Public Citizen Testimony at Forum on Prescription Drug Price Gouging

Before the Congressional Progressive Caucus, June 20, 2019

By Steven Knievel, Access to Medicines Advocate

Testimony of Steven Knievel
“Forum on Prescription Drug Price Gouging”
Before the
Congressional Progressive Caucus
June 20, 2019

Chairman Pocan, Chairwoman Jayapal, members of the Congressional Progressive Caucus, thank you for the opportunity to testify today on the important subject of prescription drug price gouging and the need for bold legislation to make medicines affordable.

I am an access to medicines advocate at Public Citizen, a nonprofit advocacy organization that works to expand prescription drug access and affordability, and on other issues impacting consumers. Right now, we’re facing a crisis in this country of prescription drug price gouging that is resulting in nearly one-in-three people going without the medicine they need due to costs.[1]

Families around the country facing high drug prices – whether it be on a medicine treating a chronic condition like diabetes, preventive medicine for HIV, or treatments for cancer – are facing financial hardship and preventable suffering, and even death.

People understand that this isn’t fair, and it’s not morally acceptable. Access to the medicines that we need should not be dependent on how much money we have in our wallets, and no one should have to face the choice between purchasing a needed medicine or paying for other life necessities or running up credit card debt.

That’s why poll after poll demonstrates that people across the political spectrum – progressives and conservatives alike – demand bold and meaningful reforms to lower drug prices and make medicines affordable now.[2] It is contingent on Congress to advance policies that are equal in measure to the breadth of people’s demands and the depth of the crisis that we face.

The underlying core of our prescription drug pricing crisis is that the government grants monopolies to pharmaceutical corporations, through patents and other exclusivities, while doing little – and sometimes actively restraining its own ability – to protect the public interest by limiting corporations’ exploitation of those monopolies through exorbitant prices.

Solutions to the drug pricing crisis should thus be tailored to the roots of the problem by—

  • untying the government’s hands and allowing it to negotiate directly with pharmaceutical corporations to obtain lower drug prices,
  • putting in place enforceable limitations on price spikes, and
  • curbing drug corporations’ monopoly power and abuses thereof.

Government Drug Price Negotiation

Government negotiation with manufacturers to obtain lower drug prices for Medicare Part D is one of the most widely supported and impactful drug pricing reforms. Nine in 10 Americans support this concept.[3]

We believe it is imperative for a government drug price negotiation system to be structured in a way that allows for the government to obtain the best possible deal on all drugs, and not only those with particularly high costs or limited therapeutic alternatives. Achieving this goal requires empowering the government with a robust backstop authority to exercise when drug companies refuse to agree to a reasonable, fair and affordable price.

Rep. Doggett’s bill, the Medicare Negotiation and Competitive Licensing Act (H.R. 1046), provides an optimal approach. The Medicare Negotiation and Competitive Licensing Act puts in place a system that would facilitate direct government negotiations for all drugs. Providing a backstop of competitive licensing, which allows for generic and biosimilar competitors to enter the Part D market, would give drug companies a strong reason to offer a fair price in negotiations, and ensure that even if they refuse, patients will still have access to the medicines they need. Public Citizen applauds the Congressional Progressive Caucus for endorsing Rep. Doggett’s bill.

We are concerned that an alternative approach under discussion involving binding arbitration, wherein a third party is empowered to make pricing decisions if negotiations fail to reach a mutually agreeable price, would not obtain the best possible deal on all drugs. In a system where the backstop to direct price negotiations is binding arbitration, government leverage is diminished relative to other approaches, such as competitive licensing. Moreover, even if ostensibly a large number of drugs are targeted for such a process, it is questionable whether it would be administratively feasible to undergo arbitration for more than a small subset of drugs.

Stopping Price Spikes

One of the most egregious pricing abuses that Congress must take action to remedy is the practice of large pharmaceutical companies routinely raising prices of older medicines without providing any additional therapeutic benefit. EpiPen price spikes earned headlines, but it is important to note that price spikes are a commonplace abuse practiced across the pharmaceutical industry.

The Stop Price Gouging Act (H.R. 1093) would levy a tax against prescription drug corporations on excess revenues gained through price spikes. The steeper the price spike, the more aggressive the penalty that would be levied against price gouging drug corporations.

This is a vital element to address the problem of high drug prices – unless there is a measure that puts a hard restriction on the ability of drug corporations to spike prices, then spikes will persist and patients will not receive much needed relief. As Harvard academics Aaron Kesselheim and Thomas Hwang wrote in Health Affairs, “[t]he burden of a price spike tax would be borne by those companies that rely disproportionately on price increases, rather than innovation, to drive returns.”[4]

Curbing Monopoly Power and Abuse

There are a wide array of reforms that fit under the category of curbing monopoly power and abuses thereof. The most impactful are those which directly strike at the root of the monopoly – government granted patents and marketing exclusivities. The patent system is intended to advance the public interest by rewarding inventors the right to exclude competitors for a limited period of time. However when drug companies in effect are allowed to hold patients and our public health programs hostage in order to extract the maximal amount of revenues they can under monopoly conditions, the public interest is not best served.

Providing appropriate limitations and exceptions to government granted patents and exclusivities would help rein in prescription drug price gouging. Rep. Doggett’s bill accomplishes this in the context of Medicare drug price negotiations. Rep. Khanna’s Prescription Drug Price Relief Act (H.R. 465) accomplishes this within an international reference pricing framework, allowing generic competition when drug companies abuse their monopolies by charging us more than they do in other large, wealthy countries; or when prices are found to be excessive with regard to the therapeutic value, research and development costs, impacts on patient access and other measures.

More narrow approaches that target abuses of our patent and regulatory systems, such as patent thicketing and evergreening, product hopping, pay-for-delay patent settlement deals, and REMS abuse, if designed well, can also provide meaningful reform.

I would like to thank the Caucus for inviting me to testify today, and I look forward to working with you in the future to stop prescription drug price gouging and to ensure patients have access to the medicines they need.

[1] A. Kirzinger, L. Lopes, B. Wu, and M. Brodie. (March 1, 2019). KFF Health Tracking Poll—February 2019: Prescription Drugs. The Henry J. Kaiser Family Foundation. https://www.kff.org/health-costs/poll-finding/kff-health-tracking-poll-february-2019-prescription-drugs/

[2] Politico and Harvard T.H. Chan School of Public Health, Americans’ Priorities for the New Congress in 2019 (Dec. 2018), p. 2, https://cdn1.sph.harvard.edu/wp-content/uploads/sites/94/2018/12/PoliticoHarvard-Poll-Dec-2018-Priorities-for-New-Congress-in-2019.pdf; Rachel Roubein and David Brown,

“Politico–Harvard Poll: New Congress Should Fight Hate Crimes, Tackle Drug Prices,” Politico, Jan. 3, 2019, https://www.politico.com/story/2019/01/03/politico-harvard-poll-hate-crimes-drug-prices-1077879.

[3] Politico and Harvard T.H. Chan School of Public Health, Americans’ View of President Trump’s Agenda on Health Care, Immigration, and Infrastructure (March 2018), p. 3, https://cdn1.sph.harvard.edu/wp-content/uploads/sites/94/2018/03/Politico-Harvard-Health-Care-Immigration-Infrastructure-Poll-3.7.18.pdf

[4] Hwang, Thomas, Kesselheim, Aaron S. (May 12, 2017). Taxing Drug Price Spikes: Assessing The Potential Impact. Health Affairs. https://www.healthaffairs.org/do/10.1377/hblog20170512.060041/full/