The committee on health, education, pensions and labor will please come to order. Senator murray and i will each have a statement and we will introduce witnesses. After the testimony senators will have five minutes of questions. There is a vote scheduled for 10 30. I think we will continue right 10 45. Until 10 4 and then we will alternate going back to vote. I think we will have time for all the witnesses testimony before we have to leave for the vote. We are holding the second in a series on Prescription Drug costs in response to a bipartisan request led by senators cassidy, senator franken, along with senators sanders,white house, and warren, as well as other senators who are interested in this object. Not only was the request for these hearings bipartisan, but both his hearing and the first hearing on drug prices were bipartisan, which means senator murray and i agreed on the witnesses. Despite this, our first hearing in june went so far off track that i delayed this hearing , instead oftors talking about drug prices, wanted to talk about other issues, specifically the Affordable Care act. Nowledge their deep feelings, but we have been stuck in a stalemate over what is a small part of health care. The individual Health Insurance market, where 7 purchase Health Insurance. Senator murray and i have been working to see if we can find within the senate a limited consensus, bipartisan agreement to stabilize the individual market in the interim. But there are many other issues that have caused Health Care Spending in this country to grow from consuming 9 of the gdp in 1980 to nearly 18 in 2015 and a predicted 20 in 2025. We need to look at all aspects of Health Care Spending. The 15 or so we spend on Prescription Drugs, including retail and Prescription Drugs administering hospitals, and the other 85 of Health Care Spending, which includes doctor visits, surgery, and medical devices, and ways to get these costs under control. We are having hearing on thursday to discuss wellness and Healthy Lifestyle changes. How they can discrete decreased serious illnesses and bring down health care costs. While they are free to say and do whatever they wish, i would hope we can focus on the cost of Prescription Drugs while we have these excellent witnesses before us. There will be a third hearing to consider a report norm augustine is issuing from the academy of sciences. The study,ult of ensuring Patient Access to affordable drug therapies. Set a good example of bipartisan success in the fda user agreement. This committee worked with our counterparts in the house to update and past user fee agreements. It included agreements for many senators on both sides of the including additional staff and resources to the fda. Generic drugs provide more competition and lower drug costs. Committee worked together on 21st century cures, to spur the development of new drugs and treatments. Ingoal is to continue these a bipartisan way to learn the facts about what goes into the price patients pay when picking up prescriptions and what steps we can agree on to lower the prices. We are at the middle of a remarkable time in producing amazing discoveries for patients. We have drugs that can cure hepatitis c, keep cancer at bay, and stop a stroke. With this innovation comes new challenges. We need to make sure all patients can benefit. The cost of new drugs are often too much for them to afford. We need to make sure any action we take does not jeopardize the innovation and the breakthroughs. The Prescription DrugDelivery System, how it drug gets from the manufacture to the patient, is complicated. More than 4. 4 billion prescriptions are written for drugs each year for americans who then pick up these prescriptions at 60,000 drugstores, or receive them from doctors or hospitals, or online pharmacies. Those 4. 4 billion prescriptions and 50d to cost four billion, paid for in a similarly, located way, what you will hear about today. In addition to private insurance, many are subsidized. 340b, Medicare Part b and d. Patients often pay a set amount, called up copay. Or coinsurance. Have tos, patients cover the whole cost, if they have not met their deductible. What amount of the cost of the Prescription Drug may take as determined by what Health Insurance they may have. Today willwitnesses help us understand the Drug Delivery system and how their role in the system affects the pay. Patients eyewitnesses recommend the Brand Manufacturers who take and normas risks, who have grown to make up 89 of all prescriptions. Lowering costs. Drug wholesalers who purchase drugs for manufacturers and deliver them all over. Managers who use buying power to leverage lower prices on all drugs, but also make decisions on drugs to offer patients at what cost. And of course, pharmacists, on the front lines of helping patients find that the cost of their medications at the drugstore, and having it meet within their budgets. We hope to adjust the fundamental cause of health care, hope we can continue to do this in a bipartisan way. Senator murray . Senator murray thank you for having these hearings. I think ill examples sides of the aisle for their commitment to address the critical challenge before us today, the increasing burden and soaring prices of Prescription Drugs. Ont like our last hearing the devastation caused by the opioid crisis, this is truly an urgent discussion. From so many families forced to choose between highpriced medication and paying their bills, between filling a prescription or putting food on the table, and between getting the care they need, or paying the mortgage or putting gas in the tank. This is clearly a challenge we need to meet and need it quickly. Fortunately we have taken some steps in the right direction. Working tod we are increase transparency and foster competition in the generic drug market in the fda reauthorization act. From bothgestions sides, we were able to accelerate the review of relieve that can anticompetitive markets, improve the process for bringing a generic market, by increasing transparency, between fda in manufacturers, encourage new companies to compete, and prevent gaming of the orphan drug act. Competitiongeneric alone will not address the high prices paid by so many patients and families with out of outofpocket costs and high premiums. We have to get rid of the problem facing patients, which is the high prices set by drug manufacturers. That is why i am glad democrats to demandorward ideas transparency from pharmaceutical companies about what is behind drug prices, allow medicare to negotiate fair prices for Prescription Drugs, prevent manufacturers from engaging in price gouging, and crack down on the various anticompetitive practices that keep prices high. These measures would make a real difference for bringing down prices. This administration has to be our partner, not a hindrance. As resolve saw last week, President Trump continue to take unilateral steps to increase premiums and undermine protections for people with preexisting conditions, and cause chaos in our Health Care System. That pattern of governing by sabotage is reckless and it, iing, and only makes believe, mark critical that Congress Shows patients and families we can Work Together to undo the damage caused and move on to doing good when it comes to families and health care. Like so many other issues, President Trump talks a big game on twitter but has not taken any action to lower drug prices. The little we have seen from this administration, a leaked executive order order in july, barely scratches the surface. Instead, many of the plans would do little to target drug prices. Some have actually targeted that programs like 340b, support hospitals and clinics serving communities that cannot afford the drugs they need to stay healthy. I hope the administration chooses a different path. I would note that President Trump could start by nominating a secretary of health and Human Services who would put Families First when it comes to Prescription Drug prices. I expect a thorough and rigorous nomination process when that comes. They have a very Important Role to play. We have a lot to cover and the one i think our witnesses for joining us. We are looking for to your testimony. I want to thank chairman alexander and our colleagues for their efforts to tackle this pressing challenge to make sure Prescription Medication and lifesaving treatments are not just available, but accessible and affordable. Workhopeful our bipartisan on stabilization can lay the groundwork for serious actions under prices, given we all agree this is a priority. Patients and families we serve cannot wait much longer. Thank you for creating a bipartisan environment where we can work ahead on trying to stabilize individual Health Insurance market and begin to move away from Health Insurance, to the larger issues affecting health care, such as drug prices. We think the witnesses for coming thank the witnesses for coming. I ask you to summarize your statements in the five minutes, that gives senators time to ask questions. Pharma. T is riley at phrma. Thatthe trade association has distributors and suppliers. The Senior Vice President for Government Affairs in general counsel, representing Prescription Drug wholesalers. Welcome, to you. And chiefesident executive of the National Group that represents americas pharmacy benefit managers. And thomas is the executive director and chief executive of the largest association of pharmacists in the United States. Ms. Reilly, lets begin with you and then hear from each witness. Lly thank you for having me here today. , theyhe past 20 years have approved more than 500 new medicines to market. Through innovation, the hivaids death rate has dropped 86 preset in this country, from the mid1990s. Progress that has been made in the face of oncology has been heralded drug spending growth is actually declining from its peak in 2014. In fact, last year restriction drugs bending cost rose 3 5 according to public and i experts in line with all other terms of spending growth. In nonretail and physician 14 nistered drugs remains of what we spend in terms of total Health Care Dollars in this country. When people talk about that 14 , there is a presumption that all of that comes back to the brand name manufacturer. In fact, less than half of that percent, about 6. 8 is it what we spend on total health or in this country comes back to the brand name industry. The rest goes to the generic history and others in the supply chain. Of the supplypart chain that is not here with us today is the hospital sector. Just this morning we released a paper that looked at 20 of the commonly most prescribed medicines and hospital and outpatient settings. On average, host itll increase our hospitals increase in a theyursed 2. 5 cost purchase medicines in this country. I hope we talk about that more later today. Going outward over the next decade, netizens are protected to remain at around 14 . For many questioned how they can possibly be the case, we know its in the pipeline. Over the next 10 years were likely to have 4045 medicines approved every single year. The reality is we have some of the most stringent costcontainment across the entire health care sector. Pharmacy benefit managers use the fact that theres a great deal of competition within therapeutic areas to limit formularies to place medicines on high costsharing tears and to use a host of utilization management techniques to keep costs under control. Over the next five years, over 100 billion worth of medicines will become an off patent and those will become generic and cheaper for americans going forward. About three pharmacy benefit managers today by on behalf of 75 of all prescriptions in this country. Because of the leverage they can exert, in 2015 they were able to secure over 100 and dollars in rebates and discounts. Unfortunately, whats happening today is those rebates and discounts often are not making their way back to patient at pointofsale. Compounding the problem is today an increasing number of patients have high cost sharing for their medicines, either because they have a deductible, today 50 of commercially insured patients have a deductible for their medicine. They are asked to pay a list price, a nonnegotiated price for their medicine. There are solutions we think could be put forth to address some of the cost challenges we face. The first one is the fact that 100 billion of discounts and rebates should find its way back to patients at the Retail Pharmacy level. Those discounts should be passed back to patients to lower their health care costs. We also need to do more to reform government rules around how companies can contract today. There is a desire to move our Health Care System for contracting for now you but today because of government rules and regulations it makes it harder to have sensible contracting. Third, we need to look at program like the 340b that provided important benefit in hospital we know sector often hospitals are increasing the price of their three times and are getting reimbursed three times as much as the manufacturer is getting reimbursed with a medicine. Last company just be the approval of new and Generic Medicines to the marketplace. Competition is the best edison to lowering costs over the longterm equity to build on the work is committee passed to continue to modernize the fda to have efficient and Safe Delivery of new medicine and new generic medicine. Future progress is needed in patients are waiting for the kind of innovation our sector can deliver. Thank you very much. Riley. K you, ms. Mr. Davis, welcome. Thank you, members of the committee. Thery much appreciate invitation to testify here today. The association for accessible medicine is the nations leading trade association for men acting. Our members actually manufacture more than 90 of all the Generic Pharmaceuticals dispensed in the United States, providing tens of thousands of jobs in over 100 empty facilities throughout the country and manufacture more than 61 billion doses of medication every year herein the United States. The core mission is to improve the lives of patients by. Dvancing timely access on behalf of our members, let me begin by thanking the committee are convening todays hearing to examine the critical challenge of rising drug prices and your leadership in reauthorizing the programs earlier this year, most our programs. Or Generic Medicines currently 89 of all prescriptions dispensed in the u. S. We account for only 26 of all expenditures on Prescription Drug. Saving patients and payers nearly 5 billion every week. Last year use of Generic Medicines say 200 83 billion to the u. S. Health care system. That translates into meaningful Patient Access. Generics operate currently in a anlationary market, not inflationary market, and thats an important context. Consider that in the past month, prescription brands have gone down by seven cents while revenue has a slightly. By contrast, generic prescriptions have gone up 2 year over year while revenue has declined by 13 . Easy to recognize the significant difference between generic and brand name Prescription Drug when it comes to prices that we often the at the pharmacy counter. The dramatic difference in how brand and generic drug market operate is not as widely understood. When generics interto provide competition to a brand monopoly, payers typically shift away on the rebate model of reimbursement you often hear about and rely on Distribution Channels to actively lower the price of edison. Generics therefore compete for sales because the products i didnt, commonly the only leveraged generic manufactures have is the ability to lower price and guaranty volume. This creates theres competition in the marketplace amongst our members which in turn causes prices to decline. The reality is that markets for brand and generics are very different, monopolize versus and these create vastly different incentives for all stakeholders in the supply chain. This reality was most recently examined and affirmed through a report issued by the university of Southern California center for Health Policy entitled the the of money through pharmaceutical distribution system. Among the findings, they capture significantly more revenue spent on generic sound brands. For every 100 spent on dispensing a generic medicine, promptly 65 goes to. Istribution in todays market, consolidation in the wholesaler and has ledtor market generic manufacturers with a small number of largescale. Essentially prepurchase and they account for 90 of all sales all generic any factors. That hasy a market three largescale purchasers is going to see sickne