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Top pharmaceutical executives expressed willingness to lower the list prices of their drugs, but only if there were cooperation among all sectors to reform how drugs get from manufacturer to patient.
That theme was common in the testimony of seven pharmaceutical executives before the Senate Finance Committee during a Feb. 26 hearing.
“We are in a system that used to be fit for purpose and really drove enormous savings over the last few years but it is no longer fit for purpose,” Pascal Soriot, executive director and CEO of AstraZeneca, testified before the committee. “It’s one of those situations where nobody in the system can do anything, can fix it by themselves.”
The problem, the executives agreed, is the financial structure of drug delivery that ties list prices and their associated rebates to formulary placement.
“If you went back a few years ago, when we negotiated to get our drugs on formulary, our goal was to have the lowest copay by patients,” Kenneth Frazier, chairman and CEO of Merck, testified before the committee. “Today, the goal is to pay into the supply chain the biggest rebate. That actually puts the patient at a disadvantage since they are the only ones that are paying a portion of the list price. The list price is actually working against the patient.”
When asked why the list prices of prescription drugs are so high, Olivier Brandicourt, MD, CEO of Sanofi, said, “We are trying to get formulary position with those high list price-high rebate. It’s a preferred position. Unfortunately that preferred position doesn’t automatically ensure affordability.”
Mr. Frazier added that if a manufacturer brings a product “with a low list price in this system, you get punished financially and you get no uptake because everyone in the supply chain makes money as a result of a higher list price.”
Executives noted that when accounting for financial incentives such as rebates, discounts, and coupons, net prices for pharmaceuticals have actually come down even as list prices are on the rise to accommodate competition on formulary placement.
But that is obscured at the pharmacy counter, where patients are paying higher and higher out-of-pocket costs because more often than not, payment is tied to the list price of the drug, not the net price after all rebates and other discounts have been taken into consideration.
This is a particular problem in Medicare Part D, said AbbVie Chairman and CEO Richard Gonzalez.
“Due to the structure of the Part D benefit design, patients are charged out-of-pocket costs on a medicine’s list price which does not reflect the market-based rebates that Medicare receives,” he testified.
Despite acknowledging that this is a problem, the executives gathered were hesitant to commit to simply lowering the list prices, or anything for that matter.
The closest the panel came to a commitment to lowering the list prices of their drugs was to do so if all rebates went away in both the public and private sector.
But beyond that, the pharma executives continued to assign responsibility for high out-of-pocket drug costs to other players in the health care system, adding that the only way to change the situation would be to have everyone come to the table simultaneously.
“I understand the dissatisfaction with our industry,” Mr. Frazier said. “I understand why patients are frustrated because they need these medicines and they can’t afford them. I would pledge to do everything that we could, but I would urge you to recognize that the system itself is complex and it is interdependent and no one company can unilaterally lower list prices without running into financial and operating disadvantages that make it impossible to do that. But if we all bring the parties together around the table with the goal of doing what’s best for the patient, I think we can some up with a system that works for all Americans.”
Ultimately, the panel suggested, legislation is going to be required to change the system.
Top pharmaceutical executives expressed willingness to lower the list prices of their drugs, but only if there were cooperation among all sectors to reform how drugs get from manufacturer to patient.
That theme was common in the testimony of seven pharmaceutical executives before the Senate Finance Committee during a Feb. 26 hearing.
“We are in a system that used to be fit for purpose and really drove enormous savings over the last few years but it is no longer fit for purpose,” Pascal Soriot, executive director and CEO of AstraZeneca, testified before the committee. “It’s one of those situations where nobody in the system can do anything, can fix it by themselves.”
The problem, the executives agreed, is the financial structure of drug delivery that ties list prices and their associated rebates to formulary placement.
“If you went back a few years ago, when we negotiated to get our drugs on formulary, our goal was to have the lowest copay by patients,” Kenneth Frazier, chairman and CEO of Merck, testified before the committee. “Today, the goal is to pay into the supply chain the biggest rebate. That actually puts the patient at a disadvantage since they are the only ones that are paying a portion of the list price. The list price is actually working against the patient.”
When asked why the list prices of prescription drugs are so high, Olivier Brandicourt, MD, CEO of Sanofi, said, “We are trying to get formulary position with those high list price-high rebate. It’s a preferred position. Unfortunately that preferred position doesn’t automatically ensure affordability.”
Mr. Frazier added that if a manufacturer brings a product “with a low list price in this system, you get punished financially and you get no uptake because everyone in the supply chain makes money as a result of a higher list price.”
Executives noted that when accounting for financial incentives such as rebates, discounts, and coupons, net prices for pharmaceuticals have actually come down even as list prices are on the rise to accommodate competition on formulary placement.
But that is obscured at the pharmacy counter, where patients are paying higher and higher out-of-pocket costs because more often than not, payment is tied to the list price of the drug, not the net price after all rebates and other discounts have been taken into consideration.
This is a particular problem in Medicare Part D, said AbbVie Chairman and CEO Richard Gonzalez.
“Due to the structure of the Part D benefit design, patients are charged out-of-pocket costs on a medicine’s list price which does not reflect the market-based rebates that Medicare receives,” he testified.
Despite acknowledging that this is a problem, the executives gathered were hesitant to commit to simply lowering the list prices, or anything for that matter.
The closest the panel came to a commitment to lowering the list prices of their drugs was to do so if all rebates went away in both the public and private sector.
But beyond that, the pharma executives continued to assign responsibility for high out-of-pocket drug costs to other players in the health care system, adding that the only way to change the situation would be to have everyone come to the table simultaneously.
“I understand the dissatisfaction with our industry,” Mr. Frazier said. “I understand why patients are frustrated because they need these medicines and they can’t afford them. I would pledge to do everything that we could, but I would urge you to recognize that the system itself is complex and it is interdependent and no one company can unilaterally lower list prices without running into financial and operating disadvantages that make it impossible to do that. But if we all bring the parties together around the table with the goal of doing what’s best for the patient, I think we can some up with a system that works for all Americans.”
Ultimately, the panel suggested, legislation is going to be required to change the system.
Top pharmaceutical executives expressed willingness to lower the list prices of their drugs, but only if there were cooperation among all sectors to reform how drugs get from manufacturer to patient.
That theme was common in the testimony of seven pharmaceutical executives before the Senate Finance Committee during a Feb. 26 hearing.
“We are in a system that used to be fit for purpose and really drove enormous savings over the last few years but it is no longer fit for purpose,” Pascal Soriot, executive director and CEO of AstraZeneca, testified before the committee. “It’s one of those situations where nobody in the system can do anything, can fix it by themselves.”
The problem, the executives agreed, is the financial structure of drug delivery that ties list prices and their associated rebates to formulary placement.
“If you went back a few years ago, when we negotiated to get our drugs on formulary, our goal was to have the lowest copay by patients,” Kenneth Frazier, chairman and CEO of Merck, testified before the committee. “Today, the goal is to pay into the supply chain the biggest rebate. That actually puts the patient at a disadvantage since they are the only ones that are paying a portion of the list price. The list price is actually working against the patient.”
When asked why the list prices of prescription drugs are so high, Olivier Brandicourt, MD, CEO of Sanofi, said, “We are trying to get formulary position with those high list price-high rebate. It’s a preferred position. Unfortunately that preferred position doesn’t automatically ensure affordability.”
Mr. Frazier added that if a manufacturer brings a product “with a low list price in this system, you get punished financially and you get no uptake because everyone in the supply chain makes money as a result of a higher list price.”
Executives noted that when accounting for financial incentives such as rebates, discounts, and coupons, net prices for pharmaceuticals have actually come down even as list prices are on the rise to accommodate competition on formulary placement.
But that is obscured at the pharmacy counter, where patients are paying higher and higher out-of-pocket costs because more often than not, payment is tied to the list price of the drug, not the net price after all rebates and other discounts have been taken into consideration.
This is a particular problem in Medicare Part D, said AbbVie Chairman and CEO Richard Gonzalez.
“Due to the structure of the Part D benefit design, patients are charged out-of-pocket costs on a medicine’s list price which does not reflect the market-based rebates that Medicare receives,” he testified.
Despite acknowledging that this is a problem, the executives gathered were hesitant to commit to simply lowering the list prices, or anything for that matter.
The closest the panel came to a commitment to lowering the list prices of their drugs was to do so if all rebates went away in both the public and private sector.
But beyond that, the pharma executives continued to assign responsibility for high out-of-pocket drug costs to other players in the health care system, adding that the only way to change the situation would be to have everyone come to the table simultaneously.
“I understand the dissatisfaction with our industry,” Mr. Frazier said. “I understand why patients are frustrated because they need these medicines and they can’t afford them. I would pledge to do everything that we could, but I would urge you to recognize that the system itself is complex and it is interdependent and no one company can unilaterally lower list prices without running into financial and operating disadvantages that make it impossible to do that. But if we all bring the parties together around the table with the goal of doing what’s best for the patient, I think we can some up with a system that works for all Americans.”
Ultimately, the panel suggested, legislation is going to be required to change the system.
REPORTING FROM SENATE FINANCE COMMITTEE HEARING