Mariam Zuhaib/AP Photo
Sen. Bernie Sanders (I-VT) speaks during a news conference on the Senate HELP Committee’s subpoenas of pharmaceutical company representatives to discuss drug prices, January 25, 2024, at the Capitol in Washington.
Today, CEOs for Johnson & Johnson, Bristol Myers Squibb, and Merck, three of the world’s biggest pharmaceutical companies, testify before the Senate Health, Education, Labor and Pensions (HELP) Committee, chaired by Sen. Bernie Sanders (I-VT). The CEOs are likely to defend themselves from public outrage over the exorbitant cost of prescription drugs, which has made them and their companies fabulously rich. They will probably not be as blunt as a recent Wall Street Journal op-ed on the subject, which had the headline “Be Thankful for High Drug Prices.”
“It’s funny you mention that, I was thinking about it five minutes ago,” Sanders told me with a laugh, in an interview to preview the hearing. “I thought maybe I will send that op-ed to the hundreds of people who have communicated with us, whose spouses have died, family members have died, because they couldn’t afford prescription drugs.”
The argument in the Journal op-ed is a familiar one from defenders of the pharmaceutical industry, which, as Sanders’s committee notes in a pre-hearing report, saw its ten leading companies earn over $112 billion in profits in 2022 alone. Both the op-ed and the Sanders HELP Committee report note that Merck has earned more from its cancer drug Keytruda in the U.S. ($43.4 billion since 2015) than it has in every other nation combined ($30 billion). This imbalance is also true of top drugs from Johnson & Johnson (Stelara) and Bristol Myers Squibb (Eliquis).
But op-ed authors David Henderson and Charles Hooper, respectively, a Hoover Institution fellow and the head of a business consulting firm with dozens of pharmaceutical clients, claim that since the rest of the world is free-riding on U.S. drug development, U.S. patients simply have to fund the research that goes into developing lifesaving treatments.
In other words, the fact that Americans pay the highest prices in the world for prescription drugs, often three times or more than the residents of other industrialized countries, is just a necessary expense for innovation, and reducing prices would destroy the industry. “Suck it up” would be a good summary of their case.
Sen. Sanders has a different view. He noted that Johnson & Johnson and Bristol Myers Squibb, two of the companies participating in today’s hearing, spent more on stock buybacks, dividends, and executive compensation in 2022 than on research and development. Moreover, their innovation often goes to “me-too drugs,” where, as Sanders said, “they are trying to make minor alterations to get another patent and maintain their monopoly.” Indeed, the HELP Committee report found that Merck put 168 different patents on Keytruda, 64 percent of them after it received FDA approval. These “patent thickets” are designed to extend the exclusivity period.
Two of the three drugs in the crosshairs of Sanders’s investigation—Johnson & Johnson’s Stelara and Bristol Myers Squibb’s Eliquis—are among the first ten drugs selected by the Centers for Medicare & Medicaid Services (CMS) for price negotiation in Medicare. Both companies have filed suit against the U.S. to block the price negotiation, which is the crown jewel of the drug reforms in the Inflation Reduction Act. Other reforms for Medicare beneficiaries include a cap on out-of-pocket drug costs (down to $3,300 this year and $2,000 in 2025), a $35-per-month cap on insulin, and a rebate from drug companies on price increases that exceed the rate of inflation.
“Our job, number one, is to increase public consciousness, that we pay more than so many other countries.”
President Biden will be emphatically selling these advances in lowering drug prices on the campaign trail this year. But of the four reforms, only the insulin cap has been in place for more than a month, and the out-of-pocket cap is partial until next year. Drug price negotiations won’t affect government and senior costs until 2026. And Stelara is likely to have generic competition before then. If that competition is legitimate, the drug will no longer be eligible for the price negotiation, with the assumption that market forces will do the job. Under the rules of the law, the administration can’t select another drug if Stelara drops off because of competition.
One of the highlights of the HELP report shows how drug companies have raised the initial prices on their drugs. From 2004 to 2008, the median launch price for new drugs sold by Johnson & Johnson, Bristol Myers Squibb, and Merck was $14,000, and not a single launch price was more than $150,000. But from 2019 to 2023, the median launch price soared to $238,000, an incredible 17-fold increase. Johnson & Johnson’s Talvey was the most expensive, with a $371,000 launch price last year.
But the Inflation Reduction Act builds in “grace periods” preventing price negotiation on drugs for up to 11 years post-launch. I asked Sanders whether that just incentivizes drug companies further to increase launch prices, so they can rake in more profits up front.
“Yes, it does!” Sanders exclaimed. “Look, I think the Inflation Reduction Act is a step in the right direction. But at the end of the day, we need fundamental reforms in the industry. In the U.S. Senate we had some Democrats who are not strong on these issues. In my view, the benefits would not take five years, it would be immediate, and if you did that, you would have support of a vast majority of the American people.”
Despite broad bipartisan support to lower drug prices, expecting a Congress with a nonfunctional House and barely functional Senate to get that done is perhaps overoptimistic. So Sanders is taking the action he thinks can make a difference at the margins.
The hearing follows two others that succeeded on this front. Last year, Sanders challenged the CEO of Moderna on the Senate floor to renounce published speculation that the company would quadruple the price of the COVID vaccine once government stockpiles diminished. Moderna responded with a program to continue access to the vaccine for free, even to those without insurance. Sanders called it “maybe the best patient assistance program ever.” Also in 2023, Eli Lilly’s CEO conceded under questioning from Sanders that the company would not raise insulin list prices after announcing a major reduction.
While these are short-term solutions—patient assistance programs can often tie up beneficiaries with red tape and do not necessarily reduce high list prices—it’s one of the biggest measures Sanders can take given Congress’s gridlock. “Our job, number one, is to increase public consciousness, that we pay more than so many other countries. And push these CEOs to lower the prices,” Sanders said. In that sense, the series of hearings resembles the oversight of the past on Big Tobacco, which did eventually lead to a master settlement and major changes on cigarettes.
One of the ways the Biden administration can use its own authority to build on the IRA’s incremental success is through the use of march-in rights, where the government can seize drug patents produced in part with public funding and redistribute them to other manufacturers if the drugs are not being delivered on “reasonable terms.” For the first time, the Biden administration has acknowledged that price could be a factor in accessibility on reasonable terms, and federal agencies are considering guidelines for when the government should exercise march-in rights. (The government has other authorities, including Section 1498, known as “eminent domain for patents.”)
Sanders was among 75 members of Congress who recently submitted their comment letter on march-in, arguing that the government should be aggressive, timely, and fully transparent in their efforts. “When you have a monopoly situation on a drug that is desperately needed but unaffordable, the administration has the absolute right and need to act,” Sanders said. “The idea that the taxpayers of this country provide the money to create an important new drug and then have to pay outrageous prices is also totally absurd.”
Clearly, by the Journal’s standards, Sanders isn’t thankful enough.
POSTSCRIPT: I couldn’t help but ask Sanders about the situation in Gaza. Sanders gave a speech on foreign policy Tuesday night attacking a “bipartisan consensus” that “has almost always been wrong.” When I asked about Gaza, Sanders gave a sigh. “This is a very deep issue, I get upset even thinking about it.” He cited not only the 27,000 deaths of Palestinians and upwards of 65,000 wounded, but the stark reality of mass starvation. “Even if you have aid coming in tomorrow, permanent damage to those children. It is a nightmare, indescribably horrible.”
We spoke just before a vote on the doomed supplemental funding request that included money for Israel’s military without conditions. Sanders vowed to vote against it. “Another $10 billion to give Netanyahu for his war on the Palestinian people, I cannot do it.”
