Testy Oversight and Government Reform Committee Hearing on Prescription Drug Pricing

The United States House Oversight and Government Reform Committee held a hearing on developments in the prescription drug market. What was particularly interesting about this hearing, compared to past hearings on drug pricing and the current drug market, was that an executive was present from each of the two most-disliked pharmaceutical companies in the country, Turing and Valeant. Also present was Dr. Janet Woodcock, Director of the Center for Drug Evaluation and Research at the Food and Drug Administration (FDA) and Mr. Mark Merritt, the President and Chief Executive Officer of the Pharmaceutical Care Management Association.

The hearing was a fairly contentious one, with Congressman Cummings coming out of the gate packing heat, saying that he doesn’t believe the pricing tactics that have been seen at companies like Turing and Valeant are “limited to a few bad apples,” and that instead, he believes most of the pharmaceutical industry is looking to make quick money off of patients who desperately need their treatments to live.

The tension did not stop there; during opening statements, when it came time for Martin Shkreli, the disgraced former-CEO of Turing Pharmaceuticals, to make his opening statement, he opted to “invoke his Fifth Amendment privilege” based on “advice of [his] counsel.” When questioned further by Chairman Jason Chaffetz, it became clear that Shkreli was not planning on answering any questions Congress had for him, even though he had previously talked about being excited to “school Congress” in television interviews.

After a five- to ten-minute long sideshow of Representative Trey Gowdy talking to Shkreli about what the Fifth Amendment does and doesn’t protect, Chairman Chaffetz asking additional questions (and receiving the same response of invoking the Fifth Amendment), and Rep. Cummings asking Shkreli to push his former company to lower drug prices and for him to become a “poster child” of prescription drug accessibility, Shkreli was excused by the Committee. Following Shkreli’s excusal, Representative John Mica asked Chairman Chaffetz to consider holding Shkreli in contempt of Congress. While Chairman Chaffetz did not seem to take to the idea then, who knows what may happen in the future. Especially after Shkreli went on Twitter, calling Congress “imbeciles,” as seen below. Welcome to the Circus.

Once Shkreli left, and it was only adults in the room (depending on your feelings of Congress, one might disagree), the hearing proceeded as normal. Once Shkreli left, however, the tension remained thick in the room – no one sitting at the witness table seemed to have a single friend on the Committee. All members were tough on the witnesses, asking (some) relevant questions as to how to lower the consumer cost of drugs.

Nancy Retzlaff, the Chief Commercial Officer of Turing, got a lot of heat for the price hike of Daraprim. She did try to talk around it, stating that they do a lot of scholarships, and that two-thirds of patients on Daraprim receive the drug through government programs and receive a discounted price of approximately one penny per pill, but that did not seem to be good enough for the Oversight Committee members present. They either weren’t buying what she was selling, or were trying to draw out of her some ideas for long-term, sustainable, changes that can be made to make pharmaceuticals more affordable to patients.

Turing Code of Conduct

Interestingly, as a footnote on compliance and ethics matters, prior to Shkreli’s dismissal, Turing did not have a Code of Conduct. Following his dismissal, however, that has supposedly changed, though information on the new Code of Conduct cannot easily be found online.

Parties

Retzlaff also received an earful when she claimed that Turing was losing money” yet the committees documents show Turing spending huge sums on salary increases and lavish items including yacht rental, fireworks, celebrity performances and nightclubs. This is clearly where an active ethics and compliance program may have kept them out of significant trouble.

Everyone’s Guilty

Besides Turning, there were significant questions posed towards Howard Schiller the Interim CEO of Valeant Pharmaceuticals. Mr. Schiller was forced to defend the almost total historical lack of R&D spending by Valeant and the significant price increases of two of their products. 

Mr. Schiller was forthright in his discussion about Valeant’s pricing strategies. He admitted to pricing drugs based on “revenue goals” and that price increases accounted for 80 percent of the company’s growth in the beginning of 2015. He said that their pricing strategy was “too aggressive” in some cases. He noted in the future Valeant would not be looking for opportunities to buy compounds and then raise prices.  Valeant was also questioned on internal memos received by the committee, where they discussed raising the prices of two of their drugs as the increase being passed on to hospitals because those drugs are reimbursed as part of the procedure.  

The FDA was not off the hook either, as Janet Woodcock, MD was forced to defend the delays in approvals at the office of generic drugs. Many of the members questioned Dr. Woodcock on the backlog of generic applications at FDA, their concern being that slow application approvals prevented competitors from entering the market. In response to questions Dr. Woodcock said FDA was behind when they started the accelerated program under GDUFA. She said at this point there are only 600 applications outstanding. Starting in October,she said, FDA will have a goal to decide new generic applications within 10 months. Reps also commented that the FDA backlog was perhaps creating the market conditions leading to the abusive pricing practices they were discussing.

Mark Merrit the President and CEO of the Pharmaceutical Care Management Association also took hits for spread pricing where the Pharmacy Benefit Manager (PBM) receives the higher price from the insurance company but reimburses the pharmacy at the previous price, he was questioned on the potential conflict of interest of the practice of PBM’s owning specialty pharmacies.  He was also questioned about predatory marketing,  and other pharmacy benefit management practices.

The Panelist included:

What is the Solution?

This hearing did not offer much in the way of solutions to rising pharmaceutical and prescription drug costs. In order for any real movement or change to be made, Congress will likely need to dial back on the heat and rhetoric. There is no doubt that this is a “hot topic,” and one that draws ire from many American citizens. However, as the old saying goes, you catch more flies with honey, and if Congress and the FDA would work not only with each other, but also with groups like the Pharmaceutical Care Management Association, and pharmaceutical and generic manufacturers, real solutions could be proposed, and timelines created. With rhetoric flying back and forth, and pharmaceutical companies feeling the need to staunchly defend themselves, few solutions can be though of, and little can actually get done.

While no solutions really came from the hearing, one potential idea to lower drug costs and promote healthy competition is for the FDA to institute a rule that if a generic manufacturer raises generic drug prices by a certain amount (such as 50%, 100%, or 200%), the FDA will then “fast track” any generic drugs currently in the pipeline, or applied for after the fact, with an average of a four-month approval time. Additionally, if any company raises generic drug prices by the specified amount, overseas companies should be permitted to submit applications.  The FDA also needs additional resources to accomplish a streamlined approval process for generic drugs, one area congress has not shown interest in doing.

This would help promote the free market and healthy competition, while still permitting pharmaceutical companies to turn their necessary profits, and allowing patients to access the lifesaving drugs they need.

These hearings are sure to continue, with different committees of Congress trying to hear different viewpoints, while making sure to get their points across. We await the hearing that finally comes up with a palatable solution, and are eager to write up that story.