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CAPD Statement for the Record to the Senate Committee on Finance

The Coalition for Affordable Prescription Drugs (CAPD) appreciates the opportunity to submit the following statement for the record. 

CAPD shares the concerns of a majority of Americans, Congress, and the Administration about the unsustainable rising prices of prescription drugs and the impact on the lives of patients and their families. CAPD represents a diverse group of large employers, labor unions, health plans, public sector employees and retirees, and other stakeholders who partner with pharmacy benefit managers (PBMs) to help manage costs so that they can continue to offer affordable, accessible health and drug benefit coverage to their employees and members. PBMs play a critical role in protecting consumers and keeping drug prices down by reducing pharmacy cost trends, decreasing overall health care costs, and improving quality of care. We believe access to the most effective and affordable drugs is one of the most important issues facing health care today and are working to be a part of the solution to protect consumers and deliver value to the industry through innovative programs and services.

Despite the rhetoric from Big Pharma, one critical fact absent from the debate over drug prices is this:nothing is stopping drug companies from lowering their prices and easing the burden on consumers TODAY. The first step to lower drug costs for patients is for drug companies to lower their prices.

Instead, we are seeing drug companies say one thing, and do the exact opposite. Drug companies claim they want to lower prices, and then they turn around and raise prices.

  • Two weeks after the President’s speech announcing the drug pricing Blueprint – American Patients First, Bayer increased the prices of two of its cancer drugs by more than $1,000 per month – an 8 percent increase and the second price increase for the two drugs in just six months. The prices for the two drugs, Stivarga and Nexavar, are now both 13 percent higher today than they were in 2017.[1]
  • At the very same time that Secretary Azar was testifying before the Senate Committee on Health, Education, Labor and Pensions (HELP) on June 12, drug maker Novartis raised the prices of four drugs, Promacta, Mekinist, Tafinlar, and Kisqali – which are used to treat cancer and blood disease – for the second time this year.[2]

This is the same pattern that we’ve seen year after year from drug companies.

  • For example, from January 2017 through February 2018, drug companies raised prices for 20 drugs by more than 200 percent. Among them, the price for Humira – the best-selling drug in the world – increased by nearly 20 percent over 14 months.[3]
  • Looking specifically at Medicare Part D—a program upon which 42 million seniors[4] depend— prices have increased for the 20 most frequently prescribed brand name drugs each year over the past five years. The prices for these drugs have increased by an average of 12 percent annually —approximately ten times the average annual rate of inflation.[5] Worse, 12 of the 20 most commonly prescribed brand name drugs for seniors saw price increases of more than 50 percent in the five-year period, and prices for six of the 20 drugs were increased by more than 100 percent.

While pharma may try to shift the blame to others, drug companies have been raising prices far exceeding inflation for years. The industry has worked tirelessly to divert attention away from their price increases. One tactic they use is to blame the rebate structure and PBMs.

Rebates drive savings and lower premiums for patients. PBMs pass along more than 90 percent of rebate savings to health plans, employers, unions, government programs, and other purchasers, which use them to cut premiums, out-of-pocket costs, and other expenses. Many health purchasers in the commercial market require PBMs to pass through 100 percent of rebates[6].

Looking specifically at Medicare Part D, PBMs pass through effectively 100 percent of rebates, which has helped to steady premium increases since the program’s inception. Eliminating rebates in Medicare Part D would hurt the millions of seniors who currently benefit from these savings, substantially increase costs to the taxpayer, and would only help pharma, who would retain even higher profits than they do today.

The fact is, there is no correlation between changes in rebate levels and the increasing prices set by drug companies. Eliminating rebates would not lower drug prices. A recent study of the top 200 self-administered, patent-protected, brand name drugs found no correlation between the prices drug makers set and negotiated rebates across 23 major drug categories.[7]

Further, drug companies do not even pay rebates for many drugs. Rebates simply do not exist for more than one-third (39 percent) of brand name drugs in Medicare Part D. According to the Office of Inspector General within the Department of Health and Human Services (HHS), even as prices for brand name drugs rose, the percentage of brand name drugs with rebates in Medicare Part D declined from 71 percent to 61 percent between 2011 and 2015.[8]

Don’t be fooled: drug companies continue to raise prices and actively thwart competition to preserve their monopoly pricing power by abusing the patent and regulatory systems to keep generics and biosimilars from reaching the market. These practices include pay-for-delay, REMS abuse, evergreening, extending monopoly pricing through authorized generics, manipulating the citizen petition process, and abusing orphan drug status. Solutions that end these abuses and ensure competition would have a significant impact on lowering drug prices.

One of these solutions, the CREATES Act, which has passed the Senate Judiciary Committee, is a targeted, market-based, bipartisan solution to the longstanding problem of brand name pharmaceutical companies denying generic manufacturers access to the samples they require to conduct necessary equivalence testing to bring their product to market. We encourage Congress to pass this law and explore other laws that target patent and regulatory abuses by drug companies in order to lower drug prices for patients.

On behalf of our coalition, we ask you to look beyond the rhetoric to the true root of this problem: the high prices set by drug companies. CAPD overwhelmingly supports lowering prescription drug prices. The first step is for drug companies to do something they have the full ability to do and have said they are going to do: lower their prices.

We thank this Committee once again for the opportunity to comment. CAPD looks forward to working with Congress, the Administration, and other stakeholders to find ways to ease the burden of high drug prices on American families and seniors. We need solutions that will help American patients, consumers, and taxpayers, and this will only happen if we tackle the problem where it starts – drug companies setting prices too high.

 

[1]The Washington Post, “Two weeks after Trump unveiled plans to lower drug prices, two cancer drugs got a $1,000-per-month price hike,”Carolyn Y. Johnson, June 8, 2018.

[2]Politico Pulse, “Azar says drug companies looking to lower list prices – just as Novartis does the opposite,”Dan Diamond, June 15, 2018.

[3]Pharmacy Benefit Consultants Analysis, Jan. 2017-March 2018.

[4]Kaiser Family Foundation, “Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost Sharing,” May 17, 2018.

[5]Manufactured Crisis: How Devastating Drug Price Increases are Harming America’s Seniors,” March 26, 2018,

[6]“Increasing prices set by drugmakers not correlated with rebates,”Visante, June 2017.

[7]“Increasing prices set by drugmakers not correlated with rebates,”Visante, June 2017.

[8]HHS Office of Inspector General, “Increases in reimbursement for brand-name drugs in Part D,”June 2018.

[9]“The flow of money in the pharmaceutical distribution system,”USC Schaeffer Center for Health Policy and Economics, June 2017.