Merck, J&J, Bristol Myers Squibb CEOs face Senate drug pricing hearing

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(L-R) Joaquin Duato, CEO of Johnson & Johnson, Robert Davis, CEO of Merck, and Chris Boerner, CEO of Bristol Myers Squibb, testify before the Senate Health, Education, Labor and Pensions Committee at the Senate Dirksen Office Building in February 08, 2024 in Washington, DC. The Committee held a hearing to examine the cost of prescription drugs. (Photo by Kevin Dietsch/Getty Images)

Kevin Dietsch | Getty Images News | Getty Images

Leaders are Johnson & Johnson, Merck and Squibb Bristol Myers defended high drug prices in the US at a Senate hearing Thursday, as the White House and lawmakers on both sides of the aisle work to keep Americans’ health care costs high.

The push to cut drug prices is one of the hot button issues that unites the two main political parties, although they often support different ways to reduce costs.

The Senate Health, Education, Labor and Pensions Committee hearing comes at a critical time, as the Biden administration begins a long-awaited process to negotiate drug prices directly with suppliers -manufacturing – which is expected to reduce the pressure on the wallets of the elderly.

At the hearing, Merck CEO Robert Davis and Bristol Myers Squibb CEO Chris Boerner did not commit to cutting the prices of some drugs in the US to match lower prices in other high-income countries, such as Canada and Japan.

But they said they would welcome cheaper copies to the market when the main patents on each of their favorite drugs expire. Drug manufacturers are known for using various strategies to extend the prohibition of beneficial drugs.

J&J CEO Joaquin Duato also promised to lower the price of its immunosuppressant drug Stelara in 2025, when competing drugs will be allowed to enter the market.

About 9 million American adults did not take their drugs as prescribed in 2021 because of the high cost of medications, according to a federal study. Prescription drug prices in the US are more than 2.5 times higher than those in high-income countries, another federal report showed.

The Senate panel said that is especially true for some of the top drugs from the three drug dealers who testified Thursday, including Stelara, Merck’s immunotherapy drug Keytruda and Bristol Myers Squibb’s blood thinner Eliquis. Eliquis and Stelara are both among the first 10 drugs subject to Medicare price negotiations.

“The pharmaceutical industry is the biggest beneficiary of the high prices of these drugs,” said Sen. Bernie Sanders, who chairs the Senate Health panel, at the hearing.

Robert Davis, CEO of Merck, testifies before the Senate Health, Education, Labor and Pensions Committee at the Dirksen Senate Office Building on February 08, 2024 in Washington, DC.

Kevin Dietsch | Getty Images News | Getty Images

The three CEOs acknowledged the high cost of healthcare in the US, but said their prices reflect the value of the life-saving drugs to patients and the healthcare system at large, along with their high investments in research and development.

They also claimed that medicines reach patients much faster in the US than in other countries, and they argued that pharmacy benefit managers – intermediaries who negotiating drug discounts on behalf of insurers and other payers—often out-of-pocket savings instead of being passed on to patients.

“Patients are affected by a complex U.S. system that is seeing health care costs continue to rise and lack of affordability. We need to make the system work better for them,” said Boerner, saying that drug dealers “play a role in addressing affordability.”

But he said Bristol Myers Squibb supports policies that “reduce patient costs without compromising innovation.” Boerner did not identify specific policies.

Drug dealers want to protect innovation

Duato noted that J&J prices its drugs to meet its commitment to innovate and develop new medicines for patients, which require a “significant” investment. J&J has spent nearly $78 billion on research and development since 2016, he said.

Merck, for its part, invested $46 billion in R&D between 2011 and 2023, and plans to spend another $18 billion in the 2030s, Davis noted in his opening remarks.

Meanwhile, Bristol Myers Squibb has spent more than $65 billion on R&D over the past decade, according to Boerner.

Still, a report released Tuesday by the committee said J&J and Bristol Myers Squibb each spent $3.2 billion more on stock buybacks, dividends and executive compensation than they did on R&D to find new drugs in 2022. Merck, however, spent less on executive compensation than on R&D that year, the report said.

“I think it would be very surprising to most Americans that, with what the industry talks about research and development, you’re actually spending more money, shedding money to investors and buying back stock than you have researched and developed,” said Sean Chris. Murphy, D-Conn., told the Leaders.

But Duato argued that paying dividends is how J&J remains operational and sustainable, which allows the company to develop medicines in the first place.

CEOs say medicines are getting to Americans faster

Senators pointed to the disparity between drug prices in the US and in other high-income countries. For example, Sanders said the annual cost of Eliquis is $7,100 in the US, but only $900 in Canada.

He asked Boerner to promise to lower the price of Eliquis in the US to the price of the drug in Canada.

Bristol Myers Squibb CEO Chris Boerner testifies before a Health, Education, Labor and Pensions Committee hearing on high drug prices on Capitol Hill in Washington, U.S., February 8, 2024. REUTERS/Leah Millis

Leah Millis | Reuters

But Boerner said he could not make that commitment, especially because “the two countries have different systems that prioritize very different things. ” He noted that medications in Canada are often more difficult to obtain and take much longer to reach patients in Canada than in the US

Merck’s CEO offered a similar response after Sanders asked him to promise to lower the price of Keytruda in the US to its price in Japan. The panel said the annual cost of Keytruda is currently $191,000 in the US, but significantly lower in Japan, at $44,000.

“I think it’s also important to state that there is access [to drugs] in the United States faster and more than anywhere else in the world,” Davis said.

He said Keytruda has many more approved treatment uses in the US, which is partly why the price of the drug is higher than in other countries.

Keytruda has 39 approved uses, or indications, across 17 cancer tumor types in the U.S., Davis said. That number is in the 20s in Europe and even lower in Japan, he said.

But these other indications often give a drug other patents, which allow companies to extend the drug’s monopoly on the market. The senators noted that Merck has 64 active patents and 51 pending patents on Keytruda.

Meanwhile, J&J has 15 active patents and 21 pending patents on Stelara. Bristol Myers Squibb has 18 active patents and two pending patents on Eliquis.

“Pharmaceutical companies are doing everything they can to keep their prices and their profit margins high … one way companies do this is by filing dozens, even hundreds of patents frivolous that locks in the exclusive right to sell the drug for decades. “said Sean Maggie Hassan, DN.H.

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