Washington, D.C. (Dec. 10, 2021)—Today, Rep. Carolyn B. Maloney, the Chairwoman of the Committee on Oversight and Reform, released the final staff report culminating the Committee’s nearly three-year investigation into pharmaceutical pricing and business practices, which was launched by the late Chairman Elijah E. Cummings.
“What the Committee has learned should be troubling to lawmakers, taxpayers, and any American who has ever struggled to afford their prescriptions,” the Chairwoman wrote to Committee Members. “Drug companies have raised prices relentlessly for decades while manipulating the patent system and other laws to delay competition from lower-priced generics. These companies have specifically targeted the U.S. market for higher prices, even while cutting prices in other countries, because weaknesses in our health care system have allowed them to get away with outrageous prices and anticompetitive conduct. The evidence overwhelmingly supports the need to pass the Build Back Better Act, which will empower Medicare to negotiate for lower prices, restrain price increases, and cap out-of-pocket patient costs for insulin and other drugs.”
“The result of the House Oversight Committee investigation is clear: American families are suffering from outrageous drug prices, while Big Pharma rakes in record profits,” said Speaker Nancy Pelosi. “With the House-passed Build Back Better Act, we are fighting back against this appalling conduct: ending unfair price hikes, empowering Medicare to negotiate for lower prices, capping the cost of insulin at $35 per month and more. Thanks to the relentless leadership of Chair Carolyn Maloney, the Congress is carrying on the life’s work of our dear late colleague Elijah Cummings: to bring down health costs For The People.”
Today’s staff report presents findings from the Committee’s review of more than 1.5 million pages of internal company documents revealing the decision-making of many of the world’s most profitable drug companies.
The Committee’s investigation found:
- Drug companies aggressively raise prices to meet revenue targets, and executive compensation structures create incentives to raise prices. The companies in the Committee’s investigation collectively raised prices more than 250 times on the 12 drugs examined. The drugs in the Committee’s investigation are now priced at a median of almost 500% higher than when they were brought to market. The Committee ’s investigation revealed evidence that company executives made aggressive price increases to meet ever-increasing revenue targets and earnings goals. All ten companies have compensation structures that tie incentive payments to revenue and other financial targets, and several companies directly tied incentive compensation to drug-specific revenue targets.
- Drug companies target the U.S. market for higher prices and use the Medicare program to boost revenue. Internal strategy documents show that drug companies targeted the U.S. market for price increases—while maintaining or lowering prices in the rest of the world—in part because Medicare cannot negotiate directly for lower prices. The Committee’s analysis found that taxpayers could have saved more than $25 billion over a five-year period for just seven of the drugs investigated—Humira, Imbruvica, Sensipar, Enbrel, Lantus, NovoLog, and Lyrica—if private Medicare Part D plans had obtained the same discounts as other federal health programs that are empowered to negotiate.
- Drug companies abuse the patent system and FDA market exclusivities to suppress competition. Collectively, the companies in the Committee’s investigation have obtained more than 600 patents on the 12 drugs examined, which could potentially extend their monopoly periods to a combined total of nearly 300 years.
- Drug companies use strategies to suppress competition and maintain monopoly pricing. Every company in the Committee’s investigation engaged in one or more strategies to suppress competition from generics or biosimilars. These strategies include what are often described as “life-cycle management” or “loss of exclusivity” strategies: (1) shifting patients to new products or formulations of a drug just before facing generic competition for the old formula (known as “product hopping” or “evergreening”); (2) pursuing contracts with PBMs and insurers that condition rebates and discounts on excluding competitor products; and (3) aggressively marketing directly to patients and physicians to drive sales, especially as drugs faced generic competition. The Committee’s investigation also uncovered new evidence of “shadow pricing,” a practice in which would-be competitor companies follow each other’s price increases.
- Drug companies use patient assistance programs as a public relations tool to boost sales. The Committee’s investigation uncovered new evidence that companies emphasized the significant returns on investment from these programs in the form of increased sales, particularly for drugs approaching loss of exclusivity. Internal documents show that companies view these programs as an important public relations tool, but that companies’ spending on patient assistance programs is minimal compared to the enormous amount of revenue brought in by these drugs. These programs often do not provide sustainable support for patients and do not address the burden that the company’s pricing practices have placed on the U.S. health care system.
- Research and manufacturing costs do not justify price increases. The Committee’s investigation found that companies’ investments in R&D are far outpaced by revenue gains. The investigation also found that even if the pharmaceutical industry collected less revenue due to pricing reforms, drug companies could maintain or even exceed their current R&D expenditures if they reduced spending on stock buybacks and dividends. From 2016 to 2020, the 14 leading drug companies spent $577 billion on stock buybacks and dividends—$56 billion more than they spent on R&D over the same period. In addition, companies dedicated a significant portion of their R&D expenditures to research intended to extend market monopolies, support the companies’ marketing strategies, and suppress competition.
Below are new findings from the Committee’s investigation of insulin products manufactured by Eli Lilly, Novo Nordisk, and Sanofi:
- The three insulin companies targeted the United States for price increases, and Medicare lost out on more than $16 billion in savings. For years, these companies provided private Medicare Part D plans with significantly smaller rebates than those secured by other federal health care programs that are allowed to negotiate directly with drug companies. Information obtained by the Committee reveals that if Medicare Part D plans had secured the same discounts as other federal health care programs for three frequently used insulin products—Humalog, Lantus, and NovoLog—Medicare could have saved more than $16.7 billion from 2011 through 2017.
- The three insulin companies have engaged in strategies to maintain monopoly pricing and defend against competition from biosimilars. These strategies include manipulating the patent system and marketing exclusivities granted by the Food and Drug Administration (FDA), pursuing tactics to switch patients to new formulations of their products before losing exclusivity, and engaging in “shadow pricing”—raising prices in lockstep with competitors—which keeps prices high.
Below are the new findings from the Committee’s investigation of Pfizer’s pain-management drug Lyrica:
- Pfizer targeted the U.S. market for price increases. A draft internal Pfizer presentation from 2016 explicitly linked Pfizer’s global profitability to its ability to raise prices in the United States, noting that growth was driven by “price increases in the U.S.”
- Pfizer used patent protections, market exclusivities, and other tactics to delay generic competition and keep prices high. Pfizer filed for dozens of patents on Lyrica and obtained an FDA pediatric marketing exclusivity extension that the company estimated would generate approximately $1.6 billion in additional revenue. Pfizer soughtto shift patients to a new controlled-release formulation of the drug before the old formulation faced generic competition, and aggressively marketed to patients and physicians to extend the Lyrica franchise and drive sales.
On January 14, 2019, the late Chairman Elijah E. Cummings launched the Committee’s historic investigation into the pricing practices of drug companies that sell some of the costliest medications for patients, Medicare, and taxpayers.
Since then, the Committee has released eight staff reports with findings from the Committee’s investigation, including six reports detailing the pricing and business practices of the companies AbbVie Inc., Amgen Inc., Celgene Corporation, Mallinckrodt Pharmaceuticals, Novartis Pharmaceuticals Corporation, and Teva Pharmaceuticals Industries Ltd. The Committee also released analyses of drug company expenditures on stock buybacks and R&D, and the lost savings to taxpayers as a result of the prohibition on Medicare negotiation. The Committee has also held five hearings with drug company executives, health policy experts, patients, and other stakeholders.