US House Drug Pricing Hearings Start Slow As Pharma Execs Dodge Some Punches
Executive Summary
Bristol Myers Squibb CEO Giovanni Caforio, former Celgene CEO Mark Alles and Teva CEO Kare Schultz fielded roughly four hours of questioning at an oversight hearing on pricing practices for Revlimid and Copaxone.
The House Oversight and Reform Committee launched hearings into abusive drug pricing practices on 30 September, but the potential drama of the initial session was undercut by the fact that two of the witnesses could claim the activities being criticized did not happen on their watch, and the other one was no longer in charge of a pharmaceutical company.
The hearing focused on substantial price increases and efforts to block generic competition for Bristol Myers Squibb Company/Celgene Corporation’s Revlimid and Teva Pharmaceuticals USA Inc.’s Copaxone, building on an investigation into pricing practices that was launched by the late former chair, Elijah Cummings, D-MD, in January 2019.
It is one of a planned series of hearings with drug company executives the committee hopes will highlight the need for legislative controls on drug pricing in the US and portray the Democrats as tougher on drug pricing than the President. (Also see "Six Pharma CEOs To Testify In House as Democrats, Trump Compete For Attention On Drug Pricing" - Pink Sheet, 22 Sep, 2020.)
At the 1 October hearing, Amgen, Inc.’s CEO Robert Bradway will testify with a focus on Enrbel and chronic kidney disease drug Sensipar. Mallinckrodt plc’s CEO Mark Trudeau will also testify on its H.P. Acthar Gel and Novartis AG US President Thomas Kendris on Gleevec.
But the impact of the first session was diluted because the pricing practices that were the focus of probing questions occurred when different CEOs ran the companies that owned the drugs. Teva CEO Kare Schultz joined that company in September 2017 and Bristol Myers Squibb CEO Giovanni Caforio became responsible for Revlimid in November 2019, when BMS acquired Celgene.
That allowed Schultz and Caforio to mostly avoid culpability for the behavior of their predecessors and blunt the impact of the accusations leveled by Democrats at the hearing. Former Celgene CEO Mark Alles, who also appeared as a witness, bore the brunt of the toughest questions on Revlimid but he is no longer in position to set company policy.
“I just want to congratulate you on being able to answer, from my estimate, about 50% of these questions by saying you weren’t there,” Rep. Sarbanes told Teva’s Schultz in frustration.
Even given the limitations of the witness list, a few progressive Democrats were able to land some strong attacks on the pharma companies. (See sidebar.)
Mostly though, the CEOs were able to avoid such stand offs. Schultz ducked several questions related to Copaxone, including those regarding the 27 price increases taken for the drug between its launch in 1997 and 2017.
He also denied knowledge about internal documents obtained by the committee, such as one cited by chair Carolyn Maloney, D-NY, showing that Teva banked on the more permissive pricing environment in the US relative to European countries and its ability to raise prices on Copaxone once or twice a year. The documents were included in reports prepared by committee staff and released ahead of the hearing. (Also see "Revlimid And Copaxone Pricing: Five Not-So-Revealing Revelations From The House Reports" - Pink Sheet, 30 Sep, 2020.)
“As you might know I joined Teva as CEO on November 1, 2017, which means I haven’t seen this document before and I’m not aware of actually what happened before I joined,” he said.
“I can assure you however, that since I joined Teva … there have been no changes, no price increases to the price of Copaxone. At the same period there’s been a dramatic reduction of the actual net pricing that Teva sells the products for, to the tune of more than 20% in 2018 and 20% 2019.” Copaxone’s net price declined significantly beginning in 2018 because by then it had succumbed to generic competition. (Also see "Teva CEO Schultz Walks Smack Into A Rough Financial Situation" - Scrip, 2 Nov, 2017.)
Rep. John Sarbanes, D-MD, criticized Schultz’s responses during his turn to question the witnesses. “I just want to congratulate you on being able to answer, from my estimate, about 50% of these questions by saying you weren’t there,” he told Schultz in frustration. “I understand and appreciate that, but it would have been nice to come maybe equipped a little bit better with what the situation was at the company.”
Bristol’s Caforio declined to weigh in on an issue raised by Rep. Peter Welch, D-VT, regarding whether executive compensation at Celgene was tied to price increases for Revlimid. Welch referred to data in the committee report showing Celgene paid top executives over $400m in compensation between 2006 and 2017 “as they repeatedly increased the price of Revlimid.”
Caforio responded: “As you know we acquired Celgene in 2019 and I am not familiar with all details of past Celgene compensation. That would have been a decision of the board of directors at Celgene and is not a topic I am familiar with.”
Although Caforio did not weigh in on past behavior with Revlimid, he had a few themes that he emphasized during the hearing. He reiterated that “innovation is recognized and rewarded in the US” with pricing flexibility and new treatments are “readily available” to patients, whereas access to new drugs is more limited in European markets, where prices are restricted.
Caforio Advocates Familiar Industry Policies On Drug Pricing
Caforio also suggested that drug pricing remedies in the US should include amending anti-kickback laws to allow manufacturer-funded patient assistance program in Medicare and that out-of-pocket spending in Medicare Part D should be capped. And he supported passing through manufacturer price concessions to patients at the point of sale.
More blows landed on former Celgene CEO Alles, who was at the company during the period of sharp price increases for Revlimid. Rep. Debbie Wasserman-Schultz, D-FL, also challenged him about the company’s use of its Risk Evaluation and Mitigation Strategies requirements for Revlimid to hamper generic competition. (Also see "REMS Abuse Website: Celgene, Actelion Top List Of Suspected 'Gamers'" - Pink Sheet, 18 May, 2018.)
Alles maintained that the company’s actions regarding the REMS were based on safety concerns and Wasserman-Schultz argued that comments by the US Food and Drug Administration showed otherwise. She noted that “thankfully, we have the CREATES Act,” which aims to restrict future REMS abuses, but added: “this shows how companies continue to exploit loopholes” in order to block generic competition.
In response to questioning, Alles also acknowledge that Revlimid was profitable in the European Union, despite its much lower prices there, which undercuts often-cited industry arguments that US prices need to be higher to compensate for losses abroad.