Recently, the Senate Special Committee on Aging held a two-panel hearing on “Valeant Pharmaceuticals’ Business Model: the Repercussions for Patients and the Health Care System.” The hearing was focused on the price spikes of older, off-patent drugs, and followed two previous hearings that centered around Turing Pharmaceuticals, Retrophin Inc., and Rodelis Therapeutics.
The two panels of witnesses came from a variety of background, with panel two consisting entirely of witnesses related to Valeant Pharmaceuticals. Berna Heyman, a Wilson Disease patient; Frederick K. Askari, M.D., PhD; and Richard Fogel, M.D., FACC, FHRS rounded out the first panel. William A. Ackman, the Founder and Chief Executive Officer, Director, of Pershing Square Capitol Management LP, Valeant Pharmaceuticals International, Inc.; J. Michael Pearson, the former Chief Executive Officer of Valeant Pharmaceuticals International, Inc.; and Howard Schiller, the Director, Former Chief Financial Officer, and Former Interim Chief Executive Officer of Valeant Pharmaceuticals International, Inc. were all on the second panel.
Throughout the hearing, lawmakers tried to make the argument that Valeant’s entire business model revolved around buying cheap drugs and making them very expensive. Both Committee Chairwoman Senator Susan Collins and Ranking Member Claire McCaskill have been known to get emotionally charged during hearings involving drug pricing and patient access, and this one was no exception. Senator Collins stated, “Valeant’s monopoly model operates at the expense of the real people.” Senator McCaskill quoted an old Wall Street saying, “Pigs get fed, hogs get slaughtered. It’s time to slaughter some hogs.”
Opening Statements
In her opening statement, Senator Collins identified four drugs that were acquired by Valeant during Mr. Pearson’s tenure that demonstrated the “monopoly model.” Nitropress and Isuprel, heart medications, saw price increases of 320 percent and 720 percent, respectively. Syprine and Cuprimine, treatments for Wilson’s Disease, saw price increases of 3200 percent and 6000 percent, respectively.
Senator McCaskill noted that Valeant is part of the “new breed” of companies, who are run by people who are not traditional pharmaceutical executives, with investors playing an outsized role, and where the goal is to acquire drugs for rare diseases that have no generic competition so they can manipulate the price. Senator McCaskill noted that “these hearings are not about demonizing capitalists,” but instead focused on healthcare costs and the national debt.
Key Discussion Points
Impact on Critical Access and Community Hospitals
Patient access is always a concern for Congress in hearings, and as such. Dr. Fogel fielded a question from Chairwoman Collins about the impact price increases have on rural and smaller community hospitals. He stated that 71 critical access hospitals have had to close their doors over the last few years. He did not place the entire burden on the pharmaceutical industry, but instead mentioned that pharmaceutical inflation “is a significant factor, and left unchecked it will contribute to the closing of more community hospitals.”
Popularity of Rare Diseases
Senator Thom Tillis mentioned that many people may think that this issue of rare disease drug pricing only affects a small population of Americans. Dr. Askari, however, noted that one in nine Americans has a rare disease (defined as a condition affecting fewer than 200,000 Americans at any given time). Such a statistic shows that in the aggregate, rare diseases are actually quite common.
Patient Assistance Programs
Patient Assistance Programs are often cited by companies like Valeant and Turing when they are trying to show that they are actually doing something to help those patients who need it. This time, Mr. Pearson testified that Valeant expects to spend over $1 Billion in 2016 on patient assistance program for 55 of its products. Senator Elizabeth Warren spoke up, stating that patient assistance programs in the form of copay assistance can actually benefit the companies – she cited “independent studies” that estimated drug companies see a return of $4 to $6 for every $1 spent on patient assistance.
How to Deter Replication of the Business Model
It isn’t necessarily the pharmaceutical industry that Congress has issue with; it’s this particular business model that purchases older drugs, does no R&D on them, and yet hikes the price way up. Mr. Ackman testified that the Committee’s investigation into this business model has been successful in helping to deter replication of the business model, believing that companies will see this investigation and avoid the mistakes that Valeant made. Senator Richard Blumenthal suggested that maybe “more active” antitrust laws in this area and more regulatory purview will help prevent “this kind of extreme misconduct” in the future.
Pearson Deposition
This hearing followed a nine-hour long deposition of Michael Pearson by the Committee. Pearson had previously dodged a scheduled deposition, drawing the ire of both Committee Chairwoman Susan Collins and Ranking Member Claire McCaskill. The two senators urged contempt proceedings against Pearson and Valeant issued a public statement, urging Pearson to cooperate.
Finally, on Monday, April 18, 2016, Pearson entered the meeting with the Committee around 10:00 a.m. and the meeting ended about 7:00 p.m.