Top officials from seven of the largest drugmakers came under a Congressional microscope on Tuesday.
Despite years of attention to rising drug prices, the hearing before the Senate Finance Committee marked an escalation of lawmaker scrutiny into why pharmaceuticals have become increasingly unaffordable.
Executives from Pfizer, Merck & Co., Johnson & Johnson, AbbVie, Bristol-Myers Squibb, Sanofi and AstraZeneca testified, providing a rare opportunity for senators to hold industry leaders individually to account.
The assembled officials largely played their role, defending the drug industry while conceding changes need to be made. For the most part, pharma avoided what some had expected to be a politically compromising moment.
Still, the political temperature on drug pricing is high, and the issue remains drugmakers' greatest reputational and business risk.
The executives were quick to deflect blame to pharmacy benefit managers, the biggest of which are now owned by major insurers. Senators indicated PBMs should be ready for scrutiny as well, with Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee, saying they "are going to have their day in front of the committee, too."
Lawmakers were able to extract acknowledgement of the burden high list prices place on patients, and executives made some concessions on policies the industry has opposed in the past.
"It felt like a hearing and not a show," said David Mitchell, president of the advocacy group Patients for Affordable Drugs Now, in an interview.
Read on for five takeaways from pharma's day in Congress:
Pharma avoids its 'Big Tobacco' moment, but doesn't come off fully clean
In the run-up to Tuesday's hearing, the prospect of seven top pharma executives testifying before Congress drew comparisons to a hearing 25 years ago that proved pivotal in legislative oversight of tobacco companies.
Yet drug company officials, tasked with defending their industry on drug pricing, were able to avoid any major missteps. Acknowledging the burden rising list prices pose to patients, CEOs conceded changes are needed but stayed on script in arguing any solution would need to address the broader system.
That executives admitted list prices matter at all, though, is to some degree a shift from the industry's standard playbook.
"I don't feel that today you saw drug companies get off the hook by trying to blame it all on pharmacy benefit managers," said Mitchell. "I thought you saw a sober recognition that PBMs are part of the problem too, but drug companies and high list prices are where the problem starts."
HHS Secretary Alex Azar has argued that point forcefully in recent months and, on Tuesday, the pharma execs conceded high list prices are hurting patients who are uninsured or covered through high-deductible plans.
"Today, the goal is to pay into the supply chain the biggest rebate," Merck CEO Ken Frazier said in response to a question from Steve Daines, a Republican Senator from Montana. "That puts the patient at a disadvantage since they are the only ones paying a portion of the list price. The list price is actually working against the patient."
Frazier's answer to Daines begs the question, of course, of why drugmakers aren't willing to cut list prices. For the assembled executives, the answer over and over again came back to the rebates drugmakers need to pay to ensure coverage by insurers.
"If you bring a product to the market with a low list price in this system, you get punished financially and you get no uptake because everyone in the supply chain makes money from a high list price," Frazier said.
Pharma may soon get called on that claim, however. The Trump administration wants to do away with certain rebates to insurers in Medicare, channeling those discounts instead directly to patients at the pharmacy counter.
And Sen. Ron Wyden, the Democratic ranking member on the Committee, has plans to hold drugmakers to account on their rebate argument.
"I would like an answer in writing to the question: If rebates go away, would you support a black letter law that requires you to reduce list prices by the amount of the rebate?"
2 parties, 1 concern
Criticism from several Republican senators was notable, namely in how similar the conservatives sounded to their Democratic counterparts.
Lawmakers on both sides of the aisle were "advancing very similar arguments and concerns" at the hearing, said Rachel Sachs, an associate law professor at Washington University in St. Louis. Republican Sens. John Cornyn, R-Texas, Bill Cassidy, R-La., and Grassley stood out in particular, Sachs said.
That's different from a few years ago, Avik Roy, a healthcare policy expert on the right, said in an interview. Historically, the GOP has been aligned with a viewpoint which saw high prices resulting from a free market generally preferable to government intervention, Roy said.
But, as with many issues, President Donald Trump has upended that party line. After heavily campaigning on drug pricing and advancing policy ideas antagonistic to drugmakers, Trump appears to have influenced Republicans' tone to some degree.
Cassidy, for instance, questioned at the hearing why Medicare shouldn't be allowed to negotiate drug prices based on a medicine's value.
"Right now, Medicare has a very limited ability to negotiate based on marginal value," the Republican senator said, "and I think that is one of the fundamental problems in this."
Wyden comes out as pharma's strongest critic
The Democratic senator from Oregon set a combative tone at the hearing's opening, contrasting a more measured statement from Sen. Grassley with a company-by-company listing of drugmaker misdeeds.
"Pfizer gets first prize for emptiest gesture on pricing in 2018," Wyden began. "Sanofi: A company wringing more and more cash out of people with an incurable disease," he added.
The drug industry is used to sharp-worded critiques of companies it can easily paint as unrepresentative of its focused on research and innovative science.
Wyden was presented an opportunity to cast the sector's standard bearers as similarly at fault and made the most of it.
His attacks weren't just grandstanding, however. He closed the hearing with a request to have in writing answers from each company on whether they would lower list prices if Congress moves to eliminate rebates.
"After the happy talk is over, that is what is really going to help people at pharmacy counters," Wyden said.
Roy said Wyden's request was a smart move: "It goes to the point that there's not a lot of patience for the standard line that the industry has been using to deflect blame for high drug prices."
As ranking member, of course, Wyden isn't as much in the driver seat for committee business as his Republican counterpart Grassley. Yet Senate Finance appears committed to following through on drug pricing, giving Wyden ample opportunities to keep pressure high.
Drugmaker patents under the microscope
Through his own interrogation of AbbVie's chief executive, Cornyn got into a back-and-forth with Richard Gonzalez over Humira's patent thicket and how the company has managed to hold patents dating to 2034 for a medication first sold in 2003.
"We've tried to strike what we think is a reasonable balance," Gonzalez responded. "I realize it may not be popular, but I think it is a reasonable balance."
Cornyn evidently wasn't satisfied with Gonzalez, remarking immediately after his questioning he wanted the Judiciary Committee, which he and Grassley also sit on, to further look into the patent issue.
Grassley promptly vowed to back him up on such a request, and a couple hours following the hearing Cornyn told reporters that Sen. Lindsey Graham, R-S.C., the Judiciary Committee's chair, agreed to investigate the topic.
Patent issues could hold particular promise for action in this Congress, as related government action could potentially lower prices in the free market context without invoking more drastic, liberal measures, such as price controls or direct government negotiation.
"I believe we could see a willingness on both sides of the aisle to tackle patent abuse," Mitchell of Patients for Affordable Drugs Now said. "You heard powerful Republican senators talk about this, and they want to make the market work the way they intended it to."
Democrats are interested in the topic too, as seen when Wyden compared AbbVie's Humira patent defense to the Lord of the Rings in opening remarks.
"AbbVie protects the exclusivity of Humira like Gollum with his ring," the Democratic senator said. "Thick cobwebs of patents and legal tricks and shadowy deals with other drugmakers."
However, wading into patent reform could pose its own hurdles, Sachs remarked, particularly since such laws are technology-neutral, where a change affecting pharma patents would likely affect other patents.
Pharma opens up to CREATES
One immediate concession pharma execs were ready to provide was voicing support of the CREATES Act, a bill focused on curbing abuse of the REMS system and thereby delaying generic competition.
At the hearing, Daines said he believes the bill, which he co-sponsors, would help provide access to generics. Executives all voiced agreement it would be a positive step forward.
Shortly following the hearing, PhRMA CEO Stephen Ubl said in a statement the powerful lobby is working with the generics lobby on progressing CREATES.
"We engaged with the Association for Accessible Medicines to jointly develop a modified version of the CREATES Act that will increase competition from generic medicines," Ubl said. "We will continue to work with policymakers on a bipartisan basis to advance this legislation.
The extent to which PhRMA can water down such a bill could be an immediate test of its lobbying strength during these turbulent times for the drug industry.