Drug makers raise their prices to meet revenue goals and exploit Medicare’s inability to negotiate directly for lower prices by targeting the U.S. for price hikes, a scathing report by the Democratic-led House Oversight and Reform Committee says.
What You Need To Know
- Drug makers raise their prices to meet revenue goals and exploit Medicare’s inability to negotiate directly for lower prices by targeting the U.S. for price hikes, a scathing report by the Democratic-led House Oversight and Reform Committee says
- The committee’s 269-page report also accuses pharmaceutical companies of creating a compensation structure that gives executives an incentive to raise prices and says that revenue gains far outpace investments in research and development
- The industry trade group Pharmaceutical Research and Manufacturers of America, called the Oversight Committee’s report “misleading" and blamed pharmacy benefit managers, health plans and government programs for driving up costs through rebates and discounts
- House Republicans issued their own 19-page report that also took aim at pharmacy benefit managers, or PBMs, which manage drug benefits on behalf of private insurers, Medicare drug plans, large employers and other payers
The panel released the findings Friday of a nearly three-year investigation that begun under former Chairman Elijah Cummings, D-Md., who died in 2019.
The committee’s 269-page report also accuses pharmaceutical companies of creating a compensation structure that gives executives an incentive to raise prices and says that revenue gains far outpace investments in research and development. It also charges that drug companies are abusing the patent system to quell competition.
“What the Committee has learned should be troubling to lawmakers, taxpayers, and any American who has ever struggled to afford their prescriptions,” committee Chairwoman Carolyn Maloney, D-N.Y., said in a news release. “Drug companies have raised prices relentlessly for decades while manipulating the patent system and other laws to delay competition from lower-priced generics."
"These companies have specifically targeted the U.S. market for higher prices, even while cutting prices in other countries, because weaknesses in our health care system have allowed them to get away with outrageous prices and anticompetitive conduct," Maloney continued.
During its investigation, the committee says it reviewed more than 18.5 million pages of internal documents from many top drug companies that shined a light on their decision-making.
The panel found that the companies raised prices 250 times on the 12 drugs it analyzed, with the median price of the medications now costing consumers 500% more than when they first became available.
Meanwhile, the wallets of American consumers were hit hardest, the report says. The committee said internal strategy documents show that pharmaceutical companies targeted the U.S. for price increases while maintaining lower prices elsewhere in part because Medicare cannot negotiate directly for lower prices.
The panel estimates Americans could have said more than $25 billion over five years on just seven drugs — Humira, Imbruvica, Sensipar, Enbrel, Lantus, NovoLog and Lyrica — if Medicare Part D plans received the same discounts as other federal health programs that are able to negotiate.
The Oversight Committee also sought to poke a hole in the argument that profit margins on certain drugs are needed to reinvest into developing other medicines. The panel’s report said that from 2016 to 2020, 14 leading drug companies spent $56 billion on research and development, but $577 billion on stock buybacks and dividends.
“The result of the House Oversight Committee investigation is clear: American families are suffering from outrageous drug prices, while Big Pharma rakes in record profits,” House Speaker Nancy Pelosi, D-Calif., said.
Maloney and Pelosi both used the report to call for the Senate to pass President Joe Biden’s Build Back Better agenda, which would allow Medicare to negotiate certain drug prices with manufacturers, cap out-of-pocket costs for some prescription drugs for Medicare recipients at $2,000 a year and limit the cost of insulin to $35 a month.
Debra DeShong, spokeswoman for the industry trade group Pharmaceutical Research and Manufacturers of America, called the Oversight Committee’s report “misleading.”
The organization blamed companies known as pharmacy benefit managers, health plans and government programs for rebates, discounts and other payments that it says cost the industry $187 billion in 2020. PhRMA also pointed to an analysis from the bioanalytics firm IQVIA that found the net prices of brand medicines after rebates and discounts declined by 2.9% last year.
“Like the disastrous bill championed by Democratic leaders, this misleading report fails to address abusive practices by insurance companies and middlemen who profit off a broken system while patients can’t afford their medicines,” DeShong said in a statement to Spectrum News. “This so-called investigation has ignored the real affordability problems people face, like rising deductibles and other out-of-pocket costs. This is nothing more than a partisan exercise to justify an extreme proposal that will restrict patient access to lifesaving cures and treatments.”
House Republicans issued their own 19-page report that also took aim at pharmacy benefit managers, or PBMs, which manage drug benefits on behalf of private insurers, Medicare drug plans, large employers and other payers. Critics argue PBMs drive up drug prices by using their purchasing power to negotiate rebates and discounts from manufacturers.
“Democrats talk a big game when it comes to lowering prescription drug prices, but they refuse to conduct oversight over the middlemen who are driving up costs for patients to increase their bottom line,” Rep. James Comer or Kentucky, the Oversight Committee’s top-ranking Republican, said in a statement. “Pharmacy Benefit Managers must be held accountable for their role in rising prescription drug prices, and Congress must take on PBMs to implement transparency and restore competition.”
JC Scott, president and CEO of Pharmaceutical Care Management Association, a trade group that represents pharmacy benefit managers, said in response to the Republicans’ report that PBMs “are the only entity in the drug and payment supply chain that actually reduces prescription drug costs for patients.”
“Any report that focuses only on pharmacy benefit managers (PBMs) seems to purposefully take a narrow view and is therefore going to miss the mark,” Scott said in a statement given to Spectrum News.
“Instead, policymakers should focus on increasing affordability for patients through more competition, market forces, and a focus on getting value for scarce health care dollars,” he added.