committee. this first portion is just under three hours. [inaudible conversations] >> the senate committee on health, education, labor and pensions will come to order. today is a busy day. as we all know very important both will be taking place, republicans of knickers will be meeting in their caucuses so people are going to be coming in and out. i also think that this hearing is important enough that we extend the time for questioning from the usual five minutes to seven minutes, if that's okay with folks. let me begin by welcoming the ceos of bristol myers squibb,

chris berner, we thank you for being here. ceo merck robert davis, we thank you for being here. and the seahawks johnson & johnson joaquin duato for being with us this morning. thanks very much. there is a lot of discussion in our nation about how divided our people are on many issues. and that is absolutely true, but on one of the most important issues facing our country, the american people whether democrats, republicans come in the pesco conservatives, progresses could not be more united. and that is the need to substantially lower the outrageous price of prescription drugs in this country. according to a recent poll, 82% of americans say the cost of

prescription drugs is too high, and 73% say that the government is not doing enough to regulate drug prices. as a nation we spent almost twice as much per capita on health care as to the people of any other country. $13,000 for every man, woman and child. and one of the reasons that we spend so much is the high cost of prescription drugs in our country. the outrageous cost of prescription drugs in america means that one out of four of our people go to the doctor, get a prescription, and they cannot afford to fill that prescription. how many die as result of that, how many suffer unnecessarily, nobody knows. but my guess is it is in the millions and i talked to many of them in vermont and around the country. meanwhile, our insurance premiums are much higher than they should be, and hospital

costs are soaring because of the high cost of prescription drugs. further, the cost of prescription drugs in this country is putting an enormous burden on taxpayers and seniors by raising the cost of medicare and medicaid. medicare alone spends at least $135 billion a year on prescription drugs. this is not only a personal issue, it is an issue of the federal budget. meanwhile, as we pay by far the highest prices in the world for prescription drugs, ten of the top pharmaceutical companies in america made over $110 billion in profits in 2022. they are doing phenomenally well while americans cannot afford the cost of the medicine they need, and the ceos in general receive exorbitant compensation packages. this morning we are going to hear a lot from our ceo panelists about how high prices

are not their fault, and that the pbms are forcing americans to pay much higher prices than they should be paying. but let us be clear. in 2022 johnson & johnson made nearly $18 billion in profit, painted cdao over 27 million in compensation, and spent over 17 billion on stock buybacks and dividends. that same year, merck made 14.5 billion in profits, , handed out over 7 billion and dividends to their stockholders, and paid its ceo over $52 million in compensation. bristol myers squibb made 8 billion in profits last year recently spending over 12 billion on stock buybacks and dividends, and giving it ceo over $41 million in compensation. now, why did the majority of members of this committee invite

these three pharmaceutical ceos to testify today? and the answer is pretty simple. mr. bernard, we want you to explain to the american people why bristol myers squibb charges patients in our country $700 a year for eloquence, when that same exact product can be purchased for just $900 in canada, $650 in france. mr. duato, , where going to ask you why johnson & johnson charges americans with arthritis $79,000 for stone barrel when that same example can be purchased for just 20,000 in canada and just 12,000 in france. mr. davis, please tell us later why merck charges americans with cancer $191,000 a year for

keytruda in the same product can be purchased for 112,000 in canada and $91,000 in france. let's be clear, johnson & johnson, merck and bristol myers squibb are not just charging higher prices in the united states compared to other countries. they are also charging americans much higher prices today than they did in the past, even accounting for inflation. from 2004-282 the eighth the median price of new innovative drugs sold by these three copies was just $14,000. inflation accounts come from 2019 to 2023 where we are today, the median price of new drugs sold by these three companies was $238,000. in other words, americans are forced to pay higher and higher

prices for the drugs they need to survive. and let's be clear, the overwhelming beneficiary of the high drug prices is the pharmaceutical industry. how do we know that? well, that is precisely what they tell their investors. according to their own shareholder reports, bristol myers squibb made $34 billion selling the blood thinner eliquis in the united states compared to just 22 billion in the rest of the world combined. make their money in the united states. in other words, the u.s. accounts for nearly 2/3 of all global sales of eliquis, not a single single dollar of this revenue is going to pbms. an hundred% just going to bristol myers squibb. johnson & johnson has a port to its shareholders that made over 30 billion in revenues selling the arthritis drug stellaris in the united states since 2016 carmarthen twice as much as rest of the world combined.

nothing to do with pbms. merck has reported to its shareholders that it made 43.4 billion selling the cancer drug keytruda and the united states compared to 30 billion in the rest of the world combined. now our ceo panelists from drug companies will tell us this morning how much it costs to develop new drugs. and often the research that they undertake for new jersey is not successful, , and they are righ. we appreciate that. but what they have not told us in the written testimony is that 40 major pharmaceutical companies, including johnson & johnson and mark, spent $87 billion more on stock buybacks and dividends over recent tenure period than what they spent on research and development, more on stock buybacks and dividends than in research and development.

in fact, bristol myers squibb spent 3.2 billion more on stock buybacks and dividends in 2022 bandits spent on research and development. johnson & johnson spent $46 $46 billion more on stock buybacks and dividends than is spent on research and development since 2012. in other words, these companies are spending more to enrich their own stockholders and ceos and are in finding new cures and new treatments. now, the average american who hears all of this is asking a very simple question. how does all of this happen? what's going on? how could drug companies charges in some cases ten times more than they charge canadians are people around the world for the same drug? how did he get away with this when so many of our people cannot afford the high price of the drugs that they need? how can it be uniquely among

industrialized countries that these companies, not just these companies but the pharmaceutical industry in general, can raise prices anytime they want to any level they want, want to double the price is, do it want. how do they get away with all of that? and here in my view is the answer. the united states government does not regulate drug companies with very few exceptions. the drug companies regulate the united states government. that is the sad state of affairs in a corrupt political system. over the past 25 years the pharmaceutical interest, not just these companies, the entire industry, spent over $8.5 billion on lobbying and more than 745 million on campaign contributions. and let me be fair. i do what to misspeak. they are bipartisan. they give to republicans. they give the democrats. and i am especially impressed by the pfizer drug company,

pfizer's letter this morning, contributing $1 million to the republican party in kentucky to expand its headquarters named after republican leader mitch mcconnell. but again, it's not just republicans. it's democrats as well. unbelievable, this is an astounding fact, last year drug companies had over 1800 well-paid lobbyists here in d.c. to make sure that congress did their bidding. there are 535 members of congress, and 1800 well-paid lobbyists, over three for every member of congress so if you want to know why you're paying the highest prices in the world, america, that's why. now, here is some goodies in the midst of all that. we are beginning, beginning to take on the greed of the pharmaceutical industry. as result of inflation reduction act has several years ago, medicare for the first time ever is beginning to do what every major country on earth does and

what the veterans administration has been doing for over 30 years, and that is to negotiate for lower prices of drugs, including stelara and eliquis. let me conclude by saying this. i am proud of what this committee up to this point has accomplished last year as you all remember the ceo of moderna committed during a h.e.l.p. committee hearing that his company would make certain that no one in america with have to pay for the vaccine out of pocket. we appreciated that. in a separate h.e.l.p. committee hearing last may that ceo of eli lilly committed that his company would not raise prices on existing insulin products after having in fact, lowered them. but let's be clear. much more needs to be done. i look forward to hearing from our ceo panelists this morning as to how they are going to go forward to substantially lower the cost of prescription drugs in this country. senator cassidy, or no recognized for an opening statement. >> thank you.

a. q. khan chair sanders. let's just be clear. everybody on this panel cares about the high cost of prescription drugs and wants to work on real solutions to address this. but it's also clear that this hearing is not about finding legislative solutions. it's kind of following a formula. we publicly attack -- i don't but others come public attack private citizens from being successful under capitalism. we grossly oversimplified a problem and blame corporations. we demand ceos come before the committee for public verbal stoning. we reject the offer to send top executives with subject matter expertise and responsibility regarding the issues at hand and threaten a subpoena when ceos are suspicious that they will get a fair shake. hold the hearing, get soundbites, then pick another set of ceos for a show trial, we don't pass meaningful legislation. if that sounds familiar that's

been hearing with starbucks founder howard schultz, moderna ceo stephan benzo, and now this hearing with the same formula. i would've gladly join the chair and exploring solutions address i cost of prescription drugs. i'm a doc. i've worked in a public hospital for the uninsured for 25 years. i did my best to get care to those who otherwise would not have received. i am aware of this. i'm also aware of the perverse incentives, they kind of like, my gosh, it shouldn't be high but it is high. bad actors gain the system and we need solutions that benefit patients and improve access. but the majority was not interested in working with the site of the dais to hold a series hearing to inform serious legislation. they didn't seek republican input. the goal was to hold you guys in to cry capitalism and blame these corporations to the high cost of drug prices. now by the way, of course. >> companies play a role and hopefully will get answers today to legitimate questions about

how high drug surprise but the problem is far greater and more complex than individual companies or even a a set of companies within an ecosystem is incredibly complex. why do americans pay more for certain drugs in patients in other countries? to understand when we needa serious effort to navigate the network of diverse incentives throughout the health care system. i lived in it for 25 years. i am very kind of aware of it. taking a substantial look at insurance benefit design, price transferred to come regulatory, intellectual property barriers, the perverse effect government discount programs have upon prices charged to commercial patients, et cetera. one example, just to see get a little bit of complexity here. the 340b drug program resulted in in a 54 gilligan introduced us in 2022 but we actually don't know if those discounts lowered isis for the patient who bought the drug. there are reports that patients pay cash when the intermediary took the full price, even though

340b should've lowered it. that is a serious investigation being conducted by the side of the dais that the other side of the dais was not interested in participating in. that is an understanding of an ecosystem. i understand there's no one more eloquent than chair sanders for medicare for all we can cherry pick examples of how other countries are doing something better. i could cherry pick the opposite. candidate is struggling just to show those complexity, let me take an example. candidate the struggle with specialty care. in may of last you the canadian government began to send 4800 canadians from british columbia to washington state to quote insure people have faster access to life-saving radiation treatment, end quote. they can afford their system because we are right next door. relatedly, to this string after that, allison, canadian woman paid for own treatment in the united states after the provincial health authority in

british columbia denied access to life-saving chemotherapy. canada had a lower cost drug council of the didn't carry the chemotherapy so she paid for out of pocket in the so she could have life-saving chemotherapy. the united states is not perfect, but if we cherry pick from other countries, we have to do a more thorough investigation to see if there is a balance there. now let's return to prescriptions. canadians pay less than we do. let's figure out why. but let's also point out the public health insurance in canada only covers 24% of newly developed drugs. now, maybe that's a trade-off but i can tell you, you tell an american they can have access to life-saving drug, they're going to see you in court. they're going to sue and they're going to say i i want that ac. the uk only covers 38% of newly available drugs. americans just would not tolerate that. it's fair to say that alice,

those radiation treatment patients or those not getting the new develop life-saving drugs more quickly mai tai in those countries that don't have access to the same treatments as do we in the u.s. these are serious questions. one more time, i may doc. i aware of this but we need to fully consider all these issues and then maybe bring in at the end, but we will bring in with the context which is complete as opposed to isolated. as i sit at the start, it would be best if this were a genuine exercise. i am so willing to do the work on this as are my colleagues. we've shown that willingness on work on pbm reforms in generic drugs. and even though the chair and i got off to a rocky start, we did some pretty good work on that, mr. chair. i think we got some good bipartisan legislation, so this committee i agree with you can accomplish that. i don't want the committee to devolved into ceo whack-a-mole,

ends up with no serious legislation as a result. further proof of what i consider the n series and cynical nature of the street is that the minority as the church other witness on the panel that could actually explore some of these issues side-by-side the ceos. that was turned down. we wanted and academic experts in drug price the could provide unbiased and substandard and input to the issues at hand. our what this was not allowed. he will be on the next the way this works is this gets all the publicity in the nixon gets crickets. and so we've not had the opportunity. and i'll also point out we didn't split the majority and minority witnesses into different panels during several hearings which promoted kind of labor union issues. i can think of no reason to not allow our witnesses to be a now, except perhaps ruining the optics. as i said at our last markup, what ends up being hollow messaging gives d.c. a bad reputation.

folks want real answers. a want relief from high prices. it is in part what were going to hear today, , but it would be separated from a context that would have made it a lot more productive. if you're telling voters you're going to do something when you know at the get go you will have no legislation solution which emerges, and that's why folks don't trust. so if we're just looking for a social media clip, then i suppose we've accomplished something. let's make a difference for the people whom we represent. for this patient and hospitals where i once traitor who otherwise would not have access to care. we have the ability to craft meaningful legislation. let's do it. with that i give. >> to senator cassidy. our first witness will be joaquin duato, chairman and ceo of johnson & johnson. mr. duato has served as johnson & johnson's chairman since 20 23 a chief executive officer since 2022. mr. duato, thanks for much for

being with us. >> chairman sanders, ranking member cassidy and members of the committee, thank you for the opportunity to be of today johnson & johnson has collaborated with this committee over several decades to advance healthcare solutions for patients, including on diversity and clinical trials, nursing and healthcare workforce, pandemic preparation, mental health, and regulatory pathways for novel cell and gene therapies. i applaud this committee for your commitment to such critical priorities. i have been with j&j for more than 75 years and have held roles in europe and in the u.s. i understand the global challenges and complexities of healthcare innovation and delivery. and today i look forward to discussing our approach to pricing and the work we do to advance healthcare for all americans. fundamentally, our decision-making is guided by the values set forth in our credo which states that our first responsibility is to the

patients. our drug pricing decisions reflect our commitment to bringing forward innovative measures for patients to the effort patients tomorrow. first, our prices are based on the value our medicines bring to patients, the healthcare system, and society. we take into consideration that our medicines improve patient's quality of life and survival rates, while often reducing healthcare costs. and for context, in 2022 the average net price of our medicines declined for the six year in a row by 3.5 percentage 3.5 percentage points. over those six years prices have declined by almost 20%, and the real inflation adjusted price decline was more than 40%. second, we price our medicines to support patient access. in 2022 although we paid $39 billion in rebate discounts and fees, almost 60% of the average lease price of her drug. with the intent the patients

benefit from the substantial cost savings. we also support patient affordability and access by funding patient assistance programs. in 2022 these programs help more than 1 billion, 1 million underinsured patients, and we donated $3.8 billion in free medicines and other support to help patients with no insurance. finally, we price a medicines to meet our commitment to innovate and develop differentiated and novel medicines for patients. the investment required to do so is massive. the average cost of bringing in drug through clinical trials in our industry is more than $2 billion. however, more than 90% of the drugs that entered clinical trials do not make it to patients. consequently, our r&d investment is enormous and totals near $78 billion since 2016. despite the tremendous investment required to bring

drugs to patients, drug costs in the u.s. have not increase significantly as as a percenf total overall healthcare costs. in fact, drug spending in the u.s. is about 14% of healthcare spending, slightly below the average for the rest of the world. while total u.s. health care spending is higher than other developed nations, is spending allows american patients to receive cutting edge healthcare earlier than any other country in the world. however, the burdensome obligations imposed in u.s. are hard for patients to meet and undermine access and health equity. remarkably, the gao found that patient co-pay obligations often exceed payor costs for the drugs. this means that patients sometimes pay more for their medicines and their insurers. clearly, this part of the system is not working as intended.

we support proposals to reconcile this inequity and torture patient access. as outlined in my testimony, congress should stop middlemen from taking for themselves, the assistance that pharmaceutical companies intend for patients. and finally, it is essential that we reject the price caps and controls that exist in other countries, which stand innovation. our nation's robust biopharmaceutical industry was created by policy choices that prioritize earlier patient access to breakthrough medicines and incentivize investment in medical innovation. thank you for the bipartisan efforts of this committee and for the opportunity to engage in today's discussion. i look forward to your question questions. >> thank you very much, mr. duato. our next what this will be robert davis, chairman and ceo of merck. mr. davis has served as chairman since december 2020 ceo since 2021. thank you very much, mr. davis, for mr. davis, for being here.

.. >> based in new jersey, our company is one of the world's most advanced research intensive biopharmaceutical companies, an organization at the forefront of providing innovative health solutions in advanced diseases in people and animals. i joined merck 10 years ago they were on the precipice for an oncology treatment. at the time people close to me were battling cancer and unfortunately were not able to benefit from this amazing

discovery. following that first approval, merck has demonstrated the efficacy of katruda and reached many americans. the impact is difficult to overstate. with the recent american cancer society report finding cancer mortality in the united states has fallen 33%, representing an estimated four million americans whose deaths have been averted and our work continues as we advance into more tumor types and earlier stages of cancer. remarkable progress like this does not come cheaply. for katruda, invested 46 billion in development and we expect to invest another 18 billion into the 2030's and oncology is just one of merck's many areas of discovery. right now nearly 20,000

researchers seeking break thieu treatments for immune disorders, infectious diseases, alzheimer's and other ailments threatening the health of many people. to advance this critical work, we've invested more than $159 billion in r and n since 2010, including 30 billion in 2023 alone and have invested more than 10 billion in capital in the form of both investments in manufacturing and r and d, over the last five years, in the united states, creating more jobs for americans. we do not hesitate to make these investments because they are necessary. at the same time many americans are struggling to afford health care, including prescription medicines and we're eager to find solutions to these access and affordability challenges. that's why we supported changes to medicare part d that allow beneficiaries to pay their costs over time and publicly disclosed our u.s. pricing data, including the average rebates and discounts we

provide. in addition we offer coupons and support a patient assistant program for patients who cannot afford the medications that they need. in the past five years, this program has helped nearly 800,000 patients to obtain merck products free of charge with an estimated value of 7.8 billion dollars. but the reality is that merck's efforts are alone are far from sufficient. they could not and cannot address the underlying structural issues pending our system. as more power and control has been concentrated into the ever smaller number of vertically consolidated players and it's increased dramatically and contracting with them, merck continues to experience increasing pressure to provide even larger discounts and the gap between list and net price continues to grow. and patients are not benefitting from the steep discounts we provide. these problems could be addressed if other actor's revenue streams, removing

incentives to favor high list prices and ensure that less flows to the middle men who do not discover, develop or manufacture them. in addition the substantial savings provided by merck and other manufacturers should be required to pass through to patients, to lower their out of pocket costs. we firmly believe that reforms like these will create a drug pricing system that incentivize incentivizes the new medicines as they see that patients have the life saving innovations. and we must hold onto a market that's free, independent one that encourages, and drives the american economy and creates jobs and continues to deliver innovation and new treatment discoveries. i'm here today to pledge our support and cooperation in these efforts. thank you for your time and your consideration of these important perspectives.

>> thank you very much. our third witness will be chris burnham, ceo bristol myers squibb and served since november, 2023. thank you for being here, mr. burnham. >> thank you for having me here today. i'm proud to be representing bristol myers squibb an american company that's committed to transforming patients' lives through science. i've spent more than 20 years in this industry, the majority in smaller, science-driven biotechnology companies. i joined bms because we have a similar focus on leading dridge driving innovation to bring more medicine to patients faster. to help illustrate the type of work we've been doing more than 150 years at bms let me provide two illustrations of how our

innovative medicines have helped patients and provided tangible benefits to society. our work in hiv/aids transformed this disease from a death sentence into a correspond being condition. similarly, our pioneering i am nuno oncology treatments harnessed the body's immune system to fight cancer and have contributed significantly to improved outcomes across a number of tumors, including metastatic melanoma, where the combination of these two medicines has changed the median life expectancy from less than nine months to over six years. i'm proud that our record of innovation continues today. we've invested more than 65 billion dollars in research and development over the past decade. this has resulted in truly novel and transformational medicines, in cardiovascular

disease and work in cancer and working to bringing to patients the first treatment for schizophrenia in 30 years. these medicines are, but a few examples of the innovation that results from an american health care system that not only accounts for the majority of new medicines launched each year, but also, one that delivers those medicines to u.s. patients faster than anywhere else in the world. this isn't by chance. the united states has built a health care system that prioritizes patient and physician choice, as well as the broad and rapid availability of cutting edge medicine. this is in stark contrast to many systems outside of the united states which while they may deliver lower prices, carry an often overlooked trade-off that patients often wait longer for new medicines, sometimes never approved or reimbursed. for example, canadian patients

have access to approximately half of the medicines available in the united states and patients in other countries face a similar reality. despite its benefits, we know our american system is far from perfect. patients bear the brunt of a complex u.s. system that results in increased health care course and lack of affordability. we have to make the system work better for them. after all, innovation that does not make it to patients is no innovation at all. while prescription medicines account for a relatively small portion of overall health care spending, we believe we have an important role to play in prioritizing the development of medicines that will bring savings to the health care system and as an industry, we should set a higher bar for doing just that. similarly, we have a role to play in addressing affordability and stand ready to partner with congress and

others to address this issue for patients in a holistic manner. but in developing those solutions, we should not abandon our system for one that denies u.s. patients the broad and rapid access to vital medicines that they appreciate today. we support policies that lower patient out of pocket costs without ultimately harming innovation. the need to strike this balance should not be abstract. i expect many of us in this room have lost a loved one to cancer or another devastating disease. in my case, it was one of my best friends and it happened as he awaited a medicine that i believe could have saved his life. this is an almost daily reminder to me that making patients wait for weeks, months, or years can be the difference between life and death. thank you again for having me here today on behalf of bms and

the more than 30,000 employees who share my passion for delivering new medicines for patients, i look forward to answering your questions. >> thank you very much. before i begin the first round of questions let me remind our witnesses that while the health committee does not swear in witnesses as a general rule, federal law at 18 u.s. code section 1001 prohibits no one willingly making any false statements to the senate regardless of being underoath and in response to many of your testimonies, we are aware of the many important, life-saving drugs that your companies have produced and that's extraordinarily important, but i think as all you know, those drugs mean nothing to anybody who cannot afford it and that's what we're dealing with today,

that millions and millions of our people cannot afford the outrageously high costs of prescription drugs in this country. now, my time and the time of all of the members is limited so we're going to just-- i'm going to ask -- so my time is limited so i'm going to start by asking all of you a number of questions and i would appreciate it if you could respond with yes or no answer. it turns out that in our dysfunctional and extraordinarily expensive health care system hundreds of thousands of americans have gone to go-fund-me in order to raise money to pay for their health care needs and for their prescription drugs. let me ask mr. davis, if i might. have you ever severaled on

go-fund-me for your can drug. keytruda? >> no, i have not. >> we have, i and my staff have and we've found over 500 stories of people trying to raise funds to pay for their cancer treatments. one of those stories is a woman named rebecca, a school lunch lady from nebraska with two kids who died of cancer after setting up a go-fund-me page because she could not afford to pay for keytruda. rebecca had raised $4,000 on her go-fund-me page, but said the cost of keytruda and the cancer treatment was $25,000 for an infusion every three weeks. mr. davis, and please, yes or no, is it true that the list price of keytruda 191,000 a year in the united states? >> that's close to being true, yes. >> thank you. >> is it true that that same exact drug can be purchased in canada for $112,000 a year and

$44,000 a year in japan? >> generally, yes. >> mr. davis, even though the price of keytruda is one quarter of the price in japan, compared to the united states, does your company, does merck make a profit selling keytruda in japan? >> we do. >> so what i understand is you make a profit selling keytruda in japan for one quarter of the price that you sell it for in the united states. my question to you is a pretty simple one, will you commit to lowering the price in keytruda in the united states for the price of japan? >> well, senator, i think first i acknowledge the prices in the united states are higher than they are in many of the countries you said and not for all drugs, but for many drugs and that's the reality we face. but i think it's also important to point out that you get

access in the united states faster and more than anywhere in the world. we have 39 indications for keytruda across 17 tumor types in the united states. you look across europe, it's in the 20's, if you look across japan, it's in that number, a little bit less. so there is a reason why the prices are different, and we need to be careful because we are also seeing in those markets that they are unwilling to support the innovation and we are very hardly -- working hard to get them to understand the need for helping to fund. >> i apologize you for cutting you off. but i did want to make this point. again, we all appreciate the breakthrough in important drugs that you and other companies have to save lives. no debate about that. i do want to point out after all is said and done and after all the money we spend on prescription drugs and health care in general, the life expectancy in japan is nine years longer than it is in the united states. senator cassidy talked about

canada, the life expectancy in canada is six years longer than in the united states. life expectancy in portugal is six years longer, life expectancy in the u.k. is four years longer. let me ask the last question to mr. davis. as i understand it, you 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 go-fund-me page for keytruda. >> well, i can tell you at merck, we are very much sensitive to what's happening with patients and that's why we have very important patient assistance programs. we commented on the fact we have over 800,000 patients benefitting where we provide free drugs for those who can't afford it as well as other assistance programs that help with co-pay and others, so we're very committed as a company to doing what we need to do to try to help alleviate

the challenges patients face that you're focusing on and that's my focus as the ceo. >> thank you. >> mr. burnham, bristol myers squibb. caroline from florida says she cannot afford eloquis, can't afford it so she'll stop taking it the risk of stroke. 7100 a year in the united states. dr. melissa barber, an expert at yale university estimated that it costs just $18 to manufacture a year's supply of eloquis. $7100 and we pay $1800 to manufacture. is it true, the same drug, it can be purchased in canada for $900 a year? >> senator, that's roughly correct. >> let me ask you this, even at

13% of the cost in the united states does bristol myers make a profit selling eloquis for $900 a year in canada? >> senator, we do make a profit. >> so you're selling the product for 13% of what -- in canada what we pay in the united states and obviously you sell it there because you make money. mr. burn many had will you commit today that bristol myers squibb will reduce the list price in the united states to the price that you charge in canada where you make a profit? >> senator, we can't make that commitment primarily because the prices in these two countries have very different systems that prioritize very different things. in canada medicines are generally made less available and it takes oftentimes considerably longer for those medicines to be available on average. >> i apologize, i do apologize.

life expectancy in canada is six years longer in canada than in the united states. mr. burnham, your company spent over $12 billion on stock buybacks in 2022. given that reality, can you tell caroline why you can't lower the price of eloquis? >> first, senator. let me say no patient should have to go through the types of choices that the patient you just described go through. it is our commitment to continue to bring down the price of medicines in the u.s. and i would love the opportunity to bring down the price in the u.s. our net prices, what we are compensated have actually the last five years declined. at that same time, the list prices have increased. why is that? because the complexity of the system and the billions of dollars in rebates that we have provided to inter immediate arearies that unfortunately do not go to lowering the price of

medicines like the patient you just described. >> again, i apologize. i want to get briefly to johnson & johnson. mr. duato, is it true that the list price of solara is $79,000 a year in the u.s.? >> it's roughly right, but also true that the discount of-- 70%. >> we've dealt with pbm's, and i'm sure we get to it this morning. and is it true when charging $79,000 in the united states the exact product is sold in spain for $18,000? >> i don't know the price in spain. i can tell you that the discount in the u.s. is 70%, so the price that you quote is 30% of that. >> okay. mr. duato, is it true that it costs less than $15 a year to manufacture so solaro.

>> the manufacturing price, we're looking at the value the medicine brings to the health care system and we continue to invest in research, $15 billion last year and also we look at affordability. the co-pay if they use our co-pay assistance programs in the u.s. for patients using is 10 to $15 per month. i apologize, i'm over my time and going to give senator cassidy the same time that i had. >> thank you all. mr. duato, in 2021, janzen constructed a contract for a blockbuster drug, changed the outcome for people with uc. but this deal protected

remicade from competition by a new biosimilar, that was launched at a lower cost than remicade. i understand that this is confidential in terms of the settlement with the courts, but -- and by the way, let me just say this involves a rebate wall so for the sake of those watching, a rebate wall is an anti-competitive tool which can be used to restrict a competitor's entry into a formulary. a manufacturer would offer more significant rebates to a health plan through a pbm potentially the pbm blocking the biosimilar. we have been looking at biosimilars to lower the cost in a market-oriented competitive way. if we are re not going to have government regulation, we need a market, but this blocks it from entering. so, in the full support of a

market oriented approach, do any of your current contracts employ rebate walls to prevent lower cost biosimilars from formulary access? >> we welcome biosimilars and generics, and a part of the system, as a matter of fact in the u.s., 90% of the prescriptions are biosimilars and that's one of the reasons that pharmaceutical expenses have remained flat or increasing during the last years. we believe that biosimilars force the patient access and we care deeply about it. >> but let me ask, because my specific question, do any of your current contracts employ rebate walls? >> our current contracts do not contain any techniques, biosimilars in the market. >> thank you. i think two of you, maybe three of you have been working on gene therapy. i've been really concerned we

don't know how we're going to price those. one of the concerns, there will not be a market for us to lower the cost of initial gene therapy which are incredible. it's amazing the lifetime of benefit that gene therapy can create, but i was speaking to a medical director of medicaid cmo, and he was telling me that the pharmaceutical cost related to medicaid is now 35% where formerly it was like 25 or 30% and he says it's being driven by gene therapy. and when sickle cell comes widely spread, i don't know how it's priced, but my state has a lot of sicklers, i don't know how my state is going to afford giving it to everybody that should have access. very concisely, how are we going to show restraint on the price of some of these new gene therapies which already is driving up medicaid so again, 35% of medicaid is now

pharmaceutical costs? i'll start with you. >> senator, we don't work in gene therapy. >> mr. davis. >> we don't work in gene therapy. >> i thought i saw press, where you did a vector or-- >>. >> mr. duato. >> we have a -- we support legislation for based gene therapy and we welcome legislation in order to have value-based contracts. >> that's good. value-based contracts will be important, but still doesn't address the opening cost because the opening cost is sky high, you still, you see where i'm going with that. what would you give to us who believe in market solution to an opening price that would be so much that it would be difficult for society to afford the gene therapy? and i could put in any other drug. let's start with gene therapy. >> we have to look at the value of these therapies and the fact

that gene therapy for diseases may affect only less than a thousand people in the world so we have to understand that and you can rest assured that if we are fortunate enough to bring the solution to people that has this, that can lead to blindness and we sit down and evaluate very thoroughly our pricing in order to make sure that patients, all patients that need this therapy are able to afford it. >> i think i recall a couple of years ago, a study shown, respected, you probably know it better than i that $2 million for gene therapy was a reasonable sort of-- it would cover the cost and create the incentive to do more and that would be where you wouldn't have the ability to produce more. obviously the more you produce, the more you get extra profit. you know where i'm going with that. so, but that shows restraint, if you will, on behalf of the manufacturer.

now, i want to create incentive, but we want to be able to provide access. and without access, it's as if the drug is never invented. so, is there any other thoughts you have on how society, if that's ultra rare, $2 million or not ultra rare, less? how could we have a market oriented approach to this? because i'm truly concerned about the medicaid program to be able to afford some of these gene therapies. >> we care deeply, but our nations getting to the patients, and ultra rare diseases that, therapy can have life changing consequences. so we will always sit down and make sure that the way we price is reflective of the value of the medicine, but also important, it enables affordability and it makes it possible that every patient that is in-- >> the affordability, we're defining it for the patient.

if medicaid covers it, it's affordable for the patients or insurance does, but that doesn't necessarily make it affordable for society and society's got to pay for it and obviously, medicaid is taking more and more of the state's budget and frankly, more of the federal budget. we want market oriented solutions and incentives so that good companies like the three of you and others are making new things. if my state goes bankrupt paying for a new gene therapy, then my state, the taxpayers, we're all in tough shape. let me go to one more thing. there's evidence that pharmaceutical companies do, the longevity of the drug, and some argue it defeats innovation, because if there's profit from innovation you could make profit from life

cycle management. any thoughts about that? >> senator, i think that life cycle management if you think about the new product is incredibly important to really being able to deliver additional benefits to patient. obviously, the patents associated with any product will dictate when a generic enters. we have been in favor of a robust generic entry primarily because our locust-- our focus is on innovative products. in cancer, start with the disease, learn more how it works and ultimately bring it know early stage cancer where you have the potential to potentially cure patients. that takes quite a bit of time, but that's an example of life cycle management where you're showing the true potential of a medicine. i would hate for us to cut off the opportunity to show those benefits. at the same time, we should be as an industry welcoming of

generic competition because ultimately, our focus as a company is to take resources as we get close to generic entry and focus on the next wave of new product innovation which is ultimately where we want to go for patients. >> mr. davis, 20 seconds. what would you do? >> well, the short answer, as i look at it, one, we very much support generic drugs, biosimilar drugs, that's the core of how our system works. we have a period where we're protected and able to recoup our objective and society benefits in perpetuity. >> and we ask, are we benefitting the patient. keytruda, 39 indications across 17 tumor types, it's revolutionizing the care of patients facing cancer. the reality only 30% of people show overall response. as great as it is, patients are still suffering. we're investing in combination therapies to go beyond that 30%

which means much better benefit and value to the patients that will ultimately use those drugs. >> thank you. >> senator murphy. >> thank you very much, mr. chairman. thank you for holding this really important hearing. mr. duato, looking at your arthritis drug and we've talked already a little in this hearing about the difference in price between the united states and other countries annual costs around $80,000 in the united states, $20,000 in canada, $12,000 in france, are the prices that you receive from a country like canada or france, which look to me to be about one quarter of the price that you get from the united states, are those prices covering your costs? >> yes, they do. to clarify, senator, the price in the u.s. is discounted by 70% so the comparison would be

25,000 in the case of solara if you're considering that price. >> are the prices you're receiving from these other countries, so let's say france, i'll give you the benefit of your argument, france is still 50% of the u.s. cost that you're claiming. are those countries prices covering your costs? >> they do. the difference, for example, in canada, the first country you quoted, solara, which is mainly indicated for inflammatory bowel disease, colitis, is not yet reimbursed in the public system. and canadian patients who want to access cannot do it in the public system because eight years, eight years later it's not yet reimbursed there. >> so you don't identify any free rider syndrome today in which the united states is paying higher prices, allowing other nations to receive lower

prices? >> i agree with you that the prices in the u.s. are generally higher for medicines, more aligned of what you are describing as the rest of the health care system are. the percent of pharmaceutical prices, it's lower than most of the advanced economies. the difference is na in the u.s., patients get access to therapy, life saving therapy years before they do in the countries that you mentioned. >> if the united states were to restrict the prices we paid would that create a different negotiating dynamic in countries that right now, for instance, are paying 50% of what the united states pays? would it allow you in your negotiations to get higher prices from other nations that right now are paying far less than the united states? >> we believe that price caps are not the way that innovation

is going to be fostered. all have worked within the department and the u.s. embassies around the world to try to reject the price caps that some countries as you mentioned imposed and we welcome the support of the u.s. government in avoiding that the governments, and that not benefitting their patients neither. >> what do you say to americans who look at the way that you allocate revenue and wonder why, in your case, for instance, you are spending $6 billion on stock buybacks, 11 billion dollars on dividends, and $14 billion on research and development? you spend all of your advertising time talking about the research and development spent, but i think most americans would be pretty surprised, given how much the industry talks about researchen development, that you are actually spending more money

shelling out money to investors and buying back stock than you are on research and development. what do you say to folks who look at that and come to the conclusion that you care much more about keeping your investors happy and keeping your executives happy than you do in researching and development, the next class of drugs that's going to help. >> we care deeply about patients, senator, and we care deeply about being able to discover the next medicines that are going to address major problems like alzheimer's-- >> but explain to me how you justify that division of dividends and stock buybacks versus research and development. you can just choose, instead of using $6 billion to buy back stock to put that in research and development, but you don't. >> our level of r and d

investment in the program buyback, which was 2021, 2023 is six times higher. we invested 6 billion in r and d and 6 billion in buyback. >> and we're looking adds. >> i'm looking at johnson & johnson, 11 billion in dividends, 6 billion in stock buybacks, executive compensation and 14 billion dollars in research and development. can you understand, let me ask you, one of my constituents in connecticut would look at numbers and think that you care more about padding the pockets of the folks that work for you and invest in you, than in research and development? >> our priorities investing in r and d. we have spent $77 billion since 2016 and just we have to pay

dividends because it's the only way that the company can remain operational and sustainable. otherwise, if we are not operational and sustainable. we are not able to making the medicines and making them affordable. >> you talk about the united states has a health care system that emphasizes the important role of patient choice. i just want to present you with the case of one of my constituents and ask you about the choices that she faces. so i have a constituent who needs eloquis, a blood thinner critical to her survival. she has priced the medicare plan that gets her the best possible price and that price is $350 a month. the average social security benefit in connecticut is about 1700 a month and someone on

eloquis is likely on other drugs as well. here is her choice, to pay the $350 and go without food or pay her rent late, or not take the drug and risk heart attack or stroke. is that the choice you're talking about when you refer to a health care system that prioritizes the important role of choice. >> senator, absolutely not. in fact, i would say on behalf of all of our employees at bristol myers squibb, that's a choice no patient should have to make. >> but she makes it. she makes it because you've chosen to price a drug at a point that's unaffordable. >> senator, we have priced in the u.s., we try to do this for all medicines, consistent with

the value that it brings. and it's the leading-- >> you put stock buybacks, why not do $4 million and instead bring the price of the drug down? >> i'm going to keep people to seven. mr. tuberville. >> thanks, mr. chairman. pretty much known where our chairman stands on this, his worldwide view, it's pretty clear he believes you guys are setting drug prices and it's all about corporate greed. i'm a true believer of capitalism. i believe that we have the best health care system in the world. the problem is we've got the federal government involved in it and it's not implemented the way probably it should be. with that being said, i've got a few questions on a couple of

things. mr. davis, can you explain me something. the biden administration has two priorities, dictate prices for prescription drugs, specifically small molecule drugs and cure cancer. can you walk me through how those priorities might be in direct contradiction of each other? >> well, senator, and i think what you're referring to is what is called the pill penalty. >> that's correct. >> underneath the ira and what that does, is effectively says that at nine years post your first approval, your price or your drug will be negotiated. and if it's small molecule, it's a 13, if it's a large. and the issue that it raises it disfavors small molecule development. and the reality if you look across the majority of cancer treatments they're still small molecules. as chris pointed out earlier, the development of cancer drugs

usually starts in a phase, starting with the sickest patient and the last stage of disease and you work forward into earlier stages of the disease. in fact, you could maybe talk about cure. to do those studies in the early stage disease often called-- care, and we have nine and we have approvals, and seven to nine years. if at nine years i have to significantly reduce the drug to the point where it's potentially at basically no profit, my incentive to do those follow-on studies is not there. that's our worry, if you look at cancer care, you're going to see patients suffer because we can't get to really talking about cure, which is an earlier stage of the disease and i'd point out you didn't ask about alzheimer's and nier

neuroscience diseases. and larger molecules can't penetrate the blood-brain barrier. and we're looking at sickness and chronic need for our society through that penalty that you're referring to. >> thank you. we hear had a lot about how health care costs are ridiculously high. i think all of us would agree to that to some degree. i want to peel back the onion a little bit. today we're led that these costs are due to corporate greed. i want to know if we're are going to talk about additional drivers into the cost. when the federal dumped this in during covid and upended the market and drove prices through the roof. when i talk to folks in alabama, labor cost is one huge problem, but there are other costs, including supplies and raw materials. what impact are those having on the drug development and high drug costs?

>> certainly, senator. when we look at the cost basis for us doing what we do as a company, which is to bring forward new medicines for patients. we have to factor in all of those costs. i'll give you an example, in cellular therapy, transforming very late line, heem hemotologic, they're honing in on cancer cells and reinject them into the patient. this is a first generation technology, unfortunately, it has very high labor costs because it's a multi-step process to manufacture the products, their transportation costs, the raw material costs, all of those factors go into a cost for the first generation medicines. now, we're very focused on trying to innovate to try to get to a second and third generation quickly so we can bring the costs down, not only

because it's important for us to be able to funnel additional research and development, but we can ultimately bring the costs. >> mr. duato, with your accent and mine, probably have a tough time. probably in 2021, i don't think you were the ceo at that time. but biden administration that u.s. troop and personnel must take the covid vaccine in order to serve in the military. are you familiar with that? >> i'm familiar with that, sir. >> are you aware more than 8400 troops were kicked out of the military for declining to take the covid vaccine and these were mostly young, healthy americans for whom covid risk was low. are you aware of that? >> i was not aware of that. >> thank you. did you or anyone at johnson & johnson encourage the biden administration to mandate this covid vaccine for the military? are you familiar with that?

>> we did not, sir. >> how much did johnson & johnson benefit financially from the administration's military covid vaccine mandate. do you have any kind of guess about that. >> the vaccine, that we with the government, it was a time of global emergency so we thought the health care company with cared for patient and we needed to collaborate with that and entirely nonfor profit. >> do you think that the soldiers expelled from the military was the right thing to do and should they be reinstated. >> i was not aware of the situation, sir. i am not aware of the circumstances, so i cannot comment on that. >> thank you. thank you, mr. chairman. >> thank you senator. senator murray. >> thank you very much, mr. chairman and thank you all for being here, we really appreciate it. i think you know we hear from our constituents constantly and frighteningly about the cost of some of the drugs that they take, so this is really an

important hearing and i continue to hear, as many have said that sky high drug costs are forcing many people, including in my home state of washington to choose between filling their prescription and paying for other things they need, essentials like groceries or rent and i often talk to people who are skipping their prescription altogether because they can't afford it, and it puts their life at risk. so i really believe that congress does need to do more here, i have for a long time and i also think that pharmaceutical companies need to do much more to put patients first and that doesn't mean that private companies can't make a profit and i think we all have a really sincere appreciation for the cutting edge research that happens at each of your companies. but when you say you're in the business of saving lives and curing disease you have to think about putting patients over profits. life saving drugs don't do anyone good if people can't afford them. i want to ask you about

affordability and i heard the numbers in my office. mr. duato your drug company makes a product to treat arthritis, solara. it costs $79,000 annually here in the u.s. 12,000 in france. mr. davis, your company makes a drug to treat cancer, keytruda, you've been talking about, annually 191,000, 44,000 in japan. the drug eloquis7100 a year and $770 in germany. so, i mean, either you think that the same prescription drugs sold around the world work better here in america or we're getting something more for it. i don't think that's the case. but i wanted to ask each one of you explain to us why it costs more in terms that we can tell our constituents and they understand and mr. duato, let

me talk to you. >> we share your concerns about what patients have to pay at the pharmacy counter for medicines. in the case of solara, you mentioned the mid price in the u.s. is 70% lower than the price that you refer so it would be $24,000. it's still higher than france, but more aligned than here. the difference is that patients with inflammatory bowel disease the main indication is able to afford it years earlier than they did in other countries. as a matter of fact, in canada after eight years, the solara was approved, it's not reimbursed in inflammatory bowel disease nor in crohn's disease or colitis. what are we do? we have patient expense programs, a patient pays 10 to $15 a month for it, and if they're not insured, or

uninsured, we have free medicine program. we distributed $3.9 billion in free drug in 2022. >> mr. davis, so, if you look at keytruda and the example you bringing up between the u.s. and japan, first of all, like all of us, we are trying to focus on making sure that patients, everywhere in the world, get access to our medicines and each market operates differently. japan is a unique market in that the way that they price their drugs, and we have been working hard to get this to change and i think maybe we have successfully gotten some of it to change, is that after you initially launched your drug, for every indication that comes afterwards, they treat it as a different drug and in addition, if a competitor launches a drug, then you also still take a price decrease because of the competitor drug and we're in a strange situation and one that's a very concerning situation to me in japan where in reality we are

the most innovative and the levels in japan would not be sustainable to support the 46 billion dollars, 48 billion dollars we spent on keytruda. so we're working hard to help those markets and we could use government help there to understand that we need to, across the globe, share in making sure we can invest to support innovation. >> what would congress do that would make a difference to lower prices here? >> well, i think on one hand, it's a different question on lowering prices here, that's a question i'm assuming we're going to get to. how do we focus on what is the really large discrepancy between the list price and the net price which i believe we need to focus on is the out of pocket cost to the patient. that's really the core. we need to address that, but in addition we need to continue to work together on--

we can work on trying to drive-in no evaluation clauses and agreements and some success with that to also help us in the markets outside of the united states as well. >> senator, there's no doubt that patients are going to pay less for our drug, or frankly most of our drugs outside of the u.s. and in the u.s. and that's a significant costs outside of the u.s., canada would wait three and a half to four years to get access to a medicine available in the u.s. you see similar stats in virtually every european country and in japan. what we can do more in the u.s. to do is try to bring out of pockets down. out of pocket costs down. for eloquis, the average out of pocket 50, $55. most patients pay less than $40. there are patients for whom the drug is not affordable and that's not acceptable. medicare in particular is a

space where we can't provide those types of co-pay support programs we could in the settings. we'd love to work with congress on that. it's a great example of what we can do trying to bring down the list price. >> so do you set the list price? >> so we set the list price is driven up by incentives-- and let me give you an example. over the last five years we as a company paid almost $100 billion in rebates and discounts to intermediaies on most on eloquis and the patients pay a co-pay on the list price. we'd love to work with congress to get that down. >> senator marshall. >> thank you. bristol myers makes this new miracle drug, relatively a

miracle drug. when i was in residency, i was using coumadin, or heparin, and they might be in the hospital for 10 or 14 days. so in its own right eloquis saves money and prevents hospitalizations as well, and i want to point that out. as we talk about rationing care, we've discussed how we're rationing care in foreign countries, but i want you to speak about rationing care in this country, how do pbm's ration care when they take a drug like eloquis and don't have the formulary, does that happen. >> i'm glad you raised that point. we've had that happen on multiple drugs and we've had it happen we've not been able to reach an agreement with an intermediatery on a rebate that they've taken it off formulary and the patients no longer have

access to eloquis they go on a different product. and it's the number one product in the anti-could he ago -- coagulant. they have to go back to coumadin, i was using it in the 1980's, with significant complications, hassle factor, the patient had to get blood testing done, maybe twice a week as well, but with your drug, one of the miracle parts of it is, a, they don't bleed into their brains anymore and two, don't have to get their blood testing done once a week as well. it's a huge amount of innovation and it amazes me how much power the pbm's have attained. and you talked about the linking, a miracle drug to treat diabetes with. there's a list price.

what percentage of the list price is typically merck get at the end of the day. >> smart, if you look at januvia, the drug you're speaking to, the list price $6,900. >> per year. >> per year for merck. we recognize $690 on that drug per year. >> so, the list price, you're only getting 10%. >> it's a 90% discount. >> 90% discount. >> where does the rest of the money go? >> into the middlemen, into the system as a whole. >> if we had the time and the energy and a chalkboard would you be able to explaining to me and show me the little places that goes? >> i could, but i think you appreciate it is highly complex and so complex that at times even learned people who play in the space can't understand it. >> certainly i can't explain and that's my point. is it so nontransparent-- we don't know where this money is going, but certainly we know

the pharmacy benefit managers are taking 50 to 75 cents of that dollar and you're only getting 10% of it. i would like to know where the rest of it goes and i'll go back with your drug, what percent of that list price do you think you all are taking home? >> senator, it's a relatively smaller percentage as i mentioned before. we've paid offer the las five years about $100 billion in rebates and discounts and the majority of that go to one product and that's eloquis. >> okay, go back to mr. davis. let's talk about, you all have an anti-viral drug that's been approved. how many drugs did you go down, when covid hit you were trying to development multiple drugs. how many have made it across the fitness line and what did you spend on r and d if you look at it altogether? >> when the covid situation hit. we drove two or four key programs, two in vaccines, two in anti-virals, only one of

those succeeded, which is the drug legevrio. and 2 and a half billion dollars. >> 2 1/2 billion dollars and one across the finish line, an anti-viral. is that used in the united states? >> it's an emergency use, and never got to full approval. and see it more outside of the united states. >> and got a significant market share in the united states despite that. mr. duato, i'll talk to you for a second. in my 25 years taking care of patients we were always able to find a solution for their drugs that they needed. 340-b programs, rebates, there's always exceptions to the rules, but what type of efforts does j and j make to work with 340-b programs and help some of the people that need help?

>> thank you, sir. we care deeply about patient affordability and care about the sustainability of the rural hospitals and the small hospitals that take care of patients that are underserved. so we believe that the 340-b program, it's an important program to support those hospitals and we are fully, fully looking forward to collaborate with them in any way we can to support patient access in these hospitals. >> i'm going to point out once again, it's not just rural hospitals, it's our community health centers that are taking advantage as well trying to make sure every patient has access, true affordable access to primary care, plus having access to affordable drugs as well. i might make a couple quick points. the people of kansas sent me here to save medicare, to save medicare, i need a miracle drug to treat alzheimer's.

it seems to me that americans bear the burden of most of the r and d in this world and other countries benefit from it. and that impacts the price in many ways as well. mr. davis, am i wrong? why does it feel like to me that americans are feeling most of the brunt of the r and d cost or is that not accurate? i don't know. >> well, i think senator, it gets down to, as you look across the globe, different markets and i appreciate what the u.s. does, i think the u.s. favors innovation, it values it, it values access for our patients, fast access, most access, many markets around the world don't do that. what they focus on more is their budgets and how do they meet the budget needs and we appreciate the bugetary constraints that everyone faces, but as a result of that, often patients aren't getting access to meds and they don't get them as fast which we've commented on today and harder to see how you can support the

innovation that we need to do in that situation. >> thank you. >> senator boulton. >> senator casey. >> thanks so much, senator baldwin for allowing me to jump ahead. >> mr. chairman, thanks for the hearing. i want to start with a sense that i have back home, when i talk to people in pennsylvania and a lot of your companies have a lot of interest in pennsylvania, i hear over and over again, this problem, the cost of prescription drugs, it's like a bag of heavy rocks, people have been carrying this around on their shoulders every day, year after year, and they're tired of it. and they don't -- they don't believe that any player in this is doing enough. i think they were-- most pennsylvanians are happy that i can vote for a bill in 2022 that allowed medicare to negotiate for lower prescription drug costs and

that we could cap the cost of insulin $35 a month for medicare part d beneficiaries. ... or either party, , but they are certainly not happy with the level of work that you put into this. look, , i hear all this talk abt rebates and cost reductions that are put in place but is not cutting back home. and when i talk to people that see what pbms are doing, they know that they're not meeting the obligation that they would expect them to. so there is no question that your companies and big pharmaceutical companies are playing a role in this. you bear a a measure of responsibility in this, and i

wanted to ask you a couple questions about that. first and foremost, tell me what concrete steps, very specific steps, that each of you were taking, and her companies are taking, to make sure that we can get these costs down. and even by way of repetition,, you may all reset it. i'm not worried about you repeating yourself, but we need to know specifically what you're doing to lowering costs so that no one, , especially someone who needs a life-saving intervention, a life-saving treatment, is going to be denied that solely solely because of cost. i'll start on the left, mr. duato, going left-right. >> thank you, senator cassidy. we absolutely want to be part of the solution. we understand that co-pay obligation for use patients are burdensome and does create health inequities. what are we doing for that? we have a very extensive haitian

assistance program that for commercial patients enables them to be able to pay low co-pays, $5-$15 per month. we supported more than 1 million patients in 2022 with our co-pay assistance programs. if the patient is under insured or not insured we provide free drug. we gave $3.9 billion in free drug in 2022. but i think we can do more and we can work together in order to lower out-of-pocket costs for patients, even in medicare as you mentioned. because that's a real need that we're committed, all our employees are committed in order to make sure that our medicines get to the patients that they deserve. >> mr. davis? >> senator, very much like j&j, we have tiered levels of patient assistance programs because we want to make sure the patient to meet our drugs can access them. if you have insurance but if all

below certain means where you're not able to handle your co-pay, we will give co-pay assistance to those patients through a program we run. if you're someone who doesn't have insurance, isn't able to qualify for the government programs, have patient assistance program that basically provides the drugs for free. so we are very much focused on this and making sure we can do everything we can, and we are investing a lot of money on it. a something i like to add because i think it's important to the discussion. we are focusing on prices today, but we also need to think about innovation as a way to fix the problem, and something we're focusing on as a company is a new technology called michael cyclic peptides that allows to potentially take what historically has been large molecules, difficult to make him expensive drugs are difficult to deliver them are starting to show the capability to convert those into cheaper small molecule forms, oral forms. we do that and we have one in late stage to now called an oral

-- which is her heart disease, overlooking to do that for others. where investing millions, billions behind the effort. i think we need also think about how can innovation solve the problem we need to address the price challenges today, we have to lower out-of-pocket cost but innovation like old news ms going to help us fix this. >> senator, maybe i would highlight three things. first, we obviously have very robust on the commercial side co-pay assistance program that brings out-of-pocket cost down in many cases for certainly are that you almost to zero. their complex at times overworking very hard to make those more universally available. at step one. step two, would like to work with this congress to find ways in which we could apply the same sort of programs in medicare. there's some complexities. we want to make sure were not diverting from use of generics, for example, but we think there are potential ways we could do that i would love to explore those opportunities with

congress to bring out-of-pocket cost down for medicare patients. the second thing i would say is we we're looking at doing more innovative work, innovative contracting work we can, for example, if our drug works we get paid, if it doesn't work we get paid less and at some cases maybe even not get paid at all. there are technicalities in the u.s. to prohibit us from doing that more in the u.s. we want to work to get those removed. the third thing just building on what rob was saying is would you believe that innovation plays aa role here. cellular therapy, while not gene therapy for the previous question, those are expensive therapies. we've got to bring this cost down and away we will do that is we will innovate to the next generation, which hopefully is way less complex than what i described previously. >> well, i believe submitting some more follow-up question for the record. thank you, mr. chairman. >> thank you. senator paul. >> i'm not an apologist for big pharma. in fact, when corporations

manipulate government to their advantage, crony capitalism, i'm an unfettered critic. but in defense of capitalism i am a consistent unapologetic advocate. milton friedman once wrote that if you want to create a shortage of tomatoes, just passed a law that retailers can't sell tomatoes for more than two cents. instantly you'll have a tomato shortage. i might also add that that's true of prescription drugs. virtually every shortage of drugs that we seen an last few years and house price controls that drive up production of the drug. one reason the united states leads and pharmaceutical innovation is because while the u.s. adhered to moore, a more market-based pricing and reported innovators, europe adopted stringent price controls in the 1980s and '90s. it's not surprising that would lead the world in innovation and europe does not. but, unfortunately, this committee and the city is not to get celebrates american success. instead the majority drags us to conduct a show trial to harangue

companies challenge inflation reduction act price controls in court. they have simply brought forward people who question the partisan legislation. ten years ago, the five-year survival rate for patients diagnosed with advanced lung cancer was 5%. terrible. since merck introduced the cancer drug keytruda fy '14 the survival rate has grown nearly fourfold, 5% 20%. we should be celebrant that instead of casting it in telling people how to run a business of why don't you buy your stock by? i have a friend with a genetic predisposition to cancer. he's alive today because of keytruda. we should be celebrating that. johnson & johnson's remicade was a first monoclonal antibody approved for treating chronic conditions like crohn's disease and rheumatoid arthritis. since his approval it has revolutionized treatment for inflammatory disease, made remission of reality for patient with debilitating conditions and paved the way for development of other autoimmune treatments. when i i begin in medicine

virtually all patients with the rheumatoid arthritis you can see from a distance had crippling disfiguring arthritis in their hands. now today it's rarely seen because of the advances of american companies under an american system that allow profit to occur. in 1987, merck pledged to donate the entire stock of its drug ivermectin to the suffering from river blindness. now released 37 years years later, ivermectin donation program treats 300 million people annually with over 11 billion treatments ship to endemic countries. this is charity, my friends, from capitalism. you don't get this under socialism because it is no profit under socialism. they have no money to give. and they kickstarter profits. did he keeps him for the investors? that's what they're supposed to do but they'll set some left over for charity and you don't get that under socialism. the cause of merck's donations come seven countries and eradicated the transmission of the number one cause of

blindness in the world. pharmaceutical innovation has improved cancer rates, cared hepatitis c, doubled the lifespan of patients living with cystic fibrosis. it goes on and on. we've tried price controls in general here. we did in the 1970s under a republican president, under nixon. it was a disaster and a little light at the gas pump. it was an old of a disaster. a study the university of chicago found that 254 fewer drug approvals over the course of 18 years would happened under price controls. under communism they knew this. socialism, communism, an economic system of socialism, from price, he became a running joke in poland during the soviet era there was a story of a guy who went to the store, looking for eggs any as the clerk of this is the store with no eggs? they said no, this is a store with no toilet paper. the store with no eggs this across the street. that's the story of socialism. that's the story of price

controls. secure, scarcity and empty shelves are the inevitable result of price controls. those who understand and appreciate capitalism did not need a show trial to do them into forgetting the price controls have never worked and never will. let's get back to profitability. i don't think you guys did a very good job on answering this. did you add into your estimate of whether it's profitable in canada whether or not it cost you 2.6 by endorsement at which to develop the question you talking manufacturing cost, how much it cost to make keytruda and how it should so forth to have propaganda. do you think would still be a prophet mr. davis if you add in all the rad, the 2.6 billion to get it through the system, the apparatus of your company and you divide all that out for profitability would still be profitable in most of these of the country? >> i have not done at analysis whatever say that the profitability would be marginal at best. >> do you think you would have as much r&d if the whole world where canada? do you think you would be developing dozens of new drugs

every of the whole world were canada. >> with no, do not. >> so this is what we're arguing against. sure you can make it for pennies now but it didn't start the week and the people are like oh my, cost so much in the beginning. that's capitalism. that's the way it works in capitalism. joseph sheba turk talked about this and he said, this is an old anecdote but he said the miracle of capitalism is not the queens have silk stockings, but the factory girls ultimately do. but in the beginning only the queen has silk stockings for rich people get sucked in the beginning. rich people drive innovation. the first characters they came up, $300 for adding, subtracting and dividing mission. now they're like pennies are free. but you have to love the price to be hired at the beginning in the market brings the actual widespread market. that's capitalism. we don't know what the correct price is. there is no moral price. there is a moral amount of profit. there is no business of any of y'all telling them how much talked of my back. their job is to make a profit. it's actually gets law for them

to not to maximize their profit, for you sit in judgment of how much profit they should make analogies should run the companies, you know nothing of running companies. nobody a few may be some but almost nobody appeared as one big companies, billion r companies, and you presume some out to say you're going to tell his people how to run the company. list price versus net price. list price means absolutely nothing. i charge $1800 for cataract surgery. the government paid the 600600. two-thirds of it nobody stole that. it disappeared because it never existed. so if i build $1 million in charges i really was only building 300,000 300,00s what i was getting paid. but because of the confusing nature of the system, the list price is much different than the net. but to quote list price and think about in that price and of the country is completely and profoundly unfair. the list price means absolutely nothing. all of these fallacies need to be addressed before we begin haranguing american ceos. thank you.

>> thank you for your question. senator hassan. >> thank you, mr. chair. >> senator baldwin, i'm sorry. she spins i yielded to senator casey. >> i know but -- >> all right? [inaudible] >> okay. on. [laughing] senator hassan go and then -- >> thank you. so i just wanted to say at the outset that the last time i checked when a buyer and seller negotiate for a price, that's capitalism. and i wanted to talk with all three of our distinguished witnesses today, because one of the things that strikes me that we're struggling with is i think at various times in each one of your statements you talk about your price reflecting the value of your product. and the thing is, human health

and life is priceless. so if that's the metric here, you will always have an excuse for charging increasing prices for these life-saving drugs. and what we are trying to do here is the drought how you can continue the innovation that senator paul just eloquent spoke about, i would suspect that if the member of. has upon the member whose life has been saved by innovative medications. or greatly improved. it at the end of the day we have to find a way to allow you all to innovate, but also to make sure that the market here and the system here works for the very people whose lives you are helping to save. some want to start with the question to you, mr. davis. while families in new hampshire and across the country struggle to afford these life-saving

medications, pharmaceutical companies are doing everything that they can to keep the prices and the profit sky high. i do know you love all talked about that not being the case publishes letter one thing here. one way that companies do this is by filing dozens, even hundreds, of frivolous patents that luck in their exclusive right to sell the drug for decades. by playing games like this with the patent system, companies block low-cost alternatives like generics from coming to market. mr. davis, the list price for merck's cancer medication keytruda is as we talked about $190,000 per year. can you tell us how many patents have been filed on this medication? >> i don't have the exact number, but i would focus you on probably the most important patents, which are the composition of matter patents. in addition to that we formulation manufacturing pads. there's one suite of a composition of matter patents

that we have, those are what allow us to continue to have exclusivity. >> i don't think it would surprise you to learn that it do not many patents you can have. it's 168. this is what this looks like, sheet after sheet after sheet. hatton office records show that not only get 168, but half of them relate to the process merck use to manufacture the drug, not the way that the drug is used to treat patients. merck is using patent gimmicks and loopholes to delay of the companies from selling lower-cost version of this medication, all while raising the price of keytruda in the u.s. year after year. so it would be good if merck would just stop blocking patient access to low-cost medications by using the patent system in this way. it's clear that merck and other pharmaceutical companies, you're not alone, won't stop abusing the patent system to keep the price is high. so it's clear we also need to

take action on that and the something we can do. senator braun and i have a bill called the medication affordability and patent integrity act which would help break up these patent rolls and it would urge my colleagues on both sides of the aisle to support that. now, mr. duato, in your testimony to mention the johnson & johnson provides financial assistance to uninsured patients in the united states. however, the barriers to access these programs are unreasonably high. for an expensive medication like your companies arthritis drug store, what does a patient have to do to get assistance from the johnson & johnson program? >> thank you. we care deeply about patient access we put a lot of work in developing well and wide patient programs go with mechanism for patients to connect with us via mechanism like the website called johnson care path in which patients can't access patient assistance.

we supported 1.1 million people with patient co-pay assistance of last year. >> well, let me just talk a little bit about that. the initial application which i have here is six pages long and it requires pages of additional documents for income verification. in the fine print this document even requires the patient to consent to a credit report check and of the financial disclosures. mr. duato come at on this dice wants you to charge a fair price for your companies medications that if someone does need assistance paying for the medications, this process has to be streamlined and easily available to anyone who qualifies. so i would urge you to look personally at this application. when someone is dating with a serious illness, the last thing you to do is read the fine print and decide that they have to disclose a credit report, the relevance of which kind of escapes me. your burner and mr. duato that mr. burke and mr. duato we can

also increase competition but make it easy for generic drugs to get approved. mr. burner, let's turn to the drug eliquis. list price of the talked about $7100 per year. how many generics of this drug could patient in the united states get at the pharmacy today? >> senator, and u.s. that are not yet generics available. >> right. there are zero generic versions of eliquis of able to patients even though the original patterns on the medication began to sunset in 2019. because your company has sued to block two approved generics from the u.s. market until 2028 at the earliest. isn't that right? >> senator, we have allowed for generic entry in 2028, that's correct. >> right. so we're too two generics ready to go. your original patent is well past, expired, but you still are actively trying to prevent generics from coming to market.

mr. duato, the list price of johnson & johnson autoimmune arthritis medication stelara is nearly $80,000 annually. similar to other quests that are currently zero low-cost biosimilars versions of trauma that able to use patients. there are zero biosimilars for stelara available in the united states today because johnson & johnson has also sued to delay the launch of the low-cost biosimilars drug. so we need you, you know, you've all talked about the need to speed up access, and mr. chair comer wrapping writer, speed of access getting drugs to market within your actively working to block the less expensive biosimilars and generics that ty come to market and that something we should address. thank you, mr. chair. >> senator romney. >> thank you, mr. chairman. and appreciate these executives taking time away from your responsibilities at your respective companies to be here and to inform us, and do some cases to get a rated by us and

give us an opportunity to participate on her face topics, which i'm about to do. -- pontificate that one is i fully concur with mr. paul, senator paul, indicator just a moment ago, rand paul, and that is that a free enterprise system works marvelously. and i know we keep asking you, you know, what are you doing to try to reduce the prices of your products? the answer is that's not what happens in free enterprise and capitalism. i hope it doesn't come as a shock to my colleagues. in capitalism if you're running an enterprise where you have fiducial responsibly to your owners, you try and get as high a price as you can. that's what you try and do. you try make as much profit as you can. that's how free enterprise works. you think cheverly sits back and says gosh, how to get the price of the charlotte douglas know, it's like how heise addressed how high a price can make it in

max was a price from? what price does mcdonald's charge for sandwich? sia prices they can get. the amazing thing about free enterprise is that someone figured out that if everyone does that and you have competition among all the players, that somehow the prices come down and the quality goes up. and access to the product is broader. it's a marvel. it doesn't seem to make a lot of sense but it's a marvel of capitalism. now, obviously wise company say you don't just raise prices to the roof and do things that are going to harm your credibility and the trust in the marketplace, and have your employees don't want to work there because they figure they are working for bad people. so wise enterprises don't just to all the things i just mentioned. they also say were going to do other things and care for the poor and for people want to come work at a company. we do those things, too, but recognize free enterprise is about enterprises ablate each

other with higher prices in many cases and then they get pushed out by people develop new products and put them out of business. it's how it works. but then the term, and i know as indicated, there's some who would like price controls. they're so we would like to socialize medicine and it's like have you seen what that produces? it doesn't produce new drugs. it doesn't produce cures. it sounds great, we're going to set a price controls is just another name for capitalism, excuse me, socialism light. our system works but there are ways to improve it. and i'm very concerned that this disparity between list price and what you actually get paid is a problem. i don't know why it's a problem or what we can do about it, i'd do you have pbms getting prices and discounts like this in other countries that you compete in? >> senator, we do not. this is unique element of the

u.s. healthcare system. >> et cetera we also? >> that is too versatile. >> this is unique in equity that exists in u.s. because of that with higher out-of-pocket cost to patients anywhere else in the developed world. >> sigh hope with focus on this. we may not have the right bad guys here, right? these of the guys that develop cures and helping people solve diseases. but with something here there have in the rest of the world, these pbms that one higher and higher list prices because they get paid based on how high the list price is because they get a percent of the list price the punisher were all the money goes. some of the goes back to patients. some goes to the companies if they're self-insured. i don't know where it all goes but i think that's the issue. so let me ask each of you. if you are in our shoes knowing what you knew, what you know, what should we be doing to try to get the cost of products down to the people in the country into the country at large, to

the government that buys a lot of goods, a lot of drugs? what should we be focused on? i know that you sell the pbms so yet to be careful not to step on the toast to our because they might punish you. but what advice would you give us? what should we be looking at? where's the problem in this mess? we will start here. mr. boerner. >> maybe three things i would offer up, senator. first, to the complexity you just described, the one delink profits from intermediaries from the list price of the drug in the rebates rather that are provided if you could delink that that would be important. alternatively, require that those rebates be passed onto lower out-of-pocket costs for patients. that's number one. number two, i firmly believe we have the ability to lower out the patient cost in medicare if we could provide the same types of co-pay support that we do on the commercial side to medicare patients. that would be a second thing. and the third thing, we've

referenced it before, we do innovative contracting outside of the u.s. will be get paid if our product works. there are constraints on our ability to do that and use. i would like to see those removed. that would be very helpful. >> thank you. mr. davis. >> i would say that we covered all the things we should also look to do. >> great, thank you. >> three things. as mr. boerner, we make sure the rebates and discounts that we pay to be a bit -- deviance come back to patients to reduce out-of-pocket cost. i will make sure that as we try to do i know this committee is looking to that, delink the conversation of the pbms from the list price and finally i would sit down to see what we can do to provide a patient assistance program for patients in medicare part d, but also look to for the lower the out-of-pocket costs for patients that the ira is bringing. >> thank you. you did mention the fact that pbms are largely owned by the insurance companies. sometimes with apms are going

to be lowering our cost as in the poor templates and enjoy a p.m. to lower your cost but it might lower your cost but then it's passing on the profit to the insurance company. is that a problem, the fact pbms are owned by the insurance companies? and set a problem? is a something we need to look at as well? any comment on that? >> the three pbms are owned by the three largest insurance companies and together they control about 80% of the market of the prescriptions in the u.s. >> i'm a big believer in free enterprise as you can tell about my opening comments. at the same time unconcern we've got some structures here that are anticompetitive and make markets less effective, we probably ought to focus on some of those. thank you. appreciate your testimony. >> thank you. senator baldwin. >> thank you. it's been very interesting to listen to the back and forth, senator romney, your points about, you know, support of the free market, but understanding

that there are times when there's market failures. we also have an obligation i think to oversee, because our committee along with the finance committee oversees, i need to have good stewardship of medicare and medicare dollars. but the point that senator romney just made about basically, i don't know, i can't follow the dollars and its complex, is a real issue. i want to start just by sharing some of my constituents struggles. i have a constituent who literally turns down the heat in the winter because that's how she is able to afford the prescription drugs she needs for her wellness. there are choices that people are making. people are rationing their medication. people are forgoing their medication because of affordability.

i think we need more transparency, and i think we need more transparency to inform the policies that we adopt. i was pleased this last may that this committee advanced my bipartisan fair drug pricing act, which i lead with senator braun. our bill would require basic transparency from your company's at any juncture in which you want to raise the price, list price of a prescription drug by more than a certain amount, a certain percentage. asking questions like what is the cost to manufacture the product? what do you invest in r&d? something we really support. how much are you spending on marketing and advertising? what are you doing in terms of stock buyback? is there excessive executive compensation? i agree that we also have to have that transparency within the pbms.

i remember under the last president when we were having our confirmation hearing for his secretary, secretary azar, who came out of the pharmaceutical industry. and i shared with him a letter from a constituent who is two diabetic sons. just talking about the cost of the month, not just the insulin but the test strips, et cetera. and i said what do i tell this dad about the high cost, which are just by the increased significantly? and he just responded, it's complicated. i can't tell my constituent, well, we can't address this because it's complicated. i remember when, this is years ago now when the epipen doubled in price overnight, went from $100 basically to $200. my constituents certainly told

me what a burden that was. i asked, show me, follow the money, a chart, follow the money. nobody could. we need additional transparency to inform our policies. so, mr. duato, the price of stelara in the u.s. is $79,000 a year. and by the way, and wisconsin the median household income is 72,000. your company has made twice as much selling this arthritis treatment in the u.s. than it did in the rest of the world combined. this is going back to 2016. under the fair drug pricing act would need to account for this exceptionally high cost. so just to look at one component of what i'm talking about. how much does johnson & johnson

spent in marketing and advertising for this particular drug? >> senator, thank you for the question. we published every year since sixers ago a report that we call it transparency report, and we explain our pricing practices and make which it transparo to the different intermediaries that play into the model. we disclose our advertising expenses, and our r&d expenses. what i can tell you is that in 2022, which was a last year that our report was published and is available, we spent double in r&d, , 110% more r&d than we did in sales and marketing. >> do you know what that dollar figure is for sales? >> i don't have top of my head but i will shoot a follow-up to give it to you but it was double the amount in r&d and we did the spent in sales and marketing. >> let's look at, mr. boerner, the price of eliquis is in the

u.s. has increased by $4000 since its launch. in other countries the cost of this drug is decreasing. how much did your company spend on r&d last year. >> with our company spend over $9 billion last year on r&d. >> and how much did you come spent on stock buybacks, dividends and executive compensation last year? >> i don't have that exact figure, senator, but we speeded test 12.7 bring sound right from the help study? >> that's roughly correct. >> okay. for the first time thanks to the inflation reduction act, medicare will negotiate the price of drugs, including eliquis and stelara. this is really welcome news families and wisconsin. but the truth is it's really not enough and my constituent should not be forced to decide if they should turn heat on in winter. or by the medication they need,

all while companies are raking in literally tens of millions of dollars, or billions. we have more work to do. >> thank you. senator collins. >> thank you very much, mr. chairman. i think all of us could agree that when a doctor prescribes unneeded medication, that cause should not be an insurmountable barrier to the patient -- cost -- using it. yet, for more than half of the adults in my state, according to a survey, it is a barrier. they are worried about affording the cost of prescription drugs, and in the last year nearly one out of three main adults reported skipping a dose of

medicine, cutting pills in half, or not filling a prescription because of cost -- maine. i talk to a young woman with type i diabetes who, after she ate out of her parents insurance, started cutting back on her insulin. she ended up in the emergency room and was gravely ill because of that. she felt she just couldn't afford it, and took a very unwise chance. so this is a huge problem, but another aspect of this discussion is that many new medications represent true breakthroughs, disease modifying therapies, or even cures. and the other part is that literally billions of dollars

are invested in developing drugs that end up to not be successful. so i think we have to balance all of these concerns. these new drugs often cost more, but if they have the potential to reduce the number of unnecessary hospitalizations and lead to better patient outcomes, they may be worth it. for disorders like alzheimer's, the breakthrough drugs can help keep patients healthier and active longer, benefiting society as well as their families. for example, i've heard of a patient being diagnosed with mild cognitive impairment early enough that the patient was able to benefit from a newly available treatment, and actually returned to the workforce. that's quite an accomplishment. now, last year the chairman

criticized this particular company for a list price of $26,500 per year, even after the company any really unprecedented fashion issued a lengthy analysis of the process by which they arrived at the price. still sticker shock around list prices and speculative claims that certain therapies will bankrupt the medicare program have contributed to restrictive coverage policies, patient confusion, and limited uptake. so i would like mr. davis, you to discuss how we can balance the need to have affordable medication without hampering innovation, and how access to the next, , what would be the impact on access to the next

generation of medications if price controls like those in europe are implemented? how do you see a solution to the balance between affordability and innovation? >> yes. so, senator, thank you for the question. i would start with, at merck and what other principles we apply when we think about how we priced drugs. because i think it also gets to some of the other questions that have been asked about what stops you from just raising your price. and and i can tell you that aa company, and this goes back to the core of who we are, over 130 years and is truly the purpose we live by, and that is we look at several elements but would look at what is a benefit to the patient, but equally we do look at what is a benefit or the cost to the system would look at access and affordability. and i can tell you, for instance, when we launched keytruda we launched at parity to market pricing that we do had

a better product. part because we wanted to ensure access. and so we look at all of that and they would look at what does it take to observe the cost of all the failed drugs. we know 90% of all drugs we will bring into the clinic fail. the reality of it is the drugs that make it have to find that failure. a case of merck it's just interesting, i think 2.0, since 2014 the minority of drugs we have launched have actually even returned the cost to r&d, the minority. i'm sorry, the majority have not returned the cost to r&d. so it means when you do get the rare drug that succeeds, it has to cover that. so that's what we're facing in the system here but as a look at how can we fix this, i think we have to get to the out-of-pocket cost and went to find a way to really drive that down and then continue to find ways to bring better access to the types of access programs we've all talked about here, whether it's through patient assistance programs,

co-pay assistance, all of the ways would help the individual person address that affordability challenge, which we all know someone who is space that and i don't want to see anyone face that. >> nih provides a lot of assistance in the research that in some fashion sometimes partners with pharmaceutical companies. how is the fact that there is been federal help, for example, in the development of the covid vaccines? how does that factor into the pricing? >> well, you know, and obviously as a look at the system, the ecosystem we live in, it is important to understand that all players are important. so the rule in age is important. the nih basically does the basic research, if you will. they provide the lock but they don't have the key. we provide the key.

we take that basic research. we sculpted into a molecule. we are able to see another we note a target disease to go after, how do we do it? and then we spent our resources in the most expensive part of the development and the riskiest part, which is a clinical development to ensure safety and efficacy, to bring the drug to market. so we need all players -- >> if i get asked you to start wrap up for senator schmitt. >> is important that we do that, and so i think i shall again go back and situation, we didn't have, we do not receive any federal funding for what we did. we spent all of our own resources at risk. we commented it was 2.5 2.5. we do that at risk. one of the programs we did do, did at some basis on the nih and they were come visit for that. >> on behalf of the chairman, senator schmitt. >> thank you, mr. chair. thanks to all of you for being with us here today. i appreciate it. i'm going to start with you, mr.

to tell us how much merck spent on advertising every year? >> so if you look in the united states, our direct to consumer advertising is about $350 $350 million. >> and then also directed medical provider? >> i don't have that. i would know that. i can combat your that would. >> okay. i think it is boxley $2 billion overall is what i think is what, worldwide. that's worldwide number, part of me i don't like it is a number of we can come back to you. >> okay, okay. you know, one thing that most of us on the panel could agree with is that nobody likes that advertising, doctor solanki, patients to like it. i'm a pair. of the american medical association has called for a ban on direct consumer consumer advertising. could you address this issue? i think it's also true that you sued to prevent regulations that would require you to disclose the list prices in that advertising. could you address it?

>> yes, i'm happy to do that, senator. so direct consumer advertising suits and important purpose. there there's been studies n that it tries better adherence. it tries patients to understand the use of the medications, and it overall will bring benefits to the health system. i do believe there's a valid educational piece to direct to consumer advertising. and and i also believe we neee full and fair and transparent in helping people understand the cost of drugs. the reason we brought suit, the one you're referring to, was are concerned that the specific request that was in that was that you show the list price of the drug. and our concern based on all the conversations we've had here this morning is it that can often be very misleading and, in fact, because patients not to seek the drug when in reality if we put on advertising that it's $600,000 when in reality if you take the total in the system is $690 come to think someone

doesn't show to get the medicine because they don't understand the price. we supported instead which is what we do today and all of our direct to consumer advertising, we try the to a site that gives our list price, gets all of the rebates we provide so that you can see it and we can give further information in education. we think that is a more effective tool and a more accurate tool to stop the misperception that exist. that's why we raise that concern. >> one of the things that is really confusing for patients is to try to figure out how much things cost in the health system overall, including prescription medications. let me just ask you, and i'm going to ask you about this, dr. how much would acute milo clicking a patient, how much with patient a argument for your drug, the cancer treatment that -- let's say they had 20% coinsurance responsibility. >> senator, i don't have that executive of the top of my head. what they can say is that for

most of our -- on the commercial side bring co-pays down to a very low amount and in many cases to zero. now, to a point there was raise earlier, we have to do more to make that more widely available and an easier process to actually get into those programs and were working on that. we've been doing that since i became ceo in november and that's something we're committed to. and again i would like to be able to provide the same benefit under medicare side. >> but if you have a list price that is, and they get what you all are saying about the list price is just the list price. that isn't necessary what people pay but if you have a list price and jenna coinsurance responsibility, thickest of a significant amount of money. i think it could be in this case, $6800 a month for this medication. >> senator, what you are pointing out is absolutely why we believe we got to also look

at ways to bring that list price down. we had been discussing at length this sort of complexity and intermediaries play in the system that lead to incentives to drive those list prices up, but unquestionably because out-of-pocket costs and coinsurance, for example, typically tied to that list price, we have to find ways to bring that list price desperate i would agree with that. i think that is a significant issue, taken as as a think sf my colleagues have pointed out that when you get to these patient assistance programs, they are quite confusing and hard to navigate through. and i think that sometimes that's only available if you have commercial insurance, and if you don't have commercial insurance then you could really be flat out of luck. >> senator, that's correct. in fact, a reference since i became ceo of one of the things we've done on the commercial side is really begun to look at how many hoops to patients have

to go through to get access to these co-pays or programs? we provided $2.5 billion in co-pays support programs over the last five years as a company, provided 12, provided 12 be in dollars in free product. but we've got to make it easier and more universally available for commercial patients to get access to that. again there are some constraints toasting them provide those services on the medicare side. the surrey some very legitimate concern to providing those under medicare side because you don't want to obvious he be diverting patients from, for example, generic products onto these as result, under branded products as result but would love to work with members of coast to find ways to do this constructively. >> is it true that the cost of those patient assistance programs, you can then turn around and deduct on your taxes, to lower your tax liability? >> senator, i don't know the answer to that but i can follow. >> okay. i want to get at the question, i just happy minute left and so let me see if i can do this

really quickly. one of the challenges that we have are some pretty often pretty severe shortages in medications. and i have heard so stories about this from minnesota folks who, they have a preferred treatment for a disease and in the drug is not available. so i want to ask you all, i'll cut to the chase on this. senator collins and senator murkowski and i have a piece of legislation that would require reporting of supply chain disruptions i could lead to shortages in medications and i like to know whether you all would support that concept to a people understand where these shortages are and where the root chemicals for the medications are coming from? >> we work very closely with the drug shortage office at the fda, and we are constantly doing all efforts to dual source the entire supply chain of our medicines so there's no

discontinuations in our supply. >> and i'm not familiar with the specifics of the bill, but i was in general the more we can continue to help understand what are the shortages, we should address that you put a a fingo get at the fundamental issues of why do we have a shortage in the first place. i can tell you in our example we make the drug called -- >> again, your overtime so if you want to take those edges of the records for i would be happy to. >> great. on behalf of the chair, senator braun. >> thank you. good to start with mr. davis. what your definition of a free market be? >> one where you you are abo bring goods, and if those goods bring value and the system sees value in them, you're able to bring those at a value think is fair and reasonable and a cushion with the other sides. in a world where you have free competition. >> so right that you said negotiate your most free markets are typified by this, and i like you all to listen to this because i think the big

challenge, if i were in your seat running your company, is that it's not a free market. a free market means you've got a lot of choices. you've got vibrant competition. no barriers to entry. and you've got an engaged consumer. now, do any of those apply to your business? >> i think all those apply, but i think one thing we need to understand in the way our business functions, for a period of time we have exclusivity. that's during the patent protection period. thereafter, and indent period we must we return investments we make to fund the r&d we do. thereafter, drugs are freely available and it is total competition in that space. >> but yet you would suit to keep transparency in terms of what the consumer price would

be, or the list price. or you do things like tweak patents. that doesn't happen anywhere else. and you're not alone there. hospitals and insurance companies do all the stuff behind closed doors as well. so i would think if i were in your shoes, you've got maybe a few years before, so none of that stuff really applies to you guys as i listed it. you might try to spin it that way but is not the case. i fixed it in my own business back in, probably 15, 16 years ago by greedy healthcare consumers, by trying to avoid the system through wellness and prevention, which you don't have much about. but when you do need it, it's got to be to where you have a lot of options, and understand you're a little different in terms of the r&d that goes into it. then many years ago you created a monster called the pbm, that

now is sucking all kinds of money out of the market. why can't you fix that in terms of doing alternative ways that would just smother the market with transparency, get it ina different channel of distribution? you got a guy like mark cuban is trying to start a company at cost plus. you're going to probably need to find things like that, or you are going to be appearing more often hear, and is going to be where is your going to be regulated like a utility would be. because in my opinion you operate more like an unregulated utility, you know, kind of cloak your cells behind free enterprise, now it's up to 18, 19% of our gdp. something has got to give. senator sanders talked earlier about things costing 10%-25% overseas, and to think i heard

the excuse was well, they have price controls. well, i think i be smart enough to know that sooner or later that will occur here. it's going to be up to the industry to fix it, and you are probably just 15-20% of the problem. you could fix the part that you get the most heat for by maybe trying to get more customers like the bases mark cuban is putting out there that's based upon transparency. if not, you're going to get all the people that don't own healthcare businesses finally saying we're not going to pay to the private side, the insurance system, three to four times what it cost to government. and i'll let you complete the logical chain. you're going to have the government as your business partner. why would you persist in a paradigm that looks like you're going to be headed towards what you deathly don't want? and that's doing more business

with the federal government. mr. davis. >> well, i don't want to speculate on the system as a whole. i think what i focus on is what do we need to do to drive the mission of our company, which is in the near-term bring access and affordability, make sure we would bring affordability we don't sacrifice access, and often patients lose access will try to address affordability, and that we find innovation. and that's what if ultimately come to as a solution, if we can protect those elements, i think we will both help patients of today and we can make -- >> have you ever looked at having some of the system of distribution like almost any other manufacturer would have when you make something? you do a pretty good job of making the pill. you completely default on how it gets from where you make it to who uses it. you are putting independent pharmacies out of business because of pbms and other kind of peculiarities in the industry. have you thought about at least

in the place where most people confront the healthcare system with a prescription about trying to restructure that, smother it with transparency, and options to where people can get their stuff and then apply that to biologics and the entirety of the spectrum and don't tweak the patents and try to preserve a broken system. >> with yeah. we have considered should be looked at going direct. the reality of it is as a single company, when you have now today three pbms controlling 80% of the lives in this country, the ability to do that takes a portfolio of characteristics that we don't currently have, and and i don't believe any one company can do that. that's why we continue to believe we need free-market -- >> i bet if you collectively got together with the other drug companies and encouraged others like cost-plus that mark cuban

has done, where you going, i think you got it under your control not to perpetuate a bad situation was created by you. i mean you make it come you have to necessarily use pbms here letter to encourage an alternative structure? at least show us your wanting to compete. all i can tell you is that if you don't take the bull by the lord, do something different, you're going to be like all of the countries, you are going to be dealing with the federal government as a regulated entity. and i think we could lose some things. but in the meantime, senator sanders pointed it out. it cost a lot more here, the healthcare outcomes are better there, and pharma, hospitals and insurance better figured out before it's too late. >> senator hickenlooper. >> first, i come with storefronts at the second, all think each of you for taking the time out. i not busy you are.

appreciate you coming in answering questions. you know, i grew up like most of us i think looking at our pharmaceutical companies as treasures, as companies in america could be rightfully proud of as innovators. but that's slipping away. when i'm back in colorado i hear a much, let's just be generously, let's be gracious and say a wider diversity of opinion. according to a recent survey, more than third of americans reported that cost that prevented them from filling a prescription they need. a separate kaiser family foundation paul this one just him laster said that 83% of americans rated profits made by pharmaceutical companies as the overwhelming contributive factor to the high cost of prescription drugs. you've all talked about the r&d, the innovation which there can be no question about that. but what is the value of these,

you know, cutting edge drugs and therapies it so many people can't afford them? and i think the widespread belief that americans feel your company's are to focus on profits, it damages for your credibility. i think the culture of your business, the culture of your customers. i want to see how you feel about that in terms of the importance of people believing in your mission again, or believing as strongly that you are good leaders of the mission. why don't we start with you, mr. duato? >> thank you, senator. i can assure you that the 50,000 employees of johnson & johnson the u.s. wake up every day taking what they can do for patients. and i can represent proudly that sentiment. what can we do to address the real inequity that exists in the u.s., which is that seniors in patients that need the medicines the most, a higher out-of-pocket costs. in my view, that's the real

problem. all the things of positive and u.s. healthcare system like to ask us to break edge treatments earlier than any other country in the world, but it's true we have a real inequity there. i think with work together in order to address that inequity, and the multiple ways we can work on that. one is make sure, sure -- >> just anyone. i've got a couple more questions. >> one is to make sure the discounts and rebates we pay $39 million in 2022, that we pay to the middlemen, are passed to the patient so we can load the out-of-pocket cost. >> that's a good one. so, senator, i appreciate the and i can tell you at merck we lived by the statement i found out, that medicines are for the patients, not for the profits. but so long as we remember that, the profits follow. and it really says we can both do good and do well for our shareholders together. and there's a balance and to think what you're talking is where is the balance? we are always trying to find

that balance, and i'm very much focused on it as the ceo of the company because the legacy of merck, the pride of our 70,000 employees and what we do matters to me, and a strong belief in the mission of the company, it's why came to the company and itss what i'm in this industry. .. photo we are focused on and we are bringing highly innovative but the patient's but we have to do a better job bring drugs like lucas every hundred thousand patients we estimate save we got

to play high bar this is we see increase costs based on target with. pathways and recognizing field to cross in the countries in the solution we are paying double even when you pay out the net price double europe or canada or australia are paying in somehow to be a negotiation.

we have programs support more than a million workers and we

develop for tuberculosis and we are not enforcing this so we have made significant progress. >> that's great but most people don't know about that stuff. >> i would add another one refocused on covid we forget about ebola that it in 2016 in western africa and had no profit to us we developed and distributed that and continue to address that. >> we have every reference and i am incredibly proud that this is the foundation and set up the

court to sub-saharan africa focusing children and they think they are saving a generation and we are no leveraging the same infrastructure to reverse something -- >> i'm sorry, time has expired think you all will we have to solve this issue. >> i'm going to do two minutes. on the innovation there's an article that came out in september 2020 like to put into the record contributions of public health and pharmaceutical 1990 to 2015 the article looked at 1990215 life expectancy and

increased by 3.3 years and authors of the study 44% because of public health. 35% was and other improvements of medical care 7% unknown but the fact that pharmaceutical to more than a third of that expectancy is something we need to acknowledge the context of discussion regina and markets in the mid- 2000 and it is a vaccine against the virus that

leads cervical cancer and that is revolutionary. we were one of the first four hpv and cervical cancer has dropped 70 +% in the last 15 years, it's remarkable if i don't how proud people are they've been at the vanguard of the revolution attempt so many americans from the world so that is the good side now we got to get to the reality of the hearing which people still paying too much out-of-pocket. my colleagues voted for the inflation reduction act, who said for a long time negotiate for prescription drug prices and we did pass by only one vote in the senate and i know not

everybody likes that but it's working. we put that out-of-pocket cap on a $35 insulin thank goodness many of the companies that cost 35 not just medicare patients but others, they would not have done that but there is more we can do and i want to focus on one thing because i think it is just right before us, this committee took strong bipartisan action about nine months ago on this reform bill on the floor of the senate right now and i don't expect you to be masters of the details but if we pass a meaningful reform bill much of this has been about this difference between list prices. if we were able to pass this

bill, what would it do to the cost for american patients paying out-of-pocket for pharmaceuticals? >> thank you for this evaluation and if we best meaningful reform and revenue that would pass, i would anticipate each one would affect list prices and out across so i welcome this reform and lowering costs for patients. >> i also believe provisions in the bill some of the big ones

around transparency and the steps in the right direction, it's what we are focusing on and i do think it can benefit patients and i'm supportive of what you're trying to do collectively could do that and reduce the significant amount we are paying to those not passing on to lower out-of-pocket costs speaking from behalf we could work almost immediately to break down those prices and i would love the opportunity to work with this committee. >> conversations with the chair the intent is to move on that bill pretty soon potentially with other items in the opportunity is right before us and three vote in the linking provision was not in the bill is

supportive of the time set we mark it up so we agreed wait on that until he got on the floor but the bill that senators marshall and i and tester cosponsored it would save about $650 billion in addition to savings for patients so hopefully will try, and so my colleagues have talked about the reality of what they hear from constituents and i hear the same thing i think the complexity of the system and list prices are different and we have rebates that never show up in people's pockets and programs try to assist folks who can afford medicines and a sticker price,

which is have to simplify and cut the middlemen in this instance. >> i have long said to the chair very concerned about pbm's because we might fight about research or should it be more than stock buyback, they are not producing a single product yet they seem to me was there scooping up the most money sloshing through the system so i hope we can address that soon. >> thank you to everyone. while competition is one way to drive down costs for patients. one of the concerns i have we often see competition in this

area with bio similar in the concern i have tactic and delay patients from having a choice but also for prescription drugs. will you commit to not block others from entering when it expires? >> we do believe bio similar competition and generic competition is corked to the system, we need a robust market and when the composition expires, i fully expect will have a similar version onto the marketplace. >> is that i guess?

>> yes. >> you commit to not blocking others from entering the market when the primary expires? >> we have another one on this and when they are relevant we will have generic competition and be around 2020. >> when it expires you commit to not blocking other drugmakers? >> i'm not a patent attorney so i would say the most relevant expires, we will welcome competition. >> is that a yes or no? >> you commit to not blocking other bookmakers from entering the market when your primary

expires? >> we would fully expect to enter the market, yes. >> the words you are using are relevant, have to primary, is that the clarification? >> i'm not certain the most but when they expire, we welcome that. >> the initial one filed when you got this done. >> if i'm not using the right words, you know what i'm talking about here. >> is generally when it expires, it doesn't sound like a yes. >> i hear what you're saying, i'm going to move on. agreements to delay the launch in 2025, this will prevent

competition in the drug market and medicare negotiation will you commit to lowering the price in 2025? >> i anticipate it will be lowered in the past decade, is it steady decline in prices and i anticipate in 2025 it will further decrease the price. >> are you answering yes to my question? >> yes. >> i appreciate that. we heard over over this will kill innovation. i want to get a few things there, the position as stated with the health and human services iras be a victim's innovation and millions of patients counting on the

pharmaceutical industry to develop therapies will accrue health and well-being. >> we have concerns about ira, specifically the fact that this isn't an actual negotiation. >> do standby in the lawsuit to the health and human services. >> is a true in your earnings call we see a legacy portfolio of products facing headwinds such as ira? though this portfolio is mining, is expected to continue to generate strong cash flows to invest in our future?

>> we have a legacy product portfolio that will continue to provide necessary funds to innovate and bring the next wave of innovations. >> cash flows were generated even though the ira is sufficient to support innovation? >> we don't yet have ira fully implemented that process is ongoing but we are generating cash flows and products to fund. >> the same filing to health and human services this portfolio, is expected to continue to generate strong cash flows to enable investment in our future growth so is it generating cash? >> are products are continue to generate cash, yes.

>> you are generating cash? >> we haven't finished negotiations on our first drug. >> i appreciate that. i grew up on a small farm in northern new mexico. when a business is, that's what it is, manure. i don't understand why it is complex. the people in the room makes them complex when no one understands them. when the question was asked can you break down where the money goes? the answer is ", we don't know. i hope it's included in the filings for investors. help me and others across the world understand what is going on.

maybe one day i will go to law school, otto but it's frustrating. >> the field of dreams in which we for families a cure could be found in this is what it's all about. 2 miles from my house trying to help the industry grow and get resources from nih. >> my father drove a truck and companies have done great work but that funding with a health

committee, it is very hard for funding and they delivered results between 2010 and 2016 about every drop approved by the was in some way based on biomedical research funded by the nadh. my father, the truck driver paid his taxes so research could be made to make breakthroughs that would help him and his families and mixed the president and you quoted him, never tried to forget and the website states

either leaders and employees to this day so fda approved the cancer drug in 2014 and nih. last year the list price was 191,0004 this cancer drug will flow 91000 a year and will need to have gotten 100 billion in revenue and are driving the growth the same time patients

are training or they are too much altogether so merck has no piled 168 on this cancer and when we discussed this we have a primary or secondary path and what i heard was witnesses in general when all the secondary parts and there are 168 patents, at least 160 lawyers to support another smaller company making

breakers from innovating. 168 new extend further lawyers in the time is which there can be lower and they need this for lung cancer so we believe in competition and we believe in paranoia and all these things but when there is this drug and it extends to ability to have new companies and scientists and that is the play in the tell

lawyers get to it so i do believe in the research. the number one thing though in this instance, my father died from lung cancer and my father sold so list price is more than his entire pension so one year the pension, he died of lung and i don't think the judge really intended the, it's got to be the results so being consistent with

this philosophy take research on to say my father's tax for lifesaving lung cancer drug charging hundreds of thousands of dollars on his hard earned retirement using patent law that could happen at a lower cost is the income to brag to investors about growth. do think that's what was intended with this philosophy? >> seventeen seconds.

>> medicine for patients, is no longer we remember that. once we are capturing make sure you have investment and return, we are a bio pharmaceutical and this is the lifeblood of our country than we can deliver the patient's i can tell you we are proud of this and we always look at ways to do that and i do think this allows us to be sustainable long-term.

>> now going to turn over. >> and q very much