable because of the predatory prices, had he not been -- the other block busting drug, that imbruvica --
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i'd like to show another graph, -- since 2013, abbvie have generated 60 million in net revenue from imbruvica, more than a quarter of this amount, or 4.3 billion, came from sales in 2020 alone. during that period, abby raise the prices of the price 19, that's nine times. mr. gonzalez, has the drug efficacy dramatically improve nine times -- >> the drug is basically the same. >> thank you. we all want to incentivize the development of new medicines, we do. but there's a difference between starting a profit and profiteering off of patients and families all over the world. mr. gonzalez, last question, will you commit to lowering the prices to humor and imbruvica in the united states? this is just a yes or no. >> no, i can't commit to that. if you allow me one more minute, i think we are aligned in that
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we want to be part of the solution to lower out of pocket costs for patients. and when i look at medicare -- i use imbruvica as example. to make -- its literally 50 times -- than any other insurance vehicle and make it affordable, we would have to lower the price of imbruvica by 90%. 98% to make the out of pocket affordable for a patient. what that tells you is the structure of these out of pocket is not built for these kinds of medicines. >> the gentlelady's time is expired. the gentleman from south carolina, mr. norment, is now recognized for five minutes. >> thank you, madam chairman. mr. garth wait, pharmaceutical
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companies have paid based on a percentage of the list price, which means your middleman, your distributors, all of them, make more money -- at the patients expense. the insurance is supposed to help existing patients to buy drug such as insulin, which has been around since the fifties. what's 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 cautionary that require that it's based more on the net or the post rebate price as opposed to just a list price. i do think that we have individual purchasing expensive medicines, and it appears part of the motivation of the plan is to generate high cost sharing payments that don't necessarily capture profits themselves, but they use to lower premiums for the rest of
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the market. that's effectively -- from six to healthy patients. and really, on winding some of the benefit of insurance. it certainly on winding the idea of community reading that was very popular among policymaking people and consumers, where you don't pay more for a pre-existing condition. we have to look at things around not having -- i also think you should look at improving the flow of information between planned sponsors and pbm. i think the senate finance committee report on insulin pricing is very interesting to read through, and issues were led to administer of these another non rebate bonds that are floating between manufacturers and pbm. -- they have a bit more information about the flow of funds, so they can negotiate an effective set of prices, rebates, and formulate replacements. >> would you agree that the first half of getting the actual contracts, getting the actual language that you can delve into, would you agree with that? >> i am concerned about the
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fact that there are such strong auditing requirements for planned sponsors. if they want to be able to look at the revenues that they are generating, for the pm, while there are obviously concerns about conventional -- regulations around who can be an audit, or who -- defied the contracts are often only allowed to be reviewed -- at the pbm personality, these are all things that congress could look into in the spirit of improving information, because the market respects with information is common among negotiating parties. well i would like any solutions that you could get to help us do this all of us democrat and republican. the price of drugs particularly those that have been around for seven years, that haven't changed as far as improvements, we need to know and take action. i'm tired of just talking about it. government is good at forming a committee to get another committee to talk about it, but anybody that has any kind of empathy really needs some
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direct things that we can do. anything that you can do i appreciate it. mr. gonzalez, to exclude certain drugs from the formularies to favor others drugs that may be inferior at best. what kind of actions like this have driven up drug prices i guess in the market as a whole but you could cite? >> congressman, i mean generally speaking my experience with pbms and managing formularies is that they tried to design them in a way the formulary in a way to be able to cover a broad set of patients. so he mira is an example. with the formularies the average number of competitive products on that formulary is nine or ten. and that gives enough flexibility to physicians to be able to alternate between different drugs to find the right drug for the patient.
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in some cases maybe a different delivery vehicle. some are injectable, some are you know there's typically a fairly broad set of products that are available. >> but would you agree is trying to get a pbm and their formulary for pricing we nate we need action or seeing contracts that they're going by to make the companies abide by do you agree? >> yes i would agree with that. >> okay madam chairman i yield back. >> the gentleman yields back. the gentlewoman from illinois, miss kelly you are now recognized for five minutes. >> thank you madam chair. one of humorous primary competitors is embroil, and it's an expensive brand name so in a functional competitive market you would expect companies to price their products below their competitors to in order to gain
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market share. so in the case of abbvie and anjem, they would be basically comparing prices with embroil. so is that what we see in the pharmaceutical sector? >> the u.s. pharmaceutical sector especially for brand name drugs and the idea behind patents is to avoid a competitive market and not to provide or to allowed these companies to price drugs at very high levels so what we see particularly with branding competition there, is not substantial price lowering when new products of the market in the u.s.. >> thank you. >> on the screen i would like to put a graph, that shows at the end and gyms pricing. that's from 2003 to 2021 and the lines are so close together it's difficult to tell which is
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which and that is what channel pricing looks like. for almost two decades abbvie and amgen have followed each other's price increases. at that time the price of humira has increased 470%, according to internal company documents obtained by the committee. abbvie viewed amgen price increases as cover for its own price increases. mr. gonzalez in 2012 you received an email from another company saying that it was a quote unquote great weekend. this email is exhibit nine in your package. i hope everyone can see. mr. gonzalez did you view it as a positive development that amgen raise the price of enbrel? just out of curiosity? >> just give me one moment to read it. >> okay.
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>> essentially view this as somebody sending an email and alerted me to the enbrel price increase and then saying have a great weekend. i don't tie those two together. >> okay. >> do you believe that amgen price increase gives abbvie to increase the price of humira? >> no but i think congresswoman, one of the things that does happen in this industry, which is somewhat unique because of the way of rebate pools work is when a competitor raises their price you don't know what the rebate is that the competitor has but what you do know is that you will be at a disadvantage if you don't raise your price. you will be at a disadvantage of how the handle many rebate dollars you'll be able to contribute. so you have seen if there has been some correlation between
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companies but i think it's driven more by this phenomena of how rebate pulls work. you don't want to put yourself at a competitive disadvantage because we still. >> well it does seem like increasing the price of human era is exactly what happened. in july you raise he mirrors price -- and listen three weeks later amgen raise the price of enbrel again. and abbvie says they price their drugs based on the value that those products bring to patients. but emails like this one, it talks about the committee's investigation and it seems to demonstrate that that's not true. and i want to go back to my colleague, i am not trying to do got shoes or things like that, but we need to come to some type of solution. this is ridiculous as you've heard over and over, people have to choose sometime life
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and death. if they can eat or not eat, and we all care about making sure that our citizens and people in the united states can't 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, i mean you have to believe there is >> a problem. congresswoman, i absolutely believe, especially in medicare part, be if there is a significant-y problem -- i would tell you, 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, regardless of their ability to have insurance, can get our drug. and that doesn't mean we don't miss people. but i can tell you, we cover the vast majority. we give away 4.3 billion dollars worth of drugs every year.
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we improve, as i mentioned moments ago, 99% of uninsured people who come to us, we approve and give them free drugs. and in the case of human era, you can have income as high as 380,000 dollars and still qualify for free humira. we are subsidized -- >> with all the things that you guys are doing, there's still a problem. so we are still not doing something right, which other people ask about, because i'm half a tally, and thank you. to >> the gentleman from kentucky, you are recognized for five minutes. >> thank you. my question, my first questions are for professor garthwaite. it's about the villas a shun of operation warp speed by -- the federal government and private companies invested hundreds of millions of dollars to develop manufacture covid-19 vaccine candidates with no guarantee those vaccines would be approved. the result was the first
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vaccine -- approved less than 12 months after the discovery of covid-19, and pre-vaccines approved today -- with this have been done without private company investment and expertise? >> i think it's quite simple to say that we would not have gotten the vaccine as fast as we did with a private company expertise, but i also think it is important and fair to know that we wouldn't have gotten it without a strong involvement of the government, money, in terms of direct financing in terms of the clinical trials, in terms of moderna, but also the advanced market commitments the federal government had that they would buy any product that they get approved. that will limit the market risk of development of drugs, and subsidizing the clinical trials that eliminated some of the scientific risk of developing the drug. >> what could congress do to build on the momentum of operation warp speed to continue investing in treatments and vaccines for other diseases? >> this is a great question, actually. i think that we -- a lot of us want to put the
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pandemic behind us. we have the vaccine, we are trying to move forward, and the people in the united states and globally, they want to come to a solution for this. i think it would be a real shame if you squandered the momentum and information that we have about the importance of investment in vaccines, but all other therapeutics. i think in particular, if congress wants to really work in this area, we need to come up with a solution for developing next generation antibiotics, how we want to funded element of them in paper the marketability. we knew that prior to the pandemic, but we also want to note that the next global disease burden might not be a virus, it might be antibiotic resistant. we need to focus on really developing treatments for the next pandemic and realize that the next pandemic might look very different from covid. >> in today's innovation tech, i believe 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
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estimates. i think the important thing to think about here is how we get drugs in a lot of the pharmaceutical markets -- i disagree vehemently with porter in terms of how to think about innovation. we want, and i think there's lots of, you if we were at the kellogg school, we read a strategy, as i would teach you, the companies, to pay attention to where they are doing and do that. early stage companies are good at developing innovative drugs. later stage companies are good at clinical trials, dealing with the fda, sales and marketing. they all occupy a very valuable place in the supply chain along with the early stage research investment of the nih. you need all of them to bring to market, and we have seen an increasing specialization in the pharmaceutical market, not because of some worry about anticompetitive practices, but because we want those early stage companies to invest. that said, those early stage companies are often going to fail. they will go out of business. so you try to add up what we
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spend on r&d, and you only look at the winners, the people whose drugs work, you are doing a disservice to this conversation. you ought to look at the losers. >> thank you. my last question is for mr. gonzalez. abbvie has received -- patents on camera, and idiot patents on imbruvica. these patents include intellectual property related to the discovery, usage, improvements, and manufacture of these medications. can you explain why so many patents are necessary for these drugs? >> if you look at you mayors example, we were approved for the first indication -- 2013. over the course of the next 14 years, we developed additional disease -- and indications along the way. all of that took research and development, clinical trial, working out dozing and all kinds of technical challenges, and we learned to invest in
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innovation along the way. we applied for pens where we had meaningful innovation to apply for pans, and i think everyone gets somewhat hung up on the number of patents and i say that's partially of function of the patent officers in the u.s. trying to narrow patents so that they are not overly broad, so sometimes you will have an innovation and they will say to you, that's five different things. go back and break them up into five different patents. so that's one of the things that pledges the larger number of that. but the most important thing is this. i can have one patent and if no one can work around that patent, that's all it will take to extend the exclusivity of the product. real innovation is what ultimately gives you the ability to have value in a patent. if you have meaningless patents, frivolous patents, i can file an ipo are at the patent
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offense and have them re-review the patent, and they take down a large number of patents, it's not expensive, it's not hard to do. and also, ultimately, competitors did that with our portfolio. and we prevailed the vast majority of the time. you can litigate, we work around patent sound time. if they are not foundational patents, we try to work around them. if you believe they are invalid, you invalidate them. you only pay royalties and license pens that you believe are fundamental to your ability to create the product. and what is evident here is we have a highly sophisticated companies like amgen and pfizer, they're just like abbvie. they made a decision that it was worth licensing our patent and paying as a royalty. i can tell you, companies don't do that unless they believe those patents are valid and meaningful. we do it. and so i think that's the best
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validation to the level of innovation and the importance of the portfolio. in the u.s. system, if you create something that is inventive, you deserve the right to get protection. and remember one other thing, you license -- 11 years before the last patent expired. the gentleman is time's expired he is recognized next because recognized for five minutes. >> thank you madam chair i appreciate the opportunity. i want to take a moment to address an argument that we keep hearing from the other side each are three and these other structural reforms that we are seeking with future innovation. but we all know the drug companies produce lifesaving therapies and vital medications. that is critical. but we also know that the current situation is untenable.
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and that is what some much of the testimony that we've received and the stories we hear from our constituents and families across the country that's what they indicate. nearly one in three americans say they are unable to take their medications as prescribed because of the cost. one out of three. innovative medications are worthless if people cannot afford them. we have to keep that in mind. and drug manufacturers like abbvie that current prices are necessary to drive innovation and discover new treatments, but that is not true. as the committee investigation reveal, much research the these companies are investing in is not innovative, it just meant to preserve their pricing. according to a 2017 a report, saying novel drugs, those recognized by the fda, have a previous unmet need they are advancing patient care to
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public health, they only counted for 18% of all drug approvals between 2005 and 2016. it is important to note that after hr three passes, and it will pass, drug companies will still make a healthy profit. so doctor will help me out here to drug companies still make money on their drugs abroad? even though these countries negotiate for lower prices? >> they absolutely do, and i agree with you. i think this is one of the big misperceptions i've heard of the day around age are three. hr three is about trying to negotiate prices with respect to branding drugs better and sort of make the market in united states work. and try to ensure that if a drug is is not a new or important drug, then we will pay a high price for it. right now they set the prices the drug companies that prices at whatever they want, and
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medicare and medicaid is required to pay those prices and they don't have a good way of pushing back and negotiating prices. for a really important and useful new drugs, for treating alzheimer's disease, i think that under hr three we would still expect to pay very high price that would make those drugs very profitable to the companies that bring them forward. i think what each are three will do, is it will give the u.s. just like other countries do, the ability to negotiate upfront and say while this drug is worth us paying a high price, and this one is not worth as paying a high price. that's what other countries do and that's how they are able to lower prices on the drugs of a pay for and that is not what we do. >> that is excellent. you basically are describing a value proposition here. the value of that drug is worth paying for, then the market will reflect that. when medicare goes into the market, the almighty market to
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negotiate. that is all we are trying to accomplish here. what's been done in other places around the world. the other thing i will just mention, and you know this for sure, is the government research that plays a huge role in drug development. so taxpayers are investors here. so taxpayers are investing on the front and a lot of the time when it comes to the trajectory of these medications and drugs. but then having to pay again on the back end exorbitant lee because of all these maneuvers that the industries managed to embrace, so i will just close with this madam chair, i don't really expect mr. gonzalez or other pharmaceutical executives to behave any differently than they are. there is a profit making incentive here that is guiding them, sadly the executive
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compensation is i think is laid bare by the congresswoman reporter, and congress congressman welch and others is operating to drive a lot of this behavior and conduct and there's not a whole lot we can do about that. so mr. gonzales and others 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 hearing and i yield back my time. >> the gentleman yields back. the gentleman from california, is recognized for five minutes. >> thank you madam chairwoman, thank you so much for this forum and i feel their predecessor mr. cummings spirit
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in the room today. so mr. gonzales, i am a survivor of seattle. i have some of your product here. this product cost about 15,000 dollars. and my treatment for one pillow day, was about 500 dollars and in australia it cost 30 dollars. 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 american subsidized people in other countries. i'm grateful for the development 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 bankruptcy for american citizens, are because of medical bills. so in addition to have to struggle with the issues around this product, people are going
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bankrupt because of it. and if the trade-off is for you and your executives to make more money, i think that's a question that the american public should be aware of. in addition to the fact of where the subsidizing australians. but i want to ask you a few questions. in 2018, abby became they started selling a formulation a new formulation citric free of human era. so is that correct internal police? >> that is correct. mr. gonzalez i want to put up a 211 strategy presentation, this is exhibit eight in your materials. if you turn to page 11 you will see it. this chart identifies the benefits of various research products that heavy was engaged in in the left collagen column, and for humira high concentration formulation, the presentation identifies bile similar defense as one of the
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benefits. by a similar defense, mr. gonzales is another way of saying you are protected from competition of bio similar's getting into the market is that a correct a characterization? >> i'm actually trying to read the page, you said page eight? correct page eight? >> no page 11 is what i said. and i will continue >> i have it now. >> so that was the question of bile similar defense? that means and i understand you have to be you have an obligation to your shareholders and your investors, you're trying to defend against bio simulators getting into the market sooner correct? >> i don't believe that is what that means. what it means is we are working on a formulation which would reduce pain upon injection.
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there were multiple aspects of that, a smaller needle, high concentration and removing the sit trait buffer. >> okay. >> it was a differentiated product for patients. >> i'm sorry for interrupting i would love to take more time. let's put up another slide, this time from the board of directors in 2015. this is exhibit 17. it is the first slide. and if that is up. the presentation states, our defense strategy remains the same. and the second bullet below, a mutual property it says quote, gain approval eu, u.s. of him era high concentration and quote. and both of the slides there is no designation for reducing patients pain. earlier you said that abbvie introduced high concentration formulation in 2018 correct?
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>> correct. >> fda approved it in 2015. why did you wait three years to bring the product out? >> it had the fda approval? >> we had to build up the manufacturing capacity, it requires different manufacturing capacity. so we introduced it first in just pediatric patients, because that's where the need was the greatest. then we move forward from that to offer it on a more broad scale market. >> some skeptics would say, the reason for the delay was to wait until the vile similar manufacturers had already put developed significant amount into the original formulation. so we shifted patience to high concentration formulation. this anticompetitive strategy is commonly preferred to as product upping. this is an unfair of description is that a fair description of what's happening?
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>> to your point a moment ago, congressman, when we launched in europe the majority of bile similar's head situate free high concentration products. it's not like this did anything to inhibit their ability to do that. the second thing i can say is, both products are still on the market in the united states so that won't change the ability for a bile similar to come to the market. ultimately we licensed our settlement agreements all the ip that we have. whether it's high concentration or situate free. so there would be no difficulty for bile similar to come forward in the marketplace. >> again munch air before i yield back. i know we spent a lot of time -- this is a cancer survivor caucus. we would like to see your books. to see how much money goes into research and development, and
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how much of it goes to financial innovation. i yield back. >> the gentlelady from massachusetts. miss pressley is recognized for five minutes. >> thank you madam chair, the patients taking abbvie number one drug humira has joint fatigue and rheumatoid us right this. veronica thing here is this medication is help meant to help people, to alleviate the hurt and pain. but due to the study, price increases abby is causing more physical pain. mental hurt, and financial hardship as well. this cost of prescription drugs is causing strife and pain for families across the nation, and you may be hearing these sobering and that ridging accounts, people are more fatigued by living them and experience them daily. i heard from people a well in my district who are forced to cut pills in half to make them
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last. people who are paying medication costs that are the equivalent of a college tuition. state college. at times even exceeding that. heart wrenching and unjust choices. people are making simply to survive. and these individuals 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 costs. and drug prices. and one five reported, taking fewer medications then prescribed due to cost. madam chair i would like to enter that 2013 research study from university of north carolina for the record. >> without objection. >> from your experience serving families in my district, how can trade-offs like these impact the patients overall health? >> very substantially.
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a lot of patients struggle with high drug prices and come looking for ways of trying to address those. people will be coming to my office and 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 and they have to jump through. as and sometimes there is that charity you know it only lasted a certain amount of time the ends, so this is a major issue and it makes people stop taking their medications, and have to make difficult decisions about other spending in their lives as well. >> thank you. mr. gonzales you know your pricing has very real impacts on patients lives, but can we review the 400 complaints from patients and caregivers begging you to lower the price of human era, yet your company
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repeatedly does the opposite, and takes away relief that these patients should have. according to your patent of 2016, there is still no competition in the u.s. market. according to documents that the committee received is part of our investigation, on page nine, an exhibit 14, at the executives predicted human error would have three to five bile similar competitors in the u.s. by the first quarter of 2017. mr. gonzales did that prediction come to pass yes or no? >> no. >> it did not that's right. using a variety of anticompetitive practices, at the has come suppressed marketing comparative products until 2023. mr. gonzalez, would you admit the lack of competition with the government where the government has to pay more, and patients have to make greater
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sacrifices is that a yes or no? >> i would like to address. >> yes or no mr. gonzales. >> we our patients having to pay more make greater sacrifices. as these own prices estimate this will cost the u.s. health care system 19 billion dollars an estimated amount for patients it will cost them their physical and psychological and financial health. we live in the richest country on the planet, yet drug prices are so high that people cannot afford to live happy, healthy and longer lives. people demand deserve and require better from abbvie and all other price gouging drug companies. thank you and i yield back. >> the gentlelady yields back. the gentleman from california, vice chair gomez is recognized for five minutes. >> thank you madam chair. i wanted to focus in on part of
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mr. gonzalez his testimony, he mentions abbvie use of a patient system or program. which we look at last fall. but before i go on to mr. gonzales, dr. kassl are, is it fair to say that companies like abbvie benefit from third-party patients assistance? >> yes they do. >> thank you and one of those third-party foundations, it's the patient access network. and mr. gonzalez your company gives donations to this company? >> correct. >> i would like to show a 2017 email, to add these director of patient access program. this is exhibit 27 in your package. >> in this email mr. cline is seeking a donation from your company, to help offset the
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cost of the drug he mira. he wrote quote, we also know these patients would be much more likely to start and state on treatment if they were not stymied by high out of pocket costs. mr. cline is essentially saying, by making a donation to his foundation at the will be able to attract and retain more humane era patience. our donations mr. gonzales, our donations to patient assistant foundations is a part of your strategy to increase sales? >> no they are not. we do it as a donation because we feel it's appropriate, we do it by disease state and the foundation is not required to use our drug. >> thank you thank you so much. >> mr. gonzales i would like to switch gears. i understand that abbvie co-promotes your cancer drug imbruvica with jansen pharmaceuticals. so that means your company market the sales and marketing
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strategy for the struck correct? >> that is correct. >> but abbvie subsidiary, pharma cyclic's, leaves leads the sales correct? >> that is correct. >> in 2017 abbvie and janssen executives, went to look at improved sales growth in existing and new indications. this is exhibit 24 in your package. a church on page 22, of the presentation breaks down to proposed spending for the next fiscal year. the chart includes a line item, for foundations. with a proposed quote collaboration spent and 55 million in 2017. this is the largest single proposed increase in any single item. elaboration spend is the amount to companies we spent together
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correct? >> i'm not familiar with this document. i would seem so yes. >> let me ask you again, or donations to patients assistance foundation part of your strategy to maximize sales yesterday? >> no. >> mr. gonzalez, you also said that you provide your patience assistant program provides one year free drug cost correct? >> that is correct. >> what happens to the patient after that one year? >> they reapply, and refunded. >> the reason i'm asking this is because we understand that a lot of the investment, everything from research to marketing also the donations to these foundations is all taken
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in into the price taken into consideration of the price of drug. it might appear it is a it is something that is altruistic, but you also get tax write offs, and other benefits. i am one of the few members of this committee who also serves on the ways and means committee. which is the tax committee. a lot of the programs that you're talking about, is just a way to get people hooked on these drugs that are high costs, in the long term. and that they also are not meant to really, you know subsidize the patient but that's really not what you're going after. really these drug companies are going after the spend from the insurance companies. increasing the number of people that are on the drug, but also increasing the amount of money that you are receiving. one of the things that we need to do is we understand that the system is broken.
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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. >> he yields back i think and for a statement. before we close, i would like to offer the ranking member an opportunity for any closing remarks. ranking member you are now recognized. >> thank you madam chair, i just want to be very clear what the republican position is. we strongly support a patent system that encourages innovation. however we certainly don't want to see a patent system that is abused. and there are always going to be bad actors. 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 and the house democrats have lost a
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lot of credibility. when we talk about the patent system. and 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 origin nation of the covid-19 vaccine. so we have some credibility issues on the other side of the aisle with respect to that system. nobody wants to see price gouging, nobody wants to see excessive ceo pay on the backs of hardworking 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 is a way that we can come to terms and protect our patent system, because it
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takes investment. private sector investment to come up with the cures for all the diseases that we want cured in america. at the same time, we have to make sure that the patent system is not abused. so i 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 madam chair i yield back. >> thank you the gentleman yields back. and before i close i would like to enter into the records 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
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project. the health and advocacy summit. the marilyn citizens health initiative. treatment action group and many more. i ask unanimous consent, that these the materials that are entered into the record the official hearing record. >> so ordered. >> at the beginning of today's hearing, we heard from patients. their stories people who have struggled to afford add these products. including humira and imbruvica. abbvie ceo mr. richard gonzalez set to cast blame on others for abbvie 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 video
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of over 170,000 pages of abbvie own documents and data. these documents show that abbvie intentionally targeted the u.s. for higher prices, as it cut prices in the rest of the world. and mr. gonzales had 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 internal data shows that medicare would've saved billions of dollars had been able to negotiate directly with the company. the documents also show that the financial assistance for patients that abbvie provides are not charity they make
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abbvie more money by having more patients use their products. abbvie has also claimed it needs to charge high prices to stimulate innovation. but the company's own internal documents show, that much of its research bred budget is dedicated to suppressing competition. abbvie also employed possibly illegal anti competitive tactics to delay lower prices of bile similar's coming to market. those tactics lead 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 that americans no longer have to choose between taking the lifesaving medication or paying their rent and putting food on their table. we must pass hr three, which
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would finally empower medicare to negotiate lower prices just like the defense department, and the va had already done, and that foreign countries do. and we must pass legislation to crack down on abbvie's abuses so the 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 whole the cost the high cost, by skyrocketing drug prices to join me and pushing for these reforms. this should be a bipartisan issue. i hope we can all agree, that no person should go without potentially lifesaving treatment in this country. now let's act together and let's do something about it. let's help the american people. i thank everyone who
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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. with that and without objection, all members have five days in which to submit extraneous materials, and to submit additional questions for the witnesses through their chair. that will be forwarded to the witnesses for their response. i ask our witnesses, to please respond as promptly as they are able to. i
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