S. HRG. 115–727 PRESCRIPTION DRUG AFFORDABILITY AND INNOVATION: ADDRESSING CHALLENGES IN TODAY’S MARKET HEARING BEFORE THE COMMITTEE ON FINANCE UNITED STATES SENATE ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION JUNE 26, 2018 ( Printed for the use of the Committee on Finance U.S. GOVERNMENT PUBLISHING OFFICE 38–796—PDF WASHINGTON : 2020 VerDate Sep 11 2014 20:23 Jan 09, 2020 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 R:\DOCS\38796.000 TIM COMMITTEE ON FINANCE ORRIN G. HATCH, Utah, Chairman CHUCK GRASSLEY, Iowa RON WYDEN, Oregon MIKE CRAPO, Idaho DEBBIE STABENOW, Michigan PAT ROBERTS, Kansas MARIA CANTWELL, Washington MICHAEL B. ENZI, Wyoming BILL NELSON, Florida JOHN CORNYN, Texas ROBERT MENENDEZ, New Jersey JOHN THUNE, South Dakota THOMAS R. CARPER, Delaware RICHARD BURR, North Carolina BENJAMIN L. CARDIN, Maryland JOHNNY ISAKSON, Georgia SHERROD BROWN, Ohio ROB PORTMAN, Ohio MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania ROBERT P. CASEY, JR., Pennsylvania DEAN HELLER, Nevada MARK R. WARNER, Virginia TIM SCOTT, South Carolina CLAIRE MCCASKILL, Missouri BILL CASSIDY, Louisiana SHELDON WHITEHOUSE, Rhode Island A. JAY KHOSLA, Staff Director JOSHUA SHEINKMAN, Democratic Staff Director (II) VerDate Sep 11 2014 20:23 Jan 09, 2020 Jkt 000000 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 R:\DOCS\38796.000 TIM C O N T E N T S OPENING STATEMENTS Page Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman, Committee on Finance .................................................................................................................. 1 Wyden, Hon. Ron, a U.S. Senator from Oregon .................................................... 4 ADMINISTRATION WITNESS Azar, Hon. Alex M., II, Secretary, Department of Health and Human Services, Washington, DC ................................................................................................... 6 ALPHABETICAL LISTING AND APPENDIX MATERIAL Azar, Hon. Alex M., II: Testimony .......................................................................................................... 6 Prepared statement .......................................................................................... 45 Responses to questions from committee members ......................................... 46 Hatch, Hon. Orrin G.: Opening statement ........................................................................................... 1 Prepared statement .......................................................................................... 80 McCaskill, Hon. Claire: ‘‘Agent Eligibility and Underwriting Guide,’’ HumanaOne Health and Life Products ................................................................................................. 82 Whitehouse, Hon. Sheldon: Letters submitted for the record ..................................................................... 166 Wyden, Hon. Ron: Opening statement ........................................................................................... 4 Prepared statement .......................................................................................... 169 COMMUNICATIONS America’s Health Insurance Plans (AHIP) ............................................................ 171 American Hospital Association ............................................................................... 177 Association of American Physicians and Surgeons ............................................... 201 Campaign for Sustainable Rx Pricing (CSRxP) .................................................... 202 Center for Fiscal Equity .......................................................................................... 209 National Community Pharmacists Association (NCPA) ....................................... 209 (III) VerDate Sep 11 2014 20:23 Jan 09, 2020 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 R:\DOCS\38796.000 TIM VerDate Sep 11 2014 20:23 Jan 09, 2020 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 R:\DOCS\38796.000 TIM PRESCRIPTION DRUG AFFORDABILITY AND INNOVATION: ADDRESSING CHALLENGES IN TODAY’S MARKET TUESDAY, JUNE 26, 2018 U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. The hearing was convened, pursuant to notice, at 9:25 a.m., in room SD–215, Dirksen Senate Office Building, Hon. Orrin G. Hatch (chairman of the committee) presiding. Present: Senators Cornyn, Thune, Isakson, Portman, Toomey, Heller, Scott, Cassidy, Wyden, Stabenow, Cantwell, Nelson, Menen- dez, Carper, Cardin, Brown, Bennet, Casey, Warner, McCaskill, and Whitehouse. Also present: Republican staff: Brett Baker, Health Policy Advi- sor; Jennifer Kuskowski, Chief Health Policy Advisor; Ryan Mar- tin, Senior Human Services Advisor; Stuart Portman, Health Policy Advisor; and Jeffrey Wrase, Deputy Staff Director and Chief Econo- mist. Democratic staff: Laura Berntsen, Senior Advisor for Health and Human Services; Michael Evans, General Counsel; Elizabeth Jurinka, Chief Health Advisor; Matt Kazan, Health Policy Advisor; Joshua Sheinkman, Staff Director; and Beth Vrable, Senior Health Counsel. OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM UTAH, CHAIRMAN, COMMITTEE ON FINANCE The CHAIRMAN. I would like to welcome everyone to today’s hear- ing on prescription drug affordability and innovation. We are pleased to have our Secretary here, Secretary Azar—who I think is doing a great job—before the committee today, and I know members on both sides of the aisle are eager to hear from him on the Trump administration’s plan to lower prescription drug costs. I was in the Rose Garden when the President announced his plan to put patients first by lowering prescription drug and out-of- pocket costs to consumers. And I commend the President and the Secretary for their focus in this area and for releasing this com- prehensive blueprint. I also appreciate that HHS is seeking feedback from the public on the policy ideas in the blueprint. The administration is prudent to work through options by properly consulting those affected by these policies first. As we continue to develop policy options, it is (1) VerDate Sep 11 2014 20:23 Jan 09, 2020 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 R:\DOCS\38796.000 TIM 2 imperative to understand the impact on patient access, afford- ability, and innovation before taking any specific action. To that end, today, in my opinion, is a golden opportunity for members to discuss policy proposals and ideas in the blueprint, which contemplates many weighty issues that would seriously change the current way of doing things. And on that note, I believe that those who have criticized the blueprint as insufficient are ei- ther responding from a lack of knowledge or purely for political gain. Now, I bring to the table decades of experience of working on drug pricing. That is why we have titled today’s hearing in a way that clearly explains the heart of these issues, quote: ‘‘Prescription Drug Affordability and Innovation.’’ This hearing title references a concept that has been very important to me throughout my time in the Senate. After all, the goal is to help consumers, and the best way to do that is to balance both affordability and innovation. Over 3 decades ago, I championed the Drug Price Competition and Patent Term Restoration Act, which has since become known as Hatch-Waxman. As I noted in an editorial that ran in Roll Call yesterday, the Hatch-Waxman law established a system for regu- lating drugs that rewards new products while encouraging generic competitors. Around that same time, I sponsored the Orphan Drug Act. And I am proud to say that law has resulted in new treatment options that have enhanced care and dramatically improved the quality of life for hundreds of thousands, if not millions, of people who live with rare diseases. At the time, we thought we were just taking care of some rare diseases, but it has become a very important law. Those two bills are just the tip of the iceberg, though. I have since spearheaded numerous other legislative initiatives to address shortcomings in the system and to capitalize on opportunities for improvement. I brokered the agreement that allowed physician- administered biologics to flourish, providing effective treatment for many cancers and other serious medical conditions. More recently, I have successfully advocated policies that promote development of biosimilars as a way to foster competition and lower costs. Now, I do not bring up this history to boast, but to point out that the pursuit of the balance of affordability and innovation has served us well. Now, nearly 90 percent of prescription drugs dis- pensed to patients are generics, yet we also have realized life- altering breakthroughs in treatment. Maintaining this balance must be a part of the conversation here today. And, as we move forward, I want to keep it that way. And any lasting solution must continue to be market-driven. The Medicare Part D prescription drug program is built on a sys- tem of private entities competing on price and service. This private- sector approach is engrained in the design of the Part D program, which wisely forbids the government from interfering with the ne- gotiations between these private entities. For Part B drugs and bio- logics, Medicare pays based on the average price that the manufac- turer charges to other payers. This effectively represents a rate ne- gotiated in the private sector. Now, do not take this to mean the way Medicare pays for pre- scription drugs is perfect. There is certainly room for improvement. VerDate Sep 11 2014 20:23 Jan 09, 2020 Jkt 000000 PO 00000 Frm 00006 Fmt 6633