Missed Opportunities: 10 Questions We Wish Senators Had Asked At The Drug Pricing Hearing

Getting seven top pharma leaders in the same room, required to answer tough questions on drug pricing, is rare. Members of the Senate Finance Committee got that opportunity recently, but there are some questions our Pink Sheet reporters think they missed.

Senators on the Senate Finance Committee had a unique opportunity to question seven of the industry's top leaders at the same time, in the same room on issues around drug pricing, formulary negotiations, rebates and biosimilars. It was a singular opportunity and while senators posed some interesting questions during the three-hour hearing Feb. 26, there were some missed opportunities.

The hearing, as expected, seemed as much about political theatre as substance, but both Democrat and Republican Senators pressed industry on topics like how they set list prices, the Administration’s international price benchmarking proposal and patent practices. (Also see "Big Pharma Defuses Drug Pricing Landmines On Capitol Hill " - Pink Sheet, 26 Feb, 2019.) 

There were also a few softballs from members sympathetic to industry. For example, Senator Pat Roberts (R-KS) asked the executives, "What is the thing that keeps you up at night" which predictably led to responses across the board about getting life-saving medicines to patients faster. Roberts also referred to them at one point as "the magnificent seven," which says something about the relatively cooperative tone of the hearing.

Pink Sheet reporters couldn't help but wish they had a chance to switch seats with the Senators to take up a second round of inquiries. Here are some of questions we would have liked big pharma to answer.

1) If pharmaceutical companies support a flourishing biosimilar market as you say you do, would you forgo exclusive contracting with payers as a defensive strategy to protect brands against biosimilars?

With Pfizer Inc. CEO Albert Bourla, Johnson & Johnson Exec VP Worldwide Pharmaceuticals Chair Jennifer Taubert and Merck & Co. Inc.'s CEO Kenneth Frazier all in the same room, senators had an interesting opportunity to hear two very different perspectives on the commercial challenges facing biosimilars in the US. If they had asked executives directly about the launch of Pfizer's Inflectra (infliximab) and Merck's Renflexis – both biosimilar versions of J&J's Remicade – and the challenges those drugs have faced securing market access from payers, it might have set the stage for a remarkable exchange.

Pfizer filed a lawsuit against J&J in 2017, alleging J&J's exclusive contracting for Remicade is anti-competitive. (Also see "Pfizer Sets The Stage For A Biosimilar Showdown Over Exclusive Contracts" - Scrip, 20 Sep, 2017.) Branded Remicade has managed to maintain a 93% volume share of the market, J&J reported in the fourth quarter, despite the entry of two biosimilars more than two years ago. The whole Remicade situation has shown a light on some of the challenging commercial dynamics for biosimilars in the US.

2) Would you support inflation caps to control annual price increases on established medicines?

With the drug pricing pressure building on drug makers, a big focus has been on the regular annual and biannual price hikes companies have historically made on mature marketed medicines. Those price increases have been a reliable way for drug makers to pad the top line even as the launch trajectory for new drugs has slowed.

Drug makers have largely reined in list price increases so far in 2019, which is expected to result in net price declines, after rebates and discounts, for many drug makers.
(Also see "Industry's Drug Pricing Power Is Running On Fumes " - Scrip, 7 Feb, 2019.) The Institute for Clinical and Economic Review (ICER) has announced plans to review 13 drugs with list price increases that are double the rate of the medical Consumer Price Index later this year. (Also see "ICER’s ‘Unsupported Price Increase’ Report Due This Fall " - Pink Sheet, 17 Jan, 2019.)

A direct question getting each of the executives on the record with their opinion on inflation caps would have grabbed attention. It's certainly unlikely anyone would have agreed to the notion, but it would have made for some political drama.

3) Have actions by President Trump or HHS Secretary Alex Azar impacted your pricing decisions?

President Trump has used his Twitter feed to target drug makers, perhaps most notably in July 2018, when he called out Pfizer for raising prices on its drugs, noting "Pfizer & others should be ashamed that they have raised drug prices for no reason." That led to a phone call between Trump and then-CEO Ian Read after which Pfizer said it would walk back its mid-year price increases. (Also see "Pfizer Agrees To Roll Back Prices On 40 Drugs, Yielding To Pressure From Trump" - Scrip, 10 Jul, 2018.)

It would be fascinating to know how that Tweet and subsequent phone conversation impacted Pfizer's thinking on drug prices, not to mention the rest of the industry, which largely stepped in line behind Pfizer at the time.

Trump also promised "massive" price reductions on drugs after the Administration released its drug pricing blueprint in May. While industry has reined in its price increases to some degree in 2019, price reductions are certainly not commonplace. (Also see "Who's Promised What: A Guide To Pharma Drug Pricing Pledges" - Scrip, 23 Jul, 2018.)

4) What is the widest/narrowest range of price discount you offer under a value-based pricing contract with a payer?

Industry leaders who testified at the Senate Finance hearing said they support value-based reimbursement agreements as a way to lower drug spending. As Pfizer's Bourla told the committee, "imagine a system in which Pfizer gets paid on the number of heart attacks we prevent."

But while drug makers talk a lot about value-based contracts, they don't provide a lot of detail about the contracts they do sign. Under the agreements, drug companies usually offer to pay a higher rebate if their drug does not work in patients the way it is expected, based on some pre-determined measure, but wouldn't it be valuable to know at least what kind of differential they are offering?

5) For Merck CEO Frazier: Why did Merck back out of launching a follow-on version of Sanofi's Lantus last year after it was tentatively approved by FDA and given the burden of the high cost of insulin on US patients?

The high cost of insulin has been a big issue for patients and frankly a public relations fiasco for industry. It is particularly confounding that so many branded insulins are old medicines that lost marketing exclusivity years ago but haven't faced generic/biosimilar competition. The complex small molecules are in the midst of being reclassified as biologics by FDA, and generic manufacturers have faced high regulatory hurdles to getting generic insulins approved by FDA.

Merck did get a follow-on version of Sanofi's blockbuster long acting insulin Lantus (insulin glargine) tentatively approved by FDA in 2017, pending the outcome of patent litigation. But the company announced last year that it decided against launching the product in the US after reviewing pricing and cost of production. (Also see "Merck Steps Out Of Insulin Glargine Market, But Says It Remains Committed To Biosimilars" - Scrip, 11 Oct, 2018.) The company took a $423m charge in 2018 to terminate its marketing agreement with Samsung Bioepis Co. Ltd..

The company's top leadership has never had to publicly explain the decision and what commercial barriers might have led to it, which could have implications for getting more cheaper insulins to market in the future.

6) For AbbVie CEO Richard Gonzalez: What amount of royalties will you receive from rival biosimilar manufacturers under patent settlement agreements for Humira?

Biosimilar versions of AbbVie Inc.'s blockbuster autoimmune drug Humira (adalimumab) launched in Europe last year, but are on hold in the US until 2023, after AbbVie successfully settled patent litigation with several manufacturers. The company has granted licensing deals to seven biosimilar manufacturers to settle patent challenges, granting market entry in 2023 in exchange for a royalty on sales. (Also see "Pfizer Decides Not To Challenge AbbVie's Humira Biosimilar Patents" - Pink Sheet, 1 Dec, 2018.)

Senator John Cornyn (R-Texas) targeted Gonzalez with a line of questioning about Humira's patent estate and AbbVie's legal maneuvers and eventually recommended the Senate Judiciary Committee launch an inquiry into drug patents. (Also see "From Pricing To Patents: Hearing Signals A Potential New Focus" - Pink Sheet, 27 Feb, 2019.) 

It would have been interesting to know more details about those settlement agreements, what kind of royalties AbbVie stands to receive on eventual sales of US biosimilars and assurance that AbbVie hasn't offered anything in exchange for a biosimilar delay.

7) How much ex-US cash did you return to the US as a result of corporate tax reform and how much have you committed to increase R&D or capital investments as a result?

Drug makers got a big pay day through corporate tax reform when the Tax Cuts and Jobs Act was passed in December 2017. The legislation benefited corporations in several ways, including reducing the corporate tax rate from 35% to 21%, but one of the biggest benefits was making it less expensive for US corporations to repatriate cash held overseas.

Some drug makers returned billions in cash to the US and while some companies like Pfizer and Amgen Inc. have announced big capital investments, a lot of the windfall has also been returned to investors in the form of stock buybacks. Pfizer, for example announced a $5bn capital investment in January 2018, but also authorized a $10bn share repurchase program. (Also see "Pfizer, Poised For A Tax Reform Windfall, Talks About Ways To Reinvest" - Scrip, 30 Jan, 2018.)

Among the top pharma R&D spenders, Pfizer, Novartis AG, Roche and J&J all modestly increased R&D investment in 2018 by 3%-6% in 2018 over 2017, while Bristol-Myers Squibb Co. and Gilead Sciences Inc. made substantial increases of 31% and 37%, respectively. R&D investment by Merck, Sanofi and GlaxoSmithKline PLC declined.

Hearing big pharma's leadership lay out these investment details in a straightforward way would surely have been useful information to have when it comes to understanding how drug companies reinvest in their businesses.

8) What is your direct-to-consumer advertising budget? And what steps are you taking to make pricing information available in TV ads?

Senator Catherine Cortez-Mastro (D-NV) asked executives to answer yes or no as to whether or not they spend more on marketing than they do on R&D, but the line of questioning quickly devolved into whether she was referring to selling, general and administrative expenses (SG&A) or just selling expenses, to which executives responded they do spend more on R&D than marketing alone but not more than SG&A combined.  

Isn't advertising spend a figure that would be more useful to know about, given what a powerful marketing tool it is and how controversial it remains?

Industry stepped forward with a voluntary proposal to include information in TV ads about where patients can access information about pricing in an attempt to stave off a more formal legal requirement. (Also see "PhRMA’s Defensive Move On DTC Ads: Putting Drug List Prices ‘In Context’" - Pink Sheet, 15 Oct, 2018.) That proposal goes into effect April 15, but so far drug makers haven't provided much in the way of details about how they plan to roll those requirements out. We'd like to hear more.

9) What is your budget for patent litigation?

 Given the time and expense drug makers spend protecting their brands from generic and biosimilar competition through litigation, it would be interesting to know just how much that investment is – and how it trickles down to drug costs.

10) You’ve advocated for restricting the 340B program. If new controls are put into place and demands for heavily discounted drugs in that program subside, will you lower list prices?

 This would have been an opportunity to get drug makers on the record with a commitment to lower drug prices if some of the restrictions to the 340B outpatient prescription drug discount program they have been advocating for are implemented. Pharma has argued that the scope of the program has caused distortions in the broader market that contributes to higher prices. The House Energy & Commerce Committee has been following a two-year investigation into potential reforms. (Also see "340B Provider Reforms Gaining Momentum In Congress" - Pink Sheet, 11 Jan, 2018.)