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Column: Drug industry CEOs say the problem isn’t high prices, it’s how misunderstood they are

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Leaders of seven top drug companies told lawmakers this week that Americans should be grateful for their work, even if patients pay “some of the highest prices in the world.”
(Getty Images)

It’s been a good week for political theater. At center stage, of course, was President Trump’s former attorney, Michael Cohen, testifying that his ex-boss is a crook. Then we had the leaders of the United States and North Korea agreeing not to agree at a high-profile summit.

But no less important was this week’s Senate Finance Committee hearing on drug prices, which saw the heads of seven top pharmaceutical companies depicting themselves as deeply misunderstood humanitarians who just want to help people.

Oh, and they said lawmakers shouldn’t even consider regulating how much patients are charged, even if those prices are shamelessly and cruelly indefensible.

“The government should not directly control the price of medicines ... through federal government price controls,” declared Olivier Brandicourt, chief executive of Sanofi, one of just three companies that control the worldwide market for insulin, which has doubled in price over the last few years.

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Giovanni Caforio, CEO of Bristol-Myers Squibb, said that, if anything, lawmakers should get behind drug companies’ efforts to improve society.

“American research-based companies are leading the next wave of biomedical innovation to help patients whose diseases cannot be adequately treated with today’s medicines,” he said. “We should work to ensure policies that support and reward these investments.”

Yeah, nice try.

The industry execs had a point when they argued that insurers and middlemen known as pharmacy benefit managers also are to blame for soaring drug prices.

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But the bottom line is that drug makers typically set list prices for their products that far surpass research and development costs, and that represent first and foremost a desire to bleed as much money as possible from people coping with life-threatening or chronic illnesses.

“These guys obviously view American consumers as patsies,” said Joe Ridout, California legislative advocate for the nonprofit organization Consumer Action.

“Lawmakers need to do much better,” he told me. “In virtually every other industrialized democracy, lawmakers do a lot more to shield constituents from abusive price increases.”

For decades, the drug industry has tried to defend itself from criticism by saying that pricing of medicine is too complex for easy solutions.

They’ve also insisted that patients seldom face the full list price for drugs, paying instead lower prices negotiated by benefit managers and insurers, or prices subsidized by the industry’s own discount programs.

The former claim is just nonsense. The latter no longer holds water as insurers, in an effort to keep premiums low enough to make their own profiteering seem less obvious, keep boosting deductibles, thus raising people’s out-of-pocket costs by exposing them to the full fury of list prices.

“Pharmaceutical companies set prices as high as they think the market will bear, because that’s what we’ve allowed them to do,” said Emily Rusch, executive director of the California Public Interest Research Group. “It’s abundantly clear that we need Congress to write better rules, because the drug companies can’t or won’t regulate themselves.”

This week’s hearing could have been a starting point for a meaningful conversation about introducing sufficient transparency to the drug market to both protect patients and ensure a fair profit to manufacturers.

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Instead, we were treated to posturing by most Republican and some Democratic lawmakers, who could have acted years ago if they really wanted to, and by well-coached CEOs who for the most part stayed on-message in depicting themselves as innocent bystanders in a healthcare system beyond their control.

The leaders of Sanofi and Bristol-Myers were joined by their counterparts from Johnson & Johnson, Merck, Pfizer, AbbVie, and AstraZeneca.

“We recognize that the current state of drug pricing in the U.S. healthcare system is not sustainable and that patients are facing increasingly high out-of-pocket costs,” AstraZeneca’s Pascal Soriot said. “We believe that these issues must be addressed urgently, and we hope to be a constructive partner in finding solutions.”

A nice sentiment, said Peter Maybarduk, director of the advocacy group Public Citizen’s Access to Medicines Program. But he told me this was a prime example of the drug CEOs “getting away with it” by saying words lawmakers wanted to hear without actually committing to anything.

“They faced some tough questions, but the manufacturers drew an increasingly convoluted image of pricing schemes and no one called them on it,” Maybarduk said. “This was not the reckoning that the pharmaceutical industry deserves.”

There’s a reason many lawmakers pull their punches with these guys. Since 2016, the drug industry has made more than $100 million in political contributions to both parties, with Republicans enjoying a slight lead over Democrats, according to the Center for Responsive Politics.

The industry also spent more than $280 million on lobbying last year. And guess what? Some of the top recipients of pharmaceutical cash sit on the Senate Finance Committee.

These include Sen. Bob Casey (D-Pa.), who received $532,859 last year; Sen. Robert Menendez (D-N.J.) with $188,763; Sen. Bill Cassidy (R-La.) with $156,600; Sen. Thomas R. Carper (D-Del.) with $143,550; and Sen. Michael D. Crapo (R-Idaho) with $131,800. The Republican committee chairman, Iowa Sen. Charles E. Grassley, has received $858,710 from the drug industry during his long career.

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Perhaps the most enlightening moment in over three hours of testimony came when Sen. Ron Wyden (D-Ore.) asked AbbVie CEO Richard Gonzalez if the company makes a profit in countries that limit how much can be charged for drugs, such as France or Germany.

Gonzalez answered that, yes, his company still earns a profit amid price controls. He insisted, however, that this was only possible because Americans pay “some of the highest prices in the world,” thus covering the lion’s share of R&D costs.

That’s insulting on multiple levels. First, drug companies aren’t hurting when their prices are held to reasonable amounts. They still make a buck.

Second, they’re happy to admit that they accommodate lower overseas prices by gouging Americans.

Finally, they claim this is necessary for R&D, when the reality is that much of their basic research is done on the taxpayers’ dime at universities and research institutes, and many of their new drugs in fact are developed by other firms and acquired through mergers.

Moreover, let’s stop pretending this is so complicated that mere mortals can’t possibly comprehend what’s happening. If we can figure out all the charges and fees on a phone bill, we can understand how an EpiPen is priced.

If nothing else, Congress should require that drug companies come clean on how much they’re really spending to bring new drugs to market and how much profit they’re making annually.

Every other developed country has taken the position that a fair profit for pharmaceuticals is perfectly acceptable, while taking financial advantage of the sick is unethical and immoral.

That seems like a good place to start in fixing our own system.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.


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