Committee. This first portion is just under three hours. [inaudible conversations] the Senate Committee on health, education, labor and pensions will come to order. Today is a busy day. As we all know very important both will be taking place, republicans of knickers will be meeting in their caucuses so people are going to be coming in and out. I also think that this hearing is important enough that we extend the time for questioning from the usual five minutes to seven minutes, if thats okay with folks. Let me begin by welcoming the ceos of Bristol Myers squibb, chris berner, we thank you for being here. Ceo merck robert davis, we thank you for being here. And the Seahawks Johnson johnson Joaquin Duato for being with us this morning. Thanks very much. There is a lot of discussion in our nation about how divided our people are on many issues. And that is absolutely true, but on one of the most important issues facing our country, the American People whether democrats, republicans come in the pesco conservatives, progresses could not be more united. And that is the need to substantially lower the outrageous price of Prescription Drugs in this country. According to a recent poll, 82 of americans say the cost of Prescription Drugs is too high, and 73 say that the government is not doing enough to regulate drug prices. As a nation we spent almost twice as much per capita on health care as to the people of any other country. 13,000 for every man, woman and child. And one of the reasons that we spend so much is the high cost of Prescription Drugs in our country. The outrageous cost of Prescription Drugs in america means that one out of four of our people go to the doctor, get a prescription, and they cannot afford to fill that prescription. How many die as result of that, how many suffer unnecessarily, nobody knows. But my guess is it is in the millions and i talked to many of them in vermont and around the country. Meanwhile, our insurance premiums are much higher than they should be, and hospital costs are soaring because of the high cost of Prescription Drugs. Further, the cost of Prescription Drugs in this country is putting an enormous burden on taxpayers and seniors by raising the cost of medicare and medicaid. Medicare alone spends at least 135 billion a year on Prescription Drugs. This is not only a personal issue, it is an issue of the federal budget. Meanwhile, as we pay by far the highest prices in the world for Prescription Drugs, ten of the Top Pharmaceutical Companies in america made over 110 billion in profits in 2022. They are doing phenomenally well while americans cannot afford the cost of the medicine they need, and the ceos in general receive exorbitant compensation packages. This morning we are going to hear a lot from our ceo panelists about how high prices are not their fault, and that the pbms are forcing americans to pay much higher prices than they should be paying. Use clea. Opportunity tongthrough. It is our commitment to continue to bring down the price of medicines in the u. S. And i would love the opportunity to bring down the price in the u. S. Our net prices, what we are compensated have actually the last five years declined. At that same time, the list prices have increased. Why is that . Because the complexity of the system and the billions of dollars in rebates that we have provided to inter immediate arearies that unfortunately do not go to lowering the price of medicines like the patient you just described. Again, i apologize. I want to get briefly to Johnson Johnson. Mr. Duato, is it true that the list price of solara is 79,000 a year in the u. S. . Its roughly right, but also true that the discount of 70 . Weve dealt with pbms, and im sure we get to it this morning. And is it true when charging 79,000 in the United States the exact product is sold in spain for 18,000 . I dont know the price in spain. I can tell you that the discount in the u. S. Is 70 , so the price that you quote is 30 of that. Okay. Mr. Duato, is it true that it costs less than 15 a year to manufacture so solaro. The manufacturing price, were looking at the value the medicine brings to the Health Care System and we continue to invest in research, 15 billion last year and also we look at affordability. The copay if they use our copay Assistance Programs in the u. S. For patients using is 10 to 15 per month. I apologize, im over my time and going to give senator cassidy the same time that i had. Thank you all. Mr. Duato, in 2021, janzen constructed a contract for a blockbuster drug, changed the outcome for people with uc. But this deal protected remicade from competition by a new biosimilar, that was launched at a lower cost than remicade. I understand that this is confidential in terms of the settlement with the courts, but and by the way, let me just say this involves a rebate wall so for the sake of those watching, a rebate wall is an anticompetitive tool which can be used to restrict a competitors entry into a formulary. A manufacturer would offer more significant rebates to a health plan through a pbm potentially the pbm blocking the biosimilar. We have been looking at biosimilars to lower the cost in a marketoriented competitive way. If we are re not going to have government regulation, we need a market, but this blocks it from entering. So, in the full support of a market Oriented Approach, do any of your current contracts employ rebate walls to prevent lower cost biosimilars from formulary access . We welcome biosimilars and generics, and a part of the system, as a matter of fact in the u. S. , 90 of the prescriptions are biosimilars and thats one of the reasons that pharmaceutical expenses have remained flat or increasing during the last years. We believe that biosimilars force the Patient Access and we care deeply about it. But let me ask, because my specific question, do any of your current contracts employ rebate walls . Our current contracts do not contain any techniques, biosimilars in the market. Thank you. I think two of you, maybe three of you have been working on gene therapy. Ive been really concerned we dont know how were going to price those. One of the concerns, there will not be a market for us to lower the cost of initial gene therapy which are incredible. Its amazing the lifetime of benefit that gene therapy can create, but i was speaking to a medical director of medicaid cmo, and he was telling me that the pharmaceutical cost related to medicaid is now 35 where formerly it was like 25 or 30 and he says its being driven by gene therapy. And when sickle cell comes widely spread, i dont know how its priced, but my state has a lot of sicklers, i dont know how my state is going to afford giving it to everybody that should have access. Very concisely, how are we going to show restraint on the price of some of these new gene therapies which already is driving up medicaid so again, 35 of medicaid is now pharmaceutical costs . Ill start with you. Senator, we dont work in gene therapy. Mr. Davis. We dont work in gene therapy. I thought i saw press, where you did a vector or. Mr. Duato. We have a we support legislation for based gene therapy and we welcome legislation in order to have valuebased contracts. Thats good. Valuebased contracts will be important, but still doesnt address the opening cost because the opening cost is sky high, you still, you see where im going with that. What would you give to us who believe in Market Solution to an opening price that would be so much that it would be difficult for society to afford the gene therapy . And i could put in any other drug. Lets start with gene therapy. We have to look at the value of these therapies and the fact that gene therapy for diseases may affect only less than a thousand people in the world so we have to understand that and you can rest assured that if we are fortunate enough to bring the solution to people that has this, that can lead to blindness and we sit down and evaluate very thoroughly our pricing in order to make sure that patients, all patients that need this therapy are able to afford it. I think i recall a couple of years ago, a study shown, respected, you probably know it better than i that 2 million for gene therapy was a reasonable sort of it would cover the cost and create the incentive to do more and that would be where you wouldnt have the ability to produce more. Obviously the more you produce, the more you get extra profit. You know where im going with that. So, but that shows restraint, if you will, on behalf of the manufacturer. Now, i want to create incentive, but we want to be able to provide access. And without access, its as if the drug is never invented. So, is there any other thoughts you have on how society, if thats ultra rare, 2 million or not ultra rare, less . How could we have a market Oriented Approach to this . Because im truly concerned about the Medicaid Program to be able to afford some of these gene therapies. We care deeply, but our nations getting to the patients, and ultra Rare Diseases that, therapy can have life changing consequences. So we will always sit down and make sure that the way we price is reflective of the value of the medicine, but also important, it enables affordability and it makes it possible that every patient that is in the affordability, were defining it for the patient. If medicaid covers it, its affordable for the patients or insurance does, but that doesnt necessarily make it affordable for society and societys got to pay for it and obviously, medicaid is taking more and more of the states budget and frankly, more of the federal budget. We want market Oriented Solutions and incentives so that Good Companies like the three of you and others are making new things. If my state goes bankrupt paying for a new gene therapy, then my state, the taxpayers, were all in tough shape. Let me go to one more thing. Theres evidence that pharmaceutical companies do, the longevity of the drug, and some argue it defeats innovation, because if theres profit from innovation you could make profit from Life Cycle Management. Any thoughts about that . Senator, i think that Life Cycle Management if you think about the new product is incredibly important to really being able to deliver additional benefits to patient. Obviously, the patents associated with any product will dictate when a generic enters. We have been in favor of a robust generic entry primarily because our locust our focus is on innovative products. In cancer, start with the disease, learn more how it works and ultimately bring it know early stage cancer where you have the potential to potentially cure patients. That takes quite a bit of time, but thats an example of Life Cycle Management where youre showing the True Potential of a medicine. I would hate for us to cut off the opportunity to show those benefits. At the same time, we should be as an industry welcoming of generic competition because ultimately, our focus as a company is to take resources as we get close to generic entry and focus on the next wave of new Product Innovation which is ultimately where we want to go for patients. Mr. Davis, 20 seconds. What would you do . Well, the short answer, as i look at it, one, we very much support generic drugs, biosimilar drugs, thats the core of how our system works. We have a period where were protected and able to recoup our objective and society benefits in perpetuity. And we ask, are we benefitting the patient. Keytruda, 39 indications across 17 tumor types, its revolutionizing the care of patients facing cancer. The reality only 30 of people show overall response. As great as it is, patients are still suffering. Were investing in Combination Therapies to go beyond that 30 which means much better benefit and value to the patients that will ultimately use those drugs. Thank you. Senator murphy. Thank you very much, mr. Chairman. Thank you for holding this really important hearing. Mr. Duato, looking at your arthritis drug and weve talked already a little in this hearing about the difference in price between the United States and other countries annual costs around 80,000 in the United States, 20,000 in canada, 12,000 in france, are the prices that you receive from a country like canada or france, which look to me to be about one quarter of the price that you get from the United States, are those prices covering your costs . Yes, they do. To clarify, senator, the price in the u. S. Is discounted by 70 so the comparison would be 25,000 in the case of solara if youre considering that price. Are the prices youre receiving from these other countries, so lets say france, ill give you the benefit of your argument, france is still 50 of the u. S. Cost that youre claiming. Are those are those countries prices cover your cost . They do. The difference is that the first country you quoted musto lara not for arthritis. Canadian patients come in they cannot do it in the public system because eight years later is not yet reimbursed there. So you dont identify any syndrome today in which the United States is paying higher prices allowing other nations to receive lower prices . I agree with you that the prices in the u. S. Are generally higher for medicines. More aligned with what you are describing. The rest of the healthcare prices are. The percentage of pharmaceutical costs lower than most of the advanced economies. The real difference is that in the u. S. Come up patient get access to their become a life saving therapy years before they do in the context that you mentioned. If the United States were to restrict the prices we paid come up with that create a different negotiating dynamic in countries that right now, for instance are paying 50 of what the United States pays. Would it allow you in your negotiations to get higher prices from other nations that right now are paying far less than the United States . We left that price cap coming out the way that innovation is going to foster. We have work with the United States department and u. S. Ambassador to try to predict the price caps that some countries, the ones you mentioned. We welcome the support and avoiding not benefiting their patients neither. Would you say to americans to look at the way you allocate revenue and wonder why, in your case for instance, you are spending 6 billion on stock buybacks, 11 billion on dividends, and 14 million on research and development. You spend all of your advertising time talking about the research and development. I think most americans would be pretty surprised given how much the industry talks about research and development, that you are actually spending more money shelling out money to investors and buying back stock. Then you are on research and development. What you say to folks who look at that and come to the conclusion that you care much more keeping your investors happy and keeping executives happy then you do in researching and development, the next class of drugs is going to help regulate . We care deeply about being able to discover the next medicines. But explained to me how you justify that division of dividends and stock buybacks . You can just choose instead of using 6 million to buy back stock to put into research and development but you dont. In the two years that refer to the program by back which was 2022. It six times higher. In that period we invested 30 million and 6 million in the stock buyback. We spent six times more in developing than we did in the stock buyback. Im looking at 2022 by Johnson Johnson. It shows me 11 billion in dividends, 6 billion in stock buybacks, 45 million in executive compensation and 14 billion in research and development. Let me ask you a different question. Do you understand one of my constituents would look at those numbers and think that you care more about adding to the pockets of the folks that work for you and invest in you that in research and development . We have sent 77 billion since 2016. We have to pay dividends because its the only way that the company can remain operational and sustainable. We are not able to fulfill and making them affordable. You talking her testimony about the United States has a Healthcare System that prioritizes. I want to ask you about the choices that she faces. I have a constituent who needs a blood thinner that is critical to her survival. She has the medicare pan that gets her the best possible price. That price is 350 a month. The average Social Security benefit is about 7000 dollars a month. And of course somebody who is on eliquis is likely on other drugs as well. Here is her choice. Her choices to pay the 350 and go without food or pay her rent, or not take the drug and risk heart attack or stroke. Is that the choice you are talking about when you refer to a Healthcare System that prioritizes the Important Role of choice . Senator, absolutely not. In fact, i would say on behalf of all of our employees at bristolmyers, that is a choice no patient has to make. She makes it because you have choice and to price a drug at a point that is not affordable. Senator, we have priced eliquis in the u. S. In our estimation like we try to do for all of her medicines, consistent with the value it brings. We are very happy with the fact that eliquis is th