Senate Hearing Challenges Pharma CEOs on Drug Pricing

February 12, 2024 - In a heated Senate hearing on February 8th, the CEOs of Bristol Myers Squibb, Johnson & Johnson, and Merck faced rigorous questioning from various United States senators regarding the exorbitant prices of prescription drugs in the US. The testimony unfolded as a clash between the imperative of funding innovation and the growing outcry over affordability and accessibility. 

Senator Bernie Sanders (I-VT), the chair of the Senate Health Committee, confronted the CEOs with stark figures.  

“[Merck] made $52 million in total compensation in 2022 — will you commit to not accepting a single dollar more in compensation until there is not a single GoFundMe page for Keytruda?” Sanders asked Robert Davis, JD, MBA, Chairman and CEO of Merck. "Your lifesaving drugs mean nothing to millions of Americans who cannot afford them." 

He highlighted the glaring discrepancy between drug prices in the US and those in other countries, pointing out that Americans pay significantly higher prices for the same medications. 

Sanders underscored the findings of a majority staff report, which revealed that these companies charge Americans the highest prices globally and have substantially increased prices over the years.  

READ MORE: Biden Administration Unveils Plan to Lower Prescription Drug Prices

For instance, Merck's Keytruda is priced at $191,000 in the US, whereas it costs $112,000 in Canada and $44,000 in Japan. Similarly, Johnson & Johnson's Stelara carries an annual price tag of $79,000 in the US while being priced significantly lower at $16,000 in the United Kingdom. Bristol Myers Squibb's Eliquis aligns with this pattern, priced at $7,100 in the US compared to just $900 in Canada. 

From 2004 to 2008, the median price of new innovative drugs from these companies was $14,000, which surged to a median price of $238,000 from 2019 to 2023. 

The CEOs defended their pricing strategies, citing the colossal expenses of drug development and clinical trials. Joaquin Duato, MBA, MIM, Chairman of the Board and CEO of Johnson & Johnson, emphasized that over 90% of drugs entering clinical trials fail to gain approval, necessitating substantial investment in R&D.  

In another heated exchange, Chris Murphy (D-CT) confronted Duato, alleging that Johnson & Johnson placed greater emphasis on shareholder profits rather than drug advancement. 

Senator Murphy pointed out that, in 2022, Johnson & Johnson allocated $17 billion toward stock buybacks and dividends while only dedicating $14 billion to R&D efforts. 

READ MORE: Medicare Prescription Drug Prices Doubled Since 2005

“Can you understand that one of my constituents in Connecticut would look at those numbers and think that you care more about padding the pockets of folks who work for you and invest in you than research and development?" Senator Murphy asked. 

In response, Duato emphasized, “Our priority is investing in R&D.” 

However, the pharma executives faced criticism over their companies' profitability and alleged manipulation of the patent system to delay generic competition.  

Senator Maggie Hassan (D-NH) also raised concerns about Merck's Keytruda having 168 patents, half related to manufacturing processes rather than the drug itself. 

“Merck is using patent gimmicks and loopholes to delay other companies from selling lower-cost versions of this medication,” said Senator Hassan. “One way that companies do this is by filing dozens — even hundreds — of frivolous patents that lock in their exclusive right to sell their drug for decades.” 

READ MORE: Pharmaceutical Companies Hike Drug Prices During COVID-19 Pandemic

Senator Hassan suggested that streamlining the approval process for generic drugs could promote competition. Directing her query to Chris Boerner, CEO of Bristol Myers Squibb, she asked about the accessibility of generic versions of Eliquis, which was approved by the FDA in 2012. 

Boerner conceded that, currently, there are no generic alternatives of Eliquis accessible at pharmacies. 

“There are zero generic versions of Eliquis available to patients because [Bristol Myers Squibb] has sued to block two approved generics from the US market,” said Senator Hassan. She added that Johnson & Johnson’s autoimmune medication, Stelara, similarly has zero low-cost alternatives available to US patients because of lawsuits from Johnson & Johnson to block them. 

The FDA approved the generic versions of Eliquis in December 2019 for Micro Labs Limited and Mylan Pharmaceuticals Inc. However, a settlement was reached between these companies and Bristol Myers Squibb and Pfizer regarding patent disputes, delaying their entry into the market until at least 2026. 

The session also spotlighted the role of pharmacy benefit managers (PBMs) as intermediaries negotiating drug prices on behalf of insurers. All three CEOs criticized PBMs. 

Duato maintained that PBMs impede efforts to alleviate patient costs, stating, “Congress should stop middlemen from taking for themselves the assistance that pharmaceutical companies intend for patients.” 

Both senators and CEOs acknowledged the complexity of the US healthcare system, with calls to streamline processes and ensure that savings negotiated with PBMs are passed on to patients. 

Amid increasing scrutiny, Duato pledged that Johnson & Johnson would reduce the list price of Stelara once generic competitors enter the market by 2025. Although Davis and Boerner refrained from making identical commitments, they indicated a willingness to embrace more affordable generic alternatives once their patents expire. 

The hearing highlighted the profound disparity among stakeholders as they navigate the intricate dynamics of the pharmaceutical industry, encompassing innovation, affordability, and accessibility. Amidst the ongoing debate, Senator Sanders emphasized the ongoing quest for viable solutions that harmonize the demands of innovation and affordability, ultimately guaranteeing equal access to life-saving medications for every American.