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Executive Summary

MERCK, PFIZER AND UPJOHN TO TESTIFY FEB. 22 BEFORE REP. WAXMAN (D-Calif.) on international drug pricing. The three manufacturers will be part of the fourth and final panel at the hearing. Appearing with the corporate witnesses at the end of the hearing will be representatives of the Pharmaceutical Manufacturers Association, the University of Minnesota College of Pharmacy, and the MIT School of Management. The point-of-departure for the hearing will be a description of the General Accounting Office's comparative report on pricing in Canada and the U.S. That report, released in late October, received wide coverage with its conclusions that about one-quarter of the top 200 products had prices greater than 50% higher in the U.S. than in Canada. Janet Shikles, director of health financing and policy issues at GAO, will testify at the Waxman hearing. Sen. Pryor's (D-Ark.) staff is understood to be ready to release a separate GAO study on the Canadian pharmaceutical price board. The Waxman hearing with price differential testimony may be the backdrop for release of the Pryor study. One of Waxman's witnesses, Albert Wertheimer, dean of the Philadelphia College of Pharmacy & Science, is scheduled to testify on drug price control mechanisms used in other countries "including profit and advertising controls used in Great Britain," according to a preliminary agenda. Rep Stark's (D-Calif.) legislation (HR 916) to establish a national commission to regulate drug prices was introduced Feb. 16 ("The Pink Sheet" Feb. 15, p. 10). The current media climate creates a tough setting for corporate witnesses. However, the hearing appearance gives the companies a chance to try to balance the heavily one-sided treatment they have been receiving since the Clinton Administration turned up the publicity on drug prices. Testifying for Pfizer will be the head of the company's international pharmaceutical business, Exec VP Robert Neimeth. Pfizer will have two chances to tell its side of the pricing story: at the Waxman hearing and at its quarterly analysts meeting at the end of the week. Merck is sending the new head of the U.S. pharmaceutical business, Richard Lane, who recently returned from a year heading up Merck's U.K. business and two years in charge of the European operations. Lane has been quoted in the past as saying that "as a leader" Merck should "sometimes take a different stand than the rest of the industry." He has stated Merck's stand against pricing restraints on new innovative products and the company's willingness to live with price competition on off-patent, multi- source products. In response to Sen. Pryor's recent allegations that Merck has raised prices of individual products at a rate above its commitment to stay below general inflation, the company has been circulating a proposal on Capitol Hill to suggest ways to assure voluntary product-by-product price restraints. One interesting sidelight of the Feb. 22 testimony will be whether Merck asserts its own, separate legislative proposal. Studies from the University of Minnesota have been playing a prominent role in the 1992-1993 pricing discussions. Stephen Schondelmeyer, the director of the PRIME Institute at the university, has been a frequent source cited for information on pricing trends. Schondelmeyer has done research for Sen. Pryor's Special Aging Committee and provided testimony on NIH cooperative research deals. Schondelmeyer's studies are also believed to be playing a supporting role in the deliberations of the cost control working group of the health reform task force headed by Hillary Clinton. MIT has prepared studies in the past debating the accuracy of the Producer Price Index as an accurate measure of drug price inflation. One section of MIT's study released in late 1991 indicated that the PPI inflation rate for drugs was showing a 9% annual rate when the prices of products from six manufacturers reviewed by MIT were up 6.7% per year. Ron Pollock, executive director of Families USA, will head a consumer panel to describe individual patient experiences with international price differentials and attempts to procure pharmaceuticals outside the U.S. Another witness on the consumer panel will be Robert Dresing, president of the Cystic Fibrosis Foundation. Dresing has been a feisty witness at previous Capitol Hill sessions on the Orphan Drug Act and has sparred with Sen. Metzenbaum (D-Ohio) on the importance of the profit motive to the development of orphan products.

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